EXHIBIT 99.5
SIS BANK
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Springfield Institution for Savings
1441 Main Street
Springfield, MA 01103
March 27, 1996
Telephone (413) 748-8000
Dear Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of the
Stockholders (the "Annual Meeting") of Springfield Institution for Savings (the
"Bank") to be held on Thursday, May 9, 1996 at 10:00 a.m. local time, at the
Springfield Marriott Hotel, Springfield, Massachusetts.
The Annual Meeting has been called for the following purposes:
1. To approve the formation of a holding company for the Bank pursuant to the
Agreement and Plan of Reorganization dated as of January 31, 1996 (the
"Plan of Reorganization") between the Bank and SIS Bancorp, Inc. (the
"Company"), a newly-formed Massachusetts corporation organized at the
direction of the Bank. Pursuant to the Plan of Reorganization, the Company
would acquire all of the outstanding common stock, par value $1.00 per
share, of the Bank (the "Bank Common Stock") other than shares held by
stockholders, if any, exercising dissenters' appraisal rights, in a
share-for-share exchange for the common stock, par value $.01 per share, of
the Company. The Bank will thereby become a wholly-owned subsidiary of the
Company;
2. To elect five Directors for a three-year term;
3. To elect a Clerk;
4. To approve an amendment to the 1995 Management Stock Option Plan to
increase the number of shares of Bank Common Stock reserved for issuance
thereunder by 250,000 shares; and
5. To transact such other business as may properly come before the meeting or
any adjournments or postponements thereof.
The accompanying Proxy Statement of the Bank and Prospectus of the Company
provides detailed information concerning the matters to be voted on at the
Annual Meeting. Also, enclosed is the Bank's 1995 FDIC Form F-2 and 1995 Annual
Report to Stockholders, which contain additional information and review of
results for the fiscal year ended December 31, 1995.
It is important that your shares be represented at the Annual Meeting. Whether
or not you plan to attend the Annual Meeting, you are requested to complete,
date, sign and return the enclosed proxy card in the enclosed postage paid
envelope.
Thank you for returning your proxy. We appreciate the support you have given the
Bank.
Sincerely,
/s/ John M. Naughton
John M. Naughton
Chairman of the Board
SPRINGFIELD INSTITUTION FOR SAVINGS
1441 Main Street
Springfield, Massachusetts 01102
Telephone: (413) 748-8000
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Thursday, May 9, 1996
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Springfield, Massachusetts
March 27, 1996
To the Holders of Common Stock of
Springfield Institution for Savings:
Notice is Hereby Given that the Annual Meeting of Stockholders of Springfield
Institution for Savings (the "Bank") will be held at the Springfield Marriott
Hotel, 1500 Main Street, Springfield, Massachusetts at 10:00 a.m. local time on
Thursday, May 9, 1996 for the following purposes:
1. To approve the formation of a holding company for the Bank pursuant to the
Agreement and Plan of Reorganization dated as of January 31, 1996 (the "Plan
of Reorganization"), a copy of which is attached as Appendix A to the Proxy
Statement-Prospectus accompanying this Notice, between the Bank and SIS
Bancorp, Inc. (the "Company"), a newly-formed Massachusetts corporation
organized at the direction of the Bank. Pursuant to the Plan of
Reorganization the Company would acquire all the outstanding common stock,
par value $1.00 per share, of the Bank (the "Bank Common Stock"), other than
shares held by stockholders, if any, exercising dissenters' appraisal rights,
in a share-for-share exchange for the common stock, par value $0.01 per
share, of the Company (the "Company Common Stock"). The Bank will thereby
become a wholly-owned subsidiary of the Company (Proposal One) (the
"Reorganization");
2. To elect five Directors of the Bank for a three-year term (Proposal Two);
3. To elect a Clerk of the Bank (Proposal Three);
4. To approve an amendment to the 1995 Management Stock Option Plan to increase
the number of shares of Common Stock reserved for issuance thereunder from
445,000 to 695,000; and
5. To transact such other business as may properly come before the meeting or
any adjournments or postponements thereof.
If the Plan of Reorganization is approved by the stockholders at the Annual
Meeting and effected by the Bank, any stockholder (i) who files with the Bank
before the taking of the vote on the approval of the Plan of Reorganization a
written objection to the Plan of Reorganization, stating that he or she intends
to demand payment for his or her shares if the Reorganization is consummated,
and (ii) whose shares are not voted in favor of the Plan of Reorganization, has
the right to demand in writing from the Bank, within twenty days after the date
of mailing to him of notice in writing that the Reorganization has become
effective, payment for his shares and an appraisal of the value thereof. The
Bank and any such stockholder shall in such cases have the rights and duties and
shall follow the procedure set forth in Sections 85 through 98, inclusive, of
Chapter 156B of the General Laws of Massachusetts, a copy of which is attached
as Appendix B to the Proxy Statement-Prospectus accompanying this Notice.
The Board of Directors has fixed the close of business on March 13, 1996 as
the record date for determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting and any adjournments or
postponements thereof. Only holders of Bank Common Stock of record at the close
of business on that date will be entitled to notice of and to vote at the Annual
Meeting and any adjournments thereof.
In the event there are not sufficient votes to approve any one or more of the
foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies by the Bank.
By Order of the Board of Directors
/s/ Michael E. Tucker
Michael E. Tucker, Esquire
Clerk
IMPORTANT
EVEN THOUGH YOU MAY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE ANNUAL MEETING AND DESIRE TO WITHDRAW YOUR PROXY AND VOTE IN
PERSON, YOU MAY DO SO.
SIS BANK
1441 Main Street
Springfield, Massachusetts 01102
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PROXY STATEMENT OF SPRINGFIELD INSTITUTION FOR SAVINGS
ANNUAL MEETING OF SHAREHOLDERS
May 9, 1996
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PROSPECTUS
OF SIS BANCORP, INC.
Shares of Common Stock
$0.01 par value per share
This Proxy Statement-Prospectus serves as a Proxy Statement in connection with
the solicitation of proxies by the Board of Directors of Springfield Institution
for Savings (the "Bank" or "SISBank") for the 1996 Annual Meeting of
Stockholders of the Bank (the "Annual Meeting"), to be held on Thursday, May 9,
1996 at 10:00 a.m. local time, at the Springfield Marriott Hotel, 1500 Main
Street, Springfield, Massachusetts, and at any adjournments or postponements
thereof. This Proxy Statement-Prospectus, the accompanying Notice of Annual
Meeting and the accompanying proxy card are first being mailed to stockholders
on or about March 27, 1996.
The Annual Meeting has been called for the following purposes: (1) to consider
and vote upon the formation of a holding company for the Bank by the approval of
the Agreement and Plan of Reorganization dated as of January 31, 1996 (the "Plan
of Reorganization"), between the Bank and SIS Bancorp, Inc. (the "Company")
pursuant to which the Bank will become a wholly-owned subsidiary of the Company
and each issued and outstanding share of common stock of the Bank, par value
$1.00 per share (other than shares held by stockholders, if any, exercising
dissenters' rights) will be exchanged for one share of common stock of the
Company, par value $0.01 per share (the "Reorganization"); (2) to elect a class
of five Directors of the Bank for a three-year term; (3) to elect a Clerk of the
Bank; (4) to amend the 1995 Management Stock Option Plan to increase the number
of shares reserved for issuance thereunder; and (5) to transact such other
business as may properly come before the Annual Meeting or any adjournments or
postponements thereof.
This document also serves as the Prospectus of the Company with respect to the
issuance of a maximum of 5,755,400 shares (assuming that the Reorganization is
completed prior to June 1, 1996; otherwise, a maximum of 5,835,800 shares) of
the Company's common stock, par value $0.01 per share ("Company Common Stock"),
to the stockholders of the Bank in exchange for shares of the Bank's common
stock, par value $1.00 per share ("Bank Common Stock"), upon consummation of the
Reorganization. The number of shares of Company Common Stock to be issued will
be based upon the exchange ratio of one share of Company Common Stock for each
share of Bank Common Stock. The maximum number of shares of Company Common Stock
referred to above is based on the 5,718,200 shares of Bank Common Stock that are
outstanding as of the Record Date and the 37,200 shares of Bank Common Stock
that are subject as of the Record Date to vested options to purchase such shares
and the additional 80,480 shares of Bank Common Stock that will become subject
as of June 1, 1996 to vested options to purchase such shares. Shares of Bank
Common Stock held by stockholders, if any, exercising dissenters' appraisal
rights will not be exchanged as part of the Reorganization.
THE SECURITIES TO BE ISSUED BY SIS BANCORP, INC. IN THE REORGANIZATION HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF BANKS OF THE
COMMONWEALTH OF MASSACHUSETTS OR BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSIONER OR THE FDIC
OR THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
IN RELIANCE UPON THE EXEMPTION PROVIDED BY SECTION 3(a)(12) OF THE SECURITIES
ACT OF 1933, AS AMENDED, THE SECURITIES OF SIS BANCORP, INC. TO BE ISSUED IN THE
REORGANIZATION HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR WITH ANY OTHER GOVERNMENTAL AGENCY.
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THE SHARES OF COMPANY COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
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The date of this Proxy Statement-Prospectus is March 27, 1996.
AVAILABLE INFORMATION
The Bank is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as administered by the
Federal Deposit Insurance Corporation (the "FDIC"), and in accordance therewith
files reports and other information with the FDIC. Reports, proxy statements and
other information filed by the Bank pursuant to the informational requirements
of the Exchange Act can be inspected and copied at the public reference
facilities maintained by the FDIC at 550 Seventeenth Street, N.W., Room No.
F-643, Washington, D.C. 20429, telephone no. 202-898-8913. The Bank Common Stock
is listed for quotation on the NASDAQ National Market System; consequently,
reports, proxy statements and other information concerning the Bank may also be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006. The Company has been formed
at the direction of the Bank solely for the purpose of effecting the
Reorganization. The Company has not issued any shares of its capital stock to
date and is not subject to the requirements of the Exchange Act. The Company is
applying to have the shares of Company Common Stock to be issued in the
Reorganization approved for inclusion on the NASDAQ National Market System,
effective upon consummation of the Reorganization. Although the Company
anticipates obtaining such approval, no assurance can be given that such
approval will be received. If the Reorganization is consummated, the Company
will become subject to the reporting and proxy statements requirements of the
Exchange Act and, in accordance therewith, will file reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC").
In addition, in connection with the annual meeting of shareholders of the
Company, proxy statements accompanied or preceded by annual reports to
shareholders will contain financial statements that have been examined and
reported upon, with an opinion expressed by an independent auditor.
No person has been authorized to give any information or to make any
representation not contained in this Proxy Statement-Prospectus, and, if given
or made, such information or representation must not be relied upon as having
been authorized by the Company. Neither the delivery hereof nor any distribution
of securities hereunder shall, under any circumstances, create an implication
that there has been no change in the affairs of the Company or the Bank since
the date hereof or that the information in this Proxy Statement-Prospectus is
correct as of any time subsequent to the date hereof.
Information contained herein is subject to completion or amendment. This Proxy
Statement-Prospectus shall not constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of these securities in any State
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
A copy of the Bank's Annual Report to Stockholders for the year ended December
31, 1995 accompanies this Proxy Statement-Prospectus. Additional copies of such
Annual Report may be obtained without charge by any stockholder of the Bank upon
written request to Ting Chang, Vice President-Investor Relations, Springfield
Institution for Savings, 1441 Main Street, Springfield, Massachusetts 01102.
This Proxy Statement-Prospectus hereby incorporates by reference the Bank's
Annual Report on Form F-2, as filed with the FDIC and included with this Proxy
Statement-Prospectus mailed to stockholders, for the fiscal year ended December
31, 1995.
CAUTIONARY STATEMENT FOR PURPOSES OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company and the Bank desire to take advantage of the new "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. This Proxy
Statement-Prospectus contains certain "forward-looking statements" including
statements concerning plans, objectives, future events or performance and
assumptions and other statements which are other than statements of historical
fact. The Company and the Bank wish to caution readers that the following
important factors, among others, may have affected and could in the future
affect the Bank's and the Company's actual results and could cause the Bank's
and/or the Company's actual
2
results for subsequent periods to differ materially from those expressed in any
forward-looking statement made by or on behalf of the Bank and/or the Company
herein: (i) the effect of changes in laws and regulations, including federal and
state banking laws and regulations, with which the Company and the Bank must
comply, the cost of such compliance and the potentially material adverse effects
if the Bank and/or the Company were not in substantial compliance either
currently or in the future as applicable; (ii) the effect of changes in
accounting policies and practices, as may be adopted by the regulatory agencies
as well as by the Financial Accounting Standards Board, or of changes in the
Bank's and/or the Company's organization, compensation and benefit plans; (iii)
the effect on the Bank's or the Company's competitive position within its market
area of increasing consolidation within the banking industry and increasing
competition from larger regional and out-of-state banking organizations as well
as nonbank providers of various financial services; (iv) the effect of
unforeseen changes in interest rates; and (v) the effect of changes in the
business cycle and downturns in the local, regional or national economies.
3
TABLE OF CONTENTS
Section Page
- ------- ----
SUMMARY OF PROXY STATEMENT-PROSPECTUS................................. 6
VOTING, REVOCATION AND SOLICITATION OF PROXIES........................ 11
Annual Meeting........................................................ 11
Record Date........................................................... 11
Proxies............................................................... 11
Quorum; Vote Required................................................. 12
PROPOSAL ONE-FORMATION OF HOLDING COMPANY............................. 13
Recommendation of Directors........................................... 13
Description of the Plan of Reorganization............................. 13
Reasons for the Holding Company Formation............................. 14
Financial Resources of the Company.................................... 15
Conditions of the Reorganization...................................... 16
Rights of Dissenting Stockholders..................................... 17
Income Tax Consequences............................................... 18
COMPARISON OF STOCKHOLDER RIGHTS...................................... 21
Capital Stock......................................................... 22
Common Stock.......................................................... 22
Preferred Stock....................................................... 23
Directors............................................................. 23
Meetings of Stockholders.............................................. 24
Stockholder Vote Required to Approve Certain Transactions............. 25
Provisions Relating to Exercise of Business Judgment
by Board of Directors............................................... 26
Beneficial Ownership Limitation....................................... 26
Indemnification and Limitation of Liability........................... 27
Amendment of Charter and Articles..................................... 27
Amendment of By-laws.................................................. 27
Legal Investments..................................................... 28
Anti-Takeover Provisions.............................................. 28
CAPITALIZATION........................................................ 29
MARKET FOR STOCK AND DIVIDENDS........................................ 30
DESCRIPTION OF COMPANY CAPITAL STOCK.................................. 31
General............................................................... 31
Common Stock.......................................................... 31
Preferred Stock....................................................... 31
Transfer Agent and Registrar.......................................... 32
Changes in Control.................................................... 32
BUSINESS OF THE COMPANY............................................... 33
General............................................................... 33
Property.............................................................. 33
Competition........................................................... 33
Employees............................................................. 34
REGULATION............................................................ 34
Holding Company Regulation............................................ 34
Other Regulatory Considerations....................................... 35
Federal Securities Laws............................................... 38
4
Section Page
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MANAGEMENT OF THE COMPANY............................................. 39
Directors............................................................. 39
Committees............................................................ 40
Executive Officers.................................................... 40
Compensation.......................................................... 40
Employee Benefit Plans................................................ 40
PROPOSAL TWO-ELECTION OF CLASS OF DIRECTORS........................... 40
Recommendation of Directors........................................... 41
MANAGEMENT OF THE BANK................................................ 41
Directors and Nominees................................................ 41
Meetings of Board of Directors and Committees......................... 42
Principal Officers of the Bank........................................ 44
Compensation of Directors............................................. 45
Executive Compensation................................................ 45
Compensation Committee Report......................................... 49
Comparative Performance Graph......................................... 51
Employment Agreements................................................. 51
Benefits Under Plans.................................................. 53
Security Ownership of Management and Directors........................ 56
Transactions with Certain Related Persons............................. 56
Certain Business Relationships........................................ 57
Prohibition on Beneficial Ownership of Five Percent of Common Stock... 57
PROPOSAL THREE-ELECTION OF CLERK...................................... 57
Recommendation of Directors........................................... 58
PROPOSAL FOUR-INCREASE IN AUTHORIZED SHARES UNDER THE 1995 MANAGEMENT
STOCK OPTION PLAN..................................................... 58
Proposal to Stockholders.............................................. 58
Description of the 1995 Management Stock Option Plan.................. 58
Federal Income Tax Consequences of the 1995 Management
Stock Option Plan................................................... 60
Required Vote......................................................... 61
Recommendation of Directors........................................... 61
STOCKHOLDER PROPOSALS................................................. 62
INDEPENDENT ACCOUNTANTS............................................... 62
OTHER MATTERS......................................................... 62
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT 1934..... 62
Appendix A Agreement and Plan of Reorganization....................... A-1
Appendix B Provisions of Massachusetts General Laws Relating
to Rights of Dissenting Stockholders................................ B-1
Appendix C Articles of Organization and By-Laws of SIS Bancorp, Inc.... C-1
5
SUMMARY OF PROXY STATEMENT-PROSPECTUS
The following is a brief summary of certain information contained elsewhere in
this Proxy Statement-Prospectus. This summary is not intended to be a complete
statement of all material features of the matters being considered and voted on
by the stockholders of the Bank and is qualified in its entirety by reference to
the full text of this Proxy Statement-Prospectus, including the Appendices
hereto, and the documents referred to herein.
Date, Time and Place of Annual Meeting
The Annual Meeting of Stockholders (the "Annual Meeting") of Springfield
Institution for Savings (the "Bank" or "SISBank") will be held at Springfield
Marriott Hotel, 1500 Main Street, Springfield, Massachusetts at 10:00 a.m.
local time on Thursday, May 9, 1996.
Purposes of the Annual Meeting
The purposes of the Annual Meeting are to consider and vote upon proposals:
(1) to consider and vote upon the formation of a holding company for the Bank by
the approval of the Agreement and Plan of Reorganization dated as of January 31,
1996 (the "Plan of Reorganization"), between the Bank and SIS Bancorp, Inc. (the
"Company"), pursuant to which the Bank will become a wholly-owned subsidiary of
the Company and each issued and outstanding share of common stock of the Bank,
par value $1.00 per share ("Bank Common Stock"), other than shares held by
stockholders, if any, exercising dissenters' appraisal rights, will be exchanged
for one share of common stock of the Company, par value $0.01 per share
("Company Common Stock"); (2) to elect a class of five Directors of the Bank for
a three-year term; (3) to elect a Clerk of the Bank; (4) to amend the 1995
Management Stock Option Plan to increase the number of shares reserved for
issuance thereunder; and (5) to transact such other business as may properly
come before the Annual Meeting or any adjournments or postponements thereof.
Record Date
The Board of Directors has fixed the close of business on March 13, 1996 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. Only holders of record of Bank Common Stock at the close of business on
the Record Date will be entitled to notice of and to vote at the Annual Meeting
or any adjournments thereof. At the close of business on the Record Date there
were 5,718,200 shares of Bank Common Stock issued and outstanding, and each such
outstanding share is entitled to one vote. As of such date there were
approximately 1,213 holders of record of the Bank Common Stock. On the Record
Date, the Directors and principal officers of the Bank beneficially owned in the
aggregate 295,286 shares of Bank Common Stock or 5.16% of the issued and
outstanding shares of Bank Common Stock which may be voted at the Annual
Meeting, all of which are expected to be voted at the Annual Meeting in favor of
the Reorganization and the Board of Directors' recommendations regarding the
election of Directors and Clerk of the Bank and the amendment of the 1995
Management Stock Option Plan.
Stockholder Vote Required
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares of Bank Common Stock is necessary to constitute a
quorum at the Annual Meeting for the transaction of business. A quorum being
present, the affirmative vote of two-thirds of the issued and outstanding shares
of Bank Common Stock eligible to be cast by stockholders of record of the Bank
at the close of business on the Record Date is required to approve the Plan of
Reorganization (Proposal One). The affirmative vote of a plurality of the votes
cast at the Annual Meeting is required to approve the election of each of the
persons within the proposed class of five Directors as a Director of the Bank
(Proposal Two). The affirmative vote of a majority of the shares
6
present and voting, in person or by proxy, is necessary to approve the election
of a Clerk of the Bank (Proposal Three). The affirmative vote of a majority of
the issued and outstanding shares of Bank Common Stock eligible to be cast by
stockholders of record of the Bank at the close of business on the Record Date
is required to approve the proposed amendment to the 1995 Management Stock
Option Plan (Proposal Four).
PROPOSAL ONE-FORMATION OF HOLDING COMPANY
Proposal to Stockholders
At the Annual Meeting, stockholders of the Bank are being asked to approve the
formation of a holding company for the Bank, to be accomplished by approving the
Plan of Reorganization pursuant to which the Company, a newly-formed
Massachusetts corporation organized at the direction of the Bank, will acquire
all of the issued and outstanding shares of Bank Common Stock in exchange for an
equal number of shares of Company Common Stock. Upon the effective date of the
transactions contemplated by the Plan of Reorganization, the outstanding Bank
Common Stock, other than shares held by stockholders, if any, exercising
dissenters' appraisal rights, will be exchanged for Company Common Stock on a
one-for-one basis (the "Reorganization"). The Bank will then be a wholly-owned
subsidiary of the Company and the stockholders of the Bank will then be
stockholders of the Company. A copy of the Plan of Reorganization is attached to
this Proxy Statement-Prospectus as Appendix A and should be read in its
entirety. See "Proposal One-Formation of Holding Company."
Recommendation of Directors
THE BOARD OF DIRECTORS OF THE BANK HAS APPROVED THE PLAN OF REORGANIZATION AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF THE PLAN OF
REORGANIZATION.
Parties to the Plan of Reorganization
Springfield Institution for Savings. The Bank is a Massachusetts-chartered
savings bank organized in 1827 and headquartered in Springfield, Massachusetts.
The conversion of the Bank from a savings bank in mutual form to a savings bank
in stock form was completed in February 1995. As of the date of this Proxy
Statement-Prospectus, the Bank had authorized capital of 25,000,000 shares of
common stock, par value $1.00 per share, of which there were 5,718,200 shares
issued and outstanding, and 5,000,000 shares of preferred stock, par value $1.00
per share, none of which was issued and outstanding. The Bank is engaged
principally in the business of attracting deposits from the general public and
investing those deposits in real estate mortgage, construction, consumer and
commercial loans, and in various securities. The Bank conducts its business from
its main office in Springfield and from a network of 20 branches in
Massachusetts.
SIS Bancorp, Inc. The Company is a newly-formed Massachusetts corporation
organized at the direction of the Bank. Pursuant to the Plan of Reorganization,
the Company will acquire all of the issued and outstanding shares of Bank Common
Stock in exchange for an equal number of shares of Company Common Stock. As of
the date of this Proxy Statement-Prospectus, the Company had authorized capital
of 250,000 shares of common stock, par value $0.01 per share, and 50,000 shares
of preferred stock, par value $0.01 per share, none of which was issued and
outstanding. Prior to the effective time of the Reorganization, and as a
condition thereto, the Company will amend its existing articles of organization
to increase its authorized capital to 25,000,000 shares of common stock, par
value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01
per share. Upon completion of the Reorganization, the Bank will be a
wholly-owned subsidiary of the Company. See "Business of the Company."
The principal executive offices of both the Bank and the Company are located
at 1441 Main Street, Springfield, Massachusetts 01102. The telephone number for
both offices is (413) 748-8000.
7
Reasons for Formation of Holding Company
The Board of Directors of the SISBank believes that the holding company
structure will better suit the current and future interests of the SISBank
shareholders and customers. The Board of Directors has determined that the
establishment of a bank holding company will provide additional flexibility to
respond to the changing and expanding needs of SISBank's present and future
customers for financial services, thereby improving SISBank's competitive
position. Moreover, it is expected that formation of a bank holding company will
facilitate expansion and entry into other financial areas either through the
creation of new subsidiaries or through the acquisition of other companies,
including banks. The Board of Directors believes that such growth should result
in enhanced long-term shareholder value. See "Proposal One-Formation of Holding
Company-Reasons for Holding Company Formation."
Regulation and Supervision
After the holding company formation, the Company and the Bank will be subject
to extensive regulation. The Company will be subject to regulation by the Board
of Governors of the Federal Reserve System ("Federal Reserve Board"), the
Secretary of State of the Commonwealth of Massachusetts and the SEC, and may, in
certain circumstances, be subject to regulation by the Commissioner of Banks of
the Commonwealth of Massachusetts (the "Commissioner of Banks"). The Bank will
continue to be subject to federal and state law, including regulation by the
FDIC and the Commissioner of Banks. Company Common Stock will be registered with
the SEC pursuant to the Exchange Act. If the Bank abandons the Reorganization,
the Bank Common Stock would continue to be registered with the FDIC. See
"Regulation."
Required Regulatory Approvals
An application will be submitted to the Commissioner of Banks to obtain his
approval of the Plan of Reorganization and the formation of the holding company.
In addition, the Company is required to provide prior notice to the Federal
Reserve Bank of Boston (the "Reserve Bank") of its proposed acquisition of all
of the issued and outstanding capital stock of the Bank in accordance with the
Plan of Reorganization. See "Proposal One-Formation of Holding
Company-Conditions of the Reorganization."
The Bank and the Company have the right under the terms of the Plan of
Reorganization to abandon the Reorganization if, among other things, the
necessary regulatory approvals cannot be obtained or if the conditions or
obligations associated with such regulatory approval make the Reorganization
inadvisable in the opinion of the Bank or the Company. Any delays which are
encountered in seeking any of the foregoing regulatory approvals could result in
a delay in the consummation of the Reorganization. See "Proposal One-Formation
of Holding Company-Regulation."
Market for Stock and Dividends
The Bank Common Stock has been traded on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") System under the symbol "SISB"
since the Bank's conversion from mutual to stock form in February 1995.
Following the formation of the holding company, the Company expects that the
Company Common Stock will be traded on the NASDAQ National Market System under
the symbol "SISB."
While the Company does not anticipate paying any cash dividends on the Company
Common Stock in the near future, the Company's Board of Directors would be
expected to periodically review whether any cash dividend should be paid.
Tax Consequences
The Bank will receive a legal opinion to the effect that neither the Company,
the Bank nor the stockholders of the Bank (except dissenting stockholders) will
recognize gain or loss for federal income tax purposes as a
8
result of the holding company formation, and that the stockholders of the Bank
who exercise dissenters' rights will recognize gain or loss in the transaction
for federal income tax purposes. The Bank also has net operating loss
carryforwards and tax credit carryforwards, the rate of utilization of which
could be impacted by the holding company formation. See "Proposal One-Formation
of Holding Company-Income Tax Consequences."
Dissenters' Rights
Pursuant to Massachusetts law, holders of Bank Common Stock have dissenters'
appraisal rights in connection with the formation of the holding company. The
Bank and any such stockholder shall in such cases have the rights and duties and
shall follow the procedure set forth in Sections 85 to 98, inclusive, of Chapter
156B of the General Laws of Massachusetts, a copy of which is attached to this
Proxy Statement-Prospectus as Appendix B and should be read in its entirety. If
the Reorganization is completed, any stockholders of the Bank who intend to
exercise dissenters' rights must carefully follow the procedures described
therein. See "Proposal One-Formation of Holding Company-Rights of Dissenting
Stockholders."
Comparison of Stockholder Rights
The Bank, as a Massachusetts savings bank, is regulated under Massachusetts
banking laws. The Company, as a Massachusetts business corporation, is governed
by the corporate laws of Massachusetts. Although the Articles of Organization
and By-laws of the Company and the Amended and Restated Charter and By-laws of
the Bank are similar, there are certain important differences of which
stockholders of the Bank should be aware. Copies of the Articles of Organization
and By-laws of the Company are attached to this Proxy Statement-Prospectus as
Appendix C and should be read in their entirety. See "Comparison of Stockholder
Rights."
PROPOSAL TWO-ELECTION OF CLASS OF DIRECTORS
Proposal to Stockholders
The Bank's Amended and Restated Charter and By-laws provide that the Board of
Directors shall be divided into three classes as nearly equal in size as
possible, with the Directors in each class serving for a term of three years. As
the term of one class expires, a successor class is elected at each annual
meeting of stockholders.
At the Annual Meeting, stockholders of the Bank are being asked to elect
William B. Hart, Jr., Thomas O'Brien, Teresita Alicea, Paulette
Henderson-Johnson and John H. Southworth, the five nominees proposed by the
Board of Directors of the Bank, as Directors of the Bank to serve until the 1999
annual meeting of stockholders and until their successors are elected and
qualified. See "Proposal Two-Election of Class of Directors."
Recommendation of Directors
THE BOARD OF DIRECTORS OF THE BANK RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ELECTION OF THE NOMINEES PROPOSED BY THE BOARD OF DIRECTORS OF THE BANK AS
DIRECTORS OF THE BANK.
PROPOSAL THREE-ELECTION OF CLERK
Proposal to Stockholders
Under Massachusetts law, the Clerk of the Bank is required to be elected by
the stockholders at an annual meeting or special meeting duly called for that
purpose. At the Annual Meeting, stockholders of the Bank are being asked to
elect Michael E. Tucker, the nominee proposed by the Board of Directors, as the
Clerk of the
9
Bank to serve until the 1997 annual meeting of stockholders and until his
successor is elected and qualified. See "Proposal Three-Election of Clerk."
Recommendation of Directors
THE BOARD OF DIRECTORS OF THE BANK RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ELECTION OF MICHAEL E. TUCKER AS CLERK OF THE BANK.
PROPOSAL FOUR-INCREASE IN AUTHORIZED SHARES UNDER
THE 1995 MANAGEMENT STOCK OPTION PLAN
Proposal to Stockholders
The Compensation Committee of the Bank's Board of Directors (the "Compensation
Committee") has recommended to the Board of Directors, and the Board of
Directors has approved, subject to receipt of the required shareholder and
regulatory approvals, an amendment to the Bank's 1995 Management Stock Option
Plan (the "Management Stock Option Plan"), pursuant to which the number of
shares authorized for issuance under such plan would be increased from 445,000
to 695,000.
The additional shares are intended to attract new employees and to retain and
reward existing employees of the Bank. The terms of options awarded under the
Management Stock Option Plan are established by the Compensation Committee,
acting in its discretion, subject to certain limitations established by the
terms of the Management Stock Option Plan. See "Proposal Four-Increase in
Authorized Shares under the 1995 Management Stock Option Plan-Description of the
1995 Management Stock Option Plan."
Recommendation of Directors
THE BOARD OF DIRECTORS OF THE BANK RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE AMENDMENT TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE
MANAGEMENT STOCK OPTION PLAN.
10
SPRINGFIELD INSTITUTION FOR SAVINGS
------------
SIS BANCORP, INC.
------------
VOTING, REVOCATION AND SOLICITATION OF PROXIES
Annual Meeting
This Proxy Statement-Prospectus is being furnished in connection with the
solicitation of proxies by the Board of Directors of the Bank for use at the
Annual Meeting of Stockholders to be held at Springfield Marriott Hotel, 1500
Main Street, Springfield, Massachusetts at 10:00 a.m. local time on Thursday,
May 9, 1996, and any adjournments thereof.
As more fully described in this Proxy Statement-Prospectus, the Annual Meeting
has been called (1) to consider and vote upon a proposal to form a holding
company for the Bank by the approval of the Plan of Reorganization pursuant to
which the Bank will become a wholly-owned subsidiary of the Company and each
issued and outstanding share of Bank Common Stock, other than shares held by
stockholders, if any, exercising dissenters' appraisal rights, will be exchanged
for one share of Company Common Stock, (2) to elect a class of five Directors of
the Bank for a three-year term, (3) to elect a Clerk of the Bank; (4) to amend
the 1995 Management Stock Option Plan to increase the number of shares reserved
for issuance thereunder; and (5) to transact such other business as may properly
come before the Annual Meeting or any adjournments or postponements thereof. See
"Proposal One-Formation of Holding Company."
Record Date
The Board of Directors of the Bank has fixed the close of business on March
13, 1996 as the Record Date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting and any adjournments thereof. Only
holders of record of Bank Common Stock at the close of business on the Record
Date will be entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof. At the close of business on the Record Date, there were
5,718,200 shares of Bank Common Stock issued and outstanding and entitled to
vote at the Annual Meeting and any adjournments thereof. As of such date there
were approximately 1,213 holders of record of Bank Common Stock. The holders of
each share of Bank Common Stock outstanding as of the close of business on the
Record Date will be entitled to one vote for each share held of record upon each
matter properly submitted to the Annual Meeting or any adjournments thereof.
Proxies
Holders of Bank Common Stock are requested to complete, date, sign and
promptly return the accompanying proxy card in the enclosed envelope which
requires no postage if mailed in the United States. If the enclosed form of
proxy is properly executed and returned to the Bank in time to be voted at the
Annual Meeting, the shares represented thereby will, unless such proxy has
previously been revoked, be voted in accordance with the instructions marked
thereon. Executed proxies with no instructions indicated thereon will be voted
(1) FOR the approval of the Plan of Reorganization, (2) FOR the election of the
five nominees of the Board of Directors of the Bank as Directors, (3) FOR the
election of Michael E. Tucker as Clerk of the Bank, (4) FOR the approval of the
amendment to the 1995 Management Stock Option Plan and (5) in such manner as
management's proxy-holders shall decide on such other matters as may properly
come before the Annual Meeting.
The presence of a stockholder at the Annual Meeting will not automatically
revoke a stockholder's proxy. A stockholder may, however, revoke a proxy at any
time prior to the voting thereof on any matter (without, however, affecting any
vote taken prior to such revocation) by filing with the Clerk of the Bank a
written notice of revocation, by delivering to the Bank a duly executed proxy
bearing a later date, or by attending the Annual
11
Meeting and voting in person. All written notices of revocation and other
communications with respect to revocation of proxies in connection with the
Annual Meeting should be addressed as follows: Springfield Institution for
Savings, 1441 Main Street, Springfield, Massachusetts 01102, Attention: Michael
E. Tucker, Clerk.
It is not anticipated that any matters other than those set forth in proposals
(1)-(4) contained in this Proxy Statement-Prospectus will be brought before the
Annual Meeting. If any other matters properly come before the Annual Meeting,
the persons named as proxies will vote upon such matters in their discretion in
accordance with their best judgment.
In addition to use of the mails, proxies may be solicited personally or by
telephone or telegraph by officers, Directors and employees of the Bank who will
not be specially compensated for such solicitation activities. Arrangements will
also be made with brokerage houses and other custodians, nominees and
fiduciaries for forwarding solicitation materials to the beneficial owners of
shares held of record by such persons, and the Bank will reimburse such persons
for their reasonable out-of-pocket expenses incurred in that connection. The
Bank has also retained Morrow & Co., Inc., a proxy soliciting firm, to assist in
solicitation of proxies at a fee of $7,500, plus reimbursement of certain
out-of-pocket costs. The cost of soliciting proxies will be borne by the Bank,
including the fee of $7,500.
Quorum; Vote Required
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares of Bank Common Stock is necessary to constitute a
quorum at the Annual Meeting for the transaction of business. Abstentions and
"broker non-votes" (as defined below) will be counted as present for purposes of
determining the presence or absence of a quorum for the transaction of business
at the Annual Meeting. A quorum being present, the affirmative vote of the
holders of two-thirds of the issued and outstanding shares of Bank Common Stock
eligible to be cast by stockholders of record at the close of business on the
Record Date is required to approve the Plan of Reorganization (Proposal One). By
voting for the Plan of Reorganization, stockholders of the Bank shall be deemed
to authorize the Bank to take all appropriate action to implement the Plan of
Reorganization. Abstentions and broker non-votes will not be counted as votes
"for" the proposal to approve the Plan of Reorganization and, therefore, will
have the effect of votes against this proposal. The affirmative vote of a
plurality of the votes cast at the Annual Meeting is required to elect each of
the persons within the proposed class of five Directors as a Director of the
Bank (Proposal Two). Abstentions and broker non-votes will not be counted as
"votes cast" for purposes of electing a class of five Directors and, therefore,
will not affect the election of Directors. The affirmative vote of a majority of
the shares present and voting, in person or by proxy, is necessary to elect a
Clerk of the Bank (Proposal Three). Abstentions and broker non-votes will not be
included among the votes deemed to be cast at the Annual Meeting for purposes of
electing a Clerk of the Bank and, therefore, will not have the effect of either
votes "for" or votes "against" this proposal. The affirmative vote of the
holders of a majority of the issued and outstanding shares of Bank Common Stock
eligible to be cast by stockholders of record at the close of business on the
Record Date is required to approve the proposal to amend the 1995 Management
Stock Option Plan (Proposal Four). Abstentions and broker non-votes will not be
counted as votes "for" the proposal to amend the 1995 Management Stock Option
Plan and, therefore, will have the effect of votes against this proposal.
A "broker non-vote" is a proxy from a broker or other nominee indicating that
such person has not received instructions from the beneficial owner or other
person entitled to vote the shares which are the subject of the proxy on a
particular matter with respect to which the broker or other nominee does not
have discretionary voting power.
The Directors and principal officers of the Bank have indicated that they
intend to vote all shares of Bank Common Stock which they are entitled to vote
in favor of each of the Proposals presented herein. On the Record Date, the
Directors and principal officers of the Bank in the aggregate had the right to
vote approximately 295,286 shares of Bank Common Stock (including shares
allocated to the accounts of principal officers under the ESOP described below),
representing approximately 5.16% of the outstanding Bank Common Stock as of such
date. See "Management of the Bank."
12
The Bank's Employee Stock Ownership Plan (the "ESOP") held on the Record Date
445,000 shares of Bank Common Stock, of which 54,812 shares had been allocated
to 363 ESOP members, all of whom are employees of the Bank. Under the ESOP Trust
Agreement, the trustee of the ESOP is directed to vote allocated shares in
accordance with the instructions of the members to whom the shares have been
allocated. In addition, the trustee is directed to vote unallocated and unvoted
shares in the same proportion as he is instructed to vote the allocated shares.
Any such action would be subject, however to the trustee's exercise of its
fiduciary duties under applicable law. See "Management of the Bank-Benefits
Under Plans-Employee Stock Ownership Plan."
PROPOSAL ONE-FORMATION OF HOLDING COMPANY
The following descriptions are qualified in their entirety by reference and
are made subject to the Plan of Reorganization attached hereto as Appendix A,
certain provisions of the General Laws of Massachusetts relating to the rights
of dissenting stockholders attached hereto as Appendix B, and the Articles of
Organization and By-laws of the Company attached hereto as Appendix C.
Recommendation of Directors
The Boards of Directors of the Bank and of the Company have each approved the
Plan of Reorganization, which provides for the acquisition of all outstanding
shares of Bank Common Stock by the Company in exchange for an equal number of
shares of Company Common Stock pursuant to the provisions of Section 26B of
Chapter 172 of the General Laws of Massachusetts. The Plan of Reorganization
will not take effect unless it is approved by the affirmative vote of two-thirds
of the total votes eligible to be cast by stockholders of record as of the close
of business on the Record Date. Unless authority to do so has been limited in a
proxy, it is the intention of the persons named as proxies to vote the shares to
which the proxy relates for the approval of the Plan of Reorganization.
THE BOARD OF DIRECTORS OF THE BANK BELIEVES THAT THE PLAN OF REORGANIZATION IS
IN THE BEST INTERESTS OF THE BANK AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD
OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF THE PLAN OF
REORGANIZATION.
Description of the Plan of Reorganization
The Company has been organized as a Massachusetts corporation at the direction
of the Bank for the purpose of becoming the holding company of the Bank. The
Company and the Bank have entered into the Plan of Reorganization.
Under the Plan of Reorganization, the Company will become the owner of all of
the outstanding shares of Bank Common Stock, and each stockholder of the Bank
who does not exercise dissenters' appraisal rights with respect to the Plan of
Reorganization will become the owner of one share of Company Common Stock for
each share of Bank Common Stock held immediately prior to the consummation of
the Reorganization. Upon the effective date of the Reorganization, each share of
Bank Common Stock will be automatically exchanged for one share of Company
Common Stock. The Reorganization will become effective (the "Effective Date") on
the first business day following the date on which the Bank and the Company
advise the Commissioner of Banks in writing that all the conditions precedent to
the Reorganization becoming effective have been satisfied and that the Plan of
Reorganization has not been abandoned by the Bank or the Company. As a condition
to the consummation of the Reorganization, the Company and the Bank must receive
certain regulatory approvals. See "-Conditions of the Reorganization." Neither
the Company nor the Bank can predict whether such approvals will be obtained or
whether such approvals will be on terms satisfactory to the Company and the
Bank. Accordingly, the consummation of the Reorganization may be subject to a
delay which may, under certain circumstances, be significant. If the
stockholders approve the Plan of Reorganization at the Annual Meeting, the
Company and the Bank shall have the right to consummate the Reorganization,
subject to the satisfaction of the conditions contained in the Plan of
Reorganization, at any time thereafter.
13
The number of shares of Company Common Stock to be issued on the Effective
Date will be equal the number of shares of Bank Common Stock issued and
outstanding immediately prior thereto, less the number of shares of Bank Common
Stock, if any, held by dissenting stockholders. Shares of Company Common Stock
which would have been issued had dissenting stockholders not dissented will
remain as authorized but unissued shares of Company Common Stock. Any shares of
Company Common Stock which are outstanding prior to the Effective Date, all of
which, if any, would be held by the Bank, will be redeemed at par value as part
of the Reorganization and retired to the status of authorized and unissued
shares.
The outstanding stock certificates of Bank Common Stock which, prior to the
Reorganization, represented shares of Bank Common Stock, will thereafter for all
purposes represent an equal number of shares of Company Common Stock, except for
certificates held by dissenting stockholders and as set forth below. After the
Effective Date, the Company will issue and deliver to the transfer agent (the
"Transfer Agent") for the Bank and the Company certificates representing the
number of shares of Company Common Stock issuable in connection with the
Reorganization. The Company and the Bank will notify the stockholders by mail at
their addresses as shown on the Bank's records and, as may be required, by
publication that they may present their certificates to the Transfer Agent for
exchange. Stockholders may exchange their present stock certificates
representing Bank Common Stock for new certificates representing Company Common
Stock by surrendering their Bank Common Stock certificates to the Transfer
Agent. They will then receive in exchange therefor a certificate representing an
equal number of shares of Company Common Stock. Until so exchanged,
stockholders' present stock certificates representing Bank Common Stock will for
all purposes represent an equal number of shares of Company Common Stock and the
holders of those certificates will have all the other rights of stockholders of
the Company. However, the Company at any time may withhold any dividends that
may be declared on shares of Company Common Stock until stockholders present
their Bank Common Stock certificates to the Transfer Agent for exchange. In such
case, upon delivery of such certificates or as soon thereafter as practicable,
such persons shall be entitled to receive from the Company or the Transfer Agent
an amount equal to all accrued dividends (without interest thereon and less the
amount of taxes, if any, which may have been imposed or paid thereon or which
are required by law to be withheld in respect thereof) on the shares represented
thereby.
After consummation of the Reorganization, the Bank, as a subsidiary of the
Company, will continue to serve the communities it presently serves from its
existing office locations. The assets, property, rights and powers, debts,
liabilities, obligations and duties of the Bank will not be changed by the
Reorganization, except for the proposed initial transfer of $250,000 from the
Bank's stockholders' equity to the Company. See "Financial Resources of the
Company." Similarly, the Amended and Restated Charter, By-laws and name of the
Bank will not be affected by consummation of the Reorganization. Pursuant to the
Plan of Reorganization, upon consummation of the Reorganization the director and
management incentive stock option plans and director and management restricted
stock plans of the Bank (the "Stock Option Plans" and the "Restricted Stock
Plans", respectively), will become the director and management incentive stock
option plans and director and management restricted stock plans of the Company.
In addition, it is expected that upon consummation of the Reorganization the
Company will become a participating employer of the Bank's ESOP so that
employees of the Company will be eligible to participate in the Bank's ESOP.
Certain officers of the Bank will initially serve as the principal officers of
the Company. See "Management of the Company."
The Reorganization will be treated as a "pooling of interests" for accounting
purposes.
Reasons for the Holding Company Formation
The Board of Directors of the Bank believes that a holding company structure
will better suit the current and future interests of the Bank's shareholders and
customers. The Board of Directors has determined that the establishment of a
bank holding company will provide additional flexibility to respond to the
changing and expanding needs of the Bank's present and future customers for
financial services, thereby improving the Bank's competitive position and
increasing long-term value to stockholders. In addition, a holding company
structure will provide greater flexibility for meeting the future financial
needs of the Bank or other subsidiaries of the Company. The Company, unlike the
Bank, will not generally be subject to any regulatory limitations on the
14
amounts which it can invest in its subsidiaries and other businesses. In
addition, the Company, unlike the Bank, will not be required to obtain the prior
approval of the Commissioner of Banks before issuing shares of its capital
stock. The Company will also be permitted, in accordance with applicable
regulations of the Federal Reserve Board to purchase or redeem its equity
securities. Although current Massachusetts banking laws would permit the Bank to
purchase its own stock, federal limitations on the permissible activities and
investments of state-chartered banks imposed by the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") may prohibit such purchases by
the Bank. See "Regulation." With a parent holding company as a potential source
of additional capital, the Bank should be better able to undertake necessary
capital expenditures and/or grow its assets, both of which may improve the
Bank's competitive position within its market area. There are no current
agreements or understandings with respect to any investments or the issuance
(other than pursuant to the Stock Option Plan and the Restricted Stock Plans) of
any additional shares of capital stock by either the Bank or the Company.
Formation of a holding company should also improve the competitive position of
the Bank in an evolving and consolidating market. The holding company structure
should facilitate the Bank's expansion and entry into other areas of financial
services, either through the creation of new subsidiaries of the parent holding
company or through the acquisition of or affiliation with other banks as well as
other companies engaged in bank-related activities. In its present form, the
only practical way for the Bank to increase its size or affiliate with another
banking institution is by merger with, or acquisition of substantially all the
assets of, the other institution. In either case, the acquired entity is
absorbed by the acquirer and ceases to operate as an ongoing business
organization. A holding company structure, however, would permit an acquired
entity to operate on a more autonomous basis as a wholly-owned subsidiary of the
Company. For example, the acquired institution could retain its own directors,
officers, corporate name and local identity. This more autonomous operation may
be decisive in acquisition negotiations. The Board of Directors of the Bank
believes that if the Company can build a multibank franchise composed of
well-established community banks with strong ties to local consumers and small
businesses, then the consolidated Company, by benefitting from improved
economies of scale and expanded managerial and financial resources, should be
able to provide in a cost effective manner an expanded range of superior quality
products and services, which will, in turn, enable the Company to compete more
effectively with the larger regional and out-of-state banking organizations
operating within the Company's market area. While the Bank, from time to time,
explores acquisition and affiliation possibilities, neither the Bank nor the
Company has any current agreements or understandings for the acquisition of or
affiliation with any financial institution or other company and there are no
assurances that any such acquisitions or affiliations will occur.
It is recognized that some increased costs, including administrative expenses
and franchise and other taxes, will be incurred in the formation and operation
of the Company. However, such increased costs are not expected to have a
material adverse effect on the consolidated financial results of the Company and
the Bank.
Financial Resources of the Company
The Bank currently intends to transfer $250,000 as a capital contribution to
the Company immediately prior to the effective time of the Reorganization. Upon
consummation of the Reorganization, the shares of the Company to be issued to
the Bank in connection with such capital contribution, will be redeemed at par
value and retired to the status of authorized and unissued shares. See
"Capitalization." Immediately following the Reorganization, therefore, the
assets of the Company, on an unconsolidated basis, will consist of the initial
transfer of funds by the Bank and all of the then outstanding shares of Bank
Common Stock. See "Capitalization." A transfer of $250,000 to the Company would
reduce the Bank's stockholders' equity as of December 31, 1995, to approximately
$81,219,000 on an unconsolidated basis. If this transfer to the Company had been
made on December 31, 1995, the Bank's tier 1 leverage capital ratio, tier 1
risk-based capital ratio and total risk-based capital ratio would have been
approximately 7.55%, 12.49% and 13.73% respectively, each of which is in excess
of the Bank's minimum regulatory requirements and would permit the Bank to
qualify as a "well capitalized" depositary institution for the purposes of
current FDIC capital regulations.
15
The actual amount of funds which may be transferred, however, is subject to
change and may be greater or less, depending on a number of factors, including
the Company's future financial requirements and applicable regulatory
restrictions. In this regard, the Bank may also lend funds to the Company,
either as part of or in addition to the transfer of funds being made at the time
of the Reorganization or thereafter. The funds provided to the Company by the
Bank may be used by the Company for various corporate purposes, including the
payment of expenses to be incurred by the Company in the ordinary course of
business. See "-Income Tax Consequences."
Additional financial resources may be available to the Company in the future
through borrowings, debt or equity financings, or dividends from the Bank, other
acquired entities or new businesses. Some or all of the foregoing will be
subject to compliance with certain regulatory restrictions. At the time of the
Reorganization, the Bank may also transfer to the Company an amount equal to
actual year to date and anticipated 1996 earnings and profits, as determined for
tax purposes. In addition, the Bank may lend amounts to the Company both prior
to the consummation of the Reorganization and thereafter. Such loans would be
subject to certain restrictions under Section 23A the Federal Reserve Act, as
amended, and other regulatory limitations. There can be no assurance, however,
as to the amount of additional financial resources which will be available to
the Company. Dividends from the Bank to the Company will also be subject to tax
and regulatory limitations and requirements. See "-Income Tax Consequences" and
"Market for Stock and Dividends."
Conditions of the Reorganization
The Plan of Reorganization provides that it shall not become effective until
all of the following first shall have occurred: (i) the Plan of Reorganization
shall have been approved by a vote of the holders of two-thirds of the
outstanding shares of Bank Common Stock, (ii) the Plan of Reorganization shall
have been approved by the Commissioner of Banks under Section 26B of Chapter 172
of the General Laws of Massachusetts, (iii) the Company shall have provided
notice to the Reserve Bank of its proposed acquisition of all of the capital
stock of the Bank in accordance with the Plan of Reorganization as required
under the regulations of the Federal Reserve Board contained at 12 C.F.R.
(S)225.15 and neither the Reserve Bank nor the Federal Reserve Board shall have
objected to the Reorganization within thirty days after the date of the Reserve
Bank's receipt of such notice, (iv) the Bank and the Company shall have received
a favorable opinion from counsel concerning the federal income tax consequences
of the Reorganization, (v) the shares of Company Common Stock to be issued in
exchange for Bank Common Stock pursuant to the Reorganization shall be
registered or qualified for issuance to the extent required under applicable
state securities laws, and (vi) the Bank and the Company shall have obtained all
other necessary consents, permissions and approvals and taken all other actions
required or otherwise deemed to be necessary or appropriate, including the
amendment of the Company's articles of organization to increase its authorized
capital to 25,000,000 shares of common stock, par value $0.01 per share, and
5,000,000 shares of preferred stock, par value $0.01 per share, for the holding
company formation.
It is expected that an application will be filed with the Commissioner of
Banks promptly after the date of this Proxy Statement-Prospectus to obtain
approval of the Plan of Reorganization. The Commissioner of Banks will not
approve the Plan of Reorganization unless and until the Plan of Reorganization
has been approved by the Bank's stockholders. The Company will also file the
required notice of the Reorganization with the Reserve Bank at approximately the
same time as the application to the Commissioner of Banks is submitted. See
"Regulation-Holding Company Regulation." The Bank has received an opinion of
counsel regarding the federal income tax consequences of the Reorganization.
See "Income Tax Consequences."
If the Plan of Reorganization is approved by the Bank's stockholders at the
Annual Meeting, the holding company formation is expected to become effective as
soon thereafter as the required regulatory approvals are received. The Bank and
the Company have the right under the terms of the Plan of Reorganization to
abandon the Reorganization if, among other things, the necessary regulatory
approvals cannot be obtained or if the conditions or obligations associated with
any such regulatory approval make the Reorganization inadvisable in the opinion
of the Bank or the Company.
16
If the Plan of Reorganization is not approved at the Annual Meeting or all of
the necessary regulatory approvals are not obtained, the Bank will continue to
operate without a holding company structure. All expenses in connection with the
Reorganization will be paid by the Bank whether or not the Plan of
Reorganization is approved by its stockholders or the Reorganization is
consummated.
In addition, the Plan of Reorganization also provides that it may be abandoned
by either the Board of Directors of the Bank or the Company if the Board of
Directors of the Bank or the Company, as the case may be, determines that
consummation of the Reorganization would be inadvisable for any reason.
An application will be filed with the NASDAQ System for the listing of the
shares of Company Common Stock to be issued in the Reorganization in
substitution for the currently outstanding shares of Bank Common Stock using the
symbol "SISB," subject to completion of the Reorganization. The Bank expects
that approval for this substitution will be received prior to consummation of
the Reorganization. See "Market for Stock and Dividends."
Rights of Dissenting Stockholders
Any holder of Bank Common Stock (i) who files with the Bank before the taking
of the vote on the approval of the Plan of Reorganization, written objection to
the Plan of Reorganization, stating that he intends to demand payment for his
shares if the Reorganization is consummated, and (ii) whose shares are not voted
in favor of the Plan of Reorganization, has or may have the right to demand in
writing from the Bank, within 20 days after the date of mailing to him of notice
in writing that the Reorganization has become effective, payment for his shares
and an appraisal of the value thereof. In the event that the Reorganization is
completed, the Bank and any such dissenting stockholder will be required to
follow the procedure set forth in Sections 85 to 98, inclusive, of Chapter 156B
of the General Laws of Massachusetts. If the Board of Directors of either the
Bank or the Company determines that consummation of the Reorganization is
inadvisable for any reason and consequently exercises the right under the Plan
of Reorganization to abandon the Reorganization, no stockholder of the Bank will
have any right to demand payment for his shares of Bank Common Stock or an
appraisal of the value thereof, whether under the statutory provisions
summarized herein or otherwise, notwithstanding any prior notice filed with the
Bank or any other action that may be taken by the stockholder for the purposes
of exercising or otherwise perfecting the statutory rights of appraisal
described herein. A brief summary of the applicable sections of the General Laws
of Massachusetts is set forth below. However, this summary does not purport to
be a complete statement of the procedures to be followed by stockholders
desiring to exercise their rights to dissent from the Reorganization and is
qualified in its entirety be express reference to such sections, which are
included in this Proxy Statement-Prospectus as Appendix B.
A holder of Bank Common Stock intending to exercise his dissenter's right to
receive payment for his shares must file with the Bank, before the Annual
Meeting or at the Annual Meeting but before the vote on the Plan of
Reorganization, written objection to the Plan of Reorganization stating that he
intends to demand payment for his shares if the Reorganization is consummated
and must not vote in favor of the Reorganization at the Annual Meeting. Within
10 days after the Reorganization becomes effective, the Bank will give written
notice of such effectiveness by registered or certified mail to each holder of
Bank Common Stock who filed such written objection and who did not vote in favor
of the Plan of Reorganization. Such written notice of effectiveness will be
addressed to the stockholder at his last known address as it appears in the
stock record books of the Bank. Within 20 days after the mailing of such notice,
any holder of Bank Common Stock to whom the Bank was required to give such
notice may make written demand for payment for his shares from the Bank and in
such event, the Bank will be required to pay to him the fair value of his shares
within 30 days after the expiration of the period during which such demand may
be made. If during such 30-day period the Bank and the dissenting stockholder
fail to agree as to the fair value of such shares, the Bank or such stockholder
may have the fair value of the stock of all dissenting stockholders determined
by judicial proceedings by filing a bill in equity in the Superior Court in
Hampden County, Massachusetts, within four months after such 30-day period. For
the purposes of any such Superior Court determination, the value of the shares
of the Bank is to be determined as of the day preceding the date of the vote of
the stockholders approving the Plan of Reorganization and shall be
17
exclusive of any element of value arising from the expectation or accomplishment
of the Reorganization. Upon making such written demand for payment, the
dissenting stockholder will not thereafter be entitled to notices of meetings of
stockholders, to vote, or to dividends unless no suit is filed within four
months to determine the value of the stock, any such suit is dismissed as to
that stockholder, or the stockholder withdraws his objection in writing with the
written approval of the Bank.
Failure to affirmatively vote against the Plan of Reorganization does not
constitute a waiver of a dissenting stockholder's right to receive payment for
his shares of Bank Common Stock, provided that such dissenting stockholder has
furnished the requisite notice of objection prior to the stockholders' vote on
the Plan of Reorganization and such stockholder does not in fact affirmatively
vote in favor of the Plan of Reorganization. Likewise, an affirmative vote
against the Plan of Reorganization does not entitle a stockholder to receive
payment for his shares of Bank Common Stock unless such stockholder has also
furnished the requisite notice of objection and undertaken the additional steps
summarized in the preceding paragraph required to perfect his dissenters' rights
of appraisal.
The enforcement by a dissenting stockholder of his right to receive payment
for his Bank Common Stock in the manner provided by Sections 85 through 98 of
Chapter 156B of the General Laws of Massachusetts will be his exclusive remedy,
except that a stockholder shall not be excluded from bringing or maintaining an
appropriate proceeding to obtain relief on the ground that consummation of the
Reorganization will be or is illegal or fraudulent as to him.
Income Tax Consequences
General. The Bank and its subsidiaries are subject to those rules of federal
income taxation which are generally applicable to corporations under the
Internal Revenue Code of 1986, as amended (the "Code"). As members of an
affiliated group of corporations within the meaning of Section 1504 of the Code,
the Bank and its subsidiaries file a consolidated federal income tax return,
which has the effect, among other things, of eliminating or deferring the tax
consequences of certain intercompany transactions, including dividends, in the
computation of consolidated taxable income for federal tax purposes. The Bank
and its subsidiaries report their income using a calendar taxable year and the
accrual method of accounting.
Tax Opinion. The Bank will not seek a ruling from the Internal Revenue Service
concerning the federal income tax consequences of the proposed holding company
formation, but will instead rely on an opinion to be received from its counsel,
Sullivan & Worcester LLP. Unlike a private letter ruling from the Internal
Revenue Service, an opinion of counsel has no binding effect on the Internal
Revenue Service. The Bank has been advised by Sullivan & Worcester LLP in
substance that the Reorganization will qualify as tax-free under the Code, and
in particular that the Reorganization will have the following consequences:
1. No gain or loss will be recognized by the stockholders of the Bank upon
the exchange of their Bank Common Stock solely for Company Common Stock
(Section 351(a) of the Code).
2. No gain or loss will be recognized by the Bank as a result of the
proposed Reorganization.
3. No gain or loss will be recognized by the Company upon the receipt of
shares of Bank Common Stock solely in exchange for Company Common Stock
(Section 1032(a) of the Code).
4. The basis of the Bank Common Stock received by the Company will be the
same as the basis of that stock in the hands of the stockholders of the Bank
immediately prior to the proposed transaction (Section 362(a)(1) of the
Code).
5. The holding period of the Bank Common Stock in the hands of the Company
will include the period during which such stock was held by the stockholders
of the Bank (Section 1223(2) of the Code).
6. The basis of the Company Common Stock to be received by each
stockholder of the Bank will be the same as the basis of the Bank Common
Stock surrendered in exchange therefor (Section 358(a)(1) of the Code).
18
7. The holding period of the Company Common Stock to be received by each
stockholder of the Bank will include the holding period of the Bank Common
Stock surrendered in exchange therefor, provided that the Bank Common Stock
was a capital asset in the hands of such stockholder (Section 1223(1) of the
Code).
8. The affiliated group of which the Bank is the common parent immediately
prior to the proposed Reorganization will remain in existence after the
proposed Reorganization and the Company will become the common parent of the
affiliated group, except where the Bank is treated under the Treasury
Regulations as continuing to be the common parent (Cf. Rev. Rul. 82-152,
1982-2 C.B. 205), and thus dividend distributions paid by the Bank to the
Company will not be included in computing the taxable income of the Company
(Treasury Regulation Section 1.1502-13(f)(2)).
9. Stockholders of the Bank who exercise their dissenters' appraisal
rights and receive cash in exchange for their shares of Bank Common Stock
will recognize taxable income or loss for federal income tax purposes in
connection with the transaction. The amount and tax treatment of that income
or loss (e.g., whether it constitutes dividend income, ordinary income or
loss, short-term capital gain or loss or long-term capital gain or loss)
will turn upon a number of factual considerations peculiar to the individual
stockholder. Any stockholder of the Bank considering exercising dissenter's
appraisal rights with respect to any shares of Bank Common Stock should
consult his personal income tax advisor for specific advice with respect to
the federal income tax consequences of that exercise.
Net Operating Loss Carryforwards. The Bank has a federal tax operating loss
carryforward aggregating approximately $12.185 million at December 31, 1995 that
ultimately expires in 2009. In addition, the Bank has made allowances on its
financial statements for both losses on loans and losses on real estate owned,
and the majority of such allowances are anticipated to give rise to deductible
tax losses in future years. Losses which the Bank has not yet recognized for tax
purposes that may be utilized to offset taxable income in the current or a past
or future year are sometimes referred to as "Built-in Losses," and gains which
the Bank has not yet recognized for tax purposes are sometimes referred to as
"Built-in Gains."
If an "ownership change," discussed below, occurs with respect to the Bank and
its subsidiaries, either in connection with this Reorganization or in future
years as a result of transactions unrelated to this Reorganization, the Bank and
its subsidiaries would become subject to a limitation on their ability to use
their net operating loss carryforwards and other tax benefit items to offset
taxable income. Such limitation, were it to become applicable, would also apply
to the recognition for tax purposes of Built-In Losses, if the excess of any
Built-In Losses of the Bank and its subsidiaries over their Built-in Gains (the
"Net Unrealized Built-In Losses" of the Bank and its subsidiaries) exceed the
lesser of (i) 15 percent of the fair market value of the assets of the Bank and
its subsidiaries immediately before the ownership change, or (ii) $10 million.
The determination whether an ownership change has occurred is made by (i)
determining, in the case of any 5% stockholder, the number of percentage points
by which such 5% stockholder's interest has increased at the end of any
three-year testing period relative to such stockholder's lowest percentage
ownership at any time during such testing period, and (ii) aggregating such
percentage point increases for all 5% stockholders during the applicable testing
period. For purposes of the preceding sentence, any direct or indirect holder,
taking into account certain attribution rules, of 5% or more of the Bank's
Common Stock is a 5% stockholder, and all holders of less than 5% collectively
are generally treated as a single 5% stockholder known as a public group. An
ownership change will occur as of the end of any three-year testing period if
the aggregate percentage point increases for all 5% stockholders for such
testing period exceeds 50 percentage points.
Under certain "segregation rules," stockholders who individually acquired less
than 5% of the Bank's Common Stock pursuant to the February, 1995 stock issuance
are treated as a single 5% stockholder (the "New Public Group") that is separate
from the public group of less-than-5% stockholders that existed prior to the
February, 1995 offering (the "Depositor Group"). In general, a member of the New
Public Group is presumed not to have owned any of the Bank's Common Stock prior
to the February, 1995 offering, except to the extent that the Bank had actual
knowledge that such person was also a member of the Depositor Group. However,
regulations provide for a "cash issuance exception" to these segregation rules
which provides that if a
19
corporation with Net Unrealized Built-in Losses or a net operating loss
carryforward issues stock for cash, an amount of the stock issued equal to the
lesser of (i) one-half of the percentage ownership of the direct public groups
before the cash issuance, or (ii) the total amount of stock issued in the
transaction less the amount of issued stock owned by 5% stockholders (other than
a direct public group) immediately after the issuance, are not be subject to the
segregation rules. As applied to the Bank's February, 1995 stock issuance, the
cash issuance exception would create a presumption that the Bank's
pre-conversion owners (i.e., it depositors) purchased 50% of the Bank Common
Stock issued in February, 1995. The Bank has treated the February, 1995 stock
issuance as eligible for the cash issuance exception and has taken the position
that no ownership change occurred as a result of such stock issuance on the
basis that, immediately following such stock issuance, the Depositor Group was
deemed to own 50% of the Bank Common Stock, the New Public Group owned 42% of
the Bank Common Stock, and the Bank's ESOP owned 8% of the Bank Common Stock.
Accordingly, the Bank experienced aggregate percentage point increases for all
5% stockholders of exactly 50 percentage points as a result of its mutual to
stock conversion in February, 1995. Thus, if the Reorganization causes any
further increases in stock ownership by a 5% stockholder, an ownership change
will occur and the limitations on the use of net operating loss carryovers and
Built-in Losses discussed above will become applicable to the Bank and the
Company.
The regulations under Section 382 of the Code require that the identity and
ownership percentages of 5% stockholders be determined by looking up and through
chains of corporate ownership. Such regulations further permit the direct public
groups of the Company after the Reorganization to be treated as identical to the
direct public groups of the Bank before the Reorganization, if all Bank Common
Stock (including restricted shares) is exchanged for identical amounts of
Company Common Stock and if no Company Common Stock is issued other than in
exchange for Bank Common Stock. Accordingly, if all the stockholders of the Bank
before the Reorganization own the same percentage of Company Common Stock
immediately after the Reorganization that they owned of Bank Common Stock before
the Reorganization, each of the Depositor Group, the New Public Group, and the
Bank's ESOP will after the Reorganization be deemed to own the same percentage
of Company Common Stock (and indirectly, Bank Common Stock) that it owned of
Bank Common Stock before the Reorganization, and the Reorganization will not, by
itself, cause an ownership change under Section 382 of the Code. Stockholders
are cautioned, however, that any redemption of Bank Common Stock or Company
Common Stock, including without limitation any repurchase required to be made
from a stockholder who dissents from the Reorganization, would likely cause an
ownership change under Section 382 of the Code. Under the segregation rules
discussed above, (i) such a redemption would be treated as though made
proportionately from the Depositor Group and the New Public Group; and (ii) each
of the Depositor Group and the New Public Group would have to be further
segregated into two smaller direct public groups, those who tendered shares in
the redemption and those who did not, with each such smaller direct public group
treated as separate 5% stockholders for purposes of ownership change
determinations. Although there is some ambiguity regarding when such segregation
would be effective, the application of the foregoing rules would likely result
in an increase in the percentage ownership by the Depositor Group and the New
Public Group that would be sufficient to trigger an ownership change. In
addition, even though he may ultimately accept Company Common Stock in lieu of
pursuing his dissent remedy, a Bank shareholder who perfected his statutory
dissent rights under Chapter 156B of the General Laws of Massachusetts would
have the option, upon the consummation of the Reorganization, to have his stock
redeemed. Whether this option were deemed exercised (and hence whether a
redemption would have occurred that would likely constitute an ownership change)
is determined under Section 382(1)(3)(A) of the Code, which provides that unless
regulations provide otherwise, an option to acquire stock is treated as
exercised if such exercise results in an ownership change. Under the
regulations, an option to acquire stock is not treated as exercised unless its
issuance or transfer satisfies an ownership test, a control test, or an income
test. Whether an option satisfies one or more of these tests depends on all the
relevant facts and circumstances, but each of these tests requires that a
principal purpose of the issuance, transfer or structuring of the option is to
avoid or ameliorate the impact of an ownership change under Section 382 of the
Code. In addition, the regulations provide a safe harbor that customary rights
of first refusal are not treated as exercised for purposes of these ownership,
control or income tests, and further provide that an analogous safe harbor is to
apply in the case of put (rather than call) options. Accordingly, a dissenting
stockholder's right to put his stock for fair value (in lieu of accepting
Company Common Stock) should not be deemed exercised any earlier than actual
exercise,
20
but there can be no assurance that the IRS would agree with such treatment, or
that such treatment would be sustained if challenged.
If an ownership change occurs with respect to the Bank and its subsidiaries,
an annual limitation (the "Section 382 limitation") would be imposed pursuant to
Section 382 of the Code on the rate at which its net operating loss carryforward
(and recognized Built-In Losses to the extent of Net Unrealized Built-in Losses)
could be deducted against taxable income. The Section 382 limitation is
generally computed by multiplying the value of the Bank immediately before the
ownership change by the then applicable long-term tax exempt rate published by
the IRS for this purpose (the long-term tax exempt rate was 5.31% for the month
of March, 1996, per IRS tables). For this purpose, it is unclear whether the
value of the Bank would include the equity received in the February, 1995 stock
offering. The limitation on the use of Built-In Losses would apply with respect
to Built-In Losses recognized in any taxable year any portion of which falls
within the 5-year period beginning on the date of the ownership change.
Accordingly, if the Section 382 limitation were to apply to the Bank and its
subsidiaries to limit the rate of utilization of such losses, it is uncertain
whether the Bank and its subsidiaries would be able to fully utilize their net
operating loss carryforward and Built-In Losses.
Section 383 of the Code provides rules that restrict a corporation's ability
to utilize tax credit carryforwards and net capital loss carryforwards after an
ownership change. These rules are similar to and work in conjunction with the
provisions of Section 382 of the Code, described above. As of December 31, 1995,
the Bank had approximately $2.19 million of tax credit carryforwards which would
become subject to the limitations of Section 383 if an ownership change
occurred.
State and Local Income Taxation. The Bank will after the Reorganization
continue to be subject to the annual Massachusetts excise tax equal to 11.72%
(reduced to 10.5% over a phase-in period through 1999) of its net income. Also,
the Bank has a number of non-bank subsidiaries that will after the
Reorganization continue to be subject either to the general excise tax rules
applicable to ordinary business corporations in Massachusetts, or to the 1.32%
excise tax on gross income applicable to Massachusetts securities corporations.
The Company will after the Reorganization be subject to an annual Massachusetts
excise tax equal to 10.5% of its net income, for which purpose there is no
exclusion or deduction for dividends received from the Bank (except that after
January 1, 1999, there would be a dividends received deduction for 95% of the
dividends received from the Bank). The Company expects that for the near future
it will not have dividend income from the Bank materially in excess of the
Company's deductible operating expenses, and therefore that the Massachusetts
excise tax on the Company's net income will be minimal. Further, if the
Company's dividend income from the Bank and other gross income should in the
future exceed its operating expenses, thus resulting in an increased
Massachusetts excise tax on net income, then the Company will consider applying
to the Massachusetts Department of Revenue for classification as a Massachusetts
securities corporation. If so classified, the annual Massachusetts excise tax
would be 0.33% of the Company's gross income.
COMPARISON OF STOCKHOLDER RIGHTS
As a result of the holding company formation, stockholders of the Bank, whose
rights are presently governed by the Massachusetts banking laws, will become
stockholders of the Company, a Massachusetts business corporation, and as such
their rights will be governed by the Massachusetts Business Corporation Law.
Certain differences in the rights of stockholders arise from this change in
governing law. In addition, although the Amended and Restated Charter and the
By-laws of the Bank (such Amended and Restated Charter being referred to herein
as the "Charter") and the Articles of Organization, as they will be amended
prior to the Effective Time to increase the Company's authorized capital stock,
and the By-laws of the Company (such Articles of Organization, as so amended,
being referred to herein as the "Articles") are similar in substance, there are
certain differences in their respective provisions. The material differences and
some of the important similarities of the rights of stockholders of the Bank and
the Company are discussed below. The following discussion does not purport to be
a complete statement of such similarities and differences affecting the rights
of
21
stockholders of the Bank but is intended as a summary only. The Articles and
By-laws of the Company, copies of which are attached as Appendix C to this Proxy
Statement-Prospectus, should be reviewed carefully by each stockholder.
Capital Stock
Authorized and Issued Stock. The Bank has 25,000,000 shares of authorized
common stock, par value $1.00 per share, of which 5,718,200 shares were issued
and outstanding as of the Record Date and 556,250 shares were reserved for
issuance under the Stock Option Plans and 66,800 shares were reserved for
issuance under the Restricted Stock Plans. The Bank also has 5,000,000 shares of
authorized but unissued preferred stock, par value $1.00 per share. The Articles
of the Company provide for the same authorized capital as that of the Bank, of
which no shares are currently issued and outstanding, except that the per share
par value of the authorized common and preferred stock of the Company is $0.01,
rather than $1.00. After the consummation of the Reorganization, the Company
will have the same number of issued and outstanding shares, shares reserved for
issuance under its stock option plan and restricted stock plans, and
non-reserved shares available for future issuance, all subject to the exercise
of dissenters' appraisal rights, as are presently so issued, reserved and
otherwise available for future issuance by the Bank. See "Description of the
Company Capital Stock."
Issuance of Stock. Under the provisions of Massachusetts banking law, the
issuance of capital stock by the Bank requires the prior approval of the
Commissioner of Banks. In contrast, the Company is able to issue shares of
capital stock without obtaining prior approval of the Commissioner of Banks. The
issuance of capital stock by the Company, however, would be subject to
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless such issuance was not in connection with a public offering or was
otherwise subject to an exemption from such registration requirements, whereas
the capital stock of the Bank is exempt in all cases from such registration.
There are no current agreements or understandings with respect to the issuance
of any additional shares of the Company capital stock.
Pre-emptive Rights. The stockholders of the Company, like the stockholders of
the Bank, will not be entitled to pre-emptive rights with respect to any shares
of capital stock which may be issued.
Rights of Issuer to Repurchase Stock. Under applicable state and federal
banking laws, the Bank is authorized to purchase shares of its own stock if such
purchase is undertaken in accordance with certain regulatory requirements,
including the prior approval of the FDIC. Under the Massachusetts Business
Corporation Law, the Company will be allowed to purchase shares of its own stock
in the open market or otherwise. Any purchase by the Company will be subject to
applicable law, including prior notice to the Federal Reserve Board under
certain circumstances. See "Regulation-Holding Company Regulation."
Common Stock
Dividend Rights. The stockholders of the Bank are entitled to dividends when
and as declared by the Bank's Board of Directors. Under applicable Massachusetts
law and FDIC regulations governing the payment of dividends by stock savings
banks, such as the Bank, the board of directors is generally empowered to pay
dividends out of the bank's net profits, to the extent that the board of
directors considers such payment advisable, and the bank remains adequately
capitalized. Massachusetts law also imposes various specific restrictions upon a
bank's payment of dividends, including the requirement that on the date a
dividend is declared the bank's capital and surplus must equal at least 10% of
its deposit liabilities or a sufficient amount must be transferred from net
profits to surplus so that the surplus account shall equal one hundred percent
of the capital stock account prior to the payment of such dividend. The Bank is
not subject to any regulatory agreement, order or directive that would restrict
its ability to pay dividends to the fullest extent otherwise permitted by
applicable law and regulation.
A Massachusetts business corporation, such as the Company, may pay dividends
or repurchase or redeem its shares of capital stock; however, a director who
votes to authorize a dividend, repurchase or redemption which is in violation of
the corporation's articles of organization or which renders the corporation
insolvent may be
22
jointly and severally liable for such improper dividend, repurchase or
redemption. Stockholders to whom a corporation makes any such distribution
(except a distribution of stock of the corporation), if the corporation is, or
is thereby rendered, insolvent, are liable to the corporation for the amount of
such distribution made, or for the amount of such distribution which exceeds
that which could have been made without rendering the corporation insolvent, but
in either event only to the extent of the amount paid or distributed to them,
respectively.
It is the policy of the Federal Reserve Board that bank holding companies
should pay cash dividends on common stock only out of the past year's net
income, and only if prospective earnings retention is consistent with the
organization's expected future needs. The policy further provides that bank
holding companies should not maintain a level of cash dividends that undermines
the bank holding company's ability to serve as a source of strength to its
subsidiary banks. The Federal Reserve Board also requires by regulation that a
bank holding company seeking to purchase or redeem any of its equity securities
must provide prior notice to the appropriate regional Federal Reserve Bank,
which may disapprove of such proposed purchase or redemption, if the gross
consideration for such purchase or redemption, when aggregated with the net
consideration paid by the holding company for all such purchases or redemptions
during the preceding twelve months, exceeds 10% of the holding company's
consolidated net worth, except that such prior notice requirements do not apply
to any holding company that is "well capitalized" in accordance with Federal
Reserve Board regulations, has received a composite "1" or "2" rating in its
most recent examination and is not subject to any unresolved regulatory issues.
Principal sources of revenues for the Company will be dividends received from
the Bank and other subsidiaries and interest earned on short-term investments
and advances to subsidiaries. See "Market for Stock and Dividends."
Any issuance of preferred stock with a preference over Company Common Stock as
to dividends may affect the dividend rights of common stockholders.
Voting Rights. All voting rights in the Bank are currently vested in the
holders of the issued and outstanding Bank Common Stock. Each share of Bank
Common Stock is entitled to one vote on all matters, without any right to
cumulative voting in the election of Directors. Following the formation of the
holding company structure, all voting rights in the Company will be vested in
the holders of Company Common Stock and each share of Company Common Stock will
be entitled to one vote on all matters, without any right to cumulative voting
in the election of Directors. In each case, any issuance of preferred stock with
voting rights may affect the voting rights of common stockholders.
Preferred Stock
Under both the Charter of the Bank and the Articles of the Company, the
respective Boards of Directors of the Bank and the Company are authorized to
issue preferred stock in series and to fix the voting powers, designations,
preferences, or other rights of the shares of each such series and the
qualifications, limitations, and restrictions thereon. The issuance of preferred
stock by the Bank and by the Company is subject to the approval of a majority
vote of the Board of Directors of the Bank or the Company, as the case may be.
The issuance of preferred stock by the Bank is also subject to approval by the
Commissioner of Banks. Preferred stock issued by the Company after the
Reorganization may rank prior to the Company Common Stock as to dividend rights,
or liquidation preferences, or both, may have full or limited voting rights
(including multiple voting rights and voting rights as a class), and may be
convertible into shares of Company Common Stock. The Company has no present
plans or understandings for the issuance of any preferred stock.
Directors
Number and Staggered Terms. The Charter and By-laws of the Bank provide that
the Board of Directors shall consist of not less than seven nor more than 25
members. The By-laws of the Company provide for the
23
number of Directors of the Company to be fixed from time to time by its Board of
Directors, which number will not in any case be less than three, unless at the
time there is an Interested Stockholder in which case a majority vote of the
Continuing Directors is also required to fix such number. The Board of Directors
of the Company will initially be composed of seven Directors. Both the Charter
of the Bank and the Articles of the Company provide for three classes of
Directors with one class elected each year for three year staggered terms, so
that ordinarily no more than approximately one-third of the Directors will stand
for election in any one year and that there will be no cumulative voting in the
election of Directors.
Removal. The Charter of the Bank and the Articles of the Company both provide
that Directors may be removed from office, but only for cause, and then only by
the affirmative vote of not less than eighty percent of the outstanding shares
entitled to vote at a duly constituted meeting of stockholders. The Articles of
the Company define cause to mean only the following: (i) conviction of a felony,
(ii) declaration of unsound mind by order of court, (iii) gross dereliction of
duty, (iv) commission of an act involving moral turpitude, or (v) commission of
an action which constitutes intentional misconduct or a knowing violation of law
if such action in either event results both in an improper substantial personal
benefit and a material injury to the Company. The term "cause" is not defined in
the Charter of the Bank.
Vacancies. The By-laws of the Bank provide that any vacancy occurring on the
Board of Directors caused by resignation, removal or death of a Director, may be
filled by the vote of a majority of the remaining Directors unless there is an
Interested Stockholder in which case the affirmative vote of a majority of the
Continuing Directors then in office is required. Any vacancy caused by an
increase in the size of the Bank's Board of Directors may be filled by the
existing Directors. All Directors of the Bank elected to fill vacancies shall
serve until the next election of Directors by the stockholders. Similarly, the
By-laws of the Company provide that any vacancy occurring on the Board of
Directors of the Company, including vacancies resulting from an enlargement of
the Board, shall be filled solely by the affirmative vote of a majority of the
remaining Directors, unless at the time there is an Interested Stockholder (as
defined below), in which case the affirmative vote of a majority of the
Continuing Directors (as defined below) is required. In contrast to the Bank,
any Director of the Company so chosen would hold office for the remainder of the
term of the class of Directors to which the Director has been elected, not just
until the next annual meeting of stockholders. The Charter of the Bank also
provides that a maximum of two additional Directors may be elected in any fiscal
year by vote of a majority of the Directors then in office. The Articles of the
Company has no such limitation on the election of additional Directors during
any period by such action of the Directors then in office. The term "Interested
Stockholder" is defined in both the Charter of the Bank and the Articles of the
Company to mean generally any beneficial owner of more than 4.9% of the
outstanding voting stock or, from and after February 7, 1998 (the third
anniversary of the Bank's conversion from mutual to stock form), 10% of the
outstanding stock of the Bank or the Company, as the case may be, and certain
assignees of such Interested Stockholder. The term "Continuing Directors" is
defined in both the Charter of the Bank and the Articles of the Company to mean
generally Directors and certain successor Directors who are not affiliates of
any Interested Stockholder and who were Directors prior to the time that any
Interested Stockholder became an Interested Stockholder.
Meetings of Stockholders
The Charter of the Bank provides that a special meeting of stockholders may be
called only by the President or by a majority of the total number of Directors
that the Bank would have if there were no vacancies (the "Whole Board"). If at
the time of such call there is an Interested Stockholder, the call of such a
meeting shall also require the affirmative vote of a majority of the Continuing
Directors then in office. The Company's Articles similarly provides that a
special meeting of stockholders may be called only by the President, or by a
majority of the Whole Board, provided that if at the time of any such call there
is an Interested Stockholder, such call shall also require the affirmative vote
of a majority of the Continuing Directors then in office. The Bank's Charter and
the Company's Articles also provide that only those matters set forth in the
call of the special meeting may be considered or acted upon at such special
meeting, unless otherwise provided by law.
24
The Bank's By-laws set forth certain advance notice and informational
requirements and time limitations on any Director nomination or any new business
which a stockholder wishes to propose for consideration at a meeting of
stockholders. Any such nomination or new business, to be timely, shall be
delivered to, or mailed and received at, the principal executive offices of the
Bank not less than 70 days nor more than 90 days prior to the first anniversary
of the preceding year's annual meeting, provided that in the event that the date
of the annual meeting is advanced by more than twenty days or delayed by more
than seventy days from such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the ninetieth day prior to such
annual meeting and not later than the close of business on the later of the
seventieth day prior to such annual meeting or the tenth day following the day
on which public announcement of the date of such meeting is first made.
Notwithstanding the above, in the event that the number of directors to be
elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Bank at least eighty days prior to
the first anniversary of the preceding year's annual meeting, a stockholder's
notice would be considered timely, but only with respect to nominees for any new
positions created by such increase, if delivered to the Clerk of the Bank at its
principal executive offices not later than the close of business on the tenth
day following the day on which such public announcement was first made by the
Bank. Stockholder proposals that do not satisfy these requirements may be
rejected by the Board of Directors. The By-laws of the Company contain
substantially the same provisions for Director nominations and new business
proposals by stockholders.
Stockholder Vote Required to Approve Certain Transactions
Massachusetts law provides that certain agreements of merger or consolidation,
or the sale, lease or exchange of all or substantially all of the property and
assets, of a Massachusetts stock savings bank or corporation must be approved by
the affirmative vote of holders of two-thirds of the shares of each class of
stock outstanding and entitled to vote thereon or, if the charter or articles of
organization so provide, the vote of a lesser proportion, but not less than a
majority. Additionally, Massachusetts law provides that no vote of the
stockholders of the surviving Massachusetts bank or corporation is required,
unless its charter or articles of organization otherwise provide, to approve a
merger if (i) the agreement of merger does not amend in any respect the bank's
or the corporation's charter or articles of organization, (ii) the number of
shares of the surviving bank's or corporation's stock to be issued in the merger
does not exceed 15% of the shares of the same class outstanding immediately
prior to the effective date of the merger and (iii) the issuance of authorized
but unissued stock pursuant to a merger by vote of the directors has been
authorized by the by-laws or a vote of the stockholders. A Massachusetts
corporation owning at least 90% of the outstanding shares of each class of stock
of another corporation may merge such corporation into itself without a vote of
the stockholders.
The Charter of the Bank provides that any Business Combination (as defined
below) involving the Bank and an Interested Stockholder must be approved by the
holders of at least 80% of the outstanding shares of the Bank's voting stock
(the "Bank Voting Requirement") voting together as a single class. The Bank
Voting Requirement does not apply and the affirmative vote of only a majority of
the Bank's voting stock is required, if (i) the Business Combination is approved
by an affirmative vote of a majority of both the Continuing Directors and the
Board of Directors or (ii) certain "fair price" (defined generally to mean,
among other things, that the consideration to be received by stockholders in
such Business Combination shall be in the same form and kind as the
consideration paid by the Interested Stockholder for the Bank's capital stock
owned by such person and shall be at least equal to the highest of the
following: (A) the highest per share price paid by such Interested Stockholder
in acquiring any of its holdings of Bank Common Stock within the two year period
immediately prior to the first public announcement of the proposal of the
Business Combination (the "Announcement Date") or in the transaction through
which such person became an Interested Stockholder; (B) the highest Fair Market
Value (as defined in the Charter) per share of Bank Common Stock on any date
during the one-year period prior to and including the Announcement Date; and (C)
the price per share equal to (1) the Fair Market Value per share of common stock
on the Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder, multiplied by (2) a fraction (x) the numerator
of which is the highest per share price paid by the Interested Stockholder for
any share of Bank Common Stock acquired by it within the two-year
25
period immediately prior to and including the Announcement Date and (y) the
denominator of which is the Fair Market Value per share of Bank Common Stock on
the first day in such two-year period on which the Interested Stockholder
acquired any shares of Bank Common Stock) and other criteria are met. As defined
in the Charter, a "Business Combination" includes, among other things (i) any
merger or consolidation of the Bank with an Interested Stockholder or affiliate
thereof, (ii) the sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Bank of assets having a fair market value of $1,000,000 or
more to or with an Interested Stockholder or an affiliate thereof, (iii) the
purchase, exchange, lease or other acquisition by the Bank of all or
substantially all the assets or business of any Interested Stockholder or
affiliate thereof, (iv) the issuance or transfer by the Bank of any securities
of the Bank to an Interested Stockholder or any affiliate thereof in exchange
for cash, securities or other property (or a combination thereof) having a fair
market value of $1,000,000 or more, (v) the adoption of a plan or proposal for
the liquidation or dissolution of the Bank proposed by or on behalf of an
Interested Stockholder or an affiliate thereof and (vi) any transaction that has
the effect of increasing the proportionate share of any class of equity security
of the Bank that is beneficially owned by an Interested Stockholder or any
affiliate thereof.
The Articles of the Company address business combinations involving Interested
Stockholders in substantially the same manner as the Bank's Charter. The
Articles further provide, however, that an affirmative vote of the holders of a
majority of the voting power of the then outstanding voting stock of the
Company, voting together as a single class, may authorize any (i) sale, lease or
exchange of all or substantially all of its assets or (ii) consolidation or
merger of the Company with or into any other corporation that would otherwise,
pursuant to Chapter 156B of the Massachusetts General Laws, have required an
affirmative vote of the holders of two-thirds of the voting power of the
Company's then outstanding voting stock voting together as a single class,
provided that, in either case, such transaction has previously been approved by
a vote of a majority of the Board of Directors (and, if at the time of such
action there is an Interested Stockholder, an additional vote of a majority of
the Continuing Directors). This additional provision in the Articles of the
Company facilitates the approval by a majority (rather than the statutory
two-thirds) vote of outstanding shares of voting stock of certain business
combinations that do not involve an Interested Stockholder or affiliate thereof
and are approved by the Board of Directors.
Provisions Relating to Exercise of Business Judgment by Board of Directors
The Charter of the Bank provides that its Board of Directors, when evaluating
any tender or exchange offer, merger, acquisition or similar offer of another
person, shall in connection with the exercise of its judgment in determining
what is in the best interests of the Bank and its stockholders, give due
consideration to all relevant factors including, without limitation, the social
and economic effects of acceptance of such an offer on the Bank's present and
future account holders, borrowers and employees, on the communities in which the
Bank operates or is located and on the ability of the Bank to fulfill its
objectives under applicable statutes and regulations. The Articles of the
Company contain a provision that is substantially the same.
Beneficial Ownership Limitation
Both the Charter of the Bank and the Articles of the Company contain a
prohibition against any person directly or indirectly offering to acquire, or
acquiring, beneficial ownership (as defined in the Charter and the Articles) of
more than 4.9% of any class of outstanding equity securities of the Bank or the
Company, as the case may be, prior to February 7, 1998 (the third anniversary of
the date of consummation of the Bank's conversion from mutual to stock form), or
directly or indirectly offering to acquire, or acquiring, beneficial ownership
of more than 10% of any class of outstanding equity securities of the Bank or
the Company at any time from and after February 7, 1998. Both the Charter of the
Bank and the Articles of the Company contain an exception from this limitation
for any offer to the Bank or the Company made by the underwriters acting on
behalf of the Bank or the Company in connection with a public offering by the
Bank or the Company of its capital stock. In addition, the Charter of the Bank
provides an exception for any acquisition of shares of capital stock which has
been approved by an affirmative vote of not less than two-thirds of the votes of
each class of shares entitled to be cast by stockholders at a duly constituted
meeting of stockholders. The Articles of the
26
Company make this exception available upon the affirmative vote of not less than
two-thirds of the Board of Directors then in office (or, if there is an
Interested Shareholder at the time of such vote, then also the affirmative vote
of not less than two-thirds of the Continuing Directors then in office). The
Charter of the Bank also contains an exception from this limitation for the
formation by the Bank of a holding company.
Indemnification and Limitation of Liability
The By-laws of both the Bank and the Company provide for the indemnification
of each director, officer, employee and agent against all expenses and
liabilities reasonably incurred by or imposed on him in connection with any
proceeding or threatened proceeding in which he may become involved by reason of
his being or having been a director or officer, so long as such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Bank or the Company, as the case may be. The By-laws of
the Company further provide that (a) if the Company is merged into or
consolidated with another corporation and the Company is not the surviving
corporation, the surviving corporation shall assume the indemnification
obligations of the Company under the By-laws with respect to any action, suit,
proceeding or investigation arising out of or relating to any actions,
transactions or facts occurring at or prior to the date of such merger or
consolidation; (b) if the By-laws are invalidated on any ground by any court of
competent jurisdiction, the Company shall nevertheless indemnify and advance
expenses to each indemnitee as to any expenses (including reasonable attorneys'
fees), judgments, fines, liabilities, losses, and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Company, to the fullest extent permitted by any applicable portion of the
By-laws that have not been invalidated and to the fullest extent permitted by
applicable law; and (c) if the Massachusetts General Laws are amended after
adoption of the Company's By-laws to expand further the indemnification
permitted to an indemnitee, the Company shall indemnify all such persons to the
fullest extent permitted by the Massachusetts General Laws, as so amended.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Directors, officers, or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the SEC such indemnification, in the event of any such actual
liability under the Securities Act, is against public policy as expressed in the
Securities Act and is therefore unenforceable.
The Charter of the Bank provides that its directors shall not be personally
liable to the Bank or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Bank or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for any unlawful distributions to stockholders or loans
to officers or directors, or (iv) for any transaction from which the director
derived an improper personal benefit. The Articles of the Company contain
provisions to substantially the same effect.
Amendment of Charter and Articles
The Charter of the Bank and the Articles of the Company each provide that an
amendment to either of the respective documents must first be approved by a
majority of the Directors of the Bank or the Company then in office,
respectively, and thereafter by an affirmative vote of at least eighty percent
(80%) of the voting power of the then outstanding voting stock of the Bank or
the Company, as the case may be (except that certain provisions may be amended
by a majority vote of the stockholders). In addition, if, at any time within a
sixty-day period prior to the meeting of stockholders at which such amendment is
to be considered there is an Interested Stockholder, the amendment must also be
approved by an affirmative vote of a majority of the Continuing Directors then
in office, prior to approval by the stockholders.
Amendment of By-laws
The Charter of the Bank and the Articles of the Company provide that the
By-laws may be adopted or amended either by the Board of Directors or the
stockholders of the Bank or the Company, as the case may be. Such action by the
Board of Directors shall require the affirmative vote of at least a majority of
the Directors
27
then in office at a duly constituted meeting of the Board of Directors, unless
at the time of such action there shall be an Interested Stockholder, in which
case such action shall also require the affirmative vote of at least a majority
of the Continuing Directors then in office, at such a meeting. Such action by
the stockholders of the Bank or the Company, as the case may be, shall require
(i) approval by the affirmative vote of a majority of its Board of Directors
then in office at a duly constituted meeting of such Board of Directors, unless
at the time of such action there shall be an Interested Stockholder, in which
case such action shall also require the affirmative vote at such meeting of at
least a majority of the Continuing Directors then in office, (ii) unless waived
by the affirmative vote of such Board of Directors (and, if applicable,
Continuing Directors) specified in the preceding sentence, the submission by the
stockholders of written proposals for adopting, altering, amending, changing or
repealing the By-laws that comply in all respects with the provisions of the
By-laws governing such submissions and (iii) the affirmative vote of at least
80% of the votes eligible to be cast by stockholders at a duly constituted
meeting of stockholders called expressly for such purpose.
Legal Investments
Under the laws of some jurisdictions, shares of Bank Common Stock may be legal
investments for certain institutions and fiduciaries, whereas shares of Company
Common Stock may not be legal investments for such investors.
Anti-Takeover Provisions
Chapter 110D of the Massachusetts General Laws covers "control share
acquisitions" affecting corporations incorporated in Massachusetts that have at
least 200 stockholders and possess certain statutory indicia reflecting
additional substantial ties to Massachusetts (as would be the case with the
Company). Chapter 110D limits the voting rights of shares held by persons who
have acquired 20% or more of the voting power of the target corporation. Under
this statute, shares acquired in a control share acquisition retain the same
voting rights as all other shares of the same class or series only to the extent
authorized by a vote of the majority of all shares entitled to vote for the
election of directors, excluding such acquired shares. A corporation that is
otherwise subject to Chapter 110D may expressly provide in its articles of
organization or bylaws that the statute does not apply. Chapter 110D by its
terms would apply to the Company, but not apply to the Bank. The Company has not
included any "opt out" provision in either the Articles or By-laws of the
Company.
Chapter 110F of the Massachusetts General Laws provides that if any acquirer
buys 5% or more of a target company's stock, where the target company has at
least 200 stockholders and possesses certain statutory indicia reflecting
substantial ties or nexus to Massachusetts, without the prior approval of the
target company's board of directors, such acquirer generally may not, for a
period of three years, (i) complete the acquisition of the target company
through a merger, (ii) pledge or sell any assets of the target company or (iii)
engage in other self-dealing transactions with the target company. The prior
board of directors approval requirement does not apply if the acquirer buys at
least 90% of the target company's outstanding stock in the transaction in which
it crosses the 5% threshold or if the acquirer, after crossing the threshold,
obtains the approval of the target company's board of directors and two-thirds
of the target company's stock held by persons other than the acquirer. A
corporation that would otherwise be covered by Chapter 110F may expressly
provide in its articles of organization that the statute does not apply. Chapter
110F by its terms would apply to both the Bank and the Company. Neither the
Charter of the Bank nor the Articles of the Company contains any such "opt out"
provision.
The foregoing does not purport to be a complete description of the differences
between the statutory and other rights of stockholders of the Bank and the
Company. Such differences can be determined more completely by reference to the
Massachusetts Business Corporation Law and various applicable banking laws, the
Company's Articles and By-laws and the Bank's Charter and By-laws.
28
CAPITALIZATION
The following tables set forth (i) the consolidated capitalization of the Bank
at December 31, 1995; (ii) the pro forma consolidated capitalization of the Bank
as of December 31, 1995 after giving effect to the Reorganization (which
reflects the transfer of $250,000 from the Bank's retained earnings to the
Company), and (iii) the pro forma capitalization of the Company on a
consolidated basis after giving effect to the Reorganization. The pro forma
consolidated capitalization of the Company as of December 31, 1995 will be
substantially the same (with certain differences resulting from the Company's
lower par value on its capital stock) as the consolidated capitalization of the
Bank as of that date. This pro forma capitalization of the Company assumes no
exercise of dissenters' appraisal rights. The pro forma capitalization of the
Bank, however, is changed as a result of the $250,000 proposed transfer by the
Bank to the Company.
As of December 31, 1995
----------------------------
Bank Bank
(Actual (Pro Forma
Consolidated) Consolidated)
------------- --------------
(Dollars in Thousands)
Deposits.................................................................. $885,386 $885,386
Federal Home Loan Bank advances........................................... 41,500 41,500
Securities sold under agreements to repurchase............................ 31,101 31,101
Loans payable............................................................. 5,470 5,470
Mortgagors' escrow deposits............................................... 4,193 4,193
------------- --------------
Total Deposits and borrowings......................................... $967,650 $967,650
Stockholder's equity:
Preferred stock ($1.00 par value; 5,000,000 shares authorized; none
issued and outstanding)................................................ $ - $ -
Common stock ($1.00 par value; 25,000,000 shares authorized; 5,710,700
shares issued and outstanding)......................................... $ 5,710 $ 5,710
Unearned Compensation................................................... (4,937) (4,937)
Additional paid-in capital.............................................. 35,887 35,887
Retained earnings....................................................... 43,083 42,833 (1)
Unrealized gain (loss) on investment securities available for sale...... 1,726 1,726
------------- --------------
Total stockholders' equity............................................ $81,469 $81,219
- ------
<FN>
(1) Reflects transfer of $250,000 from the Bank's retained earnings to the
Company.
</FN>
29
As of December 31, 1995
-----------------------
Company
(Pro Forma
Consolidated)
-----------------------
(Dollars in Thousands)
Deposits...................................................................... $885,386
Federal Home Loan Bank advances............................................... 41,500
Securities sold under agreements to repurchase................................ 31,101
Loans payable................................................................. 5,470
Mortgagors' escrow deposits................................................... 4,193
---------
Total Deposits and borrowings............................................. $967,650
Stockholder's equity:
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued and
outstanding)................................................................ $ -
Common stock ($0.01 par value; 25,000,000 shares authorized; 5,710,700 shares
issued and outstanding)..................................................... $ 57(2)
Unearned Compensation....................................................... (4,937)
Additional paid-in capital.................................................. 41,540 (2)
Retained earnings........................................................... 43,083
Unrealized gain (loss) on investment securities available for sale.......... 1,726
--------
Total stockholders' equity.................................................... $ 81,469
- ------
<FN>
(2) Reflect the change from $1 par value common stock of the Bank to $.01 par
value common stock of the Company.
</FN>
MARKET FOR STOCK AND DIVIDENDS
On February 7, 1995, the Bank completed its conversion from a
Massachusetts-chartered savings bank in mutual form to a Massachusetts-chartered
savings bank in stock form by the sale of 5,562,500 shares of Common Stock, par
value $1.00 per share, at a price of $8.00 per share. Since its issuance, Bank
Common Stock has been quoted on the NASDAQ System under the symbol "SISB." Since
February 8, 1995, Bank Common Stock has been traded on the NASDAQ National
Market System.
An application is being filed to substitute Company Common Stock for Bank
Common Stock on the NASDAQ National Market System upon completion of the
Reorganization under the symbol "SISB".
The following table sets forth the high and low closing prices per share for
the calendar quarters indicated for Bank Common Stock on the NASDAQ System based
upon information provided by NASDAQ. There is no assurance that trading in
Company Common Stock will be at prices similar to those at which Bank Common
Stock has been traded.
Bank Common
Stock
------------------
High Low
------ ----
1995 1st Quarter (from February 8, 1995)... $11 1/16 $ 9 5/8
2nd Quarter................................ $13 1/16 $10 7/8
3rd Quarter................................ $16 $12 7/8
4th Quarter................................ $17 1/8 $14 5/8
1996 1st Quarter (through March 13, 1996).. $18 3/4 $16 1/4
30
On January 30, 1996, the last full trading day prior to the execution of the
Plan of Reorganization, the closing sale price of Bank Common Stock was $173/4
On March 13, 1996, the closing sale price of Bank Common Stock was $167/8.
As of the Record Date, the Bank had approximately 1,213 stockholders of record
who held 5,718,200 outstanding shares of Bank Common Stock. This does not
reflect the number or persons or entities who held their Bank Common Stock in
nominee or "street" name through various brokerage firms.
To date, the Bank has not paid any dividends on the Bank Common Stock. While
the Bank does not anticipate paying any cash dividends on the Bank Common Stock
in the near future, the Board of Directors will be periodically reviewing
whether any cash dividend should be paid.
DESCRIPTION OF COMPANY CAPITAL STOCK
General
Under the Articles of the Company, the Company is authorized to issue up to
25,000,000 shares of common stock, par value $0.01 per share, and up to
5,000,000 shares of preferred stock, par value $0.01 per share. No shares of
Company Common Stock are currently issued and outstanding. Pursuant to the Plan
of Reorganization, the Company is deemed to have agreed to reserve 623,050
shares of Company Common Stock in the aggregate for future issuance under the
Stock Option Plans and the Restricted Stock Plans, subject to any future
amendments to the Stock Option Plans and/or the Restricted Stock Plans that may
increase the number of shares of Company Common Stock that may be issued under
said plans. The Plan of Reorganization provides that upon consummation of the
Reorganization, the Stock Option Plans and the Restricted Stock Plans will
become the director and employee stock option plans and the director and
management restricted stock plans of the Company, and as a result thereof the
Company shall assume all of the Bank's obligations under the Stock Option Plans
and the Restricted Stock Plans in accordance with the terms thereof. See
"Comparison of Stockholder Rights" for a discussion of the rights of holders of
Company Common Stock as compared to the rights of holders of Bank Common Stock.
Common Stock
Voting Rights. Stockholders are entitled to one vote per share on any matters
subject to stockholder approval, including the election of Directors. The
Articles of the Company do not provide for cumulative voting in connection with
the election of Directors, and therefore holders of a majority of the Company
Common Stock will be able to elect all of the Directors standing for election in
each year, subject to the rights of the holders of shares of preferred stock, if
and when issued. The By-laws of the Company provide, subject to the rights of
the holders of shares of preferred stock, if and when issued, that the number of
Directors shall be fixed by the Board of Directors, which number shall not in
any case be less than three, unless at the time there is an Interested
Stockholder, in which case a majority vote of the Continuing Directors then in
office is also required to fix such number of Directors. The terms "Interested
Stockholder" and "Continuing Directors" are defined in the Articles. Each
Director will serve for a term of three years, with approximately one-third of
the Directors being elected annually on a staggered basis.
Pre-emptive Rights. Holders of Company Common Stock have no pre-emptive rights
as to the purchase of any shares issued in the future. Therefore, the Board of
Directors may sell shares of capital stock without first offering them to the
then stockholders of the Company.
Assessability. Under Massachusetts law, Company Common Stock is
non-assessable.
Preferred Stock
The Board of Directors of the Company is authorized to issue shares of
preferred stock in series and to fix the voting powers, designations,
preferences, or other special rights of the shares of each such series and the
31
qualifications, limitations, and restrictions thereon. Such preferred stock
issued by the Company after the Reorganization may rank prior to Company Common
Stock as to dividend rights, liquidation preferences, or both, may have full or
limited voting rights, and may be convertible into shares of Company Common
Stock.
Transfer Agent and Registrar
The transfer agent and registrar for Company Common Stock shall be Chemical
Bank.
Changes in Control
Articles and By-Laws. A number of provisions of the Company's Articles and
By-laws deal with matters of corporate governance and the rights of
stockholders. Certain provisions of the Articles and By-laws of the Company
relating to stock ownership and transfer, the Board of Directors and business
combinations may be deemed to have an "anti-takeover" effect, and may discourage
takeover attempts not first approved by the Directors (including takeovers which
certain stockholders might deem to be in their interests). These provisions,
like the comparable provisions in the Charter of the Bank, affect stockholder
rights and should be given careful attention. Although the Board of Directors of
the Company is not aware of any effort that might be made to gain control of the
Company after the Reorganization, the Board of Directors believes that these
provisions are appropriate to protect the interests of the Company and its
stockholders from hostile takeovers that the Board of Directors believes would
not be in the best interests of the Company and all of its stockholders. A
general summary of certain of these provisions can be found under the heading
"Comparison of Stockholder Rights." That description is necessarily general and
reference should be made in each case to the Articles and By-laws of the
Company, copies of which are attached to this Proxy Statement-Prospectus as
Appendix C.
Massachusetts Law: Chapters 110D and 110F of the Massachusetts General Laws,
which are summarized above under the caption "Comparison of Stockholder
Rights-Anti-takeover Provisions", provide certain statutory limitations, in
addition to those contained in the Company's Articles and By-laws, on offers to
acquire and acquisitions of certain threshold percentages of the outstanding
voting stock of the Company under circumstances in which such transactions have
not been previously approved by the Company's Board of Directors.
Federal Law. The Change in Bank Control Act, as amended, and regulations
adopted thereunder by the Federal Reserve Board generally requires persons who
at any time intend to acquire control, directly or indirectly, of the Company to
give 60 days' prior written notice to the Federal Reserve Board. "Control" for
the purpose of the Change in Bank Control Act and related Federal Reserve Board
regulations exists in situations in which the acquiring party has voting control
of at least 25% of any class of the Company's voting stock, control in any
manner over the election of a majority of the Company's directors or the power
to direct the management or policies of the Company. "Control" is presumed to
exist where the acquiring party will acquire voting control of 10% or more of
any class of the Company's voting stock if (i) the class of voting securities is
registered under Section 12 of the Exchange Act or (ii) no other person will own
a greater percentage of that voting stock immediately after the transaction. The
Company Common Stock will be registered under Section 12 of the Exchange Act
following the Reorganization. The Change in Bank Control Act and underlying
regulations authorize the Federal Reserve Board to disapprove a proposed
acquisition of control on certain specified grounds. Acquisitions of control of
the Company that would be subject to the prior approval of the Federal Reserve
Board under the Bank Holding Company Act of 1956, as amended (the "BHCA"), which
are described in the following paragraph, are not also subject to the prior
notice requirements of the Change in Bank Control Act.
The BHCA and regulations adopted thereunder require prior Federal Reserve
Board approval before any Company or other entity may acquire control of the
Company. "Control" for this purpose involves ownership, control or possession of
power to vote or proxies with respect to 25% or more of any class of the voting
stock of the Company, control in any manner of the election of a majority of the
directors of the Company or a determination by the Federal Reserve Board, after
a hearing, that the person or entity exercises a controlling influence over the
management or policies of the Company. In the latter instance, the Federal
Reserve Board
32
presumes that acquisition of 5% or more of the voting stock of a bank holding
company constitutes acquisition of control, absent other considerations, and
therefore is likely to require prior Federal Reserve Board approval.
The Exchange Act requires that a purchaser of any class of the Company's
securities registered under the Exchange Act notify the SEC and the Company
within ten days after its purchases exceed 5% of the outstanding shares of the
security. This statement must disclose the background and identity of the
purchaser, the source and amount of funds for the purchase, the number of shares
owned and, if the purpose of the transaction is to acquire control of the
Company, any plans to materially alter the Company's business or corporate
structure. In addition, any tender offer to acquire Company Common Stock is
subject to the limitations and disclosure requirements of the Exchange Act.
For further information on certain of these matters, see "Regulation" and
"Proposal One-Formation of Holding Company-Comparison of Stockholder Rights."
BUSINESS OF THE COMPANY
General
The Company is a business corporation organized under the laws of The
Commonwealth of Massachusetts on January 18, 1996. The only office of the
Company, and its principal place of business, is located at the main office of
the Bank at 1441 Main Street, Springfield, Massachusetts 01102 and its telephone
number is (413) 748-8000.
The Company was organized for the sole purpose of becoming the holding company
of the Bank. Upon completion of the holding company formation, the Bank will be
a wholly-owned subsidiary of the Company, which will thereby become a bank
holding company under federal law. Each stockholder of the Bank, upon completion
of the holding company formation, will become a stockholder of the Company
without change in the number of shares owned or in respective ownership
percentages, subject to dissenters' appraisal rights.
The Company has not yet undertaken any business activities and there are no
operating business activities currently proposed for the Company. In the future,
following the consummation of the Reorganization, the Company may become an
operating company or acquire commercial banks or thrift institutions or
companies engaged in bank-related activities. There are no current agreements or
understandings with respect to any acquisition and no assurance can be given
that any such acquisitions will occur. Upon formation of the holding company,
the Company will own all of the outstanding Bank Common Stock and will have
received a transfer of approximately $250,000 in funds from the Bank. Pending
use of these funds for other corporate purposes, the Company intends to invest
these funds in U.S. government securities or other short-term investments
permitted by law. See "Proposal One-Formation of Holding Company-Financial
Resources of the Company." The Company may enter into a management agreement for
the purpose of rendering certain services to the Bank after completion of the
holding company formation. No proposal and no terms of any agreement, however,
have been considered.
Property
Initially, the Company will neither own nor lease any real or personal
property. Instead, the Company intends to utilize the premises, equipment and
furniture of the Bank without the direct payment of any rental fees to the Bank.
Competition
It is expected that for the near future the primary business of the Company
will be the ongoing business of the Bank. Therefore, the competitive conditions
to be faced by the Company will be the same as those faced by
33
the Bank. In addition, many banks and financial institutions have formed holding
companies or may form holding companies in the future. It is likely that these
holding companies will attempt to acquire commercial banks, thrift institutions
or companies engaged in bank-related activities. The Company, therefore, will
face competition in undertaking any such acquisitions and in operating
subsequent to any such acquisitions.
Employees
At the present time, the Company does not intend to employ any persons other
than its management. See "Management of the Company." It will utilize the
support staff of the Bank from time to time without the payment of any fees,
except to the extent as may be required by applicable law. If the Company
acquires other financial institutions or pursues other lines of business, it may
at such time hire additional employees.
REGULATION
Holding Company Regulation
General. Upon consummation of the Reorganization, the Company, as the sole
shareholder of the Bank, will become a bank holding company and will register as
such with the Federal Reserve Board. Bank holding companies are subject to
comprehensive regulation by the Federal Reserve Board under the BHCA and the
regulations of the Federal Reserve Board. As a bank holding company, the Company
will be required to file with the Federal Reserve Board annual reports and such
additional information as the Federal Reserve Board may require and will be
subject to regular examinations by the Federal Reserve Board. The Federal
Reserve Board also has extensive enforcement authority over bank holding
companies, including, among other things, the ability to assess civil money
penalties to issue cease and desist or removal orders and to require that a
holding company divest subsidiaries (including its bank subsidiaries). In
general, enforcement actions may be initiated for violations of law and
regulations and unsafe or unsound practices.
Under the BHCA, a bank holding company must obtain Federal Reserve Board
approval before: (1) acquiring, directly or indirectly, ownership or control of
any voting shares of another bank or bank holding company if, after such
acquisition, it would own or control more than 5% of such shares (unless it
already owns or controls the majority of such shares); (2) acquiring all or
substantially all of the assets of another bank or bank holding company; or (3)
merging or consolidating with another bank holding company.
The BHCA also prohibits a bank holding company, with certain exceptions, from
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of any company which is not a bank or bank holding company, or from
engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, or providing services for its subsidiaries. The
principal exceptions to these prohibitions involve certain non-bank activities
which, by statute or by Federal Reserve Board regulation or order, have been
identified as activities closely related to the business of banking or managing
or controlling banks. The list of activities permitted by the Federal Reserve
Board includes, among other things, operating a savings institution, mortgage
company, finance company, credit card company or factoring company, performing
certain data processing operations, providing certain investment and financial
advice; underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing property on a full-payout, non-operating
basis; selling money orders, travelers' checks and United States Savings Bonds;
real estate and personal property appraising; providing tax planning and
preparation services; and, subject to certain limitations, providing securities
brokerage services for customers. The Holding Company has no present plans to
engage in any of these activities.
Dividends. The Federal Reserve Board has issued a policy statement on the
payment of cash dividends by bank holding companies, which expresses the Federal
Reserve Board's view that a bank holding company should pay cash dividends only
to the extent that the company's net income for the past year is sufficient to
cover both the cash dividends and a rate of earning retention that is consistent
with the company's capital needs, asset quality and overall financial condition.
The Federal Reserve Board also indicated that it would be inappropriate
34
for a company experiencing serious financial problems to borrow funds to pay
dividends. Furthermore, under the prompt corrective action regulations adopted
by the Federal Reserve Board pursuant to FDICIA, the Federal Reserve Board may
prohibit a bank holding company from paying any dividends if the holding
company's bank subsidiary is classified as "undercapitalized."
Bank holding companies are required to give the Federal Reserve Board prior
written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration of the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of their consolidated
net worth. The Federal Reserve Board may disapprove such a purchase or
redemption of it determines that the proposal would constitute an unsafe or
unsound practice or would violate any law, regulation, Federal Reserve Board
order, or any condition imposed by, or written agreement with, the Federal
Reserve Board. This prior notice requirement does not apply to bank holding
companies that are "well capitalized" in accordance with applicable Federal
Reserve Board regulations, have received a "1" or "2" rating in their most
recent examination and that have no unresolved regulatory issues.
Capital Requirements. The Federal Reserve Board has established capital
requirements for bank holding companies that generally parallel the capital
requirements applicable to state non-member banks, such as the Bank, under
regulations promulgated by the FDIC. If the Federal Reserve Board's capital
guidelines were applied to the Company, assuming the consummation of the
Reorganization, the Company's levels of consolidated regulatory capital on a pro
forma basis as of December 31, 1995 would exceed the Federal Reserve Board's
minimum requirements, as follows:
Amount Percent (1)
------- -----------
(Dollars in
Thousands)
Tier 1 Leverage Capital........................ $79,197 7.57%
Minimum Tier 1 (leverage) requirement.......... $52,301 5.00%
Excess......................................... $26,896 2.57%
Tier 1 Risk-based Capital...................... $79,197 12.52%
Minimum Tier 1 (risk-based) requirement........ $37,941 6.00%
Excess......................................... $41,256 6.52%
Total Risk-based capital....................... $87,045 13.77%
Minimum total risk-based capital requirement... $63,235 10.00%
Excess......................................... $23,810 3.77%
- ------
(1) The "minimum" capital ratios shown are those required for an institution to
qualify as "well capitalized".
The Company would be deemed to be "well capitalized" under applicable Federal
Reserve Board regulations on the basis of the capital measures set forth above.
Other Regulatory Considerations
Banks, thrifts and bank holding companies are subject to extensive government
regulation through Federal and state statutes and regulations which are subject
to changes that may have significant impact on the way in which such entities
may conduct business. The likelihood and potential effects of any such changes
cannot be predicted. Legislation enacted in recent years has substantially
increased the level of competition among commercial banks, thrift institutions
and nonbanking institutions, including insurance companies, brokerage firms,
mutual funds, investment banks and major retailers. In addition, the enactment
of recent banking legislation such as FDICIA and the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Interstate Act") have
affected the banking industry by, among other things, broadening the regulatory
powers of the federal banking agencies in a number of areas and enabling banks
and bank holding companies to expand the geographic area in which they may
provide banking services. The following summary is qualified in its entirety by
the text of the relevant statutes and regulations.
35
Interstate Banking Legislation. On September 29, 1994 the Interstate Act
became law. Under the new law, different types of interstate transactions and
activities will be permitted, each with different effective dates. Interstate
transactions and activities provided for under the new law include: (i) bank
holding company acquisitions of separately held banks in a state other than a
bank holding company's home state; (ii) mergers between insured banks with
different home states, including consolidations of affiliated insured banks;
(iii) establishment of interstate branches either de novo or by branch
acquisition; and (iv) affiliated banks acting as agents for one another for
certain banking functions without regard to state law prohibitions on interstate
branching or unauthorized banking. In general, nationwide interstate bank
acquisitions became permissible one year after the date of enactment,
irrespective of state law limitations. Interstate mergers will be permissible on
July 1, 1997, unless a state either passes legislation either to prevent or to
permit the earlier occurrence of interstate mergers. States may at any time
enact legislation permitting interstate de novo branching. Banks may act as
agents for affiliated depository institutions beginning within one year after
enactment. Each of the transactions and activities must be approved by the
appropriate federal bank regulator, with separate and specific criteria
established for each category.
Once the applicable effective date has occurred (and, in the case of
interstate mergers and de novo branching, subject to applicable state law
"opt-out" or "opt-in" provisions), the appropriate federal bank regulator may
approve the respective interstate transactions only if certain criteria are met.
First, in order for a banking institution (a bank or bank holding company) to
receive approval for an interstate transaction, it must be "adequately
capitalized" and "adequately managed." The phrase "adequately capitalized" is
generally defined as meeting or exceeding all applicable federal regulatory
capital standards, while the phrase "adequately managed" is left undefined.
Second, the appropriate federal bank regulator must consider the applicant's and
its affiliated institutions' records under the CRA, as well as the applicant's
record under applicable state community reinvestment laws.
The new law applies deposit "concentration limits" to interstate acquisition
and merger transactions. Specifically, a banking institution may not receive
federal approval for interstate expansion if it and its affiliates would control
(i) more than 10% of the deposits held by all insured depository institutions in
the United States, or (ii) 30% or more of the deposits of all insured depository
institutions in any state in which the banks or branches involved in the
transactions (or any affiliated depository institution) overlap. States may, by
statute, regulation or order, raise or lower the 30% limit. In addition, the new
law preempts certain existing state law restrictions on interstate banking (such
as regional compacts and reciprocity requirements), effective one year after
enactment. However, in order to receive federal approval for an interstate
merger or de novo branching transaction, an applicant still also must comply
with any non-discriminatory host state filing and other requirements.
FDICIA
FDICIA, which was enacted on December 19, 1991, provides for, among other
things, increased funding for the Bank Insurance Fund ("BIF") of the FDIC and
expanded regulation of depository institutions and their affiliates, including
parent holding companies. A summary of certain provisions of FDICIA and its
implementing regulations is provided below.
Risk Based Deposit Insurance Assessments. A significant portion of the
additional funding to the BIF is in the form of borrowings to be repaid by
insurance premiums assessed on BIF members. FDICIA also provides authority for
special assessments against insured deposits and for the development of a
general risk-based assessment system.
As of January 1, 1996, the FDIC has set assessment rates for BIF-insured
institutions ranging from 0.00% to 0.27% of deposits (subject to payment by each
institution of an annual statutory minimum amount of $2,000), based on a risk
assessment of the institution.
36
Each financial institution is assigned to one of three capital groups-"well
capitalized", "adequately capitalized" or "undercapitalized"-and further
assigned to one of three subgroups within each capital group, on the basis of
supervisory evaluations, the institution's financial condition and the risk
posed to the applicable insurance fund. A well capitalized institution is one
that has a total risk-based capital ratio of 10% or more, a Tier 1 risk-based
capital ratio of 6% or more, and a leverage ratio of 5% or more. An adequately
capitalized institution has a total risk-based capital ratio of 8% or more, a
Tier 1 risk-based capital ratio of 4% or more, and a leverage ratio of 4% or
more, but does not qualify as a well-capitalized institution.
An undercapitalized institution is one that does not meet either of the
foregoing definitions. The actual assessment rate applicable to a particular
institution, therefore, depends in part upon the risk assessment classification
so assigned to the institution by the FDIC. As of December 31, 1995, the Bank
was classified as "well capitalized" under these provisions.
Prompt Corrective Actions. FDICIA also provides the federal banking agencies
with broad powers to take prompt corrective action to resolve problems of
insured depository institutions, depending upon a particular institution's level
of capital. FDICIA establishes five tiers of capital measurement for regulatory
purposes ranging from "well capitalized" to "critically undercapitalized." Under
prompt corrective action regulations adopted by the federal banking agencies in
December 1992, a depository institution is (a) "well capitalized" if it has a
total risk-based capital ratio of 10% or more, a Tier 1 risk-based capital ratio
of 6% or more, a leverage ratio of 5% or more and is not subject to any written
agreement, order or capital directive or prompt corrective action directive
issued by the primary regulator to meet and maintain a specific capital measure;
(b) "adequately capitalized" if it is not well capitalized and has a total
risk-based capital ratio of 8% or more, a Tier 1 risk-based capital ratio of 4%
or more and a leverage ratio of 4% or more (3% or more if the bank is rated
composite 1 under the CAMEL rating system in its most recent examination and is
not experiencing or anticipating significant growth); (c) "undercapitalized" if
it has a total risk-based capital ratio that is less than 8%, a Tier 1
risk-based capital ratio that is less than 4% or a leverage ratio that is less
than 4% (less than 3% if the bank is rated composite 1 under the CAMEL rating
system in its most recent examination and is not experiencing or anticipating
significant growth); (d) "significantly undercapitalized" if the bank has a
total risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital
ratio that is less than 3% or a leverage ratio that is less than 3%; and (e)
"critically undercapitalized" if the depository institution has a ratio of
tangible equity to total assets that is equal to or less than 2%. A depository
institution may be deemed to be in a capitalization category that is lower than
is indicated by its actual capital position under certain circumstances. At
December 31, 1995, the Bank had capital ratios sufficient to be characterized as
"well capitalized" under the prompt corrective action regulations.
Undercapitalized and significantly undercapitalized depository institutions
must submit capital restoration plans to their federal regulator and may be
subject to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cessation of receipt of deposits from correspondent banks. In
addition, significantly undercapitalized depository institutions also are
prohibited from awarding bonuses or increasing compensation of senior executive
officers until approval of a capital restoration plan. Critically
undercapitalized depository institutions are subject to appointment of a
receiver or conservator.
Brokered Deposits and Pass-Through Deposit Insurance Limitations. FDICIA also
imposed limits on depository institutions, except well capitalized depository
institutions, accepting, renewing or rolling over brokered deposits. A
depository institution that is adequately capitalized may not accept, renew or
roll over any brokered deposit unless it obtains a waiver of FDICIA's
limitations from the FDIC. Even if an adequately capitalized institution
receives such a waiver, it may offer yields on brokered deposits only within
specified limits. An undercapitalized depository institution may not accept
brokered deposits. The definitions of "well capitalized", "adequately
capitalized" and "undercapitalized" generally conform to the definitions
described above for prompt corrective action.
37
In addition, "pass-through" insurance coverage may not be available for
certain employee benefit accounts and eligible deferred compensation plans
maintained by depository institutions that cannot accept brokered deposits.
Safety and Soundness Guidelines. FDICIA also required the federal banking
agencies to develop regulations for all insured depository institutions and
depository institutions holding companies prescribing standards relating to
internal controls, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, and such other operational and managerial
standards as the banking agencies deem appropriate. The Community Development
and Regulatory Improvement Act of 1994 amended FDICIA by allowing the federal
banking agencies to publish guidelines rather than regulations concerning safety
and soundness.
In August, 1995, the federal banking agencies issued guidelines establishing
standards for safety and soundness. These interagency guidelines relate to the
management policies of financial institutions and are designed to implement the
safety and soundness criteria outlined in FDICIA. If the relevant federal
banking agency determines that an institution fails to meet any standard
established by such guidelines, such agency may require the institution to
submit to the agency an acceptable plan to achieve compliance with the standard.
If an institution fails to submit an acceptable plan within the time allowed by
the relevant agency or fails to implement an accepted plan, the agency must
require the institution to correct the deficiency and, until the deficiency has
been corrected, the agency may, and in some cases must, take other supervisory
actions. Action taken by a federal banking agency under these guidelines may be
taken independently of, in conjunction with, or in addition to any other
enforcement action available to such agency. At this time, management does not
believe that the safety and soundness guidelines will have any material effect
on the current practices of the Bank.
FDICIA also contains a variety of other provisions that may affect the Bank's
respective operations, including reporting requirements, regulatory guidelines
for real estate lending, "truth in savings" provisions, and the requirements
that a depository institution give 90 days' prior notice to customers and
regulatory authorities before closing any branch. Certain of the provisions in
FDICIA have recently been or will be implemented through the adoption of
regulations by the various federal banking agencies and, therefore, their
precise impact cannot be addressed at this time.
The federal banking agencies continue to indicate their desire to raise
capital requirements applicable to banking organizations, and have amended their
risk-based capital regulations to provide for the consideration of,
concentration of credit rate risk and non-traditional banking activities in the
determination of a bank's minimum capital requirements. The amendments are
intended to require that banks effectively measure and monitor these credit
risks and that they maintain capital adequate for that risk. The federal bank
regulators intend to consider these risks when assessing a bank's capital
adequacy, and the new regulations may require banks to maintain additional
capital beyond that otherwise required.
Failure to meet the minimum regulatory capital requirements could subject a
banking institution to a variety of enforcement remedies available for federal
regulatory authorities, including the termination of deposit insurance by the
FDIC and seizure of the institution.
CRA Regulations
The federal bank regulatory agencies have jointly issued amendments to the
regulations implementing the CRA that substantially revises the current CRA
framework effective July 1, 1995. They rely more than the previous CRA
regulations upon objective criteria of the performance of institutions under
three key assessment tests: a lending test, a service test and an investment
test.
At this time it is not known what effect this amendment to the CRA regulations
will have upon the current practices of the Bank.
Federal Securities Laws
Following consummation of the Reorganization, the Company will register the
shares of Company Common Stock to be issued in the Reorganization under the
Exchange Act. Accordingly, the Company will be required to file periodic and
other reports with the SEC, and will be subject to the insider trading, proxy
solicitation and other requirements of the SEC under the Exchange Act on the
same basis as the Bank is currently subject through
38
regulation by the FDIC. Following consummation of the Reorganization, the Bank
Common Stock will no longer be registered under the Exchange Act and, as a
consequence, the Bank will no longer be required to comply with the reporting
and proxy requirements of the Exchange Act.
Shares of the Company Common Stock received in the Reorganization by persons
who are not affiliates of the Bank or the Company may be resold without
registration or other limitation under the Securities Act. Shares received by
affiliates of the Bank may be resold only if registered or if they qualify for
an exemption from registration under the Securities Act. The possible exemptions
include those provided in Rules 144 and 145 under the Securities Act. The
conditions imposed by the exemption under Rule 145 are substantially the same as
the conditions imposed by Rule 144 discussed below, other than the holding
period requirement, which is not required under Rule 145. The Rule 145
conditions cease to be applicable after two years, but resales by any affiliate
of the Bank who remains an affiliate of the Company will continue to require an
exemption from registration such as Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons whose
shares are required to be aggregated) who has beneficially owned shares of
Company Common Stock that constitute restricted securities and have been
outstanding and not held by any "affiliate" of the Company for a period of two
years is entitled to sell within any three-month period a number of shares that
does not exceed the greater of one percent of the then outstanding shares of
Company Common Stock or the average weekly reported trading volume of the
Company Common Stock during the four calendar weeks preceding the date on which
notice of such sale is given, provided certain requirements as to the manner of
sale, notice of sale and the availability of current public information are
satisfied (which requirements as to the availability of current public
information are expected to be satisfied commencing within 90 days after the
consummation of the Reorganization). Affiliates of the Company must comply with
the foregoing restrictions and requirements of Rule 144 as to both restricted
and non-restricted securities, except that the two-year holding period
requirement generally does not apply to shares of the Company Common Stock that
are not "restricted securities". Under Rule 144(k), a person who is not deemed
an "affiliate" of the Company at any time during the three months preceding a
sale by such person, and who has beneficially owned shares of Company Common
Stock that were not acquired from the Company or an "affiliate" of the Company
within the previous three years, would be entitled to sell such shares without
regard to volume limitation, manner of sales provisions, notification
requirements or the availability of current public information concerning the
Company. As defined in Rule 144, an "affiliate" of an issuer is a person that
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such issuer.
MANAGEMENT OF THE COMPANY
Directors
The initial Directors of the Company consist of 7 persons, 5 of whom currently
serve as Directors of the Bank. The Directors of the Company are divided into
three classes, as nearly equal in number as possible, with one class elected
each year at the annual meeting of stockholders. The Directors in each class
serve for a term of three years and until their successors are duly elected and
qualified. As the term of one class expires, a successor class is elected at
each annual meeting of stockholders to serve until the next annual meeting. The
names of the initial Directors of the Company and their terms are set forth
below (See also "Management of the Bank"):
Term of Office
Names Expires
- -------------------------------- --------------
Class I: John M. Naughton 1997
Sister Mary Caritas (Geary) S.P. 1997
Class II: Charles L. Johnson 1998
F. William Marshall, Jr. 1998
Class III: William B. Hart, Jr. 1999
Thomas O'Brien 1999
Stephen A. Shatz 1999
39
Committees
The By-laws of the Company provide that the Company's Board of Directors may
establish various committees from time to time. It is anticipated that the
initial committees of the Company's Board of Directors will be an executive
committee and an audit committee. The Company's Board of Directors has not yet
determined the size or composition of these committees.
Executive Officers
The initial officers of the Company are: F. William Marshall, Jr., President
and Chief Executive Officer; John F. Treanor, Treasurer and Chief Financial
Officer; and Michael E. Tucker, Clerk and General Counsel. All of these persons
hold similar positions with the Bank. Information concerning their principal
occupations and business experience during the past five years and other
biographical data is set forth under "Management of the Bank-Executive
Officers."
Compensation
It is expected that until the Company becomes actively involved in the
acquisition of additional banks or other businesses, no separate compensation
will be paid to the officers of the Company. However, the Company may determine
that such compensation is appropriate in the future. It is expected that each of
the Company's Directors will be paid $400 for each meeting of the full Board and
of any committee on which the Director serves attended by such Director.
See "Management of the Bank-Compensation."
Employee Benefit Plans
Upon completion of the Reorganization, the Stock Option Plans and the
Restricted Stock Plans will become the director and employee stock option plans
and the directors and management restricted stock plans of the Company with
officers and other employees of the Bank and the Company eligible to participate
according to the terms of such plans. As the officers and Directors of the
Company will not initially be compensated by the Company but will continue to
serve and be compensated by the Bank, no separate holding company benefit plans
are anticipated at this time. The Bank intends to continue to maintain its other
benefit programs.
PROPOSAL TWO-ELECTION OF CLASS OF DIRECTORS
The Bank's Amended and Restated By-Laws provide that the number of Directors
shall be set by a majority vote of the entire Board of Directors, which has been
set at 13. Under the Bank's Charter and By-Laws, this number shall be divided
into three classes, as nearly equal in number as possible, with the Directors in
each class serving a term of three years and until their respective successors
are duly elected and qualified, or until his or her earlier resignation, death
or removal. As the term of one class expires, a successor class is elected at
the annual meeting of stockholders for that year.
At the 1996 Annual Meeting, there are five Directors to be elected to serve
until the 1999 Annual Meeting and until their respective successors are duly
elected and qualified, or until his or her earlier resignation, death or
removal. The Board of Directors of the Bank has nominated each of William B.
Hart, Jr., Thomas O'Brien, Teresita Alicea, Paulette Henderson-Johnson and John
H. Southworth, for election as a Director for a three-year term. Teresita
Alicea, Paulette Henderson-Johnson and John H. Southworth are currently
Directors of the Bank; their terms expire in 1996. For information with respect
to the nominees and the other Directors of the Bank whose terms do not expire in
1996, including their business experience, compensation paid by the Bank, and
participation on committees of the Board of Directors, see "Management of the
Bank."
Unless authority to do so has been withheld or limited in 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 a Director each of the nominees
named above. The Board of Directors believes that all of the nominees will stand
for election and will serve if elected as Director. However, if any person
nominated by the Board of Directors fails to stand for election or is unable or
refuses to accept election, the proxies will be voted for the election of such
other person or persons as the Board of Directors may recommend.
40
If the Reorganization is consummated, the Bank will become a wholly-owned
subsidiary of the Company and thereafter, so long as the Company remains the
sole stockholder of the Bank, the Directors of the Bank will be elected by the
Company. Stockholders of the Bank, who will become stockholders of the Company
upon the consummation of the Reorganization, will in the future elect the
Directors of the Company. If, however, the Reorganization is not consummated,
the Directors of the Bank will continue to be elected by the stockholders of the
Bank.
Recommendation of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION
OF THE FIVE NOMINEES PROPOSED BY THE BOARD OF DIRECTORS OF THE BANK AS DIRECTORS
OF THE BANK.
MANAGEMENT OF THE BANK
Directors and Nominees
Formation of the holding company will not change the Directors of the Bank.
The Directors of the Bank are divided into three classes, as nearly equal in
number as possible, with one class elected each year at the annual meeting of
stockholders. The Directors in each class serve for a term of three years and
until their successors are duly elected and qualified. As the term of one class
expires, a successor class is elected at each annual meeting of stockholders to
serve until the next annual meeting.
The following table sets forth certain information as of January 31, 1996 for
each of the five nominees for election as Directors at the Annual Meeting and
for those continuing Directors whose terms expire at the annual meetings of the
Bank's stockholders in 1997 and 1998. Each individual has been engaged in his or
her principal occupation for at least five years, except as otherwise indicated.
Nominees
(Term to Expire in 1999)
Director or
Trustee
Name, Age and Principal Occupation Since (1)
- ------------------------------------------ -----------
William B. Hart, Jr. (52)............................... N/A
President, The Dunfey Group, an investment management firm
Thomas O'Brien (56)..................................... N/A
Dean, University of Massachusetts School of Management
Teresita Alicea (50)................................... 1993
Attorney, Partner in Alicea & Nagel
Paulette Henderson-Johnson (44)........................ 1993
Director, Henderson Funeral Home, Inc.
John H. Southworth (68)................................. 1974
Chairman of the Board, Southworth Company, a manufacturer
of business and personal paper goods
41
Continuing Directors
(Term to Expire in 1997)
Director or Trustee
Name, Age and Principal Occupation Since (1)
- ---------------------------------------------- -------------------
Mary E. Boland (56)........................... 1973
Attorney, Partner in Egan, Flanagan & Cohen(2)
Sister Mary Caritas (Geary) (72).............. 1980
Retired; former President and Chief
Executive Officer of Mercy Hospital
Donald F. Collins (67)........................ 1973
Treasurer, Collins Electric Company(2)
John M. Naughton (59)......................... 1991
Chairman of the Board of Springfield
Institution for Savings,
Executive Vice President, Massachusetts
Mutual Life Insurance Co.
Continuing Directors
(Term to Expire in 1998)
Director or Trustee
Name, Age and Principal Occupation Since (1)
- ----------------------------------------------------- -------------------
Charles L. Johnson (57).............................. 1983
Self-employed Chartered Financial Consultant(2)
F. William Marshall, Jr. (53)........................ 1993
President and Chief Executive Officer,
Springfield Institution for Savings(4)
Gary P. Shannon (47)................................. 1988
Attorney, Partner in Doherty, Wallace,
Pillsbury and Murphy, P.C.
Stephen A. Shatz (53)................................ 1986
Attorney, Partner in Shatz, Schwartz & Fentin, P.C.
- ------
(1) Each of the present Directors of the Bank listed above with service prior to
1995 was also a Trustee of the Bank before the Bank converted from mutual to
stock form of organization in February 1995 (the "Conversion"). As a result
of the Conversion, each individual became a Director in February 1995, and
any date prior to this time indicates service as a Trustee of the Bank.
(2) Mrs. Boland and Mr. Collins are first cousins.
(3) Prior to June, 1995, Mr. Johnson was the Associate Treasurer of Smith
College, Northampton, Massachusetts
(4) Prior to joining the Bank in 1993, Mr. Marshall served as Chairman and
Chief Executive Officer of the Bank of Ireland First Holdings, Inc. and
First NH Bank. Prior to 1991, Mr. Marshall served as Executive Vice
President of Shawmut National Corporation.
Meetings of Board of Directors and Committees
Since February 1995, the Bank has been a savings bank in stock form and had
been governed by a Board of Directors consisting of 15 individuals. In March
1995, the Board voted to reduce its size to 13 members at the 1995 Annual
Meeting. In connection with the Conversion, the Bank consolidated and
streamlined the committees of its Board of Directors in a manner in which it
believes will enable the Directors to most efficiently oversee
42
the operations of the Bank. Each of the committees of the Board of Directors of
the Bank which are in effect as of the date of this Proxy Statement-Prospectus
is described below.
There were 12 meetings of the Board of Directors held during the year ended
December 31, 1995. No Director attended fewer than 75% in the aggregate of such
total number of Board of Director meetings held during such year and the total
number of meetings held by each of the committees of the Board of Directors on
which he or she served during that time.
Executive Committee. The Executive Committee of the Board of Directors in 1995
consisted of the following six Directors: F. William Marshall, Jr.
(Chairperson); John M. Naughton; Sister Mary Caritas, S.P.; Harry J. Courniotes;
Stephen A. Shatz; and John H. Southworth. This committee meets approximately
twice per month to review large loan proposals, the investment portfolio, and
any off-balance sheet exposures of the Bank, and to generally exercise control
and supervision in all matters pertaining to the interests of the Bank, subject
at all times to the direction of the Board of Directors. This committee met 22
times in 1995.
Audit Committee. The Audit Committee of the Board of Directors in 1995
consisted of the following five directors: Sister Mary Caritas, S.P.
(Chairperson); Teresita Alicea; Harry J. Courniotes; Charles L. Johnson; and
Gary P. Shannon. This committee meets at least quarterly to review and audit
functions in asset quality, corporate controls, corporate governance, and
financial reporting controls. This committee met 5 times in 1995.
Compensation Committee. The Compensation Committee of the Board of Directors
in 1995 consisted of the following four outside directors: John H. Southworth
(Chairperson); Donald F. Collins; John M. Naughton; and Albert E. Steiger, Jr.
The Compensation Committee meets on at least a semi-annual basis to exercise a
broad oversight of human resource strategies, to examine and analyze the
competitiveness of compensation programs, including short and long-term
incentive programs such as the stock option allocations and restricted stock
grants. This committee met 5 times in 1995.
CRA/Fair Lending Committee. The CRA/Fair Lending Committee of the Board of
Directors in 1995 consisted of the following four outside directors: Mary E.
Boland (Chairperson); Donald F. Collins; Paulette Henderson-Johnson; and Charles
L. Johnson. This committee meets at least 3 times per year to review the Bank's
performance in ascertaining community needs, evaluate CRA performance, and
generally assist the Bank in meeting its obligations under the Community
Reinvestment Act. This committee met 4 times in 1995.
Nominating Committee. The Nominating Committee of the Board of Directors in
1995 consisted of the following four outside directors: Gary P. Shannon
(Chairperson); Mary E. Boland; Paulette Henderson-Johnson; John M. Naughton; and
Stephen A. Shatz. This committee meets at least semi-annually to identify, with
the approval of the full Board of Directors, candidates for Directors to be
elected at each annual meeting of stockholders and also to consider stockholder
proposals for such nominations, and to identify directors for various Board
committee assignments. For information regarding procedures for submitting
stockholder proposals, see "Stockholder Proposals." This committee met 3 times
in 1995.
43
Principal Officers of the Bank
The following table sets forth certain information regarding the principal
officers of the Bank (those officers subject to Section 16 reporting
requirements under the Exchange Act):
Office held
Name Age Position and office with the Bank since
- ------------------------------ --- --------------------------------------------------------- -----------
F. William Marshall, Jr.(1)... 53 President and Chief Executive Officer, Director 1993
Frank W. Barrett(2)........... 56 Executive Vice President, Credit and 1994
Commercial Lending Division
B. John Dill(3)............... 44 Executive Vice President of Bank; President of 1987
Colebrook Corporation
John F. Treanor(4)............ 48 Executive Vice President, Chief Financial 1994
Officer and Treasurer
Gilbert F. Ehmke(5)........... 36 Senior Vice President, Chief Investment Officer 1995
Henry J. McWhinnie(6)......... 52 Senior Vice President, Human Resources 1994
Division
Jeanne Rinaldo(7)............. 46 Senior Vice President, Residential Mortgage 1992
Division
Christopher A. Sinton(8)...... 51 Senior Vice President, Retail Banking Division 1995
Michael E. Tucker(9).......... 39 Senior Vice President, General Counsel and
Clerk 1993
Ting Chang(10)................ 32 Vice President, Investor Relations and Corporate Planning 1995
Laura Sotir Katz(12).......... 32 Vice President and Controller 1992
Brian Schwartz(12)............ 29 Vice President and Director of Internal Auditing 1995
- ------
<FN>
(1) Mr. Marshall joined the Bank in May, 1993. He formerly served as Chairman
and Chief Executive Officer of Bank of Ireland First Holdings, Inc. and
First NH Bank. Prior to 1991, Mr. Marshall served as Executive Vice
President of Shawmut Corporation. Mr. Marshall served as a Trustee of the
Bank from May, 1993 until the Conversion of the Bank to stock form on
February 8, 1995.
(2) Mr. Barrett joined the Bank in January, 1994. He formerly served as Senior
Vice President of Bank of Ireland First Holdings, Inc. and First NH Bank;
Senior Vice President of Shawmut Bank, N.A.; and Executive Vice President
of Shawmut Worcester County Bank, N.A.
(3) Mr. Dill joined the Bank in 1974 and has served as Executive Vice President
of the Bank since 1987 and President and Chief Executive Officer of
Colebrook since 1982.
(4) Mr. Treanor joined the Bank in August, 1994. He formerly served as
Executive Vice President, Treasurer and Chief Financial Officer of Sterling
Bancshares Corporation and Senior Vice President of Shawmut Corporation.
(5) Mr. Ehmke joined the Bank in February 1995. He formerly served as Senior
Vice President and Treasurer of Northeast Savings, F.A. in Hartford,
Connecticut.
(6) Mr. McWhinnie joined the Bank in September, 1994. He formerly served as
Senior Vice President Human Resources of Bristol Savings Bank in Bristol,
Connecticut and as Executive Vice President of Centerbank, Waterbury,
Connecticut.
(7) Mrs. Rinaldo joined the Bank in 1988 and has served as Senior Vice
President since May, 1992.
(8) Mr. Sinton joined the Bank in February, 1995. He formerly was Executive
Vice President-Retail Banking Division of United Jersey Bank.
(9) Mr. Tucker joined the Bank in 1980 and has served as Senior Vice President
since December, 1993 and General Counsel since 1985.
(10) Ms. Chang joined the Bank in 1989 and has served as Vice President for
Investor Relations since 1995.
(11) Ms. Katz joined the Bank in 1990. She previously was a certified public
accountant at Ernst & Young LLP in Boston, Massachusetts.
(12) Mr. Schwartz joined the Bank in May, 1995. He formerly served as Audit
Manager with Shawmut National Corporation. Prior to 1993, he was Corporate
Compliance Officer with MNC Financial Corporation.
</FN>
44
Compensation of Directors
Directors' Fees. The members of the Board of Directors receive an annual
retainer of $7,500, with the Chairman of the Board receiving an additional
annual retainer of $5,000. Directors are also paid $400 for each committee
meeting attended, and if a Director attends more than one committee meeting on
the same day, the initial meeting fee is $400 and each additional meeting fee is
$200. The Chairperson of each committee will receive an additional $150 for each
meeting attended. There is also a pro-rata deduction for any Director's meetings
not attended by a Director. Directors who are employees of the Bank are not
eligible to receive any fees otherwise paid to Directors.
Stock Option Grants to Directors. Under the terms of the Director Stock Option
Plan, each non-employee Director of the Bank received an option to acquire 6,600
shares of Bank Common Stock (except that the Chairman of the Board of the Bank
received an option to acquire 10,000 shares) the day following stockholder
approval at the 1995 Annual Meeting of the Bank, and final approval of the
Commissioner of Banks, at the fair market value of $121/4 per share of Common
Stock, which was the market price on the effective date of the grant. See
"-Executive Compensation-Stock Option Plan."
Restricted Stock Grants to Directors. Under the terms of the Director
Restricted Stock Plan, each non-employee Director of the Bank was granted 2,200
shares of restricted Bank Common Stock (except that the Chairman of the Board of
the Bank was granted 3,500 shares of restricted Bank Common Stock) the day
following stockholder approval of said plan at the 1995 Annual Meeting of the
Bank and final approval of said plan by the Commissioner of Banks. See
"-Executive Compensation-Restricted Stock Plans."
Executive Compensation
Summary Compensation Table. The following table sets forth the compensation
paid by the Bank and its subsidiaries for services rendered in all capacities
during the fiscal years ended December 31, 1994 and 1995, respectively, to the
Chief Executive Officer and each of the four most highly compensated principal
officers of the Bank and its subsidiaries (the "Named Executive Officers").
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
------------------- -------------------------
Securities
Restricted Underlying All Other
Salary Bonus(2) Stock Options/ Compensation(5)
Name & Principal Position Year(1) ($) ($) Awards($)(3) SARs(#)(4) ($)
- ----------------------------------- ------- --------- --------- ------------ ------------ ---------------
F. William Marshall, Jr............ 1995 332,856 100,725 428,750 80,000(6) 24,808
President & Chief Executive Officer 1994 313,462 109,750 N/A N/A 11,171
B. John Dill....................... 1995 193,370 30,000 153,125 40,000 35,149
Executive Vice President of the
Bank, President of Colebrook
Corporation, a wholly-owned
subsidiary of the Bank 1994 189,551 35,000 N/A N/A 21,748
Frank W. Barrett................... 1995 157,308 35,000 183,750 40,000 21,145
Executive Vice President Credit and
Commercial Lending Division of the
Bank 1994 148,846 37,000 N/A N/A 6,953
John F. Treanor(7)................. 1995 157,308 40,000 153,125 40,000 13,082
Executive Vice President & Chief
Financial Officer, Treasurer 1994 50,769 25,000 N/A N/A 13,968
Christopher A. Sinton(8)........... 1995 112,154 24,000 49,000 15,000 28,158
Senior Vice President/ Retail
Banking Division 1994 N/A N/A N/A N/A N/A
45
<FN>
- ------
(1) Table includes only 1994 and 1995 since the Bank did not become a publicly
traded company until February 8, 1995 and was not subject to reporting prior
to these dates.
(2) Amounts shown include cash compensation earned and received by the Named
Executive Officers as well as amounts earned but deferred at the election of
those officers. Bonuses shown for 1994 were allocated in 1994 and paid in
1995. Bonuses shown for 1995 were allocated in 1995 and paid in 1996.
(3) Dollar amount shown equals the number of shares of restricted stock granted
multiplied by stock price on the grant date. This valuation does not take
into account the diminution of value attributable to the restrictions
applicable to the shares. The shares granted are expected to vest under
ordinary circumstances over 5 years at a rate of 20% per year, commencing
with an initial vesting on June 1, 1996. The number and dollar value of
shares of restricted stock held by the Named Executive Officers on December
31, 1995, based on a closing price for the Bank Common Stock on December 31,
1995 of $16.375, were: (i) Mr. Marshall-35,000 shares ($573,125); (ii) Mr.
Dill-12,500 shares ($204,687.50); (iii) Mr. Barrett-15,000 shares
($245,625.00); (iv) Mr. Treanor-12,500 shares ($204,687.50); and (v) Mr.
Sinton-4,000 shares ($65,500.00). Dividends (if any) paid in the future will
be paid on all shares of restricted stock at the same rate as paid on
unrestricted shares.
(4) Grants of options are expected to vest under ordinary circumstances over 5
years at a rate of 20% per year, commencing with an initial vesting on June
1, 1996, but in any event will be fully vested no later than 7 years after
the grant date.
(5) For certain officers this includes employer match to the Bank's or a
subsidiary's 401(k) Plan (Mr. Marshall-$2,310 in 1995; Mr. Dill-$4,620 in
each of 1995 and 1994; Mr. Barrett-$1,200 in 1995); insurance premiums under
a split-dollar plan (Mr. Marshall-$9,416 in 1995 and $11,071 in 1994; Mr.
Dill-$11,889 in 1995 and $12,127 in 1994; Mr. Barrett-$6,862.50 in 1995 and
6,953 in 1994); Relocation assistance (Mr. Treanor-$13,968 in 1994; Mr.
Sinton- $16,500 in 1995); cash value as of fiscal year end of shares of Bank
Common Stock allocated to the officer's account under the ESOP in 1995 (each
of Messrs. Marshall, Dill, Barrett and Treanor-$13,082; Mr.
Sinton-$11,658).
(6) Includes 40,815 qualified and 39,185 non-qualified options.
(7) Mr. Treanor joined the Bank on August 29, 1994. The salary shown for 1994
was paid from August 29, 1994 to December 31, 1994.
(8) Mr. Sinton joined the Bank on January 23, 1995. The salary shown was paid
between January 23, 1995 and December 31, 1995.
</FN>
Stock Option Plans. In connection with the Conversion of the Bank from a
mutual to stock form of ownership (the "Conversion"), the Board of Directors of
the Bank adopted the Stock Option Plans, which were approved by the stockholders
at the first annual meeting of the Bank's stockholders on May 31, 1995. The
Director Stock Option Plan authorized the granting of nonqualified stock options
for 111,250 shares for issuance to non-employee Directors of the Bank, with at
least 27,812 shares reserved for future awards to such persons. The Management
Stock Option Plan authorized 445,000 shares reserved for issuance upon the
exercise of incentive and nonqualified options granted to management and other
eligible individuals, with at least 111,250 reserved for future awards to such
persons. Awards under the Management Stock Option Plan are made by the Board of
Directors upon recommendations made by the Compensation Committee from time to
time.
The option exercise price of options granted under the Stock Option Plans may
not be less than 100% of the fair market value of the Common Stock on the date
of grant of the option, as determined in accordance with the Stock Option Plans.
The maximum option term is 10 years. Each option granted under the Director
Stock Option Plan will be exercisable in installments of 20% per year commencing
on the first anniversary of the date of grant. In addition, options granted to a
non-employee Director will become immediately vested upon the Director's death,
disability, or retirement as a Director due to attainment of maximum age, or
upon a change of control of the Bank. No non-employee Director may receive a
stock option award if, at the time of such award, such non-employee Director
owns directly or indirectly more than l0% of the combined voting power of the
Bank. The Compensation Committee may establish the terms under which options
granted under the Management Stock Option Plan became exercisable, in its
discretion. In addition, upon a change in control of the Bank, all options
become immediately vested. No person may receive any incentive stock option if,
at the time of grant, such person owns directly or indirectly more than 10% of
the total combined voting power of the
46
Bank unless the option price is at least 110% of the fair market value of the
Common Stock and the exercise period of such incentive option is by its terms
limited to five years.
Payment for shares purchased under the Stock Option Plans may be made either
in cash or cash equivalents, or, if permitted by the option agreement, by
exchanging shares of Common Stock of the Bank with a fair market value equal to
or less than the total option price plus cash for any difference, or by a
combination of the foregoing. Options generally also may be exercised by the
optionee directing that certificates for the shares purchased be delivered to a
licensed broker acceptable to the Bank as agent for the optionee, provided that
the broker tenders to the Bank cash or cash equivalents equal to the option
exercise price plus the amount of any taxes that the Bank may be required to
withhold in connection with the exercise of the option. No fractional shares
will be issued by the Bank on exercise of options and no cash will be paid in
lieu of any fractional shares.
Options granted under the Stock Option Plans are not transferable and may be
exercised only by the optionee during his or her lifetime. If an employee's
employment with the Bank, a subsidiary (or the Company) terminates, his or her
options may remain exercisable (but not for a period longer than the period
ending on the date the option would otherwise expire), if the option agreement
so provides. Options granted to non-employee Directors of the Bank terminate
upon the expiration of one year following the date on which the non-employee
Director ceases to be a member of the Board for any reason, but not more than
ten years after the date of grant.
If the outstanding shares of the Bank's Common Stock are changed for a
different number or kind of shares or securities of the Bank, by reason of any
reorganization, recapitalization, exchange of shares, stock split, combination
of shares or dividend payable in capital stock, an appropriate adjustment will
be made by the Compensation Committee in the number and kind of shares subject
to the Stock Option Plans, and for which options may be granted under the Stock
Option Plans. Any such adjustment to outstanding options, 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.
If the Bank merges or consolidates with one or more corporations, or if the
Bank is liquidated or sells all or substantially all of its assets to another
entity while any options remain outstanding, then the Compensation Committee in
its discretion shall amend the terms of all outstanding options so that either
(i) after the merger, consolidation or sale, each optionee is entitled to
receive shares of common stock of the new entity to which he or she would have
been entitled if he or she were a stockholder of the Bank at the time of the
merger, consolidation or sale, or (ii) all outstanding options shall be canceled
as of the effective date of any such merger, consolidation or sale, provided
that each optionee receives 20 days following the effective date of such
transaction to exercise his or her options in accordance with their respective
terms.
The Board may amend the Stock Option Plans with respect to shares of Common
Stock as to which options have not been granted; however, the Bank's
stockholders must approve any amendment that would (i) increase the number of
shares of Bank Common Stock as to which options may be granted under the Stock
Option Plans, (ii) change the requirements as to eligibility to receive options
or price, amount, timing or vesting under awards to non-employee Directors,
(iii) change the requirements as to eligibility to receive options for all other
participants, (iv) reduce the minimum option price, or (v) increase the maximum
term of options.
The Board at any time may terminate or suspend the Stock Option Plans. Unless
previously terminated, the Stock Option Plans will terminate automatically on
May 31, 2005, the tenth anniversary of the effective date of the Stock Option
Plans. No termination, suspension or amendment of the Stock Option Plans may,
without the consent of the optionee to whom an option has been granted,
adversely affect the rights of the holder of the option.
Restricted Stock Plans. In connection with the Conversion of the Bank, the
Board of Directors of the Bank adopted the Restricted Stock Plans, which were
approved by the stockholders at the first annual meeting of the Bank's
stockholders on May 31, 1995. Under the terms of the Restricted Stock Plans,
222,500 shares of
47
authorized but unissued Bank Common Stock, or approximately 4% of the shares of
Bank Common Stock issued in connection with the Conversion, were reserved for
issuance under the Restricted Stock Plans. Of such shares, 55,625 shares were
reserved for issuance to non-employee Directors of the Bank, with at least
27,812 shares reserved for future awards, under the Director Restricted Stock
Plan. Under the Management Restricted Stock Plan, 166,875 shares were reserved
for grant to management and other employees of the Bank, with at least 27,812
shares reserved for future awards.
Under the terms of the Director Restricted Stock Plan, each non-employee
Director of the Bank (including any new Director first elected after Conversion)
received a grant of 2,200 shares of Bank Common Stock (except that the Chairman
of the Board of the Bank received a grant of 3,500 shares) the day following
stockholder approval and final approval of the Commissioner of Banks.
Thereafter, subject to availability, additional awards of 2,200 shares of Common
Stock will be made to each newly-elected non-employee Director of the Bank on
the day following his or her election.
The shares awarded to a non-employee Director of the Bank under the Director
Restricted Stock Plan vest in installments of 20% per year commencing on the
first anniversary of the date of grant. No non-employee Director may receive any
restricted stock award if, at the time of the award, such non-employee Director
owns directly or indirectly more than 10% of the total combined voting power of
the Bank.
All shares of Bank Common Stock awarded under the Director Restricted Stock
Plan to non-employee Directors of the Bank which have not yet vested terminate
on the date the non-employee Director ceases to be a Director of the Bank,
except that if a non-employee Director retires as a result of reaching maximum
age, permanent disability or death, all shares become immediately vested. In
addition, upon a change of control of the Bank, all shares will also become
immediately vested.
The Compensation Committee, in its discretion, determines the terms upon which
Common Stock awarded to employees of the Bank under the Management Restricted
Stock Plan become vested, and other terms and conditions of those awards.
The following table shows individual grants of stock options to the Named
Executive Officers of the Bank during the 1995 fiscal year:
Option/Stock Appreciation Right ("SAR")
Grants in Last Fiscal Year
Individual Grants in 1995
---------------------------
Number of Percent of
Securities Total
Underlying Options/SARs
Options/ Granted to Exercise or Grant Date
SARs Employee in Base Price Expiration Present Value
Name Granted (#)(1) Fiscal Year ($/Sh) Date ($)(2)
- ---------------------------- -------------- ------------ ----------- ---------- -------------
F. William Marshall, Jr. ... 80,000 24.0% $12.25 05/31/2005 $554,240
B. John Dill................ 40,000 12.0% $12.25 05/31/2005 $277,120
Frank W. Barrett............ 40,000 12.0% $12.25 05/31/2005 $277,120
John F. Treanor............. 40,000 12.0% $12.25 05/31/2005 $277,120
Christopher A. Sinton....... 15,000 4.5% $12.25 05/31/2005 $132,640
<FN>
- ------
(1) None of the options granted under the Management Stock Option Plan to the
Named Executive Officers and other management employees were exercisable
during 1995.
(2) The grant date present values assigned to the options shown in the above
table are computed using the Black-Scholes option pricing model. The
calculated values assume the following: risk-free rate of return of 6.63%;
volatility of 28.3% calculated based on the 246 trading days prior to
January 31, 1996; vesting equivalent to the term of the option; no dividend
payments on the shares underlying the options; and an exercise price of
$12.25. It is important to note that the values shown are theoretical; the
actual value of an option will depend upon the market value of the shares
underlying the option at the time the option is exercised.
</FN>
48
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Fiscal Options/SARs at
Year-End (#) Fiscal Year-End ($)(1)
Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
- --------------------------- ------------------ ------------------ ---------------------- ----------------------
F. William Marshall, Jr.... -0- -0- 0/80,000 0/330,000
B. John Dill, Jr........... -0- -0- 0/40,000 0/165,000
Frank Barrett.............. -0- -0- 0/40,000 0/165,000
John F. Treanor............ -0- -0- 0/40,000 0/165,000
Christopher A. Sinton...... -0- -0- 0/15,000 0/61,875
<FN>
- ------
(1) The value of unexercised, in-the-money options at December 31, 1995 is the
difference between the closing price of the Bank Common Stock on December
31, 1995 ($16.375) and the per share option exercise price ($12.25),
multiplied by the number of shares of Bank Common Stock underlying such
options.
</FN>
Compensation Committee Report
The Compensation Committee has responsibility for reviewing all aspects of the
compensation program for executive officers of the Bank. The Compensation
Committee is comprised of four members of the Board of Directors who are not
employees of the Bank and who do not receive additional remuneration for other
services provided to the Bank. The four non-employee member of the Compensation
Committee are John H. Southworth, Chairman; Donald F. Collins; John M.
Naughton; and Albert E. Steiger, Jr.
The Compensation Committee's primary objective in the area of executive
compensation is to provide a means of attracting and retaining executives with
the experience and capabilities necessary for the Bank to compete in a rapidly
changing economic, competitive, and regulatory environment. Specific
responsibilities of the Compensation Committee are to establish policies and
procedures for the compensation of executive officers, including the
relationship of corporate performance to executive compensation and to approve
the compensation programs for the Chief Executive Officer and describe the
underlying rationale for such programs.
The executive compensation program is designed to provide competitive
compensation opportunities for executive officers as well as to reward for
superior performance when the Bank's performance so warrants. The executive
compensation program has three major components-base salary, annual incentive
compensation, and long-term incentive compensation. Each of these components has
a separate purpose and may have a different relative value depending on the
particular executive position.
Base salary is the fixed component of the package. Executives will be paid a
base salary that is intended to be competitive with the external marketplace and
to reflect the internal value of the position. The marketplace, as determined by
the Compensation Committee, consists of banking and thrift institutions of
similar size and complexity which compete for similar executive talent. In order
to establish competitive arrangements, compensation data is compiled from
published surveys and other available sources. This data provides a competitive
range within which base compensation is managed.
In addition to base salary, executive officers receive normal benefits
pursuant to the Bank's pension plan, 401(k) Plan and the ESOP which are similar
to all other employees.
Annual incentive compensation is intended to reward an executive for achieving
critical annual business objectives and/or meritorious performance. If
performance meets or exceeds the annual business plan, total cash compensation
(base plus annual incentive) may be greater than when the annual performance
objectives are not met. By managing base compensation to the market and using
annual incentive compensation to reward for performance, the Bank should not
overpay when performance falls below plan, but will be able to reinforce
49
performance when the Bank performs well. The amount of the annual incentive
award is funded on the basis of the Bank's performance. For fiscal year 1996,
award funding will be tied to the level of net income realized. The actual award
paid to executives is dependent on the level of funding and the assessment of
each executive's individual plan. The Compensation Committee reviews and
approves the performance plan and measures each year.
The Compensation Committee believes that long-term compensation is vital in
aligning management's and shareholders' interests in the creation of shareholder
value, and to attract and retain the necessary executive talent. The long-term
compensation program is composed of stock options and management restricted
stock. Options and restricted shares are intended to signify the key roles of
the executives in rebuilding the franchise, retaining these executives, and
directly linking their compensation to the success of the Bank. The Compensation
Committee is responsible for overseeing the administration of the Management
Stock Option Plan and the Management Restricted Stock Plan. The Compensation
Committee has, at its discretion, the ability to allocate stock options and
restricted shares among the Bank's executive officers and employees. It is
expected that the primary vehicle to reward for long-term performance in the
future will be through stock options.
The Compensation Committee believes that its approach to executive
compensation provides incentive to the Bank's executive officers in
accomplishing short- and long-term goals. At the same time, by establishing an
effective mix between base salary and variable compensation, executive officers
are encouraged to manage the business so as to protect the interests of the
customer as well as the shareholders.
The Chief Executive Officer's compensation package includes the elements
discussed above. Upon conversion to a public organization, a formal annual
incentive plan was implemented (under which the CEO is eligible to receive an
annual incentive award of up to 30% of base salary depending on the Bank's
performance. In addition, restricted stock and stock options were provided to
the Chief Executive Officer. For the year ending December 31, 1995, the Bank's
performance met the performance plan; accordingly, the Chief Executive Officer
received an incentive award equal to 30% of base salary (i.e. the target level).
The Compensation Committee believes the CEO's compensation is consistent with
the overall compensation strategy of the Bank and serves to focus attention on
creating shareholder value.
The Compensation Committee is aware that Section 162(m) of the Code prohibits
the Company from deducting compensation in excess of $l,000,000 paid in any
single year to each of the Chief Executive Officer and four additional named
executive officers, unless the excess compensation qualifies as "performance
based" compensation. The Compensation Committee believes that the deductibility
of compensation paid to the Bank's executives is an important, but not the most
important, factor in setting its executive compensation policy. Therefore,
certain awards comprised in the executive compensation package (such as options
awarded under the Management Stock Option Plan) are designed with the intention
of qualifying as "performance based" compensation which will be deductible by
the Bank. Where certain components of the compensation package may not qualify
as "performance based" and thereby may fail to be deductible (such as awards
under the Management Restricted Stock Plan), the Compensation Committee has
weighed that factor along with the effectiveness of the incentives provided by
that component, and has determined that, taken as a whole, that component is an
appropriate and integral part of the executive compensation package.
50
Comparative Performance Graph:
[Graph showing the comparative performance of the stock of Springfield
Institution for Savings, the S&P 500 Composite Index and New England Banks for
the period from 2/8/95 through 12/29/95. The following data points are depicted:
2/8/95 4/28/95 6/30/95 8/31/95 10/31/95 12/29/95
------ ------- ------- ------- -------- --------
Springfield Institution for Savings $100 $123.38 $135.71 $162.34 $159.74 $170.13
S&P 500 Index $100 $110.11 $117.17 $121.36 $126.03 $134.11
New England Banks $100 $113.04 $128.97 $135.95 $140.65 $154.04]
Employment Agreements
The Bank has entered into an employment and severance agreement (the
"Employment Agreement") with Mr. F. William Marshall, Jr., President and Chief
Executive Officer of the Bank (the "Executive"), and into employment and
severance agreements (collectively, the "Agreements") with the senior vice
presidents and executive vice presidents of the Bank which provide for the
respective terms discussed below. The Employment Agreement and the Agreements
establish, among other things, the compensation and/or severance compensation of
these individuals and are intended to ensure that the Bank will be able to
maintain stable and competent management.
The Employment Agreement provides for a three year term of employment which
began August 1994 with an automatic one-year extension at the end of each year
unless prior written notice is provided by the Bank to the Executive or by the
Executive to the Bank. Under the Employment Agreement, the Executive received a
base salary of $325,000 beginning on April 1, 1994, which may be increased on an
annual basis at the sole discretion of the Board of Directors of the Bank. In
addition to such base salary, the Employment Agreement provides for, among other
things, participation in annual bonus payments, disability pay, and
participation in other welfare and employee benefit plans of the Bank.
The Employment Agreement provides for termination by the Bank or the Executive
with or without cause at any time. In the event the Bank chooses to terminate
the Executive's employment without cause or if the Executive resigns from the
Bank as result of a "change of control" (as defined below) or "for good reason,"
(defined to include (i) the failure of the Board of Directors to appoint or
reappoint the officer to his or her stated offices, (ii) a material change in
such officer's functions, duties or responsibilities causing the officer's
position
51
with the Bank to become one of lesser responsibility, importance, or scope,
(iii) any reduction in base salary or a material reduction in other benefits, or
(iv) a material breach of the Employment Agreement by the Bank), the Executive
will be entitled to a lump sum severance payment equal to approximately three
times for a "change in control" and two times, for "good reason" respectively,
his highest base salary and bonus payment at any time during the term of
employment. The Bank will also be required to continue the Executive's insurance
and health coverage for up to three years, as well as among other things for
which the Executive is entitled to receive reimbursement, and any other
compensation or benefits under the Bank's plans to which is otherwise entitled
(the "Standard Entitlements"). The Executive is also entitled to certain
indemnification rights upon termination without cause. In the event of death,
disability or retirement, the Executive (or his beneficiaries) is entitled to
receive a specified portion of his base salary and bonus for limited periods of
time, and/or the continuation of welfare benefits and the Standard Entitlements.
In the event of a termination for cause (as defined in the Employment
Agreement), the Executive will only be entitled to the Standard Entitlements and
to certain indemnification rights. In the event of a voluntary termination (as
defined in the Employment Agreement) by the Executive prior to the end of the
employment term, he will only be entitled to such payments or benefits as he
would have received if terminated for cause by the Bank.
As an alternative to the termination and Standard Entitlements arrangements
specified above, in the event that the Bank terminates the Executive's
employment by not extending the term of the Employment Agreement in the manner
specified therein, the Executive will be entitled to receive a lump sum
severance payment equal to the greater of the amount to which he would have been
entitled during the balance of his employment under the Employment Agreement, or
his base salary and benefits for a period of six months.
Under the Employment Agreement, the Bank has agreed to indemnify the Executive
and hold him harmless, to the fullest extent permitted by law, as a consequence
of his being involved in a legal action by reason of the fact that he is or was
a trustee, Director or officer of the Bank. Such indemnification shall continue
after the Executive shall cease to be an officer, trustee or Director of the
Bank. In the event any payment or benefit received by the Executive in
connection with a change of control would constitute "excess parachute payments"
(as defined in Section 280G of the Code), the Bank would pay the Executive an
additional sum equal to such excise tax as well as the Executive's federal,
state and local income tax and payroll taxes imposed on such additional sum.
The Agreements entered into by the Bank with certain of its executive vice
presidents (Messrs. Barrett, Dill, and Treanor) and with all of its senior vice
presidents (including Mr. Sinton and Mr. Ehmke) provide for a one-year term with
an automatic one year extension unless prior written notice is provided by the
Bank to such officer or by such officer to the Bank. Under the Agreements, if,
following a "change of control", the Bank chooses to terminate the officer's
employment other then for cause or if the officer resigns from the Bank for
"good reason," the officer will be entitled to a lump sum severance payment
equal to (a) with respect to the senior vice presidents, such person's then
applicable annual salary and (b) with respect to the executive vice presidents,
two times such person's then-applicable annual salary. In the event of an
involuntary termination of the officer other than for cause prior to the
occurrence of a "change of control," the officer will be entitled to a lump sum
severance payment equal to, with respect to both the senior vice presidents and
executive vice presidents, one year's salary at such officer's then-applicable
annual salary.
Under the Agreements, the Bank has agreed to indemnify each senior or
executive officer and hold him or her harmless (i) against reasonable costs,
including legal fees, incurred by such officer in connection with such officer's
consultation with legal counsel or arising out of any legal action in which such
officer may be involved as a result of the Agreements and (ii) for all acts
omissions taken or not taken by such officer in good faith while performing
services for the Bank to the same extent as other similarly-situated officers
and Directors of the Bank.
For purposes of the Employment Agreement and the Agreements, a "change of
control" of the Bank would include the occurrence of any of the following
events: (i) an event which would be required to be reported under Item 1 of Form
F-3 of the FDIC; (ii) certain events which would constitute a change in control
for purposes of certain federal statutes and regulations; (iii) certain events
which would have the effect of replacing a majority
52
of the members constituting the Board of Directors; (iv) the approval by the
Bank's stockholders to become a party to certain mergers, reorganizations or
consolidations; (v) the approval by the Bank's stockholders of certain
liquidation or dissolution proceedings or the sale of all or substantially all
of the assets of the Bank, or (vi) the solicitation of proxies from the Bank's
stockholders by someone other than the current management of the Bank and
without the approval of the Board, which person seeks to acquire the Bank.
Benefits Under Plans
Employee Stock Ownership Plan. In connection with the Conversion, the Bank
established an employee stock ownership plan ("ESOP"), and it maintains the ESOP
for all full-time employees of the Bank and its affiliates who are at least 21
years of age and are credited with at least 1,000 hours of service with the Bank
or its affiliates. The ESOP currently has 445,000 shares of Common Stock
available for allocation to participants in accordance with the terms of the
ESOP (the "ESOP Shares"). Under the ESOP, the ESOP Shares will be allocated in
the proportion that each participant's compensation bears to the aggregate
compensation for all eligible participants (but no compensation over $150,000
will count toward an allocation).
Each participant becomes vested in their ESOP account in installments of 20%
for each year of service with the Bank and its affiliates after the effective
date of the ESOP. Amounts forfeited by participants who fail to vest in their
accounts will be reallocated to remaining participants in proportion to their
compensation.
Participants will be entitled to distribution of their vested benefits only
following termination of employment or retirement, or attainment of age 701/2.
Distributions will ordinarily be made in ESOP Shares, but a participant entitled
to a distribution of fewer than 100 ESOP Shares may receive his or her
distribution in cash.
A committee appointed by the Board of Directors of the Bank administers the
ESOP. The trustee of the ESOP is State Street Bank and Trust Company, Boston,
Massachusetts. Under the ESOP, the Trustee is directed to vote all allocated
ESOP Shares held in the ESOP in accordance with the instructions of the
participants to whom such shares have been allocated, and to follow such
instructions on a proportional basis in voting unallocated and unvoted shares.
In addition, the trustee is directed under the ESOP to accept or reject tender
offers with regard to allocated ESOP Shares in accordance with the instructions
of the participants to whom such shares have been allocated and to follow such
instructions on the same proportional basis with regard to unallocated shares
and to such shares with respect to which no instructions are received from the
participants. Any such vote of ESOP Shares or response to a tender offer for
ESOP Shares would be subject, however, to the Trustee's exercise of its
fiduciary duties under applicable law.
As of January 1, 1996, 54,812 ESOP Shares have been allocated.
The ESOP Shares were acquired in the Conversion with the proceeds of a
$3,560,000 loan (the "ESOP Loan") made by Mechanics Savings Bank, a Connecticut
mutual savings bank ("Mechanics") to the ESOP. The ESOP Loan is scheduled to
mature on January 31, 2005 and accrues interest at the "prime rate" as published
in The Wall Street Journal from time to time. The principal of the ESOP Loan is
payable semi-annually in 20 equal payments, and interest is payable quarterly
during the term of the ESOP Loan. The ESOP Loan is secured by a pledge of ESOP
Shares, by a standby letter of credit issued by the Bank for the account of the
Trustee naming Mechanics as beneficiary, and by a security interest in certain
Treasury securities of the Bank. The Bank intends to make cash contributions to
the ESOP from time to time in an amount at least equal to the debt service
requirement of the ESOP Loan. Each year, as the ESOP Loan is repaid, ESOP shares
will be released from the pledge to Mechanics and allocated to participant
accounts in proportion to the principal and interest under the ESOP Loan repaid
for that year to the projected principal and interest to be paid for the year
plus the remaining term of the ESOP Loan.
Pension Plan. The Bank provides a retirement plan for all eligible employees
through the Savings Banks Employees Retirement Association ("SBERA"), an
unincorporated association of savings banks operating within Massachusetts and
other organizations providing services to or for savings banks. SBERA's sole
purpose
53
is to enable the participating employers to provide pensions and other
benefits for their employees. Each employee reaching the age of 21 and having
completed at least 1,000 hours in a twelve month period beginning with such
employee's date of employment automatically becomes a participant in the
retirement plan. Benefits under the retirement plan are 100% vested after three
years of service. The Bank's pension plan is subject to the requirements of the
Employee Retirement Income Security Act of 1974, as amended, and is intended to
constitute a qualified pension plan under the applicable provisions of the
Internal Revenue Code of 1986, as amended.
The retirement plan is a qualified defined benefit plan under which an
employee is not required to make any contributions to become a participant or to
earn benefits under the plan. The benefits provided at age 65 to any participant
will be based on the average of the participant's highest three consecutive
years of cash compensation up to $150,000, as adjusted for cost-of-living
increases ("Average Compensation"). The benefits provided at age 65 will equal
1.25% of Average Compensation plus 0.6% of Average Compensation in excess of
Social Security covered compensation for each year of service with the Bank up
to a maximum of 25 years. Normal retirement age under the plan is 65; a reduced
early retirement benefit is payable from age 50 to age 64 under certain
circumstances. At January 1, 1996, the latest date for which information is
available, the present value of accrued benefits was fully funded by the market
values of related available assets.
The following table illustrates annual pension benefits at age 65 for various
levels of compensation and years of service. The average compensation shown
reflects an average of the three highest consecutive years of compensation.
Pension benefits are currently subject to the statutory maximum of $150,000,
subject to cost-of-living adjustments. In addition, for plan years beginning on
and after January 1, 1994 annual compensation earned after that date in excess
of $150,000.00 may not be used in the calculation of retirement benefits.
Annual Pension Benefit Based on Years of Service(1)
Average 10 Years 15 Years 20 Years 25 or More
Compensation Service Service Service Yrs Service(2)
- -------------- -------- -------- -------- --------------
$ 60,000...... $ 9,641 14,462 19,283 24,103
80,000...... $13,341 20,102 26,683 33,353
100,000...... $17,041 25,562 34,083 42,603
120,000...... $20,741 31,112 41,483 51,853
125,000...... $21,666 32,499 43,333 54,166
150,000(3)... $26,291 39,437 52,583 65,728
- ------
(1) The annual pension benefit is computed on the basis of a single life
annuity.
(2) Maximum number of years of service recognized under the retirement plan is
25.
(3) Federal law does not permit benefit pension plans to recognize compensation
in excess of $150,000 for plan years beginning in 1994.
The years of credit service for Mr. Marshall and Mr. Barrett are 2.25 years
and 1.50 years respectively. Mr. Treanor joined the plan in September 1995 and
Mr. Sinton is not eligible to participate until 1996. Mr. Dill is not an active
participant in this plan, but has 5.0 years of credited service from previous
participation.
Supplemental Executive Retirement Plan. The Supplemental Executive Retirement
Plan of the Bank (the "SERP") provides a select group of executive officers with
a level of retirement benefit generally commensurate with that received by
executives of similar banking organizations with similar responsibilities, under
circumstances where such executive officer's qualified pension benefit is
reduced or restricted by limitations imposed under the Code, by virtue of such
executive officer's transfer to employment with the Bank in mid-career, or
otherwise. The eligible executive officers under the SERP are the Chief
Executive Officer of the Bank, and such other executive officers as the
Compensation Committee of the Board of Directors, upon the recommendation of the
Chief Executive Officer, may select from time to time.
54
The SERP provides an annual benefit at age 65 equal to 2.5% of the
participant's final average earnings (averaged over the five years preceding his
or her termination) multiplied by his or her years of service credited under the
SERP, reduced by his or her Social Security benefit, his or her benefit under
the Bank's qualified pension plan and by benefits under any other plan or
arrangement specified by the Compensation Committee (the "Offsetting Benefits");
however, when combined with the Offsetting Benefits and any other benefits
specified by the Compensation Committee (such as benefits under a former
employer's plans), the maximum benefit under the SERP cannot exceed 60% of the
participant's final average earnings. Service is generally credited under the
SERP for each year the participant is employed by the Bank or its subsidiaries,
but the Compensation Committee may credit a participant with additional service
(which may be conditional on the occurrence of certain events, such as a change
in control), or may limit credit for years of service with the Bank prior to
participation in the SERP. Messrs. Marshall, Barrett and Sinton have been
credited with five years of additional service under the SERP, subject in each
case to Offsetting Benefits from former employer's plans. Each member of the
initial group of SERP participants will be credited with five years of
additional service in the event of a change in control. In addition, the SERP
provides for the funding of all benefits accrued for each participant through
grantor trusts upon a change in control of the Bank.
The following table represents estimated annual pension benefits for
retirement at age 65 under the most advantageous SERP provisions available for
various levels of compensation and years of service. The figures in this table
are calculated on the basis of a straight-life annuity and are based on the
assumption that the SERP continues in its present form. The benefits are subject
to deductions for Social Security and the value from the qualified pension plan
and any other plan or arrangements specified by the Compensation Committee.
Years of Service
Average --------------------------------------------------------
Comp. 10 15 20 25 30 35
- -------- ------- ------- ------- ------- ------- --------
$125,000 31,250 45,875 62,500 78,125 93,750 109,375
$150,000 37,500 56,250 75,000 93,750 112,500 131,250
$175,000 43,750 65,625 87,500 109,375 131,250 153,125
$200,000 50,000 75,000 100,000 125,000 150,000 175,000
$250,000 62,500 93,750 125,000 156,250 187,500 218,750
$300,000 75,000 112,500 150,000 187,500 225,000 262,500
$400,000 100,000 150,000 200,000 250,000 300,000 350,000
$450,000 112,500 168,750 222,000 281,250 337,500 393,750
$500,000 125,000 187,500 250,000 312,500 375,000 437,500
The average compensation for purposes of this table is based on the highest
average of the five consecutive years of service preceding retirement. The
estimated credited years of service at retirement for each of the Named
Executive Officers are as follows: Mr. Marshall-19 years; Mr. Barrett-15 years;
Mr. Treanor-18 years; and Mr. Sinton-19 years. Mr. Dill does not participate in
the SERP.
55
Security Ownership of Management and Directors
Set forth below is a list of the number of shares of Bank Common Stock
beneficially owned by each of the Directors and the Named Executive Officers and
Directors and executive officers as a group.
Shares of Common
Stock Beneficially Percent of
Owned(1) Class(2)
------------------ ----------
William B. Hart, Jr. ......................................... 2,000 *
Thomas O'Brien................................................ 3,000 *
Teresita Alicea............................................... 3,450 *
Paulette Henderson-Johnson.................................... 2,325(3) *
John H. Southworth............................................ 7,510(4) .13
Mary E. Boland(5)............................................. 12,200(6) .21
Sister Mary Caritas, S.P. .................................... 4,075(7) *
Donald F. Collins(5).......................................... 24,700(8) .43
John M. Naughton.............................................. 15,000 .26
Charles L. Johnson............................................ 7,200 .12
F. William Marshall, Jr. ..................................... 52,798 .92
Gary P. Shannon............................................... 7,825(9) .13
Stephen A. Shatz.............................................. 14,700(10) .25
Frank W. Barrett.............................................. 28,923(11) .50
B. John Dill.................................................. 27,998(12) .49
John F. Treanor............................................... 21,798 .38
Christopher A. Sinton......................................... 9,711 .16
Directors and principal officers of the bank as a group(24)... 295,286 5.16
<FN>
- ------
(1) Unless otherwise noted in the footnotes to this table, each of the
above-referenced persons have sole voting and investment power over the
shares of Bank Common Stock beneficially owned by them. The number reported
for individuals includes shares of Bank Common Stock which were granted
through the Restricted Stock Plan.
(2) "*" indicates less than 0.10% of the Bank's outstanding shares of Common
Stock. This number includes shares of the Bank Common Stock held through
the Restricted Stock Plan.
(3) Includes 125 shares owned by Ms. Henderson-Johnson jointly with her son.
(4) Includes 310 shares owned by Mr. Southworth's spouse.
(5) Mrs. Boland and Mr. Collins are first cousins.
(6) Includes 2,500 shares owned by Mrs. Boland's children.
(7) Includes 1,850 shares owned jointly with Sr. Marie Thaddeus.
(8) Includes 1,000 shares owned by Mr. Collins's spouse; 3,200 shares owned
jointly with Mr. Collins's sister; and 14,550 shares owned directly by the
Collins Electric Company Profit Sharing Plan for the benefit of Mr.
Collins.
(9) Includes 625 shares owned by Mr. Shannon's spouse.
(10) Includes 12,500 shares owned by Mr. Shatz jointly with his spouse.
(11) Includes 625 shares held by Mr. Barrett's children.
(12) Includes 2,500 shares held by Mr. Dill's children.
</FN>
Transactions with Certain Related Persons
Some of the directors and officers of the Bank, as well as firms and companies
with which they are associated, are or have been customers of the Bank and as
such have had banking transactions, including loan transactions, with the Bank.
As a matter of policy, loans to directors and officers are made in the ordinary
course of business on substantially the same terms, including interest rates and
collateral, as to those prevailing at the time for comparable transactions to
other persons and do not involve more than the normal risk of collectibility or
present other unfavorable features. All loans to principal officers and
Directors must be approved by the Executive Committee of the Board, and, if the
credit request is greater than $500,000, by a majority of the Board of
Directors.
56
Certain Business Relationships
The Bank and its subsidiaries have from time to time entered into transactions
with businesses and other organizations which are affiliated with the Bank's
Directors. The terms and rates for all such transactions have been negotiated on
an arms-length basis and are no less favorable than comparable transactions with
other businesses or other organizations.
During fiscal year 1995, the Bank and its subsidiaries retained the law firm
of Shatz, Schwartz & Fentin P.C. in which Mr. Shatz is a partner, to perform
certain legal work for the Bank and its subsidiaries. Fees and expenses paid
directly by the Bank to Shatz, Schwartz & Fentin P.C. during this period totaled
approximately $159,915.45. The Bank intends to continue to retain Shatz,
Schwartz & Fentin P.C. for future legal work. The Bank has also engaged in
transactions in which the fees and costs of such firm were paid by the borrowers
of the Bank.
In addition, the Bank and its subsidiaries retained the law firm of Doherty,
Wallace, Pillsbury & Murphy, P.C. in which Mr. Shannon is a partner, to perform
certain legal work for the Bank and its subsidiaries during fiscal year 1995.
Fees and expenses paid directly by the Bank to Doherty, Wallace, Pillsbury &
Murphy, P.C. during this period totaled approximately $274,770.66. In cases
involving foreclosure work on loans serviced by the Bank for secondary market
investors, the Bank is reimbursed by those investors. In 1995, the amount
reimbursed was $175,969.89. The Bank intends to continue to retain Doherty,
Wallace, Pillsbury & Murphy, P.C. for future legal work. The Bank has also
engaged in transactions in which the fees and costs of such firm were paid by
the borrowers of the Bank.
Prior to September 30, 1995, the Bank paid premiums totaling $87,372.77 to
Massachusetts Mutual Life Insurance Corporation, in which Mr. Naughton is an
executive vice president, for employee benefit policies previously offered by
the Bank to certain of its employees. The Bank has also paid $1,558.95 to
Massachusetts Mutual Life Insurance Corporation for fees relating to the
establishment and maintenance of a 401(k) Plan on behalf of certain employees
who chose to participate. The 401(k) Plan is available to all full-time
employees of the Bank who meet certain conditions.
Prohibition on Beneficial Ownership of Five Percent of Common Stock
The Charter of the Bank prohibits the ownership of more than 4.9% of the
outstanding shares of any class of equity securities of the Bank by any person,
other than the ESOP, for a three-year period following the Conversion.
Accordingly, as of the date of this Proxy Statement-Prospectus, the Bank is not
aware of any person or group acting in concert who owned in excess of 4.9% of
the outstanding shares of Bank Common Stock, other than the ESOP, which holds
approximately 8% of such outstanding shares.
PROPOSAL THREE-ELECTION OF CLERK
Under Massachusetts law, the Clerk of the Bank is to be elected by the
stockholders at the annual meeting or at a special meeting duly called for that
purpose. At the Annual Meeting, a Clerk of the Bank will be elected to serve
until the 1997 annual meeting or until his or her successor is elected and
qualified.
The Board of Directors of the Bank has selected Michael E. Tucker as the
nominee for Clerk. Mr. Tucker has served as the Bank's Clerk since 1995. For
information with respect to Mr. Tucker, including his business experience, see
"Management of the Bank."
Unless otherwise specified in 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 of Michael E. Tucker as Clerk of the Bank. The Board of
Directors believes that Mr. Tucker will stand for election and will serve if
elected as Clerk. However, if he fails to stand for election or is unable or
refuses to accept election, the proxies will be voted for the election of such
other person as the Board may recommend.
57
Recommendation of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION
OF MICHAEL E. TUCKER AS CLERK OF THE BANK.
PROPOSAL FOUR-INCREASE IN AUTHORIZED SHARES
UNDER THE 1995 MANAGEMENT STOCK OPTION PLAN
Proposal to Stockholders
In January 1996, the Compensation Committee recommended to the Board of
Directors, and the Board of Directors approved, subject to required shareholder
and regulatory approvals, an increase of 250,000 in the number of shares of Bank
Common Stock authorized for issuance under the Management Stock Option Plan.
As of the date of this Proxy Statement-Prospectus and without giving effect to
this proposed increase in shares, a total of 445,000 shares had been reserved
for issuance under the Management Stock Option Plan, and a total of 25,000
shares remained available for future grant under the Management Stock Option
Plan.
The additional shares are intended to be available to attract new employees,
and to retain and reward existing employees of the Bank. The terms of options
awarded under the Management Stock Option Plan are established by the
Compensation Committee, acting in its discretion, subject to certain limitations
established by the terms of the Management Stock Option Plan, as more fully
described below (e.g., that the option exercise price must be at least fair
market value on the date of grant, and the option term cannot exceed 10 years) .
The Compensation Committee expects that options awarded under the Management
Stock Option Plan with respect to the additional shares, if authorized, may be
made on an ad hoc basis to one or more employees, or under a program to provide
long term incentives to a group of key management personnel (including employees
at the level of vice president or higher), which program may include options
which become exercisable more rapidly if performance goals are met.
Description of the 1995 Management Stock Option Plan
The essential features of the Management Stock Option Plan, as proposed to be
amended, are summarized below. This summary does not, however, purport to be
complete and is qualified in its entirety by the terms of the Management Stock
Option Plan. Copies of the Management Stock Option Plan are available upon
request to the Investor Relations Department of the Bank.
Purpose of the 1995 Management Stock Option Plan. The purpose of the
Management Stock Option Plan is to provide incentives to officers and employees
of the Bank and its wholly-owned subsidiaries (and, if the Plan of
Reorganization is consummated, employees of the Company), to encourage stock
ownership by such individuals, increasing their proprietary interest in the
success of the Bank (and the Company) and its wholly-owned subsidiaries. The
Management Stock Option Plan provides for awards of incentive stock options that
qualify for favorable tax treatment under Section 422 of the Code, and
nonqualified stock options.
Description of the 1995 Management Stock Option Plan. The Management Stock
Option Plan is administered by the Compensation Committee, which selects the
officers and employees of the Bank (and, if the Plan of Reorganization is
consummated, the Company) and its wholly-owned subsidiaries to whom options may
be granted. The Management Stock Option Plan presently provides for the granting
of options to acquire Bank Common Stock. If the Plan of Reorganization is
approved by the shareholders and subsequently consummated, the Management Stock
Option Plan will be assumed by the Company, and all options granted under the
Plan will be options to acquire Company Common Stock.
The option exercise price of options granted under the Management Stock Option
Plan may not be less than 100% of the fair market value of the Common Stock on
the date of the option, as determined in accordance with
58
the terms of the Plan. The maximum option term is 10 years. Each option granted
will be become exercisable at such time, and remain exercisable for such period
(subject to the maximum 10 year term) as the Compensation Committee shall
determine and set forth in the option agreement relating thereto. The
Compensation Committee has set a vesting schedule which applies generally to
provide that under ordinary circumstances 20% of the options vest each year
beginning one year from the date of grant, but in any event all such options
shall vest no later than the seventh anniversary of the date of grant. In
addition, upon a change in control of the Bank, all options will become
immediately vested. (The consummation of the Plan of Reorganization will not
constitute a change of control for this purpose.) No employee may receive any
incentive stock option if, at the time of grant, such person owns (directly or
indirectly by attribution) more than 10% of the total combined voting power of
the Bank unless the option price is at least 110% of the fair market value of
the Common Stock and the exercise period of such incentive stock option is
limited by its terms to five years.
Payment for shares purchased under the Management Stock Option Plan may be
made either in cash or cash equivalents, or, if permitted by the option
agreement, by exchanging shares of Common Stock of the Bank (or the Company)
with a fair market value equal to or less than the total option price plus cash
for any difference, or by a combination of the foregoing. Options generally also
may be exercised by the optionee directing that certificates for the shares
purchased be delivered to a licensed broker acceptable to the Bank (or the
Company) as agent for the optionee, provided that the broker tenders to the Bank
(or the Company) cash or cash equivalents equal to the option exercise price
plus the amount of any taxes that the Bank (or the Company) may be required to
withhold in connection with the exercise of the option. No fractional shares
will be issued by the Bank (or the Company) on exercise of the options and no
cash will be paid in lieu of any fractional shares.
Options granted under the Management Stock Option Plan are not transferable
and may be exercised only by the optionee during his or her lifetime. If an
employee's employment with the Bank, a subsidiary (or the Company) 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 (but not later than the date the option would otherwise expire),
unless the option agreement provides otherwise. If the employee's employment
terminates for any reason other than death or disability, options held by such
optionee terminate three months after the date of such termination (but not
later than the date the option would otherwise expire) unless the option
agreement provides for a shorter or longer period prior to expiration.
If the outstanding shares of the Bank's (or, if the Plan of Reorganization is
consummated, the Company's) common stock are changed for a different number or
kind of shares or securities, by reason of any reorganization, recapitalization,
exchange of shares, stock split, combination of shares or dividend payable in
capital stock, an appropriate adjustment will be made by the Compensation
Committee in the number and kind of shares subject to the Management Stock
Option Plan, and for which options may be granted under the Plan. Any such
adjustment to outstanding options, 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.
If the Bank (or, if the Plan of Reorganization is consummated, the Company)
merges or consolidates with one or more corporations, or if the Bank (or the
Company) is liquidated or sells all or substantially all of its assets to
another entity while any options remain outstanding, then the Compensation
Committee in its discretion shall amend the terms of all outstanding options so
that either (i) after the merger, consolidation or sale, each optionee is
entitled to receive shares of common stock of the new entity to which he or she
would have been entitled if he or she were a stockholder of the Bank (or the
Company) at the time of the merger, consolidation or sale, or (ii) all
outstanding options shall be canceled as of the effective date of any such
merger, consolidation or sale, provided that each optionee receives 20 days
following the effective date of such transaction to exercise his or her options
in accordance with their respective terms.
The Board may amend the Management Stock Option Plan with respect to shares of
Common Stock as to which options have not been granted; however, the Bank's (or
the Company's) stockholders must approve any amendment that would (i) increase
the number of shares of Common Stock as to which options may be granted
59
under the Management Stock Option Plan, (ii) change the requirements as to
eligibility to receive options, (iii) reduce the minimum option price, or (iv)
increase the maximum term of options.
The Board may terminate or suspend the Management Stock Option Plan at any
time. Unless previously terminated, the Management Stock Option Plan will
terminate automatically on May 31, 2005, the day before the tenth anniversary of
the effective date of the Plan. No termination, suspension or amendment of the
Management Stock Option Plan may adversely affect the rights of an optionee to
whom an option has been granted, without the consent of the optionee.
Federal Income Tax Consequences of the 1995 Management Stock Option Plan
The grant of an option (whether it is an incentive stock option or a
nonqualified stock option) will not give rise to taxable income to an optionee,
or to a tax deduction for the Bank (or the Company).
Incentive Stock Options. An optionee will not recognize taxable income for
regular federal income tax purposes upon exercise of an incentive stock option.
However, for purposes of the alternative minimum tax, the excess of the fair
market value of Common Stock subject to an incentive stock option on the
exercise date over the option exercise price is included in the optionee's
alternative minimum taxable income in the year of exercise (except that, if the
optionee is subject to certain securities law restrictions, determination of the
amount included in alternative minimum taxable income will be deferred for up to
six months, unless the optionee elects within 30 days following the exercise
date to have taxable income determined without regard to such restrictions.) Any
gain realized upon a disposition of shares of Common Stock received pursuant to
the exercise of an incentive stock 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 one year after the date of exercise. An optionee may be entitled to a
credit against regular tax liability in future years for alternative minimum
taxes paid with respect to the exercise of incentive stock options. The Bank (or
the Company) will not be entitled to a compensation expense deduction with
respect to the exercise of an incentive stock option, except as discussed below.
To qualify for the foregoing tax treatment, the holder of an incentive stock
option must be an employee of the Bank or a subsidiary (or of the Company) from
the date the option is granted through a date within three months before the
date of exercise of the option. An incentive stock option may be exercised up to
one year following termination of employment on account of disability, and
remain eligible for favorable tax treatment. If an optionee dies while employed
or within three months of his or her termination date, both the time limit for
exercising incentive stock options after termination of employment and the
holding period for Common Stock received pursuant to the exercise of the option
are waived for purposes of the tax requirements for incentive stock options.
(The terms of the Management Stock Option Plan and the option agreement,
however, will establish the period during which an option can be exercised.)
If all the requirements for incentive stock option treatment are satisfied
except the special two-years from grant and one-year from exercise holding
periods described above, the optionee has engaged in a "disqualifying
disposition" of the option stock. The optionee will recognize ordinary income
upon the disqualifying disposition in an amount generally equal to the excess of
the fair market value of the Common Stock at the time the option was exercised,
over the option exercise price (but ordinary income will not exceed the gain
recognized on an arms' length disqualifying disposition). The balance of the
realized gain, if any, will be capital gain (either short-term or long-term,
depending on whether the Common Stock has been held for more than one year from
the exercise date). If the optionee engages in a disqualifying disposition, the
Bank (or the Company) will be allowed a compensation expense deduction to the
extent the optionee recognizes ordinary income on account of the disqualifying
disposition (subject to the limitations on deductibility of compensation paid to
certain executive officers under Section 162(m) of the Code, discussed below).
Nonqualified Stock Options. Upon exercising a nonqualified stock 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 securities
law restrictions,
60
determination of the amount included in taxable income will be deferred for up
to six months, unless the optionee elects within 30 days following the exercise
date to have taxable income determined without such restrictions). If the Bank
(or the Company) complies with the applicable reporting requirements, it will be
entitled to a compensation expense deduction in the same amount and at the same
time as the optionee recognizes ordinary income (subject to the limitations on
deductibility of compensation paid to certain executive officers under Section
162(m) of the Code, discussed below).
If the optionee surrenders shares of Common Stock in payment of part or all of
the exercise price for a nonqualified option, no gain or loss will be recognized
with respect to the shares surrendered (as long as the optionee is not
surrendering shares acquired by the exercise of an incentive stock option as to
which the holding requirements have not been met in order to exercise another
incentive stock option) and the optionee will be treated as receiving a number
of shares equivalent to those surrendered 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 these new shares will be
treated as having been held for the same holding period as had expired with
respect to the surrendered shares. The difference between the aggregate option
exercise price and the aggregate fair market value of the additional shares
received pursuant to the option exercise will be taxed as ordinary income. The
optionee's basis in the additional shares will be equal to the amount included
in the optionee's income. The optionee's gain (if any) on a subsequent
disposition of the option shares will be either short-term or long-term capital
gain, depending on whether the shares have been held for more than one year from
the exercise date.
Under current federal income tax law, the highest tax rate on ordinary income
is 39.6%, and long-term capital gains are subject to a maximum tax of rate of
28%. Because of certain provisions in the law relating to the phase out of
personal exemptions and certain limitations on itemized deductions, the federal
income tax consequences to a particular taxpayer of receiving additional amounts
of ordinary income or capital gain may be greater than would be indicated by
applying the foregoing tax rates to the additional amount of income or gain.
Limitation on Deduction for Compensation to Certain Executives under Section
162(m) of the Code. Section 162(m) of the Code limits the Bank's (or the
Company's) deduction for compensation paid in a single year to each of the five
highest paid executive officers to $1,000,000, unless the excess compensation
qualifies as "performance based". All options under the Management Stock Option
Plan should qualify as "performance based" because they will be granted under a
plan approved by the shareholders, will be awarded by a Compensation Committee
composed of independent directors, and will have an exercise price at least
equal to fair market value on the date of grant. Therefore, the Bank (or the
Company) should be able to deduct an amount equivalent to the ordinary income
recognized by a optionee on the exercise of a nonqualified stock option or on a
disqualifying disposition of an incentive stock option granted under the Plan.
Required Vote
At the Annual Meeting, the shareholders are being asked to approve the
increase in the number of shares reserved for issuance under the Management
Stock Option Plan from 445,000 to 695,000. Subject to the applicable rules
regarding broker non-votes, the affirmative vote of a majority of the issued and
outstanding shares of Bank Common Stock eligible to be cast by stockholders of
record of the Bank at the close of business on the Record Date is required to
approve the proposed amendment to the Management Stock Option Plan.
Recommendation of Directors
THE BOARD OF DIRECTORS OF THE BANK RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE AMENDMENT TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE
1995 MANAGEMENT STOCK OPTION PLAN.
61
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Bank intended to be presented at the 1997
Annual Meeting of the Bank must be received by the Bank no later than December
31, 1996 to be included in the Bank's proxy statement and form of proxy relating
to that meeting. In addition, the Bank's Amended and Restated By-Laws provide
that any stockholder wishing to have a stockholder proposal considered at an
annual meeting must deliver written notice of such proposal to the Clerk of the
Bank as set forth in the Amended and Restated By-Laws of the Bank at its
principal executive offices not less than 70 days nor more than 90 days prior to
the first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more than
20 days, or delayed by more than 70 days, from such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the ninetieth
day prior to such annual meeting and not later than the close of business on the
later of the seventieth day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made. Any stockholder desiring to submit a proposal must comply with the
Amended and Restated By-Laws of the Bank. The advance notice requirements under
the Bank's Amended and Restated By-laws pertaining to stockholder director
nominations are substantially similar. See "Comparison of Stockholder
Rights-Meetings of Stockholders."
INDEPENDENT ACCOUNTANTS
Representatives of Price Waterhouse LLP, the Bank's independent accountants,
are expected to be present at the Annual Meeting. They will be accorded the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions. Price Waterhouse LLP became the auditors of
the Bank for the fiscal year ending December 31, 1995 upon the approval of the
Bank's Audit Committee.
OTHER MATTERS
Shares represented by proxies in the enclosed form will be voted as
stockholders direct. Subject to applicable rules regarding broker non-votes,
proxies that contain no directions to the contrary will be voted in favor of the
proposal to approve the Plan of Reorganization, the election of the five
nominees to serve as Directors of the Bank, the election of Michael E. Tucker as
Clerk and the proposal to increase the number of shares authorized for issuance
under the 1995 Management Stock Option Plan. At the time of preparation of this
Proxy Statement-Prospectus, the Board of Directors of the Bank knows of no other
matters to be presented for action at the Annual Meeting. As stated in the
accompanying proxy card, if any other business should come before the Annual
Meeting, proxies have discretionary authority to vote the shares according to
their best judgment.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT 1934
With respect to the year ended December 31, 1995, Donald F. Collins, an
outside director of the Bank, inadvertently failed to file with the FDIC on a
timely basis one required report covering the purchase by his spouse of 1,000
shares of Bank Common Stock in April 1995. In making this disclosure, the Bank
has relied solely on written representations of its directors and principal
officers and copies of the reports that they have been required to file with the
FDIC.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF
YOU ATTEND THE MEETING, YOU MAY WITHDRAW ANY PROXY GIVEN BY YOU AND VOTE YOUR
SHARES IN PERSON.
March 27, 1996
62
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
Pursuant to Section 26B of Chapter 172
of the General Laws of Massachusetts
This Agreement and Plan of Reorganization (this "Plan") is dated as of January
31, 1996 and made between Springfield Institution for Savings, a savings bank in
stock form organized under Chapter 168 of the General Laws of Massachusetts (the
"Bank") and SIS Bancorp, Inc., a Massachusetts business corporation (the
"Holding Company"). This Plan constitutes the plan of acquisition between the
Bank and the Holding Company for purposes of Section 26B of Chapter 172 of the
General Laws of Massachusetts.
The Bank is a savings bank in stock form, duly organized and validly existing
under the laws of the Commonwealth of Massachusetts, with its principal office
at 1441 Main Street, Springfield, Massachusetts 01102. As of the date hereof,
the authorized capital stock of the Bank consists of 25,000,000 shares of common
stock, par value $1.00 per share (the "Bank Common Stock"), of which 5,718,200
shares are issued and outstanding, 556,250 shares are reserved for issuance
under the 1995 Springfield Institution for Savings Director and Management Stock
Option Plans (the "Stock Option Plans") and 66,800 shares are reserved for
issuance under the 1995 Springfield Institution for Savings Director and
Management Restricted Stock Plans (the "Restricted Stock Plans"), and 5,000,000
shares of preferred stock, par value $1.00 per share, none of which shares are
issued and outstanding.
The Holding Company is a corporation, duly organized and validly existing
under the laws of the Commonwealth of Massachusetts, with its principal office
at 1441 Main Street, Springfield Massachusetts 01102. As of the date hereof, the
authorized capital stock of the Holding Company consists of 250,000 shares of
common stock, par value $0.01 per share (the "Holding Company Common Stock"),
and 50,000 shares of preferred stock, par value $0.01 per share, none of which
shares are issued and outstanding. Prior to the Effective Time, as such term is
defined in Subsection 2.1 hereof, the Holding Company shall cause its articles
of organization to be amended to increase the authorized capital stock of the
Holding Company from its current number of shares to a level consisting of
25,000,000 shares of common stock, par value $0.01 per share, and 5,000,000
shares of preferred stock, par value $0.01 per share.
The Bank and the Holding Company have agreed that the Holding Company will
acquire all of the issued and outstanding shares of Bank Common Stock in
exchange for shares of Holding Company Common Stock pursuant to the provisions
of Section 26B of Chapter 172 of the General Laws of Massachusetts and of this
Plan. This Plan has been adopted and approved by a vote of at least a majority
of all the members of the Board of Directors of the Bank, and by a vote of at
least a majority of all the members of the Board of Directors of the Holding
Company. The officers of the Bank and of the Holding Company whose respective
signatures appear below have been duly authorized to execute and deliver this
Plan.
Now Therefore, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and adequacy of which is hereby acknowledge,
the Bank and the Holding Company agree as follows:
Section 1. Approval and Filing of Plan.
1.1 This Plan shall be submitted for approval by the holders of Bank Common
Stock at a meeting to be duly called and held in accordance with the by-laws of
the Bank and all applicable laws and regulations. Notice of such meeting shall
be mailed directly to all stockholders and published at least once a week for
two successive weeks in a newspaper of general circulation in the County of
Hamden, Commonwealth of Massachusetts. Both of said newspaper publications shall
be at least fifteen days prior to the date of the meeting.
1.2 Subject to the approval of this Plan by the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Bank Common Stock as
required by law, the Bank and the Holding Company shall submit
A-1
this Plan to the Commissioner of Banks of the Commonwealth of Massachusetts (the
"Bank Commissioner") for his approval and filing in accordance with the
provisions of Section 26B of Chapter 172 of the General Laws of Massachusetts.
This Plan shall be accompanied by such certificates of the respective officers
of the Bank and the Holding Company as may be required by law and a written
request from the Bank that this Plan not be filed by the Bank Commissioner until
such future time as the Bank Commissioner shall have received from the Bank and
the Holding Company the written notice described in Subsection 2.1 hereof.
1.3 If the requisite approval of this Plan is obtained at the meeting of
holders of Bank Common Stock referred to in Subsection 1.1 hereof, thereafter
and until the Effective Time, as hereinafter defined, the Bank shall issue
certificates for Bank Common Stock, whether upon transfer or otherwise, only if
such certificates bear a legend indicating that this Plan has been approved and
that shares of Bank Common Stock evidenced by such certificates are subject to
the acquisition by the Holding Company pursuant to this Plan.
Section 2. Definition of Effective Time.
2.1 The transactions contemplated by this Plan shall become effective at 12:01
A.M. on the first business day following the date on which the Bank Commissioner
duly files this Plan in accordance with the provisions of Section 26B of Chapter
172 of the General Laws of Massachusetts, which filing shall be preceded by
written notice to the Bank Commissioner from the Bank and the Holding Company
advising the Bank Commissioner that (i) all the conditions precedent to this
Plan becoming effective specified in Section 5 hereof, other than the condition
described in Subsection 5.2, have been satisfied and (ii) the Plan has not been
abandoned by the Bank or the Holding Company in accordance with the provisions
of Section 6 hereof. Such time is hereinafter referred to as the "Effective
Time".
Section 3. Actions at the Effective Time.
3.1 At the Effective Time, the Holding Company shall, without any further
action on its part or on the part of the holders of Bank Common Stock,
automatically and by operation of law acquire and become the owner for all
purposes of all shares of Bank Common Stock issued and outstanding immediately
prior to the Effective Time, and the Holding Company shall be entitled to have
issued to it by the Bank a certificate or certificates representing such shares.
Thereafter, the Holding Company shall have full and exclusive power to vote such
shares of Bank Common Stock, to receive dividends thereon and to exercise all
rights of an owner thereof.
3.2 At the Effective Time, any shares of Holding Company Common Stock which
may have been previously issued and are outstanding immediately prior to the
Effective Time shall be redeemed and retired and shall thereafter constitute
authorized and unissued shares of Holding Company Common Stock.
3.3 At the Effective Time, the holders of the shares of Bank Common Stock
issued and outstanding immediately prior to the Effective Time shall, without
any further action on their part or on the part of the Holding Company,
automatically and by operation of law cease to own such shares and shall instead
become owners of one share of Holding Company Common Stock for each share of
Bank Common Stock held by them immediately prior to the Effective Time.
Thereafter, such persons shall have full and exclusive power to vote such shares
of Holding Company Common Stock, to receive dividends thereon, except as
otherwise provided herein, and to exercise all rights of an owner thereof.
3.4 At the Effective Time, all previously issued and outstanding certificates
representing shares of Bank Common Stock (the "Old Certificates") shall
automatically and by operation of law cease to represent shares of Bank Common
Stock or any interest therein and each Old Certificate shall instead represent
the ownership by the holder thereof of an equal number of shares of Holding
Company Common Stock. No holder of an Old Certificate shall be entitled to vote
the shares of Bank Common Stock formerly represented by such certificate, or to
receive dividends thereon, or to exercise any other rights of ownership in
respect thereof.
3.5 Notwithstanding any of the foregoing, any Dissenting Stockholder, as such
term is defined in Subsection 8.1 hereof, shall have such rights as are provided
by Subsection 8.2 hereof and by the laws of the Commonwealth of Massachusetts.
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Section 4. Actions After the Effective Time.
As soon as practicable and in any event not more than thirty days after the
Effective Time:
4.1 The Holding Company shall deliver to the transfer agent for the Bank and
the Holding Company (the "Transfer Agent"), as agent for the then holders of the
Old Certificates (other than Old Certificates representing shares of Bank Common
Stock as to which dissenters' appraisal rights shall have been effected), a
certificate or certificates for the aggregate number of shares of Holding
Company Common Stock (the "New Certificates"), to which said holders shall be
entitled. Each such holder of an Old Certificate shall surrender his Old
Certificate to the Transfer Agent and receive in exchange therefor a New
Certificate for an equal number of shares of Holding Company Common Stock. Until
so surrendered, each Old Certificate shall be deemed, for all corporate
purposes, to evidence the ownership of the number of shares of Holding Company
Common Stock which the holder thereof would be entitled to receive upon its
surrender, except that the Holding Company may, in its sole discretion, withhold
from the holder of shares represented by such Old Certificate, distribution of
any or all dividends declared by the Holding Company on such shares until such
time as such Old Certificate shall be surrendered in exchange for one or more
New Certificates, at which time dividends so withheld by the Holding Company
with respect to such shares shall be delivered (without interest thereon and
less the amount of taxes, if any, which may have been imposed or paid thereon or
which are required by law to be withheld in respect thereof, to the stockholder
to whom such New Certificate(s) are issued.
4.2 The Holding Company shall publish, to the extent required in accordance
with applicable law, a notice to the holders of all Old Certificates, specifying
the Effective Time of the transactions contemplated by this Plan and notifying
such holders that they may, or if required to do so by the Holding Company in
its sole discretion, shall, present their Old Certificates to the Transfer Agent
for exchange. The Holding Company shall also provide notice, together with any
transmittal materials that may be necessary or appropriate, by mail directly to
such holders at their last known addresses as contained in the Bank's
stockholder records.
Section 5. Conditions Precedent.
This Plan and the transactions provided for herein shall not become effective
unless all of the following shall have occurred:
5.1 This Plan and the transactions contemplated hereby shall have been
approved by the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Bank Common Stock at a meeting of such stockholders duly
called and held for such purpose in accordance with the by-laws of the Bank and
all applicable laws and regulations.
5.2 This Plan shall have been approved by the Bank Commissioner and a copy of
this Plan with his approval endorsed thereon shall have been filed in his
office, all as provided in Section 26B of Chapter 172 of the General Laws of
Massachusetts.
5.3 The Holding Company shall have provided notice of this Plan to the Federal
Reserve Bank of Boston (the "Reserve Bank") in accordance with 12 C.F.R. Section
225.15 and the Reserve Bank shall not have objected to the parties' consummation
of the transactions contemplated hereby within thirty days after the date of the
Reserve Bank's receipt of such notice or, alternatively, the Reserve Bank or the
Board of Governors of the Federal Reserve System, acting pursuant to Section
3(a)(1) of the Bank Holding Company Act of 1956, as amended, shall have approved
an application of the Holding Company to become a bank holding company upon the
consummation of the transactions contemplated by this Plan and a period of
thirty days shall have elapsed after the date of such approval.
5.4 The Bank shall have received a favorable opinion from its counsel,
satisfactory in form and substance to the Bank, with respect to the federal
income tax consequences of this Plan and the transactions contemplated hereby.
A-3
5.5 To the extent legally required, if at all, the shares of Holding Company
Common Stock to be issued to the holders of Bank Common Stock pursuant to this
Plan shall have been registered or qualified for such issuance under the
Securities Act of 1933, as amended, and all applicable state securities laws.
5.6 The Bank and the Holding Company shall have obtained all other consents,
permissions and approvals and taken all actions required by law and agreement,
or otherwise deemed necessary or appropriate by the Bank or the Holding Company,
including the amendment of the Holding Company's articles of organization to
increase its authorized capital stock as contemplated by this Plan, prior to the
consummation of the transactions provided for by this Plan and the Holding
Company's having and exercising all rights of ownership with respect to all of
the outstanding shares of Bank Common Stock to be acquired by it hereunder.
Section 6. Abandonment of Plan.
6.1 This Plan may be abandoned by either the Bank or the Holding Company at
any time before the Effective Time in the event that:
(a) The number of shares of Bank Common Stock owned by Dissenting
Stockholders, as defined in Subsection 8.1 hereof, shall make consummation of
the transactions contemplated by this Plan inadvisable in the opinion of the
Bank or the Holding Company;
(b) Any action, suit, proceeding or claim has been instituted, made or
threatened relating to this Plan which shall make consummation of the
transactions contemplated by this Plan inadvisable in the opinion of the Bank or
the Holding Company; or
(c) For any other reason consummation of the transactions contemplated by this
Plan is inadvisable in the opinion of the Bank or the Holding Company.
Such abandonment shall be effected by written notice by either the Bank or the
Holding Company to the other of them, and shall be authorized or approved by the
Board of Directors of the party giving such notice. Upon the giving of such
notice, this Plan shall be terminated and shall be of no further force or effect
and there shall be no liability hereunder or on account of such termination on
the part of the Bank or the Holding Company or the Directors, officers,
employees, agents or stockholders of either of them. In the event of such
abandonment of this Plan, the Bank shall pay the fees and expenses incurred by
itself and the Holding Company in connection with this Plan and the proposed
transactions contemplated hereby. If either party hereto gives written notice of
termination to the other party pursuant to this Section 6, the party giving such
written notice shall simultaneously furnish a copy thereof to the Bank
Commissioner.
Section 7. Amendment of Plan.
7.1 This Plan may be amended or modified at any time by mutual agreement of
the Boards of Directors of the Holding Company and the Bank (i) prior to its
approval by the stockholders of the Bank, in any respect, and (ii) subsequent to
such approval, in any respect, provided that the Bank Commissioner shall approve
of such amendment or modification.
Section 8. Rights of Dissenting Stockholders.
8.1 The term "Dissenting Stockholders" shall mean those holders of Bank Common
Stock who file with the Bank before the taking of the vote on this Plan written
objection to this Plan, pursuant to Section 86 of Chapter 156B of the General
Laws of Massachusetts, stating that they intend to demand payment for their
shares of Bank Common Stock if this Plan is consummated and whose shares are not
voted in favor of this Plan.
8.2 Dissenting Stockholders who comply with the provisions of Sections 85
through 98, inclusive, of Chapter 156B of the General Laws of Massachusetts and
all other applicable provisions of law shall be entitled to receive from the
Bank payment of the fair value of their shares of Bank Common Stock upon
surrender by such holders of the certificates which previously represented such
shares of Bank Common Stock. Certificates so
A-4
obtained by the Bank, upon payment of the fair value of such shares as provided
by law, shall be canceled. Shares of Holding Company Common Stock, to which
Dissenting Stockholders would have been entitled had they not dissented, shall
be deemed to constitute authorized and unissued shares of Holding Company Common
Stock and may thereafter be issued or otherwise disposed of by the Holding
Company at the discretion of, and on such terms as may be fixed by, its Board of
Directors.
Section 9. Stock Options and Restricted Stock.
By the Holding Company's having executed and delivered this Plan and by the
parties' subsequent consummation of the transactions contemplated hereby, the
Holding Company shall be deemed to have approved the Stock Option Plans and the
Restricted Stock Plans, as may be amended from time to time, as the director and
employee stock option plans and the director and management restricted stock
plans of the Holding Company. The Holding Company shall be deemed to have agreed
to issue Holding Company Common Stock in lieu of Bank Common Stock with respect
to any grants of shares under the Restricted Stock Plans occurring after the
Effective Time and pursuant to stock options outstanding under the Stock Option
Plan at the Effective Time or granted under the Stock Option Plan thereafter. As
of the Effective Time, each share of Bank Common Stock then issued and
outstanding under the Restricted Stock Plans shall be converted into a share of
Holding Company Common Stock as contemplated by Subsection 3.3 hereof, except
that all of the terms and restrictions applicable to such share of Bank Common
Stock immediately prior to the Effective Time shall apply to the share of
Holding Company Common Stock issued in exchange therefor, and the unexercised
portions of the options outstanding under the Stock Option Plan shall be assumed
by the Holding Company and thereafter shall be exercisable only for shares of
Holding Company Common Stock, with each such option being exercisable for a
number of shares of Holding Company Common Stock equal to the number of shares
of Bank Common Stock that were available thereunder immediately prior to the
Effective Time, and with no change in the exercise price or any other term or
condition of such option. To the extent deemed necessary or appropriate, the
Holding Company and the Bank shall make appropriate amendments to the Stock
Option Plans and the Restricted Stock Plans to reflect the adoption thereof as
the director and employee stock option plans and the director and management
restricted stock plans of the Holding Company without adverse effect upon any of
the options and shares outstanding under the Stock Option Plans and the
Restricted Stock Plans.
Section 10. Governing Law.
This Plan shall take effect as a sealed instrument and shall be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts.
Section 11. Counterparts.
This Plan may be executed in several identical counterparts, each of which
when executed and delivered by the parties hereto shall be an original, but all
of which together shall constitute a single instrument. In making proof of this
Plan, it shall not be necessary to produce or account for more than one such
counterpart.
A-5
In Witness Whereof, the parties hereto have caused this Agreement and Plan of
Reorganization to be duly executed and delivered as of the date first above
written and their corporate seals to be hereunto affixed.
SPRINGFIELD INSTITUTION FOR SAVINGS
By:/s/ John F. Treanor
Name: John F. Treanor
Title: Executive Vice President and Treasurer
ATTEST:
By /s/ Michael E. Tucker
Name: Michael E. Tucker
Title: Clerk
SIS BANCORP, INC.
By: /s/ F. William Marshall, Jr.
Name: F. William Marshall, Jr.
Title: President and CEO
ATTEST:
By:/s/ Michael E. Tucker
Name: Michael E. Tucker
Title: Clerk
A-6
Exhibit B
PROVISIONS OF MASSACHUSETTS GENERAL LAWS
RELATING TO RIGHTS OF DISSENTING STOCKHOLDERS
(Sections 85 to 98 of Chapter 156B of the Massachusetts General Laws)
Section 85. Dissenting Stockholder; Right to Demand Payment for Stock;
Exception. A stockholder in any corporation organized under the laws of
Massachusetts which shall have duly voted to consolidate or merge with another
corporation or corporations under the provisions of sections seventy-eight or
seventy-nine who objects to such consolidation or merger may demand payment for
his stock from the resulting or surviving corporation and an appraisal in
accordance with the provisions of sections eighty-six to ninety-eight,
inclusive, and such stockholder and the resulting or surviving corporation shall
have the rights and duties and follow the procedure set forth in those sections.
This section shall not apply to the holders of any shares of stock of a
constituent corporation surviving a merger if, as permitted by subsection (c) of
section seventy-eight, the merger did not require for its approval a vote of the
stockholders of the surviving corporation.
Section 86. Selection Applicable to Appraisal; Prerequisites. If a corporation
proposes to take a corporate action as to which any section of this chapter
provides that a stockholder who objects to such action shall have the right to
demand payment for his shares and an appraisal thereof, sections eighty-seven to
ninety-eight, inclusive, shall apply except as otherwise specifically provided
in any section of this chapter. Except as provided in sections eighty-two and
eighty-three, no stockholder shall have such right unless (1) he files with the
corporation before the taking of the vote of the shareholders on such corporate
action, written objection to the proposed action stating that he intends to
demand payment for his shares if the action is taken and (2) his shares are not
voted in favor of the proposed action.
Section 87. Statement of Rights of Objecting Stockholders in Notice of
Meeting; Form. The notice of the meeting of stockholders at which the approval
of such proposed action is to be considered shall contain a statement of the
rights of objecting stockholders. The giving of such notice shall not be deemed
to create any rights in any stockholder receiving the same to demand payment for
his stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting and
effected by the corporation, any stockholder (1) who files with the corporation
before the taking of the vote on the approval of such action, written objection
to the proposed action stating that he intends to demand payment for his shares
if the action is taken and (2) whose shares are not voted in favor of such
action has or may have the right to demand in writing from the corporation (or,
in the case of a consolidation or merger, the name of the resulting or surviving
corporation shall be inserted), within twenty days after the date of mailing to
him of notice in writing that the corporate action has become effective, payment
for his shares and an appraisal of the value thereof. Such corporation and any
such stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
Section 88. Notice of Effectiveness of Action Objected To. The corporation
taking such action, or in the case of a merger or consolidation the surviving or
resulting corporation, shall, within ten days after the date on which such
corporate action became effective, notify each stockholder who filed a written
objection meeting the requirements of section eighty-six and whose shares were
not voted in favor of the approval of such action, that the action approved at
the meeting of the corporation of which he is a stockholder has become
effective. The giving of such notice shall not be deemed to create any rights in
any stockholder receiving the same to demand
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payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
Section 89. Demand for Payment; Time for Payment. If within twenty days after
the date of mailing of a notice under subsection (e) of section eighty-two ,
subsection (f) of section eighty-three, or section eighty-eight, any stockholder
to whom the corporation was required to give such notice shall demand in writing
from the corporation taking such action, or in the case of a consolidation or
merger from the resulting or surviving corporation, payment for his stock, the
corporation upon which such demand is made shall pay to him the fair value of
his stock within thirty days after the expiration of the period during which
such demand may be made.
Section 90. Demand for Determination of Value; Bill in Equity; Venue. If
during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
Section 91. Parties to Suit to Determine Value; Service. If the bill is filed
by the corporation, it shall name as parties respondent all stockholders who
have demanded payment for their shares and with whom the corporation has not
reached agreement as to the value thereof. If the bill is filed by a
stockholder, he shall bring the bill in his own behalf and in behalf of all
other stockholders who have demanded payment for their shares and with whom the
corporation has not reached agreement as to the value thereof, and service of
the bill shall be made upon the corporation by subpoena with a copy of the bill
annexed. The corporation shall file with its answer a duly verified list of all
such other stockholders, and such stockholders shall thereupon be deemed to have
been added as parties to the bill. The corporation shall give notice in such
form and returnable on such date as the court shall order to each stockholder
party to the bill by registered or certified mail, addressed to the last known
address of such stockholder as shown in the records of the corporation, and the
court may order such additional notice by publication or otherwise as it deems
advisable. Each stockholder who makes demand as provided in section eighty-nine
shall be deemed to have consented to the provisions of this section relating to
notice, and the giving of notice by the corporation to any such stockholder in
compliance with the order of the court shall be a sufficient service of process
on him. Failure to give notice to any stockholder making demand shall not
invalidate the proceedings as to other stockholders to whom notice was properly
given, and the court may at any time before the entry of a final decree make
supplementary orders of notice.
Section 92. Decree Determining Value and Ordering Payment; Valuation Date.
After hearing the court shall enter a decree determining the fair value of the
stock of those stockholders who have become entitled to the valuation of and
payment of their shares, and shall order the corporation to make payment of such
value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
Section 93. Reference to Special Master. The court in its discretion may refer
the bill or any question arising thereunder to a special master to hear the
parties, make findings and report the same to the court, all in accordance with
the usual practice in suits in equity in the superior court.
Section 94. Notation on Stock Certificates of Pendency of Bill. On motion the
court may order stockholder parties to the bill to submit their certificates of
stock to the corporation for the notation thereon of the pendency of the bill
and may order the corporation to note such pendency in its records with respect
to any uncertificated shares held by such stockholder parties, and may on motion
dismiss the bill as to any stockholder who fails to comply with such order.
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Section 95. Costs; Interest. The costs of the bill, including the reasonable
compensation and expenses of any master appointed by the court, but exclusive of
fees of counsel or of experts retained by any party, shall be determined by the
court and taxed upon the parties to the bill, or any of them, in such manner as
appears to be equitable, except that all costs of giving notice to stockholders
as provided in this chapter shall be paid by the corporation. Interest shall be
paid upon any award from the date of the vote approving the proposed corporate
action, and the court may on application of any interested party determine the
amount of interest to be paid in the case of any stockholder.
Section 96. Dividends and Voting Rights after Demand for Payment. Any
stockholder who has demanded payment for his stock as provided in this chapter
shall not thereafter be entitled to notice of any meeting of stockholders or to
vote such stock for any purpose and shall not be entitled to the payment of
dividends or other distribution on the stock (except dividends or other
distributions payable to stockholders of record at a date which is prior to the
date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the corporation, or in
the case of a consolidation or merger, the resulting or surviving corporation,
deliver to it a written withdrawal of his objections to and an acceptance of
such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
Section 97. Status of Shares Paid For. The shares of the corporation paid for
by the corporation pursuant to the provisions of this chapter shall have the
status of treasury stock, or in the case of a consolidation or merger the shares
or the securities of the resulting or surviving corporation into which the
shares of such objecting stockholder would have been converted had he not
objected to such consolidation or merger shall have the status of treasury stock
or securities.
Section 98. Exclusive Remedy; Exception. The enforcement by a stockholder of
his right to receive payment for his shares in the manner provided in this
chapter shall be an exclusive remedy except that this chapter shall not exclude
the right of such stockholder to bring or maintain an appropriate proceeding to
obtain relief on the ground that such corporate action will be or is illegal or
fraudulent as to him.
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EXHIBIT C-1
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
ARTICLE I
The exact name of the corporation is:
SIS BANCORP, INC.
ARTICLE II
The purpose of the corporation is to engage in the following
business activities:
See Exhibit A attached hereto and made a part hereof.
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ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue.
WITHOUT PAR VALUE WITH PAR VALUE
- ------------------------------ ------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ---- ---------------- ---- ---------------- ---------
Common: Common: 250,000 $.01
Preferred: Preferred: 50,000 $.01
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
See Exhibit B attached hereto and made a part hereof.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
None
ARTICLE VI
Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See Exhibit C attached hereto and made a part hereof.
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SIS BANCORP, INC.
ARTICLES OF ORGANIZATION
EXHIBIT A
ARTICLE II: Purposes
1. Buying, selling, investing in, holding and dealing in property of every
nature and description, real and personal, tangible and intangible;
2. Acquiring, investing in and holding stock in any subsidiary permitted under
the Bank Holding Company Act of 1956 or Chapter 167A of the Massachusetts
General Laws, as such statutes may be amended from time to time, and engaging
in any other activity or enterprise permitted to a bank holding company under
said statutes or other applicable law; and
3. In general, engaging in any other business which may lawfully be carried on
by a corporation organized under the Business Corporation Law of the
Commonwealth of Massachusetts, as amended from time to time.
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SIS BANCORP, INC.
ARTICLES OF ORGANIZATION
EXHIBIT B
ARTICLE IV: Description of Each of the Different Classes of Stock
A description of the different classes and series of the Corporation's capital
stock and a statement of the designations and the relative rights, preferences
and limitations of the shares of each class and series of capital stock are as
follows:
Section 4.1 Common Stock. Except as provided by law or in this Article IV (or
in any supplementary sections hereto or in any certificate of establishment of
any series of preferred stock), the holders of the common stock shall
exclusively possess all voting power. Each holder of shares of common stock
shall be entitled to one vote on all matters for each share held by such holder.
There shall be no cumulative voting rights in the election of Directors.
Whenever there shall have been paid, or declared and set aside for payment, to
the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and of a sinking fund or a retirement fund or other retirement
payments, if any, to which such holders are respectively entitled in preference
to the common stock, then dividends may be paid on the common stock and on any
class or series of stock entitled to participate therewith as to dividends, out
of any assets legally available for the payment of dividends; but only when and
as declared by the Board of Directors.
Subject to Section 6.4 of these Articles of Organization, in the event of any
liquidation, dissolution or winding up of the Corporation, after there shall
have been paid to or set aside for the holders of any class having preference
over the common stock in the event of liquidation, dissolution or winding up of
the Corporation the full preferential amounts to which they are respectively
entitled, the holders of the common stock, and of any class or series of stock
entitled to participate in whole or in part therewith as to distribution of
assets, shall be entitled, after payment or provision for payment of all debts
and liabilities of the Corporation, to receive the remaining assets of the
Corporation available for distribution, in cash or in kind, in proportion to
their holdings.
Section 4.2 Preferred Stock. The Board of Directors of the Corporation is
authorized by vote or votes, from time to time adopted, to provide for the
issuance of preferred stock (the "Preferred Stock") in one or more series and to
fix and state the voting powers, designations, preferences and relative
participating, optional or other special rights of the shares of each series and
the qualifications, limitations and restrictions thereof, including, but not
limited to, determination of one or more of the following:
(1) The distinctive serial designation and the number of shares
constituting such series;
(2) The dividend rates or the amount of dividends to be paid on the shares
of such series, whether dividends shall be cumulative and, if so, from which
date or dates, the payment date or dates for dividends and the participating
or other special rights, if any, with respect to dividends;
(3) The voting powers, if any, of shares of such series;
(4) Whether the shares of such series shall be redeemable and, if so, the
price or prices at which, and the terms and conditions on which, such shares
may be redeemed;
(5) The amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding up of
the Corporation;
(6) Whether the shares of such series shall be entitled to the benefit of
a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of
its application, including the price or prices at which such shares may be
redeemed or purchased through the application of such fund;
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(7) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation, and if so convertible or exchangeable, the conversion price or
prices, or the rate or rates of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(8) The price or other consideration for which the shares of such series
shall be issued;
(9) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of preferred stock
and whether such shares may be reissued as shares of the same or any other
series of stock; and
(10) Such other powers, preferences, rights, qualifications, limitations
and restrictions thereof as are permitted by law and as the Board of
Directors of the Corporation may deem advisable.
Unless otherwise provided by law, any such vote shall become effective when
the Corporation files with the Secretary of State of the Commonwealth of
Massachusetts a certificate of designation of one or more series of preferred
stock signed by the President or any Vice President and by the Clerk, Assistant
Clerk, Secretary or Assistant Secretary of the Corporation, setting forth a copy
of the vote of the Board of Directors establishing and designating the series
and fixing and determining the relative rights and preferences thereof, the date
of adoption of such vote and a certification that such vote was duly adopted by
the Board of Directors.
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SIS BANCORP, INC.
ARTICLES OF ORGANIZATION
EXHIBIT C
ARTICLE VI: Other Lawful Provisions
Section 6.1 Issuance of Rights. The Board of Directors is hereby authorized to
create and issue, whether or not in connection with the issuance and sale of any
of its stock or other securities or property, rights entitling the holders
thereof to purchase or receive from the Corporation shares of stock or other
securities or assets of the Corporation or any other corporation, recognizing
that, under certain circumstances, the creation and issuance of such rights
could have the effect of discouraging third parties from seeking, or impairing
their ability to seek, to acquire a significant portion of the outstanding
securities of the Corporation, to engage in any transaction which might result
in a change of control of the Corporation or to enter into any agreement,
arrangement or understanding with another party to accomplish the foregoing or
for the purpose of acquiring, holding, voting or disposing of any securities of
the Corporation. The times at which and the terms upon which such rights are to
be issued will be determined by the Board of Directors and set forth in the
contracts or instruments that evidence such right. The authority of the Board of
Directors with respect to such rights shall include, but not be limited to,
determination of the following:
(1) The initial purchase price per share or other unit of the stock or
other securities or property to be purchased upon exercise of such rights.
(2) Provisions relating to the times at which and the circumstances under
which such rights may be exercised or sold or otherwise transferred, either
together with or separately from, any other stock or other securities of the
Corporation.
(3) Provisions which adjust the number or exercise price of such rights or
amount or nature of the stock or other securities or property receivable
upon exercise of such rights in the event of a combination, split or
recapitalization of any stock of the Corporation, a change in ownership of
the Corporation's stock or other securities or a reorganization, merger,
consolidation, sale of assets or other occurrence relating to the
Corporation or any stock of the Corporation, and provisions restricting the
ability of the Corporation to enter into any such transaction absent an
assumption by the other party or parties thereto of the obligations of the
Corporation under such rights.
(4) Provisions which deny the holder of a specified percentage of the
outstanding stock or other securities of the Corporation the right to
exercise such rights and/or cause the rights held by such holder to become
void.
(5) Provisions which permit the Corporation to redeem or exchange such
rights, which redemption or exchange may be within the sole discretion of
the Board of Directors, if the Board of Directors reserves such right to
itself.
(6) The appointment of a rights agent with respect to such rights.
Section 6.2 No Action by Written Consent of Stockholders. Subject to the
rights of the holders of any series of Preferred Stock or any other series or
class of stock as set forth in Article IV of these Articles of Organization to
elect additional Directors under specific circumstances or to consent to
specific actions taken by the Corporation, any action required or permitted to
be taken by the stockholders of the Corporation must be effected at a duly
called annual or special meeting of stockholders of the Corporation and may not
be effected by any consent in writing in lieu of a meeting of such stockholders.
Section 6.3 Certain Business Combinations.
6.3.1. Vote Required for Certain Business Combinations.
(A) In addition to any affirmative vote required by the Massachusetts General
Laws or by Section 6.3.2 below, the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of the then
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outstanding shares ofcapital stock of the Corporation entitled to vote generally
in the election of Directors (the "Voting Stock"), voting together as a single
class, shall be required for any Business Combination (hereinafter defined).
(B) "Business Combination" shall mean:
(1) any merger or consolidation of the Corporation or any Subsidiary
(hereinafter defined) with (a) any Interested Stockholder (hereinafter
defined) or (b) any other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate of an Interested Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder, or any Affiliate of any Interested Stockholder, of
any assets of the Corporation or any Subsidiary having an aggregate Fair
Market Value (as hereinafter defined) of $1,000,000 or more; or
(3) the purchase, exchange, lease or other acquisition by the Corporation
or any Subsidiary (in a single transaction or a series of related
transactions) of all or substantially all of the assets or business of any
Interested Stockholder or any Affiliate of any Interested Stockholder; or
(4) the issuance or transfer by the Corporation or any Subsidiary (in one
transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any Affiliate
of any Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair Market Value
(as hereinafter defined) of $1,000,000 or more, except for any issuance or
transfer pursuant to an employee benefit plan of the Corporation or any
Subsidiary thereof; or
(5) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate of any Interested Stockholder; or
(6) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any Subsidiary which
is directly or indirectly owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder.
6.3.2. When Higher Vote is Not Required.
Section 6.3.1 above shall not be applicable to any particular Business
Combination, and such Business Combination shall require only the affirmative
vote of the majority of the outstanding shares of Voting Stock, if, in the case
of any Business Combination that does not involve any cash or other
consideration being received by the stockholders of the Corporation solely in
their capacity as stockholders of the Corporation, the condition specified in
the following paragraph A of this Section 6.3.2 is met or, in the case of any
other Business Combination, the condition(s) specified in either of the
following paragraph A or paragraph B of this Section 6.3.2 is met:
(A) Approval by Continuing Directors. The Business Combination shall have been
approved by a majority of the Continuing Directors (hereinafter defined) and a
majority of the Board of Directors.
(B) Price and Procedure Requirements. All of the following conditions shall
have been met:
(1) The aggregate amount of the cash and the Fair Market Value as of the date
of the consummation of the Business Combination of consideration other than cash
to be received per share by the holders of common stock in such Business
Combination shall at least be equal to the higher of the following:
(a) (if applicable) the Highest Per Share Price (hereinafter defined),
including any brokerage commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Stockholder or any
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of its Affiliates for any shares of common stock acquired by it (x) within the
two-year period immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date"), or (y) in the
transaction in which it became an Interested Stockholder, whichever is higher;
and
(b) the highest Fair Market Value per share of common stock on any date during
the one-year period prior to and including the Announcement Date; and
(c) (if applicable) the price per share equal to the product of (i) the Fair
Market Value per share of common stock on the Announcement Date or on the date
on which the Interested Stockholder became an Interested Stockholder (such later
date is referred to in this Section 6.3 as the "Determination Date"), whichever
is higher, multiplied by (ii) a fraction, (x) the numerator of which is the
Highest Per Share Price (including any brokerage commissions, transfer taxes and
soliciting dealers fees) paid by the Interested Stockholder for any shares of
common stock acquired by it within the two-year period immediately prior to and
including the Announcement Date, and (y) the denominator of which is the Fair
Market Value per share of common stock on the first day in such two-year period
upon which the Interested Stockholder acquired any shares of common stock.
(2) The aggregate amount of the cash and the Fair Market Value as of the date
of the consummation of the Business Combination of consideration other than cash
to be received per share by holders of shares of any class of outstanding Voting
Stock other than common stock shall be at least equal to the highest of the
following (it being intended that the requirements of this paragraph B(2) shall
be required to be met with respect to every such class of outstanding Voting
Stock, whether or not the Interested Stockholder has previously acquired any
shares of a particular class of Voting Stock):
(a) (if applicable) the Highest Per Share Price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the Interested
Stockholder for any shares of such class of Voting Stock acquired by it (x)
within the two-year period immediately prior to the Announcement Date, or (y) in
the transaction in which it became an Interested Stockholder, whichever is
higher;
(b) (if applicable) the highest preferential amount per share to which the
holders of shares of such class of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; and
(c) the highest Fair Market Value per share of such class of Voting Stock on
any date during the one-year period prior to and including the Announcement
Date; and
(d) (if applicable) the price per share equal to the product of (i) the Fair
Market Value per share of such class of Voting Stock on the Announcement Date or
on the Determination Date, whichever is higher, multiplied by (ii) a fraction,
(x) the numerator of which is the Highest Per Share Price (including any
brokerage commissions, transfer taxes and soliciting dealers fees) paid by the
Interested Stockholder for any shares of such class of Voting Stock acquired by
it within the two-year period immediately prior to and including the
Announcement Date, and (y) the denominator of which is the Fair Market Value per
share of such class of Voting Stock on the first day in such two-year period
upon which the Interested Stockholder acquired any shares of such class of
Voting Stock.
(3) The consideration to be received by holders of a particular class of
outstanding Voting Stock (including common stock) shall be in cash or in the
same form as the Interested Stockholder has previously paid for shares of such
class of Voting Stock. If the Interested Stockholder has paid for shares of any
class of Voting Stock with varying forms of consideration, the form of
consideration to be received per share by holders of shares of such class of
Voting Stock shall be either cash or the form used to acquire the largest number
of shares of such class of Voting Stock previously acquired by the Interested
Stockholder. The price determined in accordance with this paragraph B(3) shall
be
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subject to appropriate adjustment in the event of any stock dividend, stock
split, combination of shares or similar event.
(4) After such Interested Stockholder has become an Interested Stockholder and
prior to the consummation of such Business Combination: (i) except as approved
by a majority of the Continuing Directors, there shall have been no failure to
declare and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) on any outstanding stock having preference over
common stock as to dividends or liquidation, (ii) there shall have been (x) no
reduction in the annual rate of dividends paid on common stock (except as
necessary to reflect any subdivision of common stock), except as approved by a
majority of the Continuing Directors, and (y) an increase in such annual rate of
dividends as necessary to reflect any reclassification (including any reverse
stock split), reorganization or any similar transaction which has the effect of
reducing the number of outstanding shares of common stock, unless the failure to
so increase such annual rate is approved by a majority of the Continuing
Directors, and (iii) neither such Interested Stockholder nor any of its
Affiliates shall have beneficial ownership of any additional shares of Voting
Stock except as part of the transaction which results in such Interested
Stockholder becoming an Interested Stockholder.
(5) After such Interested Stockholder has become an Interested Stockholder,
such Interested Stockholder shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided, directly or indirectly, by the Corporation or any
Subsidiary, whether in anticipation of or in connection with such Business
Combination or otherwise.
(6) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and rules and regulations promulgated
thereunder, shall be mailed to stockholders of the Corporation at least 30 days
prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to the Exchange
Act or such rules and regulations).
6.3.3. Certain Definitions.
For the purposes of these Articles of Organization:
(A) A "Person" shall include an individual, a group acting in concert, a
corporation, a partnership, an association or other entity, a joint venture, a
pool, a joint stock company, a trust, an unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of acquiring,
holding or disposing of securities.
(B) "Interested Stockholder" shall mean any Person (other than the Corporation
or Subsidiary thereof) that:
(1) is the beneficial owner, directly or indirectly, of more than 4.9% of the
outstanding Voting Stock for the 3 year period from and after February 9, 1995
or of more than 10% of the outstanding Voting Stock thereafter; or
(2) is an Affiliate of the Corporation and at any time within the two-year
period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of 4.9% or more of the outstanding Voting Stock for the
3 year period from and after February 9, 1995 or of 10% or more of the
outstanding Voting Stock thereafter; or
(3) is an assignee of or has otherwise succeeded to any shares of Voting Stock
which were at any time within the two-year period immediately prior to the date
in question beneficially owned by any Interested Stockholder, if such assignment
or succession shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933, as amended, and such assignment or succession was not
approved by a majority of the Continuing Directors.
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(C) "Affiliate" or "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act (the "SEC Rules").
(D) "Beneficial ownership" shall be determined pursuant to Rule 13d-3 of the
SEC Rules; provided, however, that, a Person shall, in any event, also be deemed
the beneficial owner of any Voting Stock:
(1) which such Person or any of its Affiliates or Associates, directly or
indirectly, beneficially owns; or
(2) which such Person or any of its Affiliates or Associates, directly or
indirectly, has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement or understanding (but shall not be deemed to be the beneficial owner
of any Voting Stock solely by reason of an agreement, arrangement or
understanding with the Corporation to effect any transaction which is described
in any one or more of the subparagraphs of paragraph A of Section 6.3.1 above),
or upon the exercise of conversion rights, exchange rights, warrants, or options
or otherwise, or (B) sole or shared voting or investment power with respect
thereto pursuant to any agreement, arrangement, understanding, relationship or
otherwise (but shall not be deemed to be the beneficial owner of any voting
shares solely by reason of a revocable proxy granted for a particular meeting of
stockholders, pursuant to a public solicitation of proxies for such meeting,
with respect to shares of which neither such Person nor any such Affiliate or
Associate is otherwise deemed the beneficial owner); or
(3) which is beneficially owned, directly or indirectly, by any partnership,
limited partnership, syndicate or other group in which such Person or any of its
Affiliates or Associates participates pursuant to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares of Voting Stock of the Corporation;
provided further, however, that (1) no Director or officer of the Corporation
(or any Affiliate or Associate of any such Director or officer) shall, solely by
reason of any or all of such Directors or officers acting in their capacities as
such, be deemed, for any purposes of these Articles of Organization, to
beneficially own any Voting Stock beneficially owned by any other such Director
or officer (or any Affiliate or Associate thereof), and (2) neither any
tax-qualified employee benefit plan of the Corporation or any Subsidiary, nor
any trustee with respect thereto or any Affiliate or Associate of such trustee
(solely by reason of such capacity of such trustee), shall be deemed, for any
purposes of these Articles of Organization, to beneficially own any Voting Stock
held under any such plan.
(E) For purposes of determining whether a Person is an Interested Stockholder
pursuant to paragraph B of this Section 6.3.3, the number of shares of Voting
Stock deemed to be outstanding shall include shares deemed owned by such Person
through application of paragraph D of this Section 6.3.3, but shall not include
any other shares of Voting Stock which may be issuable by the Corporation
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options or otherwise.
(F) "Subsidiary" shall mean any corporation (including without limitation, any
banking or thrift institution) of which a majority of any class of equity
security is owned, directly or indirectly, by the Corporation; provided,
however, that for the purposes of the definition of Interested Stockholder set
forth in paragraph (B) of this Section 6.3.3, the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity security is
owned, directly or indirectly, by the Corporation.
(G) "Continuing Director" shall mean any member of the Board of Directors who
is not an Affiliate or Associate of the Interested Stockholder and was a member
of the Board of Directors prior to the time that the Interested Stockholder
became an Interested Stockholder, and any Director who is thereafter chosen to
fill any vacancy of the Board of Directors or who is elected and who, in either
event, is not an Affiliate or Associate of the Interested Stockholder and in
connection with his or her initial assumption of office is recommended for
appointment or election by a majority of Continuing Directors then on the Board
of Directors.
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(H) "Fair Market Value" shall mean:
(1) in the case of stock, the highest closing sales price of the stock during
the 30 calendar day-period immediately preceding the date in question of a share
of such stock on the National Association of Securities Dealers Automated
Quotation System or any system then in use, or, if such stock is admitted to
trading on a principal United States securities exchange registered under the
Exchange Act, Fair Market Value shall be the highest sale price reported during
the 30 calendar day-period preceding the date in question, or, if no such
quotations are available, the Fair Market Value on the date in question of a
share of such stock as determined by the Board of Directors in good faith, in
each case with respect to any class of stock, appropriately adjusted for any
dividend or distribution in shares of such stock or any combination or
reclassification of outstanding shares of such stock into a smaller number of
shares of such stock; and
(2) in the case of property other than cash or stock, the Fair Market Value of
such property on the date in question as determined by the Board of Directors in
good faith.
(I) Reference to "Highest Per Share Price" shall in each case with respect to
any class of stock reflect an appropriate adjustment for any dividend or
distribution in shares of stock or any stock split or reclassification of
outstanding shares of such stock into a greater number of shares of such stock
or any combination or reclassification of outstanding shares of such stock into
a smaller number of shares of such stock.
6.3.4. Powers of the Board of Directors.
A majority of the Directors of the Corporation (or, if there is an Interested
Stockholder, a majority of the Continuing Directors then in office) shall have
the power to determine for the purposes of this Section 6.3 on the basis of
information known to them after reasonable inquiry, (A) whether a Person is an
Interested Stockholder, (B) the number or percentage of any class of securities
beneficially owned by any Person, (C) whether a Person is an Affiliate or
Associate of another, (D) whether the requirements of Section 6.3.2 above have
been met with respect to any Business Combination, (E) whether the assets which
are the subject of any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an aggregate Fair Market Value of
$1,000,000 or more and (F) any other matters of interpretation arising under
this Section 6.3 or under Section 6.6 below. The good faith determination of a
majority of the Directors (or, if there is an Interested Stockholder, a majority
of the Continuing Directors then in office) on such matters shall be conclusive
and binding for all purposes of this Section 6.3 and of Section 6.6 below. A
majority of the Directors of the Corporation (or, if there is an Interested
Stockholder, a majority of the Continuing Directors then in office) shall have
the further power to interpret all the terms and provisions of this Section 6.3
and of Section 6.6 below.
6.3.5. No Effect on Fiduciary Obligations of Interested Stockholders.
Nothing contained in this Section 6.3 shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
Section 6.4 Standards for Board of Directors' Evaluation of Offers. The Board
of Directors of the Corporation, when evaluating any offer of another Person (as
defined in Section 6.3 above) to (A) make a tender or exchange offer for any
equity security of the Corporation, (B) merge or consolidate the Corporation
with another institution or (C) purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation and its stockholders, give due consideration to all
relevant factors including, without limitation, the social and economic effects
of acceptance of such offer on the Corporation's and/or its Subsidiaries'
present and future account holders, borrowers and employees; on the communities
in which the Corporation and its Subsidiaries operate or are located; and on the
ability of the Corporation to fulfill the objectives of a bank holding company
under applicable statutes and regulations.
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Section 6.5 Pre-emptive Rights. Holders of the capital stock of the
Corporation shall not be entitled to pre-emptive rights with respect to any
shares of the capital stock of the Corporation which may be issued.
Section 6.6 Beneficial Ownership Limitation. No person shall directly or
indirectly offer to acquire or acquire beneficial ownership (as that term is
defined in Section 6.3.3 above of more than 4.9% of the outstanding shares of
any class of equity securities of the Corporation during the period up to and
through February 6, 1998 or at any time thereafter more than ten percent (10%)
of the outstanding shares of any class of equity securities of the Corporation.
This limitation shall not apply (A) to any acquisition of shares of capital
stock of the Corporation which has been expressly approved in advance by an
affirmative vote of not less than two-thirds of the Board of Directors then in
office (or, if there shall be an Interested Stockholder at the time of such
vote, then also by the affirmative vote of not less than two-thirds of the
Continuing Directors then in office) or (B) to any offer to the Corporation made
by the underwriters selected by the Corporation in connection with a public
offering by the Corporation of the Corporation's capital stock.
For the purposes of determining the number of shares of equity securities
owned hereunder by any Person, the number of shares of equity securities deemed
to be outstanding shall include shares deemed owned by such Person through the
application of paragraph D of Section 6.3.3 above but shall not include any
other shares of equity securities which may be issuable by the Corporation
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options or otherwise.
In the event that beneficial ownership of any class of equity securities is
acquired in violation of this Section 6.6, (i) all shares of common or preferred
stock beneficially owned by any Person in excess of 4.9% or ten percent (10%),
as the case may be, of the total number of outstanding shares of such class
shall not be counted as shares entitled to vote, shall not be voted by any
Person or counted as voting shares in connection with any matter submitted to
the stockholders for a vote, and shall not be counted as outstanding for
purposes of determining the affirmative vote necessary to approve any matter
submitted to the stockholders for a vote, and (ii) the Board of Directors may
cause all securities beneficially owned by any Person in excess of 4.9% or ten
percent (10%), as the case may be, of the total number of outstanding shares of
such class of equity securities to be transferred to an independent trustee for
sale to the Corporation or on the open market at a price which shall be the
lesser of the purchase or the market price. The expenses of such trustee shall
be paid out of the proceeds from such sale. The term "offer" as used in this
Section 6.6 includes every offer to buy or acquire, solicitation of an offer to
sell, tender offer for or request or invitation for tender of, a security or
interest in a security of value.
Section 6.7 Directors. The Corporation shall be under the direction of a Board
of Directors. The number of Directors shall not be fewer than three. The Board
of Directors shall be divided into three classes as nearly equal in number as
possible, with one class to be elected each year.
The initial directors of the Corporation shall hold office as follows: the
directors initially elected to Class I shall hold office for a term expiring at
the annual meeting of stockholders to be held in 1997, the directors initially
elected to Class II shall hold office for a term expiring at the annual meeting
of stockholders to be held in 1998, and the directors initially elected to Class
III shall hold office for a term expiring at the annual meeting of stockholders
to be held in 1999, with the members of each such class to hold office until
their respective successors are duly elected and qualified. At each annual
meeting, or special meeting in lieu thereof, of stockholders of the Corporation,
the successors to the class of directors whose term expires at the meeting shall
be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election and
until their respective successors are elected and qualified.
Subject to the rights of the holders of any series of Preferred Stock or any
other series or class of stock as set forth in any certificate of establishment
with respect thereto to elect additional Directors under specific circumstances,
any Director may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of the then outstanding Voting Stock, voting together as a single
class. At least thirty days prior to such meeting of stockholders, written
notice
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shall be sent to the Director whose removal will be considered at the meeting.
For purposes of this Section 6.7, "cause" shall be defined to mean only the
following: (i) conviction of a felony, (ii) declaration of unsound mind by order
of court, (iii) gross dereliction of duty, (iv) commission of an act involving
moral turpitude, or (v) commission of an action which constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
Corporation.
Section 6.8 Directors' Liability. No Director shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of such
Director's fiduciary duty as a Director, notwithstanding any provision of law
imposing such liability; provided, however, that, to the extent required by
applicable law, this provision shall not eliminate the liability of a Director
(i) for any breach of such Director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under provisions of
the Massachusetts General Laws imposing liabilities on Directors in respect of
distributions to the stockholders of the Corporation or loans to officers or
Directors of the Corporation, or (iv) any transaction from which such Director
derived any improper personal benefit. This provision shall not eliminate the
liability of a Director for any act or omission occurring prior to the date upon
which this provision becomes effective. No amendment to or repeal of this
provision shall apply to or have any effect on the liability or alleged
liability of any Director of the Corporation for or with respect to any acts or
omissions of such Director occurring prior to the date of such amendment or
repeal.
Section 6.9 Transactions with Interested Persons.
6.9.1. Unless entered into in bad faith or in violation of any provision of
these Articles of Organization, no contract or transaction by the Corporation
shall be void, voidable or in any way affected by reason of the fact that it is
with an Interested Person.
6.9.2. For the purposes of this Section 6.9, "Interested Person" means any
Person in any way interested in the Corporation whether as a director, officer,
stockholder, employee or otherwise, and any other entity in which any such
Person is in any way interested.
6.9.3. Unless such contract or transaction was entered into in bad faith or in
violation of any provision of these Articles of Organization, no Interested
Person, because of such interest, shall be liable to the Corporation or to any
other Person for any loss or expense incurred by reason of such contract or
transaction or shall be accountable for any gain or profit realized from such
contract or transaction.
6.9.4. The provisions of this Section 6.9 shall be operative notwithstanding
the fact that the presence of an Interested Person was necessary to constitute a
quorum at a meeting of Directors or stockholders of the Corporation at which
such contract or transaction was authorized or that the vote of an Interested
Person was necessary for the authorization of such contract or transaction.
Section 6.10 Acting as a Partner. To the extent not prohibited by applicable
law, the Corporation may be a partner in any business enterprise which it would
have power to conduct by itself.
Section 6.11 Stockholders Meetings. Meetings of stockholders may be held at
such place in the Commonwealth of Massachusetts or, if permitted by applicable
law, elsewhere in the United States as the Board of Directors may determine.
Section 6.12 Call of Special Meetings. Special meetings of the stockholders
for any purpose or purposes may be called at any time only by the President or
by the Board of Directors pursuant to a resolution adopted by a majority of the
total number of Directors that the Corporation would have if there were no
vacancies (the "Whole Board"); provided, however, that if there is an Interested
Stockholder, any such call shall also require the affirmative vote of a majority
of the Continuing Directors then in office. Only those matters set forth in the
call of the special meeting may be considered or acted upon at such special
meeting, unless otherwise required by law.
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Section 6.13 Amendment of Bylaws. The Bylaws of the Corporation may be
adopted, altered, amended, changed or repealed by the Board of Directors or the
stockholders of the Corporation. Such action by the Board of Directors shall
require the affirmative vote of at least a majority of the Directors then in
office at a duly constituted meeting of the Board of Directors, unless at the
time of such action there shall be an Interested Stockholder, in which case such
action shall also require the affirmative vote of at least a majority of the
Continuing Directors then in office, at such a meeting. Such action by the
stockholders shall require (i) approval by the affirmative vote of a majority of
Directors then in office, unless at the time of such action there shall be an
Interested Stockholder, in which case such action shall also require the
affirmative vote of at least a majority of the Continuing Directors then in
office, at such meeting, (ii) unless waived by the affirmative vote of a
majority of the Directors then in office (and, if applicable, Continuing
Directors) specified in the preceding sentence, the submission by the
stockholders of written proposals for adopting, altering, amending, changing or
repealing the Bylaws that comply in all respects with the provisions of the
Bylaws governing such submissions and (iii) the affirmative vote of at least
eighty percent (80%) of the voting power of the then outstanding Voting Stock
voting together as a single class at a duly constituted meeting of stockholders
called expressly for such purpose.
Section 6.14 Amendment of Articles of Organization. No amendment, addition,
alteration, change or repeal of any Article of these Articles of Organization
shall be made, unless the same is first approved by the affirmative vote of a
majority of the Board of Directors of the Corporation then in office, and
thereafter approved by the affirmative vote of stockholders holding not less
than eighty percent (80%) of the voting power of the then outstanding Voting
Stock voting together as a single class cast at a duly constituted meeting, or,
in the case of Articles I, II and III hereof by not less than a majority of the
voting power of the then outstanding Voting Stock voting together as a single
class cast at a duly constituted meeting; provided, however, that if, at any
time within the sixty day period immediately preceding the meeting at which the
stockholder vote is to be taken, there is an Interested Stockholder, such
amendment, addition, alteration, change or repeal shall also require the
affirmative vote of not less than a majority of the Continuing Directors then in
office, prior to approval by the stockholders. Unless otherwise provided by law,
any amendment, addition, alteration, change or repeal so acted upon shall be
effective on the date it is filed with the Secretary of State of the
Commonwealth of Massachusetts or on such other date as specified in such
amendment, addition, alteration, change or repeal or as the Secretary of State
may specify.
Section 6.15 Reduced Shareholder Vote Approval for Certain Transactions. The
Corporation may, by an affirmative vote of the holders of a majority of the
voting power of the then outstanding Voting Stock voting together as a single
class cast at a duly constituted meeting, authorize any (i) sale, lease or
exchange of all or substantially all of its assets (a "Sale") or (ii)
consolidation or merger of the Corporation with or into any other corporation (a
"Merger", and together with a Sale, a "Transaction") that would otherwise,
pursuant to Chapter 156B of the Massachusetts General Laws, have required an
affirmative vote of the holders of two-thirds of the voting power of the then
outstanding Voting Stock voting together as a single class cast at a duly
constituted meeting; provided however, that such Transaction has previously been
approved by a vote of at least a majority of the Board of Directors then in
office (and, if at the time of such action there shall be an Interested
Stockholder, an additional vote of at least a majority of the Continuing
Directors then in office). This Section 6.15 is intended to apply to any
Transaction that would not otherwise constitute a Business Combination that is
subject to the provisions of Section 6.3 above.
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ARTICLE VII
The effective date of organization of the corporation shall be the date approved
and filed by the Secretary of the Commonwealth. If a later effective date is
desired, specify such date which shall not be more than thirty days after that
date of filing.
ARTICLE VIII
The information contained in Article VIII is not a permanent part of the
Articles of Organization.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation in Massachusetts is:
1441 Main Street, Springfield, Massachusetts 01102-3034
b. The name, residential address and post office address of each director and
officer of the corporation is as follows:
Name Residential Address Post Office Address
President: F. William Marshall, Jr. 87 Ely Road SIS Bancorp, Inc.
Longmeadow, MA 01106 1441 Main Street
Springfield, MA 01102-3034
Treasurer: John F. Treanor 10 Dutton Circle "
Medford, MA 02155
Clerk: Michael E. Tucker 26 Lawler Drive "
Easthampton, MA 01027
Directors: John M. Naughton 75 Churchill Drive "
Longmeadow, MA 01106
F. William Marshall, Jr. See Above "
John F. Treanor See Above "
c. The fiscal year (i.e., tax year) of the corporation shall end on the last
day of the month of: December
d. The name and business address of the resident agent, if any, of the
corporation is: N/A
ARTICLE IX
By-laws of the corporation have been duly adopted and the president, treasurer,
clerk and directors whose names are set forth above, have been duly elected.
IN WITNESS WHEREOF AND UNDER THE PAINS AND PENALTIES OF PERJURY, I, whose
signature appear below as incorporator and whose name and business or
residential address are clearly typed or printed beneath each signature do
hereby associate with the intention of forming this corporation under the
provisions of General Laws, Chapter 156B and do hereby sign these Articles of
Organization as incorporator this 18th day of January, 1996.
/s/ Stephen J. Coukos
Stephen J. Coukos, Esq.
SULLIVAN & WORCESTER
One Post Office Square
Boston, MA 02109
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THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
I hereby certify that, upon examination of these Articles of Organization, duly
submitted to me, it appears that the provisions of the General Laws relative to
the organization of corporations have been complied with, and I hereby approve
said articles; and the filing fee in the amount of $300 having been paid, said
articles are deemed to have been filed with me this 18th day of January 1996.
Effective date:_________________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
FILING FEE: One tenth of one percent of the total authorized capital stock, but
not less than $200.00. For the purpose of filing, shares of stock with a par
value less than $1.00, or no par stock, shall be deemed to have a par value of
$1.00 per share.
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Stephen J. Coukos, Esq.
SULLIVAN & WORCESTER
One Post Office Square
Boston, MA 02109
Telephone: 617-338-2912
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[FORM OF ARTICLES OF AMENDMENT TO
BE FILED PRIOR TO REORGANIZATION]
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
We, F. William Marshall, Jr., President, and Michael E. Tucker, Clerk, of
SIS Bancorp, Inc.
(EXACT Name of Corporation)
located at: 1441 Main Street, Springfield, Massachusetts 01102
(MASSACHUSETTS Address of Corporation)
do hereby certify that these ARTICLES OF AMENDMENT affecting
Articles NUMBERED: 3
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended hereby)
of the Articles of Organization were duly adopted at a meeting held on
__________ 1996, by vote of: the sole incorporator in accordance with the rights
and powers accorded thereto under Ch. 156B M.G.L. ss.44.
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To CHANGE the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCK
- ------------------------------ -------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ---- ---------------- ---- ---------------- ---------
COMMON: COMMON: 250,000 $0.01
PREFERRED: PREFERRED: 50,000 $0.01
CHANGE the total authorized to:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCK
- ------------------------------ -------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ---- ---------------- ---- ---------------- ---------
COMMON: COMMON: 25,000,000 $0.01
PREFERRED: PREFERRED: 5,000,000 $0.01
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The foregoing amendment will become effective when these articles of amendment
are filed in accordance with Chapter 156B, Section 6 of The General Laws unless
these articles specify, in accordance with the vote adopting the amendment, a
later effective date not more than thirty days after such filing, in which event
the amendment will become effective on such later date. LATER EFFECTIVE
DATE:__________
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed
our names this day of , in the year 1996.
______________________________________________President
F. William Marshall, Jr.
______________________________________________ Clerk
Michael E. Tucker
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THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
I hereby approve the within articles of amendment and,
the filing fee in the amount of $ having been paid,
said articles are deemed to
have been filed with me this day of 19
MICHAEL J. CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF ARTICLES OF AMENDMENT TO BE SENT
To: Stephen J. Coukos, Esq.
SULLIVAN & WORCESTER LLP
One Post Office Square
Boston, MA 02109
Telephone: 617-338-2912
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EXHIBIT C-2
BYLAWS
OF
SIS BANCORP, INC.
ARTICLE 1
Organization
The name of this Company is SIS Bancorp, Inc. The Company shall have and fully
exercise all powers and authority, both express and implied, available to it
under applicable law.
ARTICLE 2
Offices
Section 2.1 Principal Office. The principal office of the Company shall be
located at 1441 Main Street, Springfield, Massachusetts and may be changed from
time to time by the Board of Directors of the Company, subject to applicable
law.
Section 2.2 Additional Offices. The Company may have such additional offices,
either within or without the Commonwealth of Massachusetts, as the Board of
Directors may from time to time designate or the business of the Company may
require, subject to applicable law.
ARTICLE 3
Stockholders
Section 3.1 Annual Meeting. The annual meeting of the stockholders of the
Company shall be held on the last Wednesday in April of each year, if not a
legal holiday, and if a legal holiday then on the next succeeding business day,
at 10:00 a.m., local time, at the principal executive offices of the Company, or
at such other date, place and/or time as may be fixed by resolution of the Board
of Directors.
Section 3.2 Special Meeting. Subject to the rights of the holders of any
series of preferred stock, par value $0.01 per share (the "Preferred Stock"), or
any other series or class of stock as set forth in the Articles of Organization
(as defined in Section 10.3 of these Bylaws) to elect additional directors under
specified circumstances, special meetings of the stockholders may be called only
by the President or by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of directors that the Company would have if
there were no vacancies (the "Whole Board"); provided, however, that if at the
time of such call there is an Interested Stockholder, any such call shall also
require the affirmative vote of a majority of the Continuing Directors then in
office. As used in these Bylaws, the terms "Interested Stockholder" and
"Continuing Director" shall have the same respective meanings assigned to them
in the Articles of Organization. Any determination of beneficial ownership of
securities under these Bylaws shall be made in the manner specified in the
Articles of Organization.
Section 3.3 Place of Meeting. The Board of Directors may designate the place
of meeting for any meeting of the stockholders. If no designation is made by the
Board of Directors, the place of meeting shall be the principal executive
offices of the Company.
Section 3.4 Notice of Meeting. A written notice of all annual and special
meetings of stockholders stating the hour, date, place and purposes of such
meetings shall be given by the Clerk or an Assistant Clerk (or other person
authorized by these Bylaws or by law) not less than seven days nor more than
fifty days before the
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meeting to each stockholder entitled to vote thereat or to each stockholder who,
under the Articles of Organization or under these Bylaws, is entitled to such
notice by mailing it addressed to such stockholder at the address of such
stockholder as it appears on the stock transfer books of the Company. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail with postage thereon prepaid. In the case of a special meeting the notice
shall also state the purpose or purposes thereof. Any previously scheduled
meeting of the stockholders may be postponed by resolution of the Board of
Directors upon public notice given prior to the time previously scheduled for
such meeting of stockholders.
Section 3.5 Waiver of Notice. Notice of any stockholders' meeting may be
waived in writing by any stockholder either before or after the time stated
therein for convening of the meeting, and, if any person present in person or by
proxy at a stockholders' meeting does not protest, prior to or at the
commencement of the meeting, the lack of proper notice, such person shall be
deemed to have waived notice of such meeting.
Section 3.6 Quorum and Adjournment. Except as otherwise provided by law or by
the Articles of Organization, the holders of a majority of the voting power of
the then outstanding shares of the Company entitled to vote generally in the
election of directors (the "Voting Stock"), represented in person or by proxy,
shall constitute a quorum at a meeting of stockholders, except that when
specified business is to be voted on by a class or series voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum for the transaction of such business. The chairman of the meeting or a
majority of the voting power of the shares of Voting Stock so represented may
adjourn the meeting from time to time, whether or not there is such a quorum (or
in the case of specified business to be voted on as a class or series, the
chairman or a majority of the shares of such class or series so represented may
adjourn the meeting with respect to such specified business). No notice of the
time and place of adjourned meetings need be given except as required by law.
The stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 3.7 Proxies. Stockholders may vote either in person or by written
proxy dated not more than six months before the meeting named therein. Proxies
shall be filed with the Clerk of the meeting, or of any adjournment thereof,
before being voted. Except as otherwise limited therein, proxies shall entitle
the persons authorized thereby to vote at any adjournment of such meeting, but
they shall not be valid after final adjournment of such meeting. A proxy with
respect to stock held in the name of two or more persons shall be valid if
executed by or on behalf of any one of them unless at or prior to the exercise
of the proxy the Company receives a specific written notice to the contrary from
any one of them. A proxy purporting to be executed by or on behalf of a
stockholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger.
Section 3.8 Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors of the
Company and the proposal of business to be considered by the stockholders may be
made at an annual meeting of the stockholders (a) pursuant to the Company's
notice of meeting delivered pursuant to Section 3.4 of these Bylaws, (b) by or
at the direction of the President or the Board of Directors pursuant to a
resolution adopted by a majority of the Whole Board (unless there is an
Interested Stockholder, in which case the affirmative vote of a majority of the
Continuing Directors then in office shall also be required) or (c) by any
stockholder of the Company who is entitled to vote at the meeting, who complied
with the notice procedures set forth in clauses (2) and (3) of paragraph (A) of
this Section 3.8 and who was a stockholder of record at the time such notice is
delivered to the Clerk of the Company.
(2) For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this
Section 3.8, the stockholder must have given timely notice thereof in writing to
the Clerk of the Company. To be timely, a stockholder's notice shall be
delivered to the Clerk at the principal executive offices of the Company not
less than seventy days nor more
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than ninety days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than twenty days, or delayed by more than seventy
days, from such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the ninetieth day prior to such annual meeting and
not later than the close of business on the later of the seventieth day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
regulations promulgated by the Securities and Exchange Commission (the "SEC"),
or any successor agency thereto, pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including such person's written consent
to being named in the proxy statement as a nominee and to serving as a director
if elected; (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such stockholder,
as they appear on the Company's books, and of such beneficial owner and (ii) the
class and number of shares of the Company which are owned beneficially and of
record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of
this Section 3.8 to the contrary, in the event that the number of directors to
be elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Company at least eighty days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by these Bylaws shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Clerk at the principal executive offices of the Company not
later than the close of business on the tenth day following the day on which
such public announcement is first made by the Company.
(B) Special Meeting of Stockholders. Only such business shall be conducted at
a special meeting of stockholders as shall have been brought before the meeting
pursuant to the Company's notice of meeting pursuant to Section 3.4 of these
Bylaws.
(C) General.
(1) Only persons who are nominated in accordance with the procedures set forth
in these Bylaws shall be eligible to serve as directors and only such business
shall be conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in these Bylaws.
(2) Except as otherwise provided by law, the Articles of Organization or these
Bylaws, the Chief Executive Officer of the Company as chairman of the meeting
shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance with the
procedures set forth in these Bylaws and, if any proposed nomination or business
is not in compliance with these Bylaws, to declare that such defective proposal
or nomination shall be disregarded.
(3) For purposes of these Bylaws, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the Company
with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(4) Notwithstanding the foregoing provisions of these Bylaws, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in these
Bylaws. Nothing in these Bylaws shall be deemed to affect any rights (i) of
stockholders to request inclusion of proposals in the Company's proxy statement
pursuant to rules promulgated under the Exchange Act or (ii) of the holders of
any series of Preferred Stock to elect directors under specified circumstances.
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Section 3.9 Procedure for Election of Directors; Required Vote. Election of
directors at all meetings of the stockholders at which directors are to be
elected shall be by written ballot, and except as otherwise set forth in the
Articles of Organization with respect to the right of the holders of any series
of Preferred Stock or any other series or class of stock to elect additional
directors under specified circumstances, a plurality of the votes cast thereat
shall elect the directors. Except as otherwise provided by law, the Articles of
Organization or these Bylaws, all matters submitted to the stockholders at any
meeting shall be decided by the affirmative vote of a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the matter and shall be the act of the stockholders.
Section 3.10 No Stockholder Action by Written Consent. Subject to the rights
of the holders of any series of Preferred Stock or any other series or class of
stock as set forth in the Articles of Organization to elect additional directors
under specific circumstances or to consent to specific actions taken by the
Company, any action required or permitted to be taken by the stockholders of the
Company must be effected at an annual or special meeting of stockholders of the
Company and may not be effected by any consent in writing by such stockholders.
ARTICLE 4
Board of Directors
Section 4.1 General Powers. The business and affairs of the Company shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these Bylaws expressly conferred upon them, the Board
of Directors may exercise all such powers of the Company and do all such lawful
acts and things as are not by law or by the Articles of Organization or by these
Bylaws required to be exercised or done by the stockholders.
Section 4.2 Composition and Term. The Board of Directors shall be composed of:
(a) those persons elected by the incorporator(s) of the Company to serve as the
initial directors of the Company in accordance with Section 12 of Chapter 156B
of the Massachusetts General Laws, such persons to serve as directors until the
respective expiration dates of their terms as established by said
incorporator(s) and until their successors are elected and qualified and (b)
such other persons who are elected as directors from time to time as provided
herein. Subject to the rights of the holders of any series of Preferred Stock or
any other series or class of stock as set forth in the Articles of Organization
to elect directors under specified circumstances, the number of directors shall
be fixed from time to time exclusively pursuant to a resolution adopted by a
majority of the Whole Board (provided that if at the time of such action there
is an Interested Stockholder, a majority vote of the Continuing Directors then
in office shall also be required), but shall consist of not less than three
directors. The directors, other than those who may be elected by the holders of
any series of Preferred Stock or any other series or class of stock as set forth
in the Articles of Organization, shall be divided into three classes as nearly
equal in number as possible, and designated as Class I, Class II and Class III.
Members of each Class shall hold office until their successors shall have been
duly elected and qualified. At each succeeding annual meeting of stockholders of
the Company, (i) the successors of the Class of directors whose term expires at
that meeting shall be elected by a plurality vote of all votes cast at such
meeting to hold office for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election, and until their
successors are elected and qualified and (ii) if authorized by a resolution of
the Board of Directors, directors may be elected to fill any vacancy on the
Board of Directors, regardless of how such vacancy shall have been created.
Section 4.3 Qualification. Each director shall have such qualifications as are
required by applicable law. Any director who becomes in any manner disqualified,
shall vacate his office forthwith. To the extent required by law, each director,
when appointed or elected, shall take an oath that he will faithfully perform
the duties of his office. The oath, to the extent so required, shall be taken
before a notary public or justice of the peace, who is not an officer of the
Company, and a record of the oath shall be made a part of the records of the
Company.
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To the extent required by law, members of the Board of Directors shall be
citizens and residents of the Commonwealth of Massachusetts.
Section 4.4 Regular Meetings. A regular meeting of the Board of Directors
shall be held without notice other than these Bylaws immediately after, and at
the same place as, each annual meeting of stockholders. The Board of Directors
may, by resolution, provide the time and place for the holding of additional
regular meetings without notice other than such resolution.
Section 4.5 Special Meetings. Special meetings of the Board of Directors shall
be called at the request of the Chairman of the Board, if one is elected, the
President, or a majority of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings.
Section 4.6 Notice. Notice of any special meeting shall be given to each
director at his or her business or residence in writing by hand delivery,
first-class or overnight mail or courier service, telegram or facsimile
transmission or orally by telephone communication. If mailed, such notice shall
be deemed adequately delivered when deposited in the United States mails so
addressed, with postage thereon prepaid, at least five days before such meeting.
If by telegram, overnight mail, or courier service such notice shall be deemed
adequately delivered when the telegram is delivered to the telegraph company or
its notice is delivered to the overnight mail or courier service company at
least twenty-four hours before such meeting. If by facsimile transmission, such
notice shall be deemed adequately delivered when the notice is transmitted at
least twenty-four hours before such meeting. If by telephone or by hand
delivery, the notice shall be given at least twelve hours prior to the time set
for the meeting. Neither business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice of such meeting, except for amendments to these Bylaws as provided under
Article 8 of these Bylaws. A meeting may be held at any time without notice if
all the directors are present or if those not present waive notice of the
meeting as provided in Section 4.7 of these Bylaws.
Section 4.7 Waiver of Notice. Notice of any directors' meeting may be waived
in writing by all the directors and, if any director present at a directors'
meeting does not protest prior to or at the commencement of the meeting the lack
of proper notice, he shall be deemed to have waived notice of such meeting.
Section 4.8 Quorum. A majority of the Whole Board shall constitute a quorum
for the transaction of business, but if at any meeting of the Board of Directors
there shall be less than a quorum present, a majority of the directors present
may adjourn the meeting from time to time without further notice. The act of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 4.9 Vacancies. Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in the
Articles of Organization to elect additional directors under specified
circumstances, vacancies resulting from death, resignation, retirement,
disqualification, removal from office or other cause, and newly created
directorships resulting from any increase in the authorized number of directors,
may be filled only by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors, unless there is
an Interested Stockholder, in which case such vacancy may only be filled by vote
of a majority of the Continuing Directors then in office. A director so chosen
shall hold office for the remainder of the full term of the Class of directors
in which the vacancy occurred or the new directorship was created and until such
director's successor has been elected and qualified. No decrease in the number
of authorized directors shall shorten the term of any incumbent director.
Section 4.10 Presumption of Assent. A director of the Company who is present
at a meeting of the Board of Directors at which action on any Company matter is
taken shall be presumed to have assented to the action taken unless his dissent
or abstention shall be entered in the minutes of the meeting or unless he shall
file a written dissent to such action with the person acting as the Clerk of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Clerk of the Company within five days after the date a
copy of the minutes of the meeting is received. Such right to dissent shall not
apply to a director who voted in favor of such action.
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Section 4.11 Manner of Participation. Members of the Board of Directors or of
committees elected by the Board pursuant to Section 4.15 may participate in
meetings of the Board or such committee by means of conference telephone or
similar communications equipment by which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person but shall not constitute attendance for the purpose of compensation
pursuant to Section 4.12, unless the Board of Directors by resolution so
provides.
Section 4.12 Compensation of Directors. The Board of Directors shall have
authority to fix fees of directors, including a reasonable allowance for
expenses actually incurred in connection with their duties.
Section 4.13 Resignation. Any director may resign at any time by sending a
written notice of such resignation to the principal executive office of the
Company addressed to the Chairman of the Board, the President or the Clerk.
Unless the resigning director otherwise specifies in the notice of resignation,
such resignation shall take effect upon receipt by the Chairman of the Board,
the President or the Clerk.
Section 4.14 Limitation on Service by Directors. A director upon attaining the
age of seventy (70) shall retire from service as a director of the Company. In
special circumstances, a person may be nominated as a Director who has attained
the age of seventy (70) because of the special contribution such person may make
to the business and management of the Company.
Section 4.15 Committees. The Board of Directors may, by resolution adopted by
a majority of the Whole Board, designate one or more committees, including
without limitation an executive committee, each committee to consist of three
(3) or more directors elected by the Board of Directors. The Board of Directors
may elect one or more directors as alternate members of any such committee, who
may take the place of any absent member or members at a meeting of such
committee.
If a member of any such committee shall be absent from any meeting, or
disqualified from voting thereat, the remaining member or members present and
not disqualified from voting, whether or not such member or members constitute a
quorum, may, by unanimous vote, appoint another member of the Board of Directors
to act at the meeting in place of an absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
and except as otherwise provided by law, the Articles of Organization or these
Bylaws, shall have and may exercise, when the Board of Directors is not in
session, all the powers and authority of the Board of Directors in the direction
of the Company.
Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Unless otherwise specified in the resolution of the Board of Directors
designating the committee, the majority of the total number of members of the
committee shall constitute a quorum for the transaction of business, and the
vote of the majority of the members of the committee present at any meeting of
which there is a quorum shall be the act of the committee. Each such committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors, when required.
Section 4.16 Removal. Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in the
Articles of Organization to elect additional directors under specified
circumstances, any director may be removed from office at any time, but only for
cause and then only by the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of the then outstanding Voting Stock, voting
together as a single class.
ARTICLE 5
Officers
Section 5.1 Enumeration. The officers of the Company shall consist of a
President, a Treasurer, a Clerk and such other officers, including, without
limitation, a Chairman of the Board, a Clerk and one or more Vice Presidents as
the Board of Directors may determine to be necessary for the management of the
Company.
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Section 5.2 Election. The President, Treasurer and the Clerk (and, if any, the
Secretary) shall be elected annually by the Board of Directors at its first
meeting following the annual meeting of stockholders. Other officers shall be
elected by the Board of Directors at such first meeting of the Board of
Directors or at any other meeting.
Section 5.3 Qualification. Any two or more offices may be held by any person.
The President shall be a Director. Any officer may be required by the Board of
Directors to give bond for the faithful performance of his duties in such amount
and with such sureties as the Board of Directors may determine.
Section 5.4 Tenure. Except as otherwise provided by law, by the Articles of
Organization, or by these Bylaws, the President, Treasurer and Clerk (and, if
any, the Secretary) shall hold office until the first meeting of the Board of
Directors following the next annual meeting of the stockholders and until their
respective successors are chosen and qualified and all other officers shall hold
office until the first meeting of the Board of Directors following the next
annual meeting of stockholders, or for such shorter term as the Board of
Directors may fix at the time such officers are chosen. The Chief Executive
Officer may resign at any time by written notice to the Board of Directors or
the Clerk. Any other officer may resign at any time by written notice to the
Chief Executive Officer. Such resignation shall be effective upon receipt unless
the resignation otherwise provides. Election or appointment of an officer,
employee or agent shall not of itself create contract rights. The Board of
Directors may, however, authorize the Company to enter into an employment
contract with any officer in accordance with law, but no such contract right
shall impair the right of the Board of Directors to remove any officer at any
time in accordance with Section 5.5 hereof.
Section 5.5 Removal. Except as otherwise provided by law or the Articles of
Organization, the Board of Directors may remove any officer with or without
cause by the affirmative vote of a majority of the Whole Board; provided,
however, that if at the time of such removal there is an Interested Stockholder,
the affirmative vote of a majority of the Continuing Directors then in office
shall also be required. Any such removal, other than for cause, shall be without
prejudice to the contract rights, if any, of the persons involved. Any officer
may be removed for cause only after ten days' written notice and opportunity to
be heard by the Board of Directors.
Section 5.6 Absence or Disability. In the event of the absence or disability
of any officer, the Board of Directors may designate another officer to act
temporarily in place of such absent or disabled officer.
Section 5.7 Vacancies. Any vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors.
Section 5.8 Chief Executive Officer. The President shall be the Chief
Executive Officer, unless the Board of Directors shall elect a Chairman of the
Board and designate such Chairman to be the Chief Executive Officer. The Chief
Executive Officer shall, subject to the direction of the Board of Directors,
have general supervision and control of the Company's business and shall
preside, when present, at all meetings of the stockholders.
Section 5.9 Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the Board of Directors. If a Chairman of the Board is not
elected or is absent, the President shall preside at all meetings of the Board
of Directors. The Chairman of the Board shall have such other powers and shall
perform such other duties as the Board of Directors may from time to time
designate. If the Chairman of the Board is not the Chief Executive Officer, he
shall also have such powers and perform such duties as the Chief Executive
Officer may from time to time designate.
Section 5.10 The President. The President, if he is the Chief Executive
Officer, shall preside at all meetings of the stockholders. If a Chairman of the
Board is not elected or is absent, the President shall preside at all meetings
of the Board of Directors. If the President is not the Chief Executive Officer,
he shall have such powers and perform such duties as the Chief Executive Officer
may from time to time designate.
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Section 5.11 Vice Presidents, Treasurer and Other Officers. Any Vice
President, the Treasurer and any other officers whose powers and duties are not
otherwise specifically provided for herein shall have such powers and shall
perform such duties as the Chief Executive Officer may from time to time
designate.
Section 5.12 Clerk and Assistant Clerks. The Clerk shall keep a record of the
meetings of stockholders. If a Secretary is not elected or is absent, the Clerk
shall keep a record of the meetings of the Board of Directors. In the absence of
the Clerk, an Assistant Clerk, if one is elected, shall perform the Clerk's
duties. Otherwise a Temporary Clerk designated by the person presiding at the
meeting shall perform the Clerk's duties.
Section 5.13 Secretary and Assistant Secretaries. The Secretary, if one is
elected, shall keep a record of the meetings of the Board of Directors. In the
absence of the Secretary, any Assistant Secretary, the Clerk, any Assistant
Clerk or a Temporary Secretary designated by the person presiding at such
meeting shall perform the Secretary's duties.
ARTICLE 6
Stock Certificates and Transfers
Section 6.1 Certificates of Stock. Unless otherwise provided by the Board of
Directors, each stockholder shall be entitled to a certificate of the capital
stock of the Company in such form as may from time to time be prescribed by the
Board of Directors. Such certificate shall be signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer. Such signatures may be
facsimile if the certificate is signed by a transfer agent or by a registrar,
other than a Director, officer or employee of the Company. In case any officer
who has signed or whose facsimile signature has been placed on such certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Company with the same effect as if he were such officer at the
time of its issue. Every certificate for shares of stock which are subject to
any restriction on transfer and every certificate issued when the Company is
authorized to issue more than one class or series of stock shall contain such
legend with respect thereto as is required by law.
Section 6.2 Transfers. Subject to any restrictions on transfer and unless
otherwise provided by the Board of Directors, shares of stock may be transferred
on the books of the Company by the surrender to the Company or its transfer
agent of the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with transfer stamps (if
necessary) affixed, and with such proof of the authenticity of signature as the
Company or its transfer agent may reasonably require.
Section 6.3 Record Holders. Except as otherwise required by law, by the
Articles of Organization or by these Bylaws, the Company shall be entitled to
treat the record holder of stock as shown on its books as the owner of such
stock for all purposes, including the payment of dividends and the right to
vote, regardless of any transfer, pledge or other disposition of such stock,
until the shares have been transferred on the books of the Company in accordance
with the requirements of these Bylaws.
It shall be the duty of each stockholder to notify the Company of his address
and any changes thereto.
Section 6.4 Record Date. The Board of Directors may fix in advance a time of
not more than sixty days before the date of any meeting of the stockholders, the
date for the payment of any dividend or the making of any distribution to
stockholders or the last day on which the consent or dissent of stockholders may
be effectively expressed for any purpose, as the record date for determining the
stockholders having the right to notice of and to vote at such meeting, and any
adjournment thereof, or the right to receive such dividend or distribution or
the right to give such consent or dissent. In such case, only stockholders of
record on such record date shall have such right, notwithstanding any transfer
of stock on the books of the Company after the record date.
If no record date is fixed and the transfer books are not closed, (a) the
record date for determining stockholders having the right to notice of or to
vote at a meeting of stockholders shall be the close of business
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on the day next preceding the day on which notice is given, and (b) the record
date for determining stockholders for any other purpose shall be the close of
business on the date on which the Board of Directors acts with respect thereto.
Section 6.5 Replacement of Certificates. In case of the alleged loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
Section 6.6 Issuance of Capital Stock. Except as provided by law, the Board of
Directors shall have the authority to issue or reserve for issue from time to
time the whole or any part of the capital stock of the Company which may be
authorized from time to time, to such persons or organizations, for such
consideration, whether cash, property, services or expenses and on such terms as
the Board of Directors may determine, including, without limitation, the
granting of options, warrants or conversion or other rights to subscribe to said
capital stock.
Section 6.7 Dividends. Subject to applicable law, the Articles of Organization
and these Bylaws, the Board of Directors may from time to time declare, and the
Company may pay, dividends on outstanding shares of its capital stock.
ARTICLE 7
Indemnification
Section 7.1 Indemnification and Insurance.
(A) Each person who was or is made a party or is threatened to be made a party
to or is otherwise involved (including, without limitation, as a witness) in any
action, suit or proceeding, whether civil, derivative, criminal, administrative
or investigative (hereinafter a "proceeding"), by reason of the fact that he or
she or a person of whom he or she is the legal representative is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, partner, trustee, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to any employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action or inaction in an official capacity as a director, officer, partner,
trustee, employee or agent or in any other capacity while serving as a director,
officer, partner, trustee, employee or agent, shall be indemnified and held
harmless by the Company against all expense, liability and loss (including,
without limitation, attorneys' fees and disbursements, judgments, fines, excise
taxes or penalties under the Employee Retirement Income Security Act of 1974, as
amended, and amounts paid or to be paid in settlement) reasonably incurred by
such indemnitee in connection with such proceeding, provided that such
indemnitee shall have acted in good faith in the reasonable belief that such
action was in, or not opposed to, the best interests of the Company or such
corporation, partnership, joint venture, trust or other enterprise, as the case
may be, or with respect to any employee benefit plan, the best interests of the
participants or beneficiaries of such employee benefit plan; provided, however,
that except as provided in paragraph (C) of this Section 7.1 with respect to
proceedings seeking to enforce rights to indemnification, the Company shall
indemnify any such indemnitee seeking indemnification in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors.
(B) The right to indemnification conferred in paragraph (A) of this Section
7.1 shall include the right to be paid by the Company the expenses (including
attorneys' fees and disbursements) incurred in defending any such proceeding in
advance of its final disposition (hereinafter an "advancement of expenses");
provided, however, that, to the extent required by applicable law, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Company of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay
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all amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this paragraph (B) or otherwise.
(C) If a claim under paragraphs (A) or (B) of this Section 7.1 is not paid in
full by the Company within thirty days after a written claim has been received
by the Company, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty days, the indemnitee may at any
time thereafter bring suit against the Company to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right of an advancement of expenses) it shall be a defense that, and
(ii) in any suit brought by the Company to recover an advancement of expenses
pursuant to the terms of an undertaking, the Company shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
any applicable standard for indemnification set forth under applicable law.
Neither the failure of the Company (including its Board of Directors,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of such action that indemnification of the indemnitee is proper
in the circumstances because the indemnitee has met the applicable standard of
conduct set forth under applicable law, nor an actual determination by the
Company (including its Board of Directors, independent legal counsel or
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Company to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden or proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under these
Bylaws or otherwise shall be on the Company.
(D) The right to indemnification and the advancement of expenses conferred in
this Section 7.1 shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Articles of
Organization, provision of these Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
(E) The Company may maintain insurance, at its expense, to protect itself and
any director, officer, employee or agent of the Company or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under applicable law.
(F) The Company may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification, and rights to the advancement of
expenses, to any employee or agent of the Company to the fullest extent of the
provisions of these Bylaws with respect to the indemnification and advancement
of expenses of directors and officers of the Company.
(G) The rights to indemnification and to the advancement of expenses conferred
in paragraphs (A) and (B) of this Section 7.1 shall be contract rights and such
rights shall continue as to an indemnitee who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the indemnitee's
heirs, executors and administrators.
Section 7.2 Merger or Consolidation. If the Company is merged into or
consolidated with another corporation and the Company is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Company under this Article 7 with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring at or prior to the date of such merger or consolidation.
Section 7.3 Savings Clause. If this Article 7 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and advance expenses to
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each indemnitee as to any expenses (including reasonable attorneys' fees),
judgments, fines, liabilities, losses, and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Company, to the fullest extent permitted by any applicable portion of this
Article 7 that shall not have been invalidated and to the fullest extent
permitted by applicable law.
Section 7.4 Subsequent Legislation. If the Massachusetts General Laws are
amended after adoption of this Article 7 to expand further the indemnification
permitted to an indemnitee, then the Company shall indemnify all such persons to
the fullest extent permitted by the Massachusetts General Laws, as so amended.
ARTICLE 8
Amendments
Section 8.1 Amendments. These Bylaws may be altered, amended, changed or
repealed by the Board of Directors or the stockholders of the Company, provided
notice of the proposed change was given in the notice of the meeting and, in the
case of the Board of Directors, in a notice given no less than twenty-four hours
prior to the meeting. Such action by the Board of Directors shall require the
affirmative vote of at least a majority of the Directors then in office at a
duly constituted meeting of the Board of Directors, unless at the time of such
action there shall be an Interested Stockholder, in which case such action shall
also require the affirmative vote of at least a majority of the Continuing
Directors then in office, at such a meeting. Such action by the stockholders
shall require (i) approval by the affirmative vote of a majority of Directors
then in office, unless at the time of such action there shall be an Interested
Stockholder, in which case such action shall also require the affirmative vote
of at least a majority of the Continuing Directors then in office, at such
meeting, (ii) unless waived by the affirmative vote of a majority of the
Directors then in office (and, if applicable, the affirmative vote of a majority
of the Continuing Directors then in office) specified in the preceding sentence,
the submission by the stockholders of written proposals for adopting, altering,
amending, changing or repealing the Bylaws that comply in all respects with the
provisions of these Bylaws governing such submissions and (iii) the affirmative
vote of at least eighty percent (80%) of the voting power of the then
outstanding Voting Stock voting together as single class at a duly constituted
meeting of stockholders called expressly for such purpose.
ARTICLE 9
Special Corporate Acts
Section 9.1 Execution of Negotiable Instruments. All checks, drafts, notes,
bonds, bills of exchange, and orders for the payment of money shall be signed by
such officer or officers of the Company as the Board of Directors shall
determine from time to time. The Board of Directors may authorize the use of
facsimile signatures of any officer or employee in lieu of manual signatures.
Section 9.2 Execution of Deeds, Contracts, Etc. Subject always to the specific
directions of the Board of Directors or the Executive Committee, all deeds,
mortgages, assignments, extensions, releases, partial releases, and discharges
of mortgages made by the Company and all other written contracts, agreements and
undertakings to which the Company shall be a party shall be executed in its name
by the Chairman of the Board of Directors, the President, any Executive Vice
President, any Senior Vice President, any Vice President, or such other officer
as may be designated by the Chairman of the Board of Directors or the President,
and, when requested, the Clerk or an Assistant Clerk shall attest to such
signatures and affix the corporate seal to the instruments.
Section 9.3 Endorsement of Stock Certificates. Subject always to the specific
directions of the Board of Directors or the Executive Committee, any share or
shares of stock issued by any corporation and owned by the Company (including
reacquired shares of stock of the Company) may, for sale or transfer, be
endorsed in the name of the Company by the Chairman of the Board of Directors,
the President or such other officer as may be
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designated by the Chairman of the Board of Directors or the President, and his
signature shall be attested to by the Clerk or an Assistant Clerk who shall
affix the corporate seal.
Section 9.4 Voting of Shares Owned by Company. Subject always to the specific
directions of the Board of Directors or the Executive Committee, any share or
shares of stock issued by any other corporation and owned or controlled by the
Company may be voted at any stockholders' meeting of the other corporation by
the President or Chief Executive Officer of the Company, or in the absence by
such other officer as may be designated by the President or Chief Executive
Officer. Whenever, in the judgment of the President or the Chief Executive
Officer, or in their absence, of any such other officer as may be designated by
the President or Chief Executive Officer, it is desirable for the Company to
execute a proxy or give a stockholders' consent in respect to any share or
shares of stock issued by any other corporation and owned or controlled by the
Company, the proxy or consent shall be executed in the name of the Company by
the President of Chief Executive Officer without necessity of any authorization
by the Board of Directors. Any person or persons designated in the manner above
stated as the proxy or proxies of the Company shall have full right, power and
authority to vote the share or shares of stock issued by the other corporation.
ARTICLE 10
Miscellaneous Provisions
Section 10.1 Fiscal Year. Except as otherwise determined by the Board of
Directors, the fiscal year of the Company shall be the twelve months ending
December 31 or on such other date as may be required by law.
Section 10.2 Seal. The Board of Directors shall have power to adopt and alter
the seal of the Company.
Section 10.3 Articles of Organization. All references in these Bylaws to the
Articles of Organization shall be deemed to refer to the Articles of
Organization of the Company, as amended and in effect from time to time.
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