<PAGE>
SIS BANCORP
- -------------------------------------------------------------------------------
SIS Bancorp, Inc.
1441 Main Street
Springfield, MA 01103
March 30, 1998
Telephone (413) 748-8000
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of the
Stockholders (the "Annual Meeting") of SIS Bancorp, Inc. (the "Company") to be
held on Thursday, May 7, 1998 at 10:00 a.m. local time, at the Springfield
Sheraton Hotel, One Monarch Place, Springfield, Massachusetts.
The Annual Meeting has been called for the following purposes:
1. To elect two Directors for a three-year term;
2. To approve and adopt the Amended and Restated SIS Bancorp, Inc. Stock
Option Plan;
3. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
The accompanying Proxy Statement for Annual Meeting of SIS Bancorp, Inc.
Shareholders provides detailed information concerning the matters to be voted
on at the Annual Meeting. Also, enclosed is the Company's 1997 SEC Form 10-K
and 1997 Annual Report to Stockholders, which contain additional information
and review of results for the fiscal year ended December 31, 1997.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are requested to
complete, date, sign and return the enclosed proxy card in the enclosed
postage paid envelope.
Thank you for returning your proxy. We appreciate the support you have given
the Company.
Sincerely,
/s/ John M. Naughton
John M. Naughton
Chairman of the Board
<PAGE>
SIS BANCORP, INC.
1441 MAIN STREET
SPRINGFIELD, MASSACHUSETTS 01102
TELEPHONE: (413) 748-8000
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 7, 1998
----------------
Springfield, Massachusetts
March 30, 1998
To the Holders of Common Stock of
SIS Bancorp, Inc.
Notice is Hereby Given that the Annual Meeting of Stockholders of SIS
Bancorp, Inc. will be held at the Springfield Sheraton Hotel, One Monarch
Place, Springfield, Massachusetts 01144 at 10:00 a.m. local time on Thursday,
May 7, 1998 for the following purposes:
1. To elect two Directors of SIS Bancorp, Inc., each for a three-year term
(PROPOSAL 1);
2. To approve and adopt the Amended and Restated SIS Bancorp, Inc. Stock
Option Plan (PROPOSAL 2); and
3. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 11, 1998 as
the record date for determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournments or postponements thereof.
By Order of the Board of Directors
/s/ Michael E. Tucker
Michael E. Tucker, Esquire
Clerk
REGARDLESS OF HOW MANY SHARES YOU OWN, YOUR VOTE IS VERY IMPORTANT. WHETHER OR
NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW ANY PROXY GIVEN BY YOU AND VOTE
YOUR SHARES IN PERSON.
<PAGE>
SIS BANCORP
1441 MAIN STREET
SPRINGFIELD, MASSACHUSETTS 01102
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SIS BANCORP, INC. SHAREHOLDERS
TO BE HELD ON THURSDAY, MAY 7, 1998
The Company:
SIS Bancorp, Inc.
1441 Main Street
Springfield, Massachusetts 01102
(413) 748-8000
SIS Bancorp, Inc. ("SIS") is a bank holding company. It conducts business
through its two subsidiary banks, Springfield Institution for Savings
(operating as "SIS Bank"), Springfield, MA and Glastonbury Bank & Trust
Company ("GBT"), Glastonbury, CT.
PURPOSE OF THIS PROXY STATEMENT/1998 ANNUAL MEETING:
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of SIS from the holders of outstanding
shares of SIS common stock, par value $.01 per share (the "Common Stock"), for
use at the 1998 Annual Meeting of Stockholders of SIS (the "Annual Meeting")
to be held on Thursday, May 7, 1998 at 10:00 a.m. local time, at the
Springfield Sheraton Hotel, One Monarch Place, Springfield, Massachusetts
01144, and at any adjournments or postponements thereof.
MATTERS TO BE VOTED UPON AT THE 1998 ANNUAL MEETING:
At the Annual Meeting, shareholders will be asked to:
. elect two members of the Board of Directors, each for a three-year term
(Proposal One);
. approve and adopt the Amended and Restated SIS Bancorp, Inc. Stock
Option Plan (the "Amended and Restated Plan") (Proposal Two); and
. transact such other business as may properly come before the meeting or
any adjournments or postponements thereof.
This Proxy Statement, together with the accompanying Notice of Annual
Meeting and proxy card, are first being mailed to stockholders on or about
March 30, 1998.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
Stockholders of SIS are requested to complete, sign, date and return the
accompanying proxy card in the enclosed envelope. The following summary
contains information that should be reviewed by all stockholders in connection
with the Annual Meeting. Please refer to the detailed discussion of Proposal
One and Proposal Two contained in this Proxy Statement for a more complete
description of the matters to be considered and voted upon at the Annual
Meeting.
. Record Date: The Board of Directors has set March 11, 1998 as the Record
Date for determining the stockholders entitled to notice of, and to vote
at, the Annual Meeting.
. Outstanding Shares: As of March 6, 1998, the most recent practicable
date, there were approximately 1,599 holders of record of 6,957,987
shares of the Common Stock outstanding which would be entitled to vote
at the Annual Meeting.
1
<PAGE>
. Quorum: A majority of the outstanding shares of the Common Stock present
in person or by proxy will constitute a quorum for the transaction of
business at the Annual Meeting. Each share of the Common Stock will be
accorded one vote.
. Required Vote: A plurality of the votes cast at the Annual Meeting is
required to elect the Directors in Proposal One. A majority of the votes
cast at the Annual Meeting is required to approve the Amended and
Restated Plan in Proposal Two.
. Tabulation of Votes: Shareholders' votes will be tabulated by the
persons appointed by the Board of Directors to act as inspectors of
election for the Annual Meeting. Abstentions and broker non-votes will
be treated as shares that are present, or represented, for purposes of
determining the presence of a quorum at the Annual Meeting. Abstentions
and broker non-votes will not be counted as "votes cast" at the Annual
Meeting, and, therefore, will have no effect on either the election of
Directors or stockholder approval of the Amended and Restated Plan. A
"broker non-vote" is a proxy from a broker or other nominee indicating
that such person has not received instructions from the beneficial owner
or other person entitled to vote the shares which are the subject of the
proxy on a particular matter with respect to which the broker or other
nominee does not have discretionary voting power.
. Actions requested of Stockholders: You are requested to complete, sign,
date and return the accompanying proxy card in the enclosed return
envelope. Shares represented by proxies in the enclosed form will be
voted as stockholders direct in their properly executed proxy card.
Properly executed proxies that contain no directions to the contrary
will be voted in favor of the election of the two nominees of the Board
of Directors to serve as Directors of SIS (Proposal One) and for the
approval and adoption of the Amended and Restated Plan (Proposal Two).
. Other Business: At the time of preparation of this Proxy Statement, the
Board of Directors knows of no other matters to be presented for action
at the Annual Meeting. If other business should come before the Annual
Meeting, the persons named as proxies have discretionary authority to
vote the shares subject to such proxies according to their best
judgment.
. Revocation of Proxy: A shareholder who executes a proxy card may revoke
it at any time before it has been exercised by (i) delivering a
revocation in writing to the Clerk of SIS, Michael E. Tucker, at the
address listed above, (ii) delivering a later-dated proxy or (iii) by
voting in person at the Annual Meeting. Attendance at the Annual Meeting
will not in and of itself constitute revocation of a proxy.
. Cost of Proxy Solicitation: The cost of soliciting proxies in the form
enclosed herewith will be borne by SIS. The solicitation of proxies by
mail may be followed by telephonic or other oral solicitation of certain
stockholders by officers or regular employees of SIS. SIS has also
retained Morrow & Co., Inc. to assist in the solicitation of proxies.
SIS has agreed to pay Morrow & Co., Inc. a fee of approximately
$5,000.00 for services, and to reimburse Morrow & Co., Inc. for its
reasonable expenses incurred in connection with the solicitation of
stockholders.
PROPOSAL ONE--ELECTION OF A CLASS OF DIRECTORS
. Proposal to Elect Two Directors: At the Annual Meeting, two (2)
directors will be elected, each for a three year term. Unless otherwise
specified on the proxy, it is the intention of the persons named in the
proxy to vote the shares represented by each properly executed proxy for
the election as directors of the persons named below as nominees.
. Number of Directors: Under the By-Laws of SIS, the number of Directors
shall be set by a majority vote of the entire Board of Directors. This
number has been set by the Board at eight (8). Under the Articles of
Organization and By-Laws of SIS, this number shall be divided into three
classes, as nearly equal in number as possible, with the Directors in
each class serving a term of three years and until their respective
successors are duly elected and qualified, or until his or her earlier
resignation, death or removal. As the term of one class expires, a
successor class is elected at the annual meeting of
2
<PAGE>
stockholders for that year. At the Annual Meeting, there are two (2)
Directors to be elected to serve until the 2001 annual meeting of SIS's
stockholders and until their respective successors are duly elected and
qualified, or until his or her earlier resignation, death or removal.
. It is intended that, if no contrary specification is made, the persons
named as proxies shall vote for the nominees named below. The Board of
Directors believes that all of the nominees will be available and able
to serve as Directors, but if for any reason any of the nominees named
below should not be available or able to serve, the proxies may exercise
discretionary authority to vote for a substitute or substitutes. THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A PLURALITY OF THE SHARES OF THE
COMMON STOCK VOTED AT THE ANNUAL MEETING IS REQUIRED TO ELECT THE
NOMINEES AS DIRECTORS.
. OUR RECOMMENDATIONS TO SHAREHOLDERS: THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE TWO (2) NOMINEES LISTED
BELOW.
3
<PAGE>
INFORMATION REGARDING DIRECTORS AND NOMINEES
The following table sets forth certain information as of December 31, 1997
for each of the two nominees for election as Directors at the Annual Meeting
and for those continuing Directors whose terms expire at the annual meetings
of SIS's stockholders in 1999 and 2000. Each individual has been engaged in
his or her principal occupation for at least five years, except as otherwise
indicated.
<TABLE>
<CAPTION>
DIRECTOR OR
NAME, AGE & PRINCIPAL TRUSTEE EXPIRATION OF CURRENT POSITION HELD
OCCUPATION SINCE(1) THREE YEAR TERM WITH COMPANY
- --------------------- ----------- ---------------------- -------------------
NOMINEES
<S> <C> <C> <C>
Charles L. Johnson, 59 1983 1998--Nominee for term Director
Consultant--Associated to expire in Year 2001
Energy Managers, investment
management firm(2)
F. William Marshall, Jr., 55 1993 1998--Nominee for term Director, President
President & CEO, SIS and to expire in Year 2001 and Chief
SIS Bank(3) Executive Officer
CONTINUING DIRECTORS
Thomas O'Brien, 58 1996 1999 Director
Dean, School of Management
University of Massachusetts
William B. Hart, Jr., 54 1996 1999 Director
President, the Dunfey
Group, an investment
corporation
Stephen A. Shatz, 55 1986 1999 Director
Attorney, partner in Shatz,
Schwartz & Fentin, P.C.
Sr. Mary Caritas (Geary), 1980 2000 Director
S.P., 74 Retired, former
President & CEO of Mercy
Hospital
John M. Naughton, 61 1991 2000 Chairman of the
Retired, former Executive Board of Directors
Vice President,
Massachusetts Mutual Life
Insurance Co.
Ronald E. Bourbeau, 59 1997 2000 Director
Owner, Yankee Boat Yard &
Marina, Inc., Treasurer,
Northeast Yacht Sales(4)
</TABLE>
- --------
(1) Each of the present Directors (including the named nominees) of SIS listed
above with service as a Director prior to 1996 was also a Director of SIS
Bank prior to the reorganization of SIS Bank into a holding company
structure in June 1996 (the "Reorganization"). Any service noted prior to
1995 indicates the Director was a Trustee of SIS Bank before SIS Bank
converted from mutual to stock form in February 1995.
(2) Prior to June, 1995, Mr. Johnson was the Associate Treasurer of Smith
College, Northampton, MA. He is also a Visiting Professor at Mount Holyoke
College, South Hadley, MA.
(3) Prior to joining SIS Bank in 1993, Mr. Marshall served as Chairman and
Chief Executive Officer of the Bank of Ireland First Holdings, Inc. and
First NH Bank. Mr. Marshall is also on the board of MML Series Investment
Fund and Mass Mutual Institutional Funds, which are investment companies
registered under the Investment Company Act of 1940.
(4) Mr. Bourbeau joined the Board in connection with the acquisition of GBT by
SIS on December 17, 1997. Mr. Bourbeau is currently the Chairman of the
Board of Directors of GBT and has served as a director of GBT since 1977.
4
<PAGE>
STOCK OWNED BY DIRECTORS AND MANAGEMENT
The following table sets forth information as of January 31, 1998 with
respect to the shares of the Common Stock beneficially owned by each director,
nominee for director and each of the executive officers named in the Summary
Compensation Table at page 8 below (the "Named Executive Officers"), and by
all directors and executive officers as a group. The number also includes
shares that these persons have the right to acquire within 60 days of January
31, 1998 through the exercise of options that are either currently vested or
will become vested within such time period (see below).
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME AND POSITION(S) WITH SIS BENEFICIAL OWNERSHIP(1) STOCK OUTSTANDING(2)
----------------------------- ----------------------- --------------------
<S> <C> <C>
Ronald E. Bourbeau--Director...... 133,069 1.91%
Sister Mary Caritas (Geary),
S.P.--Director................... 6,715 (3) *
John M. Naughton--Director,
Chairman of the Board of SIS..... 21,000 *
Charles L. Johnson--Director...... 9,840 *
F. William Marshall, Jr.--
Director, President & CEO of
SIS.............................. 114,899.8(4) 1.65%
Thomas O'Brien--Director.......... 8,133 *
William B. Hart, Jr.--Director.... 6,120 (5) *
Stephen A. Shatz--Director........ 20,790 (6) *
John F. Treanor--Executive Vice
President, Chief Operating
Officer, Treasurer & Chief
Financial Officer of SIS......... 54,151.8 *
Frank W. Barrett--Executive Vice
President of SIS................. 57,270.8(7) *
J. Gilbert Soucie--Vice Chairman
of SIS, President & CEO of GBT... 40,189 *
Gilbert F. Ehmke--Senior Vice
President of SIS................. 21,016.8 *
All Nominees, Continuing
Directors, Named Executive
Officers and all other executive
officers as a group (21
persons)......................... 690,369.7(8) 9.93%
</TABLE>
- --------
(1) Unless otherwise noted in the footnotes to this table, each of the
nominees, continuing Directors and Named Executive Officers have sole
voting and investment power over the shares of Common Stock beneficially
owned by them. The number reported includes shares, both vested and
unvested, of Restricted Stock which were granted through the SIS Director
and Management Restricted Stock Plans. The number also includes the
following number of shares that the above listed Directors and/or officers
have the right to acquire within 60 days of January 31, 1998 through the
exercise of options granted pursuant to SIS's Director and Management
Stock Option Plans: Sr. Mary Caritas--2,640 shares; Mr. Hart--1,320
shares; Mr. Johnson--2,640 shares; Mr. Naughton--4,000 shares; Mr.
O'Brien--1,320 shares; Mr. Marshall--55,840 shares; Mr. Shatz--2,640
shares; Mr. Treanor--32,000 shares; Mr. Barrett--32,000 shares; Mr.
Ehmke--11,700 shares. The number also includes the following shares
allocated to the Named Executive Officers under SIS's Employee Stock
Ownership Plan: 2,037.8 shares for each of Messrs. Marshall, Treanor, and
Barrett and 1,216.3 shares for Mr. Ehmke. Mr. Soucie was not eligible for
ESOP allocation for 1997.
(2) * indicates less than 1.00% of SIS's outstanding shares of Common Stock.
(3) Includes 1850 shares owned jointly with Sr. Marie Thaddeus.
(4) Includes 4522 shares owned jointly with his spouse.
(5) Includes 600 shares owned by Mr. Hart's spouse as to which Mr. Hart
disclaims beneficial ownership.
(6) Includes 12,500 shares owned by Mr. Shatz jointly with his spouse and
3,000 shares owned solely by his spouse.
(7) Includes 625 shares held by Mr. Barrett's children.
(8) Reflects the inclusion in the calculation of all (i) 248,540 shares that
this group has the right to acquire within 60 days through the exercise of
options granted pursuant to SIS's Director and Management Stock Option
Plans and (ii) 15,911.7 shares allocated to all executive officers
(including the Named Executive Officers) as a group under SIS's Employee
Stock Ownership Plan.
5
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES MEETINGS
Board of Directors: The Board of Directors of SIS consisted of the following
eight (8) individuals as of December 31, 1997: John M. Naughton (Chairperson),
Ronald E. Bourbeau, Sister Mary Caritas (Geary) S.P., William B. Hart, Jr.,
Charles L. Johnson, F. William Marshall, Jr., Thomas O'Brien, and Stephen A.
Shatz. The Directors of SIS met 11 times in 1997.
Each of the committees of the Board of Directors of SIS is described below.
No Director attended fewer than 75% of the total number of applicable Board of
Director meetings held during its 1997 fiscal year and the total number of
meetings held by committees on which he or she served during that time.
Executive Committee. SIS's Executive Committee is currently made up of the
entire Board of Directors of SIS, which are as listed above. This committee
meets on an as-needed basis between regular board meetings to generally
exercise control and supervision in all matters pertaining to the interests of
SIS, subject at all times to the direction of the full Board.
Audit Committee. The Audit Committee of SIS consisted of the following three
individuals: Sister Mary Caritas (Geary) S.P. (Chairperson), Charles L.
Johnson, and William B. Hart, Jr. This committee meets at least quarterly to
review and audit functions in asset quality, corporate controls, corporate
governance, and financial reporting controls. The SIS Audit Committee met 4
times in 1997.
Compensation Committee. The Compensation Committee of SIS consisted of the
following three outside Directors: Thomas O'Brien (Chairperson); John M.
Naughton and Sr. Mary Caritas (Geary) S.P. The Compensation Committee meets on
at least a semi-annual basis to exercise a broad oversight of human resource
strategies, to examine and analyze the competitiveness of compensation
programs, including short- and long-term incentive programs, and to review and
consider proposed stock option allocations and restricted stock grants. The
SIS Compensation Committee met 4 times in 1997.
Nominating Committee. SIS's Nominating Committee consisted of the following
two outside Directors: John M. Naughton and Stephen A. Shatz. This committee
meets as needed to identify, with the approval of the full Board of Directors,
candidates for Directors to be elected at each annual meeting of stockholders
and also to consider stockholder proposals for such nominations. This
Committee did not meet during 1997.
For information regarding procedures for submitting stockholder proposals,
including director nominations, see "STOCKHOLDER PROPOSALS." at page 23.
COMPENSATION FOR DIRECTORS
Directors' Fees. The members of SIS's Board of Directors receive an annual
retainer of $2,500. Directors are also paid $400 for each Board meeting and
committee meeting attended, and if a Director attends more than one committee
meeting immediately following the previous meeting on the same day, the
initial meeting fee is $400 and the additional meeting fee is $200. The
Chairperson of each committee receives an additional $150 for each meeting
attended. There is also a pro-rata deduction for any director's meetings not
attended by a director. Directors who also sit on a subsidiary bank's board of
directors also receive a retainer and per meeting fee from that subsidiary
bank as follows: (i) Directors of SIS Bank receive a retainer of $7,500
(except the chairman who receives $10,000) and $400 per meeting; (ii)
Directors of GBT receive a retainer of $2,500 and $400 per meeting. Directors
who are employees of SIS or its subsidiaries are not eligible to receive any
fees otherwise paid to Directors.
Stock Option Grants to Directors. Under the terms of the current SIS
Director Stock Option Plan, each non-employee Director who was a director of
SIS Bank prior to the Reorganization, has been granted an option to acquire
6,600 shares of the Common Stock (except that the Chairman of the Board was
granted an option to acquire 10,000 shares) at the market price at the close
of business on the effective date of the grant. Also under the current
Director Stock Option Plan new non-employee Directors of SIS may receive
options for up to 6,600 shares, subject to the availability of options. The
option exercise price of options granted under the Director Stock Option Plan
may not be less than 100% of the fair market value of the Common Stock on the
date of grant of the option, as determined in accordance with the Director
Stock Option Plan. Subject to stockholder
6
<PAGE>
approval of Proposal Two, future grants of options to all Directors, including
non-employee Directors, would be subject to the terms of the Amended and
Restated Plan in lieu of the foregoing terms currently contained in the
Director Stock Option Plan.
Restricted Stock Grants to Directors. Under the terms of the SIS Director
Restricted Stock Plan, each non-employee Director who was a director of SIS
Bank prior to the Reorganization, has been granted 2,200 shares of restricted
Common Stock (except that the Chairman of the Board was granted 3,500 shares
of restricted Common Stock). Also under the Director Restricted Stock Plan new
non-employee Directors of SIS may be awarded up to 2,200 shares of restricted
Common Stock, subject to the availability of shares of such restricted Common
Stock.
EXECUTIVE OFFICERS OF SIS BANCORP, INC.
The following table sets forth certain information regarding the executive
officers of SIS as of January 31, 1998. Each individual has occupied his or
her office for at least the last five years, except as otherwise indicated.
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICE WITH THE COMPANY SINCE
---- --- ------------------------------------ -----
<S> <C> <C> <C>
F. William Marshall, 54 President & Chief Executive Officer, Director-- 1993
Jr.(1)................. SIS BANCORP, INC. and SIS BANK
J. Gilbert Soucie(2).... 59 Vice Chairman of SIS and President & CEO-- 1997
GLASTONBURY BANK & TRUST COMPANY
Frank W. Barrett(3)..... 58 EVP, Credit & Commercial Lending Group--SIS 1994
John F. Treanor(4)...... 50 EVP, Treasurer, COO & CFO--SIS 1994
Gilbert F. Ehmke(5)..... 39 Senior Vice President & Chief Investment 1995
Officer--SIS
Henry J. McWhinnie(6)... 54 Senior Vice President/Human Resources Group--SIS 1994
Jeanne Rinaldo.......... 48 Senior Vice President/Residential Mortgage 1992
Group--SIS
Christopher A.
Sinton(7).............. 53 Senior Vice President/Retail Banking Group--SIS 1995
Michael E. Tucker(8).... 41 Senior Vice President, General Counsel & Clerk-- 1993
SIS
Ting Chang(9)........... 34 Vice President--Investor Relations & Corporate 1995
Planning, SIS
Patricia
Jatkevicius(10)........ 38 Vice President--Marketing, SIS 1997
Laura Sotir Katz........ 34 Vice President & Controller, SIS 1992
Brian Schwartz(11)...... 31 Vice President & Director of Auditing, SIS 1995
</TABLE>
- --------
(1) Mr. Marshall joined SIS Bank in May, 1993. He formerly served as Chairman
and Chief Executive Officer of the Bank of Ireland First Holdings, Inc.
and First NH Bank. Mr. Marshall served as a Trustee of SIS Bank from May,
1993 until the conversion of SIS Bank to stock form on February 8, 1995.
(2) Mr. Soucie became Vice Chairman effective with the acquisition of GBT by
SIS on December 17, 1997. He has served as President & CEO of GBT since
April, 1994. Prior to that, Mr. Soucie was Senior Vice President and
Chief Credit Officer of Mechanics Savings Bank, Hartford, CT.
(3) Mr. Barrett joined SIS Bank in January, 1994. He formerly served as
Senior Vice President of Bank of Ireland First Holdings and First NH
Bank.
(4) Mr. Treanor joined SIS Bank in August, 1994. He formerly served as
Executive Vice President, Treasurer and Chief Financial Officer of
Sterling Bancshares Corporation.
(5) Mr. Ehmke joined SIS Bank in February, 1995. He formerly served as Senior
Vice President and Treasurer of Northeast Savings, F.A. in Hartford,
Connecticut.
(6) Mr. McWhinnie joined SIS Bank in September, 1994. He formerly served as
Senior Vice President Human Resources of Bristol Savings Bank in Bristol,
Connecticut and as Executive Vice President of Centerbank, Waterbury,
Connecticut.
(7) Mr. Sinton joined SIS Bank in February, 1995. He formerly was Executive
Vice President-Retail Banking Division of United Jersey Bank.
(8) Mr. Tucker has served as Clerk since 1995 and as Senior Vice President &
General Counsel since December, 1993.
(9) Ms. Chang joined SIS Bank in 1989 and has served as Vice President for
Investor Relations & Corporate Planning since 1995.
(10) Ms. Jatkevicius joined SIS Bank in 1994 and has served as Vice President
of Marketing since 1996. Prior to 1994, she was head of marketing for
Riverside Amusement Park, Agawam, MA.
(11) Mr. Schwartz formerly served as Audit Manager with Shawmut National
Corporation.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
paid by SIS and its subsidiaries for services rendered in all capacities
during the fiscal year ended December 31, 1997 to the Chief Executive Officer
and each of the four most highly compensated executive officers of SIS
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
----------------- ---------------------
RESTRICTED # OPTIONS
STOCK /SARS ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS$(2) AWARDED(3) COMPENSATION(4)
- ------------------------- ---- -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
F. William Marshall, Jr.. 1997 $355,838 $162,000 0 21,500 $23,486
President & Chief 1996 352,894 160,000 0 46,800 18,900
Executive Officer 1995 332,856 100,725 428,750 80,000 24,808
John F. Treanor,
Executive............... 1997 189,918 64,000 0 9,000 57,442
VP, Chief Financial 1996 174,327 55,000 62,562 21,500 18,799
Officer, Chief Operating
Officer & Treasurer 1995 157,308 40,000 153,125 40,000 13,082
Frank W. Barrett......... 1997 167,223 52,000 0 8,500 23,486
Executive Vice 1996 166,827 50,000 0 21,000 18,793
President, Credit and
Commercial Lending 1995 157,308 35,000 183,750 40,000 21,145
J. Gilbert Soucie........ 1997 144,874 36,000 0 0 6,270
Vice Chairman/SIS; 1996 143,875 0 0 0 0
President &
CEO--GBT(5) 1995 131,976 3,000 0 0 0
Gilbert F. Ehmke......... 1997 127,812 30,000 48,000 11,200 22,519
Senior Vice President & 1996 126,615 30,000 32,750 18,400 17,153
Chief Investment Officer 1995 103,315 24,500 24,500 6,000 N/A
</TABLE>
- --------
(1) Amounts shown include cash compensation earned and received by the Named
Executive Officers as well as amounts earned but deferred at the election
of those officers. Bonuses shown for 1997 were allocated in 1997 and paid
in 1998; for 1996 were allocated in 1996 and paid in 1997; for 1995 were
allocated in 1995 and paid in 1996.
(2) Dollar amount shown for restricted stock awards in any year equals the
number of shares of restricted stock awarded in such year multiplied by
the market price for SIS's unrestricted stock on the applicable award
date. This valuation does not take into account the diminution of value
attributable to the restrictions applicable to the restricted shares. The
restricted shares ordinarily vest over a 5 year period at a rate of 20%
per year, commencing upon the first anniversary of the grant date;
provided however that such vesting may be accelerated in the discretion of
the Compensation Committee of SIS's Board of Directors if certain
performance criteria are met. The ordinary 20% vesting occurred in 1997
with respect to shares awarded on June 1, 1995. The number and dollar
value of shares of restricted stock held by Named Executive Officers on
December 31, 1997, which would normally vest within 3 years, absent any
acceleration of such vesting, based on a closing price for the Common
Stock on December 31, 1997 of $40.1875 per share, were as follows: (i) Mr.
Marshall--14,000 shares ($562,625); (ii) Mr. Barrett--6,000 shares
($241,125); (iii) Mr. Treanor--7,100 shares ($285,331); (iv) Mr. Ehmke--
4,000 shares ($160,750). Dividends paid by SIS on shares of Common Stock
will be paid on all restricted shares at the same rate as paid on
unrestricted shares.
(3) The outstanding options become exercisable as follows: (i) options granted
under SIS's long term incentive program to purchase shares granted to: Mr.
Marshall--22,800; Mr. Barrett--9,000; Mr. Treanor--9,500; and Mr. Ehmke--
5,200, which will become fully exercisable on the third anniversary date
of the grant, if certain performance criteria are satisfied; (ii) options
granted on an ad-hoc basis on January 31, 1996,
8
<PAGE>
granted to: Mr. Marshall--24,000; Mr. Barrett--12,000; Mr. Treanor--12,000,
which will become exercisable, provided certain criteria are met, at a rate
of 33 1/3% on the grant date and 33 1/3% on each subsequent anniversary of
the grant date, and on May 9, 1996, granted to: Mr. Ehmke--4,000, which
will become exercisable, provided the same criteria are met, 50% on January
31,1997 and 50% on January 31, 1998; and (iii) with respect to all other
options outstanding, the underlying shares ordinarily become exercisable
over a 5 year period at a rate of 20% per year, commencing upon the first
anniversary of the date of grant; provided, however, that the ordinary
five-year vesting schedule may be accelerated in the discretion of the
Compensation Committee of SIS's Board of Directors if certain performance
criteria are satisfied. In 1997, the ordinary 20% vesting occurred.
Notwithstanding any other terms of the grant of an option under the current
SIS Management Stock Option Plan, all options granted thereunder shall
become fully exercisable in any case, if not sooner becoming fully
exercisable, upon the seventh anniversary of the date of grant.
(4) Amounts included here in 1997 include the following: employer's match to
SIS Bank's 401(k) Plan (Mr. Marshall--$2,375, Mr. Treanor--$2,375, Mr.
Barrett--$2,375, Mr. Ehmke--$2,052 and Mr. Soucie--$2,900); the value of
shares allocated to the account of each Named Executive Officer under
SIS's Employee Stock Ownership Plan (Messrs. Marshall, Treanor, and
Barrett--$21,111, Mr. Ehmke--$20,468; Mr. Soucie--$0, as he was not
eligible for the ESOP in 1997); relocation assistance (Mr. Treanor--
$33,956); and the value of excess group life insurance (Mr. Soucie--
$3,370).
(5) Mr. Soucie joined SIS as Vice Chairman on December 17, 1997 in connection
with the acquisition of GBT by SIS on such date. He has been President and
CEO of GBT since April, 1994. Amounts shown include compensation paid by
GBT prior to its acquisition by SIS.
9
<PAGE>
OPTION/STOCK APPRECIATION RIGHTS ("SAR")
GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------------
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS/SARS GRANTED EXERCISE OR GRANT DATE
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
/SARS GRANTED(1) FISCAL YEAR ($/SH) DATE ($)(3)
(A) (B) (C) (D) (E) (F)
--- -------------------- -------------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
F. William Marshall,
Jr..................... 21,500 19.80% 24.00 1/22/2007 $109,200
John F. Treanor......... 9,000 8.29% 24.00 1/22/2007 45,500
Frank W. Barrett........ 8,500 7.83% 24.00 1/22/2007 42,900
J. Gilbert Soucie(4).... 0 0 0 0 0
Gilbert F. Ehmke........ 5,200(1) 4.79% 24.00 1/22/2007 26,208
6,000(2) 5.52% 24.00 1/22/2007 30,600
</TABLE>
- --------
(1) Options granted on 1/22/97 under the SIS Management Stock Option Plan are
under SIS's long-term incentive program and will become fully exercisable
on the third anniversary date of the grant, if certain performance
criteria are satisfied. In any event, all outstanding options must become
fully exercisable no later than 7 years after the date of grant.
(2) Additional options granted on 1/22/97 to Mr. Ehmke under the SIS
Management Stock Option Plan are under an ad hoc program which will
normally become exercisable over a 5 year period at a rate of 20% per year
commencing upon the first anniversary of the date of grant. In any event,
all outstanding options must become fully exercisable no later than 7
years after the date of grant.
(3) The values assigned to each reported option grant shown on this table are
computed using the Black-Scholes option pricing model. The calculated
value assumes the following: risk-free rate of return of 6.30%; volatility
of 0.23529% calculated based on the 250 trading days prior to December 31,
1997; expected life of option of 3 years; an exercise price of $24.00 per
share; and a dividend yield of 0.00%. It is important to note that the
values shown are theoretical and the actual value of the option will
depend upon the market value of the underlying stock at the time the
option is exercised.
(4) Mr. Soucie joined the Company as Vice Chairman on December 17, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-
UNEXERCISED THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT FY-END (#) FY-END ($)(1)
-------------------- -----------------
SHARES ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
(A) (B) (C) (D) (E)
---- ------------------ ------------------ -------------------- -----------------
<S> <C> <C> <C> <C>
F. William Marshall,
Jr..................... 0 0 64,000/84,300 $949,999/$963,949
John F. Treanor......... 0 0 32,000/38,500 474,998/452,248
Frank W. Barrett........ 0 0 32,000/37,500 474,998/444,248
J. Gilbert Soucie....... 0 0 0/0 0/0
Gilbert F. Ehmke........ 0 0 9,200/26,400 125,150/239,973
</TABLE>
- --------
(1) The value of unexercised, in-the-money options at December 31, 1997 is the
difference between the closing price of the Common Stock on December 31,
1997 ($40.1875) and the various per share exercise prices (ranging from
$12.25 to $24.00) under such outstanding options, multiplied by the number
of shares of the Common Stock subject to such options.
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee for SIS for fiscal 1997 is comprised of three
disinterested non-employee directors, Mr. Thomas O'Brien (chairman), Sr. Mary
Caritas (Geary) S.P., and Mr. John M. Naughton, none of whom receive
additional remuneration for any other services provided to the Company and its
subsidiaries. Mr. Naughton is also the Chairman of the Board of the Directors
of SIS. All of the members of SIS's Compensation Committees are also "outside"
directors within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code").
COMPENSATION COMMITTEE REPORT
The Compensation Committee has responsibility for reviewing all aspects of
the compensation program for executive officers of the Company as well as its
subsidiary banks, SIS Bank and GBT. The Compensation Committee's primary
objective in the area of executive compensation is to administer a program
that will attract and retain executives with the experience and capabilities
necessary for SIS to compete in a rapidly changing economic, competitive and
regulatory environment. Specific responsibilities of the Compensation
Committee are to establish policies and procedures for the compensation of
executive officers, including the relationship of performance to executive
compensation, to approve the Chief Executive Officer's compensation, and to
establish the strategic basis for compensation of other executive positions.
The executive compensation program is designed to provide competitive
compensation opportunities for executive officers as well as to reward for
superior performance when SIS's performance so warrants.
The executive compensation program has three major components--base salary,
annual incentive compensation, and long-term incentive compensation. Each of
these components has a separate purpose and may have a different relative
value depending on the particular executive position.
Base salary is the fixed component of the package. Base salary is intended
to be competitive with the external marketplace and to reflect the internal
value of the executive position. The marketplace, as determined by the
Compensation Committee, consists of banking and thrift institutions of similar
size and complexity which compete for similar executive talent. In order to
establish competitive guidelines to assist in managing base salaries,
compensation data is compiled from published surveys and other available
sources. Companies included in these sources differ from those in the
performance graph shown below. The Compensation Committee believes the more
comprehensive group of peer companies is appropriate due to size and business
similarities between SIS and those companies. The analysis establishes a
competitive range within which base compensation is managed.
In addition to base salary, executive officers receive normal benefits
pursuant to the subsidiary banks' pension plans and 401(k) plans as well as
the SIS ESOP, which are similar to all other employees.
Annual incentive compensation is intended to reward executives for achieving
critical annual business objectives and/or meritorious performance. If
performance meets or exceeds the annual business plan, total cash compensation
(base plus annual incentive) may be greater than when the annual performance
objectives are not met. By managing base compensation to the market and using
annual incentive compensation to reward for performance, SIS should not
overpay when performance falls below plan, but will be able to reinforce
performance when SIS performs well. The amount of the annual incentive award
is funded on the basis of SIS's performance. For fiscal year 1998, award
funding will be tied to the level of net income realized. The actual award
paid to an executive is dependent on the level of company performance and the
assessment of each executive's individual performance. The Compensation
Committee reviews and approves SIS's performance plan and measures each year.
The Compensation Committee believes that long-term compensation is vital in
aligning management's and shareholders' interests in the creation of
shareholder value, and in attracting and retaining the executive talent
necessary for SIS's long-term growth and profitability. The long-term
compensation program is composed of
11
<PAGE>
stock options and management restricted stock. By directly linking executive
compensation to the long-term success of SIS, options and restricted shares
are intended to reflect management's key role in expanding the SIS franchise
and serve as an incentive to qualified executives to remain with SIS. The
Compensation Committee is responsible for overseeing the administration of
SIS's stock option and restricted stock plans. The Compensation Committee has,
subject to final ratification of the full Board of Directors, the authority to
allocate stock options and restricted shares among SIS's and its subsidiary
banks' executive officers and employees, and subject to certain conditions, to
accelerate the normal vesting schedule of outstanding options and restricted
shares. Consistent with its role in overseeing SIS's stock option and
restricted stock plans, the Compensation Committee has recommended that the
current Management and Director Stock Option Plan be consolidated into a
single plan and further updated and amended to stay current with industry
practices regarding equity compensation and to maintain SIS's flexibility in
the use of stock options as SIS grows. This is discussed in more detail under
Proposal Two contained in this Proxy Statement. It is expected that the
primary vehicle to reward plan participants for long-term performance in the
future will be through stock options.
The Chief Executive Officer's compensation package includes the elements
discussed above. The CEO is eligible to receive a targeted annual incentive
award of 35% of base salary (the maximum is 70%) depending on SIS's
performance. For the year ending to December 31, 1997, the performance of SIS
has been reviewed by the Compensation Committee and Board. The Compensation
Committee determined the CEO's performance in managing the acquisition of GBT,
exceeding the annual net income performance plan and delivering value to
shareholders exceeded expectations. As a result, the CEO's base salary has
been increased to $380,000. Also, the CEO earned an incentive award of
$162,000.
The Compensation Committee believes the CEO's compensation is consistent
with the overall compensation strategy of SIS and serves to focus attention on
creating shareholder value.
The Compensation Committee is aware that Section 162(m) of the Code
prohibits SIS from deducting compensation in excess of $1,000,000 paid in any
single year to any of the Named Executive Officers, unless the excess
compensation qualifies as "performance based" compensation. The Compensation
Committee believes that the deductibility of compensation paid to the
Company's executives is an important, but not the most important, factor in
setting its executive compensation policy. Therefore, certain awards comprised
in the executive compensation package (such as options under the Management
Stock Option Plan) are designed with the intention of qualifying as
"performance based" compensation which will be deductible by SIS. Where
certain components of the compensation package may not qualify as "performance
based" and thereby may fail to be deductible (such as awards under the
Management Restricted Stock Plan), the Compensation Committee has weighed that
factor along with the effectiveness of the incentives provided by that
component, and has determined that, taken as a whole, that component is an
appropriate and integral part of the executive compensation package.
Respectively submitted,
Thomas O'Brien, Chairman
Sr. Mary Caritas, S.P.
John M. Naughton
12
<PAGE>
COMPARATIVE PERFORMANCE GRAPH:
The Securities and Exchange Commission requires SIS to present a chart
comparing the cumulative total return on the Common Stock with the cumulative
total return of (i) a broad based equity market index, and (ii) a published
industry index or peer group. The following graph shows the changes over the
past two-year period (since the conversion of SIS Bank from a mutual to a
stockholder-owned bank on February 7, 1995) in the value of $100 invested in
(a) SIS's Common Stock; (b) an industry peer group; and (C) the Standard and
Poor's 500 Index.
<TABLE>
<CAPTION>
02/08/95 03/31/95 06/30/95 09/29/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Springfield Inst Savings $100 $114.94 $135.71 $159.74
S&P 500 Index $100 $106.96 $117.17 $126.49
New England Banks $100 $109.17 $128.99 $142.31
</TABLE>
<TABLE>
<CAPTION>
12/29/95 03/29/96 06/28/96 09/30/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Springfield Inst Savings $170.13 $177.92 $188.31 $233.77
S&P 500 Index $134.11 $141.30 $147.65 $152.21
New England Banks $155.08 $161.57 $168.36 $185.09
</TABLE>
<TABLE>
<CAPTION>
12/31/96 03/31/97 06/30/97 09/30/97 12/31/97
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Springfield Inst Savings $237.66 $250.52 $306.70 $366.05 $425.07
S&P 500 Index $164.90 $169.32 $198.88 $213.77 $219.91
New England Banks $216.90 $236.24 $274.37 $315.07 $343.06
</TABLE>
EMPLOYMENT AGREEMENTS
SIS Bank has entered into an amended and restated employment agreement (the
"Employment Agreement") with Mr. F. William Marshall, Jr., President and Chief
Executive Officer of SIS Bank (the "Executive"). SIS Bank has also entered
into employment and severance agreements with the executive vice presidents
and senior vice presidents, and GBT has entered into a similar agreement with
J. Gilbert Soucie, its President & CEO (collectively, these employment and
severance agreements are referred to as the "Agreements"). The Employment
Agreement and the Agreements establish, among other things, the compensation
and/or severance compensation of these individuals and are intended to ensure
that SIS and its subsidiaries will be able to maintain stable and competent
management.
The Employment Agreement provides for a three year term of employment
beginning on June 30, 1997, with an automatic one-year extension at the end of
each year unless prior written notice is provided by SIS Bank to the Executive
or by the Executive to SIS Bank. Under the Employment Agreement, the Executive
receives a base salary of $360,000, which may be increased on an annual basis
at the sole discretion of the Board of Directors of SIS Bank. In addition to
such base salary, the Employment Agreement provides for, among other things,
participation in annual bonus payments, disability pay, and participation in
other welfare and employee benefit plans of SIS Bank.
The Employment Agreement provides for termination by SIS Bank or the
Executive with or without cause at any time. In the event SIS Bank chooses to
terminate the Executive's employment without cause or if the
13
<PAGE>
Executive resigns from SIS Bank as result of a "change of control" of SIS (as
defined below) or "for good reason," (defined to include (i) the failure of
the Board of Directors to appoint or reappoint the officer to his or her
stated offices, (ii) a material change in such officer's functions, duties or
responsibilities causing the officer's position with SIS Bank to become one of
lesser responsibility, importance, or scope, (iii) any reduction in base
salary or a material reduction in other benefits, or (iv) a material breach of
the Employment Agreement by SIS Bank), the Executive will be entitled to a
lump sum severance payment equal to approximately three times for a "change in
control" and two times, for "good reason" respectively, his highest base
salary and bonus payment at any time during the term of employment. SIS Bank
will also be required to continue the Executive's insurance and health
coverage for up to three years, to reimburse the Executive for any proper job-
related expenses incurred by the Executive prior to the date of termination,
and to pay certain other compensation or benefits as may be accrued prior to
the date of termination (such reimbursement of expenses and payment of accrued
compensation and benefits, the "Standard Entitlements"). The Executive is also
entitled to certain indemnification rights upon termination without cause. In
the event of death, disability or retirement, the Executive (or his
beneficiaries) is entitled to receive a specified portion of his base salary
and bonus for limited periods of time, and/or the continuation of welfare
benefits and the Standard Entitlements. In the event of a termination for
cause (as defined in the Employment Agreement), the Executive will only be
entitled to the Standard Entitlements and to certain indemnification rights.
In the event of a voluntary termination (as defined in the Employment
Agreement) by the Executive prior to the end of the employment term, he will
only be entitled to such payments or benefits as he would have received if
terminated for cause by SIS Bank.
As an alternative to the termination and Standard Entitlements arrangements
specified above, in the event that SIS Bank terminates the Executive's
employment by not extending the term of the Employment Agreement in the manner
specified therein, the Executive will be entitled to receive a lump sum
severance payment equal to the greater of the amount to which he would have
been entitled during the balance of his employment under the Employment
Agreement, or his base salary and benefits for a period of six months.
Under the Employment Agreement, SIS Bank has agreed to indemnify the
Executive and hold him harmless, to the fullest extent permitted by law, as a
consequence of his being involved in a legal action by reason of the fact that
he is or was a trustee, Director or officer of SIS Bank. Such indemnification
shall continue after the Executive shall cease to be an officer, trustee or
Director of SIS Bank. The Employment Agreement also provides that, in the
event any payment or benefit received by the Executive in connection with a
change of control would constitute an "excess parachute payment" (as defined
in Section 280G of the Code), SIS Bank shall pay the Executive an additional
sum equal to the Federal excise tax imposed upon the Executive as a result of
such excess parachute payment and the Executive's federal, state and local
income tax and payroll taxes imposed on such additional sum.
The Agreements entered into by SIS Bank with all of its executive vice
presidents and with all of its senior vice presidents provide for a one-year
term with an automatic one year extension unless prior written notice is
provided by SIS Bank to such officer or by such officer to SIS Bank. Under the
Agreements, if, following a "change of control" of SIS, SIS Bank chooses to
terminate the officer's employment other than for cause or if the officer
resigns from SIS Bank for "good reason," the officer will be entitled to a
lump sum severance payment equal to (a) with respect to the senior vice
presidents, such person's then applicable annual salary and (b) with respect
to the executive vice presidents, two times such person's then-applicable
annual salary. In the event of an involuntary termination of the officer other
than for cause prior to the occurrence of a "change of control" of SIS, the
officer will be entitled to a lump sum severance payment equal to, with
respect to both the senior vice presidents and executive vice presidents, one
year's salary at such officer's then-applicable annual salary.
Under the Agreements, SIS Bank has agreed to indemnify each senior or
executive vice president and hold him or her harmless (i) against reasonable
costs, including legal fees, incurred by such officer in connection with such
officer's consultation with legal counsel or arising out of any legal action
in which such officer may be involved as a result of the Agreements and (ii)
for all acts or omissions taken or not taken by such officer in good faith
while performing services for SIS Bank to the same extent as other similarly-
situated officers and Directors of SIS Bank or SIS.
14
<PAGE>
The Agreement between GBT and Mr. Soucie provides for a two-year employment
agreement beginning December 17, 1997. Under the Agreement with Mr. Soucie,
if, following a "change of control" of SIS, GBT chooses to terminate Mr.
Soucie's employment other than for cause or if Mr. Soucie resigns from GBT for
"good reason," he will be entitled to a lump sum severance payment equal to
two times his then-applicable annual salary and benefits.
For purposes of the Employment Agreement and the Agreements, a "change of
control" of SIS would include the occurrence of any of the following events:
(i) an event which would be required to be reported under Item 1 of Form 8-K
with the Securities and Exchange Commission; (ii) certain events which would
constitute a change in control for purposes of certain federal statutes and
regulations; (iii) certain events which would have the effect of replacing a
majority of the members constituting the Board of Directors; (iv) the approval
by SIS's stockholders to become a party to certain mergers, reorganizations or
consolidations; (v) the approval by SIS's stockholders of certain liquidation
or dissolution proceedings or the sale of all or substantially all of the
assets of SIS, or (vi) the solicitation of proxies from SIS's stockholders by
someone other than the current management of SIS and without the approval of
the Board, which person seeks to acquire SIS.
BENEFITS UNDER PLANS
. SIS Bank Pension Plan. SIS Bank provides a retirement plan for all eligible
employees through the Savings Banks Employees Retirement Association
("SBERA"), an unincorporated association of savings banks operating within
Massachusetts and other organizations providing services to or for savings
banks. SBERA's sole purpose is to enable the participating employers to
provide pensions and other benefits for their employees. Each employee
reaching the age of 21 and having completed at least 1,000 hours of service
in a relevant twelve-month computation period becomes a participant in the
retirement plan. Benefits under the retirement plan are 100% vested after
five years of service. SIS Bank's pension plan is subject to the Employee
Retirement Income Security Act of 1974, as amended, and is intended to
constitute a qualified pension plan under the applicable provisions of the
Code, as amended.
The pension plan is a defined benefit plan under which an employee is not
required to make any contributions to become a participant or to earn
benefits under the plan. The benefits provided at age 65 to any participant
will be based on the average of the participant's highest three consecutive
years of cash compensation ("Average Compensation"). Federal law does not
permit defined benefit plans to recognize annual compensation in excess of
$150,000 (subject to cost of living adjustments) for purposes of calculating
such Average Compensation for plan years beginning in 1995 and thereafter.
This maximum annual compensation amount was adjusted to $160,000 for plan
years beginning in 1997 and thereafter. The benefits provided at age 65 will
equal 1.25% of Average Compensation plus 0.6% of Average Compensation in
excess of Social Security covered compensation for each year of service with
SIS Bank up to a maximum of 25 years. Normal retirement age under the plan is
65; a reduced early retirement benefit is payable from age 50 to age 64 under
certain circumstances. At January 1, 1997, the latest date for which
information is available, the present value of accrued benefits was fully
funded by the market values of related available assets.
15
<PAGE>
The following table illustrates annual pension benefits at age 65 for
various levels of Average Compensation and years of service.
ANNUAL PENSION BENEFIT BASED ON YEARS OF SERVICE(1)
<TABLE>
<CAPTION>
AVERAGE 10 15 20 25 YEARS
COMPENSATION YEARS YEARS YEARS AND AFTER(2)
------------ ------ ------ ------ ------------
<S> <C> <C> <C> <C>
$20,000.................................... 2,500 3,750 5,000 6,250
$40,000.................................... 5,642 8,463 11,282 14,104
$60,000.................................... 9,342 14,013 18,684 23,354
$80,000.................................... 13,042 19,563 26,084 32,604
$100,000................................... 16,742 25,113 33,484 42,854
$120,000................................... 20,442 30,663 40,884 51,104
$125,000................................... 21,367 32,050 42,734 53,417
$140,000................................... 24,142 36,213 48,284 60,354
$150,000................................... 25,992 38,988 51,984 64,979
$160,000................................... 27,842 41,763 55,684 69,604
</TABLE>
- --------
(1) The annual pension benefit is computed on the basis of a single life
annuity.
(2) Maximum number of years of service recognized under the retirement plan is
25.
The years of credited service for Mr. Marshall, Mr. Barrett, Mr. Treanor and
Mr. Ehmke are 4.25 years, 3.50 years, 3.0 years, and 2.5 years, respectively.
Mr. Soucie is not a participant in this plan.
. GBT Pension Plan. GBT also provides a retirement plan for all eligible
employees, which is a non-contributory defined benefit pension plan (the
"GBT Plan"). All employees of GBT are eligible to participate, subject to
certain minimum age and length of service requirements. The formula for
determining benefits is a percentage of average pay multiplied by the
number of years of credited service prior to retirement. Average pay is
calculated using a participant's highest average pay for a five consecutive
year period occurring during the participant's last ten years of service
prior to the GBT Plan's normal retirement date. The GBT Plan's normal
retirement date is the later of attaining age 65 or five years of service.
The normal form of retirement income under the GBT Plan is a monthly
benefit (in straight life annuity amounts) payable during the lifetime of
the participant, although a lump sum cash payment may be elected.
Alternative payment options are available that reduce the benefit payable
to the participant but include survivor or beneficiary benefits.
GBT PENSION TABLE
The following table illustrates approximate annual pension benefits payable
at age 65 under the plan for various levels of compensation and years of
service for October 1, 1996--September 30, 1997 Plan Year.
<TABLE>
<CAPTION>
AVERAGE 5 10 15 20 25 28+
COMPENSATION YEARS YEARS YEARS YEARS YEARS YEARS*
------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
$50,000............................... 3,673 7,345 11,018 14,961 18,364 20,567
$75,000............................... 5,923 11,845 17,768 23,691 29,614 33,167
$100,000.............................. 8,173 16,345 24,518 32,691 40,864 45,767
$125,000.............................. 10,423 20,845 31,268 41,691 52,114 58,367
$150,000.............................. 12,673 25,345 38,018 50,691 63,364 70,967
</TABLE>
* After an employee reaches 28 years of service while a GBT Plan participant,
no additional years are used in determining pension benefits. As of
September 30, 1997, the estimated credited years of service at retirement
for Mr. Soucie was 3 years. No other Named Executive Officers participates
in the GBT Pension Plan.
16
<PAGE>
. Supplemental Executive Retirement Plan. The Supplemental Executive
Retirement Plan of SIS Bank (the "SERP") provides a select group of
executive officers with a level of retirement benefit generally
commensurate with that received by executives of similar banking
organizations with similar responsibilities, under circumstances where such
executive officer's qualified pension benefit is restricted by limitations
imposed under the Code, by virtue of such executive officer's transfer to
employment with SIS Bank in mid-career or otherwise. The eligible executive
officers under the SERP are the Chief Executive Officer of SIS Bank, and
such other executive officers as the Compensation Committee of the Board of
Directors, upon the recommendation of the Chief Executive Officer, may
select from time to time.
The SERP provides an annual benefit at age 65 equal to 2.5% of the
participant's final average earnings (averaged over the five years preceding
his or her termination) multiplied by his or her years of service credited
under the SERP, reduced by his or her Social Security benefit, his or her
benefit under SIS Bank's qualified pension plan, and by benefits under any
other plan or arrangement specified by the Compensation Committee (the
"Offsetting Benefits"); however, when combined with the Offsetting Benefits
and any other benefits specified by the Compensation Committee (such as
benefits under a former employer's plans), the maximum benefit under the SERP
cannot exceed 60% of the participant's final average earnings. Service is
generally credited under the SERP for each year the participant is employed
by SIS or its subsidiaries, but the Compensation Committee may credit a
participant with additional service (which may be conditional on the
occurrence of certain events, such as a change in control), or may limit
credit for years of service with SIS Bank prior to participation in the SERP.
Messrs. Marshall and Barrett have been credited with five years of additional
service under the SERP, at the time the SERP was adopted, to compensate them
for the negative impact of a mid-career transfer to employment with SIS on
their qualified benefit entitlements. In each case, their SERP benefit is
subject to Offsetting Benefits from former employer's plans. Each member of
the initial group of SERP participants will be credited with five years of
additional service in the event of a change in control. In addition, the SERP
provides for the funding of all benefits accrued for each participant through
grantor trusts upon a change in control of SIS.
ANNUAL BENEFIT PROVIDED BY SERP
(LIMITED TO 60% OF AVERAGE COMPENSATION)
<TABLE>
<CAPTION>
AVERAGE 10 15 20 25 30 35
COMPENSATION YEARS YEARS YEARS YEARS YEARS YEARS
------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$125,000........................ 31,250 46,875 62,500 75,000 75,000 75,000
$150,000........................ 37,500 56,250 75,000 90,000 90,000 90,000
$175,000........................ 43,750 65,625 87,500 105,000 105,000 105,000
$200,000........................ 50,000 75,000 100,000 120,000 120,000 120,000
$250,000........................ 62,500 93,750 125,000 150,000 150,000 150,000
$300,000........................ 75,000 112,500 150,000 180,000 180,000 180,000
$400,000........................ 100,000 150,000 200,000 240,000 240,000 240,000
$450,000........................ 112,500 168,750 225,000 270,000 270,000 270,000
$500,000........................ 125,000 187,500 250,000 300,000 300,000 300,000
</TABLE>
The average compensation for purposes of this table is based on the highest
average of the five consecutive years of service preceding retirement. The
estimated credited years of service at retirement for each of the Named
Executive Officers are as follows: Mr. Marshall--20 years; Mr. Barrett--16
years, and Mr. Treanor--19 years. Mr. Soucie and Mr. Ehmke are not
participants in this SERP.
. GBT Supplemental Executive Retirement Plan. The GBT SERP provides Mr.
Soucie with a level of retirement benefits he would not be able to attain
under GBT's qualified retirement plan due to his age and relatively recent
arrival at GBT. The plan provides for a level of annual retirement benefit
based on the age at which he actually retires or otherwise terminates his
employment with GBT; provided that, in the event of a change of control of
SIS, full benefits will be payable as if he had actually retired at the
normal retirement age. Full annual retirement benefits are $60,000 and the
amount of pre-retirement death benefits payable to his beneficiary is
$1,500,000. No other named Executive Officer participates in the GBT SERP.
17
<PAGE>
TRANSACTIONS WITH CERTAIN RELATED PERSONS
SIS's policies do not prohibit loans to executive officers or Directors of
SIS or its subsidiaries. Loans by SIS Bank and GBT are made in the ordinary
course of business on substantially the same terms, including interest rates
and collateral, as to those prevailing at the time for comparable transactions
to other persons. All loans to executive officers and Directors of SIS or its
subsidiaries must be approved by a majority of the whole Board of Directors of
SIS Bank (for loans by SIS Bank) or the Board of Directors of GBT (for loans
made by GBT).
CERTAIN BUSINESS RELATIONSHIPS:
SIS and its subsidiaries have from time to time entered into transactions
with businesses and other organizations which are affiliated with SIS's
Directors. The terms and rates for all such transactions have been negotiated
on an arms-length basis and are no less favorable than comparable transactions
with other businesses or other organizations.
During fiscal year 1997, SIS and its subsidiaries retained the law firm of
Shatz, Schwartz & Fentin P.C. in which Mr. Shatz is a partner, to perform
certain legal work for SIS and its subsidiaries. Fees and expenses paid
directly by SIS or its subsidiaries to Shatz, Schwartz & Fentin P.C. during
this period totaled approximately $59,902.18. SIS intends to continue to
retain Shatz, Schwartz & Fentin P.C. for future legal work. SIS Bank has also
engaged in transactions in which the fees and costs were paid by the borrowers
of SIS Bank.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of March 2, 1998,
with respect to the beneficial ownership of the Common Stock by each person or
group of persons, as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, known to SIS to be the beneficial owner of more than
5% of the outstanding shares of the Common Stock. The only SIS voting stock
outstanding is the Common Stock. The Articles of Organization of SIS
prohibited the ownership of more than 4.9% of the outstanding shares of any
class of equity securities of SIS for a three-year period following the
conversion of SIS Bank from mutual to stock form, which period ended February
7, 1998. Following the expiration of this period, the Articles of Organization
of SIS continue to prohibit the ownership of more than 10.0% of the
outstanding shares of any class of SIS equity securities.
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE OF
CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------- ------------------------ ------------------------ -----
<S> <C> <C> <C>
Common Stock State Street Bank & 441,073 held as Trustee 6.5%
Trust Company, Trustee of the SIS Bank ESOP
for the SIS Bank 6,504 held as trustee of
Employee Stock other benefit plans for
Ownership other institutions
Total: 447,577 shares
</TABLE>
PROPOSAL TWO--TO APPROVE AND ADOPT THE AMENDED AND RESTATED SIS STOCK OPTION
PLAN
. Current Director and Management Stock Option Plans: The current Director
and Management Stock Option Plans of SIS (together, the "Current Plans")
were adopted in 1995 in connection with the conversion of SIS Bank from
mutual to stock form. The Management Stock Option Plan was subsequently
amended in 1996 to increase the number of shares of Common Stock reserved
for issuance thereunder from 445,000 to 695,000. The Current Plans were
further amended in 1996 to reflect their having been assumed by SIS in
connection with the reorganization of SIS Bank into a holding company
structure. The purpose of the Current Plans is to encourage directors,
officers and other key employees of SIS and its subsidiaries to continue
their association with SIS and its subsidiaries by providing opportunities
for them to participate in the ownership of SIS and in its future growth
through the granting of options to acquire shares of the
18
<PAGE>
Common Stock (the "Options"). In accordance with the terms of the Current
Plans, the Options that may be granted to eligible persons (as further
described below) shall be either Options that are intended by their terms
and conditions to qualify as incentive stock options ("ISOs") within the
meaning of Section 422 of the Code or Options that are not intended to
qualify as ISOs (such nonqualified stock options being referred to herein
as "NSOs").
. Amended and Restated Stock Option Plan:
Changes to Current Plans. On February 18, 1998, the Board of Directors
approved, subject to stockholder approval, the Amended and Restated Plan
for the principal purposes of increasing the number of shares that may be
issued pursuant to Options, clarifying that non-employee directors of
subsidiaries may be granted Options, incorporating changes to the
requirements of Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which applies to stock option plans of
companies, such as SIS, which have a class of securities registered under
the Exchange Act, and otherwise improving plan administration by
consolidating the Current Plans into a single plan. Among other changes to
the terms of the Current Plans, the Amended and Restated Plan would amend
the collective terms of the Current Plans in the material ways summarized
below. First, the total number of shares of Common Stock that may be issued
by SIS from time to time pursuant to Options granted under the Amended and
Restated Plan is increased by 340,000 shares as compared to the total
number of shares reserved for issuance under the Current Plans. Under the
Current Plan, of the 806,250 shares reserved for issuance pursuant to
Options granted thereunder, a maximum of 111,250 shares could be issued
pursuant to Options granted to non-employee directors under the Director
Stock Option Plan and a maximum of 695,000 could be issued pursuant to
Options granted to officers and other key employees under the Management
Stock Option Plan. Under the Amended and Restated plan, there would simply
be an overall limit of 1,146,250 shares reserved for issuance pursuant to
Options granted thereunder. Second, unlike the Current Plans, the Amended
and Restated Plan would permit option grants to directors of subsidiaries
of SIS who are not otherwise employees of SIS or any subsidiary. The
Current Plans provide that Options may be granted to directors of SIS who
are not officers or full-time employees of SIS or any subsidiary and to key
employees of SIS and its subsidiaries. Third, the provisions relating to
the administration of the Amended and Restated Plan incorporate changes
reflecting changes to the requirements of Rule 16b-3 of the Exchange Act,
which were previously applicable to the administration of the Current
Plans. Fourth, whereas the Director Stock Option Plan specifies the terms
and conditions that must apply to all Options granted to non-employee
directors, including immediate acceleration of vesting for all such Options
that may be outstanding on the date of a Change of Control (as such term is
defined therein) affecting SIS, the Amended and Restated Plan provides that
all Options granted thereunder, including Options granted to non-employee
directors, shall be on terms and conditions determined by the Compensation
Committee with respect to each such Option (subject to the general
requirement that ISOs may be granted only to persons who are employees of
SIS or a subsidiary). Fifth, whereas the Current Plans prohibit the
assignment or transfer of any Options granted thereunder, except by will or
by the laws of descent and distribution, the Amended and Restated Plan
authorizes the Compensation Committee to provide in option agreements
pertaining to NSOs that the NSOs may be transferred to members of the
option holder's immediate family, a trust or trusts for the exclusive
benefit of such immediate family members or a partnership in which such
immediate family members are the only partners. Sixth, the expiration date
of the Amended and Restated Plan is February 29, 2008 as compared to an
expiration date of May 31, 2005 for the Current Plans. A copy of the
Amended and Restated Plan is included as Exhibit A to this Proxy Statement.
The following summary of the material features of the Amended and Restated
Plan is qualified in its entirety by reference to the copy thereof included as
Exhibit A to this Proxy Statement.
Shares Reserved for the Amended and Restated Plan. The total number of
shares of Common Stock which may be issued by SIS pursuant to Options granted
under the Amended and Restated Plan shall be increased by 340,000 shares, to
raise the overall total to not exceed 1,146,250, subject to adjustments for
subdivisions, stock splits, dividends, combinations of shares,
recapitalizations, or other changes in the outstanding shares of
19
<PAGE>
Common Stock. Any such adjustment will be made by the Board of Directors. No
eligible participant under the Amended and Restated Plan may be granted
Options thereunder with respect to more than 600,000 shares of Common Stock.
As of December 31, 1997, Options to acquire 701,900 shares of Common Stock had
been granted under the Current Plans (representing Options to acquire 95,800
shares granted under the Director Stock Option Plan and Options to acquire
606,100 shares granted under the Management Stock Option Plan). Taking into
account such previously granted and currently outstanding Options, Options to
acquire up to 444,350 additional shares of Common Stock could be granted under
the Amended and Restated Plan.
Persons Eligible To Receive Options. Directors of SIS and its subsidiaries
and key employees of SIS and its subsidiaries are eligible to receive Options
under the Amended and Restated Plan. ISOs may be granted only to those
eligible persons who are employees of SIS or a subsidiary. As of January 1,
1998, approximately 400 individuals, including 11 executive officers and 21
non-employee directors, would be eligible to receive Options under the Amended
and Restated Plan.
Material Features of the Amended and Restated Plan. Until the Amended and
Restated Plan is terminated or the number of shares reserved for Options is
exhausted, the Compensation Committee may grant all such Options to those
eligible persons ("Optionees") as the Compensation Committee determines
appropriate. All Optionees are required to execute an option agreement within
ten days of the date on which an Option is granted. The Compensation Committee
determines the duration of any Option, subject to certain limitations.
Optionees cannot transfer their Options (except by will or under the laws of
descent or distribution); provided, however, that the Compensation Committee
may, in its discretion, authorize NSOs granted to an Optionee to be on terms
which permit transfer by such Optionee to (i) the spouse, children,
stepchildren, grandchildren, parents, stepparents, grandparents, siblings, and
all in-laws of the Optionee ("Immediate Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members, or (iii) a
partnership in which such Immediate Family Members are the only partners. Any
such transfer would be intended for estate planning purposes only and it is
expected that the applicable option agreement would require that there may be
no consideration for any such transfer and that any such transferred NSOs
shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, including the termination provisions
thereof, as if the Optionee had continued to be the holder thereof.
The price at which the shares of Common Stock subject to an Option may be
purchased shall be determined by the Compensation Committee, but this price
with respect to an ISO can never be less than 100% (or 110% if the Optionee
owns (or is considered under Section 424(d) of the Code as owning) stock
possessing more than 10% of the total combined voting power of all classes of
stock of SIS or any subsidiary (a "10% Owner")) of the fair market value of
the Common Stock on the date of grant. Under the Amended and Restated Plan,
unless otherwise explicitly provided in an individual option agreement the
"fair market value" of the Common Stock as of a specified date, assuming that
the Common Stock continues to be traded on the Nasdaq Stock Market or any
stock exchange, is defined as the reported closing price on such day on the
Nasdaq Stock Market or such principal exchange as the case may be. The
reported closing price of a share of the Common Stock on the Nasdaq National
Market on March 5, 1998 was $37.50.
The duration of any Option shall be specified by the Compensation Committee
in the option agreement, but no ISO may be exercisable after the expiration of
ten (10) years. In the case of any employee who is a 10% Owner, no ISO may be
exercisable after the expiration of five (5) years from the date such Option
is granted. The aggregate fair market value (determined as of the date on
which the Option is granted) of the Common Stock with respect to which ISOs
may be exercisable for the first time by an Optionee during any calendar year
(whether granted under the Amended and Restated Plan or any other incentive
stock option plan(s) of SIS or any subsidiary) may not exceed $100,000.
Options shall be exercised by notifying SIS of the number of shares of
Common Stock under the Option to be exercised, together with the payment of
the purchase price thereof. Payment may be made in cash, cash equivalents, or,
in certain circumstances, through a "cashless exercise" procedure through
which a broker retained by the Optionee transmits the entire purchase price to
SIS, and such broker retains that number of shares
20
<PAGE>
of Common Stock which would have been issued to the Optionee with a fair
market value equal to the purchase price. The broker then shall deliver the
remainder of the shares to the Optionee.
The Compensation Committee may determine in its discretion and specify in
each individual option agreement the effect, if any, of the termination of the
Optionee's employment by or involvement with SIS upon the exercisability of
the Option.
Administration. The Compensation Committee has full power to administer the
Amended and Restated Plan. The Compensation Committee's interpretation and
construction of the Amended and Restated Plan is final and conclusive. For so
long as Section 16 of the Exchange Act is applicable to SIS, each member of
the Compensation Committee shall be a "non-employee director" or the
equivalent within the meaning of Rule 16b-3 under the Exchange Act, and, for
so long as Section 162(m) of the Code is applicable to SIS, each member of the
Compensation Committee also shall be an "outside director" within the meaning
of Section 162 of the Code and the regulations thereunder. The Amended and
Restated Plan shall be administered in such a manner as to permit those
Options granted thereunder and specifically designated as such to qualify as
"incentive stock options" as described in Section 422 of the Code.
The Board of Directors may at any time and from time to time modify, revise
or terminate the Amended and Restated Plan, except that, without the further
approval of the shareholders of SIS, no modification or revision may (a)
materially increase the benefits granted to the Optionees or make any
"modifications" as that term is defined under Section 424(b)(3) of the Code if
such increase in benefits or modification would adversely affect (i) the
availability to the Amended and Restated Plan of the protections of Section
16(b) of the Exchange Act, if applicable to SIS, or (ii) the qualification of
the Amended and Restated Plan or any Options granted thereunder for "incentive
stock option" treatment under Section 422 of the Code, (b) change the
aggregate number of shares reserved for issuance under Options granted under
the Amended and Restated Plan either to any one employee or in the aggregate,
(c) change the class of persons eligible to receive ISOs, or (d) effect any
other change that requires stockholder approval under applicable law. The
Board of Directors shall have the right to terminate the Amended and Restated
Plan at any time. Unless terminated earlier, and subject to stockholder
approval of this proposal, the Amended and Restated Plan shall continue in
effect through February 29, 2008.
Effect of Certain Corporate Transactions. If while unexercised Options
remain outstanding under the Amended and Restated Plan, SIS merges or
consolidates with one or more corporations (whether or not SIS is the
surviving corporation), or 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 option agreement, the
Compensation Committee, in its discretion, shall amend the terms of all
outstanding Options so that:(i) after the effective date of such merger,
consolidation or sale, as the case may be (each such event, a "Reorganization
Transaction"), 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 Reorganization Transaction if he or she 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 liquidation or
Reorganization Transaction 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 liquidation
or Reorganization Transaction, and in addition to the foregoing, the
Compensation 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 such provision to a greater extent than that permitted on
its existing terms; or (iii) all outstanding Options shall be canceled as of
the effective date of any such liquidation or Reorganization Transaction in
exchange for consideration in cash or in kind, which consideration in both
cases shall be equal in value to the value of those shares of Common Stock or
other securities the Optionee would have received had the Option been
exercised (to the extent then exercisable) and no disposition of the shares
acquired upon such exercise had been made prior to such liquidation or
Reorganization Transaction, less the option price therefor, and upon receipt
of such consideration by the Optionee, his or her Option shall immediately
terminate and be of no further force or effect. Under the
21
<PAGE>
circumstances described in the preceding clause (iii), the value of the stock
or other securities the Optionee would have received if the Option had been
exercised shall be determined in good faith by the Compensation Committee, and
in the case of shares of the Common Stock of SIS, in accordance with the
applicable provisions of the Amended and Restated Plan.
The following description of the federal income tax consequences of Options
is general and does not purport to be complete.
. Tax Treatment of Options:
Treatment of NSOs. An Optionee realizes no taxable income when an NSO is
granted. Instead, the difference between the fair market value of the Common
Stock subject to the NSO and the exercise price paid is taxed as ordinary
compensation income when the NSO is exercised. The difference is measured and
taxed as of the date of exercise, if the stock is not subject to a
"substantial risk of forfeiture," or as of the date or dates on which the risk
terminates in other cases. Gain on the subsequent sale of the Common Stock is
taxed as capital gain. SIS receives no tax deduction on the grant of a NSO,
but is entitled to a tax deduction when the Optionee recognizes taxable income
on or after exercise of the NSO, in the same amount as the income recognized
by the Optionee.
Treatment of ISOs. Generally, an Optionee incurs no federal income tax
liability on either the grant or the exercise of an ISO, although an Optionee
will generally have income for alternative minimum tax purposes at the time of
exercise equal to the excess of the fair market value of the stock subject to
an ISO over the exercise price. Provided that the shares of Common Stock are
held for at least one year after the date of exercise of the related ISO and
at least two years after its date of grant, any gain realized on subsequent
sale of the stock will be taxed as either mid-term or long-term capital gain.
If the stock is disposed of within a shorter period of time, the Optionee will
be taxed as if the Optionee had then received ordinary compensation income in
an amount equal to the difference between the fair market value of the stock
on the date of exercise of the ISO and its fair market value on its date of
grant, unless the amount realized is less than the fair market value on the
date of exercise. SIS receives no tax deduction on the grant or exercise of an
ISO, but is entitled to a tax deduction if the Optionee recognizes taxable
income on account of a premature disposition of ISO stock, in the same amount
and at the same time as the Optionee's recognition of income.
Parachute Payments. Under certain circumstances, an accelerated vesting or
granting of Options in connection with a Reorganization Transaction (as
defined above) affecting SIS may give rise to an "excess parachute payment"
for purposes of the golden parachute tax provisions of Section 280G of the
Code. Under such circumstances, an Optionee may be subject to a 20%
nondeductible federal excise tax and SIS may be denied an income tax
deduction.
. Required Vote: The affirmative vote of the holders of a majority of the
shares of the Common Stock voted at the Annual Meeting is required to
approve and adopt the Amended and Restated Plan. If this proposal is not
approved at the Annual Meeting, the Current Plans as previously adopted by
the Board of Directors and approved by stockholders will continue to remain
in full force and effect, including having an expiration date of May 31,
2005.
. OUR RECOMMENDATIONS TO SHAREHOLDERS: THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR PROPOSAL TWO TO APPROVE AND ADOPT THE AMENDED
AND RESTATED PLAN.
22
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders of SIS intended to be presented at the 1999 annual
meeting of SIS stockholders must be received by SIS no later than November 19,
1998 to be included in SIS's proxy statement and form of proxy relating to
that meeting. In addition, SIS's By-Laws provide that any stockholder wishing
to have any director nominations or a stockholder proposal considered at an
annual meeting must provide written notice of said nomination or stockholder
proposal to the Clerk of SIS as set forth in the By-Laws of SIS at its
principal executive offices not less than 60 days nor more than 50 days prior
to the date of the scheduled annual meeting; provided, however, that in the
event that less than 70 days notice or prior public disclosure of the
scheduled date of the meeting is given or made to stockholders, notice by the
stockholder must be received not later than the close of business on the 10th
day following the day on which such notice of the scheduled date of the
meeting was mailed or such disclosure was made, whichever first occurs. Any
stockholder desiring to submit a nomination or proposal must comply with the
By-Laws of SIS.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Price-Waterhouse LLP, SIS's independent Certified Public
Accountants, are expected to be present at the Annual Meeting. They will be
accorded the opportunity to make a statement if they desire to do so and will
be available to respond to appropriate questions.
STOCKHOLDERS' ANNUAL REPORT; FORM 10-K
SIS's Annual Report to shareholders, together with its annual report on Form
10-K as filed with the SEC (without exhibits), for the year ended December 31,
1997 accompanies this Proxy Statement.
OTHER MATTERS
Shares represented by proxies in the enclosed form will be voted as
stockholders direct. Properly executed proxies that contain no directions to
the contrary will be voted in favor of (i) the election of the two nominees to
serve as Directors of SIS and (ii) the approval and adoption of the Amended
and Restated Plan. At the time of preparation of this Proxy Statement, the
Board of Directors of SIS knows of no other matters to be presented for action
at the Annual Meeting. As stated in the accompanying proxy card, if any other
business should properly come before the Annual Meeting, the proxies named
therein have discretionary authority to vote the shares subject to such
proxies according to their best judgment.
SECTION 16(A) COMPLIANCE
Section 16(a) of the Exchange Act requires SIS's executive officers and
directors, and persons who own more than ten percent of a registered class of
SIS's equity securities, to file reports of ownership and changes in ownership
with the SEC. Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish SIS with copies of all Section 16(a)
forms they file. Based solely upon written representations of its directors
and executive officers and copies of the reports that they have been required
to file with the SEC, SIS believes that during the year ended December 31,
1997, all filing requirements applicable to its executive officers, directors
and greater than ten percent owners were complied with.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW ANY PROXY GIVEN
BY YOU AND VOTE YOUR SHARES IN PERSON.
23
<PAGE>
EXHIBIT A TO
PROXY STATEMENT
SIS BANCORP, INC.
STOCK OPTION PLAN
(Amended and restated as of March 1, 1998)
1. PURPOSE
The purpose of the SIS Bancorp, Inc. Stock Option Plan (the "Plan") 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 Plan 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 Plan, refers to any individual to whom an
Option has been granted.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Committee (the "Committee") composed of
two or more 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. For so long as Section 16 of the
Securities Exchange Act of 1934, as amended from time to time (the "Exchange
Act"), is applicable to the Company, each member of the Committee shall be a
"non-employee director" or the equivalent within the meaning of Rule 16b-3
under the Exchange Act, and, for so long as Section 162(m) of the Code is
applicable to the Company, an "outside director" within the meaning of Section
162 of the Code and the regulations thereunder. With respect to persons
subject to Section 16 of the Exchange Act ("Insiders"), transactions under the
Plan are intended to comply with all applicable conditions of Rule 16b-3 or
its successor under the Exchange Act. 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 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 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
Plan. All questions of interpretation and application of such rules and
regulations, of the Plan and of options granted thereunder (the "Options"),
shall be subject to the determination of the Committee, which shall be final
and binding.
The 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 PLAN
The total number of shares of stock which may be subject to Options under
the Plan shall be 1,146,250 shares of the Company's Common Stock, provided
that the number of shares stated in this sentence shall be
A-1
<PAGE>
subject to adjustment in accordance with the provisions of Section 9. Shares
of Common Stock subject to an Option under the Plan that is not fully
exercised shall again become available for grant under the terms of the Plan.
The shares of Common Stock which may be subject to Options granted under the
Plan may be authorized but unissued shares or treasury shares. The maximum
number of shares of Stock subject to Options that may be granted to any
Optionee in the aggregate in any calendar year shall not exceed 600,000
shares.
4. ELIGIBILITY FOR AWARDS; TERMS AND CONDITIONS OF OPTIONS
The individuals who shall be eligible for discretionary grants of Options
under the Plan shall be key employees of the Company or a Subsidiary and
members of the Board of Directors 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 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.
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. Except as may be otherwise
explicitly provided in the 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.
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d) Effect of Cessation of Employment. Subject to the provisions of
Section 9(d) hereof, 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 or 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.
5. 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.
6. 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 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
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delivery thereof, his or her right to exercise the Option with respect to
those shares shall be terminated, unless the Company otherwise agrees.
7. 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 Plan shall be governed by Massachusetts law, except to the extent
that such law is preempted by federal law.
8. 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 Plan. 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 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 Plan 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, or
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(iii) all outstanding Options shall be cancelled as of the effective date
of any such merger, consolidation liquidation or sale, in exchange for
consideration in cash or in kind, which consideration in both cases shall
be equal in value to the value of those shares of stock or other securities
the Optionee would have received had the Option been exercised (to the
extent then exercisable) and no disposition of the shares acquired upon
such exercise had been made prior to such merger, consolidation liquidation
or sale, less the option price therefor. Upon receipt of such consideration
by the Optionee, his or her Option shall immediately terminate and be of no
further force and effect. The value of the stock or other securities the
Optionee would have received if the Option had been exercised shall be
determined in good faith by the Committee.
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 8, 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.
9. MISCELLANEOUS
a). Transferability of Options. Options shall not be transferable by the
Optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable during his or her lifetime only by the Optionee,
except that the Committee may specify in an Option Agreement that pertains to
an NSO that the Optionee may transfer such NSO to a member of the Immediate
Family of the Optionee, to a trust solely for the benefit of the Optionee and
the Optionee's Immediate Family, or to a partnership or limited liability
company whose only partners or members are the Optionee and members of the
Optionee's Immediate Family. "Immediate Family" shall mean, with respect to
any Optionee, such Optionee's child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-
in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
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. This Plan shall
not give any 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 or a
Subsidiary the right to require any Director to continue in office. Neither
the 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
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(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 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.
10. DURATION, AMENDMENT AND TERMINATION OF THE PLAN
The Committee may grant Options under the Plan from time to time until the
close of business on the day prior to March 1, 2008. Unless earlier terminated
by action of the Board of Directors, the Plan shall expire on the day prior to
March 1, 2008.
The Board may, in its sole and absolute discretion, modify, revise or
terminate the Plan at any time and from time to time; provided, however, that
without the further approval of the holders of at least a majority of the
outstanding shares of Common Stock, the Board may not (a) materially increase
the benefits accruing to Optionees under the Plan or make any "modifications"
as that term is defined under Section 424(h)(3) (or its successor) of the Code
if such increase in benefits or modifications would adversely affect (i) the
availability to the Plan of the protections of Section 16(b) of the Exchange
Act, if applicable to the Company, or (ii) the qualification of the Plan or
any Options for "incentive stock option" treatment under Section 422 of the
Code; (b) change the aggregate number of shares of Common Stock which may be
issued under Options pursuant to the provisions of the Plan either to any one
employee or in the aggregate; (c) change the class of persons eligible to
receive ISOs; or (d) change the Plan in any other respect that may require the
approval of the Company's shareholders under applicable law. Notwithstanding
the preceding sentence, the Board shall in all events have the power and
authority to make such changes in the Plan and in the regulations and
administrative provisions hereunder or in any outstanding Option as, in the
opinion of counsel for the Company, may be necessary or appropriate from time
to time to enable any Option granted pursuant to the Plan to qualify as an
incentive stock option or such other stock option as may be defined under the
Code, as amended from time to time, so as to receive preferential federal
income tax treatment.
Except as provided in Section 9 hereof, rights and obligations under any
Option granted before any amendment of the Plan (including this March 1, 1998
restatement and amendment) shall not be adversely affected by such amendment,
except with the consent of the Optionee.
The Plan 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.
11. EFFECTIVE DATE OF THE PLAN; STOCKHOLDER APPROVAL
The Plan, formerly known as the SIS Bancorp, Inc. Director Stock Option Plan
and Management Stock Option Plan, became effective on June 1, 1995 and was
approved by the Bank's stockholders on May 31, 1995. The Plan was 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. This amendment and restatement of the Plan is effective as of March
1, 1998, subject to the approval of the Company's shareholders. No option may
be granted under the Plan on or after March 1, 2008.
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