Exhibit 99.4
THE HIBERNIA SAVINGS BANK
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of the Stockholders of The
Hibernia Savings Bank ("the Bank") will be held at the Sheraton Tara Hotel,
37 Forbes Road, Braintree, Massachusetts on Monday, April 29, 1996, at 10:00
A.M. for the following purposes:
1. To elect four Directors to serve on the Board of Directors for a term
of three years or until their successors have been elected and
qualified.
2. To elect a Director to serve on the Board of Directors for a term of
one year or until a successor has been elected and qualified.
3. To consider and vote upon the formation of a holding company for the
Bank by approval of a plan of reorganization and acquisition, dated as
of February 15, 1996 (the "Plan of Reorganization") between the Bank
and Emerald Isle Bancorp, Inc. ("Bancorp"), a newly formed
Massachusetts corporation organized at the direction of the Bank, and
each of the transactions contemplated thereby, pursuant to which the
Bank will become a wholly-owned subsidiary of Bancorp, and each issued
and outstanding share of common stock of the Bank, par value $1.00 per
share (the "common stock"), other than shares held by stockholders, if
any, exercising dissenters' rights, will be converted into and
exchanged for one share of common stock of Bancorp, par value $1.00
per share (the "Reorganization"). A copy of the plan of reorganization
is attached as Exhibit (A) to the accompanying proxy statement.
If the action is approved by the stockholders at the Annual Meeting and
effected by the Bank, any stockholder (1) who files with Bancorp 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 Bancorp within twenty (20) 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. Bancorp 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.
4. To elect Douglas C. Purdy to serve as Clerk of the Bank until the next
election, or until a successor is elected and qualified.
5. To approve the selection of the independent accounting firm of Arthur
Andersen LLP as auditors for the fiscal year ending December 31, 1996.
6. To consider and act upon any other matters which may properly come
before the meeting and any and all adjournments thereof.
The close of business on Thursday, February 29, 1996 has been fixed as the
record date for determining the stockholders entitled to notice of and to vote
at the meeting.
This notice and accompanying proxy materials are being mailed to such
stockholders on or about Friday, March 15, 1996.
Whether or not you are able to attend the meeting, please complete and sign
the accompanying proxy and return it promptly in the enclosed envelope.
/s/ Douglas C. Purdy
Douglas C. Purdy, CLERK
730 Hancock Street
Quincy, MA 02170
(617) 479-5001
Quincy, Massachusetts
March 15, 1996
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THE HIBERNIA SAVINGS BANK
EMERALD ISLE BANCORP, INC.
-----------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Hibernia Savings Bank (the "Bank") for
use at the 1996 Annual Meeting of Stockholders of the Bank (the "Meeting") to be
held at the Sheraton Tara Hotel, 37 Forbes Road, Braintree, Massachusetts on
Monday, April 29, 1996 at 10:00 A.M. and is revocable by written notice to the
Clerk prior to its exercise. Proxies in the accompanying form, properly executed
and received prior to the meeting and not revoked, will be voted. Assistance in
soliciting proxies will be provided by D.F. King & Co., Inc., 77 Water Street,
New York, New York, 10005. The projected cost of such proxy solicitation
assistance is $3,000. The expense of soliciting proxies will be borne by the
Bank. Solicitation will be accomplished by first mailing the proxy materials on
or about March 15, 1996 to stockholders as of the record date and subsequently
by letter and by telephone to stockholders whose proxies have not been received.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE,
SUCH INFORMATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL A SECURITY, OR A SOLICITATION OF
A PROXY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES MADE UNDER THIS PROXY STATEMENT
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE HIBERNIA SAVINGS BANK OR EMERALD ISLE BANCORP, INC.
SINCE THE DATE OF THIS PROXY STATEMENT.
THE SHARES OF STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS
AND ARE NOT INSURED BY THE BANK INSURANCE FUND, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE SHARE INSURANCE FUND, THE DEPOSIT INSURANCE FUND OF
MASSACHUSETTS OR ANY OTHER GOVERNMENTAL AGENCY.
The Bank is subject to the informational reporting requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, files reports,
proxy statements and other information with the Federal Deposit Insurance
Corporation ("FDIC"). Copies may be obtained at prescribed rates from the
office of the FDIC, 550 Seventeenth Street, N.W., Washington, D.C. 20429, or
at the Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, MA 02106.
Bancorp is applying to have its common stock approved for quotation on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System using the symbol: "EIRE," effective upon consummation
of the Reorganization. Such approval is anticipated although there is no
assurance that such approval will be received.
The principal executive offices of both Emerald Isle Bancorp, Inc. and
The Hibernia Savings Bank are located at 730 Hancock Street, Quincy,
Massachusetts 02170 and their telephone number is (617) 479-5001.
STOCKHOLDERS ARE URGED TO EXECUTE AND RETURN THEIR PROXIES PROMPTLY IN
ORDER TO MINIMIZE THE COST OF SOLICITATION.
THE DATE OF THIS PROXY STATEMENT IS MARCH 15, 1996.
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THE HIBERNIA SAVINGS BANK
EMERALD ISLE BANCORP, INC.
PROXY STATEMENT
MARCH 15, 1996
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TABLE OF CONTENTS
PAGE
Notice of Annual Meeting of Stockholders . . . . . . . . . . . . . . . . 1
Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Summary Information on Proposed Holding Company. . . . . . . . . . . . . 4
Outstanding Voting Securities. . . . . . . . . . . . . . . . . . . . . . 6
Proposals I and II -- Election of Directors . . . . . . . . . . . . . . 7
Market Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Executive Compensation of Principal Officers . . . . . . . . . . . . . . 10
Option Grants in Last Fiscal Year. . . . . . . . . . . . . . . . . . . . 11
Compensation Committee Report on Executive Compensation. . . . . . . . . 11
Performance Graph. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Proposal III -- Formation of Holding Company . . . . . . . . . . . . . . 14
Description of the Plan of Reorganization . . . . . . . . . . . . . 15
Remuneration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Effect on Stock Options and Other Stock Related Benefit Plans . . . 16
Reasons for the Holding Company Formation . . . . . . . . . . . . . 17
Business of the Bank. . . . . . . . . . . . . . . . . . . . . . . . 17
Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 18
Business of Bancorp . . . . . . . . . . . . . . . . . . . . . . . . 18
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 19
Financial Resources of Bancorp. . . . . . . . . . . . . . . . . . . 19
Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Financial Statements and Annual Disclosure Statement. . . . . . . . 20
Conditions of the Reorganization. . . . . . . . . . . . . . . . . . 21
Rights of Dissenting Stockholders . . . . . . . . . . . . . . . . . 22
Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . 23
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . 24
Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Comparison of Stockholder Rights. . . . . . . . . . . . . . . . . . 25
Effect on Current Market Value of Outstanding Bank Stock. . . . . . 29
Anti-Takeover Provisions. . . . . . . . . . . . . . . . . . . . . . 29
Legal Investments . . . . . . . . . . . . . . . . . . . . . . . . . 29
Regulation of Bancorp and the Bank. . . . . . . . . . . . . . . . . 29
Proposal IV -- Election of Clerk . . . . . . . . . . . . . . . . . . . . 32
Proposal V -- Selection of Auditors. . . . . . . . . . . . . . . . . . . 32
Stockholder Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . 32
Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Exhibit A -- Plan of Reorganization and Acquisition. . . . . . . . . . . 33
Exhibit B -- Articles of Organization. . . . . . . . . . . . . . . . . . 38
Exhibit C -- Dissenters' Appraisal Rights. . . . . . . . . . . . . . . . 46
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THE HIBERNIA SAVINGS BANK
EMERALD ISLE BANCORP, INC.
730 HANCOCK STREET
QUINCY, MASSACHUSETTS 02170
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SUMMARY INFORMATION
ON
PROPOSED HOLDING COMPANY
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The following summary does not purport to be complete and is qualified in
its entirety by reference to the more detailed information appearing elsewhere
in this Proxy Statement under "Proposal III -- Formation of Holding Company,"
and Exhibits A, B and C attached hereto.
THE HIBERNIA SAVINGS BANK
The Hibernia Savings Bank (the "Bank") is a Massachusetts-chartered
savings bank incorporated in 1912. The Bank provides a wide array of
commercial and consumer banking services and its deposits are insured by the
Federal Deposit Insurance Corporation. In addition, deposits in excess of
Federal Deposit Insurance limits are insured by the Deposit Insurance Fund.
EMERALD ISLE BANCORP, INC.
Emerald Isle Bancorp, Inc. ("Bancorp") is a Massachusetts stock
corporation established in January, 1996 under the provisions of Chapter 156B
of the General Laws of Massachusetts solely for the purpose of becoming a
holding company for the Bank. Bancorp has not engaged in any business since
its incorporation.
THE REORGANIZATION
The formation of a holding company will be accomplished under a Plan of
Reorganization and Acquisition, dated February 15, 1996, pursuant to which
the Bank will become a wholly-owned subsidiary of Bancorp. Under the terms of
the Plan of Reorganization and Acquisition, each outstanding share of Bank
common stock (other than shares held by dissenting stockholders, if any) will
be converted into one share of common stock, par value $1.00 per share, of
Bancorp, and the former holders of Bank common stock will become the holders
of all of the outstanding common stock of Bancorp (the "Reorganization").
Following the Reorganization, it is intended that the Bank will continue its
operation at the same location, with the same management, and subject to all
the rights, obligations and liabilities of the Bank existing immediately
prior to the Reorganization.
CONDITIONS TO THE REORGANIZATION
The Plan of Reorganization sets forth a number of conditions which must
be met before the Reorganization will be consummated, including: (i) the Plan
of Reorganization shall have been approved by a vote of the holders of
two-thirds of the outstanding Common Stock of the Bank, (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) any
approval, consent or waiver required by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") shall have been received and any
waiting period imposed by applicable law shall have expired, (iv) the Bank
and Bancorp shall have received a favorable opinion from the BankOs
independent public accountants, Arthur Andersen LLP, concerning the federal
income tax consequences of the Reorganization, (v) Bancorp Common Stock to be
issued in exchange for Common Stock of the Bank shall have been registered or
qualified for issuance under applicable state securities laws, and (vi) the
Bank and Bancorp shall have obtained all other necessary consents or
approvals required for the formation of the Holding Company. In addition, the
Plan of Reorganization also provides that the Reorganization may be
terminated by the Board of Directors of the Bank or Bancorp if, among other
things, (i) the number of shares of Common Stock owned by dissenting
stockholders makes the Reorganization unwise in the opinion of the Bank and
Bancorp, (ii) any action, suit, proceeding or claim has been instituted, made
or threatened relating to the proposed Reorganization which will make its
consummation inadvisable in the opinion of the Bank or Bancorp, or (iii) for
any other reason the Reorganization is inadvisable in the opinion of the Bank
or Bancorp.
-4-
RISK
The transactions contemplated by the Reorganization are principally
designed to reorganize the corporate structure of the Bank in order to
conduct the business of the Bank as a wholly-owned subsidiary of a registered
bank holding company. The Reorganization, if consummated, does not represent
any material change in the nature of the business conducted by the Bank.
Stockholders electing to receive Bancorp stock for Bank stock do so without
the ability to analyze the historical financial performance of Bancorp.
Bancorp is a newly formed Massachusetts corporation and has no history of
financial performance. Bancorp's financial condition immediately following
the effective date of the merger contemplated by the Agreement will depend on
the operation and profitability of the Bank at the time of and after the
effective date of the Reorganization. As Bancorp continues to operate in the
future, additional factors may affect its profitability including, among
other things: (i) businesses started or acquired by Bancorp other than the
Bank; (ii) the nature of federal or state laws and regulations applicable to
Bancorp; and (iii) the effect of management.
REASONS FOR THE HOLDING COMPANY REORGANIZATION
The Board of Directors of the Bank believes that a holding company
structure will provide greater flexibility in the operation of the Bank and
in responding to competitive conditions in the banking and financial services
industries. See "Proposal III -- Formation of Holding Company -- Reasons for
the Holding Company Reorganization."
COMPARISON OF STOCKHOLDER RIGHTS
As a result of the Reorganization, holders of the common stock of the
Bank, which is a Massachusetts-chartered savings bank subject to
Massachusetts banking law and the Charter and By-laws of the Bank, will
become stockholders of Bancorp, a Massachusetts corporation. Accordingly,
their rights will be governed by Massachusetts corporation law and the
Articles of Organization and By-laws of Bancorp. Certain differences arise
from this change of governing law, as well as from distinctions between the
Charter and By-laws of the Bank and the Articles of Organization and By-laws
of Bancorp. These differences relate, among other things, to the issuance of
capital stock, the payment of dividends and dissenters' rights. See "Proposal
III -- Formation of Holding Company -- Comparison of Stockholder Rights."
ACCOUNTING TREATMENT
It is anticipated that the Reorganization will be accounted for as a
"pooling of interests" transaction under generally accepted accounting
principles.
TAX CONSEQUENCES
The Bank has received an opinion from its independent public accountants
that, among other things, the Reorganization will be treated as a non-taxable
transaction at the corporate and stockholder levels, except with respect to
shares purchased from dissenting stockholders, if any. Receipt of this
opinion is a condition to the consummation of the Reorganization. This
opinion is not binding on the Internal Revenue Service. Each stockholder
should consult his own tax counsel as to specific federal, state and local
tax consequences of the Reorganization, if any, to such stockholder. See
"Proposal III -- Formation of Holding Company -- Income Tax Consequences."
DISSENTERS' RIGHTS
Stockholders of the Bank will have dissenters' rights in connection with
the Reorganization. Stockholders who exercise dissenters' rights must
carefully follow the required procedures. See "Proposal III -- Formation of
Holding Company -- Rights of Dissenting Stockholders."
VOTE REQUIRED
The affirmative vote of the holders of at least two-thirds of the issued
and outstanding shares of Common Stock eligible to be cast by stockholders of
record at the close of business on the Record Date will be required to
approve the Plan of Reorganization and each of the transactions contemplated
thereby. All officers and Directors as a group own 51.43% of the shares
entitled to vote.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED THE PROPOSED
REORGANIZATION AND ACQUISITION AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE REORGANIZATION.
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OUTSTANDING VOTING SECURITIES
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Only holders of record at the close of business on February 29, 1996 will
be entitled to vote at the meeting. As of that date there were 1,553,846
shares of common stock of the Bank outstanding. These are the only voting
securities of the Bank outstanding. Each share is entitled to one vote on
each matter to be presented to the meeting. To the knowledge of management,
as of February 29, 1996 and based upon 1,553,846 outstanding shares of common
stock, only the stockholders listed below own more than five percent of the
common stock of the Bank:
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
The Hibernia Savings Bank 237,003(1) 15.25%
Employee Stock Ownership Plan
c/o The Pentad Corporation
950 Winter Street, Suite 1400
Waltham, MA 02154
Mark A. Osborne, 212,889(2) 13.70%(3)
Chairman of the Board
and Chief Executive Officer
The Hibernia Savings Bank
730 Hancock Street
Quincy, MA 02170
Michael T. Putziger
Roche, Carens & DeGiacomo
One Post Office Square
Boston, MA 02109 and
Myrna Putziger 171,700(4) 11.05%
Rubin and Rudman
50 Rowes Wharf
Boston, MA 02110
The officers, Directors and nominees for Director own common stock
in the Bank as follows:
All Officers and Directors
as a group(5) 799,153(5) 51.43%
(1) Form F-11A, filed with the FDIC 1/90; Amendment 1 to Form F-11A filed with
the FDIC 2/92; Amendment 2 to Form F-11A filed with the FDIC 2/93;
Amendment 3 to Form F_11A filed with FDIC 2/94; Amendment 4 to Form F-11A
filed with the FDIC 1/95; Amendment 5 to Form F-11A filed with the FDIC
1/96. The ESOP has no power to vote these shares. Allocated shares are
voted as directed by the persons to whom they are allocated; unallocated
shares are voted in the same percentages as the allocated shares.
(2) Form F-11, filed with the FDIC 9/89; Amendment 1 to Form F-11 filed with
the FDIC 1/90; Amendment 2 to Form F-11 filed with the FDIC 2/90; Amendment
3 to Form F-11 filed with the FDIC 4/91; Amendment 4 to Form F-11 filed
with the FDIC 3/92; Amendment 5 to Form F-11 filed with the FDIC 2/93;
Amendment 6 to Form F-11 filed with the FDIC 2/94; Amendment 7 to Form F-11
filed with the FDIC 12/94; Amendment 8 to Form F-11 filed with the FDIC
3/96. Of the shares beneficially owned by Mr. Osborne, Mr. Osborne owns
83,500 in his own name; he presently has a right to acquire 40,500 by
exercise of options granted to him; 51,132 are being held in the ESOP;
9,291 are being held for Mr. Osborne under the Bank's NQERP; 5,500 are
owned jointly with his wife; 13,300 are owned by his wife. Effective 2/92
Mr. Osborne, by power of attorney from his parent, has the right to vote
and dispose of 6,000 shares. In addition, Mr. Osborne presently has the
right to vote 3,666 shares of unallocated stock in the ESOP. Mr. Osborne
specifically disclaims ownership of the shares owned by his wife and mother
and of the unallocated shares of the ESOP. Mr. Osborne currently has sole
power to vote 144,298 shares and shared power to vote 5,500 shares. He has
sole power to dispose of 89,500 shares and shared power to dispose of 5,500
shares.
(3) The Board of Directors voted at its 2/90 meeting to approve the acquisition
by Mr. Osborne of more than 10% of the outstanding common stock of the Bank
in accordance with Article 10 of the Bank's Amended and Restated Charter.
(4) Form F-11, filed with the FDIC 12/90; Amendment 1 to Form F-11 filed with
the FDIC 11/91; Amendment 2 to Form F-11 filed with the FDIC 5/92;
Amendment 3 to Form F-11 filed with the FDIC 2/93, Amendment 4 to Form F-11
filed with the FDIC 2/94; Amendment 5 to Form F-11 filed with the FDIC
11/94; Amendment 6 to Form F-11 filed with the FDIC 1/95.
(5) This amount also includes shares owned in the company's ESOP of 215,877
allocated shares and 15,477 unallocated shares and unexercised incentive
stock options granted to principal officers of 84,350 shares.
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PROPOSALS I AND II -- ELECTION OF DIRECTORS
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At the 1996 Annual Meeting, four persons will be elected to serve three
year terms as Directors (Proposal I) and one person will be elected to serve
for a one year term (Proposal II). 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 the nominees
listed below.
If any of the nominees shall be unable to serve, discretionary authority
is reserved to vote for a substitute or to reduce the number of Directors to
be elected, or both. The Board of Directors has no reason to believe that any
of the nominees will be unwilling or unable to serve if elected. The
information shown in the following table regarding nominees has been
furnished by each of the nominees. Shares held by or jointly with a spouse,
minor child, or other relative living in the home of such nominee, or by a
trust in which members of the nominee's family have a beneficial interest,
have been treated for purposes of this proxy statement as beneficially owned
by such nominee. However, such nominees disclaim beneficial interest in
shares so held.
CURRENT PROPOSED
TRUSTEE OR SHARES % OF TERM TERM
NAME AND PRINCIPAL AGE AT DIRECTOR OWNED AT COMMON TO TO
OCCUPATION 2/29/96 SINCE 2/29/96 STOCK EXPIRE EXPIRE
THREE YEAR TERM:
Thomas P. Moore, Jr.(1) 57 1991 32,280(2) 2.08 1996 1999
VICE PRESIDENT
STATE STREET RESEARCH &
MANAGEMENT CO.
Mark A. Osborne(1) 46 1977 212,889(3) 13.70 1996 1999
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
THE HIBERNIA SAVINGS BANK
Paul D. Osborne(4) 45 1986 8,375(5) .54 1996 1999
TREASURER
OSBORNE OFFICE FURNITURE(6)
Douglas C. Purdy 53 1995 400 .03 1996 1999
ATTORNEY-AT-LAW
SERAFINI, PURDY, DINARDO & WELLS(7)
ONE YEAR TERM:
William E. Lucey 47 1996 800 .05 - 1997
CERTIFIED PUBLIC ACCOUNTANT
O'CONNOR & DREW
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS ONE AND TWO.
(1) Director of Kildare Corporation, The Limerick Securities Corporation and
The Meath Corporation, all subsidiaries of the Bank. Mr. Osborne is also
trustee of a testamentary trust which owns 49.9% of Paul D. Osborne Desk
Co., Inc. which does business as Osborne Office Furniture.
(2) Includes 2,700 shares held in trust for children.
(3) Refer to footnote 3 "Outstanding Voting Securities."
(4) Brother of Mark A. Osborne.
(5) Includes 375 shares owned by spouse.
(6) The Bank, during 1995, paid Osborne Office Furniture $68,961 for the
purchase of office equipment.
(7) During 1995, the Bank paid $115,100 to Serafini, Purdy, DiNardo & Wells in
fees, reimbursement of expenses paid on behalf of the Bank and conveyancing
fees paid by borrowers at loan closings.
-7-
The following is a list of present Directors of the Bank whose terms have not
expired. These Directors, together with those named above, if elected, will
constitute the Board of Directors of the Bank for the coming year or until
their successors are elected and qualified.
CURRENT
TRUSTEE OR SHARES % OF TERM
NAME AND PRINCIPAL AGE AT DIRECTOR OWNED AT COMMON TO
OCCUPATION 2/29/96 SINCE 2/29/96 STOCK EXPIRE
Martha M. Campbell 52 1986 23,700(1) 1.53 1998
ATTORNEY-AT-LAW
Bernard J. Dwyer 65 1970 5,302(2) .34 1998
ATTORNEY-AT-LAW
Peter L. Maguire(3) 47 1986 18,240 1.17 1998
PRESIDENT
MANAGEMENT INFORMATION SERVICES
Michael T. Putziger(3) 49 1989 171,700(4) 11.05 1998
ATTORNEY-AT-LAW
ROCHE, CARENS & DEGIACOMO(5)
Thomas J. Carens 73 1985 1,143 .07 1997
OF COUNSEL
ROCHE, CARENS & DEGIACOMO(5)
Richard J. Murney 67 1987 1,650(6) .11 1997
CERTIFIED PUBLIC ACCOUNTANT
John V. Murphy(3) 46 1989 9,750 .63 1997
EXECUTIVE VICE PRESIDENT &
CHIEF OPERATING OFFICER
DAVID L. BABSON & CO. INC.
Richard P. Quincy(3) 41 1994 1,500 .10 1997
PRESIDENT
QUINCY & CO.(7)
William T. Novelline 54 1977 5,550(8) .36 1996
PRESIDENT
ABBOT FINANCIAL MANAGEMENT
(1) Includes 12,450 shares held in mother's estate, of which Ms. Campbell is
the executrix and in which she has a 25% beneficial interest.
(2) Includes 2,700 shares held in trust for children.
(3) Director of Kildare Corporation, The Limerick Securities Corporation and
The Meath Corporation, all subsidiaries of the Bank.
(4) Includes 77,250 shares held jointly with spouse and 31,250 shares held in
IRA and pension trust.
(5) Roche, Carens & DeGiacomo has been retained as counsel to the Bank during
the last eight fiscal years and will be retained in the 1996 fiscal year.
During 1995, the Bank paid $569,985 to Roche, Carens & DeGiacomo in fees,
reimbursement of expenses paid on behalf of the Bank, and conveyancing fees
paid by borrowers at loan closings.
(6) Includes 1,500 shares held jointly with spouse.
(7) The Bank during 1995 paid Quincy & Co. $136,934 for the Bank's general
insurance coverage. Said coverage was obtained at the same rate and on the
same terms and conditions the Bank could have obtained from other insurance
agents.
(8) Includes 300 shares held as trustee of family trust and 3,750 shares held
as trustee of profit sharing plan.
-8-
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MARKET INFORMATION
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The Bank's common stock is presently traded on the NASDAQ National Market
System under the symbol "HSBK." Bancorp intends to seek approval for the
listing of Bancorp Common Stock in substitution for the Bank's Common Stock
on the NASDAQ National Market System using the symbol "EIRE" subject to
completion of Bancorp formation. The Bank expects that approval for this
substitution will be received prior to consummation of the Reorganization.
Set forth below are the per share high and low closing sale prices of the
Bank's Common Stock as reported on the NASDAQ National Market System and the
cash dividends declared during the periods indicated. Prices listed below
have been adjusted to reflect a 3 for 2 stock split effective February 1,
1995.
CASH DIVIDENDS
FISCAL YEAR 1995 HIGH LOW PAID
December 31, 1995 $18 1/4 $15 3/4 $0.06
September 30, 1995 17 1/8 14 1/2 0.06
June 30, 1995 14 3/4 12 1/2 0.05
March 31, 1995 13 1/2 10 1/8 0.05
CASH DIVIDENDS
FISCAL YEAR 1994 HIGH LOW PAID
December 31, 1994 $11 5/8 $10 $ --
September 30, 1994 12 5/8 11 1/2 --
June 30, 1994 13 1/8 10 3/8 --
March 31, 1994 11 5/8 9 --
The closing sale price of the Common Stock as reported on the NASDAQ
National Market System on February 14, 1996 was $16.00 per share. As of
February 29, 1996, there were approximately 400 holders of record of the
Common Stock, not including persons or entities who hold the stock in nominee
or street name through various brokerage firms.
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COMMITTEES
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The Board of Directors met twelve times in 1995. The Bank has standing
Audit, Executive and Nominating Committees. Directors who are not Officers
of the Bank receive an annual retainer of $2,500.00, payable semi-annually
and are compensated for meetings attended during the year. Compensation is
equal to $300.00 per meeting attended for board and committee members and
$400.00 per meeting attended for the committee clerk or chairman. Total
compensation to all Directors, including attendance at Board and Committee
meetings amounted to $95,400 in 1995.
During 1995 two members of the Board of Directors, Mr. William T.
Novelline and Mr. Thomas P. Moore, Jr. attended fewer than 75 percent of the
Director's meetings. One member of the Executive Committee, Mr. Thomas P.
Moore, Jr. attended fewer than 75 percent of the meetings of that committee
held during 1995.
The Audit Committee presently is chaired by Mr. Richard J. Murney and has
as its members Ms. Martha M. Campbell, Mr. Bernard J. Dwyer and Mr. William
E. Lucey. The Committee met four times in 1995. The Audit Committee reviews
the results of the Bank's independent audit and regulatory examinations,
reviews internal auditing procedures, and the results of internal auditing
programs.
The Executive Committee presently is chaired by Mr. Mark A. Osborne and
has as its members Messrs. Peter L. Maguire, John V. Murphy, Thomas P. Moore,
Jr., Michael T. Putziger and Richard P. Quincy. The Committee met eleven
times in 1995. The Executive Committee approves all investments and lending
activities. In addition, the Executive Committee administers the 1986 Stock
Option Plan, the 1989 Stock Option Plan, the 1995 Premium Incentive Stock
Option Plan, Short Term Incentive Bonus Plan, and determines compensation for
the Principal Officers of the Bank. The Executive Committee is also the
Trustee of the Employee Stock Ownership Plan.
The Nominating Committee presently is chaired by Mr. Mark A. Osborne and
has as its members Messrs. Peter L. Maguire, Thomas P. Moore, Jr., Michael T.
Putziger and Richard P. Quincy. The Committee meets annually to recommend
nominees for Officers and Directors of the Bank to the full Board. The Committee
will consider stockholder nominations, if received along with all background
materials, prior to November 15, 1996, for consideration at the annual meeting
to be held in the second quarter of 1997.
-9-
Two members of the Board of Directors, Mr. William T. Novelline and Mr.
Charles R. Simpson, Jr. have tendered letters of resignation from the Board
of Directors. Mr. Novelline has been a member of the Board of Directors for
over 25 years and has decided not to stand for re-election when his term
expires April 29, 1996 due to increased business commitments. Mr. Novelline's
resignation is effective as of that date. Mr. Simpson has taken a senior
management position at another federally insured banking institution;
consequently, he is prohibited by statute from continuing to serve as a
member of the Board. Mr. Simpson's resignation was effective January 15, 1996.
During 1995, three members of the Board of Directors, Douglas C. Purdy,
Paul D. Osborne and Martha M. Campbell purchased additional shares of The
Hibernia Savings Bank stock that were not reported on Form F-8, during the
year, as required by the FDIC. All purchases have been properly reported on
Form F-8A filed as of December 31, 1995.
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EXECUTIVE COMPENSATION OF PRINCIPAL OFFICERS
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The following table sets forth a summary of certain information
concerning the compensation awarded or paid by The Hibernia Savings Bank for
services rendered in all capacities during the last three fiscal years to the
Chairman of the Board and Chief Executive Officer and the top four other
senior officers.
ANNUAL COMPENSATION
OTHER LONG-TERM ALL
NAME AND PRINCIPAL ANNUAL COMPENSATION OTHER
POSITION FOR 1995 FISCAL YEAR SALARY BONUS COMPENSATION AWARDS(1) COMPENSATION(2)
Mark A. Osborne 1995 $225,000 $40,000 $8,353(3) $247,500 $49,748
Chairman of the Board 1994 210,000 50,000 8,701 173,250 64,248
and Chief Executive Officer 1993 198,000 - 7,995 132,500 29,700
Richard S. Straczynski 1995 $108,316 - - $191,750 -
President and Chief 1994 - - - - -
Operating Officer 1993 - - - - -
Gerard F. Linskey 1995 $90,000 $7,000 - - $10,800
Senior Vice President and 1994 90,000 10,000 $2,500(4) $ 49,500 13,500
Chief Financial Officer 1993 86,000 - 2,500 - 12,900
Dennis P. Myers 1995 $90,000 $10,000 - - $10,800
Senior Vice President and 1994 90,000 20,000 - $49,500 13,500
Senior Lending Officer 1993 85,000 - - - 12,750
Wayne F. Blaisdell 1995 $80,000 $5,000 - - $9,600
Senior Vice President and 1994 76,000 10,000 - $9,900 11,400
Branch Administration and 1993 73,000 - - - 10,950
Operations Officer
(1) Long term compensation awards consist of stock options granted to
officers. The value is computed based on the option price which was the
fair market value of the Bank's stock on the date the options were issued.
(2) Contributions by the Bank to the Employee Stock Ownership Plan, the Non
Qualified Employee Retirement Plan and the Bank's 401(k) plan.
(3) Personal use of Bank automobile and reimbursement of costs associated with
life insurance.
(4) Personal use of Bank automobile.
-10-
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OPTION GRANTS IN LAST FISCAL YEAR(1)
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The following table sets forth certain information with respect to stock
options granted during the Bank's last fiscal year. No stock appreciation rights
(SARs) were granted during such year.
POTENTIAL REALIZABLE VALUES
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERMS (1)
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NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OF
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
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1986 STOCK OPTION PLAN
Richard S. Straczynski 1,500 100% $11.75 3-14-05 $11,084 $28,090
1989 STOCK OPTION PLAN
Richard S. Straczynski 1,500 40% $11.75 3-14-05 $11,084 $28,090
Richard S. Straczynski 2,250 60% $11.75 3-14-05 $16,626 $42,135
1995 STOCK OPTION PLAN
Mark A. Osborne 15,000 40.82% $16.50 12-12-05 $155,651 $394,451
Richard S. Straczynski 14,750 40.14% $13.00 5-10-05 $120,590 $305,600
Robert D. McCarthy 4,000 10.88% $16.50 12-12-05 $41,507 $105,187
Roger L. Meade 1,000 2.72% $16.50 12-12-05 $10,377 $26,296
Edwin J. Beck 1,000 2.72% $16.50 12-12-05 $10,377 $26,296
Michael P. Donohoe 1,000 2.72% $16.50 12-12-05 $10,377 $26,296
(1) All such options are exercisable twenty-four months after their respective
issue dates at the market price of the Bank stock as of the issue date, and
expire on the tenth anniversary of the date of grant.
(2) These amounts represent assumed rates of appreciation only, are not
discounted for inflation, and are not necessarily indicative of actual
expected growth. Actual gains, if any, on stock option exercises and common
stock holdings are dependent on the future performance of the common stock
and overall stock market conditions. There can be no assurance that the
amounts reflected in this table will be achieved.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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The Executive Committee of The Hibernia Savings Bank acts as the
compensation committee in establishing salaries for the principal officers of
the Bank. The Bank's compensation policies are designed to provide
competitive levels of compensation integrating pay with the Bank's
performance goals, reward above average performance, recognize individual
initiatives and achievements and assist the Bank in attracting and retaining
qualified executives in the competitive market in which the Bank operates.
Executive compensation consists of three components: cash compensation,
including base salary and an annual incentive bonus; long term incentive
compensation in the form of stock options; and executive benefits. The
components are intended to provide incentives to achieve short and long-range
objectives of the Bank and to reward exceptional performance. Performance is
evaluated not only with respect to The Hibernia Savings Bank's earnings but also
with respect to comparable industry performance, the accomplishment of business
objectives and the individual's contribution to The Hibernia Savings Bank's core
earnings and stockholder value. The competitiveness of The Hibernia Savings
Bank's compensation structure is determined by a thorough review of compensation
survey data collected by the Committee. To motivate job performance and to
encourage growth in stockholder value, stock options are granted under The
Hibernia Savings Bank's stock option plans to all executives and other personnel
in order to encourage substantial contributions toward the overall success of
The Hibernia Savings Bank. The Committee believes that this focuses attention on
managing the Bank from the perspective of an owner with an equity stake in the
business. With respect to executive benefits, executive officers receive all
normal employee fringe benefits.
-11-
In determining the overall compensation package for the Chief Executive
Officer, the Committee considered each of the factors enumerated in the
preceding paragraphs regarding compensation for executive officers of The
Hibernia Savings Bank, as well as the financial performance achieved by the
Bank during the past fiscal year. In addition, The Hibernia Savings Bank
continued at or near the top of the financial industry for such key financial
performance measures as growth in assets, growth in earning assets, growth in
loans outstanding, return on average assets, return on average equity, and
efficiency ratios. Additionally, the Committee reviewed various compensation
packages provided to executive officers of publicly traded financial
institutions. The results of such review showed Mr. Osborne's overall
compensation package to be competitive for chief executive officers of
publicly traded financial institutions of comparable size, complexity of
operation and performance.
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PERFORMANCE GRAPH
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The following graph sets forth the cumulative total stockholders return
(assuming reinvestment of dividends) to The Hibernia Savings Bank's
stockholders during the five year period ended December 31, 1995 as well as
the NASDAQ Combined Composite Index, NASDAQ Combined Bank Index and S&P 500
Index:
Date Date The Hibernia NASDAQ Comb NASDAQ S&P 500
Savings Bank Composite Index Comb Bank Index
Equity Return Return Index Return Return
1/29/91 0% 0% 0% 0%
1/30/91 0% 0% 0% 0%
2/28/91 78% 9% 10% 7%
3/29/91 56% 16% 16% 10%
4/29/91 89% 17% 23% 10%
5/29/91 67% 22% 25% 15%
6/29/91 Jun-91 56% 15% 22% 9%
7/29/91 56% 21% 23% 15%
8/29/91 56% 27% 29% 17%
9/29/91 56% 27% 28% 15%
10/29/91 11% 31% 25% 17%
11/29/91 0% 6% 21% 12%
12/29/91 Dec-91 22% 42% 31% 25%
1/29/92 100% 50% 40% 23%
2/29/92 111% 53% 48% 24%
3/29/92 100% 46% 48% 22%
4/29/92 178% 40% 56% 25%
5/29/92 200% 41% 64% 26%
6/29/92 Jun-92 256% 36% 66% 24%
7/29/92 244% 40% 73% 29%
8/29/92 244% 36% 70% 27%
9/29/92 178% 41% 73% 28%
10/29/92 200% 46% 79% 28%
11/29/92 233% 58% 89% 33%
12/29/92 Dec-92 244% 63% 99% 34%
1/29/93 422% 68% 121% 36%
2/28/93 322% 62% 124% 37%
3/29/93 322% 67% 135% 40%
4/29/93 511% 57% 127% 37%
5/29/93 522% 69% 123% 41%
6/29/93 Jun-93 489% 70% 127% 41%
7/29/93 578% 70% 142% 40%
8/29/93 456% 79% 153% 46%
9/29/93 556% 84% 161% 45%
10/29/93 600% 88% 164% 48%
11/29/93 567% 82% 155% 46%
12/29/93 Dec-93 511% 88% 158% 48%
1/29/94 567% 93% 164% 53%
2/28/94 556% 91% 159% 49%
3/29/94 622% 79% 152% 42%
4/29/94 611% 77% 158% 44%
5/29/94 622% 78% 174% 47%
6/29/94 Jun-94 678% 70% 183% 43%
7/29/94 733% 74% 187% 48%
8/29/94 700% 85% 193% 54%
9/29/94 667% 85% 189% 50%
10/29/94 656% 88% 175% 53%
11/29/94 589% 81% 161% 48%
12/29/94 Dec-94 611% 82% 161% 50%
1/29/95 648% 82% 173% 54%
2/28/95 670% 92% 186% 60%
3/29/95 754% 97% 188% 65%
4/29/95 774% 104% 197% 69%
5/29/95 812% 109% 204% 76%
6/29/95 Jun-95 888% 125% 218% 80%
7/29/95 912% 142% 232% 86%
8/29/95 963% 146% 256% 87%
9/29/95 056% 152% 262% 95%
10/29/95 1110% 150% 258% 94%
11/29/95 1068% 156% 271% 102%
12/29/95 Dec-95 1000% 154% 277% 106%
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BENEFITS
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EMPLOYMENT AGREEMENTS
The Bank in 1986 entered into an Employment Agreement (the "Agreement")
with Mark A. Osborne, Chairman of the Board and Chief Executive Officer. The
Agreement provides for a five year term and for a continuation of benefits
currently provided by the Bank. This Agreement was amended and approved by a
vote of the Board of Directors at its July 1991 meeting.
The Agreement will be automatically extended for an additional year on
each anniversary of the Agreement, unless prior to such anniversary either
party gives written notice to the other of an election not to extend the
Agreement.
The Agreement provides that the Bank may terminate Mr. Osborne's
employment at any time for "cause" as that term is defined by the Agreement,
without further obligation on the part of the Bank. However, if the Bank were
to terminate Mr. Osborne's employment for any reason other than cause, Mr.
Osborne would be entitled to receive the compensation specified in the
Agreement for the balance of the term of the Agreement. The Bank would not be
entitled to a set-off for compensation received as a result of new employment.
In addition, the Bank entered into a Special Termination Agreement with
Mr. Osborne in 1986. This Agreement was amended and approved by a vote of the
Board of Directors at its July 1991 meeting. This Agreement provides that if
there is a Change in Control of the Bank, and Mr. Osborne's employment is
terminated within three years thereafter, or if Mr. Osborne should terminate
his employment within three years after such a Change in Control because of
demotion, loss of title or office or reduction in compensation, Mr. Osborne
would be entitled to an additional severance benefit in an amount equal to
three times his annual compensation. A Change in Control, as defined in the
Special Termination Agreement, occurs (a) where a person or group of persons
acquires beneficial ownership of 25% or more of the common stock of the Bank
without the approval of two-thirds of the Board of Directors, or (b) where as
a result of a tender offer, exchange offer, business combination or merger,
or sale of assets, a majority of the Board of Directors is comprised of
persons who did not serve on the Board of Directors prior to such tender
offer or other transaction listed above.
-12-
EMPLOYEE STOCK OWNERSHIP PLAN
The Board of Directors at its February 1989 meeting voted to establish an
Employee Stock Ownership Plan ("ESOP"), which is one type of qualified stock
bonus plan under Internal Revenue Code Section 401(a). All employees who
complete twelve consecutive months of employment with the Bank are eligible
to participate in the Plan. After thirty six months of consecutive
employment, employees are 100% vested in the plan. An ESOP is designed to
invest primarily in the stock of the employer corporation and may borrow
money to buy such stock. As of February 29, 1996 the Employee Stock Ownership
Plan had acquired 237,003 shares of the Bank's outstanding common stock. The
Executive Committee of the Board of Directors has been designated as Trustee
for the ESOP and the plan is administered by The Pentad Corporation, Waltham,
MA. For the years 1990, 1991, 1992, 1993, 1994 and 1995 the Bank made
contributions to the plan of $170,949, $184,299, 178,233, $195,875, $200,914
and $183,800, respectively.
401(K) PLAN
The Board of Directors at its January 1992 meeting, voted to establish a
Profit Sharing Plan as defined in the Internal Revenue Code Section 401(k).
The 401(k) Plan became effective on February 1, 1992. All employees who
complete twelve consecutive months of employment with the Bank are eligible
to participate in the Plan. Vesting at 100% begins when the employees are
eligible to participate in the plan. The Bank will match employees' voluntary
contributions on a dollar for dollar basis up to 3% of total compensation.
The plan is administered by the Savings Banks Employees Retirement
Association (SBERA). For the years 1992, 1993, 1994 and 1995, the Bank made
contributions to the plan of $40,965, $44,624, $43,394 and $49,444,
respectively.
NON-QUALIFIED EXECUTIVE RETIREMENT PLAN
The Board of Directors at its January 1994 meeting voted to establish a
Non-Qualified Executive Retirement Plan (NQERP) which is an unfunded
non-qualified plan maintained for the purpose of providing deferred
compensation for a select group of management whose retirement benefits in
the Bank's tax qualified retirement plans are restricted by statute. The
amount credited to an executive's account shall be equal to the difference
between what the Bank would have (in the absence of statutory limitations)
contributed minus the actual contribution made for the year. During 1994 and
1995, the Bank made contributions to the plan of $41,748 and $30,944,
respectively.
SHORT TERM INCENTIVE BONUS PLAN
During 1986, the Bank adopted a Short Term Incentive Bonus Plan (the
"Plan") whereby certain employees are eligible to receive a bonus if the Bank
meets or exceeds certain base standards of profitability, and certain
strategic goals are achieved. The structure of the Plan is reviewed on an
annual basis by the Executive Committee of the Bank. There was no incentive
compensation expense recorded for 1990, 1991 or 1992, while for 1993, 1994
and 1995, the Bank recorded expenses of $136,900, $124,125 and $185,504 of
incentive compensation expense, respectively.
1986, 1989 AND 1995 STOCK OPTION PLANS
The Bank currently has three stock option plans designed to furnish an
additional incentive to key employees of the Bank by affording them the
opportunity to become owners of the Bank's common stock. The options
available, granted and exercised under both plans have been adjusted to
reflect a three for two stock split effective February 1, 1995.
During 1995, the Bank received $77,418 from the exercise of 41,200
options.
The total number of shares available under the 1986 Stock Option Plan is
120,000 shares. Options for 120,000 shares have been granted. Of the total
number of options granted under the plan, 7,100 options remain unexercised as
of February 29, 1996. On March 14, 1995, 1,500 new options were granted to
Richard S. Straczynski under the 1986 Stock Option Plan. These options will
be exercisable after 24 months from issue date. They are exercisable at
$11.75 per share, the market price of the Bank's stock as of the issue date.
The total number of shares available under the 1989 Stock Option Plan is
52,500 shares. Options for 52,500 shares have been granted. Of the total
number of options granted under the plan, 40,500 options remained unexercised
as of February 29, 1996. On March 14, 1995, 3,750 new options were granted to
Richard S. Straczynski under the 1989 Stock Option Plan. These options will
be exercisable after 24 months from the issue date. They are exercisable at
$11.75 per share, the market price of the Bank's stock as of the issue date.
-13-
The 1995 Premium Incentive Stock Option Plan provides for options on an
additional 70,000 shares. Options for 36,750 shares have been granted. Of the
total number of options granted under the plan, 36,750 options remain
unexercised as of February 29, 1996. On May 10, 1995, 14,750 new options were
granted to Richard S. Straczynski under the 1995 plan. These options will be
exercisable after 24 months from the issue date. They are exercisable at
$13.00 per share, the market price of the Bank's stock as of the issue date.
In addition on December 12, 1995, new options were granted to the following
persons under the 1995 Premium Incentive Stock Option Plan: Mark A. Osborne,
15,000 shares; Robert D. McCarthy, 4,000 shares; Edwin J. Beck, 1,000 shares;
Michael P. Donohoe, 1,000 shares and Roger L. Meade, 1,000 shares. The
options will be exercisable after 24 months from the issue date. They are
exercisable at $16.50 per share, the market price of the Bank's stock as of
the issue date.
STOCK PURCHASE PLAN
In 1989, the Board of Directors voted to adopt a Stock Purchase Plan,
which was subsequently approved by the Commissioner of Banks. Shares
available for purchase were limited to 150,000 shares adjusted for a 3 for 2
stock split effective February 1, 1995 of authorized but unissued common
stock. In 1990 the Board of Directors voted to increase the shares available
for purchase to 300,000 shares adjusted for a 3 for 2 stock split effective
February 1, 1995 of authorized but unissued common stock, but not to
authorize the issuance of any shares pursuant to the Plan without further
Board approval. The increase in the number of shares of authorized but
unissued stock was also approved by the Commissioner of Banks.
The two purposes of the Plan are (1) to provide a continuing source of
additional capital for the Bank without the costs normally associated with
that activity, and (2) to provide an additional method for Directors,
officers, employees, and employee benefit plans to acquire a proprietary
interest in the Bank through the purchase of shares of common stock of the
Bank. No participant, except for the Employee Stock Ownership Plan, may
purchase more than 25,000 shares absent the approval of two thirds of the
Board of Directors. The Board of Directors approved the purchase of in excess
of 25,000 shares for Director Michael T. Putziger at its October 21, 1992
meeting. Shares must be purchased for investment only and must be held for at
least one year. The purchase price will be the closing bid price of the
common stock on the business day prior to the purchase.
The Board of Directors authorized the sale of stock through the Stock
Purchase Plan at its April 29, 1992 meeting and as of February 29, 1996,
164,715 additional shares of common stock had been issued under the Plan. All
of the shares were issued at market prices at the time of issuance, raising
additional paid in capital of $1,663,225.
INDEBTEDNESS OF MANAGEMENT
Certain of the Bank's Directors and executive officers and their
associates are customers of the Bank and from time to time have had loans
from the Bank. Such loans were made in the ordinary course of business and on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unaffiliated
persons and did not involve more than the normal risk of collectibility or
present other unfavorable features to the Bank. The total outstanding
indebtedness of Directors and officers was $1,088,274 at December 31, 1995.
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PROPOSAL III -- FORMATION OF HOLDING COMPANY
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The following descriptions are qualified in their entirety by reference
and made subject to the Plan of Reorganization attached hereto as Exhibit A,
the form of Articles of Organization of Emerald Isle Bancorp, Inc. attached
hereto as Exhibit B, and certain provisions of the General Laws of
Massachusetts relating to the rights of dissenting stockholders attached
hereto as Exhibit C.
RECOMMENDATION OF DIRECTORS
The Plan of Reorganization has been unanimously approved by the Board of
Directors of The Hibernia Savings Bank (the "Bank") and Emerald Isle Bancorp,
Inc. ("Bancorp"). THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS
OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK ELIGIBLE TO BE CAST BY
STOCKHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON THE RECORD DATE WILL BE
REQUIRED TO APPROVE THE PLAN OF REORGANIZATION AND EACH OF THE TRANSACTIONS
CONTEMPLATED THEREBY. The Board of Directors of the Bank believes that the
Plan of Reorganization is in the best interests of the Bank and its
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE BANK VOTE
FOR APPROVAL OF THE PLAN OF REORGANIZATION AND EACH OF THE TRANSACTIONS
CONTEMPLATED THEREBY.
-14-
DESCRIPTION OF THE PLAN OF REORGANIZATION
Bancorp has been organized as a Massachusetts corporation at the
direction of the Bank for the purpose of becoming the holding company of the
Bank. Bancorp and the Bank have entered into the Plan of Reorganization,
which provides, subject to the exercise of dissenters' rights, for the
acquisition of all the outstanding shares of Bank Common Stock by Bancorp in
exchange for an equal number of shares of the common stock, par value $1.00
per share, of Bancorp ("Bancorp Common Stock") pursuant to the provisions of
Section 26B of Chapter 172 of the General Laws of Massachusetts.
Under the Plan of Reorganization, Bancorp will become the owner of all
the outstanding shares of the Common Stock of the Bank, and each stockholder
of the Bank who does not exercise dissenters' rights with respect to the Plan
of Reorganization will become the owner of one share of Bancorp Common Stock
for each share of Common Stock of the Bank held immediately prior to the
consummation of the Reorganization. On the effective date of the
Reorganization, each share of Common Stock of the Bank will be automatically
converted into and exchanged for one share of Bancorp Common Stock. The
Reorganization will become effective at 12:01 a.m. on the first business day
following the date on which the Bank and Bancorp advise the Massachusetts
Commissioner of Banks (the "Commissioner") that all conditions precedent have
been satisfied or on such other date as is specified to the Commissioner (the
"Effective Time"). As a condition to the consummation of the Reorganization,
Bancorp and the Bank must receive certain regulatory approvals. See
"-- Regulation of Bancorp and the Bank." Neither Bancorp nor the Bank can
predict with any certainty whether such approvals on terms satisfactory to
Bancorp and the Bank will be obtained, and, if so, the timing of such
approvals. 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,
Bancorp and the Bank shall have the right to consummate the Reorganization at
any time thereafter.
The number of shares of Bancorp Common Stock to be issued at the
Effective Time will equal the number of shares of Common Stock of the Bank
issued and outstanding immediately prior thereto, less the number of shares
of Common Stock of the Bank held by dissenting stockholders. Shares of
Bancorp Common Stock that would have been issued had dissenting stockholders
not dissented will remain as authorized but unissued shares of Bancorp Common
Stock. The shares of Bancorp Common Stock that are outstanding prior to the
Effective Time, all of which are presently held by the Bank, will be canceled
as part of the Reorganization.
The outstanding stock certificates of Common Stock of the Bank that,
prior to the Reorganization, represented shares of Common Stock of the Bank,
will thereafter, for all purposes represent an equal number of shares of
Bancorp Common Stock, except for certificates held by dissenting stockholders
and as further described below. After the Effective Time, Bancorp will issue
and deliver to the transfer agent (the "Transfer Agent") for the Bank and
Bancorp certificates representing the number of shares of Bancorp Common
Stock issuable in connection with the Reorganization. Bancorp and the Bank
will notify stockholders by mail at their addresses as shown on the Bank's
records and by publication that they may, or, if required to do so by Bancorp
in its sole discretion, shall, present their certificates to the Transfer
Agent for exchange. Stockholders may exchange their present stock
certificates representing Common Stock of the Bank for new certificates
representing Bancorp Common Stock by surrendering their certificates of the
Bank's Common Stock to the Transfer Agent. They will then receive in exchange
therefor a certificate representing an equal number of shares of Bancorp
Common Stock. Until so exchanged, stockholders' present certificates for the
Bank's Common Stock will, for all purposes, represent an equal number of
shares of Bancorp Common Stock, and the holders of those certificates will
have all the other rights of stockholders of Bancorp. However, Bancorp, at
any time, may, in its sole discretion, withhold any dividends that may be
declared on shares of Bancorp Common Stock until stockholders present their
certificates for the Bank's Common Stock to the Transfer Agent for exchange.
In such case, upon delivery of such certificates or as soon thereafter as
practicable, such person shall be entitled to receive from Bancorp 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
Bancorp, 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, subject to
applicable law and any agreements of the Bank with regulatory agencies, of up
to approximately $100,000.00 from the Bank to Bancorp. See "Regulation of
Bancorp and the Bank." Similarly, the Charter, By-laws and the name of the
Bank will not be affected by consummation of the Reorganization. The Hibernia
Savings Bank 1986 Stock Option Plan, The Hibernia Savings Bank 1989 Stock
Option Plan, and The Hibernia Savings Bank 1995 Premium Incentive Stock
Option Plan will become stock option plans of Bancorp. All other stock
related benefit plans of the Bank will be unchanged by the Reorganization,
except that any plan which refers to the Bank's Common Stock, such as the
Employee Stock Ownership Plan ("ESOP"), will, following the comple-
-15-
tion of the Reorganization, be deemed to refer instead to Bancorp Common
Stock. The Directors, officers and other employees of the Bank will be
unchanged by the Reorganization. The Directors and officers of Bancorp will
initially consist of the following persons who are also Directors and
officers of the Bank:
---------------------------------------
DIRECTORS: TERM TO EXPIRE:
---------------------------------------
Douglas C. Purdy 1997
Richard P. Quincy 1997
Peter L. Maguire 1998
John V. Murphy 1998
Thomas P. Moore, Jr. 1999
Mark A. Osborne 1999
Michael T. Putziger 1999
For further information regarding Bancorp"s Directors, see Proposals I and
II -- Election of Directors.
---------------------------------------
OFFICERS: OFFICE HELD:
---------------------------------------
Mark A. Osborne President
Gerard F. Linskey Treasurer
Douglas C. Purdy Clerk
REMUNERATION
Since the formation of Bancorp, none of its executive officers or
Directors has received any remuneration from Bancorp. It is expected that
unless and until Bancorp becomes actively involved in additional business, no
separate compensation will be paid to the Directors and officers of Bancorp
in addition to that paid to them by the Bank. However, Bancorp may determine
in the future that such separate compensation is appropriate.
EFFECT ON STOCK OPTIONS AND OTHER STOCK RELATED BENEFIT PLANS
By voting in favor of this Plan of Reorganization, Bancorp shall have
approved adoption of The Hibernia Savings Bank 1986 Stock Option Plan, The
Hibernia Savings Bank 1989 Stock Option Plan, and The Hibernia Savings Bank
1995 Premium Incentive Stock Option Plan as the stock option plans of Bancorp
and shall have agreed to issue Bancorp Common Stock in lieu of Bank Common
Stock pursuant to options currently outstanding under the existing Stock
Option Plans. As of the Effective Time, the Stock Option Plans shall
automatically, by operation of law, be continued as, and become the stock
option plans of Bancorp. Further, at the Effective Time, each option to
purchase shares of Bank Common Stock under the Stock Option Plans outstanding
and unexercised immediately prior to the Effective Time shall automatically
be converted into an identical option, with identical price, terms and
conditions, to purchase an identical number of shares of Bancorp Common Stock
in lieu of shares of Bank Common Stock. Bancorp and the Bank shall make
appropriate amendments to the Stock Option Plans to reflect the adoption of
the Stock Option Plans as the Stock Option Plans of Bancorp, without adverse
effect upon the options outstanding as of the Effective Time under the Stock
Option Plans.
By voting in favor of this Plan of Reorganization, Bancorp shall also
have approved The Hibernia Savings Bank 1989 Stock Purchase Plan and The
Hibernia Savings Bank 1995 Automatic Dividend Reinvestment and Common Stock
Purchase Plan as the stock purchase plans of Bancorp. As of the Effective
Time, the Stock Purchase Plans shall automatically, by operation of law, be
continued as and become the stock purchase plans of Bancorp. Further, at the
Effective Time, all rights to purchase shares of Bank Common Stock under the
existing Stock Purchase Plans shall automatically, by operation of law, be
converted into and shall become identical rights to purchase Bancorp Common
Stock upon identical terms and conditions. The Bank shall make appropriate
amendments to the Stock Purchase Plans, effective as of the Effective Time,
to reflect the substitution of rights to purchase Bank Common Stock for
rights to purchase Bancorp Common Stock.
-16-
REASONS FOR THE HOLDING COMPANY FORMATION
The Board of Directors of the Bank believes that a holding company
structure will provide flexibility for meeting the future financial needs of
the Bank or other subsidiaries of Bancorp and responding to competitive
conditions in the financial services market. As a bank holding company,
Bancorp will not be subject to the same regulatory restrictions as the Bank,
and will be able to acquire and invest more freely in certain bank and
bank-related activities as well as such other activities as might be
permitted by regulatory authorities. In addition, Bancorp, unlike the Bank,
will not be subject to any regulatory limitations on the amounts which it can
invest in its subsidiaries and other businesses and will not be required to
obtain regulatory approval before issuing shares of its capital stock, except
under certain circumstances. Furthermore, Bancorp, when market conditions so
warrant, can purchase its own Common Stock without adverse federal income tax
consequences, which the Bank, in certain circumstances, may not be able to
do. See "-- Regulation of Bancorp and the Bank." There are no current
agreements or understandings with respect to any investments or the issuance
of any additional shares of capital stock by either the Bank or Bancorp,
except pursuant to options granted under the Stock Option Plans.
A holding company structure will also facilitate the acquisition of other
banks as well as other companies engaged in bank-related activities if and
when opportunities arise. A holding company structure would permit an
acquired entity to operate on a more autonomous basis as a wholly-owned
subsidiary of Bancorp rather than as a division of the Bank. 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. In addition, the stock of Bancorp may serve as
appropriate consideration in any such acquisition. Although the recent
enactment of federal interstate banking legislation may eventually curtail
the advantages of a holding company structure for acquisitions, the ability
of states to opt out of the interstate branching authorization until June 1,
1997 favors continued use of a holding company structure.
While the Bank is, from time to time, exploring various acquisition
possibilities, there are no current agreements or understandings for the
acquisition of any financial institution or other company and there are no
assurances that any such acquisitions will occur.
It is recognized that some increased costs, including administrative
expenses, will be incurred in the formation and operation of Bancorp.
However, such increased costs are not expected to have a material adverse
effect on the consolidated financial results of Bancorp and the Bank.
BUSINESS OF THE BANK
The Hibernia Savings Bank is a Massachusetts-chartered stock savings bank
founded in 1912. The Bank's headquarters is located at 731 Hancock Street,
Quincy, Massachusetts. In 1986, the Bank converted from mutual to stock form.
The Bank is primarily engaged in attracting retail deposits from the general
public and borrowing funds, primarily from the Federal Home Loan Bank, and
using these funds to originate and invest in loans secured by first or second
mortgage loans on residential real estate, to originate or participate in
commercial real estate loans, to make small business loans, and to make
investments in securities. The Bank also originates and services residential
mortgage loans sold into the secondary mortgage market and originates
consumer loans for inclusion in its loan portfolio.
The Bank, at December 31, 1995, has a wholly-owned subsidiary known as
Kildare Corporation. Kildare holds investments in limited real estate
partnerships and is the sole owner of four subsidiaries, Athlone Corporation,
Donegal Corporation, Mayo Corporation, and Roscommon Corporation, each of
which is currently inactive.
The Bank, at December 31, 1995, also has a wholly-owned subsidiary known
as Limerick Securities Corporation. This corporation was formed solely in
order to invest in securities in which the Bank could invest pursuant to
Sections 2 and 3 of Chapter 167F of the Massachusetts General Laws.
The Bank, at December 31, 1995, also has a wholly-owned subsidiary known
as Meath Corporation. This corporation was formed to undertake the
construction and sale of a condominium project in the western part of
Massachusetts and is currently inactive.
-17-
PROPERTIES
The Bank has branches located at 731 Hancock Street, Quincy,
Massachusetts, 101 Federal Street, Boston, Massachusetts, 51 Commercial
Street, Braintree, Massachusetts, 52 Coddington Street, Quincy,
Massachusetts, 1150 Washington Street, Weymouth, Massachusetts, 274 Main
Street, Hingham, Massachusetts, and 397 Washington Street, Stoughton,
Massachusetts. The Bank's headquarters in Quincy, and the Boston and
Stoughton facilities are leased premises. The Bank owns the Hingham, Weymouth
and Braintree properties. The Bank also has three Loan Centers located at 730
Hancock Street, Quincy, Massachusetts, 51 Commercial Street, Braintree,
Massachusetts, and 731 Hancock Street, Quincy, Massachusetts. The Bank, in
February of 1994, purchased a building at 730 Hancock Street, Quincy,
Massachusetts which houses the Executive Offices and Commercial Real Estate
Department.
COMPETITION
The Bank faces extensive competition, both in originating loans and in
attracting deposits, from other savings banks as well as co-operative banks,
savings and loan associations, credit unions, and other financial service
businesses. Competition for loans comes primarily from other savings banks,
co-operative banks, savings and loan associations, commercial banks, and
mortgage banking companies. The Bank competes for loans principally on the
basis of interest rates and loan fees, types of loans originated, processing
time, and the quality of service provided to borrowers.
In attracting deposits, the Bank's primary competitors are other thrift
institutions, commercial banks, mutual funds, and credit unions. The Bank's
branches attract deposits from the communities in which they are located. The
Bank's attraction and retention of deposits depend principally on the quality
of its service and its ability to provide investment opportunities that
satisfy the requirements of investors with respect to rate of return,
liquidity, risk, and other factors. The Bank also competes for these deposits
by offering competitive rates, convenient locations, and convenient business
hours.
Management believes that providing quality financial services and
products in a personalized manner along with maintaining a community
orientation have long been characteristics of the Bank which have resulted in
customer recognition and loyalty. The Bank seeks to develop multiple
relationships with its customers through an experienced service staff and
offers a wide range of financial products and services to meet the demands of
the Bank's existing market area and target customer base.
EMPLOYEES
As of December 31, 1995, the Bank employed 94 employees, none of whom was
represented by a collective bargaining group. Management considers the Bank's
relationship with its employees to be excellent.
LEGAL PROCEEDINGS
The Bank is not currently involved in any material legal proceedings.
BUSINESS OF BANCORP
Bancorp is a business corporation organized under the laws of the
Commonwealth of Massachusetts on January 10, 1996. The only office of
Bancorp, and its principal place of business, is located at the
administrative office of the Bank at 730 Hancock Street, Quincy,
Massachusetts 02170, and its telephone number is (617) 479-5001. Bancorp was
organized for the purpose of becoming the holding company of the Bank. Upon
completion of the Reorganization, the Bank will be a wholly-owned subsidiary
of Bancorp, which will thereby become a bank holding company. Each
stockholder of the Bank, upon completion of the Reorganization, will, subject
to dissenters' appraisal rights, become a stockholder of Bancorp without
change in the number of shares owned or in respective ownership percentages.
Bancorp has not yet undertaken any business activities and there are no
operating business activities currently proposed for Bancorp. In the future,
Bancorp may become an operating company or acquire banks or companies engaged
in bank-related activities and may engage in or acquire such other business
or activities as may be permitted by applicable law. Upon consummation of the
Reorganization, Bancorp will own all of the outstanding Common Stock of the
Bank. Bancorp may enter into a management agreement for the purpose of
rendering certain services to the Bank after completion of the
Reorganization. No proposal and no terms of any such agreement, however, have
been considered.
COMPETITION
It is expected that for the immediate future that the primary business of
Bancorp will be the ownership of the Common Stock acquired in the
Reorganization. Therefore, the competitive conditions to be faced by Bancorp
will be the same as those faced by the Bank.
-18-
EMPLOYEES
At the present time, Bancorp does not intend to employ persons other than
its present management. If Bancorp acquires other business, it may at such
time hire additional employees.
LEGAL PROCEEDINGS
Bancorp has not, since its organization, been a party to any legal
proceedings.
FINANCIAL RESOURCES OF BANCORP
In connection with the Reorganization, the Bank currently intends,
subject to applicable law and any agreements of the Bank with regulatory
agencies, to transfer up to approximately $100,000.00 to Bancorp, which
amount does not exceed the accumulated earnings and profits for tax purposes
of the Bank as of December 31, 1995. See "-- Regulation of Bancorp and the
Bank." The actual amount of funds which may be transferred, however, is
subject to change and may be greater or less than this amount, depending on a
number of factors, including Bancorp's future financial requirements and
applicable regulatory restrictions. In this regard, the Bank may also lend
funds to Bancorp, either as part of or in addition to the transfer of funds
being made in connection with the Reorganization. However, the amount of
capital which will initially be transferred from the Bank to Bancorp may be
reduced to the extent necessary to avoid any taxable income to the Bank.
See "-- Income Tax Consequences."
A transfer of $100,000.00 to Bancorp would reduce the Bank's stockholders'
equity as of December 3l, 1995, to approximately $22,724,616. If such a
transfer to Bancorp had been made on December 31, 1995, the leverage, Tier 1
risk-based, and total risk-based capital ratios of the Bank would have been
approximately 6.55 %, 11.39% and 12.64%, respectively.
Upon consummation of the Reorganization, the currently outstanding shares
of Bancorp, all of which are owned by the Bank, will be canceled.
Any amounts transferred to Bancorp by the Bank may be used by Bancorp for
various corporate purposes, including acquisitions of other banks and
bank-related businesses. At the present time, however, Bancorp has no
agreements or understandings regarding any acquisitions. In addition, such
funds will be available for other general corporate purposes, to the extent
permitted by law, including the payment of dividends to Bancorp's
stockholders and loans to the Bank.
Additional financial resources may be available to Bancorp in the future
through borrowings, debt or equity financings, or dividends from the Bank,
other acquired entities or new businesses. In addition, the Bank may lend
amounts to Bancorp both prior to the consummation of the Reorganization and
thereafter. Such loans may be subject to certain restrictions on transactions
with affiliates of a bank holding company under the Federal Reserve Act.
There can be no assurance, however, as to the amount of additional financial
resources which will be available to Bancorp. In particular, dividends from
the Bank to Bancorp will be subject to tax considerations and regulatory
limitations. See "-- Income Tax Consequences," "Comparison of Stockholder
Rights -- Common Stock -- Dividend Rights."
-19-
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Bank as of 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 proposed transfer of $100,000.00 from the Bank's retained
earnings to Bancorp); and (iii) the pro forma capitalization of Bancorp on a
consolidated basis after giving effect to the Reorganization. The pro forma
consolidated capitalization of Bancorp as of December 31, 1995 will be the
same as the consolidated capitalization of the Bank as of that date. However,
the pro forma capitalization of the Bank is changed as a result of the
$100,000.00 proposed transfer by the Bank to Bancorp.
AS OF DECEMBER 31, 1995
BANK BANK BANCORP
(ACTUAL (PRO FORMA (PRO FORMA
CONSOLIDATED) CONSOLIDATED) CONSOLIDATED)
- --------------------------------------------------------------------------------
Deposits $282,787,249 $282,787,249 $282,787,249
Securities sold under
agreements to repurchase -- -- --
Federal Home Loan Bank advances 38,968,000 38,968,000 38,968,000
Stockholders' equity:
Serial Preferred stock - $1.00
par value
authorized 1,000,000 shares,
none issued -- -- --
Common stock - $1.00 par value
authorized, 5,000,000 shares
issued and outstanding 1,532,431 1,532,431 1,532,431
Additional paid-in capital 8,824,970 8,824,970 8,824,970
Retained earnings 12,406,361 12,306,361 12,406,361
Net unrealized gain (loss) on
investment securities available
for sale, after tax effects 60,854 60,854 60,854
Total stockholders' equity $22,824,616 $ 22,724,616 $22,824,616
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS AND ANNUAL DISCLOSURE STATEMENT
The Bank's 1995 Annual Report to Stockholders, including financial
statements prepared in accordance with generally accepted accounting
principles, has been mailed on or about March 15, 1996 to all stockholders of
record as of the close of business on February 29, 1996 together with this
Proxy Statement.
A copy of the most recent Form F-2 as filed with the Federal Deposit
Insurance Corporation will be furnished without charge to stockholders as of
the record date upon written request to Gerard F. Linskey, Senior Vice
President and Chief Financial Officer, The Hibernia Savings Bank, 730 Hancock
Street, Quincy, Massachusetts 02170.
-20-
Provided below is a five-year summary of selected financial data of the
Bank. For additional information, see the Bank's 1995 Annual Report to
Stockholders which contains the management's discussion and analysis of
financial condition and results of operations.
At December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------
(Dollars in Thousands, except per share data)
Balance Sheet Data:
Total assets $346,865 $286,429 $249,827 $229,792 $216,575
Loans, net 208,327 163,371 135,661 134,584 144,143
Securities 125,300 111,584 105,735 80,449 56,277
Deposits 282,787 256,340 221,950 205,921 187,102
Borrowings 38,968 9,000 8,530 8,531 16,606
Stockholders' equity 22,825 19,786 17,312 13,954 11,953
Book value per share $ 14.89 $ 13.68 $ 12.92 $ 10.89 $ 9.96
At December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------
(Dollars in Thousands, except per share data)
Operating Data:
Interest and dividend income $ 23,949 $ 18,728 $ 18,157 $ 18,805 $ 19,698
Interest expense 13,720 9,498 8,950 10,569 13,779
--------- --------- --------- --------- ---------
Net interest income 10,229 9,230 9,207 8,236 5,919
Add
Non-interest income 579 549 719 364 216
Gain (loss) on sale of loans (52) (1) 20 320 24
Less
Provision for possible loan
losses 300 135 2,080 2,270 2,850
Non-interest expenses 6,552 6,209 5,680 4,835 4,695
--------- --------- --------- --------- ---------
Pretax core earnings 3,904 3,434 2,186 1,815 (1,386)
Net gain on sale of securities 91 193 3,952 2,188 768
Gain on sale of loan servicing 764 - - - -
Loss on sale of fixed assets (50) - - - -
Net loss on sale of other real
estate owned (43) (170) (666) (511) (561)
Real estate owned expense 301 387 1,194 1,643 972
--------- --------- --------- --------- ---------
Income (loss) before income
taxes 4,365 3,070 4,278 1,849 (2,151)
Provision (benefit) for income
taxes 1,646 1,002 1,198 265 (673)
--------- --------- --------- --------- ---------
Net income (loss) $ 2,719 $ 2,068 $ 3,080 $ 1,584 $ (1,478)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings (loss) per share
primary $ 1.76 $ 1.41 $ 2.14 $ 1.21 $ (1.23)
Weighted average number of
common shares and common
equivalents 1,545,297 1,468,758 1,437,092 1,306,610 1,200,000
Dividend declared per share $ 0.22 $ - $ - $ - $ -
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 Common Stock of the Bank, (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) any
approval, consent or waiver required by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") shall have been received and any
waiting period imposed by applicable law shall have expired, (iv) the Bank
and Bancorp shall have received a favorable opinion from the Bank's
independent public accountants, Arthur Andersen LLP, concerning the federal
income tax consequences of the Reorganization, (v) Bancorp Common Stock to be
issued in exchange for Common Stock of the Bank shall have been registered or
qualified for issuance under applicable state securities laws, and (vi) the
Bank and Bancorp shall have obtained all other necessary consents or
approvals required for Bancorp formation.
-21-
The Bank intends to file an application with the Commissioner of Banks to
obtain approval of the Plan of Reorganization under Section 26B of Chapter
172 of the General Laws of Massachusetts after the date of this Proxy
Statement. The Commissioner will not grant his approval until the Plan of
Reorganization has been approved by the Bank's stockholders. Bancorp intends
to file an application or notice as is required to register with the Federal
Reserve Board as a bank holding company under the Bank Holding Company Act of
1956, as amended (the "BHC Act"). 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 "Regulation of Bancorp and the Bank".
If the Plan of Reorganization is approved by the Bank's stockholders at
the Annual Meeting, the formation of Bancorp's structure is currently
expected to become effective as soon thereafter as the required regulatory
approvals are received. Bank and Bancorp have the right under the terms of
the Plan of Reorganization to abandon the Reorganization if, among other
things, regulatory approvals cannot be obtained or if the conditions or
obligations associated with such regulatory approvals make the Reorganization
inadvisable in the opinion of the Bank or Bancorp.
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.
RIGHTS OF DISSENTING STOCKHOLDERS
Any holder of the Bank's 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. The
Bank and any such stockholder shall follow the procedures set forth in
Sections 86 to 98, inclusive, of Chapter 156B of the General Laws of
Massachusetts. A brief summary of those 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 by express reference to such sections, which are
included in this Proxy Statement as Exhibit C.
A holder of the Bank's 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 proposed 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
the Bank's 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 Norfolk 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 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, and such suit is dismissed as to that stockholder, or the stockholder
withdraws his objection in writing with the written approval of the Bank.
The enforcement by a dissenting stockholder of his right to receive
payment for his Bank Common Stock in the manner provided by Sections 86
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.
-22-
INCOME TAX CONSEQUENCES
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 of its independent
public accountants, Arthur Andersen LLP. Unlike a private letter ruling from
the Internal Revenue Service, an opinion of the independent public
accountants has no binding effect on the Internal Revenue Service. Based on
such opinion, the material federal tax results of the Reorganization would be
as follows:
1. No gain or loss will be recognized by the stockholders of the Bank
upon the exchange of their Common Stock of the Bank solely for Bancorp Common
Stock.
2. No gain or loss will be recognized by the Bank as a result of the
proposed transaction (except to the extent that, as described below, the Bank
may have taxable income as a result of payments to stockholders who exercise
dissenters' rights and/or the transfer to Bancorp of an amount that exceeds
the current and accumulated earnings and profits of the Bank).
3. No gain or loss will be recognized by Bancorp upon the receipt of
shares of the Bank's Common Stock solely in exchange for Bancorp Common Stock.
4. The holding period of the Bank's Common Stock in the hands of Bancorp
will include the period during which such stock was held by stockholders of
the Bank.
5. The basis of the Bancorp Common Stock to be received by each
stockholder of the Bank will be the same as the basis of the Bank's Common
Stock surrendered in exchange therefor.
6. The holding period of the Bancorp Common Stock to be received by each
stockholder of the Bank will include the holding period of the Bank's Common
Stock surrendered in exchange therefor, provided that the Bank's Common Stock
was held as a capital asset in the hands of such stockholder.
7. The Bank and Bancorp will be considered members of an "affiliated
group," within the meaning of Section 1504(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"); dividend distributions paid by the Bank to
Bancorp will not be included in computing the taxable income of Bancorp.
8. The affiliated group of which the Bank was the common parent
immediately prior to the proposed transaction will remain in existence after
the proposed transaction with Bancorp as the new common parent of the
affiliated group.
9. The basis of the Bank's Common Stock in the hands of Bancorp, as the
new parent company of the affiliated group, will be equal to the net asset
basis of the property of the Bank immediately after the proposed transaction,
adjusted as necessary in accordance with Treas. Reg. Section 1.1502-31(d).
10. Stockholders of the Bank who exercise their dissenters' appraisal
rights and receive cash in exchange for their shares of the Common Stock of
the Bank will recognize taxable income or gain or loss for federal income tax
purposes in connection with the transaction. The amount of that income or
gain or loss and the character of that income or gain or loss (that is,
whether it constitutes ordinary income, 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.
If a stockholder exercises his dissenter's appraisal rights with respect
to all of his shares of the Bank's Common Stock, including any shares
constructively owned by him under the rules of Section 318(a) (unless such
constructive ownership is waived under the rules of Section 302(c)(2)), then
the transaction should qualify as a sale or exchange of the stock redeemed
under Section 302(a), rather than a dividend. If the shares of the Bank's
Common Stock qualify as "capital assets" in the hands of such a stockholder
and if the shares have been held for more than one year, then any gain
recognized on the exchange should qualify for long-term capital gain
treatment. If, however, a stockholder fails to exercise dissenters' appraisal
rights as to all shares owned by him, (or is deemed to own constructively
under Section 318(a)) then the transaction might be treated as a dividend to
the stockholder, depending upon whether or not it qualifies as "not
essentially equivalent to a dividend" within the meaning of Section
302(b)(1), or as "a substantially disproportionate redemption" within the
meaning of Section 302(b)(2). If the transaction were treated as a dividend,
then the entire payment could be taxable as ordinary income, depending upon
the circumstances.
ANY STOCKHOLDER OF THE BANK CONSIDERING EXERCISING HIS DISSENTER'S
APPRAISAL RIGHTS WITH RESPECT TO ANY SHARES OF THE BANK'S COMMON STOCK SHOULD
CONSULT HIS PERSONAL INCOME TAX ADVISOR FOR SPECIFIC ADVICE WITH RESPECT TO
THE FEDERAL INCOME TAX CONSEQUENCES OF THAT EXERCISE.
-23-
The Bank utilizes the reserve method under Section 593 of the Code for
computing its bad debt reserve deduction for federal income tax purposes.
Payments made by the Bank to stockholders who exercise their dissenters'
appraisal rights will result in taxable income to the Bank to the extent that
the payments are deemed made out of the Bank's bad debt reserve. Section
593(e). Any of these payments that are treated as being in exchange for the
shares of such stockholders under Section 302(a) would be deemed to be made
out of the Bank's bad debt reserve to the extent of the sum of the following:
(i) the excess of the reserve for losses on "qualifying real property loans"
over the reserve that would be permitted under the "actual loss experience"
method, and (ii) the supplemental reserve for losses. The amount deemed
withdrawn from the bad debt reserve (and included in the Bank's gross income)
will be equal to the lesser of (x) the sum of (i) and (ii) above, or (y) the
amount which, when reduced by the federal income tax attributable to the
inclusion of such amount in the Bank's gross income, is equal to the amount
payable to dissenting stockholders in exchange for their Common Stock of the
Bank. Hence, depending upon the amount of the Bank's bad debt reserve,
payments to dissenting stockholders could result in federal taxable income to
the Bank in an amount equal to approximately 1.52 times the amount paid to
the dissenting stockholders.
In addition, any dividend distributions by the Bank (including any
distribution made to provide working capital to Bancorp and any payments to
dissenting stockholders that are treated as dividends) that exceed the
current and accumulated earnings and profits of the Bank will result in
taxable income to the Bank to the extent that they are deemed made out of the
Bank's bad debt reserve. Section 593(e)(1). Whether a dividend distribution
to Bancorp (or payments to dissenting stockholders that are treated as
dividends) in excess of the current and accumulated earnings and profits of
the Bank will be deemed made out of the Bank's bad debt reserve and the
amount deemed paid out of the bad debt reserve will be determined under the
rules described above in connection with payments to dissenting stockholders.
The determination of current and accumulated earnings and profits turns
upon the application of a complicated set of tax laws within the Code
generally set forth in Section 312 to a number of factual circumstances
arising over an extended period of years. Because of the inherently factual
issues associated with determining accumulated earnings and profits, Arthur
Andersen LLP, does not intend to confirm the amount of the Bank's earnings
and profits and thus its opinion will not address whether or not the proposed
transfer of funds to Bancorp will exceed the current and accumulated earnings
and profits of Bancorp.
Payments to dissenting stockholders that are treated as made in exchange
for their Common Stock under Section 302 will not reduce the amount that the
Bank can distribute to Bancorp without some portion of the distribution being
treated as made out of the Bank's bad debt reserve, if such payments are made
in the same taxable year as the distribution to Bancorp. Such payments will,
however, reduce the accumulated earnings and profits of the Bank available
for distribution in later years. Under Section 312(n)(7), in such cases the
Bank's accumulated earnings and profits will be reduced by the allocable
portion of the Bank's earnings and profits attributable to the Common Stock
redeemed. On the other hand, payments to dissenting stockholders that are
treated as dividend distributions will reduce the Bank's current and
accumulated earnings and profits in their entirety and, to the extent made in
the same taxable year as a distribution to Bancorp, will reduce the amount
that can be distributed to Bancorp without some portion of the distribution
being treated as made out of the Bank's bad debt reserve.
EACH STOCKHOLDER OF THE BANK SHOULD CONSULT HIS OWN TAX COUNSEL AS TO
SPECIFIC FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE REORGANIZATION, IF
ANY, TO SUCH STOCKHOLDER.
ACCOUNTING TREATMENT
It is anticipated that the Reorganization will be accounted for as a
"pooling of interests" transaction under generally accepted accounting
principles. The Bank's Annual Report to Stockholders, which is being mailed
to stockholders of the Bank together with this Proxy Statement, includes the
consolidated financial statements of the Bank for the fiscal year ended
December 31, 1995.
LEGAL OPINION
The validity of the shares of Bancorp's common stock issuable upon
consummation of the Reorganization will be passed upon by Roche, Carens &
DeGiacomo, A Professional Corporation, Boston, Massachusetts.
-24-
COMPARISON OF STOCKHOLDER RIGHTS
As a result of Bancorp formation, stockholders of the Bank, whose rights
are presently governed by Massachusetts banking law, will become stockholders
of Bancorp, a Massachusetts corporation, and as such, their rights will be
governed by Massachusetts corporate law. Certain differences in the rights of
stockholders arise from this change in governing law. In addition, there are
certain differences between the Charter and By-laws of the Bank and the
Articles of Organization (the "Articles") and By-laws of Bancorp. Certain
differences and similarities of the rights of stockholders of the Bank and
Bancorp are discussed below. The following discussion does not purport to be
a complete statement of such similarities and differences affecting the
rights of stockholders of the Bank but is intended as a summary only. The
form of Articles of Organization of Bancorp attached as Exhibit B to this
Proxy Statement should be reviewed carefully by each stockholder.
CAPITAL STOCK
AUTHORIZED AND ISSUED STOCK. The Bank had, as of the Record Date,
5,000,000 shares of authorized Common Stock of which 1,553,846 shares were
issued and outstanding, and 117,600 shares were reserved for issuance under
the Stock Option Plans. As of such date, the Bank also had 1,000,000 shares
of authorized but unissued preferred stock.
The Articles of Bancorp will provide for 10,000,000 shares of authorized
Bancorp Common Stock and 5,000,000 shares of preferred stock, of which
1,553,846 shares of Bancorp Common Stock are currently issued and
outstanding, all of which are owned by the Bank. After the consummation of
the Reorganization, and subject to the exercise of dissenters' appraisal
rights, the number of issued and outstanding shares, shares reserved for
issuance under the Stock Option Plans, and non-reserved shares of Common
Stock available for future issuance by Bancorp will be the same as the number
of such shares of the Bank immediately prior to the Effective Time. Because
Bancorp has more authorized shares of common stock available for issuance
than the Bank, if in the future, Bancorp authorizes the issuance of
additional shares of Bancorp Common Stock, said issuance may have a greater
dilutive effect on the voting power of stockholders then holding shares of
Bancorp Common Stock than an additional stock issuance by the Bank would have
on the voting power of current holders of Bank Common 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, Bancorp is authorized to issue shares of
capital stock without obtaining prior approval of the Commissioner of Banks.
Although the issuance of Bancorp Common Stock in connection with the
Reorganization is exempt from registration under the Securities Act, future
issuances of Bancorp Common Stock would be subject to registration under the
Securities Act, unless another exemption were available. See "Regulation of
Bancorp and the Bank--Consequences of the Reorganization Under Federal
Securities Laws". The Bank's Common Stock is exempt from registration under
the Securities Act. There are no current agreements or understandings with
respect to the issuance of any additional shares of Bancorp capital stock.
PRE-EMPTIVE RIGHTS. The stockholders of Bancorp, 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.
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 Massachusetts
banking law, Massachusetts stock-form savings banks, such as the Bank, may
pay dividends only out of net profits without impairing their capital stock
and surplus accounts. Such dividend payments are also subject to a number of
additional statutory limitations. Bancorp may pay dividends if, as, and when
declared by its Board of Directors. The holders of Common Stock of Bancorp
will be entitled to receive and share equally in such dividends as may be
declared by the Board of Directors out of funds legally available therefor.
Although Massachusetts does not have a specific statute regulating the
payment of dividends by Massachusetts corporations, the directors of a
corporation are jointly and severally liable to the corporation if a payment
of dividends (i) is made when the corporation is insolvent, (ii) renders the
corporation insolvent, or (iii) violates the corporation's articles of
organization. In both cases, any issuance by the Bank or Bancorp of preferred
stock with a preference over 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 Bank's issued and outstanding Common Stock. Each share of the
Bank's Common Stock is entitled to one vote on all matters. A stockholder is
not permitted to vote cumulatively in the election of Directors by casting
all of said stockholder's votes for one or more but fewer than all of the
Directors on the slate. Following the formation of Bancorp, all voting rights
in Bancorp will be vested in the holders of Bancorp Common Stock, and each
share of Bancorp Common Stock will be entitled to one vote on all matters. In
both cases, any issuance by the Bank or Bancorp of preferred stock with
voting rights may affect the voting rights of common stockholders.
-25-
PREFERRED STOCK
Both under the Charter of the Bank and under the Articles of Bancorp, the
respective Boards of Directors (or a committee thereof in the case of
Bancorp) of the Bank and Bancorp are authorized to issue preferred stock in
series (and classes in the case of Bancorp) and to fix the powers,
designations, preferences, or other rights of the shares of each such series
(or class in the case of Bancorp) and the qualifications, limitations, and
restrictions thereof. The issuance of preferred stock by the Bank, unlike the
issuance of preferred stock by Bancorp, would be subject to approval by the
Commissioner of Banks. Preferred stock issued by Bancorp after the
Reorganization may rank prior to the Bancorp Common Stock as to dividend
rights, 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 Bancorp Common Stock. Bancorp has no
present plans or understandings for the issuance of any preferred stock.
DIRECTORS
NUMBER AND STAGGERED TERMS. The By-laws of Bancorp provide that the Board
of Directors shall consist of not less than three Directors. The Board of
Directors of Bancorp will initially be composed of seven Directors. The
Charter and By-laws of the Bank provide that the Board shall consist of not
less than seven nor more than twenty-five Directors. The By-laws of Bancorp
provide that the Board of Directors may fix the number and classification of
Directors, unless at the time there is an Interested Stockholder (as defined
in Bancorp's By-laws) in which case a two-thirds vote of the Continuing
Directors (as defined in Bancorp's By-laws) is also required. The By-laws of
the Bank provide that the Board of Directors may fix the number and
classification of Directors, unless at the time there is an Interested
Stockholder (as defined in the Bank's Charter) in which case a majority vote
of the Continuing Directors (as defined in the Bank's Charter) is also
required. The By-laws of the Bank also authorize the Board of Directors to
elect up to two additional Directors in any year.
Both the Charter of the Bank and the Articles of Bancorp 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 OF DIRECTORS. Bancorp's Articles provide that a Director may be
removed with or without cause, by a vote of two-thirds of the Directors then
in office unless at the time of such action there is an Interested
Stockholder, in which case the affirmative vote of two-thirds of the
Continuing Directors shall also be required. The Bank's Charter provides that
a Director may be removed, with or without cause, by vote of eighty percent
of the stockholders or two-thirds of the Directors, unless there is an
Interested Stockholder, in which case a vote of two-thirds of the Continuing
Directors is required.
VACANCIES. The By-laws of Bancorp provide that any vacancy occurring on
the Board of Directors as a result of resignation, removal or death may be
filled by vote of a majority of the remaining Directors, unless at the time
of the action there is an Interested Stockholder, in which case such vacancy
may only be filled by a vote of two-thirds of the Continuing Directors then
in office. A Director elected to fill such a vacancy shall be elected to
serve for a term of office continuing until the next election of Directors by
the stockholders. Any directorship to be filled by reason of an increase in
the authorized number of Directors may be filled by a majority of the Board
of Directors for a term of office continuing until the next election of
Directors by the stockholders. If at the time of such action, there is an
Interested Stockholder, a vote of two-thirds of the Continuing Directors is
required instead.
The By-laws of the Bank provide that any vacancy occurring on the Board
of Directors as a result of resignation, removal or death may be filled by
vote of a majority of the remaining 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 elected to
fill such a vacancy shall be elected to serve for a term of office continuing
until the next election of Directors by the stockholders. Any directorship to
be filled by reason of an increase in the authorized number of Directors may
be filled by the Board of Directors for a term of office continuing until the
next election of Directors by the stockholders.
MASSACHUSETTS LAW. Under Section 50A of Massachusetts General Laws
Chapter 156B, a publicly-held Massachusetts corporation which has not opted
out of that statute must have a classified Board of Directors. In general,
Section 50A provides that the Board of Directors of the corporation must be
divided into three classes, each of which would contain approximately
one-third of the total number of the members of the Board of Directors.
Section 50A provides that each class shall serve a staggered term, with
approximately one-third of the total number of Directors being elected each
year. The stockholders may remove a Director from the board prior to the
expiration of his term only for cause, upon the affirmative vote of the
holders of a majority of the shares then entitled to vote in an election of
Directors. Section 50A provides that the number of Directors shall be fixed
by the board, and that any vacancy occurring on the board, including a
vacancy created by an increase in the number of Directors or resulting from
death, resignation, disqualification, removal from office or other cause,
shall be filled for the remainder of the unexpired term exclusively by a
majority vote of the Directors then in office.
-26-
A Massachusetts corporation is permitted to opt out of Section 50A.
Bancorp's By-laws contain a provision opting out of Section 50A. As a result
of Bancorp's decision to opt out of the statute, the provisions of Section
50A are not currently applicable to Bancorp's stockholders. The Board of
Directors of Bancorp may amend the By-laws at any time to subject Bancorp
shares to this statute prospectively. In addition, as described above,
Bancorp's Articles and By-laws contain provisions similar to Section 50A
regarding a classified Board of Directors, removal of Directors and vacancies.
MEETINGS OF STOCKHOLDERS
The By-laws of Bancorp provide that special meetings of the stockholders
may be called by the Chairman of the Board, if one is elected, the
Vice-Chairman, if one is elected, or by the Board of Directors, unless there
is an Interested Stockholder, in which case any such call shall also require
the affirmative vote of two-thirds of the Continuing Directors then in
office, and unless otherwise provided in the Articles of Organization or
By-laws, shall be called by the Clerk, or in the case of the death, absence,
incapacity or refusal of the Clerk, by any other officer, upon written
application of one or more stockholders who hold at least forty percent in
interest of the capital stock entitled to vote thereat. Only matters set
forth in the call may be considered or acted upon at the meeting.
The Bank's Charter provides that special meetings of the stockholders for
any purpose or purposes may be called at any time only by the Chairman of the
Board, if one is elected, the President or by a majority of two-thirds of the
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 provided by law.
The Bank's By-laws provide that special meetings of the stockholders for
any purpose or purposes may be called at any time only by the Chairman of the
Board, if one is elected, the President or by the affirmative vote of
two-thirds of the 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 provided by law.
Both the Bank's and Bancorp's By-laws set forth certain advance notice
and informational requirements and time limitations on any Director
nomination or any new business that a stockholder wishes to propose for
consideration at an annual or special meeting of stockholders. Bancorp's
By-laws provide that a stockholder's nomination or proposal must be received
not less than 120 days nor more than 150 days prior to the annual meeting.
The Board of Directors may reject a stockholder's nomination or proposal if
it is not timely or does not contain sufficient information, or, if the Board
does not make this determination, the presiding officer at the meeting shall
do so. If there is an Interested Stockholder, the nomination or proposal
shall also require the concurrence of two-thirds of the Continuing Directors.
The Bank's By-laws provide that a stockholder's nomination must be
received not less than 60 days nor more than 150 days prior to the annual
meeting and that a stockholder's proposal must be received not less than 90
days nor more than 150 days prior to the annual meeting. The Board of
Directors may reject a stockholder's nomination or proposal if it is not
timely or does not contain sufficient information, or, if the Board does not
make this determination, the presiding officer at the meeting shall do so. If
there is an Interested Stockholder, the nomination or proposal shall require
the concurrence of a majority of the Continuing Directors.
STOCKHOLDER VOTE REQUIRED TO APPROVE CERTAIN TRANSACTIONS
Bancorp's Articles contain a provision requiring a two-thirds vote of the
stockholders to authorize (i) a sale, lease, or other disposition of all or
substantially all of the property or assets of Bancorp, (ii) a merger or
consolidation of Bancorp with or into any other corporation, or (iii) any
reclassification of or recapitalization involving Bancorp's common stock. The
Bank's Charter contains a provision requiring approval by 80% of the voting
stock for certain Business Combinations (as defined in the Charter) except
where two-thirds of the Continuing Directors have approved the Business
Combination or where certain procedures and price requirements are met.
MASSACHUSETTS LAW. Chapter 110F of the Massachusetts General Laws,
entitled "Business Combinations with Interested Shareholders" ("Chapter
110F") provides that a Massachusetts corporation with more than 200
stockholders may not engage in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person becomes an interested stockholder, unless (i) the interested
stockholder obtains the approval of the Board of Directors prior to becoming
an interested stockholder, (ii) the interested stockholder acquires 90% of
the outstanding voting stock of the corporation (excluding shares held by
certain affiliates of the corporation) at the time it becomes an interested
stockholder, or (iii) the business combination is approved by both the Board
of Directors and the holders of 66 2/3% of the outstanding voting stock of
the corporation (excluding shares held by the interested stockholder). An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or, in certain cases, at any time within the prior three
years did own) 5% or more of the outstanding voting stock of the
corporation. A "business combination" includes a merger, certain stock or
asset sales, and certain other specified transactions resulting in a
financial benefit to the interested stockholder.
-27-
A Massachusetts corporation is permitted to opt out of Chapter 110F. The
Articles of Bancorp contain a provision opting out of Chapter 110F. As a
result of Bancorp's decision to opt out of the statute, the provisions of
Chapter 110F are not currently applicable to Bancorp's stockholders. The
Board of Directors of Bancorp may amend the By-laws at any time to subject
Bancorp to this statute prospectively.
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, exchange, merger, acquisition or similar offer of
another person, must 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.
CONTROL SHARE ACQUISITION STATUTE
Massachusetts General Laws Chapter 110D, entitled "Regulation of Control
Share Acquisitions" ("Chapter 110D") provides that any person who makes a
bona-fide offer to acquire, or acquires (the "acquiror") shares of stock of a
corporation in an amount equal to or greater than one-fifth, one-third, or a
majority of the voting stock of the corporation (the "thresholds") must
obtain the approval of a majority of shares of all stockholders except the
acquiror and the officers and inside Directors of the corporation in order to
vote the shares that the acquiror acquires in crossing the thresholds.
A Massachusetts corporation is permitted to opt out of Chapter 110D. The
By-laws of Bancorp contain a provision opting out of Chapter 110D. As a
result of Bancorp's decision to opt out of the statute, the voting
restrictions of Chapter 110D are not currently applicable to Bancorp's
stockholders. The Board of Directors of Bancorp may amend the By-laws at any
time to subject Bancorp to this statute prospectively.
INDEMNIFICATION
The By-laws of the Bank provide that Directors and officers of the Bank
shall, and in the discretion of the Board of Directors, non-officer employees
may, be indemnified by the Bank against expenses arising out of service for,
or on behalf of the Bank. The By-laws of the Bank provide that such
indemnification shall not be provided if it is determined that the action
giving rise to the liability was not taken in good faith in the reasonable
belief that the action was in the best interests of the Bank. The By-laws of
the Bank provide that the indemnification provision in the By-laws does not
limit any other right to indemnification existing independently of the
By-laws. The By-laws of Bancorp contain a similar indemnification provision.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to Directors, officers or persons
controlling Bancorp pursuant to the foregoing provisions, it is the position
of the SEC that such indemnification is against public policy as expressed in
such Act and is therefore unenforceable.
AMENDMENT OF CHARTER AND ARTICLES
The Bank's Charter provides that any amendment thereof must be first
approved by a majority of the Board of Directors, and then approved by at
least two-thirds of the stockholders eligible to vote thereon (but only a
majority of the stockholders in the case of amendments to provisions in the
Bank's Charter relating to the Bank's name, office, powers, authorized
capital stock and liquidation account) except that, to the extent that any
Charter provision requires stockholder approval by more than two-thirds of
the eligible votes, if at any time within the sixty day period immediately
preceding the meeting at which the stockholder vote is to be taken on such
amendment there is an Interested Stockholder, amendment of such provision
shall be only the same vote required by that provision, unless such action is
approved by a majority of the Continuing Directors, in which case only a
two-thirds vote of the eligible votes is required.
Under Massachusetts law, certain amendments to a corporation's articles
of organization require a vote of a majority of the outstanding shares of
each class of stock entitled to vote thereon, while other amendments require
a two-thirds vote. In either case, the articles of organization may provide
for a greater or lesser percentage vote, but not less than a majority.
Bancorp's Articles provide that any amendment, addition, alteration, change
or repeal of the Articles regarding (i) an increase or reduction of the
capital stock or of any authorized class, (ii) a change of the par value of
any authorized shares or class thereof, (iii) a change of the authorized
shares with par value or any class thereof into any number of shares without
par value, or the exchange thereof pro rata for any number of shares without
par value, (iv) a change of the authorized shares without par value or any
class thereof into a greater or lesser number of shares without par value, or
the exchange thereof pro rata for a greater or lesser number of shares
without par value, (v) a change of the authorized shares with par value or
any class thereof into a greater or lesser
-28-
number of shares with par value, (vi) a change of the authorized shares
without par value or any class thereof into any number of shares with par
value, or the exchange thereof pro rata for any number of shares with par
value, or (vii) a change of the corporate name may be made if first approved
by the affirmative vote of two-thirds of the Board of Directors (unless at
the time of such action there is an Interested Stockholder, in which case the
affirmative vote of two-thirds of the Continuing Directors shall also be
required) and thereafter approved by the affirmative vote of a majority of
the stockholders. No other amendment, alteration, change or repeal of the
Articles shall be made unless first approved by the affirmative vote of
two-thirds of the Board of Directors and thereafter approved by the
affirmative vote of not less than two-thirds of the total votes eligible to
be cast at a duly constituted meeting of stockholders. 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
provision may only be amended, altered, changed or repealed if such action
shall have been approved by not less than two-thirds of the Continuing
Directors then in office. Massachusetts law requires a class vote under
certain circumstances when an amendment of the articles of organization will
adversely affect the special rights of a class of stock.
AMENDMENT OF BY-LAWS
The Charter of the Bank provides that the By-laws of the Bank may be
adopted or amended by affirmative vote of 80% of the Board of Directors.
Bancorp's Articles provide that Bancorp's By-laws may be adopted or amended
by affirmative vote of two-thirds of the Board of Directors, unless there is
an Interested Stockholder, in which case the affirmative vote of two-thirds
of the Continuing Directors is also required. Bancorp's Articles further
provide that the By-laws may be adopted or amended by the stockholders only
upon vote of two-thirds of the stock entitled to vote, such vote to be cast
at a meeting of stockholders called for the purpose of adopting or amending
the By-laws.
EFFECT ON CURRENT MARKET VALUE OF OUTSTANDING BANK STOCK
Although the Board of Directors does not know of any reason why
implementation of the Plan of Reorganization would cause the market value of
the stock of Bancorp to be different from the market value of the stock of
the Bank immediately prior to consummation of the Reorganization, it is
possible that the public trading market could perceive that the stock of
Bancorp has a different value from the stock of the Bank. It is not known
whether the public trading market will attribute any additional or lesser
value to Bancorp Common Stock than it would attribute to the Bank's Common
Stock. On February 14, 1996, the last trading day prior to the day on which
the Board of Directors adopted a resolution approving the Plan of
Reorganization, the high and low sale prices of the Bank's Common Stock as
quoted on the NASDAQ National Market were $16.00 and $16.00 per share,
respectively.
ANTI-TAKEOVER PROVISIONS
A number of provisions of the Bank's Charter and By-laws deal with matters
of corporate governance and rights of stockholders. Certain of the provisions
discussed above 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).
For example, the Bank's charter requires the affirmative vote of at least 80%
of the Bank's voting stock in order for the Bank or any Subsidiary to enter
into certain business combinations with Interested Stockholders or their
Affiliates (as defined therein), including, but not limited to, any merger or
consolidation, sale, lease, exchange, mortgage, pledge or other disposition
of assets, the issuance or transfer of securities having an aggregate fair
market value of $100,000 or more, the adoption of any plan or proposal for
the liquidation or dissolution of the Bank or any reclassification of
securities, recapitalization of the Bank or any other transaction which has
the effect of increasing the proportion of the outstanding shares of any
class of equity or convertible securities of the Bank which is directly or
indirectly owned by any Interested Stockholder or its Affiliates. The
super-majority vote detailed above is not required if the business
combination is approved by two-thirds of the Continuing Directors of the Bank
(as defined therein) or if certain detailed fair price and procedure
requirements are met. Bancorp's Articles and By-laws do not contain similar
provisions. The Bank has entered into an agreement with its Chairman which
requires the Bank to make certain payments to the Chairman upon the
termination of his employment under certain circumstances.
LEGAL INVESTMENTS
Under the laws of some jurisdictions, shares of the Bank's Common Stock
may be legal investments for certain institutions and fiduciaries, whereas
shares of Bancorp's Common Stock may not be legal investments for such
investors.
REGULATION OF BANCORP AND THE BANK
The following summaries of statutes and regulations affecting banks and
holding companies do not purport to be complete. Such summaries are qualified
in their entirety by reference to such statutes and regulations.
-29-
HOLDING COMPANY REGULATION. As a bank holding company, Bancorp would be
subject to regulation and supervision by the Federal Reserve Board under the
BHC Act. The regulations of the Federal Reserve Board restrict or require
prior approval for acquisitions of ownership or control of banks or other
companies, restrict transactions between bank holding companies and their
affiliates, restrict tying arrangements, limit non-banking activities of bank
holding companies and their subsidiaries, require filing of annual and
periodic reports and give the Federal Reserve Board supervisory authority
over various activities of bank holding companies. The Bank is not currently
subject to the regulations or authority of the Federal Reserve Board, except
as certain of such regulations are made applicable to the Bank by law or
regulations of the FDIC.
CERTAIN FEDERAL AND STATE RESTRICTIONS ON ACQUISITION OF STOCK. Any
attempt to acquire control of the Bank, currently, or Bancorp, following
completion of the Reorganization, through the purchase of stock would be
subject to regulation under Massachusetts law, the BHC Act and the federal
Change in Bank Control Act of 1978, as amended (the "CBCA").
With respect to acquisitions of Common Stock of the Bank, Massachusetts
law prohibits any person from acquiring voting stock of a bank that would
result in such person having the power, directly or indirectly, to direct the
management or policies of such bank or to vote 25% or more of such stock
unless such person has provided the Commissioner with 60 days prior notice
and certain information in connection therewith, and the acquisition has not
been disapproved by the Commissioner. An exemption from these requirements is
provided for acquiring persons who have complied with substantially similar
procedures under the federal law provisions outlined below.
The Federal Reserve Board's regulations promulgated under the CBCA
generally require persons who at any time intend to acquire control of a bank
holding company, to provide 60 days prior written notice and certain
financial and other information to the Federal Reserve Board. The 60-day
notice period does not commence until the information is deemed to be
substantially complete. Control for the purpose of the CBCA exists in
situations in which the acquiring party would have voting control of at least
25% of any class of a holding company's voting stock, or the power to direct
management or policies of Bancorp. However, under Federal Reserve Board
regulations, control would be presumed to exist where the acquiring party
would have voting control of at least 10% of any class of Bancorp's voting
securities if (i) Bancorp has a class of voting securities which is
registered under Section 12 of the Exchange Act, or (ii) the acquiring party
would be the largest holder of a class of voting shares of Bancorp. The
statute and underlying regulations authorize the Federal Reserve Board to
disapprove the proposed acquisition on certain specified grounds. The FDIC
has adopted substantially similar regulations under the CBCA which would
apply to the acquisition of control of an FDIC insured bank such as the Bank.
Under the BHC Act, prior approval of the Federal Reserve Board is
generally required for an acquisition of control of a bank by any "company"
defined under the BHCA. Control for purposes of the BHCA would be based on a
25% voting stock test or on the ability of the acquiror otherwise to control
the election of a majority of the Board of Directors of the Bank or Bancorp
or on the ability of the acquiror to exert controlling influence over the
management and policies of the Bank or Bancorp (as set forth in the BHCA). As
part of such acquisition, the acquiring company (unless already so
registered) would be required to register as a bank holding company under the
BHCA.
A bank holding company's business activities are generally limited to
those activities which the Federal Reserve Board determines to be so closely
related to banking or managing or controlling banks as to be a proper
incident thereto. Registration as a bank holding company would generally
require divestiture or other termination of other business activities not
approved for bank holding companies by the Federal Reserve Board under the
foregoing test.
In addition to the aforementioned state and federal laws governing the
acquisition of stock of a bank or a bank holding company, there are various
provisions of Massachusetts law which apply to the acquisition of stock of
business corporations and banks.
BANK REGULATION. As a Massachusetts-chartered, FDIC insured savings bank,
the Bank is subject to regulation and supervision by the Commissioner and the
FDIC. After the Reorganization, the Bank will continue to be subject to such
regulation and supervision.
MASSACHUSETTS LAW. As a Massachusetts-chartered, stock form savings bank,
the Bank now is, and following consummation of the Reorganization will
continue to be, subject to regulation and examination by the Commissioner.
The Massachusetts statutes and regulations govern, among other things,
lending and investment powers, deposit activities, borrowings, maintenance of
surplus and reserve accounts, distribution of earnings, and payment of
dividends. The Bank is also subject to state regulatory provisions covering
such matters as issuance of capital stock, branching, and mergers and
acquisitions. Bancorp has been incorporated as a business corporation under
Massachusetts law. Thus, Bancorp is subject to regulation by the Secretary of
State of Massachusetts and the rights of its stockholders are governed by
Massachusetts corporate law.
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PROPOSED LEGISLATION. From time to time, various types of federal and
state legislation have been proposed that could result in additional
regulation of, and restrictions on, the business of the Bank or Bancorp. It
cannot be predicted whether any legislation currently being considered will
be adopted or how such legislation or any other legislation that might be
enacted in the future would affect the business of the Bank or Bancorp.
CERTAIN FEDERAL TAX MATTERS. If the Reorganization is consummated,
Bancorp and the Bank intend to file consolidated federal income tax returns,
which would have the effect of eliminating inter-company distributions,
including dividends, in the computation of consolidated taxable income.
Bancorp and the Bank are required to file unconsolidated state income tax
returns.
If the Bank adopts the reserve method under Section 593 of the Code for
computing its bad debt reserve deduction for federal income tax purposes for
its taxable year ending October 31, 1996, even though Bancorp and the Bank
plan to file consolidated federal income tax returns, distributions from the
Bank to Bancorp would have significant adverse tax consequences to the Bank
to the extent that the distributions were deemed to be out of the Bank's bad
debt reserve (to the extent that the amount in the bad debt reserve account
exceeds the amount that would be in such account had the Bank always used the
experience method when making additions to such account), rather than its
current or accumulated earnings and profits. The amount deemed distributed
out of the bad debt reserve (which would be approximately 1.52 times the net
amount actually distributed to Bancorp) would increase the Bank's federal
taxable income and be subject to federal income tax rates of up to 34%.
However, a dividend distribution will be deemed to be out of the bad debt
reserve only if it exceeds the sum of the current and accumulated earnings
and profits of the Bank. Some or all of the Bank's accumulated earnings and
profits for tax purposes are expected to be transferred to Bancorp by the
Bank as part of the Reorganization. The actual amount of the distribution
will be adjusted to the extent necessary to avoid any taxable income to the
Bank. See "--Financial Resources of Bancorp." Bancorp has no present intention
of causing the Bank to pay cash dividends that would result in the Bank being
required to recognize taxable income.
Although it is intended that Bancorp, the Bank and their subsidiaries
will file consolidated federal income tax returns, in general, only the
income of the Bank may be considered in determining the amount the Bank is
permitted to deduct as an addition to its bad debt reserve for federal income
tax purposes. However, if other members of the group of corporations filing
consolidated returns with the Bank incur losses that are "functionally
related" to the Bank's business, such losses will be taken into account for
purposes of determining the Bank's allowable deduction for additions to its
bad debt reserve.
CONSEQUENCES OF THE REORGANIZATION UNDER FEDERAL SECURITIES LAWS. Upon
consummation of the reorganization, the reporting obligations of the Bank
under the Securities and Exchange Act of 1934 (the "Exchange Act"), as
administered by the FDIC, will be replaced with substantially identical
obligations of Bancorp under the Exchange Act, as administered by the
Securities and Exchange Commission ("SEC"). Pursuant to the Exchange Act,
Bancorp will file annual, quarterly and periodic reports with the SEC.
Bancorp will also be subject to the insider trading requirements of Sections
16(a) and 16(b) of the Exchange Act as administered by the SEC.
Upon consummation of the Reorganization, Bancorp intends to file a
Registration Statement on Form S-8 to register the issuance by Bancorp of
shares of Common Stock under the Stock Option Plans.
The issuance of Bancorp Common Stock in connection with the
Reorganization is exempt from registration under the Securities Act of 1933,
as amended (the "Securities Act"), as a result of a new Section 3(a)(12) of
the Securities Act. Section 3(a)(12) exempts securities issued in connection
with the acquisition of a bank by a newly formed holding company from the
registration requirements of the Securities Act. In order to qualify for the
exemption (i) the acquisition must occur solely as part of a reorganization
in which security holders exchange their shares of the bank for shares of a
newly formed holding company with no significant assets other than securities
of the bank and its existing subsidiaries, (ii) the security holders must
receive the same proportional share interests in the holding company as they
held in the bank (except for changes resulting from elimination of fractional
interests and the exercise of dissenters' rights), (iii) the rights and
interests of security holders in the holding company must be substantially
the same as those in the bank prior to the transaction, other than as
required by law, and (iv) the assets and liabilities of the holding company
on a consolidated basis must be substantially the same assets and liabilities
as the bank prior to the transaction.
The exemption under Section 3(a)(12) would not apply to future issuances
of Bancorp Common Stock. Such future issuances would be subject to the
registration requirements of the Securities Act, unless another exemption
under the Securities Act were available. In addition, the Section 3(a)(12)
exemption does not cover the resale of any of Bancorp Common Stock issued in
connection with the Reorganization. Bancorp Common Stock received by persons
who are not affiliates of the Bank or Bancorp may be resold without
registration. Shares received by affiliates of the Bank of Bancorp will be
subject to the resale restrictions of Rule 145 under the Securities Act,
which are substantially the same as the restrictions of Rule 144 discussed
below. The Rule 145 restrictions terminate after two years, if Bancorp
continues to comply with the reporting requirements under the Exchange Act,
but any affiliate of the Bank who becomes an affiliate of Bancorp will
continue to be subject to the restrictions of Rule 144.
-31-
If Bancorp meets the current public information requirements of Rule 144
under the Securities Act, each affiliate of the Bank who complies with the
other conditions of Rule 144, including requirements as to the manner of sale
and aggregation of affiliate sales with those of certain other persons, would
be able to sell in the public market without registration, in any three-month
period, a number of shares not to exceed the greater of 1% of the outstanding
shares of Bancorp, or the average weekly volume of trading in such shares
during the preceding four calendar weeks.
Each person who controls, or is a member of a group which controls, or
who is under common control with, the Bank at the time the Plan of
Reorganization is submitted for a vote of the stockholders of the Bank may,
in connection with any distribution after the Reorganization of securities of
Bancorp to be received in the Reorganization, be deemed to be an underwriter
within the meaning of the Securities Act.
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PROPOSAL IV -- ELECTION OF CLERK
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Massachusetts General Laws Ch. 172, Section 14 provides that the Clerk of
the Bank shall be elected by the Stockholders. Shares represented by the
enclosed proxy will be voted to elect Douglas C. Purdy to serve as Clerk of
the Bank until the next election, or until a successor is elected and
qualified, unless otherwise specified in the proxy.
Mr. Purdy is an attorney at Serafini, Purdy, DiNardo and Wells of Quincy,
Massachusetts. He is 53 years old.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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PROPOSAL V -- SELECTION OF AUDITORS
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The Board of Directors recommends that the stockholders approve the
selection of Arthur Andersen LLP as independent auditors for the Bank to
certify the Annual Report of Condition of the Bank for the year ending
December 31, 1996.
Arthur Andersen LLP was engaged as of June, 1990, and has certified the
Annual Report of Condition of the Bank from December 31, 1990. The Audit
Committee and the Board of Directors approved the engagement of Arthur
Andersen LLP in June of 1990. In 1995, the Bank paid Arthur Andersen $85,550,
of which amount $57,000 was for audit work and $28,550 was for tax return
preparation. Prior to completion of the work, the services to be provided
were approved by, and the possible effect on the independence of the
accountant was considered by, the Audit Committee.
It is expected that a representative of Arthur Andersen LLP will attend
the stockholders meeting; such representative will be afforded the
opportunity to make a statement if he desires to do so and will be available
to respond to appropriate questions. Ms. Campbell and Messrs. Murney, Dwyer
and Lucey are members of the Audit Committee and are also expected to attend
the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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STOCKHOLDER PROPOSALS
- -------------------------------------------------------------------------------
The Bank will entertain proposals of stockholders. Stockholder proposals
relating to the April 28, 1997 Annual Meeting must be received by the Bank at
its executive offices on or before December 30, 1996 and should be addressed
to Douglas C. Purdy, Clerk.
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OTHER MATTERS
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As of the date of this statement, management knows of no other matters
which will be presented to the meeting, which are not referred to in the
accompanying notice. However, regarding the other matters, if any, which may
properly come before the meeting and as to matters incident to the conduct of
the meeting, it is the intention of the persons named in the accompanying
form of proxy to vote such proxies in accordance with their judgment.
By order of the Board of Directors
Douglas C. Purdy, CLERK
Quincy, Massachusetts
March 15, 1996
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EXHIBIT A
PLAN OF REORGANIZATION AND ACQUISITION
THIS PLAN OF REORGANIZATION AND ACQUISITION (the "Plan of
Reorganization"), dated as of February 15, 1996, is made and entered into by
and between The Hibernia Savings Bank, a Massachusetts-chartered savings bank
in stock form (the "Bank"), and Emerald Isle Bancorp, Inc., a Massachusetts
corporation (the "Holding Company"), pursuant to Chapter 172, Section 26B of
the Massachusetts General Laws ("MGL").
The parties hereto desire to enter into a Plan of Reorganization whereby
the corporate structure of the Bank will be reorganized into holding company
form of ownership. The result of such reorganization (the "Reorganization")
will be that, at and after the Effective Time (as defined in Section 2
below), all of the issued and outstanding shares of common stock of the Bank
("Bank Common Stock"), $1.00 par value per share, will be held by the Holding
Company, and the holders of the issued and outstanding shares of common stock
of the Bank, except for those stockholders exercising dissenters' rights in
accordance with Chapter 156B, Sections 86 to 98 of the MGL, will become the
holders of the issued and outstanding shares of common stock of the Holding
Company ("Holding Company Common Stock"), $1.00 par value 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 Chapter 172,
Section 26B of the MGL and this Plan of Reorganization. The Plan of
Reorganization has been adopted and approved by a vote of two-thirds of the
members of the Board of Directors of the Bank and by a vote of two-thirds of
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 of Reorganization.
NOW, THEREFORE, and in consideration of the premises, the Bank and the
Holding Company agree as follows:
SECTION 1 - APPROVAL AND FILING OF PLAN OF REORGANIZATION
1.1 The Plan of Reorganization shall be submitted for approval by the
holders of Bank Common Stock at the Annual Meeting of Stockholders, scheduled
for April 29, 1996, or at a special meeting to be called and held in
accordance with the applicable provisions of law. Notice of such special
meeting shall be published at least once a week for two successive weeks in a
newspaper of general circulation in the County of Norfolk, Commonwealth of
Massachusetts or for such other times and such other publications as may be
required by law or regulation.
1.2 Upon approval of the Plan of Reorganization by the holders of
two-thirds of the outstanding shares of Bank Common Stock as required by law,
the Bank and the Holding Company shall submit the Plan of Reorganization to
the Commissioner of Banks of the Commonwealth of Massachusetts (the
"Commissioner") for his approval and filing in accordance with the provisions
of Chapter 172, Section 26B of the MGL. The Plan of Reorganization 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 the Plan of Reorganization not be filed by the Commissioner until
such further time as the Commissioner shall have received from the Bank and
the Holding Company the written notice described in Section 2.1.
1.3 If the requisite approval of the Plan of Reorganization is obtained
at the meeting of the holders of Bank Common Stock referred to in Subsection
1.1, thereafter and until the Effective Time, as hereafter defined, the Bank
shall issue certificates for Bank Common Stock, whether upon transfer or
otherwise, only if such certificates bear a legend indicating that the Plan
of Reorganization has been approved and that shares of Bank Common Stock
evidenced by such certificates are subject to acquisition by the Holding
Company pursuant to the Plan of Reorganization.
SECTION 2 - DEFINITION OF EFFECTIVE TIME
2.1 The Plan of Reorganization shall become effective at 12:01 A.M. on
the first business day following the date on which the Bank and the Holding
Company advise the Commissioner in writing (i) that all the conditions
precedent to the Plan of Reorganization becoming effective specified in
Section 5 have been satisfied and (ii) that the Plan of Reorganization has
not been abandoned by the Bank or the Holding Company in accordance with the
provisions of Section 6, or at such other date and time as is specified in
such written notice to the Commissioner. Such time is hereafter called the
"Effective Time."
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SECTION 3 - ACTIONS AT THE EFFECTIVE TIME
3.1 Each share of Bank Common Stock issued and outstanding immediately
prior to the Effective Time (other than any shares of Bank Common Stock held
by a stockholder who exercises dissenters' rights under applicable provisions
of the MGL, as set forth below) shall, at the Effective Time, automatically
and by operation of law, be converted into one share of Holding Company
Common Stock.
3.2 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 the then issued and outstanding shares of Bank Common Stock
and 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.
3.3 At the Effective Time, the holders of the then issued and outstanding
shares of Bank Common Stock (except for any such holder who exercises
dissenters' rights) 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 previously held by
them. 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 Certificates representing shares of Bank Common Stock that are
outstanding immediately prior to the Effective Time (the "Old Certificates")
shall, at the Effective Time, 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.
3.5 At the Effective Time, the holders of Old Certificates shall cease to
be holders of Bank Common Stock and shall have no rights as stockholders of
the Bank other than (i) to receive shares of Holding Company Common Stock
into which the shares of Bank Common Stock evidenced by such Old Certificates
have been converted in accordance with the provisions of Section 3.1 hereof,
and (ii) the rights afforded to the Bank stockholders who chose to exercise
dissenters' rights under applicable provisions of the MGL.
3.6 Notwithstanding any of the foregoing, any Dissenting Stockholder, as
defined in Subsection 8.1, shall have such rights as are provided by
Subsection 8.2 and by the laws of the Commonwealth of Massachusetts.
SECTION 4 - ACTIONS AFTER THE EFFECTIVE TIME
Section 4.1 After the Effective Time, there shall be no transfers on
the stock transfer books of Bank of shares of Bank Common Stock that were
issued and outstanding immediately prior to the Effective Time and converted
into shares of Holding Company Common Stock pursuant to the provisions of
Section 3.1.
As soon as practicable and in any event not more than thirty days after
the Effective Time:
Section 4.2 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 Old Certificates (other than Old Certificates representing
shares of Bank Common Stock as to which dissenters' appraisal rights shall
have been exercised), 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 may, or if required by the
Holding Company in its sole discretion, 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
Certificates are issued.
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4.3 The Holding Company shall publish, in accordance with applicable law,
a notice to the holders of all Old Certificates, specifying the Effective
Time of the Plan of Reorganization 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. Such
notice shall likewise be given by mail to such holders at their addresses on
the Bank's records.
SECTION 5 - CONDITIONS PRECEDENT
This Plan of Reorganization and the acquisition provided for herein shall
not become effective unless all of the following first shall have occurred:
5.1 The holders of the outstanding shares of Bank Common Stock, at a
meeting of the stockholders of the Bank, duly called and held, shall have
adopted this Plan of Reorganization by the affirmative vote of stockholders
owning at least two-thirds in amount of the issued and outstanding shares of
Bank Common Stock.
5.2 The Plan of Reorganization shall have been approved by the
Commissioner and a copy of the Plan of Reorganization with his approval
endorsed thereon shall have been filed in his office, all as provided in
Chapter 172, Section 26B of the MGL.
5.3 Any approval, consent, or waiver required by the Board of Governors
of the Federal Reserve System shall have been received and any waiting period
imposed by applicable law shall have expired.
5.4 All approvals from any other state or federal governmental agency
having jurisdiction necessary for the lawful consummation of the
Reorganization as contemplated by this Plan of Reorganization shall have been
obtained, all conditions imposed by such regulatory approvals shall have been
satisfied, and all waiting periods required in connection with any such
approvals shall have expired.
5.5 The Bank shall have received a favorable opinion or opinions from its
independent auditors or legal counsel, satisfactory in form and substance to
the Bank, with respect to the federal and state income tax consequences of
the Plan of Reorganization and the Reorganization contemplated thereby.
5.6 The shares of Holding Company Common Stock to be issued to the
stockholders of the Bank pursuant to this Plan of Reorganization, shall have
been duly registered or qualified for such issuance to the extent required
under all applicable state securities laws.
5.7 The Bank and the Holding Company shall have obtained all other
consents, permissions and approvals and shall have taken all actions required
by law or agreement, or deemed necessary by the Bank or the Holding Company
prior to the consummation of the acquisition provided for in the Plan of
Reorganization and to the Holding Company's having and exercising all rights
of ownership with respect to all of the outstanding shares of Bank Common
Stock acquired by it under this Agreement.
SECTION 6 - ABANDONMENT OF THE PLAN OF REORGANIZATION
6.1 The Plan of Reorganization 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, shall make consummation of the
acquisition contemplated by the Plan of Reorganization 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 the Plan of Reorganization which shall make
consummation of the acquisition contemplated by the Plan of Reorganization
inadvisable in the opinion of the Bank or the Holding Company; or
(c) For any other reason consummation of the acquisition contemplated by
the Plan is inadvisable in the opinion of the Bank or the Holding Company.
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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, the Plan of Reorganization shall be terminated and
there shall be no liability hereunder or on account of such 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 abandonment of the Plan of
Reorganization, the Bank shall pay the fees and expenses incurred by itself
and the Holding Company in connection with the Plan of Reorganization and
proposed acquisition. If either party hereto gives written notice of
termination to the other party pursuant to this section, the party giving
such written notice shall simultaneously furnish a copy thereof to the
Commissioner.
SECTION 7 - AMENDMENT OF PLAN OF REORGANIZATION
7.1 Any of the terms or conditions of the Plan of Reorganization may be
amended or modified in whole or in part at any time, to the extent permitted
by applicable law, rules, and regulations, by an amendment in writing,
provided that any such amendment or modification is not materially adverse to
the Bank, the Holding Company or their stockholders. In the event that any
governmental agency requests or requires regulatory approval for favorable
ruling, or that in the opinion of counsel to the Bank, such modification is
necessary to obtain such approval or ruling, this Plan of Reorganization may
be modified, at any time before or after adoption thereof by the stockholders
of the Bank, by an instrument in writing, provided that the effect of such
amendment would not be materially adverse to the Bank, the Holding Company or
their stockholders.
SECTION 8 - RIGHTS OF DISSENTING STOCKHOLDERS
8.1 "Dissenting Stockholders" shall mean those holders of Bank Common
Stock who file with the Bank before the taking of the vote on the Plan of
Reorganization, written objection to the Plan of Reorganization, pursuant to
Chapter 156B, Section 86 of the MGL, stating that they intend to demand
payment for their shares of Bank Common Stock if the Plan of Reorganization
is consummated and whose shares are not voted in favor of the Plan of
Reorganization.
8.2 Dissenting Stockholders who comply with the provisions of Chapter
156B, Sections 86 to 98, inclusive, of the MGL 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 shares of Bank
Common Stock. Certificates so 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 but
unissued shares of Holding Company Common Stock and may be sold 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
9.1 By voting in favor of this Plan of Reorganization, the Holding
Company shall have approved adoption of The Hibernia Savings Bank 1986 Stock
Option Plan, The Hibernia Savings Bank 1989 Stock Option Plan, and The
Hibernia Savings Bank 1995 Premium Incentive Stock Option Plan as the stock
option plans of the Holding Company and shall have agreed to issue Holding
Company Common Stock in lieu of Bank Common Stock pursuant to options
currently outstanding under the existing Stock Option Plans. As of the
Effective Time, the Stock Option Plans shall automatically, by operation of
law, be continued as, and become the stock option plans of the Holding
Company. Further, at the Effective Time, each option to purchase shares of
Bank Common Stock under the Stock Option Plans outstanding and unexercised
immediately prior to the Effective Time shall automatically be converted into
an identical option, with identical price, terms and conditions, to purchase
an identical number of shares of Holding Company Common Stock in lieu of
shares of Bank Common Stock. The Holding Company and the Bank shall make
appropriate amendments to the Stock Option Plans to reflect the adoption of
the Stock Option Plans as the stock option plans of the Holding Company,
without adverse effect upon the options outstanding as of the Effective Time
under the Stock Option Plans.
9.2 By voting in favor of this Plan of Reorganization, the Holding
Company shall also have approved The Hibernia Savings Bank 1989 Stock
Purchase Plan and The Hibernia Savings Bank 1995 Automatic Dividend
Reinvestment and Common Stock Purchase Plan as the stock purchase plans of
the Holding Company. As of the Effective Time, the Stock Purchase Plans shall
automatically, by operation of law, be continued as and become the stock
purchase plans of the Holding Company. Further, at the Effective Time, all
rights to purchase shares of Bank Common Stock under the existing Stock
Purchase Plans shall automatically, by operation of law, be converted into
and shall become identical rights to purchase Holding Company Common Stock
upon identical terms and conditions. The Bank shall make appropriate
amendments to the Stock Purchase Plans, effective as of the Effective Time,
to reflect the substitution of rights to purchase Holding Company Common
Stock for rights to purchase Bank Common Stock.
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SECTION 10 - GOVERNING LAW
10.1 This Plan of Reorganization 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
11.1 This Plan of Reorganization may be executed in several identical
counterparts, each of which when executed by the parties hereto and delivered
shall be an original, but all of which together shall constitute a single
instrument.
SECTION 12 - HEADINGS
12.1 The headings contained in this Plan of Reorganization are for
reference purposes only and shall not be deemed to be part of this Plan of
Reorganization.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of
Reorganization and Acquisition to be executed by their duly authorized
officers as of the date first above written.
THE HIBERNIA SAVINGS BANK
Attest: /s/ Gerard F. Linskey By: /s/ Mark A. Osborne
----------------------- -------------------------
Mark A. Osborne
Chairman of the Board and
Chief Executive Officer
EMERALD ISLE BANCORP, INC.
Attest: /s/ Gerard F. Linskey By: /s/ Mark A. Osborne
----------------------- --------------------------
Mark A. Osborne, President
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EXHIBIT B
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:
Emerald Isle Bancorp, Inc.
ARTICLE II
The purpose of the corporation is to engage in the
following business activities:
To acquire, invest in or hold 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 to engage in any
other permissible activity or enterprise under said statutes or other
applicable law.
To engage generally in any business activity which may be lawfully
carried on by a corporation organized under Chapter 156B of the Massachusetts
General Laws.
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: 10,000,000 $1.00
Preferred: Preferred: 5,000,000 $1.00
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 Continuation Sheet IV attached.
NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICENT, ADDITIONS SHALL BE SET FORTH ON ONE SIDE ONLY OF SEPARATE 8 1/2
X 11 SHEETS OF PAPER WITH A LEFT MARGIN OF AT LEAST 1 INCH. ADDITIONS TO MORE
THAN ONE ARTICLE MAY BE MADE ON A SINGLE SHEET SO LONG AS EACH ARTICLE
REQUIRING EACH ADDITION IS CLEARLY INDICATED.
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CONTINUATION SHEET IV
CAPITAL STOCK
The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 15,000,000, of which 10,000,000 are to
be shares of common stock, of $1.00 par value per share, and of which
5,000,000 are to be shares of serial preferred stock, of $1.00 par value per
share. The shares may be issued by the Corporation from time to time as
approved by the Board of Directors of the Corporation without the approval of
the stockholders except as otherwise provided in this Article IV or the rules
of a national securities exchange if applicable. The consideration for the
issuance of the shares shall be paid to or received by the Corporation in
full before their issuance and shall not be less than the par value per
share. The consideration for the issuance of the shares shall be cash,
services rendered, personal property (tangible or intangible), real property,
leases of real property or any other consideration deemed appropriate by the
Board of Directors. In the absence of actual fraud in the transaction, the
judgment of the Board of Directors as to the value of such consideration
shall be conclusive. Upon payment of such consideration, such shares shall be
deemed to be fully paid and nonassessable. In the case of a stock dividend,
the part of the surplus of the Corporation which is transferred to stated
capital upon the issuance of shares as a stock dividend shall be deemed to be
the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series
(if any) of capital stock, and the qualifications, limitations or
restrictions thereof, are as follows:
A. COMMON STOCK. Except as provided in these Articles (or in any
certificate of establishment of 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 for each share. 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 sinking fund or 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 of the
Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having
preference over the common stock in any such event 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 therewith,
in whole or in part, 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.
Each share of common stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects with, all
the other shares of common stock of the Corporation.
B. SERIAL PREFERRED STOCK. Subject to any limitations prescribed by law
or these Articles, the Board of Directors of the Corporation is authorized,
by vote from time to time taken, to provide for the issuance of serial
preferred stock in one or more series and to fix and state the powers,
designations, preferences and relative, participating, optional or other
special rights of the shares of each such series, and the qualifications,
limitations or restrictions thereof, including, but not limited, to
determination of any 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, full or limited, if any, of the 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 upon which such shares
may be redeemed;
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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 benefits
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;
7. whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or 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 subscription or purchase price and form of consideration for
which the shares shall be issued; and
9. whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any
other series of serial preferred stock.
Any establishment of a series of preferred stock by the Board of
Directors shall become effective when the Corporation files with the
Secretary of State of the Commonwealth of Massachusetts a certificate of
establishment of series of preferred stock, signed under the penalties of
perjury 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 of the Corporation.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon
the transfer of shares of stock of any class are:
See Continuation Sheet V attached.
CONTINUATION SHEET V
ARTICLE V(A)
REGULATION OF CONTROL SHARE ACQUISITIONS
Pursuant to M.G.L. c. 110D, Section 2(d), the Corporation hereby elects
not to be governed by the provisions of Chapter 110D.
ARTICLE V(B)
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
Pursuant M.G.L. c. 110F, Section 2(a), the Corporation hereby elects not
to be governed by the provisions of Chapter 110F.
ARTICLE V(C)
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
The affirmative vote of at least two-thirds of the total votes eligible
to be cast by stockholders, at a meeting expressly called for such purpose,
(and, if any class or series of shares is entitled to vote thereof
separately, the affirmative vote of the holders of at least two-thirds of the
outstanding shares) shall be required in order to authorize any (i) sale,
lease, exchange or other disposition, including without limitation, a
mortgage, or any other security device, of all or substantially all of the
property or assets, including goodwill, of the Corporation, (including
without limitation, any voting securities of a subsidiary), (ii) merger or
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consolidation of the Corporation with or into any other corporation or (iii)
any reclassification of the common stock of the Corporation, or any
recapitalization involving the common stock of the Corporation.
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 Continuation Sheet VI attached.
**IF THERE ARE NO PROVISIONS STATE "NONE".
NOTE: THE PRECEDING SIX (6) ARTICLES ARE CONSIDERED TO BE PERMANENT AND MAY ONLY
BE CHANGED BY FILING APPROPRIATE ARTICLES OF AMENDMENT.
CONTINUATION SHEET VI
ARTICLE VI(A)
PRE-EMPTIVE RIGHTS
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any pre-emptive
right to purchase or subscribe for any unissued stock of any class or series,
or any unissued bonds, charters of indebtedness, debentures or other
securities convertible into or exchangeable for stock of any class or series
or carrying any right to purchase stock of any class or series. Any such
unissued stock, bonds, charters of indebtedness, debentures or other
securities convertible into or exchangeable for stock or carrying any right
to purchase stock may be issued pursuant to a vote of the Board of Directors
of the Corporation to such persons, firms, corporations or associations,
whether or not holders thereof, and upon such terms as may be deemed
advisable by the Board of Directors in the exercise of its sole discretion.
ARTICLE VI(B)
REPURCHASE OF SHARES
The Corporation may, from time to time, pursuant to authorization by the
Board of Directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness, or other securities
of the Corporation in such manner, upon such terms, and in such amounts as
the Board of Directors shall determine; subject, however, to such limitations
or restrictions, if any, as are contained in the express terms of any class
of shares of the Corporation outstanding at the time of the purchase or
acquisition in question or as are imposed by applicable law.
ARTICLE VI(C)
DIRECTORS
The number of Directors of the Corporation shall be such number, not less
than three as shall be provided from time to time, provided that no decrease
in the number of Directors shall have the effect of shortening the term of
any incumbent Director.
The Board of Directors of the Corporation shall be divided into three
classes of Directors as nearly equal in number as possible, with one class to
be elected annually. The initial Directors of the Corporation shall hold
office as follows: the first class of Directors shall hold office initially
for a term expiring at the annual meeting of stockholders to be held in 1997,
the second class of Directors shall hold office initially for a term expiring
at the annual meeting of stockholders to be held in 1998, and the third class
of Directors shall hold office initially for a term expiring at the annual
meeting of stockholders to be held in 1999, with the members of each class to
hold office until their respective successors are duly elected and qualified.
At each annual meeting of stockholders of the Corporation, the successors to
the class of Directors whose term expires at the meeting shall be
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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. Should the
number of Directors of the Corporation be increased, the additional
directorships shall be allocated among classes as appropriate so that the
number of Directors in each class is as nearly equal as possible.
ARTICLE VI(D)
REMOVAL OF DIRECTORS
Any Director may be removed with or without cause by a vote of two-thirds
of the Directors then in office, unless at the time of such action there is
an Interested Stockholder, in which case the affirmative vote of two-thirds
of the Continuing Directors shall also be required.
ARTICLE VI(E)
LIMITATION OF LIABILITY OF DIRECTORS
No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director notwithstanding any provision of law imposing such
liability; provided, however, that this Article VI(E) shall not eliminate or
limit any liability of a Director (i) for any breach of the Director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or emissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Sections 61 or 62 of Chapter 156B of the
Massachusetts General Laws or (iv) with respect to any transaction from which
the Director derived an improper personal benefit.
No amendment or repeal of this Article VI(E) shall adversely affect the
rights and protection afforded to a Director of this Corporation under this
Article VI(E) for acts or omissions occurring prior to such amendment or
repeal. If the Massachusetts Business Corporation Law is hereafter amended to
further eliminate or limit the personal liability of Directors or to
authorize corporate action to further eliminate or limit such liability, then
the liability of the Directors of this Corporation shall be eliminated or
limited to the fullest extent permitted by Massachusetts Business Corporation
Laws as so amended.
ARTICLE VI(F)
ACTING AS PARTNER
The Corporation may be a partner in any business enterprise which it
would have power to conduct by itself.
ARTICLE VI(G)
AMENDMENT OF BY-LAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make,
repeal, alter, amend and rescind the by-laws of the Corporation by the
affirmative vote of not less than two-thirds of the Directors then in office,
unless at the time of such action, there is an Interested Stockholder, in
which case the affirmative vote of not less than two-thirds of the Continuing
Directors shall also be required. Notwithstanding any other provision of
these Articles or the by-laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law), the by-laws shall
not be made, repealed, altered, amended, or rescinded by the stockholders of
the Corporation except by the vote of the holders of not less than two-thirds
of the outstanding shares of capital stock of the Corporation (considered for
this purpose as one class) cast at a meeting of the stockholders called for
that purpose (provided that notice of such proposed adoption, repeal,
alteration, amendment or rescission is included in the notice of such
meeting).
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ARTICLE VI(H)
AMENDMENT OF ARTICLES OF ORGANIZATION
Any amendment, addition, alteration, change or repeal of these Articles
of Organization regarding, (i) an increase or reduction of the capital stock
or of any authorized class, (ii) a change of the par value of any authorized
shares or class thereof, (iii) a change of the authorized shares with par
value or any class thereof into any number of shares without par value, or
the exchange thereof pro rata for any number of shares without par value,
(iv) a change of the authorized shares without par value or any class thereof
into a greater or lesser number of shares without par value, or the exchange
thereof pro rata for a greater or lesser number of shares without par value,
(v) a change of the authorized shares with par value or any class thereof
into a greater or lesser number of shares with par value, or the exchange
thereof pro rata for a greater or lesser number of shares with par value,
(vi) a change of the authorized shares without par value or any class thereof
into any number of shares with par value, or the exchange thereof pro rata
for any number of shares with par value or, (vii) a change of the corporate
name may be made if first approved by the affirmative vote of two-thirds of
the Board of Directors of the Corporation then in office (unless at the time
of such action there is an Interested Stockholder, in which case the
affirmative vote of two-thirds of the Continuing Directors shall also be
required) and thereafter approved by the affirmative vote of a majority of
the stockholders.
No other amendment, addition, alteration, change or repeal of these
Articles of Organization shall be made unless first approved by the
affirmative vote of two-thirds of the Board of Directors of the Corporation
then in office, and thereafter approved by the affirmative vote of not less
than two-thirds of the total votes eligible to be cast at a duly constituted
meeting of stockholders. Notwithstanding the foregoing, 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
provision may only be amended, altered, changed or repealed if such action
shall have been approved by not less than two-thirds of the Continuing
Directors then in office. 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 in the Secretary of State may specify.
As used in these Articles, the phrase "Interested Stockholder" shall have
the meaning as set forth in the by-laws of the Corporation.
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 the 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:
730 Hancock Street, Quincy, Massachusetts 02170
b. The name, residence address and post office address of each Director
and officer of the corporation is as follows:
NAME RESIDENTIAL ADDRES POST OFFICE ADDRESS
President: Mark A. Osborne 100 Brigantine Circle 100 Brigantine Circle
Norwell, MA 02061 Norwell, MA 02061
Treasurer: Gerard F. Linskey 1299 South River Street 1299 South River Street
Marshfield, MA 02050 Marshfield, MA 02050
Clerk: Douglas C. Purdy 115 Branch Street 115 Branch Street
Scituate, MA 02066 Scituate, MA 02066
Directors: See Continuation Sheet VIII Attached.
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CONTINUATION SHEET VIII
DIRECTORS
Name Residential Address Post Office Address
- ---- ------------------- --------------------
Richard P. Quincy 41 Countryside Lane 41 Countryside Lane
Milton, MA 02186 Milton, MA 02186
Douglas C. Purdy 115 Branch Street 115 Branch Street
Scituate, MA 02066 Scituate, MA 02066
Peter L. Maguire 405 North Street 405 North Street
Duxbury, MA 02332 Duxbury, MA 02332
John V. Murphy 651 Main Street 651 Main Street
Hingham, MA 02043 Hingham, MA 02043
Thomas P. Moore, Jr. 68 Abbot Road 68 Abbot Road
Wellesley, MA 02181 Wellesley, MA 02181
Michael T. Putziger 30 King Street 30 King Street
Cohasset, MA 02025 Cohasset, MA 02025
Mark A. Osborne 100 Brigantine Circle 100 Brigantine Circle
Norwell, MA 02061 Norwell, MA 02061
c. The fiscal year (i.e., tax year) of the corporation shall end on the
last day of the month of October
d. The name and business address of the resident agent, if any, of the
corporation is:
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/we,
whose signature(s) appear below as incorporator(s) and whose name(s) and
business or residential address(es) 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(s) this 9th day of January, 1996.
/s/ Mark A. Osborne
The Hibernia Savings Bank
730 Hancock Street
Quincy, MA 02170
NOTE: IF AN EXISTING CORPORATION IS ACTING AS INCORPORATOR, TYPE IN THE EXACT
NAME OF THE CORPORATION, THE STATE OR OTHER JURISDICTION WHERE IT WAS
INCORPORATED, THE NAME OF THE PERSON SIGNING ON BEHALF OF SAID CORPORATION
AND THE TITLE HE/SHE HOLDS OR OTHER AUTHORITY BY WHICH SUCH ACTION IS TAKEN.
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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
$15,000.00 having been paid, said articles are deemed to have been filed with
me this 10th day of January 1996.
Effective date: ______________________
/s/ 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:
Anne H. Stossel
Roche, Carens & DeGiacomo
A Professional Corporation
One Post Office Square
Boston, MA 02109
Telephone (617) 451-9300
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EXHIBIT C
PROVISIONS OF THE GENERAL LAW OF MASSACHUSETTS
RELATING TO RIGHTS OF DISSENTING STOCKHOLDERS
(Sections 86 to 98 of Chapter 156B of the
General Laws of Massachusetts)
SECTION 86. Sections 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 Stockholder 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 nonexistence 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
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
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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 for 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.
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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