<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [x]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BayBanks, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(l)(ii), 14a-6(i)(1), 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
BAYBANKS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of Stockholders of
BayBanks, Inc. will be held at the offices of BayBank Systems, Inc., One BayBank
Technology Place, Waltham, Massachusetts, on Thursday, April 27, 1995, at 10:00
A.M.
1. To elect four directors to hold office for a term of three years and
until their respective successors are chosen and qualified.
2. To transact such other businesss as may be in furtherance of or
incidental to the foregoing.
The business referred to above may be transacted at said meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on February 28,
1995, as the record date for determination of stockholders entitled to notice of
and to vote at said meeting or any adjournement therof.
You are requested to sign the enclosed proxy and mail it to us promptly in
the enclosed self-addressed envelope, whether or not you plan to attend the
meeting in person. The giving of such proxy will not affect your right to vote
in person if you attend the meeting in person.
ILENE BEAL, Secretary and Clerk
Dated: March 20, 1995
<PAGE>
BAYBANKS, INC.
175 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
1995 ANNUAL MEETING
PROXY STATEMENT
DATED MARCH 20, 1995
This proxy statement is furnished to the stockholders of BayBanks, Inc. (the
"Corporation") in connection with the solicitation of proxies to be used in
voting at the Annual Meeting of Stockholders to be held April 27, 1995. The
enclosed proxy is solicited by the Board of Directors of the Corporation.
The principal business expected to be transacted at the meeting will be the
election of four directors. This matter is more fully described below.
A person giving the enclosed proxy has the power to revoke it at any time
before it is exercised.
The Corporation will bear the cost of the solicitation of proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of stock. In addition to the use of
the mails, proxies may be solicited by officers and employees of the Corporation
by personal interview, by telephone, or by telegraph, the cost of which will be
nominal. The Corporation has retained Georgeson & Company, Inc. to assist in the
solicitation of proxies for an estimated fee of $7,000, plus certain expenses.
VOTING SECURITIES AND VOTES REQUIRED
Only holders of Common Stock of record at the close of business on February
28, 1995, will be entitled to vote at the meeting. As of that time, 19,002,445
shares of Common Stock were outstanding, each of which is entitled to one vote.
A majority in interest of the Corporation's Common Stock outstanding and
entitled to vote represented at a meeting in person or by proxy constitutes a
quorum for the transaction of business. The affirmative vote of a majority of
any quorum is sufficient to elect the nominees for director and to transact any
other business at the meeting. In calculating the votes cast, broker non-votes
would be treated as withholding authority to vote for the nominees for election
as directors. (A "broker non-vote" occurs when a registered broker holding a
customer's shares in the name of the broker has not received voting instructions
on a matter from the customer and is barred by stock exchange rules from
exercising discretionary authority to vote on the matter, which the broker
indicates on the proxy.)
BOARD OF DIRECTORS
At the meeting, four directors are to be elected to serve for the ensuing
three years and until their respective successors are chosen and qualified.
Unless the enclosed proxy withholds authority to vote for one or more of the
nominees or indicates a broker non-vote, the shares represented by such proxy
will be voted for the election as directors of the nominees indicated in this
proxy statement. If any nominee becomes unavailable for any reason (which event
is not anticipated), the shares represented by the enclosed proxy may be voted
for such other person as may be determined by the holders of such proxy.
The following table contains certain information as to the nominees for
election to the office of director of the Corporation and each other person
whose term of office as a director will continue after the meeting, and includes
the number of shares of Common Stock of the Corporation beneficially owned,
directly or indirectly, by each of such persons as of February 16, 1995. The
nominees for election to the office of director at the meeting are Messrs.
Crozier, Gable, MacNeil, and Strehle and are indicated by an asterisk in the
table that follows.
<TABLE>
<CAPTION>
SHARES OF
FIRST COMMON
PRINCIPAL OCCUPATION BECAME PRESENT STOCK
AND OTHER DIRECTORSHIPS DIRECTOR OF TERM BENEFICIALLY
NAME HELD IN PUBLIC CORPORATIONS AGE CORPORATION EXPIRES OWNED<F2>
- ------------------------------- ------------------------------------------------- --- ----------- ------- ------------
<S> <C> <C> <C> <C> <C>
John A. Cervieri Jr. <F3> Chairman and President, Property Capital 64 1980 1996 4,683
Associates, Inc. -- Real estate investment and
consulting firm; Managing Trustee,
Property Capital Trust, and Chairman of the Board
and Chief Executive Officer, Americana Hotels and
Realty Corporation
William M. Crozier, Jr.<F3><F1> Chairman of the Board and President of 62 1974 1995 119,849
the Corporation
Robert L. Gable<F1> Chairman, President, and Chief Executive Officer, 64 1994 1995 461
Unitrode Corporation -- Manufacturer of electronic
components and subsystems
Samuel J. Gerson Chairman of the Board and Chief Executive Officer, 53 1990 1997 2,102
Filene's Basement, Inc. --Retailer
Donald L. Isaacs Vice Chairman of the Board of the Corporation 47 1992 1996 41,531
Norman E. MacNeil<F1> Chairman of the Board, Ark-Les Corporation -- 68 1971 1995 6,163
Manufacturer of switches and electrical components
Arlene A. McNamee Executive Director, Catholic Social Services, 48 1990 1996 2,621
Diocese of Fall River -- Social services agency
Thomas R. Piper <F3> Senior Associate Dean and Industrial Bank of Japan 57 1979 1997 6,133
Professor of Business Administration, Harvard
University Graduate School of Business
Administration-- Educational institution
Richard F. Pollard Vice Chairman of the Board of the Corporation 62 1983 1997 64,156
Glenn P. Strehle <F3><F1> Vice President for Finance and Treasurer, 58 1979 1995 4,083
Massachusetts Institute of Technology --
Educational institution; Director, SofTech, Inc.,
and Trustee, Property Capital Trust
Joseph H. Torras President and Chairman of the Board, Preco 70 1990 1997 52,002
Corporation -- Manufacturer of pulp , paper, and
specialty products
Directors and Executive 431,940
Officers as a Group (2.3%)
<FN>
<F1>Nominee for election as director.
<F2>Does not include a total of 27,946 shares of the Corporation's Common Stock
that are held by members of the immediate families of two directors and two
officers, who disclaim beneficial ownership of such shares. Includes the
following shares subject to options exercisable as of February 16, 1995, or
within 60 days thereafter: Mr. Crozier 67,332, Mr. Isaacs 8,889, Mr. Pollard
18,000, and all executive officers and directors as a group 138,553; as well
as the following shares of Restricted Stock as to which the holders have
voting power but will not have investment power until the restrictions
lapse: Mr. Crozier 2,000, Mr. Isaacs 6,800, Mr. Pollard 800, and all
executive officers and directors as a group 33,760. The group total also
includes 40,454 shares beneficially owned by Michael W. Vasily, Executive
Vice President, of which 18,333 shares are subject to options exercisable as
of February 16, 1995, or within 60 days thereafter, and 5,300 shares are
Restricted Stock. It also includes 9,203 shares beneficially owned by John
J. Arena, former Vice Chairman of the Corporation, as of December 31, 1994,
the date of his resignation, and 155 shares allocated to Mr. Arena under the
Corporation's Employee Stock Ownership Plan as of January 31, 1995. None of
the persons listed beneficially owns more than 1% of the outstanding Common
Stock.
<F3> Member of the Executive Committee.
</TABLE>
The preceding table shows the present principal occupation of the directors
listed, each of whom has had the same principal occupation for the past five
years except for Mr. Gable and Ms. McNamee. Mr. Gable, who currently is Chairman
and President of Unitrode Corporation, was a director and consultant to various
corporations from 1988 to 1990 before joining Unitrode. Further information
regarding his occupation follows in the biography below. Ms. McNamee, who is
Executive Director, Catholic Social Services, Diocese of Fall River, also is
President of Richards and Davis, Inc., a wholesale distributor of lumber, where
she has been active in management since 1988 and which position was her
principal occupation from that time until early 1993, when she joined the
Massachusetts Society for the Prevention of Cruelty to Children as Southeast
Regional Administrator. In 1994, Ms. McNamee left the MSPCC to accept her
current position.
NOMINEES FOR ELECTION
WILLIAM M. CROZIER, JR. -- Mr. Crozier has been a director of the
Corporation since 1974, when he became Chairman of the Board and Chief Executive
Officer. Prior to that he served in various management capacities with the
Corporation beginning in 1963. Mr. Crozier is a graduate of Yale University and
Harvard Business School and served in the United States Army. He is a director
of Jobs for Massachusetts, a trustee of the Boston Symphony Orchestra, and an
overseer of the Museum of Fine Arts, Boston.
ROBERT L. GABLE -- Mr. Gable was elected a director of the Corporation by
the Board of Directors in 1994. He is Chairman, President, and Chief Executive
Officer of Unitrode Corporation, a high technology company headquartered in
Billerica, Massachusetts, with which he has been employed since 1990. Mr. Gable
is a certified public accountant with bachelor's and master's degrees from the
University of Maryland. After serving as a Lieutenant Commander in the United
States Navy, Mr. Gable began his business career in 1956 at Craig Systems
Corporation of Lawrence, Massachusetts, where he held successive financial
positions prior to his election as President and Chairman of the Board. Upon the
acquisition of that company by Kidde, Inc. in 1966, Mr. Gable became Group
Executive and Vice President of Kidde, where he remained until 1985, when he
became President and Chief Executive Officer of Computervision Corporation,
another Massachusetts high technology company. Mr. Gable has long been active in
community and cultural affairs. His current activities include serving as a
trustee of the Lahey Clinic, an overseer of the Museum of Fine Arts, a trustee
of Outward Bound USA, and director of the Lawrence Boys Club.
NORMAN E. MACNEIL -- Mr. MacNeil has been a director of the Corporation
since 1971. He is Chairman of the Board and a director of Ark-Les Corporation of
Watertown, Massachusetts, with which he has been affiliated since 1949, serving
as President from 1962 to 1982 and as Chairman of the Board since 1982. Mr.
MacNeil received his education at Tufts University and served in the United
States Air Force. He is an honorary trustee and past president of the Lawrence
Academy, Groton, Chairman of the Board of Trustees of St. Elizabeth's Hospital,
a trustee of the Newton Cemetery, and an incorporator and director of Caritas
Christi, a hospital management corporation. He also is a director of Tailored
Risk Assurance Company, Ltd.
GLENN P. STREHLE -- Mr. Strehle has been a director of the Corporation since
1979. He has been Treasurer of the Massachusetts Institute of Technology since
1975, and in 1986 he also was named Vice President. In 1994 he became Vice
President for Finance and Treasurer. Prior to 1975 Mr. Strehle was affiliated
for thirteen years with Colonial Management Associates, Inc., Boston, a
registered investment adviser, where he first served as a securities analyst and
later became a Vice President and director. He holds both bachelor's and
master's degrees from the Massachusetts Institute of Technology and
certification as a Chartered Financial Analyst. Mr. Strehle is a director of
Liberty Mutual Insurance Companies and of SofTech, Inc. He also serves as a
trustee of Property Capital Trust. He is a member and past President of the
Boston Security Analysts Society, a member of the Association of Investment
Management and Research, and a member and former President of the Boston
Economic Club. In addition, he is an Incorporator of Brigham and Women's
Hospital. Mr. Strehle formerly was chairman and trustee of The Common Fund.
Committees of the Board. The Audit Committee is composed of Mr. Gable, Mr.
Gerson, Ms. McNamee, and Mr. Piper. The Audit Committee's primary functions are
to make annual recommendations to the Board of Directors as to the designation
of independent auditors for the Corporation, to meet with the auditors to review
the scope of the audit, to review the internal audit and loan review programs of
the Corporation and its subsidiaries, and to review reports on those activities.
In addition, the Audit Committee reviews reports of regulatory examinations and
internal reports on credit quality. The Committee reports to the Board of
Directors on all such matters. In performing its functions, the Audit Committee
held four meetings in 1994. The Corporate Compensation Committee, the members of
which also comprise the Stock Option Committee, is composed of Messrs. Cervieri,
Strehle, and Torras. Its function is to consider and recommend action to the
Board of Directors on compensation matters. The Corporate Compensation Committee
administers the Corporation's Incentive Compensation Plan and Restricted Stock
Plan, and, acting as the Stock Option Committee, the Stock Option Plan. In
addition, it administers the Corporation's Supplemental Executive Retirement
Plan and Severance Benefits Plan. In performing their functions in 1994, the
Corporate Compensation Committee held six meetings and the Stock Option
Committee held two meetings. The entire Board of Directors functions as a
nominating committee and considers nominations submitted to the Chairman of the
Board and President. The Board of Directors held thirteen meetings in 1994, and
each of the directors attended 75% or more of the total of all Board and
Committee meetings that he or she was eligible to attend, except Mr. Gable, who
attended 67% of such meetings.
Compensation of Directors. Directors are paid a fee of $1,000 for each full
meeting of the Board or a Committee of the Board they attend and an annual
retainer of $15,000. Each director in office immediately after the Annual
Meeting of Stockholders of the Corporation receives the annual retainer in the
form of shares of the Corporation's Common Stock. For tax purposes, directors
may elect to defer all or part of their cash compensation and to receive their
retainer shares subject to restrictions on transfer that permit deferral of the
realization of income on the value received. Officers of the Corporation who are
directors do not receive additional compensation for their service as directors.
Compensation Committee Interlocks and Insider Participation. Certain of the
Corporation's executive officers and directors are at present, as in the past,
customers of its subsidiary banks and have transactions with such banks in the
ordinary course of business. In addition, certain of the directors, including
members of the Corporate Compensation Committee, are at present, as in the past,
also directors or officers of corporations or members of partnerships that are
customers of the Corporation's subsidiary banks and that have transactions with
such banks in the ordinary course of business. Such transactions with executive
officers and directors of the Corporation and with such corporations and
partnerships were at rates and charges comparable to those charged to other
customers of the subsidiary banks. Loans to executive officers and directors and
persons and entities related to them were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other customers and did not involve more than
normal risk of collectibility or present other features unfavorable to the
lending bank.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table provides summary information
on the cash compensation and certain other compensation paid, awarded, or
accrued by the Corporation and its subsidiaries for each of the last three
fiscal years to, or for, the five executive officers of the Corporation who
received the highest compensation for 1994 as measured by their cash
compensation and bonus.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
SALARY<F2> BONUS<F3> AWARDS<F4> OPTIONS COMPENSATION<F5>
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
--------------------------- --- ----- ----- ----- ---- -------
<S> <C> <C> <C> <C> <C> <C>
William M. Crozier,Jr. 1994 $530,000 $333,017 -- -- $44,552
Chairman of the Board, 1993 461,250 249,844 -- 50,000 29,696
President and Director 1992 410,250 102,570 $634,500 50,000 7,856
Richard F. Pollard 1994 310,000 149,833 -- -- 24,351
Vice Chairman of the 1993 297,500 99,167 -- -- 17,362
Board and Director 1992 287,125 64,610 235,000 -- 7,856
Donald L. Isaacs 1994 290,000 140,167 -- -- 22,632
Vice Chairman of the 1993 262,500 109,375 -- 25,000 13,778
Board and Director 1992 236,250 59,060 235,000 25,000 7,856
John J. Arena 1994 240,625 108,281 -- -- 18,841
Former Vice Chairman of 1993 268,750 111,979 -- -- 20,404
the Board and Director <F1> 1992 187,500 46,880 -- 50,000 --
Michael W. Vasily 1994 215,000 72,742 -- -- 16,970
Executive Vice President 1993 183,750 53,594 -- -- 9,551
and Chief Financial Officer 1992 161,250 24,190 176,250 10,000 5,535
<FN>
<F1> The salary and incentive compensation shown in the table for 1992 are for
the nine-month period beginning April 1, 1992, when Mr. Arena became
employed by the Corporation as an executive officer.
<F2> Includes amounts deferred pursuant to Section 401(k) of the Internal
Revenue Code.
<F3> Incentive compensation based on performance for the years shown.
<F4> Restricted Stock granted for the year shown, expressed as the dollar value
of the shares granted at the closing price on the date of grant. The grants
to Mr. Crozier and Mr. Pollard vest over a period of three years in equal
parts. The grants to Mr. Isaacs and Mr. Vasily vest over a period of five
years; restrictions will lapse on 7% of the shares granted on the first
anniversary of the date of grant and on 13%, 20%, 27%, and 33% of the
shares, respectively, on each of the next four anniversaries of the date of
grant. Dividends on Restricted Stock are paid at the same time and in the
same amounts as dividends on stock not subject to restriction. At year end
1994, the number and aggregate value of Restricted Stock holdings of each
of the executive officers listed in the table were as follows, as
calculated using the year-end closing price of the Corporation's Common
Stock, which was $52.75: Mr. Crozier 11,000 shares, $580,250; Mr. Pollard
4,140 shares, $218,385; Mr. Isaacs 8,800 shares, $464,200; and Mr. Vasily
6,800 shares, $358,700.
<F5> Consists of the dollar value of stock and cash payments made under the
Corporation's Employee Stock Ownership Plan ("ESOP") and Profit Sharing
Plan and related Excess Benefit Plans for the years shown. Amounts included
for 1993 cover the ESOP and the Excess Benefit Plan payments for 1993, as
well as the Excess Benefit Plan payments for 1992 and 1991, which were paid
in 1993. In the case of Mr. Arena, the amount shown for 1993 represents
cash payments made pursuant to the terms of his employment offer, which
provided that until he became eligible to participate in the Corporation's
Profit Sharing Plan and ESOP in the second quarter of 1994 he would receive
an annual cash payment equal to the value of the amounts he would have
received were he then a participant in those plans. Included for 1993 are
both the payment to Mr. Arena for 1993 and the payment made to him in 1993
for 1992. Included for 1994 is the payment to Mr. Arena for the first
quarter of the year, following which he became a participant in the Plans.
</TABLE>
Stock Option Grants in Last Fiscal Year. No stock options were granted
during 1994 to the executive officers named in the Summary Compensation Table.
Aggregated Option Exercises in Last Fiscal Year and Year-End Stock Option
Values. The following table provides information regarding the aggregate number
of shares of Common Stock of the Corporation received upon exercise of options
during the last fiscal year, the aggregate dollar value realized upon exercise,
and the total number of unexercised stock options held as of the end of 1994 by
the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES AT DECEMBER 31, 1994 (#) DECEMBER 31, 1994 <F1> ($)
ACQUIRED ON VALUE -------------------------------- ------------------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
William M. Crozier, Jr. 8,000 $313,086 47,889 86,111 $842,140 $992,359
Richard F. Pollard 12,500 389,687 18,000 -- 301,500 --
Donald L. Isaacs 19,500 439,500 6,889 43,111 115,390 497,109
John J. Arena 16,666 454,148 -- 33,334 -- 625,012
Michael W. Vasily 6,000 216,750 17,889 7,111 329,640 119,109
<FN>
<F1> Based on the difference between the closing price of the Common Stock on
December 31, 1994, which was $52.75, and the option exercise price for each
underlying grant.
</TABLE>
Pension Plan Table. Executive officers of the Corporation participate in the
Corporation's Retirement Plan and, if designated by the Corporate Compensation
Committee, in the Corporation's supplemental executive retirement plan ("SERP").
The following table shows the estimated annual lifetime retirement benefits
payable from both plans to the executive officers named in the Summary
Compensation Table, beginning at age 65.
AVERAGE YEARS OF SERVICE
ANNUAL -------------------------------
COMPENSATION 15 20 25-35
------------ -- -- -----
$200,000 ............................ $ 60,000 $ 80,000 $100,000
300,000 ............................ 90,000 120,000 150,000
400,000 ............................ 120,000 160,000 200,000
500,000 ............................ 150,000 200,000 250,000
600,000 ............................ 180,000 240,000 300,000
700,000 ............................ 210,000 280,000 350,000
800,000 ............................ 240,000 320,000 400,000
900,000 ............................ 270,000 360,000 450,000
The amounts in the table have been calculated under the Retirement Plan and
SERP benefit formulas using the years of service and average annual compensation
levels specified in the table without taking into account any offsets for Social
Security benefits or benefit limitations under the Internal Revenue Code.
Compensation taken into account for the named executive officers by the
Retirement Plan and SERP benefit formulas is the same as the amounts shown as
salary and bonus in the Annual Compensation portion of the Summary Compensation
Table. Average annual compensation is determined using the three consecutive
years in the ten years preceding retirement or earlier termination of service in
which compensation is the highest. Years of service credited as of year-end 1994
for the named executive officers are as follows: Mr. Arena (2 years, 9 months),
Mr. Crozier (31 years), Mr. Isaacs (20 years), Mr. Pollard (18 years), and Mr.
Vasily (15 years).
Severance Arrangements. The Corporation has a severance benefits plan that
provides severance benefits to certain employees of the Corporation and its
subsidiaries in connection with a change in control of the Corporation. Benefits
are payable in the event of termination of employment without cause or voluntary
termination following certain events (such as a specified reduction in salary or
benefits) occurring within two years after a change in control of the
Corporation. Under the plan, the executive officers named in the Summary
Compensation Table would receive for each year of service a severance payment of
eight weeks' salary and pro rata incentive compensation, covering up to a
maximum of 156 weeks. They also would receive medical, life, and other insurance
coverages for the number of weeks used to compute severance pay, as well as
outplacement assistance valued at not less than 15% of annual salary.
Under the terms of the Retirement Plan and SERP, the formulas currently used
to determine benefits would be modified in the event of a change in control of
the Corporation. A feature of the formulas provides smaller benefits to
terminating employees who are not yet eligible for retirement as compared to
employees with the same compensation and length of service who are eligible for
retirement. Since a participant's ability to continue as an employee until
retirement age could be affected by a change in control, this feature of the
benefit formulas would be deleted from such plans if a change in control occurs.
Also, in the event of a change in control, the number of weeks used to compute
severance pay under the severance benefits plan will be added to the age and
service of SERP participants when their SERP benefits are calculated.
Vesting of restricted stock and stock options would be accelerated upon a
change in control. Also, protections have been implemented to ensure, to the
extent possible, that employees and directors receive the value of compensation
or benefits earned but not received before a change in control.
CORPORATE COMPENSATION COMMITTEE AND STOCK OPTION
COMMITTEE REPORT ON EXECUTIVE OFFICER COMPENSATION
Securities and Exchange Commission regulations require the compensation
committee of the board of directors of a publicly-traded company to publish in
each proxy statement involving the election of directors a report addressing
certain aspects of executive officer compensation for the last completed fiscal
year. The following report is provided in accordance with those regulations.*
*The Securities and Exchange Commission has requested that the report of the
Corporate Compensation Committee address any policy the Corporation may have
adopted with respect to a provision of the Internal Revenue Code limiting the
income tax deductions of public companies for certain compensation in excess of
$1 million paid to any of the executive officers named in the proxy statement
compensation tables. No such officer of the Corporation received applicable
compensation at that level in 1994. At such time as it becomes likely that
applicable compensation for a covered executive will exceed the deductibility
limit, the Committee will consider adoption of a policy in this regard.
The compensation of the Corporation's executive officers reported for 1994
was paid or awarded pursuant to plans and arrangements that collectively are
intended to attract, retain, and motivate employees of outstanding ability,
control costs, link changes in compensation to individual and corporate
performance, and align the interests of management with the interests of the
Corporation's stockholders.
The Corporate Compensation Committee reviews executive officer salaries each
year and recommends to the Board of Directors appropriate adjustments based on
the Corporation's salary budget for the year, competitive salary levels, changes
in job responsibilities, and the performance of each executive.
To determine competitive salary levels the Corporation participates in
external compensation studies, subscribes to professional surveys with respect
to salary movements by region and industry, and engages compensation consultants
to provide information and advice on its compensation programs and cash
compensation levels for specific positions. In addition, the Corporate
Compensation Committee engages independently an outside compensation consulting
firm to provide it with research data and analysis regarding the competitiveness
of the salaries and incentive compensation opportunity for the executives of the
Corporation named in the proxy statement Compensation Table. For this purpose
the consulting firm reviews the compensation of executives of selected regional
bank holding companies throughout the United States. Such companies are selected
for comparative purposes based on either a New England regional presence or
comparable asset size and business characteristics. Companies in the
compensation reference group that are located outside of New England tend to
range in size from approximately $7 to $25 billion and have significant retail
banking operations. There is some overlap between the companies included in the
compensation reference group and the companies comprising the published industry
index in the stock performance graph that follows this report. However, the
majority of the companies comprising the Dow Jones Eastern Regional Banks Index
are considerably larger than those in the compensation reference group or have
substantially different business characteristics (i.e., product/service mix) and
therefore have not been considered appropriate bases of comparison for
compensation study purposes.
In 1994, in determining a recommended salary adjustment for Mr. Crozier for
that year, the Committee considered both the report of its compensation
consultant and the strength of improvements in the Corporation's financial
performance as reported to stockholders in the 1993 Annual Report. Noteworthy
with respect to financial performance were both the level and composition of
earnings, which reflected sharply lower loan loss provisions. Of particular
significance to stockholders was the reinstatement of the dividend (which by
early 1994 had risen to a quarterly rate of $.35 share). Also significant was
the return of relationships with regulatory bodies to normal status and the
steady improvement in the Corporation's standing with credit rating agencies.
The Committee reviewed its consultant's report on the competitiveness of the
chief executive officer's salary in the context of such performance. The study
indicated that while the prior year's adjustment to Mr. Crozier's salary had a
positive effect on its competitive position, an equitable compensation target
within a median range (25th to 75th percentile) for reference group companies
had not as yet been attained. Based on the consultant's research data and
analysis, the recommendation by the Committee for the 1994 salary adjustment for
Mr. Crozier was intended to bring his cash compensation closer to the targeted
range as measured by combined salary and incentive compensation opportunity.
Executive officers of the Corporation (as well as other designated staff
members) are eligible to receive incentive compensation up to specified
percentages of their salaries under the Corporation's Incentive Compensation
Plan. Participants and their award eligibility for each plan year are approved
by the Corporate Compensation Committee, and, in the case of the executive
officers named in the Compensation Table, by the Board. Participants are
intended to be those individuals with positions in which job performance can
significantly affect profits or the achievement of strategic objectives. The
level of incentive compensation for which each participant is eligible is based
on the scope of that individual's responsibility and accountability relative to
other Plan participants. Awards under the Incentive Compensation Plan are based
partly on the performance of the Corporation (the Corporate award) and partly on
an evaluation of individual job performance. Corporate performance normally
accounts for one third of the award opportunity. Under the Plan the Committee
may recommend to the Board exceptions to this formula, but it has not done so.
Determination of the portion of the Corporate award that will be paid for
any year is made by the full Board following the end of that year on the basis
of the Corporate Compensation Committee's review of data comparing the
Corporation's performance with previously established internal budget targets
and with the performance of other similar companies. For these purposes, budget
targets and performance comparisons with other companies focus principally on
net income, return on equity, and operating profit margins, but also may include
other financial measures, such as return on assets, price/ earnings ratios, and
market value/book value ratios. The reference group companies, which are
reviewed annually by the Corporate Compensation Committee and the Board, are
substantially the same as the reference group companies comprising the
compensation study group. The overlap of these companies with the Dow Jones
Eastern Regional Banks Index is described above. In early 1995 the Corporate
Compensation Committee and the Board determined that 90% of the Corporate Award
would be paid for 1994 because while earning results for the year exceeded
budgetary targets, more time was needed to assure that the rates of return on
equity achieved in the latter half of the year would be sustained.
The portion of each incentive award that is determined specifically by an
evaluation of individual performance is based principally on the extent to which
individual performance goals for the year were achieved and, in the case of
executive officers of the Corporation named in the Compensation Table, an
evaluation by the Corporate Compensation Committee and the Board of the
executive's job performance during the year. In determining awards for
individual job performance by the named executives other than the chief
executive officer, the Committee receives recommendations from the chief
executive officer. Individual performance goals that are the primary bases of
the award evaluations may be budgetary, strategic, organizational, operational,
and administrative. Budgetary goals may include, as applicable, sales, revenues,
profits, asset quality, and expense control. In addition, in accordance with the
Plan, the Committee considers other factors, including, for example, the quality
and effectiveness of an executive's response to significant developments
affecting the Company or a line of business during the year (e.g., economic and
competitive events). The Committee, which has discretion over selection of
individual award determination factors, subject to Board review, does not
necessarily weight performance factors in determining the individual portion of
an award, except that the Plan provides that up to half of the individual
portion of the award may be based on subjective considerations. The results of
the Committee's Plan administration are reviewed by the Board of Directors.
In determining the incentive compensation award for Mr. Crozier for 1994,
the Committee and the Board considered principally the substantial increase in
the Corporation's earnings for the year, which exceeded 14% of stockholders'
equity and were well above budget. The Committee also noted that the careful
management of the Company's securities portfolio, comprising investments of very
high quality and relatively short maturity, minimized the potential adverse
effect of declining bond prices during the year and facilitated an effective
reallocation of assets to fund the strong growth in loans that occurred as the
local economy recovered from the recession of the early 1990s. The Committee
further observed that increases in operating expenses were modest while the
organization continued to maintain or increase its market share of deposit
accounts and loans in the region. Of note as well in the Committee's assessment
of the year's performance were successful organizational changes made possible
by the strength of the Company's senior and middle management.
The Stock Option Plan and the Restricted Stock Plan are administered by the
Stock Option and Corporate Compensation Committees, subject to review by the
Board. These Plans provide longer term incentives intended to attract, motivate,
and retain outstanding individuals as employees of the Corporation and its
subsidiaries and to reward those who make substantial contributions to the
success and welfare of the Corporation to the benefit of the Corporation's
stockholders. They also are intended to align the future interests of the
executives who receive grants under the Plans with the interests of stockholders
and provide compensation that is directly related to enhancements in shareholder
value. Benefits accrue over a number of years, depending on the terms of the
grants: Stock Options become exercisable and restrictions on shares lapse during
a vesting period, providing that the grantee remains in the employ of the
Corporation or a subsidiary. During the vesting period Restricted Stock
recipients are paid dividends on their restricted shares. As shown in the
Compensation Table, no Stock Option grants or Restricted Stock awards were made
in 1994 to any of the named executive officers.
Glenn P. Strehle, Chairman
John A. Cervieri Jr.
Joseph H. Torras
<PAGE>
Five Year Stock Performance Graph. The following graph shows the cumulative
total stockholder return on the Corporation's Common Stock (stock price
appreciation plus dividends) over the five-year period ended December 31, 1994,
and compares this return with that of the S&P Composite - 500 Stock Index and
the Dow Jones Eastern Bank Index.
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning December 31, 1989
DEC-89 DEC-90 DEC-91 DEC-92 DEC-93 DEC-94
BayBanks Inc. $100 $45 $67 $143 $181 $194
S&P 500(R) $100 $97 $126 $136 $150 $152
Dow Jones Eastern Regional
Banks Index $100 $56 $103 $149 $156 $150
OWNERSHIP OF COMMON STOCK
The following are the only known beneficial owners of more than 5% of the
Corporation's Common Stock.
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- -------------------------- -------------- ----
The Capital Group Companies, Inc. 1,536,000 shares (2) 8.1%
333 South Hope Street
San Francisco, CA 90071 (1)
Marine Midland Bank, N.A. and 1,287,486 shares (4) 6.8%
BayBank, Co-Trustees of the
BayBanks Savings, Profit Sharing and
Stock Ownership Plan (3)
250 Park Avenue
New York, New York 10177
- ----------
(1) The Capital Group Companies, Inc. has filed a Securities and Exchange
Commission Schedule 13G reporting the above stock ownership in investment
accounts managed by several of its subsidiaries as of December 31, 1994, a
copy of which has been sent to the Corporation. One of such subsidiaries,
Capital Research and Management Company, which states that it is a
registered investment adviser, also has filed a Schedule 13G in which it
reported beneficial ownership of 985,600 of the shares shown (5.2% of the
class) as of December 31, 1994.
(2) Sole investment power with respect to all of such shares and sole voting
power with respect to 398,200 of such shares. Capital Research and
Management Company reports sole investment power, and no voting power, with
respect to 985,600 of such shares.
(3) BayBank, 7 New England Executive Park, Burlington, Massachusetts 01803,
disclaims beneficial ownership of 551,526 of the shares shown (2.9% of the
class). BayBank also is Trustee of the BayBanks Retirement Plan, in which
capacity it has sole investment power with respect to the 405,000 shares of
Common Stock held by that Plan (2.1% of the class). Under the Retirement
Plan, BayBank votes such shares and in the event of a tender offer will
tender them in the same proportions as participants in the ESOP portion of
the Profit Sharing Plan vote or tender the shares of Common Stock allocated
to their accounts. As trustee under other trusts established by its
customers, BayBank shares voting and investment power over an additional
40,191 shares of Common Stock.
(4) Investment decisions with respect to the shares in the BayBanks, Inc. Common
Stock Fund portion of the Plan are made by the participants in that fund.
Marine Midland Bank, N.A., as Co-Trustee, votes all shares in the Common
Stock Fund in accordance with the voting instructions received from
participants in that fund and votes all shares of Common Stock in the ESOP
portion of the Plan in accordance with the voting instructions received from
participants to whom shares have been allocated. The Plan provides that in
the event of a tender offer the Co-Trustee will tender allocated ESOP shares
and shares in the Common Stock Fund as instructed by the respective
participants and will tender unallocated ESOP shares in the same proportion
as it tenders allocated ESOP shares.
ACCOUNTANTS
The firm of KPMG Peat Marwick LLP, independent public accountants, has
audited the accounts of the Corporation for a number of years and will do so for
1995. Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting, to be available to respond to appropriate questions and to have
the opportunity to make a statement if they so desire.
NOTICE OF AMENDMENT TO BY-LAWS
On October 27, 1994, the Board of Directors amended the By-Laws of the
Corporation to add provisions specifying the procedures required for
stockholders to nominate directors and propose business to be considered at
meetings of the stockholders and modifying the procedures for calling,
scheduling, and conducting annual and special meetings of stockholders. The
By-Law amendments require stockholders to give advance notice of director
nominations during a 30-day period that begins 90 days before the calendar date
of the prior year's annual meeting and ends 60 days before that date. Other
advance notice periods apply in specified circumstances if the date of the
annual meeting is moved to a date that is earlier than the prior year's meeting
date by 30 days or more or if the Board of Directors votes to increase the
number of Directors on the Board and one or more of the seats added is subject
to election at the Annual Meeting. Notice of any stockholder proposal of
business to be considered at an annual meeting must be given not less than 120
days before the calendar date of the mailing of the Corporation's proxy
statement for the previous year's annual meeting, except in certain specified
circumstances. Stockholders giving notice of director nominations or submitting
proposals also are required to meet eligibility criteria and other requirements
specified in the amended By-Laws. The amendments further specify that annual
meetings and special meetings held in lieu of annual meetings may be held only
for those purposes prescribed by law or the Corporation's Articles of
Organization or By-Laws or for purposes that may be specified by the Board of
Directors, and also that the only business that may be conducted at such
meetings of stockholders is that which is specified in the Corporation's notice
of meeting or approved by the Chairman of the meeting or the Board of Directors.
The By-Law amendments increase from 40% to 66 2/3% the percentage of
outstanding stock required to call a special meeting of stockholders and require
that the business to be conducted at a special meeting be specified in the
Corporation's notice of meeting.
The amended By-Laws also expressly recognize the power of the Board of
Directors to postpone any meeting of stockholders or to cancel any special
meeting of the stockholders, other than a special meeting called at the request
of the requisite number of stockholders, and give the Chairman of the meeting
(or a majority of the shares present and represented) the power to adjourn or
dissolve a meeting, whether or not there is a quorum. In addition, the By-Law
amendments formally change from the second Thursday to the fourth Thursday of
April the date on which annual meetings are held, unless the Board of Directors
selects another date for the meeting.
A complete copy of the amended By-Laws was filed with the Securities and
Exchange Commission on November 10, 1994, as an exhibit to the Corporation's
Form 10-Q for the quarter ended September 30, 1994.
STOCKHOLDER PROPOSALS AT 1996 ANNUAL MEETING
If any stockholder of the Corporation intends to present a proposal at the
1996 Annual Meeting of Stockholders and desires that it be considered for
inclusion in the Corporation's proxy statement and form of proxy for that
meeting, it must be received by the Corporation at 175 Federal Street, Boston,
Massachusetts 02110, no later than November 20, 1995. Any proposal to be
presented at the Annual Meeting also must comply with the requirements,
including timing, specified in the Corporation's By-Laws.
GENERAL
While the Notice of Meeting calls for transaction of such other business as
may be in furtherance of, or incidental to, the matters described in the Notice,
the Board of Directors has no knowledge of any matters to be presented for
action by the stockholders at the meeting other than as set forth above. The
enclosed proxy gives discretionary authority, however, in the event that any
additional matters should be presented.
IN ADDITION TO THE CORPORATION'S ANNUAL REPORT, WHICH HAS BEEN MAILED TO
STOCKHOLDERS, ANY HOLDER OR BENEFICIAL OWNER OF THE CORPORATION'S COMMON STOCK
MAY OBTAIN A COPY OF THE CORPORATION'S FORM 10-K FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1994, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WRITTEN
REQUESTS FOR COPIES OF THE CORPORATION'S FORM 10-K SHOULD BE ADDRESSED TO
MICHAEL W. VASILY, EXECUTIVE VICE PRESIDENT AND TREASURER, BAYBANKS, INC., 175
FEDERAL STREET, BOSTON, MASSACHUSETTS 02110.
ILENE BEAL, Secretary and Clerk
<PAGE>
APPENDIX
PROXY
BAYBANKS, INC.
ANNUAL MEETING OF STOCKHOLDERS APRIL 27, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints John A.
Cervieri, Jr., Thomas R. Piper, and Glenn P. Strehle, and each of them, with
full power of substitution to each, proxies to represent the undersigned at the
Annual Meeting of Stockholders of BayBanks, Inc., to be held at the offices of
BayBank Systems, Inc., One Baybank Technology Place, Waltham, Massachusetts at
10:00 A.M. on April 27, 1995, and at any adjournment thereof, and to vote as
designated on the reverse all shares of stock of BayBanks, Inc. that the
undersigned would be entitled to vote at said meeting. A majority of said
proxies present and acting at the meeting (or, if only one shall be present and
acting, then that one) may exercise all the powers granted hereby. SAID PROXIES
ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON ANY OTHER MATTERS THAT MAY COME
BEFORE THE MEETING.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE
SIDE
<PAGE>
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
1. ELECTION OF DIRECTORS Each stockholder should specify by a mark in
NOMINEES: William M. Crozier, the appropriate box how he wishes his shares
Robert L. Gable, voted.
Norman E. MacNeil,
Glenn P. Strehle IF NO SPECIFICATION IS MADE, SHARES WILL BE
FOR AGAINST VOTED FOR THE ELECTION OF THE ABOVE DIRECTORS
[ ] [ ] [ ] MARK HERE FOR ADDRESS CHANGE AND NOTE
BELOW
[ ] --------------------------
For all nominees except as noted above
Please sign, date, and return by April 27,
1995. If signing as attorney or for an
estate, trust or corporation, title or
capacity should be stated.
Signature:------------------- Date----------
Signature:------------------- Date----------
