FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended 06/30/96
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 000-20809
SIS BANCORP, INC.
(Exact Name of Issuer as Specified in its Charter)
Massachusetts 04-3303264
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SIS BANCORP, INC.
1441 Main Street
Springfield, Massachusetts 01102
(Address of Principal Executive Offices) (Zip Code)
(413) 748-8000
(Issuers Telephone Number , Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of the registrant's common
stock, as of the latest practicable date: 5,722,600 shares as of August 8, 1996.
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Report contains certain "forward-looking statements" including statements
concerning plans, objectives, future events or performance and assumptions and
other statements which are other than statements of historical fact. SIS
Bancorp, Inc. and its subsidiaries (the "Company") wishes to caution readers
that the following important factors, among others, may have affected and could
in the future affect the Company's actual results and could cause the Company's
actual results for subsequent periods to differ materially from those expressed
in any forward-looking statement made by or on behalf on the Company herein: (i)
the effect of changes in laws and regulations, including federal and state
banking laws and regulations, with which the Company must comply, and the
associated costs of compliance with such laws and regulations either currently
or in the future as applicable; (ii) the effect of changes in accounting
policies and practices, as may be adopted by the regulatory agencies as well as
by the Financial Accounting Standards Board, or of changes in the Company's
organization, compensation and benefit plans; (iii) the effect on the Company's
competitive position within its market area of the increasing consolidation
within the banking and financial services industries, including the increased
competition from larger regional and out-of-state banking organizations as well
as nonbank providers of various financial services; (iv) the effect of
unforeseen changes in interest rates; and (v) the effect of changes in the
business cycle and downturns in the local, regional or national economies.
<PAGE>
SIS BANCORP, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 1996 and 1995.......................... 1
Condensed Consolidated Statements of Financial Condition
at June 30, 1996 and December 31, 1995..................................... 2
Condensed Consolidated Statements of Cash Flows for the
three and six months ended June 30, 1996 and 1995.......................... 3
Condensed Consolidated Statements of Changes in Stockholders' Equity
for the six months ended June 30, 1996 and 1995............................ 5
Notes to the Unaudited Financial Statements................................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................. 7
PART II OTHER INFORMATION
Item 1. Legal
Proceedings................................................................ 26
Item 2. Changes in Securities.............................................. 26
Item 3. Default upon Senior Securities..................................... 26
Item 4. Submission of Matters to a Vote of Security Holders................ 26
Item 5. Other Information.................................................. 26
Item 6. Exhibits and Reports on Form 8-K................................... 26
SIGNATURES..................................................................28
<PAGE>
<TABLE>
<CAPTION>
SIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
-------------------------- -------------------------
June June June June
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest and dividend income
Loans ......................................................... $ 11,922 $ 11,411 $ 23,474 $ 22,029
Investment securities available for sale ...................... 5,170 2,674 9,296 5,330
Investment securities held to maturity ........................ 3,269 2,769 6,215 5,053
Federal funds sold and interest bearing deposits .............. 45 153 259 617
---------- ---------- ---------- ----------
Total interest and dividend income ............. 20,406 17,007 39,244 33,029
---------- ---------- ---------- ----------
Interest expense
Deposits ...................................................... 7,992 7,528 16,068 14,244
Borrowings .................................................... 1,957 228 3,148 274
---------- ---------- ---------- ----------
Total interest expense ......................... 9,949 7,756 19,216 14,518
---------- ---------- ---------- ----------
Net interest and dividend income ...................................... 10,457 9,251 20,028 18,511
Less: Provision for possible loan losses .............................. 750 1,202 1,450 2,355
---------- ---------- ---------- ----------
Net interest and dividend income after provision
for possible loan losses ...................................... 9,707 8,049 18,578 16,156
Noninterest income:
Net gain (loss) on sale of loans .............................. 162 (4) 432 (10)
Net gain (loss) on sale of securities ......................... -- 10 2 14
Fees and other income ......................................... 2,575 2,188 4,884 4,236
---------- ---------- ---------- ----------
Total noninterest income ....................... 2,737 2,194 5,318 4,240
---------- ---------- ---------- ----------
Noninterest expense:
Operating expenses:
Salaries and employee benefits ....................... 4,242 3,672 8,492 7,708
Occupancy expense of bank premises, net .............. 795 805 1,577 1,705
Furniture and equipment expense ...................... 514 457 1,056 916
Other operating expenses ............................. 3,656 3,780 6,771 7,315
---------- ---------- ---------- ----------
Total operating expenses ...................... 9,207 8,714 17,896 17,644
---------- ---------- ---------- ----------
Foreclosed real estate expense ................................ 63 112 223 442
Net expense of real estate operations ......................... (148) 62 (162) 127
---------- ---------- ---------- ----------
Total noninterest expense ..................... 9,122 8,888 17,957 18,213
Income before income tax expense ...................................... 3,322 1,355 5,939 2,183
Income tax expense .................................................... 278 74 490 113
---------- ---------- ---------- ----------
Net income .................................... $ 3,044 $ 1,281 $ 5,449 $ 2,070
========== ========== ========== ==========
Earnings per share and pro forma earnings per share: (1)
Primary ...................................................... $ 0.56 $ 0.25 $ 1.00 $ 0.40
Fully diluted ................................................ $ 0.56 $ 0.25 $ 1.00 $ 0.40
Weighted average and pro forma weighted average shares outstanding: (1)
Primary ...................................................... 5,434,834 5,117,700 5,432,265 5,117,500
Fully diluted ................................................ 5,450,529 5,130,034 5,445,968 5,123,767
<FN>
(1) Net income per share for the three and six months ended June 30, 1996 is
computed on weighted average shares outstanding for the period. Net income per
share for the six months ended June 30, 1995 is computed on a pro forma basis as
if the conversion of the Bank from mutual to stock had been completed as of the
beginning of the period presented.
</FN>
</TABLE>
See accompanying Notes to the Unaudited Financial Statements
1
<PAGE>
<TABLE>
<CAPTION>
SIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands Except Share Amounts)
(Unaudited)
June 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks ..................................................... $ 35,931 $ 30,377
Federal funds sold and interest bearing deposits ............................ 10,045 8,045
Investment securities available for sale .................................... 337,444 246,984
Investment securities held to maturity (fair value: $192,728 at June 30, 1996
and $172,930 at December 31, 1995).......................................... 193,197 172,793
Loans receivable, net of allowance for possible losses
($ 14,913 at June 30, 1996 and $ 14,986 at December 31, 1995) .............. 578,635 558,663
Accrued interest and dividends receivable ................................... 7,946 7,109
Investments in real estate and real estate partnerships ..................... 5,494 6,092
Foreclosed real estate, net ................................................. 427 1,529
Bank premises, furniture and fixtures, net .................................. 25,602 25,706
Other assets ................................................................ 15,122 13,680
----------- -----------
Total assets ............................................................ $ 1,209,843 $ 1,070,978
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits .................................................................... $ 927,298 $ 885,386
Federal Home Loan Bank advances ............................................. 74,493 41,500
Securities sold under agreements to repurchase .............................. 91,400 31,101
Loans payable ............................................................... 3,026 5,470
Mortgage escrow ............................................................. 4,321 4,193
Accrued expenses and other liabilities ...................................... 22,309 21,859
----------- -----------
Total liabilities ..................................................... 1,122,847 989,509
----------- -----------
Stockholders' equity:
Preferred stock ($.01 par value; 5,000,000 shares
authorized: no shares issued and outstanding) ............................. -- --
Common stock ($.01 par value; 25,000,000 shares authorized; shares
issued and outstanding: 5,722,600 in 1996 and 5,710,700 in 1995) ............ 57 57
Unearned compensation ....................................................... (4,503) (4,937)
Additional paid in capital .................................................. 42,308 41,790
Retained earnings ........................................................... 48,282 42,833
Net unrealized gain (loss) on investment securities available for sale ...... 852 1,726
----------- -----------
Total stockholders' equity ............................................ 86,996 81,469
----------- -----------
Total liabilities and stockholders' equity .................................. $ 1,209,843 $ 1,070,978
=========== ===========
</TABLE>
See accompanying Notes to the Unaudited Financial Statements
2
<PAGE>
<TABLE>
<CAPTION>
SIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
(Unaudited)
Six Months Ended
June 30,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net income .............................................................................................. $ 5,449 $ 2,070
Adjustments to reconcile net income to net cash (used for)/
provided by operating activities
Provision for possible loan losses ................................................................. 1,450 2,355
Provision for foreclosed real estate ............................................................... -- 461
Depreciation ....................................................................................... 1,510 1,551
Amortization of premium on investment securities, net .............................................. 1,193 314
ESOP and restricted stock expenses ................................................................. 722 101
Investment security (gains) ........................................................................ (2) (14)
(Income) loss from equity investment in partnerships ............................................... (145) 1
(Gain) loss on sale of loans ....................................................................... (432) 10
Disbursements for mortgage loans held for sale ..................................................... (54,864) (29,251)
Receipts from mortgage loans held for sale ......................................................... 55,296 29,242
Loss on sale of fixed assets and real estate ....................................................... 342 158
Changes in assets and liabilities:
(Increase) in other assets, net ................................................................ (1,644) (73)
Decrease (increase) in accrued expenses and other liabilities .................................. 680 (12,464)
--------- ---------
Net cash (used for)/provided by operating activities ...................................... 9,555 (5,539)
--------- ---------
Cash Flows From Investing Activities
Proceeds from sales of investment securities - available for sale .................................. 12,200 9
Proceeds from maturities and principal payments received
on investment securities - available for sale .................................................... 71,652 54,326
Purchase of investment securities - available for sale .............................................. (176,695) (64,563)
Proceeds from maturities and principal payments received
on investment securities - held to maturity ...................................................... 25,862 7,476
Purchase of investment securities -held to maturity ................................................. (46,583) (50,046)
Proceeds from sale of investments in real estate partnerships ....................................... 475 --
Net change in loans receivable ...................................................................... (22,549) (44,923)
Net change in foreclosed real estate ................................................................ 1,767 242
Proceeds from sale of loans ......................................................................... 462 250
Proceeds from sale of fixed assets and leases ....................................................... -- 158
Purchase of fixed assets ............................................................................ (1,480) (2,805)
--------- ---------
Net cash (used for)/provided by investing activities ...................................... (134,889) (99,876)
--------- ---------
</TABLE>
See accompanying Notes to the Unaudited Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
SIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars In Thousands)
(Unaudited)
Six Months Ended
June 30,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Cash Flows from Financing Activities
Net proceeds from stock conversion .................................................................... -- 35,946
Net increase in deposits .............................................................................. 41,912 8,448
Net increase in borrowings ............................................................................ 90,848 50,837
Net increase (decrease) in mortgagors' escrow deposits ................................................ 128 (271)
-------- --------
Net cash provided by/(used for) financing activities ............................................ 132,888 94,960
-------- --------
Increase (decrease) in cash and cash equivalents ........................................................ 7,554 (10,455)
Cash and cash equivalents, beginning of year ............................................................ 38,422 55,720
-------- --------
Cash and cash equivalents, at quarter end ............................................................... $ 45,976 $ 45,265
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest to depositors
and interest on debt ....................................................................... $ 19,217 $ 14,075
Non-cash investing activities:
Transfers to foreclosed real estate, net ........................................................... $ 665 $ 74
</TABLE>
See accompanying Notes to the Unaudited Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
SIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
For The Six Months Ended June 30, 1996 and 1995
(Dollars In Thousands)
Net unrealized
gain (loss)
Additional on investment
Common Unearned Paid-In Retained securities avaliable
Stock Compensation Capital Earnings for sale Total
-------- ------------ ---------- -------- -------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ................. $ 57 $ (4,937) $ 41,790 $ 42,833 $ 1,726 $ 81,469
Net income ................................... -- -- -- 5,449 -- 5,449
Issuance of common stock ..................... -- -- -- -- -- --
Unearned compensation ........................ -- (315) 297 -- -- (18)
Decrease in unearned compensation ............ -- 749 221 -- -- 970
Change in unrealized gain (loss) on investment --
securities available for sale ............ -- -- -- -- (874) (874)
---------- --------- -------- -------- -------- --------
Balance at June 30, 1996 ..................... $ 57 $ (4,503) $ 42,308 $ 48,282 $ 852 $ 86,996
========== ========= ======== ======== ======== ========
Balance at December 31, 1994 ................. $ -- $ -- $ -- $ 31,624 $ (3,121) $ 28,503
Net income ................................... -- -- -- 2,070 -- 2,070
Issuance of common stock ..................... 56 -- 39,665 (250) -- 39,471
Unearned compensation ........................ -- (3,560) -- -- -- (3,560)
Decrease in unearned compensation ............ -- 190 101 -- -- 291
Change in unrealized gain (loss) on investment
securities available for sale ............ -- -- -- -- 4,011 4,011
-------- -------- -------- -------- -------- --------
Balance at June 30, 1995 ..................... $ 56 $ (3,370) $ 39,766 $ 33,444 $ 890 $ 70,786
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying Notes to the Unaudited
Consolidated Financial Statements
5
<PAGE>
SIS BANCORP, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. Holding Company Formation
SIS Bancorp, Inc., a Massachusetts corporation, was organized by Springfield
Institution for Savings (the "Bank") for the purpose of reorganizing the Bank
into a holding company structure. The Company acquired 100% of the outstanding
shares of the Bank's common stock, par value $1.00 per share, in a 1:1 exchange
for shares of the Company's common stock, par value $.01 per share (the "Company
Common Stock"). Upon the effectiveness of such share-for-share exchange (the
"Reorganization") on June 21, 1996, the Bank became the wholly-owned subsidiary
of the Company and the Bank's former stockholders became stockholders of the
Company. The Reorganization was accounted for as a pooling of interests, and
accordingly, the information included in the financial statements and their
accompanying notes presents the combined results of the Bank and the Company as
if the merger had been effected on January 1, 1995.
2. Condensed Consolidated Financial Statements
The Condensed Consolidated Financial Statements of the Company included herein
are unaudited, and in the opinion of Management all adjustments, consisting only
of normal recurring adjustments necessary for a fair presentation of the
financial condition, results of operations and cash flows, as of and for the
periods covered herein, have been made. Certain information and note disclosures
normally included in Condensed Consolidated Financial Statements prepared in
accordance with generally accepted accounting principles have been omitted as
they are included in the most recent Federal Deposit Insurance Corporation
("FDIC") Form F-2 Annual Report and accompanying Notes to the Financial
Statements (the "Form F2") filed by the Bank for the year ended December 31,
1995. The Form F-2 was included as Exhibit 99.3 in the Form 8-A registration
statement filed by the Company with the Securities and Exchange Commission on
June 3, 1996. Management believes that the disclosures contained herein are
adequate to make a fair presentation.
It is suggested that these unaudited condensed consolidated financial statements
be read in conjunction with the Form F-2.
The results for the three and six month interim periods covered hereby are not
necessarily indicative of the operating results for a full year.
3. New Accounting Pronouncements
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 122, "Accounting for Mortgage Service Rights". SFAS 122
amends certain provisions of SFAS 65, "Accounting for Certain Mortgage Banking
Activities", to eliminate the accounting distinction between rights to service
mortgage loans for others that are acquired through loan origination activities
and those acquired through purchase transactions. The adoption of this statement
did not have a material affect on the Company's financial position as of June
30, 1996 or on the results of its operations for the three and six month periods
then ended.
4. Dividend Policy
While the Company does not pay a cash dividend on its common stock at this time,
the Board of Directors of the Company periodically reviews the appropriateness
of a cash dividend in light of the Company's existing policies.
5. Earnings Per Share and Pro Forma Earnings Per Share
Net income per share for the three and six months ended June 30, 1996 and the
three months ended June 30, 1995 is computed on weighted shares outstanding for
the period. Net income per share for the six months ended June 30, 1995 is
computed on a pro forma basis as if the stock issued in the conversion of the
Bank from mutual to stock form had been issued as of the beginning of the
period.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
Overview
As discussed in Note 1 of the financial statements included in this filing, SIS
Bancorp, Inc., a Massachusetts corporation (the "Company"), was organized by
Springfield Institution for Savings (the "Bank") for the purpose of reorganizing
the Bank into a holding company structure. Upon the effectiveness of the
Reorganization on June 21, 1996, the Bank became the wholly-owned subsidiary of
the Company and the Bank's former stockholders became stockholders of the
Company. The Company's Common Stock is quoted on the NASDAQ National Market
System under the symbol "SISB", which had previously been used by the Bank.
The Bank is a state chartered, stock form savings bank headquartered in
Springfield, MA. The Bank provides a wide variety of financial services which
include retail and commercial banking, residential mortgage origination and
servicing, commercial real estate lending and consumer lending. The Bank serves
its primary market of Hampden and Hampshire Counties through a network of 21
retail branches. The Bank completed a successful conversion from mutual to stock
form (the "Conversion") on February 7, 1995. Through the issuance of 5,562,500
shares of common stock, the Bank received proceeds of $35.9 million, net of
Conversion related costs and the Company's Employee Stock Ownership Plan (the
"ESOP").
The Bank's revenues are derived principally from interest payments on its loan
portfolios and mortgage-backed and other investment securities. The Bank's
primary sources of funds are deposits, borrowings and principal and interest
payments on loans and mortgage-backed securities.
Results of Operations for the Three Months Ended June 30, 1996 and June 30, 1995
The Company reported net income of $3.0 million, or $0.56 per share, for the
second quarter of 1996 as compared to net income of $1.3 million, or $0.25 per
share, for the same period last year. The improved results are primarily
attributable to increased net interest income and noninterest income as well as
lower provisions for possible loan losses.
Net Interest Income
Net interest income represents the difference between income on interest-earning
assets and expense on interest-bearing liabilities. Net interest income is
affected by the mix and volume of assets and liabilities, and the movement and
level of interest rates.
The following table sets forth, for the period indicated, average balances,
interest income and expense, and yields earned or rates paid on the major
categories of assets and liabilities. Non-accrual loans have been included in
the appropriate average balance loan category, but unpaid interest on
non-accrual loans has not been included for purposes of determining interest
income. In addition, investment securities available for sale are reflected at
amortized cost.
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------------------------------------------------
1996 1995
--------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
----------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Fed funds sold and interest-bearing deposits .. $ 3,396 $ 45 5.24% $ 9,814 $ 153 6.17%
Investment securities held to maturity ........ 193,672 3,269 6.75% 189,279 2,769 5.85%
Investment securities available for sale ...... 319,709 5,170 6.47% 163,414 2,674 6.55%
Residential real estate loans ................. 243,998 4,758 7.80% 268,568 5,247 7.81%
Commercial real estate loans .................. 119,523 2,573 8.61% 118,882 2,518 8.47%
Commercial loans .............................. 128,974 2,841 8.71% 91,905 2,181 9.39%
Home equity loans ............................. 76,590 1,592 8.36% 55,902 1,310 9.40%
Consumer loans ................................ 7,096 158 8.91% 6,600 155 9.39%
----------- ----------- ------ ---------- ---------- ---------
Total interest-earning assets ................. 1,092,958 20,406 7.47% 904,364 17,007 7.52%
Allowance for loan losses ..................... (14,737) (17,095)
Non-interest-earning assets .................... 84,258 70,642
----------- ----------
Total assets ...............................$ 1,162,479 $ 20,406 $957,911 $ 17,007
=========== =========== ========== ==========
Interest-bearing liabilities
Deposits
Savings accounts .............................$ 195,987 $ 1,218 2.50% $185,842 $ 1,155 2.49%
NOW accounts ................................. 57,412 161 1.13% 53,084 187 1.41%
Money market accounts ........................ 206,801 1,701 3.31% 211,113 1,751 3.33%
Time deposit accounts ........................ 371,828 4,912 5.31% 344,743 4,435 5.16%
------------ ----------- ------- ---------- ---------- ---------
Total interest-bearing deposits ............... 832,028 7,992 3.86% 794,782 7,528 3.80%
borrowed funds ................................ 141,217 1,957 5.48% 13,457 228 6.70%
----------- ----------- ------- ---------- ---------- ---------
Total interest-bearing liabilities ............ 973,245 9,949 4.11% 808,239 7,756 3.85%
Non-interest-bearing liabilities .............. 106,530 80,817
----------- ----------
Total liabilities ............................. 1,079,775 889,056
Stockholders' equity .......................... 82,704 68,855
----------- ----------
Total liabilities and stockholders' equity. $ 1,162,479 $ 9,949 $957,911 $ 7,756
=========== =========== ========== ==========
Net interest income/spread .................... $ 10,457 3.36% $ 9,251 3.67%
=========== ======= ========== =========
Net interest margin as a % of interest-
earning assets ................................. 3.83% 4.09%
======= =========
</TABLE>
Net interest income for the three months ended June 30, 1996 was $10.5 million
compared to $9.3 million for the three months ended June 30, 1995, an increase
of $1.2 million or 13.0%. This increase is primarily due to a $188.6 million
increase in average earning assets partially offset by a 26 basis points
decrease in net interest margin.
Total interest income was $20.4 million for the three months ended June 30,
1996, an increase of $3.4 million or 20.0% from the same period last year. This
increase is attributable to higher levels of interest-earning assets.
Interest-earning assets totaled $1.1 billion in the second quarter of 1996
compared to $904.4 million in the second quarter of 1995, an increase of $188.6
million or 20.9%. Total investments increased $160.7 million reflecting higher
deposit levels as well as leveraging a portion of the Company's capital
position. Total loans increased $34.3 million as the Company continued to focus
on the commercial (small business) and home equity market segments, which grew
by $37.1 million or 40.3% and $20.7 million or 37.0%, respectively. Residential
real estate loan balances declined $24.6 million or 9.2%, reflecting significant
refinancing activity during the first quarter of 1996. The Company originates
long-term fixed rate mortgages for sale in the secondary market and generally
holds adjustable rate mortgages in the Company's loan portfolio.
8
<PAGE>
Total interest expense was $9.9 million for the three months ended June 30, 1996
compared to $7.8 million during the same period in 1995, an increase of $2.1
million or 28.3%. This increase is attributable to increases in interest-bearing
deposits and borrowed funds. Interest-bearing deposits totaled $832.0 million
for the quarter ended June 30, 1996 compared to $794.8 million for the same
period in 1995, an increase of $37.2 million or 4.7%. This growth occurred
primarily in Time and Savings deposits, which increased $27.1 and $10.1 million
respectively. Time deposits increased as a result of the new "Can't Lose CD"
product, which pays an interest rate equal to the prime rate less 350 basis
points. Savings deposit growth reflects the continued success of the totally
free savings account, a key feature of the Company's consumer strategy. Borrowed
funds averaged $141.2 million for the three months ended June 30, 1996 compared
to $13.5 million for the same period in 1995 reflecting the use of Federal Home
Loan Bank ("FHLB") advances and repurchase agreements to leverage a portion of
the Company's capital.
The following table presents the changes in net interest income resulting from
changes in interest rates or changes in the volume of interest-earning assets
and interest-bearing liabilities during the periods indicated. Changes which are
attributable to both rate and volume have been allocated evenly between the
change in rate and volume components.
<TABLE>
<CAPTION>
Three months ended June 30,
1996 versus 1995
-----------------------------
Increase (Decrease) Due to
-----------------------------
Volume Rate Net
------- ------- -------
<S> <C> <C> <C>
Interest-earning assets:
Federal funds sold and
interest bearing deposits ........................ $ (93) $ (15) $ (108)
Investment securities held to maturity .............. 70 430 500
Investment securities available for sale ............ 2,541 (45) 2,496
Residential real estate loans ....................... (480) (9) (489)
Commercial real estate loans ........................ 14 41 55
Commercial loans .................................... 848 (188) 660
Home equity loans ................................... 457 (175) 282
Consumer loans ...................................... 11 (8) 3
------- ------- -------
Total interest-earning assets ......................... 3,368 31 3,399
------- ------- -------
Interest-bearing liabilities:
Deposits:
Savings accounts .................................... 63 -- 63
NOW accounts ........................................ 14 (40) (26)
Money market accounts ............................... (36) (14) (50)
Time deposit accounts ............................... 352 125 477
------- ------- -------
Total deposits ........................................ 393 71 464
Borrowed funds ........................................ 1,968 (239) 1,729
------- ------- -------
Total interest-bearing liabilities .................... 2,361 (168) 2,193
------- ------- -------
Change in net interest income ......................... $ 1,007 $ 199 $ 1,206
======= ======= =======
</TABLE>
9
<PAGE>
Provision for Possible Loan Losses
The Company provided $0.8 million for its provision for possible loan losses in
the second quarter of 1996 compared to $1.2 million in the second quarter of
1995. This decrease of $0.4 million reflects an improvement in the credit
quality profile of the loan portfolio. The provision for possible loan losses is
based upon Management's judgment of the amount necessary to maintain the
allowance for possible loan losses at a level which is considered adequate. For
further discussion of this topic please refer to the section titled "Allowance
for Possible Loan Losses" in the Balance Sheet Analysis section of this
document.
Non-interest Income
Non-interest income is composed of fee income for bank services and gains or
losses from the sale of assets. The components of non-interest income for the
periods presented are as follows:
Three months ended
June 30,
------------------------------------
1996 1995
------------ ------------
Net gain (loss) on sale of loans $ 162 $ (4)
Net gain (loss) on sale of securities - 10
Loan charges and fees 757 788
Deposit related fees 1,544 1,200
Other charges and fees 274 200
-------- --------
$2,737 $2,194
======== ========
Net gain (loss) on sale of loans increased $0.2 million due to an increase in
the amount of loans sold servicing released.
Deposit service charges and fees increased $0.3 million due primarily to the
Company's larger noninterest bearing account base.
Other charges and fees increased $0.1 million reflecting higher brokerage fees.
Salaries and Benefits Expense
Salaries and benefits expense totaled $4.2 million for the second quarter of
1996 compared to $3.7 million for the same period in 1995, an increase of $0.5
million reflecting standard wage increases, the introduction of new benefit
programs including ESOP, restricted stock and 401(k) plan, and higher ESOP and
restricted stock expenses as a result of an increase in the Company's stock
price.
10
<PAGE>
Other Operating Expense
The components of other operating expense for the periods presented are as
follows:
Three months ended
June 30,
----------------------------------
1996 1995
-------------- ---------------
Marketing and public relations $ 493 $ 365
Insurance 93 891
Professional services 851 825
Outside processing 1,098 803
Other 1,121 896
---------- ---------
$3,656 $3,780
========== =========
Marketing and public relations expense increased $0.1 million reflecting a
higher level of advertising expenses directed towards the Company's consumer
strategy of obtaining consumer deposit accounts in connection with its increased
emphasis on community banking activities.
Insurance expense includes FDIC deposit insurance expense, which totaled $1
thousand in the second quarter of 1996 compared to $0.7 million in the same
period in 1995. This decrease is attributable to a significant reduction in FDIC
premiums.
Outside processing increased $0.3 million reflecting higher transaction and
account volume associated with increased account activity resulting from the
Company's consumer strategy, as well as costs associated with the outsourcing of
the Company's item processing operations in 1996.
Other operating expenses increased $0.2 million primarily due to supplies and
postage costs associated with growth in consumer deposit accounts as a result of
the Company's consumer strategy.
Net Expense of Real Estate Operations
The Company has certain subsidiaries that are engaged in various real estate
investments directly or in joint ventures with unaffiliated partners. The
Company has terminated its real estate development activities and is in the
process of selling its remaining real estate investments. Net expense of real
estate operations reflects the net operating results of these activities,
writedowns on real estate properties and gains/losses on sales of these
properties. Net expense of real estate operations of $(0.1) million and $0.1
million for the three months ended June 30, 1996 and June 30, 1995,
respectively, reflects normal operating results.
Income Taxes
The Company recorded $0.3 million of state and federal alternative minimum tax
provision in the second quarter of 1996 compared to $0.1 million in the second
quarter of 1995. This increase in taxes resulted from the increase in pretax
earnings between the periods ended June 30, 1995 and 1996.
11
<PAGE>
Results of Operations for the Six Months Ended June 30, 1996 and June 30, 1995
The Company reported net income of $5.4 million, or $1.00 per share, for the six
months ended June 30, 1996 as compared to net income of $2.1 million, or $0.40
per share, on a pro forma basis, for the same period last year. The improved
results are primarily attributable to increased net interest income and
noninterest income as well as the lower provisions for possible loan losses.
Net Interest Income
Net interest income represents the difference between income on interest-earning
assets and expense on interest-bearing liabilities. Net interest income is
affected by the mix and volume of assets and liabilities, and the movement and
level of interest rates.
The following table sets forth, for the period indicated, average balances,
interest income and expense, and yields earned or rates paid on the major
categories of assets and liabilities. Non-accrual loans have been included in
the appropriate average balance loan category, but unpaid interest on
non-accrual loans has not been included for purposes of determining interest
income. In addition, investment securities available for sale are reflected at
amortized cost.
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------------------------------------
1996 1995
--------------------------------------- ---------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Fed funds sold and interest-bearing deposits ...$ 9,594 $ 259 5.34% $ 20,840 $ 617 5.89%
Investment securities held to maturity ......... 182,841 6,215 6.80% 169,885 5,053 5.95%
Investment securities available for sale ....... 291,192 9,296 6.38% 169,397 5,330 6.29%
Residential real estate loans .................. 249,899 9,792 7.84% 264,141 10,266 7.77%
Commercial real estate loans ................... 119,102 5,018 8.43% 121,424 4,958 8.17%
Commercial loans ............................... 120,248 5,333 8.77% 86,952 4,039 9.24%
Home equity loans .............................. 72,971 3,077 8.48% 53,373 2,469 9.33%
Consumer loans ................................. 6,977 254 7.32% 6,677 297 8.90%
---------- ----------- -------- ---------- ---------- ----------
Total interest-earning assets .................. 1,052,824 39,244 7.45% 892,689 33,029 7.40%
Allowance for loan losses ...................... (15,286) (16,611)
Non-interest-earning assets .................... 82,267 70,299
---------- ----------
Total assets ...................................$ 1,119,805 $ 39,244 $ 946,377 $ 33,029
========== =========== ========== ==========
Interest-bearing liabilities
Deposits
Savings accounts .............................$ 192,419 $ 2,395 2.50% $ 184,769 $ 2,279 2.49%
NOW accounts ................................. 55,829 328 1.18% 53,194 374 1.42%
Money market accounts ........................ 205,305 3,397 3.33% 218,305 3,471 3.21%
Time deposit accounts ........................ 371,205 9,948 5.39% 337,178 8,120 4.86%
---------- ----------- -------- ----------- ---------- ----------
Total deposits ................................. 824,758 16,068 3.92% 793,446 14,244 3.62%
Borrowed funds ................................. 112,469 3,148 5.54% 7,808 274 6.98%
---------- ----------- -------- ----------- ---------- ----------
Total interest-bearing liabilities ............. 937,227 19,216 4.12% 801,254 14,518 3.65%
Non-interest-bearing liabilities ............... 101,415 84,047
---------- ---------
Total liabilities .............................. 1,038,642 885,301
Total stockholders' equity ..................... 81,163 61,076
---------- ---------
Total liabilities and stockholders' equity .$ 1,119,805 $ 19,216 $ 946,377 $ 14,518
========== =========== ========== ==========
Net interest income/spread ..................... $ 20,028 3.33% $ 18,511 3.75%
========== ======== ========== ==========
Net interest margin as a % of interest-
earning assets ................................. 3.80% 4.15%
======== ==========
</TABLE>
12
<PAGE>
Net interest income for the six months ended June 30, 1996 was $20.0 million
compared to $18.5 million for the six months ended June 30, 1995, an increase of
$1.5 million or 8.2%. This increase is primarily due to a $160.1 million
increase in average earning assets partially offset by a 35 basis points
decrease in net interest margin.
Total interest income was $39.2 million for the six months ended June 30, 1996,
an increase of $6.2 million or 18.8% from the same period last year. This
increase is primarily attributable to higher levels of interest-earning assets.
Interest-earning assets totaled $1.1 billion for the six months ended June 30,
1996 compared to $892.7 million for the same period in 1995, an increase of
$160.1 million or 17.9%. Total investments increased $134.8 million reflecting
higher deposit levels as well as leveraging of a portion of the Company's
capital position. Total loans increased $36.6 million as the Company continued
to focus on the commercial (small business) and home equity market segments,
which grew by $33.3 million or 38.3% and $19.6 million or 36.7%, respectively.
Residential real estate loan balances declined $14.2 million or 5.4% reflecting
significant refinancing activity to a fixed rate market during the first quarter
of 1996. The Company originates long-term fixed rate mortgages for sale in the
secondary market and generally holds adjustable rate mortgages in the Company's
loan portfolio.
Total interest expense was $19.2 million for the six months ended June 30, 1996
compared to $14.5 million during the same period in 1995, an increase of $4.7
million or 32.4%. This increase is attributable to increases in interest-bearing
deposits, deposit rates and borrowed funds. Interest-bearing deposits totaled
$824.8 million for the six months ended June 30, 1996 compared to $793.4 million
for the same period in 1995, an increase of $31.3 million or 4.0%. This growth
occurred primarily in Time deposits, which increased $34.0 million principally
as a result of the new "Can't Lose CD." The Can't Lose CD pays an interest rate
equal to the prime rate less 350 basis points. The average rate paid on deposits
was 3.92% for the six months ended June 30, 1996 compared to 3.62% for the six
months ended June 30, 1995, an increase of 30 basis points or 8.3% principally
reflecting repricing of the existing portfolio as well as continued competitive
pricing pressures and the introduction of the Can't Lose CD. Borrowed funds
averaged $112.5 million for the six months ended June 30, 1996 reflecting the
use of FHLB advances and repurchase agreements to leverage a portion of the
Company's capital.
The following table presents the changes in net interest income resulting from
changes in interest rates or changes in the volume of interest-earning assets
and interest-bearing liabilities during the periods indicated. Changes which are
attributable to both rate and volume have been allocated evenly between the
change in rate and volume components.
<TABLE>
<CAPTION>
Six months ended June 30,
1996 versus 1995
-------------------------------
Increase (Decrease) Due to
-------------------------------
Volume Rate Net
------- ------- -------
<S> <C> <C> <C>
Interest-earning assets:
Federal funds sold and
interest bearing deposits .................................................. $ (318) $ (40) $ (358)
Investment securities held to maturity ........................................ 413 749 1,162
Investment securities available for sale ...................................... 3,859 107 3,966
Residential real estate loans ................................................. (556) 82 (474)
Commercial real estate loans .................................................. (96) 156 60
Commercial loans .............................................................. 1,512 (218) 1,294
Home equity loans ............................................................. 866 (258) 608
Consumer loans ................................................................ 12 (55) (43)
------- ------- -------
Total interest-earning assets ................................................... 5,692 523 6,215
------- ------- -------
Interest-bearing liabilities:
Deposits:
Savings accounts .............................................................. 95 21 116
NOW accounts .................................................................. 17 (63) (46)
Money market accounts ......................................................... (211) 137 (74)
Time deposit accounts ......................................................... 866 962 1,828
------- ------- -------
Total deposits .................................................................. 767 1,057 1,824
Borrowed funds .................................................................. 3,301 (427) 2,874
------- ------- -------
Total interest-bearing liabilities .............................................. 4,068 630 4,698
------- ------- -------
Change in net interest income ................................................... $ 1,624 $ (107) $ 1,517
======= ======= =======
</TABLE>
13
<PAGE>
Provision for Possible Loan Losses
The Company provided $1.5 million for its provision for possible loan losses for
the six months ended June 30, 1996 compared to $2.4 million for the same period
in 1995. This decrease of $0.9 million reflects an improvement in the credit
quality profile of the loan portfolio. The provision for possible loan losses is
based upon Management's judgment of the amount necessary to maintain the
allowance for possible loan losses at a level which is considered adequate. For
further discussion of this topic please refer to the section titled "Allowance
for Possible Loan Losses" in the Balance Sheet Analysis section of this
document.
Non-interest Income
Non-interest income is composed of fee income for bank services and gains or
losses from the sale of assets. The components of non-interest income for the
periods presented are as follows:
Six months ended June 30,
---------------------------------
1996 1995
----------------- --------------
Net gain/(loss) on sale of loans $ 432 $ (10)
Net gain/(loss) on sale of securities 2 14
Loan charges and fees 1,480 1,595
Deposit related fees 2,947 2,289
Other charges and fees 457 352
--------- ---------
$5,318 $4,240
========= =========
Net gain (loss) on sale of loans increased $0.4 million due to an increase in
the amount of loans sold servicing released.
Deposit service charges and fees increased $0.6 million due primarily to the
Company's larger noninterest bearing account base.
Other charges and fees increased $0.1 million reflecting an increase in
brokerage fees.
Salaries and Benefits Expense
Salaries and benefits expense totaled $8.5 million for the six months ended June
30, 1996 compared to $7.7 million for the same period in 1995, an increase of
$0.8 million reflecting standard wage increases, the introduction of new benefit
programs including ESOP, restricted stock and 401(k) plan, and higher ESOP and
restricted stock expenses as a result of an increase in the Company's stock
price.
Occupancy Expense
Total occupancy expense was $1.6 million for the six months ended June 30, 1996,
a decrease of $0.1 million from the same period in 1995 as a result of the
improved operating results of SIS Center, the Company's corporate headquarters.
14
<PAGE>
Other Operating Expense
The components of other operating expense for the periods presented are as
follows:
Six months ended June 30,
-------------------------------------------
1996 1995
------------------ ------------------
Marketing and public relations $ 877 $ 672
Insurance 194 1,692
Professional services 1,490 1,472
Outside processing 2,055 1,698
Other 2,156 1,781
--------- ----------
$6,772 $7,315
========= ==========
Marketing and public relations expense increased $0.2 million reflecting a
higher level of advertising expenses directed towards the Company's consumer
strategy for obtaining consumer deposit accounts in connection with its
increased emphasis on community banking activities.
Insurance expense includes FDIC deposit insurance expense, which totaled $2
thousand for the six months ended June 30, 1996 compared to $1.4 million in the
same period in 1995. This decrease is attributable to a significant reduction in
FDIC premiums.
Outside processing increased $0.4 reflecting higher transaction and account
volume associated with increased account activity resulting from the Company's
consumer strategy, as well as costs associated with the outsourcing of the
Company's item processing operations in 1996.
Other operating expenses increased $0.4 million primarily due to supplies and
postage costs associated with growth in consumer deposit accounts as a result of
the Company's consumer strategy.
Foreclosed Real Estate Expense
Foreclosed real estate expense reflects losses on sales, writedowns and net
operating results of foreclosed properties. These expenses were $0.2 million for
the six months ended June 30, 1996 compared to $0.4 million for the same period
in 1995. This $0.2 million decrease reflects lower levels of foreclosed
properties.
Net Expense of Real Estate Operations
The Company has certain subsidiaries that are engaged in various real estate
investments directly or in joint ventures with unaffiliated partners. The
Company has terminated its real estate development activities and is in the
process of selling its remaining real estate investments. Net expense of real
estate operations reflects the net operating results of these activities,
writedowns on real estate properties and gains/losses on sales of these
properties. Net expense of real estate operations of $(0.2) million and $0.1
million for the six months ended June 30, 1996 and June 30, 1995 respectively,
reflects normal operating results.
Income Taxes
The Company recorded $0.5 million of state and federal alternative minimum tax
provision in the six months ended June 30, 1996 compared to $0.1 million for the
same period in 1995. This increase in taxes resulted from the increase in pretax
earnings between the periods ended June 30, 1995 and 1996.
15
<PAGE>
BALANCE SHEET ANALYSIS - COMPARISON AT JUNE 30, 1996 TO DECEMBER 31, 1995
Total assets increased from $1.07 billion at December 31, 1995 to $1.21 billion
at June 30, 1996. This increase reflects growth in loans and investments funded
through an increase in deposits and wholesale borrowings.
Investments
The Company's investment portfolio increased $110.8 million from $419.8 million
at December 31, 1995 to $530.6 million at June 30, 1996.
The Company engages in investment activities for both investment and liquidity
purposes. The Company maintains an investment securities portfolio which
consists primarily of U.S. Government and Agency securities, corporate
obligations, asset-backed securities, collateralized mortgage obligations,
Federal Home Loan Bank stock, and marketable equity securities. Other short-term
investments held by the Company periodically include interest-bearing deposits
and federal funds sold. The Company also maintains a mortgage-backed securities
portfolio consisting of securities issued and guaranteed by the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Company
("FHLMC") in addition to publicly traded mortgage-backed securities issued by
private financial intermediaries which are rated "AA" or higher by rating
agencies of national prominence.
Securities which the Company has the intent and ability to hold until maturity
are classified as held-to-maturity and are carried at amortized cost, while
those securities which have been identified as assets that may be sold prior to
maturity or assets for which there is not a positive intent to hold to maturity
are classified as available-for-sale and are carried at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of stockholders' equity.
The table below sets forth certain information regarding the amortized cost and
fair value of the Corporation's investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
June 30, 1996
----------------------------------------------
Available for Held to
Sale Maturity
----------------------- ---------------------
Amortized Amortized
Cost Fair Value Cost Fair Value
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
U.S. government and agency obligations ......................... $ 15,060 $ 14,948 $ -- $ --
Mortgage-backed securities ..................................... 299,841 300,065 166,577 166,217
Other bonds and short term obligations ......................... 8,648 8,581 26,620 26,511
Other securities ............................................... 13,924 13,850 -- --
----------- -------- -------- --------
Total ...................................................... $ 337,473 $337,444 $193,197 $192,728
=========== ======== ======== ========
<CAPTION>
December 31, 1995
-----------------------------------------------
Available for Held to
Sale Maturity
----------------------- ----------------------
Amortized Amortized
Cost Fair Value Cost Fair Value
----------- ---------- --------- ----------
<S> <C> <C> <C> <C>
U.S. government and agency obligations ......................... $ 7,700 $ 7,699 $ -- $ --
Mortgage-backed securities ..................................... 222,673 224,101 161,168 161,481
Other bonds and short term obligations ......................... 9,300 9,300 11,625 11,449
Other securities ............................................... 5,884 5,884 -- --
----------- -------- -------- --------
Total ...................................................... $ 245,557 $246,984 $172,793 $172,930
=========== ======== ======== ========
</TABLE>
16
<PAGE>
Loan Portfolio Composition
Gross loans comprised $592.7 million or 49.0% of total assets as of June 30,
1996. The following table sets forth information concerning the Company's loan
portfolio in dollar amounts and percentages, by type of loan at June 30, 1996
and at December 31, 1995.
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------------------ -----------------------
Percent of Percent of
Amount Total Amount Total
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Residential real estate loans .............................................. $ 244,100 41.18% $ 263,551 45.99%
Commercial real estate loans ............................................... 118,435 19.98% 118,005 20.59%
Commercial loans ........................................................... 139,557 23.55% 117,674 20.53%
Home equity loans .......................................................... 83,806 14.14% 67,657 11.81%
Consumer loans ............................................................. 6,822 1.15% 6,196 1.08%
--------- -------- --------- ---------
Total loans receivable, gross ........................................... 592,720 100.00% 573,083 100.00%
Less:
Unearned income and fees .................................................... (828) (566)
Allowance for possible loan losses .......................................... 14,913 14,986
--------- ---------
Total loans receivable, net .............................................. $ 578,635 $ 558,663
========= =========
</TABLE>
The Company continues to actively originate loans secured by first mortgages on
one to four family residences, and offers a variety of fixed and adjustable rate
mortgage loan products. The Company originates long-term fixed rate mortgages
for sale in the secondary market and generally holds adjustable rate mortgages
in the Company's loan portfolio. During the six months ended June 30, 1996, the
Company experienced an increase in prepayments in its adjustable rate mortgage
portfolio due to lower interest rates. These prepayments offset new originations
and resulted in a $19.5 million decrease in residential real estate loans
between December 31, 1995 and June 30, 1996.
During the six months ended June 30, 1996 commercial loan balances increased
$21.9 million, reflecting the Company's continued focus on lending activities in
the small business market.
Home equity loans outstanding have increased $16.1 million since December 31,
1995 resulting from the Company's pricing strategy, the waiver of closing costs
and the active promotion of these products.
The growth in the Company's consumer loan portfolio from December 31, 1995 to
June 30, 1996 reflects increases of $1.0 million in student loans and $0.8
million in overdraft protection lines, partially offset by runoff in personal
installment loan balances. The Company offered student loans to its customers
until June 30, 1996. These loans are subsidized by the government and held by
the Company while the student is in school. When the student graduates and
repayment begins the loans are sold to the Student Loan Marketing Association
("SLMA"). Effective July 1, 1996 the Company discontinued the origination of
student loans. The Company continues to offer applications to prospective
borrowers and refers these customers to SLMA. The company continues to offer
overdraft protection lines associated with the transaction accounts of its
customers. The company has discontinued offering most types of personal
installment loans. This decision was made based on the low volumes achieved by
the Company and the highly competitive nature of consumer products offered by
Bank and non-Bank competitors.
17
<PAGE>
Non-performing Assets
Non-performing assets totaled $10.5 million as of June 30, 1996 compared to
$13.9 million as of December 31, 1995, a decrease of $3.4 million or 24.5%.
The following table sets forth information regarding the components of
non-performing assets for the periods presented:
June 30, 1996 December 31, 1995
------------- -----------------
Non-accrual loans (1):
Residential real estate loans $2,246 $2,553
Commercial real estate loans 5,123 5,745
Commercial loans 1,151 638
Home equity loans 340 90
Consumer loans 12 11
-------- --------
Total non-accrual loans 8,872 9,037
-------- --------
Loans past due 90 days still accruing (2) 296 587
-------- --------
Total non-performing loans 9,168 9,624
Foreclosed real estate (3) 427 1,529
Restructured loans on accrual status (4) 891 2,732
======== ========
Total non-performing assets $10,486 $13,885
======== ========
Total non-performing loans to total
gross loans 1.55% 1.68%
Total non-performing assets to total
assets 0.87% 1.30%
Allowance for possible losses to
non-performing loans 162.66% 155.71%
(1) Non-accrual loans are loans that are contractually past due in excess of 90
days, for which the Bank has discontinued the accrual of interest, or loans
which are not past due but on which the Bank has discontinued the accrual of
interest based on Management's assessment of the circumstances surrounding these
loans.
(2) Accruing loans past due 90 days or more are loans which have not been placed
on non-accrual status as, in management's opinion, the collection of the loan,
in full, is not in doubt.
(3) Foreclosed real estate includes OREO, defined as real estate acquired
through foreclosure or acceptance of a deed in lieu of foreclosure. The Bank
carries foreclosed real estate at net realizable value, which approximates fair
value less estimated selling costs.
(4) Restructured loans are loans for which concessions, including reduction of
interest rates or deferral of interest or principal payments have been granted
due to the borrower's financial condition. Restructured loans on non-accrual
status are reported in the non-accrual loan category. Restructured loans on
accrual status are those loans that have complied with terms of a restructuring
agreement for a satisfactory period (generally six months).
Potential Problem Loans
The Bank maintains a "watch list" of potential problem loans, which are
performing loans that have potential weaknesses that require Management's
attention. These potential weaknesses may stem from a variety of factors
including, among other things economic or market conditions, adverse trends in
the obligor's operations or balance sheet weaknesses. Potential problem loans
totaled $15.6 million (1.3% of total assets) at June 30, 1996.
18
<PAGE>
Allowance for Possible Loan Losses
The allowance for possible loan losses reflects an amount that in Management's
judgment is adequate to provide for potential losses in the loan portfolio. In
addition, examinations of the adequacy of the loan loss reserve are conducted
periodically by various regulatory agencies.
The Company's loan loss reserve methodology emphasizes an evaluation of
non-performing loans and those loans that have been identified as having a
higher risk of becoming non-performing loans. The overall analysis is a
continuing process that gives consideration to such factors as size and risk
characteristics of the loan portfolio, the risk rating of individual credits,
general economic conditions, historic delinquency and charge-off experience and
the borrowers' financial capabilities and the underlying collateral, including,
when appropriate, independent appraisals of real estate properties. In addition,
Management periodically reviews the methodology of allocating reserves to the
various loan categories based on similar factors.
The Company's allowance for possible loan losses is decreased by loan
charge-offs and increased by provisions for possible loan losses and recoveries
on loans previously charged-off. When commercial and residential real estate
loans are foreclosed, the loan balance is compared with the fair value of the
property. If the net carrying value of the loan at the time of foreclosure
exceeds the fair value of the property less estimated selling costs, the
difference is charged to the allowance for possible loan losses and the fair
value of the property becomes the new cost basis of the real estate owned. The
Company has or obtains current appraisals on real estate owned at the time it
obtains possession of the property. Real estate owned is subsequently carried at
the lower of cost or fair value less estimated selling costs with any further
adjustments reflected as a charge against operations. The Company assesses the
value of real estate owned on a periodic basis.
The allowance for possible loan losses at June 30, 1996 was $14.9 million,
compared to $16.0 million at June 30, 1995. The activity in the allowance for
possible loan losses for the six months ended June 30, 1996 and 1995 was as
follows:
<TABLE>
<CAPTION>
Six Months
ended June 30,
---------------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Balance at beginning of period $14,986 $15,844
Provision for possible loan losses 1,450 2,355
Charge-offs:
Residential real estate loans (563) (323)
Commercial real estate loans (2,102) (2,048)
Commercial loans (180) (45)
Home equity loans (138) (25)
Consumer loans (38) (91)
--------------- ----------------
Total charge-offs (3,021) (2,532)
--------------- ----------------
Recoveries:
Residential real estate loans 577 51
Commercial real estate loans 762 160
Commercial loans 100 99
Home equity loans 39 28
Consumer loans 20 44
--------------- ----------------
Total recoveries 1,498 382
--------------- ----------------
Net charge-offs (1,523) (2,150)
--------------- ----------------
Balance, end of period $14,913 $16,049
=============== ================
Ratio of allowance for possible loan losses to
total loans at the end of the period 2.51% 2.89%
Ratio of allowance for possible loan losses to
non-performing loans at the end of the period 162.66% 116.28%
</TABLE>
19
<PAGE>
At June 30, 1996, the recorded investment in loans that are considered impaired
under SFAS 114 was $8.3 million. Included in this amount is $3.8 million of
impaired loans for which the related SFAS 114 allowance is $0.5 million and $4.5
million of impaired loans for which the SFAS 114 allowance is zero. The average
recorded investment in impaired loans during the three and six months ended June
30, 1996 was approximately $8.2 million and $9.4 million, respectively. For the
three and six month periods ended June 30, 1996, the Company recognized interest
income on these impaired loans of zero and $0.2 million, respectively.
The following table shows the allocation of the allowance for possible loan
losses to the various types of loans as well as the percentage of loans in each
category to total loans.
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
-------------------- ---------------------
% of Total % of Total
Allowance Allowance
for for
Amount Loan Losses Amount Loan Losses
------ ----------- ------- -----------
<S> <C> <C> <C> <C>
Residential real estate loans .............................. $ 1,269 8.51% $1,881 12.55%
Commercial real estate loans ............................... 8,372 56.14% 6,784 45.27%
Commercial loans ........................................... 4,517 30.29% 5,480 36.57%
Home equity loans .......................................... 536 3.59% 672 4.48%
Consumer loans ............................................. 219 1.47% 169 1.13%
---------- --------- -------- ---------
Total allowance for
possible loan losses .................................. $ 14,913 100.00% $14,986 100.00%
========== ========= ======== =========
</TABLE>
20
<PAGE>
Deposit Distribution
The principal source of funds for the Company are deposits from local consumers
and businesses. There were no brokered deposits at June 30, 1996. The Company's
deposits consist of demand and NOW accounts, passbook and statement savings
accounts, Money Market accounts and Time deposit accounts.
Total deposits were $927.3 million at June 30, 1996 compared to $885.4 million
at December 31, 1995, an increase of $41.9 million. This growth occurred
primarily in Demand deposits, Savings accounts and Time deposits. Demand
deposits and Savings accounts increased $15.6 million and $11.4 million,
respectively as customers continue to take advantage of free savings and
checking accounts offered as a result of the Company's consumer deposit strategy
to attract and retain core deposits, which provides the Company with a lower
cost source of funds. Also contributing to the growth of Demand deposit balances
is an increase in business checking accounts of $3.6 million resulting from the
Company's focus on small business banking. The growth in Time deposits is
primarily attributable to the introduction of a new nine month CD in June of
1996. As of June 30, total balances for this new product were $8.4 million.
The following table presents the composition of deposits for the periods
indicated:
June 30, 1996 December 31, 1995
------------------- -------------------
Percent Percent
of of
Amount Total Amount Total
-------- ------- -------- -------
Demand deposits ................ $ 87,173 9.40% $ 71,539 8.08%
NOW accounts ................... 58,579 6.32% 57,271 6.47%
Savings accounts ............... 197,003 21.24% 185,555 20.96%
Money market accounts .......... 206,880 22.31% 203,313 22.96%
Time deposits .................. 377,663 40.73% 367,708 41.53%
-------- ------- -------- -------
Total deposits .............. $927,298 100.00% $885,386 100.00%
======== ======= ======== =======
21
<PAGE>
Regulatory Capital
Under current FDIC capital regulations, state-chartered, non-member banks (i.e.,
banks that are not members of the Federal Reserve System), such as the Bank, are
required to comply with three separate minimum capital requirements: a "Tier 1
leverage capital ratio" and two "risk-based" capital requirements: "Tier 1
risk-based capital ratio" and "Total risk-based capital ratio".
The Tier 1 leverage capital ratio is expressed as a percentage of Tier 1 capital
to total quarterly average assets. Tier 1 capital generally includes common
stockholders' equity (including retained earnings), qualifying noncumulative
perpetual preferred stock and any related surplus and minority interests in the
equity accounts of fully consolidated subsidiaries. In addition, deferred tax
assets are allowable up to a certain limit. Intangible assets, other than
properly valued purchased mortgage servicing rights up to certain specified
limits, must be deducted from Tier 1 capital. The unrealized gain or loss on
securities available for sale is not included as a component of Tier 1 capital
under the current guidelines.
The Tier 1 risk-based capital ratio is expressed as a percentage of Tier 1
capital to total risk-weighted assets. Risk-weighted assets are calculated by
assigning assets to one of several broad categories (0%, 20%, 50%, or 100%)
based primarily on credit risk. The aggregate dollar value of the amount in each
category is then multiplied by the risk-weight associated with the category.
Risk weights for all off-balance sheet items are determined by a two-step
process. First, the "credit equivalent amount" of off-balance sheet items is
determined in most cases by multiplying the off-balance sheet item by a credit
conversion factor. Second, the credit equivalent amount is treated like any
balance sheet asset and generally is assigned to the appropriate risk category.
The resulting weighted values from each of the risk categories are added
together, and this sum is the Company's total risk-weighted assets that comprise
the denominator of the risk-based capital ratios.
The Total risk-based capital ratio is expressed as a percentage of "Qualifying
total capital" to total risk-weighted assets. Qualifying total capital consists
of the sum of Tier 1 capital plus Tier 2 capital, which consists of cumulative
perpetual preferred stock, mandatory convertible debt, term subordinated debt,
and a certain portion of the allowance for loan losses up to a maximum of 1.25%
of risk-weighted assets.
The following table reflects the regulatory capital position of the Bank as of
June 30, 1996 and December 31, 1995 as well as the June 30, 1996 minimum
regulatory capital requirements for well-capitalized institutions.
June 30, December 31, FDIC
1996 1995 Requirement
------- ---------- -----------
Tier 1 leverage capital ratio ......... 7.38% 7.57% 5.00%
Tier 1 risk-based capital ratio ....... 12.22% 12.52% 6.00%
Total risk-based capital ratio ........ 13.48% 13.77% 10.00%
Under current Federal Reserve Board (the "FRB") capital regulations, bank
holding companies, such as the Company, are also required to comply with minimum
capital requirements, which are substantially the same as those which apply to
the Bank under the FDIC regulations. As of June 30, 1996, the Company's capital
ratios, which on a consolidated basis are substantially the same as those set
forth above with respect to the Bank, qualify the Copany as "well capitalized"
under applicable FRB regulations.
22
<PAGE>
Interest Rate Risk Management
The operations of the Company are subject to the risk of interest rate
fluctuations to the extent that there is a substantial difference in the amount
of the Company's assets and liabilities repricing or maturing within specific
time periods. An asset-sensitive position indicates that there are more
rate-sensitive assets than rate-sensitive liabilities repricing or maturing
within specific time horizons, which would generally imply a favorable impact on
net interest income in periods of rising interest rates and a negative impact in
periods of falling interest rates. A liability-sensitive position would
generally imply a negative impact on net interest income in periods of rising
interest rates and a positive impact in periods of falling interest rates.
The objective of the Company's interest rate risk management process is to
identify, manage and control its interest rate risk within established limits in
order to produce consistent earnings that are not contingent upon favorable
trends in interest rates. This is attained by monitoring the levels of interest
rates, the relationships between the rates paid on assets and the rates paid on
liabilities, the absolute amount of assets and liabilities which reprice or
mature over similar periods, and the effect of all of these factors on the
estimated level of net interest income.
There are a number of industry standards used to measure a financial
institution's interest rate risk position. Most common among these is the
one-year gap which is the difference between assets, liabilities, and
off-balance sheet instruments that will mature or reprice within one year
expressed as a percentage of total assets. Using Management's estimates of asset
prepayments and core deposit decay in its computation, the Company estimates
that its cumulative one-year gap position was a positive $55.7 million or 4.61%
of total assets at June 30, 1996. The Company also utilizes income simulation
modeling in measuring its interest rate risk and managing its interest rate
sensitivity. Income simulation not only considers the impact of changing market
interest rates on forecasted net interest income, but also takes into
consideration other factors such as yield curve relationships, the volume and
mix of assets and liabilities, customer preferences and general market
conditions.
The following table sets forth the amounts of assets and liabilities outstanding
at June 30, 1996, which are anticipated by the Company to mature or reprice in
each of the future time periods shown using certain assumptions based on its
historical experience, the current interest rate environment, and other data
available to management. Management believes that these assumptions approximate
actual experience and considers such assumptions reasonable, however, the
interest rate sensitivity of the Company's assets and liabilities could vary
substantially if different assumptions were used or actual experience differs
from the assumptions used. Management periodically reviews and, when
appropriate, changes assumptions used in creating this table.
23
<PAGE>
<TABLE>
<CAPTION>
GAP Position
at June 30, 1996
------------------------------------------------------------------
More than six
Less than months less
six months than one year 1 - 5 Years Over 5 Yrs TOTAL
---------- ------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Assets:
Federal funds sold and
interest bearing deposits ............... $ 10,045 $ -- $ -- $ -- $ 10,045
Investment securities .................. 293,322 129,373 72,129 35,817 530,641
Residential real estate loans.............. 79,361 62,637 85,538 14,620 242,156
Commercial real estate loans............... 36,896 18,781 57,629 -- 113,306
Commercial loans .......................... 65,154 8,455 61,351 3,630 138,590
Home equity loans.......................... 66,806 853 10,257 5,971 83.887
Consumer loans ............................ 2,223 3,655 594 265 6,737
Other assets .............................. -- -- -- 84,481 84,481
---------- ---------- ---------- --------- ---------
Total assets .............................. $ 553,807 $ 223,754 $ 287,498 $ 144,784 $1,209,843
========== ========== ========== ========= =========
Liabilities & stockholders' equity:
Savings accounts .......................... $ 29,550 $ 29,550 $ 137,903 $ -- $ 197,003
NOW accounts .............................. 8,786 8,786 41,007 -- 58,579
Money market accounts...................... 62,064 62,064 82,752 -- 206,880
Time deposits ............................. 200,527 118,451 58,685 -- 377,663
Borrowed funds ............................ 167,450 23 210 1,236 168,919
Other liabilites & stockholders equity..... 17,286 17,286 51,859 114,368 200,799
---------- ---------- ---------- --------- ---------
Total liabilities & stockholders' equity... $ 485,663 $ 236,160 $ 372,416 $ 115,604 $1,209,843
========== ========== ========== ========= =========
Period GAP position........................ $ 68,144 $ (12,406) $ (84,918) $ 29,180
Net period GAP as a percentage of total
assets.................................. 5.63% (1.03%) (7.02%) 2.41%
Cumulative GAP ............................ $ 68,144 $ 55,738 $ (29,180) --
Cumulative GAP as a percentage of total
assets ................................. 5.63% 4.61% (2.41%) --
</TABLE>
For purposes of the above interest sensitivity analysis:
Residential loans held for sale at June 30, 1996 totaling $3.2 million are
in the less than six month interest sensitivity period.
Fixed rate assets are scheduled by contractual maturity and adjustable rate
assets are scheduled by their next repricing date. In both cases, assets
that have prepayment optionality are adjusted for the Bank's estimate of
prepayments.
Loans do not include non accrual loans of $8.9 million.
Loans do not include the allowance for loan loss of $14.9 million.
In certain deposit categories where there is no contractual maturity,
Management assumed the sensitivity characteristics listed below based on
the current interest rate environment and the Company's historical
experience. Management reviews these assumptions on a quarterly basis and
may modify them as circumstances dictate.
- Savings accounts are assumed to decay at an annual rate of 30%.
- NOW accounts are assumed to decay at an annual rate of 30%.
- Money market accounts are assumed to decay at an annual rate of 60%.
- Non-interest bearing accounts of $87.2 million are included in
other liabilities and are assumed to decay at an annual rate of 40%.
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, while certain assets and liabilities may have
similar contractual maturities or periods to repricing, they may react in
different ways to changes in market interest rates. Further, in the event of a
change in interest rates, prepayment and early withdrawal levels would likely
deviate significantly from those assumed in calculating the table. Additionally,
certain assets, such as adjustable rate mortgages, have features which restrict
changes in interest rates on a short-term basis and over the life of the asset.
Finally, the ability of borrowers to service their adjustable rate mortgages may
decrease in the event of an interest rate increase.
24
<PAGE>
Liquidity
Liquidity measures the ability of the Company to meet its maturing obligations
and existing commitments, to withstand fluctuations in deposit levels, to fund
its operations and to provide for customer credit needs.
The Company's principal sources of funds are deposits, advances from the FHLB of
Boston, repurchase agreements, repayments and maturities on loans and
securities, proceeds from the sale of securities in the available-for-sale
portfolio, and funds provided by operations. While scheduled loan and security
amortization and maturities are relatively predictable sources of funds, deposit
flows and loan and security prepayments are greatly influenced by economic
conditions, the general level of interest rates and competition. The Company
utilizes particular sources of funds based on comparative costs and
availability. The Company generally manages the pricing of its deposits to
maintain a steady deposit balance, but has from time to time decided not to pay
rates on deposits as high as its competition, and when necessary, will
supplement deposits with longer term and/or less expensive alternative sources
of funds such as advances from the FHLB and repurchase agreements.
Liquidity management is both a daily and long-term responsibility of Management.
The Company adjusts its investments in cash and cash equivalents based upon
Management's assessment of expected loan demand, projected security maturities,
expected deposit flows, yields available on interest-bearing deposits, and the
objectives of its asset/liability management program. If the Company requires
funds beyond its ability to generate them internally, it has additional
borrowing capacity with the FHLB and collateral eligible for repurchase
agreements. Because the Company has a stable retail deposit base, Management
believes that significant borrowings will not be necessary to maintain its
current liquidity position.
The Company's ongoing principal use of capital resources remains the origination
of single-family residential mortgage loans, commercial real estate loans,
commercial loans, and consumer loans secured by residential real estate.
25
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The Company is involved in litigation arising in the normal course of
business. Management does not believe that the ultimate liabilities arising from
such litigation, if any, would be material in relation to the consolidated
results of operations or financial position of the Company.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2. Agreement and Plan of Reorganization dated as of January 31, 1996
between the Company and the Bank (incorporated by reference from
Appendix A to the Proxy Statement-Prospectus dated March 27, 1996
included as Exhibit 99.5 to the Company's Registration Statement on
Form 8-A).
3.(i) Articles of Incorporation (incorporated by reference from Exhibit 99.1
to the Company's Registration Statement on Form 8-A).
3.(ii) Bylaws (incorporated by reference from Exhibit 99.2 to the Company's
Registration Statement on Form 8-A).
10.1 Employment agreement dated August 23, 1994 for Mr. F. William Marshall,
Jr.
10.2 The form of employment agreement for Messrs. Frank W. Barrett, B. John
Dill and John F. Treanor.
10.3 The form of employment agreement for Messrs. Gilbert F. Ehmke, Henry J.
McWhinnie, Ms. Jeanne Rinaldo, Messrs. Christopher A. Sinton, and
Michael E. Tucker (incorporated by reference from Exhibit B to the FDIC
Form F-2 filed as Exhibit 99.3 to the Company's Registration Statement
on Form 8-A).
10.4 Directors Stock Option Plan and Management Stock Option Plan
10.5 Directors Restricted Stock Plan and Management Restricted Stock Plan
11. Computation of Earnings per Share and Proforma Earnings per Share.
27. Financial Data Schedule.
26
<PAGE>
(b) Report on Form 8-K
Form 8-K, dated June 21, 1996, was filed reporting the completion of
the reorganization of the Bank into a holding company form of organization.
27
<PAGE>
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, as amended,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIS BANCORP, INC.
(Registrant)
Date: August 14, 1996 By: /s/ John F. Treanor
John F. Treanor
Executive Vice President and
Chief Financial Officer
(authorized officer and principal
financial officer)
28
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of
August 23, 1994, is made by and among Springfield Institution for Savings, a
state savings bank organized under the laws of the Commonwealth of
Massachusetts, having its principal offices at 1441 Main Street, P.O. Box 30,
Springfield, Massachusetts 02102- 3034 (the "Bank"), and F. William Marshall,
Jr., residing at 10 Crescent Hill, Springfield, Massachusetts 01155 (the
"Executive") and shall be effective as of the above date (the "Effective Date").
Recitals
1. The Bank desires to employ the Executive as President and
Chief Executive Officer of the Bank, and to enter into an employment agreement
embodying the terms of such relationship.
2. The Executive is willing to be employed as
President and Chief Executive Officer of the Bank on the terms
set forth herein.
Agreement
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and for other good and valuable consideration, the
Bank and the Executive hereby agree as follows.
1. Definitions.
1.1 "Affiliate" means any person or entity of any kind
effectively controlling, effectively controlled by or effectively
under common control with the Bank.
1.2 "Board" means the board of trustees of the Bank, if the
Bank is a mutual savings bank, and the board of directors of the Bank, if the
Bank is a stock savings bank.
1.3 "Cause" means termination due to the Executive's (a)
personal dishonesty, (b) incompetence, (c) willful misconduct, (d) breach of
fiduciary duty involving personal profit, (e) intentional failure to perform
stated duties, (f) willful violation of any law, rule or regulation (other than
traffic violations or similar offenses), or final cease-and- desist order, or
(g) material breach of any provision of this Agreement.
1.4 "Change in Control" means, after the date of this
Agreement, (a) a change in control of the Bank of a nature that would be
required to be reported in response to Item 1 of the current report on Form 8-K,
as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of
<PAGE>
1934, as amended (the "Exchange Act"), other than any change in control directly
related to or in connection with the conversion of the Bank from a state
chartered mutual savings bank to a state chartered stock savings bank; (b) a
change in control of the Bank within the meaning of 12 U.S.C. ss. 1817(i), the
change in Bank Control Act, and 12 C.F.R. ss. 574.4 of the Acquisition of
Control of Savings Association regulations of the Office of Thrift Supervision,
other than any change in control directly related to or in connection with the
conversion of the Bank from a state chartered mutual savings bank to a state
chartered stock savings bank; (c) individuals who constitute the Board as of the
date of this Agreement (the "Incumbent Board") cease for any reason, including
in connection with the conversion of the Bank from a state chartered mutual
savings bank to a state chartered stock savings bank, to constitute at least a
majority thereof, provided that any person becoming a director or a trustee, as
the case may be, subsequent to the date of this Agreement whose election was
approved by a vote of at least three-quarters of the directors or the trustees,
as the case may be, then comprising the Incumbent Board, or whose nomination for
election by the Bank's depositors or shareholders, as the case may be, was
approved by the Bank's nominating committee then serving under the Board, shall
be, for purposes of this clause (c), considered as though he or she was a member
of the Incumbent Board (but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents; (d) approval by the depositors or
shareholders of the Bank, as the case may be, of a reorganization, merger or
consolidation, or the consummation of any such reorganization, merger or
consolidation, other than, in any case (i) any such transaction occurring in
connection with or directly related to the conversion of the Bank from a state
chartered mutual savings bank to a state chartered stock savings bank, or (ii) a
reorganization, merger or consolidation with respect to which all or
substantially all of the individuals and entities who were the beneficial
owners, immediately prior to such reorganization, merger or consolidation, of
the Voting Interest in the Bank beneficially own, directly or indirectly,
immediately after such reorganization, merger or consolidation more than 80
percent of the Voting Interest of the corporation or other entity resulting from
such reorganization, merger or consolidation in substantially the same
proportions as their respective ownership, immediately prior to such
reorganization, merger or consolidation, of the Voting Interest in the Bank; (e)
approval by the depositors or shareholders of the Bank, as the case may be, of
(i) a complete liquidation or dissolution of the Bank, or (ii) the sale or other
disposition of all or substantially all of the assets of the Bank, or the
occurrence of any such liquidation, dissolution, sale or other disposition,
other than, in any case, to a Subsidiary, directly or indirectly, of the Bank,
or any Affiliate, or in connection with or directly related to any conversion of
the Bank from a state chartered mutual savings bank to a state chartered stock
savings bank;
-2-
<PAGE>
and/or (f) the solicitation of proxies from depositors or shareholders of the
Bank, by someone other than the current management of the Bank and without the
approval of the Board, seeking depositor or shareholder approval of a plan of
reorganization, merger or consolidation of the Bank with one or more
corporations as a result of which the depositors' or shareholders' interests in
the Bank are actually exchanged for or converted into securities not issued by
the Bank. No failure on the part of the Executive to exercise any rights upon
the occurrence of a Change in Control shall be deemed a waiver of any subsequent
events or circumstances constituting a Change in Control.
1.5 "Code" means the Internal Revenue Code of 1986, as
amended, as in effect from time to time, and/or any successor code thereto.
1.6 "Date of Termination" means the date specified in the
Notice of Termination (as defined in Section 6.8 of this Agreement); provided,
however, that if, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgement, order or decree of a court of competent jurisdiction, including all
appeals, unless the time for appeal therefrom has expired and no appeal has been
perfected; provided, further, however, that the Date of Termination shall (a) in
no case be later than the date on which the Term of Employment expires, and (b)
be extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such dispute with
reasonable diligence.
1.7 "Excise Tax" means any excise tax imposed under Section
4999 of the Code and/or any successor section thereto.
1.8 "Good Reason" means, and shall be deemed to exist if,
without the written consent of the Executive, (a) the Bank (or any Parent for
the balance of this Section 1.8) fails to appoint or reappoint the Executive as
President and Chief Executive Officer of the Bank, (b) there occurs any
reduction of Base Salary or material reduction in other benefits or any material
change by the Bank to the Executive's function, duties, or responsibilities in
effect on the date hereof and/or as set forth in Section 4.1 of this Agreement,
which change would cause the Executive's position with the Bank to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof in effect on the date hereof and/or as set forth in Section 4.1 of this
Agreement (and any such material change shall be deemed a continuing breach of
this Agreement), (c) there occurs any material breach of this Agreement by the
Bank, (d) a Change in Control occurs, or (e) the Bank, if and after a Suspension
for Disability (as defined in Section 6.2(a))
-3-
<PAGE>
occurs and after a Change in Control occurs, fills the Executive's position (in
the manner set forth in Section 6.2(b) of this Agreement).
1.9 "Parent" means any corporation which has a direct or
indirect legal or beneficial ownership interest in the Bank, but only if any
such corporation owns or controls, directly or indirectly, securities possessing
at least 50% of the total combined voting power of all classes of securities of
the Bank.
1.10 "Subsidiary" means any corporation (other than the Bank)
in which the Bank or any Parent has a direct or indirect legal or beneficial
ownership interest, but only if the Bank or the Parent, as the case may be, owns
or controls, directly or indirectly, securities possessing at least 50% of the
total combined voting power of all classes of securities in any such
corporation.
1.11 "Retirement" means the termination of the Executive's
employment with the Bank for any reason by the Executive at any time after the
Executive attains age 65.
1.12 "Voting Interest" means securities of any class or
classes or other ownership interests having general voting power under ordinary
circumstances to elect members of a board of directors or trustees of any
entity.
2. Employment.
2.1 General. Subject to the terms and provisions set forth in
this Agreement, the Bank, during the Term of Employment, agrees to continue to
employ Executive as President and Chief Executive Officer of the Bank and the
Executive hereby accepts such continued employment.
2.2 FDIC Suspension. If the Executive is suspended from office
and/or temporarily prohibited from participating in the conduct of the Bank's
affairs by a notice served under Section 8(e)(3) or (g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. ss.ss. 1818(e)(3) and (g)(1)), the Bank's
obligations under this Agreement shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank shall (i) pay the Executive all or part of the compensation
withheld while its contract obligations were suspended, and (ii) reinstate (in
whole or in part) any of its obligations which were suspended.
3. Term of Employment.
3.1 Term. The term of employment under this Agreement shall
commence as of the Effective Date and, unless extended as provided below or
earlier terminated by the Bank or the Executive under Section 6 of this
Agreement, shall continue until the third anniversary of the Effective Date (the
"Term of Employment"). As of each anniversary of the date of this Agreement, a
one year
-4-
<PAGE>
extension of the then Term of Employment shall automatically be effected, unless
either the Bank or the Executive shall give written notice to the other party,
not less than four months prior to the anniversary of the date of this Agreement
of the intent of such party to terminate at the expiration of the Term of
Employment.
3.2 FDIC Removal. Notwithstanding anything to the contrary in
this Agreement, if the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. ss.ss.
1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement shall
terminate as of the effective date of the order, but vested rights of the Bank
and/or the Executive, if any, shall not be affected.
4. Positions, Responsibilities and Duties.
4.1 Positions and Duties. During the Term of Employment, the
Executive shall be employed and shall serve as President and Chief Executive
Officer of the Bank. In such position(s), the Executive shall have the duties,
responsibilities and authorities and authority as determined and designated from
time to time by the Board, including, without limitation, complete management
authority with respect to, and total responsibility for, the overall operations
and day-to-day business and affairs of the Bank. The Executive shall serve under
the direction and supervision of, and report only to, the Board. Notwithstanding
the above, the Executive shall not be required to perform any duties and
responsibilities (a) which would result in a noncompliance with or violation of
any applicable law, regulation, regulatory bulletin, and/or any other regulatory
requirement or (b) on a regular basis in any locations outside the counties of
Berkshire, Franklin, Hampden or Hampshire, unless agreed upon by the Executive.
4.2 Attention to Duties and Responsibilities. During the Term
of Employment, the Executive shall, except for periods of absence occasioned by
illness, vacation in accordance with Section 5.6, and reasonable leaves of
absence in accordance with the practices of the Bank as of the date of this
Agreement, devote substantially all of his business time to the business and
affairs of the Bank and the Executive shall use his best efforts, business
skills, ability and fidelity to perform faithfully and efficiently the duties
and responsibilities contemplated by this Agreement; provided, however, that the
Executive shall be allowed, to the extent such activities do not present a
conflict or substantially interfere with the performance by the Executive of his
duties and responsibilities hereunder, (a) to manage the Executive's personal
affairs, and (b)(i) to serve on boards or committees of civic or charitable
organizations or trade associations, and (ii) after obtaining the consent of the
Board, as evidenced by a written resolution of the Board and under the terms and
conditions specified in any such resolution, to serve
-5-
<PAGE>
on the boards of directors or trustees of companies or other organizations and
associations; provided, further, however, that all offices or positions which
the Executive currently holds or has held prior to the date of this Agreement
and those set forth on Exhibit "A", annexed hereto are designated as currently
consented to positions.
5. Compensation and Other Benefits.
5.1 Base Salary. During the Term of Employment, the Executive
shall receive a base salary of $325,000 per annum ("Base Salary") payable in
accordance with the Bank's normal payroll practices. Such Base Salary shall be
reviewed annually by the Board for increase in the Board's sole discretion. Such
Base Salary as so increased shall then constitute the Executive's "Base Salary"
for purposes of this Agreement. Notwithstanding the foregoing, after a Change in
Control occurring during the Term of Employment, the Base Salary of the
Executive shall be increased not less than often than once every twelve calendar
months during the Term of Employment in an amount not less than the average
increase the Executive had received in the prior three (3) years or for the
length of the Executive's employment.
5.2 Annual Bonus. During the Term of Employment, the Executive
shall be entitled to participate in an equitable manner with other executive
officers of the Bank in such discretionary bonus payment or awards as may be
authorized, declared, and paid by the Board to the Bank's executive employees.
No other compensation or additional benefits provided for in this Agreement
shall be deemed a substitute for the Executive's right, if any, to receive such
bonuses if, when and as declared by the Board.
5.3 Incentive, Retirement, and Savings Plan. During the Term
of Employment, the Executive shall participate in all incentive, pension,
retirement, supplemental retirement, savings, stock option and other stock grant
plans, as well as other employee benefit plans and programs, if any, maintained
from time to time by the Bank for the benefit of senior executives and/or other
employees of the Bank.
5.4 Welfare Benefit Plans. During the Term of Employment, the
Executive, the Executive's spouse, if any, and their eligible dependents, if
any, shall participate in and be covered by all the welfare benefit plans and
programs, if any, maintained by the Bank for the benefit of senior executives
and/or other employees of the Bank.
5.5 Expense Reimbursement. During the Term of Employment, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses, including reasonable business travel expenses, incurred by the
Executive in performing his duties and responsibilities hereunder in accordance
with the policies and procedure of the Bank as in effect at the time the expense
was incurred, as the same may be changed from time to time.
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5.6 Vacation and Fringe Benefits. During the Term of
Employment, the Executive shall be entitled to five (5) weeks paid vacation each
calendar year at such times which do not materially interfere with the
performance of the Executive's duties hereunder. In addition, during the Term of
Employment, the Executive shall be eligible to benefit from such fringe benefits
and prerequisites, if any, in accordance with the policies of the Bank and as in
effect and provided from time to time to senior executives of the Bank.
Notwithstanding the above, the Executive, during the Term of Employment, shall
retain, pursuant to current policy and practice of the Bank, all privileges, if
any, including club memberships and automobile usage of a bank-owned vehicle, to
which he is entitled on the date of this Agreement.
6. Termination.
6.1 Termination Due to Death. In the event of the Executive's
death during the Term of Employment, the Term of Employment shall thereupon end
and his estate or other legal representative, as the case may be, shall, subject
to Sections 2.2, 3.2, 6.9, 6.11 and 6.12 of this Agreement, only be entitled to:
(a)(i)(A) Base Salary continuation at the rate in effect (as
provided in Section 5.1 of this Agreement) on the Date of Termination
for a six month period commencing on such Date of Termination, or (B),
if the Board so determines in its sole discretion and in lieu of such
one year salary continuation described above in (A), a lump sum payment
equal in amount to the present value of such Base Salary continuation
(reasonably determined using a discount rate equal to the most recent
quote available for the one year United States Treasury Bill rate on
the Date of Termination) payable within thirty business days after the
Date of Termination, and (ii) a pro-rata annual bonus for the fiscal
year in which such termination occurs, such pro-rata bonus amount to be
(I) pro-rated based on a minimum of six months service during the
fiscal year of the Bank (prior to the Date of Termination), (II)
determined in good faith by the Board (but in its sole discretion), and
(III) if any such bonus is payable, paid on or about the same date that
the annual bonus amounts payable in respect of such fiscal year, if
any, to the senior executives of the Bank are actually paid to them;
(b)any Base Salary accrued, but not less than for a period of
six months to the Date of Termination or any bonus actually awarded,
but not yet paid as of the Date of Termination;
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(c)reimbursement for all expenses (under Section 5.5 incurred
as of the Date of Termination, but not yet paid as of the Date of
Termination;
(d)payment of the per diem of any unused vacation days
accruing during the Term of Employment and the unused, unaccrued
portion of any vacation days available through the end (but not beyond)
of the calendar year of the Bank in which such termination occurs;
(e)any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable plans and
programs, if any, of the Bank or any Subsidiary; and
(f)continuation of the welfare benefits of the Executive and
Executive's dependents, or any of the same, at the level in effect (as
provided for by Section 5.4 of this Agreement) on, and at the same
out-of-pocket cost to the Executive as of, the Date Termination for a
six (6) month period commencing on the Date of Termination (or, if such
continuation is not permitted by applicable law or if the Board so
determines in its sole discretion, the Bank shall provide the economic
equivalent in lieu thereof);
(g)any rights to indemnification in accordance with Section 11
of this Agreement.
6.2 Suspension for Disability.
(a)If, during the Term of Employment, the Executive shall have
been absent from his duties with the Bank on a full-time basis due to
physical or mental illness for six (6) consecutive months, the Bank may
give thirty (30) days written notice of potential suspension. If the
Executive shall not have returned to the full-time performance of his
duties within such 30-day period, the Bank may suspend the Executive's
employment for "Disability" (a "Suspension for Disability").
(b)If a Suspension for Disability occurs during the Term of
Employment, the Bank will pay the Executive a bi-weekly payment equal
to two-thirds (2/3) of the Executive's bi-weekly rate of Base Salary on
the effective date of the Suspension for Disability. These payments
shall commence on the effective date of the Executive's Suspension for
Disability and will end on the earlier of (i) the date the Executive
returns to the full-time employment of the Bank; (ii) the Executive's
equivalent full-time employment by another employer; (iii) the
Executive's retirement; (iv) the Executive's death; or (v) the Term of
Employment. After a Suspension for Disability occurs, the Bank shall be
free to fill the Executive's position, but such action by the Bank,
shall constitute Good Reason if it occurs after a Change in Control.
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Upon the Executive being able to return to full-time employment before
the expiration of the Term of Employment, the Executive shall be
offered an equivalent available position and otherwise be subject to
the provisions of this Agreement. The disability payments hereunder
will be in addition to any benefit payable from any qualified or
nonqualified retirement plans or programs maintained by the Bank but
will be reduced by payments received by the Executive on account of
such disability under any long-term disability plan maintained for the
Bank's employees or maintained by the Executive. The Executive shall
maintain any such disability insurance during the Term of Employment.
(c)During the Term of Employment, the Bank will cause to be
continued life and health coverage and such other benefits
substantially identical to the coverage and benefits maintained by the
Bank for the Executive prior to the occurrence of any Suspension for
Disability.
(d)Notwithstanding the foregoing, there will be no reduction
in the compensation (except as otherwise provided in Section 6.2(b)
above, accrued benefits or pension granted or accruing to the Executive
during the Term of Suspension. Nothing in this Section 6.2 shall
abrogate or limit other provisions of this Agreement granting rights to
the Executive or the Executive's spouse or the Executive's estate
following death, retirement or termination, if applicable.
(e)continuation of the welfare benefits of the Executive and
the Executive's dependents, or any of the same, at the level in effect
(as provided for by Section 5.4 of this Agreement) on, and at the same
out-of-pocket cost to the Executive as of, the Date of Termination for
the three-year period commencing on the Date of Termination (or, if
such continuation is not permitted by applicable law or if the Board so
determines in its sole discretion, the Bank shall provide the economic
equivalent in lieu thereof);
6.3 Termination by the Board for Cause. The Board may
terminate the Executive's employment hereunder for Cause, as provided below. If
the Board terminates the Executive's employment hereunder for Cause, the Term of
Employment (if not already expired) shall thereupon end as set forth below and
the Executive shall, subject to Sections 2.2, 3.2, 6.9, 6.11, and 6.12 of this
Agreement, only be entitled to:
(a)Base Salary up to and including the Date of Termination;
(b)any bonus actually awarded, but not yet paid as of the Date
of Termination;
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(c)reimbursement for all expenses (under Section 5.5) incurred
as of the Date of Termination, but not yet paid as of the Date of
Termination;
(d)payment of the per diem value of any unused vacation days
accruing during the Term of Employment and, to the extent not
prohibited by applicable law, regulation, regulatory bulletin, and/or
any other regulatory requirement, as the same exists or may hereafter
be promulgated or amended the unused, unaccrued portion of any vacation
days available through the end and (but not beyond) of the calendar
year of the Bank in which such termination occurs;
(e)to the extent not prohibited by applicable law, regulation,
regulatory bulletin, and/or any other regulatory requirement, as the
same exists or may hereafter be promulgated or amended, any other
compensation and benefits as may be provided in accordance with the
terms and provisions of any applicable plans and programs, if any, of
the Bank or any Subsidiary; and
(f)any rights to indemnification in accordance with Section 11
of this Agreement.
In each case, in determining Cause the alleged acts or omissions of the
Executive shall be measured against standards generally prevailing in the
banking industry generally and the ultimate existence of Cause must be confirmed
by not less than 51% of the Incumbent Board (as constituted in accordance with
Section 1.4(c) of this Agreement) as a meeting prior to any termination
therefor; provided, however, that it shall be the Bank's burden to prove the
alleged facts and omissions and the prevailing nature of the standards the Bank
shall have alleged are violated by such acts and/or omissions of the Executive.
In the event of such a confirmation by 51% or more of the Board, the Bank shall
notify the Executive that the Bank intends to terminate the Executive's
employment for Cause under this Section 6.3 (the "Confirmation Notice"). The
Confirmation Notice shall specify the act, or acts, upon the basis of which the
Board has confirmed the existence of Cause and must be delivered to the
Executive within ninety (90) days after a majority of the Board (excluding, if
applicable, the Executive) has actual knowledge of the events giving rise to
such purported termination. If the Executive notifies the Bank in writing (the
"Opportunity Notice") within thirty (30) days after the Executive has received
the Confirmation Notice, the Executive (together with counsel) shall be provided
one opportunity to meet with the Board (or a sufficient quorum thereof) to
discuss such act or acts. Such opportunity to meet with the Board shall be fixed
and shall occur on a date selected by the Board (such date being not less than
ten (10) nor more than forty-five (45) days after the Bank receives the
Opportunity Notice from the Executive). Such meeting shall take place at the
principal offices of the Bank or such other location as agreed to by the
Executive and the Bank. During the period commencing on the date the Bank
receives the Opportunity Notice and ending on the date next succeeding the date
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on which such meeting between the Board (or a sufficient quorum thereof) and the
Executive is scheduled to occur and not withstanding anything to the contrary in
this Agreement, the Executive shall be suspended from employment with the Bank
(with pay to the extent not prohibited by applicable law, regulation, regulatory
bulletin, and/or any other regulatory requirement, as the same exists or may
hereafter be promulgated or amended) and the Board may, during such suspension
period, reasonably limit the Executive's access to the principal offices of the
Bank or any of its assets. If the Board properly sets the date of such meeting
and if the Board (or a sufficient quorum thereof) attends such meeting and in
good faith does not rescind its confirmation of Cause at such meeting or if the
Executive fails to attend such meeting for any reason, the Executive's
employment by the Bank shall, immediately upon the closing for such meeting and
the delivery to the Executive of the Notice of Termination, be terminated for
Cause under this Section 6.3. If the Executive does not respond in writing to
the Confirmation Notice in the manner and within the time period specified in
this Section 6.3, the Executive's employment with the Bank shall, on the
thirty-first day after the receipt by the Executive of the Confirmation Notice,
be terminated for Cause under this Section 6.3. In the event of any dispute
hereunder, Executive shall be entitled, to the extent not prohibited by
applicable law, regulation, regulatory bulletin, and/or any other regulatory
requirement, as the same exists or may hereafter be promulgated or amended,
until the earlier to occur of (i) the Date of Termination, (ii) the expiration
of the current state Term of Employment, or (iii) the resolution of such dispute
to (A) be paid bi-weekly his then Base Salary, and (b) continue to receive all
other benefits; and there shall be no reduction whatsoever of any amounts
subsequently paid to the Executive upon resolution of such dispute as a result
of, or in respect to, such interim payments or coverage. The procedure set forth
in this Section 6.3 to determine the existence of Cause shall at all times be
subject to the requirements of applicable law, regulation, regulatory bulletin
or other regulatory requirements.
6.4 Terminate Without Cause or for Good Reason. The Bank may
terminate the Executive's employment hereunder at any time without Cause. The
Executive may terminate his employment hereunder for Good Reason at any time by
delivery or written notice to the Bank within the six-month period commencing
after the occurrence of the Good Reason effective forty-five (45) days after
such written notice is delivered. If the Bank terminates the Executive's
employment hereunder without Cause (other than due to Retirement, death,
Disability or the normal expiration of the full Term of Employment), or if the
Executive terminates his employment hereunder for Good Reason, the Term of
Employment shall thereupon end (if not already expired) and the Executive shall,
subject to Sections 2.2, 3.2, 6.9, 6.11, and 6.12 of this Agreement, only be
entitled to:
(a)as liquidated damages, a cash lump sum equal to two (2)
times the Executive's "Highest Annual Compensation" (as herein
defined), provided that if the Executive terminates for Good Reason
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following a Change in Control, the cash lump sum shall be equal to
three (3) times the Executive's "Highest Annual Compensation". For
purposes of this Agreement, "Highest Annual Compensation" shall mean
the sum of (i) the highest per annum rate of Base Salary, and (ii) the
aggregate bonus amounts paid to the Executive (or which would have been
paid but for an election to defer payment to a later period), in
respect of any fiscal year of the Bank at any time during the Term of
Employment;
(b)any Base Salary accrued to the Date of Termination or any
bonus actually awarded, but not yet paid as of the Date of Termination;
(c)reimbursement for all expenses (under Section 5.5) incurred
as of the Date of Termination, but not yet paid as of the Date of
Termination;
(d)payment of the per diem value of any unused vacation days
accruing during the Term of Employment and the unused, unaccrued
portion of any vacation days available through the end (but not beyond)
of the calendar year of the Bank in which such termination occurs;
(e)continuation of the welfare benefits of the Executive and
dependents, or any of the same, at the level in effect (as provided for
by Section 5.4 of this Agreement) on, and at the same out-of-pocket
cost to the Executive as of, the Date of Termination for the three-year
period commencing on the Date of Termination (or, if such continuation
is not permitted by applicable law or if the Board so determines in its
sole discretion, the Bank shall provide the economic equivalent in lieu
thereof);
(f)any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable plans or
programs, if any, of the Bank or any Subsidiary; and
(g)any rights to indemnification in accordance with Section 11
of this Agreement.
In the event of any dispute hereunder, the Executive shall be entitled until the
earlier to occur of (i) the Date of Termination, (ii) the expiration of the
current stated Term of Employment, or (iii) the resolution of such dispute to
(A) be paid bi-weekly his then Base Salary, and (B) continue to receive all
other benefits; and there shall be no reduction whatsoever of any amounts
subsequently paid to the Executive upon resolution of such dispute as a result
of, or in respect to, such interim payments or coverage.
6.5 Voluntary Termination. During the Term of Employment, the
Executive may effect, upon sixty (60) days prior written notice to the Bank, a
Voluntary Termination of his employment hereunder and thereupon the Term
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of Employment (if not already expired) shall end. A "Voluntary Termination"
shall mean a termination of employment by the Executive on his own initiative
other than (a) a termination due to death or Disability, (b) a termination for
Good Reason, (c) a termination due to Retirement, or (d) a termination as a
result of the normal expiration of the full Term of Employment. A Voluntary
Termination shall, subject to Sections 2.2, 3.2, 6.9, 6.11, and 6.12 of this
Agreement, entitled the Executive only to all of the payments and benefits which
the Executive would be entitled to in the event of a termination of his
employment by the Bank for Cause.
6.6 Termination Due to Retirement. The Executive may terminate
the Executive's employment hereunder due to Retirement upon thirty (30) days
prior written notice to the Bank. If, during the Term of Employment, the
Executive's employment is so terminated due to Retirement, the Term of
Employment shall thereupon and the Executive shall, subject to Sections 2.2,
3.2, 6.9, 6.11, and 6.12 of this Agreement, only be entitled to:
(a)Base Salary up to and including the Date of Termination;
(b)any bonus actually awarded, but not yet paid as of the Date
of Termination;
(c)reimbursement for all expenses (under Section 5.5) incurred
as of the Date of Termination, but not yet paid as of the Date of
Termination;
(d)(i) continuation of the Executive's welfare benefits (as
described in Sections 5.4 of this Agreement) at the level in effect on
the Date of Termination for the one-year period following the
termination of the Executive's employment due to Retirement (or, if
such continuation is not permitted by applicable law or if the Board so
determines in its sole discretion, the Bank shall provide the economic
equivalent in lieu thereof), and (ii) any other compensation and
benefits as may be provided in accordance with the terms and provisions
of any applicable plans and programs, if any, of the Bank or any
Subsidiary;
(e)payment of the per diem value of any unused vacation days
accruing during the Term of Employment and the unused, unaccrued
portion of any vacation days available through the end (but not beyond)
of the calendar year of the Bank in which such termination occurs; and
(f)any rights to indemnification in accordance with Section 11
of this Agreement.
6.7 No Mitigation; No Offset. In the event of any termination
of employment under this Section 6, the Executive shall be under no obligation
to seek other employment or to mitigate damages and there shall be no offset
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against any amounts due the Executive under this Agreement for any reason,
including, without limitation, on account of any remuneration attributable to
any subsequent employment that the Executive may obtain. Any amounts due under
this Section 6 are in the nature of severance payments, or liquidated damages,
or both, and are not in the nature of a penalty.
6.8 Notice of Termination. Any termination of the Executive's
employment under this Section 6 requiring advance written notice shall be
communicated by a notice of termination to the other party hereto given in
accordance with Section 12.3 of this Agreement (the "Notice of Termination").
The Notice of Termination, in the case of a termination by the Bank for Cause,
or a termination by the Executive for Good Reason, shall (a) indicate the
specific termination provision in this Agreement relied upon, and (b) set forth
in reasonable detail the dates, facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated.
6.9 Code Section 280G Reduction.
6.9.1 Notwithstanding any other provisions of this Agreement
or of any other agreement, contract, understanding, plan or program entered in
to or maintained by the Bank, if any payment or benefit received or to be
received by the Executive in connection with the termination of the Executive's
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with (a) the Bank or any Affiliate, Parent or
Subsidiary of the Bank, or (b) any person affiliated with the Bank or any such
person) (all such payments and/or benefits, including the payments and benefits,
if any, under this Section 6, being hereinafter referred to as the "Total
Payments") would subject the Executive to an Excise Tax, and if such Total
Payments less the Excise Tax is less than the maximum amount of Total Payments
which would otherwise be payable to the Executive without imposition of an
Excise Tax, then, to the extent necessary to eliminate the imposition of an
Excise Tax (and after taking into account any reduction in the Total payments
provided by reason of Section 280G of the Code in such other plan, arrangement
or agreement), (i) the cash and non-cash payments and benefits payable under
this Agreement shall first be reduced (but not below zero),and (ii) all other
cash and non-cash payments and benefits shall next be reduced (but not below
zero); but only if, by reason of any such reduction, the Total Payments with any
such reduction shall exceed the Total Payments without any such reduction. For
purposes of this Section 6.9, (A) no portion of the Total Payments the receipt
or enjoyment of which the Executive shall have effectively waived in writing
prior to the Date of Termination shall be taken into account, (B) no portion of
the Total Payments shall be taken into account which in the opinion of tax
counsel selected in good faith by the Bank does not constitute a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code, including
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(without limitation) by reason of Section 280G(b)(4)(A) of the Code, (C) the
payments and/or benefits under this Agreement shall be reduced only to the
extent necessary as that the Total Payments (other than those referred to in
clauses (A) and (B) above) in their entirety constitute reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4)(B)of the
Code or are otherwise not subject to disallowance as deductions, in the opinion
of the tax counsel referred to above in clause (B), and (D) the value of any
non-cash payment or benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Bank's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
Except as otherwise provided above, the foregoing calculations and
determinations shall be made in good faith by the Bank and the Executive. If no
agreement on the calculations is reached, then the Executive and the Bank will
agree to the selection of an accounting firm to make the calculations. If no
agreement can be reached regarding the selection of an accounting firm the Bank
will select a prominent national accounting firm which has no current or recent
business relationship with the Bank. The Bank shall pay all costs and expenses
incurred in connection with any such calculations or determinations. Any
calculations or determinations made in accordance with this Section 6.9 shall be
conclusive and binding on all parties.
6.9.2 Notwithstanding any other provisions of this Agreement
or of any other agreement, contract, understanding, plan or program entered into
or maintained by the Bank, if any payment or benefit received or to be received
by the Executive in connection with the termination of the Executive's
employment (pursuant to a Change in Control, any amount payable under this
Agreement or any other payments to which Executive is entitled under any benefit
plan, option or stock grant plan, incentive plan or other agreement with the
Bank constitute "excess parachute payments" (as defined in Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code")), the Bank shall pay to
the Executive an additional sum equal to: (i) the excise tax imposed by Section
4999 of the Code on the excess parachute payments (including any payments made
pursuant to this sentence), and (ii) the Executive's federal, state and local
income and payroll taxes imposed upon the payments made pursuant to this
sentence.
6.10 Payment. Except as otherwise provided in this Agreement,
any payments to which the Executive shall be entitled to under this Section 6,
including, without limitation, any economic equivalent of any benefit, shall be
made, to the extent practicable, within five (5) business days following the
Date of Termination.
6.11 Bank Regulatory Limitations.
6.11.1 Any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. ss. 1828(k) and any regulations promulgated thereunder.
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6.11.2 To the extent required by applicable law, regulation,
regulatory bulletin, and/or any other regulatory requirement, the aggregate
amount and/or value of the Compensation paid as a result of any termination of
the Executive's employment with the Bank, regardless of the reason for any such
termination of employment, shall not exceed the limit prescribed by applicable
law, rule or regulation.
6.12 Other Required Provisions.
6.12.1 If the Bank is in default (as defined in Section
3(x)(1) of the Federal Deposit Insurance Act), all obligations under this
Agreement shall terminate as of the date of default, but this Section 6.12.1
shall not affect the vested rights of the Bank and/or the Executive, if any.
6.12.2 All obligations under this Agreement shall be
terminated, except to the extent determined that continuation of this Agreement
is necessary for the continued operation of the Bank, (i) by the director, or
his or her designee, at the time the Federal Deposit Insurance Corporation
enters into an agreement to provide assistance to or on behalf of the Bank under
the authority contained in Section 13(c) of the Federal Deposit Insurance Act;
or (ii) by the director, or his designee, at the time the director, or his or
her designee, approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by such director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by any such actions.
6.13 Post-Termination Obligations. During the Term of
Employment and for one (1) full year after the expiration or termination
thereof, or subject to ordinary court process, the Executive shall, upon
reasonable notice, use his reasonable best efforts to cooperate with the Bank by
providing such information and assistance to the Bank as may reasonably be
required by the Bank at the Bank's expense in connection with any litigation not
commenced by or involving the Executive in which the Bank or any of its
Subsidiaries or Affiliates is, or may become, a party.
7. Non-exclusivity of Rights; Non-extension Severance.
7.1 Other Benefits. Except as is otherwise specifically
provided in this Agreement, the Executive's continuing or future participation
in any benefit, bonus, incentive or other plan or program provided or maintained
by the bank, and for which the Executive may be eligible and qualify, shall not
be prevented or limited, and the Executive's rights under any future agreements
with the Bank and/or any Affiliate, including, without limitation, any stock
option agreements shall not be limited or prejudiced. Subject to Section 7.2
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below, this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of a kind elsewhere provided. Except as
otherwise specifically provided in this Agreement, no provision of this
Agreement shall be interpreted to mean or result in the Executive receiving
fewer benefits than those available to him without reference to this Agreement.
7.2 Non-extension Severance. If (a)(i) the Executive's
employment hereunder is not terminated or suspended under Sections 6.1, 6.2,
6.3, 6.4, 6.5 or 6.6 of this Agreement prior to the expiration of the Term of
Employment, or (ii) any such termination or suspension of the Executive's
employment is not initiated prior to the expiration of the Term of Employment,
(b) the Term of Employment is not extended by the Bank, and (c) the Executive's
employment with the Bank terminates after the expiration of the Term of
Employment (other than for Cause), the Executive shall be entitled to receive,
in lieu of any severance payments or severance benefits under any other plan or
program maintained by the Bank or any Affiliate, (1) Base Salary continuation at
the rate in effect (as provided in Section 5.1 of this Agreement) as of the
expiration of the Term of Employment, and (2) welfare benefit continuation, at
the level in effect (as provided for by Section 5.4 of this Agreement) on, and
at the same out-of-pocket cost to the Executive as of, the expiration of the
Term of Employment, in each case (1) and (2), for the greater of (A) the period
ending six (6) months after the Executive's employment terminates, or (B) the
period commencing on the date the Executive's employment terminates and ending
as of the Term of Employment. Notwithstanding the above, if the Board determines
in its sole discretion and in lieu only of such Base Salary continuation in (1),
a lump sum payment, equal to the present value of such Base Salary continuation
(reasonably determined using the discount rate specified in Section 6.1(a)(1)),
shall be paid to the Executive within thirty (30) days after the date the
Executive's employment terminates. Notwithstanding anything to the contrary in
this Section 7.2, if (x) there occurs a Change in Control during the Term of
Employment, (y) the Term of Employment is not extended by the Bank up to and/or
through the Term of Employment, and (z) the Executive's employment with the Bank
is subsequently terminated (other than for Cause), the Executive, in lieu of the
Base Salary and welfare benefits continuation under this Section 7.2, shall be
entitled to receive the payments and benefits set forth in Section 6.4 of this
Agreement.
8. Resolution of Dispute. With the exception of proceedings for
equitable relief brought pursuant to this Section or Section 9.2 of this
Agreement, any dispute or controversy arising under or in connection with this
Agreement may, at either the Bank's or the Executive option, be settled
exclusively by arbitration in Springfield, Massachusetts in accordance with the
rules of the American Arbitration Association then in effect and at the Bank's
expense. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that the Executive shall be entitled to seek
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specific performance in court of his right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement. If a claim for any payments or benefits under
this Agreement or any other provision of this Agreement is disputed by the Bank
and the Executive, the Executive shall, to the extent and at such time or times
as is not prohibited by applicable law, regulation, regulatory bulletin, and/or
any other regulatory requirement, as the same exists or may be hereafter
promulgated or amended, if the Executive is successful in his claim, be
reimbursed for all reasonable attorney's fees and expenses incurred by the
Executive in pursuing such claim.
9. Confidential Information.
9.1 Confidentiality. The Executive will not, during or after
the Term of Employment, disclose any confidential information relating to the
business activities of the Bank or any Affiliate thereof which has not been
previously disclosed by any person to any person, firm corporation, bank or
other entity for any reason or purpose whatsoever. Notwithstanding the
foregoing, the Executive may disclose any knowledge or other information
relating to banking, financing and/or economic principles, concepts or ideas
which are based on experience and which are not derived from the business plans
and activities of the Bank, and may disclose such confidential information in
connection with legal and/or regulatory proceedings.
9.2 Injunctive Relief. The Executive acknowledges and agrees
that the Bank will have no adequate remedy at law, and would be irreparably
harmed, if the Executive breaches or threatens to breach any of the provisions
of this Section 9 of this Agreement. The Executive agrees that the Bank shall be
entitled to equitable and/or injunctive relief to prevent any breach or
threatened breach of this Section 9, and to specific performance of each of the
terms of such Section in addition to any other legal or equitable remedies that
the Bank may have. The Executive further agrees that he shall not, in any equity
proceeding relating to the enforcement of the terms of this Section 9, raise the
defense that the Bank has an adequate remedy at law.
9.3 Special Severability. The terms and provisions of this
Section 9 are intended to be separate and divisible provisions and if, for any
reason, any one or more of them is held to be invalid or unenforceable, neither
the validity nor the enforceability of any other provision of this Agreement
shall thereby be affected.
10. Successors.
10.1 The Executive. This Agreement is personal to the Executive
and, without the prior express written consent of the Bank, shall not be
assignable by the Executive, except that the Executive's rights to receive any
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<PAGE>
compensation or benefits under this Agreement may be transferred or disposed of
pursuant to testamentary disposition, intestate succession or pursuant to a
qualified domestic relations order. This Agreement shall inure to the benefit of
and be enforceable by the Executive's heirs, beneficiaries and/or legal
representatives.
10.2 The Bank. This Agreement shall inure to the benefit of
and be binding upon the Bank and its successors and assigns; provided, however,
that no assignment of this Agreement may be made without written consent of the
Executive.
11. Indemnification. The Executive (and his heirs, executors and
administrators) shall be indemnified and held harmless by the Bank to the
fullest extent permitted by applicable law, regulations, regulatory bulletin,
and/or any other regulatory requirement, as the same exists or may hereafter be
promulgated or amended, against all expense, liability and loss (including,
without limitation, attorneys' fees, judgments, fines, excise taxes or penalties
and amounts paid or to be paid in settlement) reasonable incurred or suffered by
the Executive as a consequence of the Executive being or having been made a
party to, or being or having been involved, in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that the Executive is or was a trustee,
director or officer of the Bank or is or was serving at the request of the Bank
as a trustee, director or officer or of another corporation (including, but not
limited to, a subsidiary or an Affiliate of the Bank), and such indemnification
shall continue after the Executive shall cease to be an officer, director or
trustee. The right to indemnification conferred hereby shall be a contract right
and shall also include, to the extent permitted by applicable regulation, the
right to be paid by the Bank the expenses incurred in defending any such
proceeding in advance of the final disposition upon receipt by the Bank of an
undertaking by or on behalf of the Executive to repay such amounts or a portion
thereof, if it shall ultimately be determined that the Executive is not entitled
to be indemnified by the Bank pursuant hereto or as otherwise authorized by law
but such repayment by the Executive shall only be in an amount ultimately
determined to exceed the amount to which the Executive was entitled to be
indemnified.
12. Miscellaneous.
12.1 Applicable Law. This Agreement shall, to the extent not
superseded by federal law, be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts, without regard to principles of
conflict of laws.
12.2 Amendments/Waiver. This Agreement may not be amended,
waived, or modified otherwise than by a written agreement executed by the
parties to this Agreement or their respective successors and legal
representatives. No waiver by any party to this Agreement of any breach of any
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<PAGE>
term, provision or condition of this Agreement by the other party shall be
deemed a waiver of a similar or dissimilar condition or provision at the same
time, or any prior or subsequent time.
12.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when received by hand-delivery to
the other party, by facsimile transmission, by overnight courier, or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
with a copy to:
If to the Bank:
with a copy to:
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
12.4 Withholdings. The Bank may withhold from any amounts
payable under this Agreement such taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
12.5 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
12.6 Captions. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect.
12.7 Entire Agreement. This Agreement contains the entire
agreement between the parties to this Agreement concerning the subject matter
hereof and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the parties with
respect thereto.
12.8 Representation. The Executive represents and warrants
that the performance of the Executive's duties and obligations under this
Agreement will not violate any agreement between the Executive and any other
person, firm, partnership, corporation, or organization.
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<PAGE>
12.9 Survivorship. The respective rights and obligations of
the parties to this Agreement, including, without limitation, any rights of the
Executive and the Bank under Section 11 of this Agreement, shall survive any
termination of this Agreement or the Executive's employment hereunder for any
reason to the extent necessary to the intended preservation of such rights and
obligations.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and the Bank has caused this Agreement to be executed in its
name on its behalf, and its corporate seal to be hereunto affixed and attested
by its Secretary, all as of the Effective Date.
SPRINGFIELD INSTITUTION FOR SAVINGS
By: /s/ Albert E. Steiger, Jr.
Name:
Title: Chairman
/s/ F. William Marshall, Jr.
F. William Marshall, Jr.
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EXHIBIT 10.2
FORM OF
EMPLOYMENT AND SEVERANCE AGREEMENT
FOR EXECUTIVE VICE PRESIDENTS
OF SPRINGFIELD INSTITUTION FOR SAVINGS
This AGREEMENT is made as of [date] by and between ___________ (the
"Executive") and SPRINGFIELD INSTITUTION FOR SAVINGS, a Massachusetts savings
bank (the "Bank").
WHEREAS, the Bank recognizes the substantial contribution the Executive
has made and is expected to make to the Bank and wishes to protect his position
therewith for the period provided in this Agreement; and
WHEREAS, the Executive has been elected to, and has agreed to serve in
the position of Executive Vice President of the Bank, a position of substantial
responsibility;
NOW, THEREFORE, in consideration of the contribution and
responsibilities of the Executive, and upon the other terms and conditions
hereinafter provided, the parties hereto agree as follows:
1. TERM OF AGREEMENT.
The term of this Agreement shall be deemed to have commenced as of the
date hereof and shall continue for a period of twelve (12) full calendar months
thereafter. Commencing on the first anniversary date of this Agreement and
continuing at each anniversary date thereafter, the term of this Agreement shall
renew for an additional year unless written notice is provided to the Executive
by the Bank, or to the Bank by the Executive, at least ninety (90) days and not
more than one hundred eighty (180) days prior to any such anniversary date, that
this Agreement shall cease at the end of the then current term hereof.
2. DEFINITIONS.
For purposes of this Agreement,
(a) "Affiliate" means any person or entity of any kind effectively
controlling, effectively controlled by or effectively under common control with
the Bank.
(b) "Board" means the board of trustees of the Bank, if the Bank is a
mutual savings bank, and the board of directors of the Bank, if the Bank is a
stock savings bank.
(c) "Change in Control" means a change in control of the Bank of a
nature that would be required to be reported in response to Item 1 of the
current report on Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), other than any change in control directly related to or in connection
with the conversion of the Bank from a state-chartered mutual savings bank to a
state-chartered stock savings bank; a change in control of the Bank within the
meaning of 12 U.S.C. ss.1817(i), the Change in Bank Control Act, and the Rules
and Regulations promulgated by the Federal Deposit Insurance Corporation
("FDIC") at 12 C.F.R. ss.303.4(a), other than any change in control directly
related to or in connection with the conversion of the Bank from a
state-chartered mutual savings bank to state-chartered stock savings bank;
individuals who constitute the Board immediately after the consummation of the
process of converting the Bank from a mutual-form savings bank to a stock-form
savings bank (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided that any person becoming a director subsequent to
such consummation whose election was approved by a vote of at least
three-quarters of the directors then comprising the Incumbent Board, or whose
nomination for election by the Bank's shareholders was approved by the Bank's
nominating committee then serving under the Board, shall be, for purposes of
this clause (iii), considered as though he or she was a member of the Incumbent
Board (but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or
<PAGE>
threatened solicitation of proxies or consents; approval by the depositors or
shareholders of the Bank of a reorganization, merger or consolidation, or the
consummation of any such reorganization, merger or consolidation, other than, in
any case any such transaction occurring in connection with or directly related
to the conversion of the Bank from a state-chartered mutual savings bank to a
state-chartered stock savings bank, or a reorganization, merger or consolidation
with respect to which all or substantially all of the individuals and entities
who were the beneficial owners, immediately prior to such reorganization, merger
or consolidation, of the Voting Interest in the Bank beneficially own, directly
or indirectly, immediately after such reorganization, merger or consolidation
more than eighty percent (80%) of the Voting Interest of the corporation or
other entity resulting from such reorganization, merger or consolidation in
substantially the same proportions as their respective ownership, immediately
prior to such reorganization, merger or consolidation, of the Voting Interest in
the Bank; approval by the depositors or shareholders of the Bank, as the case
may be, of a complete liquidation or dissolution of the Bank, or the sale or
other disposition of all or substantially all of the assets of the Bank, or the
occurrence of any such liquidation, dissolution, sale or other disposition,
other than, in any case, to a Subsidiary, directly or indirectly, of the Bank,
or any Affiliate, or in connection with or directly related to any conversion of
the Bank from a state-chartered mutual savings bank to a state-chartered stock
savings bank; and/or the solicitation of proxies from shareholders or depositors
of the Bank by someone other than the current management of the Bank and without
the approval of the Board, seeking depositor or shareholder approval of a plan
or reorganization, merger or consolidation of the Bank with one or more
corporations as a result of which the depositors' or the shareholders' interests
in the Bank are actually exchanged for or converted into securities not issued
by the Bank. No failure on the part of the Executive to exercise any rights upon
the occurrence of a Change in Control shall be deemed a waiver of or otherwise
impair the rights of the Executive in respect of any subsequent events or
circumstances constituting a Change in Control.
(d) "Code" means the Internal Revenue Code of 1986, as amended, and as
in effect from time to time, and/or any successor code thereto.
(e) "Excise Tax" means any excise tax imposed under Section 4999 of the
Code and/or any successor section thereto.
(f) "Good Reason" means, and shall be deemed to exist if, without the
written consent of the Executive, the Bank fails to appoint or reappoint the
Executive as [Executive\Senior] Vice-President of the Bank, there occurs any
reduction of base salary or material reduction in other benefits or any material
change by the Bank to the Executive's function, duties, or responsibilities in
effect on the date hereof, which change would cause the Executive's position
with the Bank to become one of lesser responsibility, importance, or scope from
the position and attributes thereof in effect on the date hereof, or there
occurs any material breach of this Agreement by the Bank.
(g) "Subsidiary" means any corporation in which the Bank has a direct
or indirect legal or beneficial ownership interest, but only if the Bank owns or
controls, directly or indirectly, securities possessing at least 50% of the
total combined voting power of all classes of securities in any such
corporation.
(h) "Voting Interest" means securities of any class or classes or other
ownership interests having general voting power under ordinary circumstances to
elect members of a board of directors or trustees of any entity.
2
<PAGE>
3. PAYMENTS TO EXECUTIVE UPON TERMINATION.
(a) The provisions of Section 4(a) hereof shall apply upon:
(i) the involuntary termination of the Executive's employment
at any time during the term of this Agreement, other than Termination for Cause
(as defined below), following the occurrence of a Change in Control; or
(ii) the voluntary termination of the Executive's employment
for Good Reason at any time during the term of this Agreement, following the
occurrence of a Change of Control.
(b) The provisions of Section 4(b) shall apply upon the involuntary
termination of the Executive's employment at any time during the term of this
Agreement, other than for Termination for Cause, prior to the occurrence of a
Change in Control.
(c) The term "Termination for Cause" shall mean termination because of
a material loss to the Bank or one of its Subsidiaries caused by the Executive's
personal dishonesty, willful misconduct, any breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule, regulation (other than traffic violations or similar offenses)
or final cease and desist order, or any material breach of this Agreement. For
purposes of this Section, no act, or the failure to act, on Executive's part
shall be "willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that the action or omission was in the best interest
of the Bank or its Subsidiaries. Notwithstanding the foregoing, Executive shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to him a Notice of Termination which shall include a copy of
a resolution duly adopted by the affirmative vote of not less than two-thirds of
the members of the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, the Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause (except as required by the Employment
Retirement Income Security Act of 1974, as amended ("ERISA") or other applicable
law). Any stock options and limited rights granted to Executive under any stock
option plan or unvested awards granted to Executive under any recognition and
retention plan of the Bank, or any Subsidiary or Affiliate thereof, shall become
null and void effective upon Executive's receipt of Notice of Termination for
Cause and shall not be exercisable by Executive at any time subsequent to such
Termination for Cause.
4. TERMINATION BENEFITS.
(a) Upon the termination of the Executive's employment by the Bank as
described in Section 3(a) hereof, the Bank shall be obligated to make a lump sum
severance payment, within thirty (30) days of such termination to the Executive,
or in the event of his subsequent death, his beneficiary or beneficiaries, or
his estate, as the case may be, in an amount equal to two (2) years' salary (at
the then applicable annual salary of the Executive). In addition, the Executive
shall be entitled to any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable plans and programs of
the Bank.
(b) Upon the termination of the Executive's employment by the Bank as
described in Section 3(b) hereof, the Bank shall be obligated to make a lump sum
severance payment within thirty (30) days of such termination to the Executive,
or in the event of his subsequent death, his beneficiary or beneficiaries, or
his estate, as the case may be, in an amount equal to one (1) year's salary (at
the then applicable annual salary of the Executive). In addition, the Executive
shall be entitled to any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable plans and programs,
if any, of the Bank.
3
<PAGE>
5. NOTICE OF TERMINATION.
(a) Any purported termination by the Bank, or by the Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated.
(b) "Date of Termination" shall mean the date specified in the Notice
of Termination which, in the instance of Termination for Cause, shall be
immediate.
6. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the Bank and the Executive,
except that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to Executive of a kind elsewhere provided. No provision of
this Agreement shall be interpreted to mean that Executive is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.
Nothing in this Agreement shall confer upon the Executive the right to
continue in the employ of the Bank or shall impose on the Bank any obligation to
employ or retain the Executive in its employ for any period.
7. NO ATTACHMENT.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment,encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
8. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon, and inure to the benefit of, the
Executive, the Bank and their respective successors and assigns.
9. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
4
<PAGE>
10. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
11. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of this reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
12. GOVERNING LAW.
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of The Commonwealth of Massachusetts.
13. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Springfield,
Massachusetts as hereinbelow provided. If a dispute or controversy hereunder
arises and, within thirty (30) days of each party's written notice thereof, such
dispute or controversy has not been resolved by mutual accord, then such dispute
or controversy shall be conclusively determined by three arbitrators, one
arbitrator being selected by the Executive, one arbitrator being selected by the
Bank and the third being selected by the two arbitrators so selected. In the
event of their inability to agree on the selection of a third arbitrator, the
third arbitrator shall be designated in accordance with the rules of the
American Arbitration Association then in effect. In the event that within ten
(10) business days after the above-referenced 30-day period expires without
resolution of any dispute or controversy by mutual accord any party shall not
have selected its arbitrator and given written notice thereof to the other
party, such arbitrator shall be selected in accordance with the rules of the
American Arbitration Association as then in effect. All determinations made by
the arbitrators selected pursuant to the provisions of this Section shall be by
majority vote and shall be final. Notice of any such determination shall be
forthwith given to each party. Judgment may be entered on the arbitrators' award
in any court having jurisdiction; provided, however, that the Executive shall be
entitled to seek specific performance of his right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
14. INDEMNIFICATION AND ATTORNEYS' FEES.
(a) The Bank shall indemnify, hold harmless and defend the Executive
against reasonable costs, including legal fees, incurred by him in connection
with his consultation with legal counsel or arising out of any action, suit or
proceeding in which he may be involved, as a result of his efforts, in good
faith, to defend or enforce the terms of this Agreement.
(b) In the event any dispute or controversy arising under or in
connection with the Executive's termination is resolved in favor of the
Executive, whether by judgment, arbitration or settlement, the Executive shall
be entitled to the payment of all back-pay, including salary, bonuses and any
other cash compensation, fringe benefits and any compensation and benefits due
the Executive under this Agreement.
5
<PAGE>
(c) The Bank shall indemnify, hold harmless and defend Executive for
all acts or omissions taken or not taken by him in good faith while performing
services for the Bank to the same extent and upon the same terms and conditions
as other similarly situated officers and directors of the Bank. If and to the
extent that the Bank maintains, at any time during its employment of the
Executive an insurance policy covering the other officers and directors of the
Bank against law suits, the Bank shall use its best efforts to cause Executive
to be covered under such policy upon the same terms and conditions as other
similarly situated officers and directors.
IN WITNESS WHEREOF, SPRINGFIELD INSTITUTION FOR SAVINGS has caused this
Agreement to be executed by its duly authorized officer, and the Executive has
signed this Agreement, as of the ____ day of _______________, 199__.
ATTEST: SPRINGFIELD INSTITUTION FOR SAVINGS
_________________________ BY:_____________________________________________
Secretary Name: F. William Marshall, Jr.
Title: President and Chief Executive Officer
[SEAL]
WITNESS:
________________________ __________________________________
[Name of Executive]
6
EXHIBIT 10.4
SIS BANCORP, INC.
DIRECTOR STOCK OPTION PLAN
AND
MANAGEMENT STOCK OPTION PLAN
(Amended and restated as of July 31, 1996)
1. PURPOSE
The purpose of the SIS Bancorp, Inc. Director Stock Option Plan (the
"Director Plan") and Management Stock Option Plan (the "Management Plan")
(together, the "Plans") is to attract directors and key employees of SIS
Bancorp, Inc. (the "Company") and its Subsidiaries (as hereinafter defined) and
to encourage them to continue their association with the Company, by providing
favorable opportunities for them to participate in the ownership of the Company
and in its future growth through the granting of stock options with respect to
the Company's stock. The term "Subsidiary" as used in the Plans means a
corporation, including, without limitation, any banking or thrift institution,
of which the Company owns, directly or indirectly through an unbroken chain of
ownership, fifty percent (50%) or more of the total combined voting power of all
classes of stock. The term "Optionee," as used in the Plans, refers to any
individual to whom an Option has been granted.
2. ADMINISTRATION OF THE PLANS
The Plans shall be administered by the Compensation Committee (the
"Committee") composed of at least three members of the Board of Directors of the
Company (the "Board"), and may include those members serving at any time and
from time to time as the Compensation Committee of the Board; provided, however,
that during the period of one year immediately preceding any action by the
Committee under the Plans, no member of the Committee may have been granted an
option, or stock, or stock appreciation right or similar right under any plan of
the Company under which any person exercises discretion to determine the
recipients or terms or conditions of such grants. In the event that a vacancy
occurs on account of the resignation of a member or the removal of a member by
vote of the Board, a successor member shall be appointed by vote of the Board.
The Committee shall from time to time determine to whom options shall
be granted under the Management Plan, whether options granted shall be incentive
stock option ("ISOs") or non-qualified stock options ("NSOs"), the terms of the
options and the number of shares which may be granted under options. The
Committee shall report to the Board the names of individuals to whom such
options are to be granted, the number of shares covered and the terms and
conditions of each grant.
The Committee shall select one of its members as Chairman and shall
hold meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum, and acts of the Committee at which a quorum
<PAGE>
is present, or acts reduced to or approved in writing by all the members of the
Committee, shall be the valid acts of the Committee. The Committee shall have
the authority to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plans. All questions of
interpretation and application of such rules and regulations, of the Plans and
of options granted thereunder (the "Options"), shall be subject to the
determination of the Committee, which shall be final and binding.
Notwithstanding the foregoing, the Committee shall have no discretionary or
interpretative power or authority with respect to any award under the Director
Plan which would cause any non-employee director to fail to be a "disinterested
person" as defined in Rule 16b-3 of the Securities Exchange Commission, as in
effect prior to August 15, 1996. All decisions and determinations by the
Committee in the exercise of its power shall be final and binding upon the
Company and Optionees.
The Management Plan shall be administered in such a manner as to permit
those Options granted thereunder and specially designated under Section 5 to
qualify as incentive stock options as described in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
3. STOCK SUBJECT TO THE PLANS
Director Plan. The total number of shares of stock which may be subject
to Options under the Director Plan shall be 111,250 shares of the Company's
common stock, $.01 par value per share (the "Common Stock"), provided that the
number of shares stated in this sentence shall be subject to adjustment in
accordance with the provisions of Section 9. Shares of Common Stock subject to
an Option under the Director Plan that is not fully exercised shall again become
available for grant under the terms of the Director Plans.
Management Plan. The total number of shares of stock which may be
subject to Options under the Management Plan shall be 695,000 shares of the
Company's Common Stock and the total number of shares that may be so issued to
any single employee under the Management Plan shall not exceed an aggregate of
fifty percent (50%) of the allocated shares of Common Stock; provided that the
number of shares stated in this sentence shall be subject to adjustment in
accordance with the provisions of Section 9. Shares of Common Stock subject to
an Option under the Management Plan that is not fully exercised shall again
become available for grant under the terms of the Management Plan.
The shares of Common Stock which may be subject to Options granted
under the Plans may be authorized but unissued shares or treasury shares.
4. DIRECTOR PLAN
Options shall be granted under the Director Plan pursuant to this
Section 4 only to members of the Board who are not officers or full-time
employees of the Company or any of its Subsidiaries (each, an "Eligible
Director").
2
<PAGE>
(a) Amount of Award. Options under which an aggregate total of 95,800
shares of Common Stock may be acquired have been granted by the Company's
predecessor in interest under the Plans, Springfield Institution for Savings
(the "Bank") to eligible members of the Board of Directors of the Bank. Each
Eligible Director who is first elected to serve after June 21, 1996 shall be
granted an Option under which a total of 6,600 shares of Common Stock may be
acquired on the day following his election to office. In the event the aggregate
number of remaining shares of Common Stock authorized to be awarded under the
Director Plan is insufficient to make such awards in full to each Eligible
Director first elected to office on the same date, each such Eligible Director
shall be awarded an Option to acquire a pro-rated portion of the available
shares.
(b) Limitations of Awards. Notwithstanding the foregoing provisions of
this Section 4, no Eligible Director shall be eligible to receive any Option
under this Section 4, if at the date of grant of such Option such person
beneficially owns in excess of ten percent (10%) of the outstanding Common Stock
of the Company. No Eligible Director shall receive any Option or other award
under the Plans except as provided under this Section 4.
(c) Exercise Price. The option exercise price per share of Common Stock
under each Option shall be the fair market value of the Common Stock on the date
the Option is granted. Payment of the exercise price shall be made in cash or,
at the Optionee's election (but only if such election shall not cause such
Optionee to cease to be a "disinterested director"), by delivery of shares of
Common Stock of the Company or by a "cashless exercise" through a broker
acceptable to the Company, as described in Section 7 below.
(d) Exercise.
(i) Each Option shall be exercisable in one or more
installments, on or after the applicable anniversary of the date the
Option was granted, in accordance with the schedule set forth below,
but not later than the date the Option expires:
Option Shares
Subject to Exercise
---------------------------------
Incremental Cumulative
Date Amount Amount
- ---- ----------- ----------
On or after First Anniversary............... 20% 20%
On or after Second Anniversary.............. 20% 40%
On or after Third Anniversary............... 20% 60%
On or after Fourth Anniversary.............. 20% 80%
On or after Fifth Anniversary............... 20% 100%
Notwithstanding the foregoing schedule, in the event of an Eligible
Director's retirement on account of attainment of maximum age ("Retirement"),
permanent disability ("Disability"), or death, all Options then outstanding
shall become immediately exercisable.
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(ii) The minimum number of shares with respect to which an
Option may be exercised at any one time shall be 100 shares, or such
lesser number as is subject to exercise under the Option at the time.
(iii) In the event of an Eligible Director's Retirement,
Disability, death or other termination of service, the Option (to the
extent exercisable under the provisions hereof) may be exercised by the
Eligible Director (or, if he is not living, by his heirs, legatees or
legal representatives) during its specified term within one year of the
date of Retirement, Disability, death or termination; provided,
however, that in the event an Eligible Director is removed for cause,
his Options shall expire on the date of his removal from office.
(iv) In the event of a Change in Control of the Company (as
defined in Section 9(c) below), all Options outstanding as of the date
of such Change in Control shall become immediately exercisable.
(e) Expiration. Notwithstanding any other provision of the Director
Plan or of any option agreement, each Option granted under the Director Plan
shall expire ten (10) years after the date on which the Option was granted, or,
if earlier, on the date the Optionee ceases to be a director of the Company or
the Bank for any reason other than Retirement, Disability, death or resignation.
5. MANAGEMENT PLAN: ELIGIBILITY FOR AWARDS; TERMS AND
CONDITIONS OF OPTIONS
The individuals who shall be eligible for discretionary grants of
Options under the Management Plan shall be key employees of the Company or a
Subsidiary. Incentive Stock Options ("ISO") shall not be granted to any
individual who is not an employee of the Company or a Subsidiary.
Every Option under the Management Plan shall be evidenced by a written
Stock Option Agreement in such form as the Committee shall approve from time to
time, specifying the number of shares of Common Stock that may be purchased
pursuant to the Option, the time or times at which the Option shall become
exercisable in whole or in part, whether the option is intended to be an ISO or
a NSO, and such other terms and conditions as the Committee shall approve, and
containing or incorporating by reference the following terms and conditions:
(a) Duration. The duration of each Option shall be as specified by the
Committee in its discretion; provided, however, that no ISO shall expire later
than ten (10) years from its date of grant, and no ISO granted to an employee
who owns (directly or under the attribution rules of Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Subsidiary shall expire later than
five (5) years from its date of grant.
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(b) Exercise Price. The exercise price of each Option shall be any
lawful consideration, as specified by the Committee in its discretion; provided,
however, that the price with respect to an ISO shall be at least one hundred
percent (100%) of the fair market value of the shares on the date on which the
Committee awards the Option, which shall be considered the date of grant of the
Option for purposes of fixing the price; and provided further that the price
with respect to an ISO granted to an employee who at the time of grant owns
(directly or under the attribution rules of Section 424(d) of the Code) stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or of any Subsidiary shall be at least one hundred ten
percent (110%) of the fair market value of the shares on the date of grant of
the ISO. For purposes of the Management Plan, except as may be otherwise
explicitly provided in the Management Plan or in any Stock Option Agreement or
similar document, the "fair market value" of a share of Common Stock at any
particular date shall be determined according to the following rules: (i) if the
Common Stock is at the time listed or admitted to trading on any stock exchange
or NASDAQ, then the fair market value shall be the reported closing price of the
Common Stock on such date on the principal exchange or NASDAQ, as the case may
be; or (ii) if the Common Stock is not at the time listed or admitted to trading
on a stock exchange of NASDAQ, the fair market value shall be the closing price
of the Common Stock on the date in question in the over-the-counter market, as
such price is reported in a publication of general circulation selected by the
Board and regularly reporting the price of the Common Stock in such market;
provided, however, that if the price of the Common Stock is not so reported,
that fair market value shall be determined in good faith by the Board, which may
take into consideration (1) the price paid for the Common Stock in the most
recent trade of a substantial number of shares known to the Board to have
occurred at arm's length between willing and knowledgeable investors, or (2) an
appraisal by an independent party, or (3) any other method of valuation
undertaken in good faith by the Board, or some or all of the above as the Board
shall in its discretion elect.
(c) Notice of ISO Stock Disposition. The Optionee must notify the
Company promptly in the event that he or she sells, transfers, exchanges or
otherwise disposes of any shares of Common Stock issued upon exercise of an ISO,
before the later of (i) the second anniversary of the date of grant of the ISO,
and (ii) the first anniversary of the date the shares were issued upon his or
her exercise of the ISO.
(d) Effect of Cessation of Employment. The Committee shall determine in
its discretion and specify in each Stock Option Agreement the effect, if any, of
the termination of the Optionee's employment upon the exercisability of the
Option.
(e) Substituted Option. With the consent of the Optionee, the Committee
shall have the authority at any time and from time to time to terminate any
outstanding Option and grant in substitution for it a new Option covering the
same number of a different number of shares, provided that the option price
under the new Option shall be no less than the fair market value of the Common
Stock on the date of grant of the new Option.
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<PAGE>
6. MANAGEMENT PLAN: METHOD OF GRANTING OPTIONS
The grant of Options shall be made by action of the Board at a meeting
at which a quorum of its members is present, or by unanimous written consent of
all its members; provided, however, that if an individual to whom a grant has
been made fails to execute and deliver to the Committee a Stock Option Agreement
within ten (10 ) days after it is submitted to him, the Option granted under the
agreement shall be voidable by the Company at its election, without further
notice to the Optionee.
7. METHOD OF EXERCISING OPTIONS
To the extent that it has become exercisable under the terms of the
Stock Option Agreement, an Option may be exercised from time to time by written
notice to the Secretary, or Assistant Secretary or Chief Financial Officer of
the Company stating the number of shares with respect to which the Option is
being exercised and accompanied by payment of the exercise price in cash or
check payable to the Company.
Alternatively, payment of the exercise price may be made, in whole or
in part, in shares of Common Stock owned by the Optionee; provided, however,
that the Optionee may not make payment in shares of Common Stock that he or she
acquired upon the earlier exercise of any ISO, unless he has held the shares
until at least two (2) years after the date the ISO was granted and at least one
(1) year after the date the ISO was exercised. If payment is made in whole or in
part in shares of Common Stock, then the Optionee shall deliver to the Company
certificates registered in his name representing a number of shares of Common
Stock legally and beneficially owned by him, fully vested and free of all liens,
claims and encumbrances of every kind and having a fair market value on the date
of delivery that is not greater than the exercise price, such certificates to be
duly endorsed, or accompanied by stock powers duly endorsed, by the record
holder of the shares presented by such certificates. If the exercise price
exceeds the fair market value of the shares for which certificates are
delivered, the Optionee shall also deliver cash or a check payable to the order
of the Company in an amount equal to the amount of that excess.
Options may be exercised by means of a "cashless exercise" procedure in
which a broker (i) transmits the option price to the Company in cash or
acceptable cash equivalents, either (1) against the Optionee's notice of
exercise and the Company's confirmation that it will deliver to the broker stock
certificates issued in the name of the broker for at least that number of shares
having fair market value equal to the option price, or (2) as the proceeds of a
margin loan to the Optionee; or (ii) agrees to pay the option price to the
Company in cash or acceptable cash equivalents upon the broker's receipt from
the Company of stock certificates issued in the name of the broker for at least
that number of shares having fair market value equal to the Option price. The
Optionee's written notice of exercise of an Option pursuant to a "cashless
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<PAGE>
exercise" procedure must include the name and address of the broker involved, a
clear description of the procedure, and such other information or undertaking by
the broker as the Committee shall reasonably require.
At the time specified in a Optionee's notice of exercise, which shall
not be earlier than the fifteenth (15th) day after the date of the notice except
as may be mutually agreed, the Company shall, without issue or transfer tax to
the Optionee, deliver to him at the Main Office of the Company, or such other
place as shall be mutually acceptable, a certificate for the shares as to which
his or her Option is exercised. If the Optionee fails to pay for or to accept
delivery of all or any part of the number of shares specified in his or her
notice upon tender of delivery thereof, his or her right to exercise the Option
with respect to those shares shall be terminated, unless the Company otherwise
agrees.
8. REQUIREMENTS OF LAW AND REGULATIONS; GOVERNING LAW
(a) The Company shall not be required to sell or issue any shares upon
the exercise of any Option if the issuance of such shares will result in a
violation by the Optionee or the Company of any provisions of any law, statute
or regulation of any governmental authority, and the grant of Options hereunder
or the obligation of the Company to issue shares upon the exercise of Options
hereunder shall be subject to the obtaining of all approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
Specifically, in connection with the Securities Act of 1933, as amended (the
"Securities Act"), the Company shall not be required to issue shares upon the
exercise of any Option unless the Board has received evidence satisfactory of it
to the effect that the Optionee will not transfer such shares except pursuant to
a registration statement in effect under the Securities Act or unless an opinion
of counsel satisfactory to the Company has been received by the Company to the
effect that such registration is not required. Any determination in this
connection by the Board shall be conclusive. The Company shall not be obligated
to take any other affirmative action in order to cause the exercise of an Option
to comply with any law or regulations of any governmental authority, including,
without limitation, the Securities Act or applicable state securities laws.
(b) The Plans shall be governed by Massachusetts law, except to the
extent that such law is preempted by federal law.
9. CHANGES IN CAPITAL STRUCTURE
(a) In the event that the outstanding shares of Common Stock are
hereafter changed into or exchanged for a different number or kind of shares or
other securities of the Company, by reason of a reorganization,
recapitalization, exchange of shares, stock split, combination of shares or
dividend payable in shares or other securities, a corresponding adjustment shall
be made by the Committee in the number and kind of shares or other securities
covered by outstanding Options, and for which Options may be granted under the
Plans. Any such adjustment in outstanding Options shall be made without change
in the total price applicable to the unexercised portion of the Option, but the
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<PAGE>
price per share specified in each Stock Option Agreement shall be
correspondingly adjusted; provided, however, that no adjustment shall be made
with respect to an ISO that would constitute a modification as defined in
Section 424 of the Code. Any such adjustment made by the Committee shall be
conclusive and binding upon all affected persons, including the Company and all
Optionees.
If while unexercised Options remain outstanding under the Plans the
Company merges or consolidates with one or more corporations (whether or not the
Company is the surviving corporation), or if the Company is liquidated or sells
or otherwise disposes of substantially all of its assets to another entity,
then, except as otherwise specifically provided to the contrary in an Optionee's
Stock Option Agreement, the Committee, in its discretion, shall amend the terms
of all outstanding Options so that either:
(i) after the effective date of such merger, consolidation or
sale, as the case may be, each Optionee shall be entitled, upon
exercise of an Option, to receive in lieu of shares of Common Stock the
number and class of shares of such stock or other securities to which
he or she would have been entitled pursuant to the terms of the merger,
consolidation or sale if he had been the holder of record of the number
of shares of Common Stock as to which the Option is being exercised, or
shall be entitled to receive from the successor entity a new stock
option of comparable value, or
(ii) all outstanding Options shall be canceled as of the
effective date of any such merger, consolidation, liquidation or sale,
provided that each Optionee shall have the right to exercise his or her
Option according to its terms during the period of twenty (20) days
ending on the day preceding the effective date of such merger,
consolidation, liquidation or sale; and in addition to the foregoing,
the Committee may in its discretion amend the terms of an Option by
canceling some or all of the restrictions on its exercise, to permit
its exercise pursuant to this paragraph (ii) to a greater extent than
that permitted on its existing terms.
All adjustments to ISOs or assumptions of ISOs by any successor
corporation shall preserve their status as ISOs.
(b) Except as expressly provided to the contrary in this Section 9, the
issuance by the Company of shares of stock of any class for cash or property or
for services, either upon direct sale or upon the exercise of rights or
warrants, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect the number, class or
price of shares of Common Stock then subject to outstanding Options.
(c) "Change in Control" means
(i) a change in control of the Company of a nature that would
be required to be reported in response to Item 1 of the current report
on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act");
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(ii) any acquisition of control of the Company by any company
within the meaning of 12 U.S.C. ss. 1841(a)(2), the Bank Holding
Company Act of 1956, as amended, or by any person within the meaning of
12 U.S.C. ss. 1817(j), the Change in Bank Control Act of 1978, as
amended;
(iii) individuals who constitute the Board as of June 21, 1996
(the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director
subsequent to June 21, 1996 whose election was approved by a vote of at
least three-quarters of the directors then comprising the Incumbent
Board, or whose nomination for election by the Company's shareholders
was approved by the Company's Nominating Committee then serving under
the Board, shall be, for purposes of this clause (iii), considered as
though he or she was a member of the Incumbent Board but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents;
(iv) approval by the shareholders of the Company of a
reorganization, merger or consolidation, or the consummation of any
such reorganization, merger or consolidation, other than a
reorganization, merger or consolidation with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners, immediately prior to such reorganization, merger or
consolidation, of the Voting Interest in the Company beneficially own,
directly or indirectly, immediately after such reorganization, merger
or consolidation more than eighty percent (80%) of the Voting Interest
of the corporation or other entity resulting from such reorganization,
merger or consolidation in substantially the same proportions as their
respective ownership, immediately prior to such reorganization, merger
or consolidation, of the Voting Interest in the Company;
(v) approval by the shareholders of the Company of (1) a
complete liquidation or dissolution of the Company, or (2) the sale or
other disposition of all or substantially all of the assets of the
Company, or the occurrence of any such liquidation, dissolution, sale
or other disposition, other than, in any case, to a Subsidiary,
directly or indirectly, of the Company, or any affiliate; and/or
(vi) the solicitation of proxies from shareholders of the
Company, by someone other than the current management of the Company
and without the approval of the Board, seeking shareholder approval of
a plan of reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the shareholders'
interests in the Company are actually exchanged for or converted into
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securities not issued by the Company. "Voting Interest" means
securities of any class or classes or other ownership interests having
general voting power under ordinary circumstances to elect members of a
board of directors or trustees of any entity.
10. MISCELLANEOUS
(a) Nonassignability of Options. No Option shall be assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the life of an Optionee, the Option shall be exercisable
only by the Optionee.
(b) No Rights as Stockholder. An Optionee shall have no rights as a
stockholder with respect to any shares covered by an Option until the date of
issuance of a certificate to him for the shares. No adjustment shall be made for
dividends or other rights for which the record date is earlier than the date the
certificate is issued, other than as required or permitted pursuant to Section
9.
(c) No Guarantee of Employment or Continuation in Office. The Director
Plan shall not give any Eligible Director the right to continue in office as a
director or to be nominated for reelection to office as a director, or give the
Company the right to require an Eligible Director to continue in office. Neither
the Management Plan nor any Stock Option Agreement shall give an employee the
right to continue in the employment of the Company or its Subsidiary, or give
the Company or its Subsidiary the right to require an employee to continue in
employment.
(d) Tax Withholding. To the extent required by law, the Company or its
Subsidiary shall withhold or cause to be withheld income and other taxes with
respect to any income recognized by an Optionee by reason of the exercise of an
Option (or the disqualifying disposition of shares acquired by exercise of an
ISO), and as a condition to the receipt of any Option the Optionee shall agree
that if the amount payable to him by the Company and any Subsidiary in the
ordinary course is insufficient to pay such taxes, then he shall upon the
request of the Company pay to the Company or its Subsidiary an amount sufficient
to satisfy its tax withholding obligations.
Without limiting the foregoing, the Committee may in its discretion
permit any Optionee's withholding obligation to be paid in whole or in part in
the form of shares of Common Stock, by withholding from the shares to be issued
or by accepting delivery from the Optionee of shares already owned by him or
her. The fair market value of the shares for such purposes shall be determined
as set forth in Section 5(b). An Optionee may not make any such payment in the
form of shares of Common Stock acquired upon the exercise of an ISO until the
shares have been held by him or her for at least two (2) years after the date
the ISO was granted and at least one (1) year after the date the ISO was
exercised. If payment of withholding taxes is made in whole or in part in shares
of Common Stock, the Optionee shall deliver to the Company certificates
registered in his name representing shares of Common Stock legally and
beneficially owned by him, fully vested and free of all liens, claims and
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encumbrances of every kind, duly endorsed or accompanied by stock powers duly
endorsed by the record holder of the shares represented by such certificates.
(e) Use of Proceeds. The proceeds from the sale of shares pursuant to
Options shall constitute general funds of the Company.
11. DURATION, AMENDMENT AND TERMINATION OF PLANS
The Committee may grant Options under the Management Plan from time to
time until the close of business on the day prior to June 1, 2005. Unless
earlier terminated by action of the Board of Directors, the Plans shall expire
on the day prior to June 1, 2005.
The Board of Directors may amend the Plans at any time, and from time
to time, subject to any required regulatory approval and to the limitation that,
except as provided in Section 9 hereof, no amendment shall be effective unless
approved by the stockholders of the Company in accordance with applicable law
and regulations at an annual or special meeting held within twelve (12) months
before or after the date of adoption of such amendment, where such amendment
will:
(a) increase the number of shares of Common Stock as to which options
may be granted under the Plans;
(b) change in substance any provision relating to eligibility to
participate in, or price, amount, timing or vesting of awards under the Director
Plan;
(c) change in substance Section 5 hereof relating to eligibility to
participate in awards under the Management Plan;
(d) reduce the minimum option price; or
(e) increase the maximum term of options provided herein.
Except as required to comply with the requirements of the Code or the
Employee Retirement Income Security Act of 1974, as amended, no amendment to the
provisions of the Director Plan relating to the amount, price and timing of
awards under the Director Plan shall be made unless at least six (6) months have
elapsed since the adoption of the Director Plan or any subsequent amendment
affecting such provisions.
Except as provided in Section 9 hereof, rights and obligations under
any Option granted before any amendment of the Plans shall not be adversely
affected by such amendment, except with the consent of the Optionee.
The Plans may be terminated at any time by action of the Board, but any
such termination will not terminate Options then outstanding, without the
consent of the Optionee.
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12. EFFECTIVE DATE OF PLANS; STOCKHOLDER APPROVAL
The Plans became effective, as Plans of the Bank, on June 1, 1995 and
were approved by the Bank's stockholders on May 31, 1995. The Plans were assumed
by the Company upon consummation of the reorganization contemplated by an
Agreement and Plan of Reorganization between the Company and the Bank on June
21, 1996. No option may be granted under the Plans on or after the tenth
anniversary of the effective date of the Plans.
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EXHIBIT 10.5
SIS BANCORP, INC.
DIRECTOR RESTRICTED STOCK PLAN
AND
MANAGEMENT RESTRICTED STOCK PLAN
(Amended and restated as of July 31, 1996)
1. PURPOSE
The purpose of the SIS Bancorp, Inc. Director Restricted Stock Plan
(the "Director Plan") and Management Restricted Stock Plan (the "Management
Plan") (together, the "Plans") is to attract directors and key employees of SIS
Bancorp, Inc. (the "Company") and its Subsidiaries (as hereinafter defined) and
to encourage them to continue their association with the Company, by providing
favorable opportunities for them to participate in the ownership of the Company
and in its future growth through the granting of shares of the Company's stock.
The term "Subsidiary" as used in the Plans means a corporation, including,
without limitation, any banking or thrift institution, of which the Company
owns, directly or indirectly through an unbroken chain of ownership, fifty
percent (50%) or more of the total combined voting power of all classes of
stock. The term "Grantee," as used in the Plans refers to any individual to whom
Restricted Stock has been granted.
2. ADMINISTRATION OF THE PLANS
The Plans shall be administered by the Compensation Committee (the
"Committee") composed of at least three members of the Board of Directors of the
Company (the "Board"), and may include those members serving at any time and
from time to time as the Compensation Committee of the Board; provided, however,
that during the period of one year immediately preceding any action by the
Committee under the Plans, no member of the Committee may have been granted an
option, or stock, or stock appreciation right or similar right under any plan of
the Company under which any person exercises discretion to determine the
recipients or terms or conditions of such grants. In the event that a vacancy
occurs on account of the resignation of a member or the removal of a member by
vote of the Board, a successor member shall be appointed by vote of the Board.
The Committee shall from time to time determine to whom stock shall be
granted under the Management Plan, and the number of shares which may be
granted, and the terms upon and restrictions under which such shares shall be
granted. The Committee shall report to the Board the names of individuals to
whom shares of stock are to be granted, the number of shares covered and the
terms and conditions of each grant.
The Committee shall select one of its members as Chairman and shall
hold meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum, and acts of the Committee at which a quorum
is present, or acts reduced to or approved in writing by all the members of the
<PAGE>
Committee, shall be the valid acts of the Committee. The Committee shall have
the authority to adopt, amend and rescind such rules and regulations, as in its
opinion, may be advisable in the administration of the Plans. All questions of
interpretation and application of such rules and regulations, of the Plans and
of the Common Stock transferred subject to restrictions under the Plans
("Restricted Stock") shall be subject to the determination of the Committee,
which shall be final and binding. Notwithstanding the foregoing, the Committee
shall have no discretionary or interpretative power or authority with respect to
any award under the Director Plan which would cause any non-employee director to
fail to be a "disinterested person" as defined in Rule 16b-3 of the Securities
Exchange Commission, as in effect prior to August 15, 1996. All decisions and
determinations by the Committee in the exercise of its power shall be final and
binding upon the Company and Grantees.
3. STOCK SUBJECT TO THE PLANS
(a) Director Plan. The total number of shares of stock which may be
subject to the grant under the Director Plan shall be 55,625 of the Company's
common stock, $.01 par value per share (the "Common Stock"), provided that the
number of shares stated in this sentence shall be subject to adjustment in
accordance with the provisions of Section 10(a). Shares of Restricted Stock
granted under the Director Plan that fail to vest shall again become available
for grant under the terms of the Director Plan.
(b) Management Plan. The total number of shares of stock which may be
subject to grant under the Management Plan shall be 166,875 shares of the
Company's Common Stock and the total number of shares that may be so granted to
any single employee under the Management Plan shall not exceed an aggregate of
fifty-percent (50%) of the allocated shares of Common Stock, provided that the
number of shares stated in this sentence shall be subject to adjustment in
accordance with the provisions of Section 10(a). Shares of Restricted Stock
granted under the Management Plan that fail to vest shall again become available
for grant under the terms of the Management Plan.
The shares of Common Stock which may be subject to Restricted Stock
grants under the Plans may be authorized but unissued shares or treasury shares.
4. DIRECTOR PLAN
Restricted Stock shall be granted under the Director Plan only to
members of the Board who are not officers or full-time employees of the Company
or any of its Subsidiaries (each, an "Eligible Director").
(a) Amount of Award. An aggregate of 32,100 shares of Restricted Stock
have been granted by the Company's predecessor in interest under the Plans,
Springfield Institution for Savings (the "Bank") to eligible members of the
Board of Directors of the Bank. Each Eligible Director who is first elected to
serve after June 21, 1996 shall be granted 2,200 shares of Restricted Stock
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on the day following his or her election to office. In the event the aggregate
number of shares of Common Stock authorized to be awarded under this Section 4
is insufficient to make such awards in full, each Eligible Director shall be
awarded a pro-rata portion of the available shares as Restricted Stock.
(b) Limitations on Awards. Notwithstanding the foregoing provisions of
this Section 4, no Eligible Director shall be eligible to receive any grant of
Restricted Stock under this Section 4, if at the date of the grant such person
beneficially owns in excess of ten percent (10%) of the outstanding Common Stock
of the Company. No Eligible Director shall receive any award under the Plans
except as provided under this Section 4.
(c) Vesting of Restricted Stock. An Eligible Director shall be vested
in the shares of Restricted Stock awarded to him or her pursuant to the Director
Plan in accordance with the following schedule:
(i) Upon Completion of the following period of service as a
Director of the Company and/or the Bank from the date of grant of
Restricted Stock:
Vested Portion
--------------------------
Incremental Cumulative
Date Amount Amount
- ---- -------- -------
On or after First Anniversary.................... 20% 20%
On or after Second Anniversary................... 20% 40%
On or after Third Anniversary.................... 20% 60%
On or after Fourth Anniversary................... 20% 80%
On or after Fifth Anniversary.................... 20% 100%
Notwithstanding the foregoing schedule, in the event of an Eligible
Director's retirement on account of attainment of maximum age,
permanent disability or death, all Restricted Stock then outstanding
shall become immediately fully vested.
(ii) In the event of a Change of Control of the Company (as
defined in Section 10(b) below), all Restricted Stock outstanding as of
the date of such Change in Control shall become immediately fully
vested.
5. MANAGEMENT PLAN: ELIGIBILITY FOR DISCRETIONARY AWARDS;
TERMS AND CONDITIONS OF AWARDS
The individuals who shall be eligible for grants of Restricted Stock
under the Management Plan shall be key employees who have contributed or may be
expected to contribute materially to the success of the Company or a Subsidiary.
The Committee may grant or award shares of Restricted Stock in respect
of such number of shares of Common Stock, and subject to such terms or
conditions (including, without limitation, conditioning the vesting of the
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Restricted Stock in the Grantee upon satisfaction of specified performance goals
or completion of a period of employment with the Company or its Subsidiaries),
as it shall determine and specify in a Restricted Stock Agreement.
A holder of Restricted Stock shall have all the rights of a stockholder
of the Company, including the right to vote the shares and the right to receive
any cash dividends, unless the Committee shall otherwise determine. Certificates
representing Restricted Stock shall be imprinted with a legend to the effect
that the shares represented may not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of except in accordance with the terms of the
Restricted Stock Agreement, and if the Committee so determines, the Grantee may
be required to deposit the certificates with an escrow agent designated by the
Committee, together with the stock power or other instrument of transfer
appropriately endorsed in blank.
6. MANAGEMENT PLAN: METHOD OF GRANTING RESTRICTED STOCK
The grant of Restricted Stock shall be made by action of the Board at a
meeting at which a quorum of its members is present, or by unanimous written
consent of all its members; provided, however, that if an individual to whom a
grant has been made fails to execute and deliver to the Committee a Restricted
Stock Agreement within ten (10) days after it is submitted to him or her, the
Restricted Stock granted under the agreement shall be voidable by the Company at
its election, without further notice to the Grantee.
7. REQUIREMENTS OF LAW AND REGULATIONS; GOVERNING LAW
(a) The Company shall not be required to transfer any Restricted Stock
if the issuance of such shares will result in a violation by the Grantee or the
Company of any provisions of any law, statute or regulation of any governmental
authority, and the obligation of the Company to issue Restricted Stock hereunder
shall be subject to the obtaining of all approvals by governmental agencies as
may be deemed necessary or appropriate by the Committee. Specifically, in
connection with the Securities Act of 1933, as amended (the "Securities Act"),
upon the grant of a Restricted Stock award the Company shall not be required to
issue shares unless the Board has received evidence satisfactory to it to the
effect that the Grantee will not transfer such shares except pursuant to a
registration statement in effect under the Securities Act or unless an opinion
of counsel satisfactory to the Company has been received by the Company to the
effect that such registration is not required. Any determination in this
connection by the Board shall be conclusive. The Company shall not be obligated
to take any other affirmative action in order to cause the transfer of
Restricted Stock to comply with any law or regulations of any governmental
authority, including, without limitation, the Securities Act or applicable state
securities laws.
(b) The Plans shall be governed by Massachusetts law, except to the
extent that such law is preempted by federal law.
4
<PAGE>
8. MISCELLANEOUS
(a) No Guarantee of Continuation in Office or Employment. The Director
Plan shall not give any Eligible Director the right to continue in office as a
director or to be nominated for reelection to office as a director, or give the
Company the right to require an Eligible Director to continue in office. Neither
the Management Plan nor any Restricted Stock Agreement shall give an employee
the right to continue in the employment of the Company or any of its
Subsidiaries, or give the Company or its Subsidiary the right to require an
employee to continue in employment.
(b) Tax Withholding. To the extent required by law, the Company or its
Subsidiary shall withhold or cause to be withheld income and other taxes with
respect to any income recognized by a Grantee by reason of the grant or vesting
of Restricted Stock, and as a condition to the receipt of any Restricted Stock
the Grantee shall agree that if the amount payable to him or her by the Company
and its Subsidiary in the ordinary course is insufficient to pay such taxes,
then he or she shall upon the request of the Company pay to the Company or its
Subsidiary an amount sufficient to satisfy its tax withholding obligations.
Without limiting the foregoing, the Committee may in its discretion
permit any Grantee's withholding obligation to be paid in whole or in part in
the form of shares of Common Stock, by withholding from the shares to be issued
or by accepting delivery from the Grantee of shares already owned by him. The
fair market value of the shares for such purposes shall be determined as set
forth in Section 10(c). A Grantee may not make any such payment in the form of
shares of Common Stock acquired upon the exercise of an incentive stock option
(an "ISO") within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") until the shares have been held by him or her for
at least two (2) years after the date the ISO was granted and at least one (1)
year after the date the ISO was exercised. If payment of the withholding taxes
is made in whole or in part in shares of Common Stock, the Grantee shall deliver
to the Company certificates registered in his or her name representing shares of
Common Stock legally and beneficially owned by him, fully vested and free of all
liens, claims and encumbrances of every kind, duly endorsed or accompanied by
stock powers duly endorsed by the record holder of the shares represented by
such certificates.
9. DURATION, AMENDMENT AND TERMINATION OF PLANS
The Committee may grant Restricted Stock under the Management Plan from
time to time until the close of business on the day prior to June 1, 2005.
Unless earlier terminated by action of the Board of Directors, the Plans shall
expire on the day prior to June 1, 2005.
The Board of Directors may amend the Plans at any time, and from time
to time, subject to any required regulatory approval and to the limitation that
no amendment shall be effective unless approved by the stockholders of the
5
<PAGE>
Company in accordance with applicable law and regulations at an annual or
special meeting held within twelve months before or after the date of adoption
of such amendment, where such amendment will:
(a) increase the number of shares of Common Stock as to which
Restricted Stock grants may be made under the Plans;
(b) change in substance any provision relating to eligibility to
participate in, or price, amount, timing or vesting of awards under the Director
Plan; or
(c) change in substance Section 5 hereof relating to eligibility to
participate in awards under the Management Plan.
Except as required to comply with the requirements of the Code or the
Employee Retirement Income Security Act of 1974, as amended, no amendment to the
provisions of the Director Plan relating to the amount, price and timing of
awards under the Director Plan shall be made unless at least six months have
elapsed since the adoption of the Director Plan or any subsequent amendment
affecting such provisions.
The Plans may be amended or terminated at any time by action of the
Board, but any such amendment or termination will not adversely affect
Restricted Stock then outstanding, without the consent of the Grantee.
10. CHANGE IN CAPITAL STRUCTURE; CHANGE IN CONTROL;
DETERMINATION OF FAIR MARKET VALUE
(a) In the event that the outstanding shares of Common Stock are
hereafter changed into or exchanged for a different number or kind of shares or
other securities of the Company, by reason of reorganization, recapitalization,
exchange of shares, stock split, combination of shares or dividend payable in
shares or other securities, a corresponding adjustment shall be made by the
Committee in the number and kind of shares of outstanding Restricted Stock and
for which Restricted Stock may be granted under the Plans. Any such adjustment
made by the Committee shall be conclusive and binding upon all affected persons,
including the Company and all Grantees.
(b) "Change in Control" means
(i) a change in control of the Company of a nature that would
be required to be reported in response to Item 1 of the current report
Form 8-K as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act");
(ii) any acquisition of control of the Company by any company
within the meaning of 12 U.S.C. ss. 1841(a)(2), the Bank Holding
Company Act of 1956, as amended, or by any person within the meaning of
12 U.S.C. ss. 1817(j), the Change in Bank Control Act of 1978, as
amended;
6
<PAGE>
(iii) individuals who constitute the Board as of June 21, 1996
(the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director
subsequent to June 21, 1996 whose election was approved by a vote of at
least three-quarters of the directors then comprising the Incumbent
Board, or whose nomination for election by the Company's shareholders
was approved by the Company's Nominating Committee then serving under
the Board, shall be, for purposes of this clause (iii), considered as
though he or she was a member of the Incumbent Board but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents;
(iv) approval by the shareholders of the Company of a
reorganization, merger or consolidation, or the consummation of any
such reorganization, merger or consolidation, other than a
reorganization, merger or consolidation with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners, immediately prior to such reorganization, merger or
consolidation, of the Voting Interest in the Company beneficially own,
directly or indirectly, immediately after such reorganization, merger
or consolidation more than eighty percent (80%) of the Voting Interest
of the Company or other entity resulting from such reorganization,
merger or consolidation in substantially the same proportions as their
respective ownership, immediately prior to such reorganization, merger
or consolidation, of the Voting Interest in the Company;
(v) approval by the shareholders of the Company of (1) a
complete liquidation or dissolution of the Company, or (2) the sale or
other disposition of all or substantially all of the assets of the
Company, or the occurrence of any such liquidation, dissolution, sale
or other disposition, other than, in any case, to a Subsidiary,
directly or indirectly, of the Company, or any affiliate; and/or
(vi) the solicitation of proxies from shareholders of the
Company, by someone other than the current Management of the Company
and without the approval of the Board, seeking shareholder approval of
a plan of reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the shareholders'
interest in the Company are actually exchanged for or converted into
securities not issued by the Company. "Voting Interest" means
securities of any class or classes or other ownership interests having
general voting power under ordinary circumstances to elect members of
the board of directors or trustees of any entity.
7
<PAGE>
(c) For purposes of the Plans, except as may be otherwise explicitly
provided in the Plans or in any Restricted Stock Agreement or similar document,
the "fair market value" of a share of Common Stock at any particular date shall
be determined according to the following rules:
(i) if the Common Stock is at the time listed or admitted to
trading on any stock exchange or NASDAQ, then the fair market value
shall be the reported closing price of the Common Stock on such date on
the principal exchange or NASDAQ, as the case may be; or
(ii) if the Common Stock is not at the time listed or admitted
to trading on a stock exchange or NASDAQ, the fair market value shall
be the closing price of the Common Stock on the date in question in the
over-the-counter market, as such price is reported in a publication of
general circulation selected by the Board and regularly reporting the
price of the Common Stock in such market; provided, however, that if
the price of the Common Stock is not so reported, the fair market value
shall be determined in good faith by the Board, which may take into
consideration (1) the price paid for the Common Stock in the most
recent trade of a substantial number of shares known to the Board to
have occurred at arm's length between willing and knowledgeable
investors, or (2) an appraisal by an independent party, or (3) any
other method of valuation undertaken in good faith by the Board, or
some or all of the above as the Board shall in its discretion elect.
11. EFFECTIVE DATE OF PLANS; STOCKHOLDER APPROVAL
The Plans became effective, as Plans of the Bank, on June 1, 1995 and
were approved by the Bank's stockholders on May 31, 1995. The Plans were assumed
by the Company upon consummation of the reorganization contemplated by an
Agreement and Plan of Reorganization between the Company and the Bank on June
21, 1996. No Restricted Stock may be granted under the Plans on or after the
tenth anniversary of the effective date of the Plans.
8
EXHIBIT 11
<TABLE>
<CAPTION>
SIS BANCORP, INC. AND SUBSIDIARIES
COMPUTATION OF PRO FORMA PRIMARY AND FULLY DILUTED
EARNINGS PER SHARE
(In Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Net income $ 3,044 $ 1,281 $ 5,449 $ 2,070
Weighted average and pro forma weighted
average shares outstanding during the period 5,574 5,562 5,568 5,562
Unearned ESOP shares (390) (445) (390) (445)
Stock options considered outstanding during the period 105 - 105 -
Restricted stock shares considered outstanding during the period 146 - 149 -
------- ------- ------- -------
Total shares 5,435 5,117 5,432 5,117
======= ======= ======= =======
Net income per share $ 0.56 $ 0.25 $ 1.00 $ 0.40
======= ======= ======= =======
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Fully Diluted:
Net income $ 3,044 $ 1,281 $ 5,449 $ 2,070
Weighted average and pro forma weighted
average shares outstanding during the period 5,574 5,562 5,568 5,562
Unearned ESOP shares (390) (445) (390) (445)
Stock options considered outstanding during the period 120 9 119 5
Restricted stock shares considered outstanding during the period 146 4 149 2
------- ------- ------- -------
Total shares 5,450 5,130 5,446 5,124
======= ======= ======= =======
Net income per share $ 0.56 $ 0.25 $ 1.00 $ 0.40
======= ======= ======= =======
</TABLE>
Net income per shares for the three and six months ended June 30, 1996 and the
three months ended June 30, 1995 is computed on weighted shares outstanding for
the period. Net income per share for the six months ended June 30, 1995 is
computed on a pro forma basis as if the stock issued in the conversion had been
issued as of the beginning of the period presented.
This computation includes the impact of the Restricted Stock Plan ("RSP") and
the Stock Option Plan which were approved by stockholders at the Annual Meeting
of the Stockholders held on May 31, 1995.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements of SIS Bancorp. Inc. for the six months ended
June 30, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 35,931
<INT-BEARING-DEPOSITS> 45
<FED-FUNDS-SOLD> 10,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 337,444
<INVESTMENTS-CARRYING> 193,197
<INVESTMENTS-MARKET> 192,728
<LOANS> 578,635
<ALLOWANCE> 14,913
<TOTAL-ASSETS> 1,209,843
<DEPOSITS> 927,298
<SHORT-TERM> 165,893
<LIABILITIES-OTHER> 26,630
<LONG-TERM> 3,026
0
0
<COMMON> 57
<OTHER-SE> 86,939
<TOTAL-LIABILITIES-AND-EQUITY> 1,209,843
<INTEREST-LOAN> 23,474
<INTEREST-INVEST> 15,511
<INTEREST-OTHER> 259
<INTEREST-TOTAL> 39,244
<INTEREST-DEPOSIT> 16,068
<INTEREST-EXPENSE> 19,216
<INTEREST-INCOME-NET> 20,028
<LOAN-LOSSES> 1,450
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 6,771
<INCOME-PRETAX> 5,939
<INCOME-PRE-EXTRAORDINARY> 5,939
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,449
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
<YIELD-ACTUAL> 7.45
<LOANS-NON> 8,872
<LOANS-PAST> 296
<LOANS-TROUBLED> 891
<LOANS-PROBLEM> 14,965
<ALLOWANCE-OPEN> 14,986
<CHARGE-OFFS> 3,021
<RECOVERIES> 1,498
<ALLOWANCE-CLOSE> 14,913
<ALLOWANCE-DOMESTIC> 14,913
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
