VERMONT FINANCIAL SERVICES CORP.
100 Main Street
Brattleboro, VT 05301
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on August 31, 1994
To the Shareholders of Vermont Financial Services Corp.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders
of VERMONT FINANCIAL SERVICES CORP., (the "Company") will be held at
The Holiday Inn, Rutland, Vermont, on August 31, 1994, at 10:00 a.m.
(the "Meeting") for the purpose of considering and voting upon the
following matters:
1. To elect Zane V. Akins, Charles A. Cairns, Beverly G. Davidson,
John D. Hashagen, Jr. and Kimball E. Mann as members of Class I of the
Board of Directors, each to hold office for a three-year term or until
his successor is elected and qualified.
2. To ratify and approve the Vermont Financial Services Corp.
1994 Stock Option Plan.
3. To act on whatever other business may properly be brought
before the Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business July 8,
1994 as the record date for the determination of shareholders entitled
to receive notice of, and to vote at, the Meeting or any adjournment
thereof. The By-Laws require that the holders of a majority in
interest of all of the common stock outstanding and entitled to vote
be present in person or represented by proxy at the Meeting in order
to constitute a quorum for the transaction of business. Shares of
Company Common Stock which are present in person or by proxy but
abstain from voting at the Meeting will be included for purposes of
determining a quorum at the Meeting. A list of Company stockholders
entitled to vote at the Meeting will be available for examination for
any purpose germane to the Meeting, during ordinary business hours,
at the offices of the Company located at West Street, Rutland,
Vermont 05701, for 10 days prior to the Meeting.
If you are able to attend the Meeting, we would be delighted to
have you join us for a continental Breakfast in the Ballroom at
9:00 a.m. So that proper arrangements can be made, please indicate
your attendance on the back of your proxy.
By Order of the Board of Directors
Richard O. Madden, Secretary
Brattleboro, Vermont
July 19, 1994
WE URGE YOU TO COMPLETE, DATE, SIGN AND RETURN IN THE ENVELOPE
PROVIDED THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY
THEN WITHDRAW YOUR PROXY AND VOTE YOUR SHARES IN PERSON BY BALLOT.
PROXY STATEMENT
VERMONT FINANCIAL SERVICES CORP.
100 MAIN STREET
BRATTLEBORO, VERMONT 05301
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on August 31, 1994
Accompanying this Proxy Statement is a Notice of the Annual Meet-
ing of Shareholders (the "Meeting") of Vermont Financial Services Corp.
(the "Company") to be held at The Holiday Inn, Rutland, Vermont, on August
31, 1994, at 10:00 a.m. Shareholders of record at the close of business on
July 8, 1994 will be entitled to vote at the Meeting.
GENERAL INFORMATION
Proxies in the form enclosed are solicited by the Board of Direc-
tors of the Company. Any such proxy, if properly executed and received in
time for voting and not revoked, will be voted at the Meeting in accordance
with the instructions of the shareholder indicated thereon. If no instruc-
tions are given on the proxy, an executed proxy will be voted FOR the elec-
tion of the five nominees named under the caption "Election of Directors
for Class I" below and for the ratification and approval of Vermont Finan-
cial Services Corp. 1994 Stock Option Plan described under the caption
"1994 Stock Option Plan" below.
Management knows of no other matters to presented at the Meeting,
but if other matters are properly presented, the persons named in the proxy
and acting thereunder will vote or refrain from voting in accordance with
their best judgment pursuant to the discretionary authority conferred by
the proxy.
The Proxy Statement and the accompanying form of proxy are being
first mailed or given to holders of the common stock, $1.00 par value, of
the Company (the "Common Stock") on or about July 19, 1994.
A proxy may be revoked at any time prior to its exercise (1) by
filing, at the principal office of the Company, a written notice revoking
such proxy, or a duly executed proxy bearing a later date, or (2) in open
meeting prior to the taking of a vote. Any shareholder of the Company en-
titled to vote at the Meeting may attend the Meeting and vote in person on
any matter presented for a vote to the shareholders of the Company at such
meeting, whether or not such shareholder has previously given a proxy. If
a shareholder attends the Meeting and wishes to vote in person, but has
previously submitted his proxy, he or she must revoke or withdraw such pro-
xy before voting in person.
The Company maintains its principal executive offices at 100 Main
Street, Brattleboro, Vermont 05301, and its telephone number is
802/257-7151. The Company is the owner of 100% of the outstanding capital
stock, of Vermont National Bank ("VNB") headquartered in Brattleboro, Ver-
mont and United Savings Bank ("USB") headquartered in Greenfield, Massachu-
setts.
VOTING SECURITIES
As of July 8, 1994, the Company had 20,000,000 shares of Common
Stock authorized and 4,659,547* shares outstanding and entitled to vote.
In addition, there are 5,000,000 shares of Preferred Stock authorized, none
of which is outstanding. Each share of Common Stock entitles the holder
thereof to one vote on the matters to be voted upon at the meeting, with
all shareholders voting as one class.
* Includes 115,800 shares which may not be outstanding if
shareholders of West Mass Bankshares, Inc., "West Mass" who have exercised
"dissenter" rights demand to receive cash for the fair value of those
shares for which such shareholder exercised dissenter rights.
As of July 8, 1994 the following beneficial owners were known to
control five percent or more of the outstanding shares of Common Stock, $1
par value, of the Company. The information below was taken from form
Schedule 13Gs filed as of December 31, 1993 with the Securities and Ex-
change Commission.
Amount of
Beneficial Percent
Name and Address Ownership of Class
David L. Babson & Company, Inc. . . . . . . 239,600 5.3% (1)
One Memorial Drive
Cambridge, MA 02142-1300
UBS Asset Management . . . . . . . . . . . 267,300 5.9% (2)
1211 Avenue of the Americas
New York, NY 10036-8796
Vermont National Bank . . . . . . . . . . . 274,002 6.0% (3)
Trust Department
100 Main Street
Brattleboro, VT 05301
(1) Includes sole voting power for 216,200 shares, shared voting pow-
er for 23,400 shares and sole dispositive power for 239,600 shares.
(2) Includes sole voting power for 236,100 shares and sale disposi-
tive power for 267,300 shares.
(3) Includes sole voting power for 30,185 shares, shared voting power
for 243,817 shares, sole dispositive power for 157,632 shares and shared
dispositive power for 116,370 shares.
PROPOSAL 1
ELECTION OF DIRECTORS FOR CLASS I
The Board of Directors of the Company consists of fifteen Direc-
torships, divided into three classes. The terms of office of the Directors
in Class I expire in 1994. The terms of the Directors in Class II expire
in 1995, and Class III in 1996. The nominees for Class I, for election for
terms to expire at the Company's 1997 Annual Meeting or until their succes-
sors are elected and qualified, are as follows: Zane V. Akins , Charles A.
Cairns, Beverly G. Davidson, John D. Hashagen, Jr. and Kimball E. Mann.
As currently constituted, each of Classes I, II and III presently
has five directors.
Although all nominees have agreed to serve if elected, if, at the
time of the Meeting, any of the nominees should be unable to serve or
should decline to serve, the discretionary authority provided in the proxy
may be exercised by the proxies named therein to vote for a substitute or
substitutes designated by the Board of Directors of the Company.
A majority of the shares of Common Stock of the Company, issued
and outstanding, and entitled to vote at the Meeting, is necessary to con-
stitute a quorum for the transaction of business. Shares of Company Common
Stock which are present in person or by proxy but abstain from voting at
the Meeting will be included for purposes of determining a quorum at the
Meeting. The vote of a majority of the quorum, represented in person or by
proxy at the Meeting, is necessary to elect the five nominees for Class I
named above. There is no cumulative voting in elections of directors of
the Company. The Board of Directors of the Company recommends that you
vote "FOR" the election of these five directors.
PROPOSAL 2
1994 STOCK OPTION PLAN
In July 1994, the Board adopted, subject to shareholder ratifica-
tion and approval, the Vermont Financial Services Corp. 1994 Stock Option
Plan (the "1994 Plan"). The 1994 Plan is intended to permit the Company,
in its discretion, through its compensation Committee, to grant either in-
centive stock options under the Internal Revenue Code of 1986, as amended,
or options which are not subject to any special tax treatment. If ratified
and approved by the shareholders, the 1994 Plan provides eligible partici-
pants (described below) with the opportunity to be awarded options to pur-
chase Common Stock of the Company. The 1994 Plan is intended as an employ-
ment incentive to encourage stock ownership and to participate in the
future growth of the Company during the term of the 1994 Plan.
Shares Reserved for the 1994 Plan
The total number of shares of Common Stock which may be subject
to the granting of options should not exceed 225,000, subject to adjust-
ments for subdivisions, stock splits, dividends, combinations of shares,
recapitalizations, or other changes in the outstanding Common Stock of the
Company. Any such adjustment will be made by the Board.
Eligible Participants
Key employees, officers and directors of the Company or a subsid-
iary are eligible to receive options under the 1994 Plan, including the
President and five Executive Vice Presidents of the Company and Vermont Na-
tional Bank. Approximately 30 individuals would have been eligible to re-
ceive options under the 1994 Plan on January 1, 1994.
Material Features of the 1994 Plan
Until the 1994 Plan is terminated or the number of shares re-
served for options is exhausted, the Compensation Committee may grant all
such options to those eligible participants ("Optionees") as the Compensa-
tion Committee determines appropriate. All Optionees are required to exe-
cute an option agreement within ten days of the date the option was
granted. The Compensation Committee determines the duration of any option,
subject to certain limitations. Optionees cannot transfer their options
(except by will or laws of descent or distribution).
The price at which the shares of Common Stock subject to an op-
tion may be purchased shall be determined by the Compensation Committee,
but this price can never be less than 100% (or 110% for any ten percent
owner of the capital stock of the Company pursuant to an incentive stock
option) of the reported sales price, or, if no such sale takes place on
that day, the average of the reported closing bid and asked prices, as re-
ported on the NASDAQ National Market System.
Options shall be exercised by notifying the Company 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 exer-
cise" procedure through which a broker retained by the Optionee transmits
the entire purchase price to the Company, and such broker retains that num-
ber of shares 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.
In the event that any Optionee's employment with the Company is
terminated, or such Optionee retires, the option expires three (3) months
after such termination or retirement (unless it has already expired under
the terms of the option). Generally, upon the death of an Optionee, the
option will terminate one year following his or her death.
Options may contain terms to the effect that if the Optionee is
terminated from employment for certain reasons, the option terminates imme-
diately.
Shares of Common Stock acquired by an Optionee pursuant to the
1994 Plan cannot be transferred without the prior consent of the Compensa-
tion Committee. The Company also has the right in certain circumstances to
repurchase such shares.
Administration
The Compensation Committee has full power to administer the 1994
Plan. The Compensation Committee's interpretation and construction of the
1994 Plan is final and conclusive.
The Board may at any time and from time to time modify, revise or
terminate the 1994 Plan, except that, without the further approval of the
shareholders of the Company, no modification or revision may materially in-
crease the benefits granted to the Optionees, change the number of shares
reserved for purchase, reduce the purchase price per share, or change the
class of persons eligible to receive incentive stock options. The Board
shall have the right to terminate the 1994 Plan at any time. Unless termi-
nated earlier, the 1994 Plan shall continue in effect through July, 2004.
Adoption of this proposal requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock. The Board
of Directors of the Company recommends that you vote "FOR" the approval and
ratification of the 1994 Plan. Shares of Company Common Stock which are
present in person or by proxy but abstain from voting at the Meeting will
be included for purposes of determining a quorum at the Meeting. Shares of
Common Stock represented by "broker non-votes" will be treated as present
for purposes of determining a quorum. Under applicable Delaware law, in
determining whether this proposal has received the requisite number of af-
firmative votes, abstentions and broker non-votes will be counted and will
have the same effect as a vote against this proposal. "Broker non-votes"
are proxies with respect to shares held in record name by brokers or nomi-
nees, as to which (i) instructions have not been received from the benefi-
cial owners or persons entitled to vote, (ii) the broker or nominee does
not have discretionary voting power under applicable national securities
exchange rules or the instrument under which it serves in such capacity, or
(iii) the record holder has indicated on the proxy card or otherwise noti-
fied the Company, as the case may be, that it does not have authority to
vote such shares on that matter."
MANAGEMENT OF THE COMPANY
Stock Ownership of Management
The following table sets forth the name and address of each di-
rector, nominee for director or executive officer of the Company, his or
her age and principal occupation, all positions or offices held by such in-
dividual within the Company, the year in which he or she first became a di-
rector of the Company or its predecessors, the number of whole shares of
Common Stock of the Company beneficially owned by each at the close of
business on July 8, 1994, and the percent of class so owned. The business
address of each of the directors, nominees and executive officers is the
Company's address except as otherwise noted. It is anticipated that each
of the nominees will continue to act as Directors of VNB and/or USB. No
family relationship exists between any director or persons nominated by the
Company to become directors.
Class and Shares of Percent
Name, Age and Principal Year First Common Stock of
Occupation or Employment and Became Beneficially Common
Offices held with the Company(1) Director Owned(2) Stock
Anthony F. Abatiell (54) . . . . . . . . . III 65,349(3) 1.40%
Attorney, Partner, Abatiell, Wysolmerski & 1982
Valerio Law Offices, Rutland, VT
Zane V. Akins (53)*. . . . . . . . . . . . I 1,378(4) 0.03%
President, Akins & Associates; President & 1987
Director, Anitech International., Inc.,
Brattleboro, VT
Charles A. Cairns (52)*. . . . . . . . . . I 3,845(5) 0.08%
President, Champlain Oil Co., Inc. and 1986
Coco Mart, Inc., South Burlington, VT
Robert C. Cody (69). . . . . . . . . . . II 14,963(6) 0.32%
President, Cody Chevrolet, Inc.; Chairman, 1974
Cody Management Associates (Real Estate
Ownership & Management), Montpelier, VT
Allyn W. Coombs (59) . . . . . . . . . . . II 6,836(7) 0.15%
Owner, Mount Holyoke Realty Trust (Real 1994
Estate Development & Management),
Greenfield, MA
Beverly G. Davidson (62)*. . . . . . . . . I 2,380(8) 0.05%
Secretary, Treasurer of RCAS, Inc., 1980
(Vermont State Fair); Treasurer, N.M.&B.
Ltd. (Nutrisystem Weight Control), Rutland, VT
James E. Griffin (66). . . . . . . . . . . II 2,540(9) 0.05%
President, J. R. Resources, Inc. 1972
(Business Consultants), Rutland, VT
John D. Hashagen, Jr. (52)*. . . . . . . . I 12,185(10) 0.26%
President & Chief Executive Officer of 1987
Vermont Financial Services Corp.,
Brattleboro; President & Chief Executive
Officer, Vermont National Bank,
Brattleboro, VT
Francis L. Lemay (61). . . . . . . . . . . III 59,031(11) 1.27%
President & Chief Executive Officer and 1994
Chairman, United Savings Bank, Greenfield, MA
Daniel C. Lyons (63) . . . . . . . . . . . II 9,712(12) 0.21%
Lyons Pontiac-Cadillac GMC Trucks; Toyota, 1974
Inc., Berlin, VT
Kimball E. Mann (59)*. . . . . . . . . . . I 11,013(13) 0.24%
President, J. E. Mann, Inc., (Women's 1969
Department Store), Brattleboro, VT
Stephan A. Morse (47). . . . . . . . . . . II 4,648(14) 0.10%
President and CEO, The Windham Foundation, 1986
Inc., Grafton, VT
Donald E. O'Brien (68) . . . . . . . . . . III 4,516(15) 0.10%
Attorney, Burlington, VT 1978
Roger M. Pike (53) . . . . . . . . . . . . III 6,647(16) 0.14%
Vice President, Kinney, Pike, Bell & 1980
Conner, Inc. (Insurance), Rutland, VT
Mark W. Richards (48). . . . . . . . . . . III 24,142(17) 0.52%
President, Richards, Gates, Hoffman 1988
& Clay (Insurance), Brattleboro, VT
Executive Officers
W. Bruce Fenn (52) . . . . . . . . . . . 6,257(18) 0.13%
Executive Vice President, VNB Regional
Banking Executive
Richard O. Madden (46) . . . . . . . . . . 2,135(19) 0.05%
Executive Vice President, Treasurer and
Secretary
Robert G. Soucy (48) . . . . . . .. . . . 9,117(20) 0.20%
Executive Vice President, VNB Senior
Banking Executive
__________
* Nominee for election at 1994 Annual Meeting
(1) During the past five years, the principal occupation and employ-
ment of each director and executive officer has been as set forth above,
except as follows: Francis L. Lemay was President & Chief Executive Officer
and Chairman of West Mass Bankshares, Inc. until June 14, 1994; Zane V.
Akins was Chief Executive Officer, Holstein-Friesian Association of Ameri-
ca; Executive Vice President Holstein-Friesian Services, Inc., (Cattle Reg-
istration) until December 31, 1990; Richard O. Madden became Secretary of
the Company on May 1, 1993; Robert G. Soucy became Executive Vice President
of the Company in July 1992.
(2) Beneficial ownership means sole voting and investment powers, un-
less otherwise noted.
(3) Includes 813 shares held jointly with a family member in which
Mr. Abatiell shares voting and investment power. Also includes 60,192
shares held in a custodial capacity in VNB's trust department in which Mr.
Abatiell has sole voting and investment powers. Does not include options
to acquire 1,000 additional shares, exercisable within sixty (60) days,
pursuant to the Directors' Non-Qualified Stock Option Plan.
(4) Does not include options to acquire 1,000 shares, exercisable
within sixty (60) days, pursuant to the Directors' Non-Qualified Stock Op-
tion Plan.
(5) Does not include options to acquire 1,000 shares, exercisable
within sixty (60) days, pursuant to the Directors' Non-Qualified Stock Op-
tion Plan.
(6) Includes 10,149 shares held jointly with a family member in which
Mr. Cody shares voting and investment powers. Does not include options to
acquire 1,000 shares, exercisable within sixty (60) days, pursuant to the
Directors' Non-Qualified Stock Option Plan.
(7) Includes 6,836 shares held jointly with a family member in which
Mr. Coombs shares voting and investment powers.
(8) Mrs. Davidson shares voting and investment powers on 2,365
shares. Does not include options to acquire 1,000 shares, exercisable
within sixty (60) days, pursuant to the Directors' Non-Qualified Stock Op-
tion Plan.
(9) Does not include options to acquire 1,000 shares, exercisable
within sixty (60) days, pursuant to the Directors' Non-Qualified Stock Op-
tion Plan.
(10) Includes 224 shares held by a family member in which Mr. Hashagen
has no voting or investment powers and as to which Mr. Hashagen disclaims
beneficial ownership. Also includes 200 shares held in the name of Green
Mountain Investment Club in which Mr. Hashagen shares voting and investment
powers and 7,154 shares held in the VNB Profit Sharing Plan. Does not in-
clude options to acquire 5,000 shares, exercisable within sixty (60) days,
pursuant to the Officers' Non-Qualified Stock Option Plan.
(11) Includes 59,031 shares held jointly with family members in which
Mr. Lemay shares voting and investment powers. Does not include options to
acquire 50,000 shares, exercisable within sixty (60) days, pursuant to the
Directors Non-Qualified Stock Option Plan.
(12) Includes 2,512 shares held jointly with a family member in which
Mr. Lyons shares voting and investment powers. Also includes 7,206 shares
held by a family member in which Mr. Lyons has no voting or investment pow-
ers and in which Mr. Lyons disclaims beneficial ownership. Does not in-
clude options to acquire 1,000 shares, exercisable within sixty (60) days,
pursuant to the Directors' Non-Qualified Stock Option Plan.
(13) Includes 9,379 shares held jointly with a family member in which
Mr. Mann shares voting and investment powers. Also includes 814 shares
held by a family member in which Mr. Mann has no voting or investment pow-
ers and as to which Mr. Mann disclaims beneficial ownership. Does not in-
clude options to acquire 1,000 shares, exercisable within sixty (60) days,
pursuant to the Directors' Non-Qualified Stock Option Plan.
(14) Includes 2,507 shares held jointly with a family member. Also
includes 505 shares held by a family member in which Mr. Morse has no vot-
ing or investment powers and as to which Mr. Morse disclaims beneficial
ownership. Does not include options to acquire 1,000 shares, exercisable
within sixty (60) days, pursuant to the Directors' Non-Qualified Stock Op-
tion Plan.
(15) Does not include options to acquire 1,000 shares, exercisable
within sixty (60) days, pursuant to the Directors' Non-Qualified Stock Op-
tion Plan.
(16) Includes 777 shares held jointly with family members and 1,125
shares held by Kinney, Pike, Bell & Conner, Inc. in which Mr. Pike shares
voting and investment powers. Also includes 997 shares held by a family
member in which Mr. Pike has no voting power and as to which Mr. Pike dis-
claims beneficial ownership. Does not include options to acquire 1,000
shares, exercisable within sixty (60) days, pursuant to the Directors'
Non-Qualified Stock Option Plan.
(17) Includes 24,142 shares held jointly with family members in which
Mr. Richards shares voting and investment powers. Does not include options
to acquire 1,000 shares, exercisable within sixty (60) days, pursuant to
the Directors' Non-Qualified Stock Option Plan.
(18) Includes 96 shares in which Mr. Fenn has no voting or investment
powers. Also includes 1,667 shares held jointly with a family member in
which Mr. Fenn shares voting and investment powers, and 4,494 shares in the
VNB Profit Sharing Plan. Does not include options to acquire 4,000 shares
exercisable within sixty (60) days pursuant to the Officers Non-Qualified
Stock Option Plan.
(19) Includes 26 shares held jointly with a family member in which Mr.
Madden shares voting and investment powers. Also includes 2,109 shares
held in the VNB Profit Sharing Plan.
(20) Includes 346 shares held by a family member in which Mr. Soucy
has no voting or investment powers. Also includes 484 shares held jointly
with family members in which Mr. Soucy shares voting and investment powers
and 3,754 shares in the VNB Profit Sharing Plan. Does not include options
to acquire 4,000 shares, exercisable within sixty (60) days pursuant to the
Officers Non-Qualified Stock Option Plan.
On July 8, 1994, the directors and officers of the Company as a
group (20) had beneficial ownership of 255,049 shares of Company Common
Stock, amounting to 5.5% of the outstanding shares. This does not include
options to acquire 98,000 shares, or 2.1% of the outstanding shares, exer-
cisable within sixty (60) days, pursuant to the Directors' and Officers'
Non-Qualified Stock Options Plans.
Directors' Non-Qualified Stock Option Plan
The Company maintains a Directors' Non-Qualified Stock Option
Plan under which Directors have been granted options to acquire an aggre-
gate of 12,000 shares of the Company's Common Stock at a price of $19 per
share. The exercise price of these options was equal to the fair market
value of the Company's Common Stock on the date of grant. All options are
exercisable for a period of five years from the date of grant.
Attendance of Directors
The Board of Directors met fifteen (15) times during calendar
year 1993. During 1993, all directors of the Company attended at least 75%
of the aggregate of (1) the total number of meetings of the Board of Direc-
tors of the Company, and (2) the total number of meetings held by all
committees and subcommittees of the Board of Directors of the Company on
which he or she served.
Certain Committees
The management of the Company is the responsibility of the Board
of Directors. In carrying out this responsibility, the Board is authorized
to establish certain committees with the duties described below. In 1993,
the Board of Directors of the Company held 15 meetings.
The Company has an Executive Committee which has nominating du-
ties and had compensation duties until October, 1993 (see "Compensation
Committee Report" following). Directors serving on the Executive Committee
during 1993 were Anthony F. Abatiell, Zane V. Akins, Robert C. Cody, Bever-
ly G. Davidson, John D. Hashagen, Jr. (President & CEO), Daniel C. Lyons,
Kimball E. Mann and Roger M. Pike. The Committee met 12 times during 1993.
The Executive Committee determines personnel policies and has authority to
appoint officers and to fix their compensation until the next meeting of
the Board of Directors. The Committee also considers nominees for election
to the Board of Directors. Shareholders who wish to suggest qualified can-
didates should write to the Secretary of the Company at 100 Main Street,
Brattleboro, Vermont 05301, stating in detail the qualifications of such
persons for consideration by the Committee, together with all other infor-
mation specified in the Company's By-Laws. Nominations must be received by
the Secretary not less than 60 days nor more than 90 days prior to the
meeting; but if less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to shareholders, nominations must be
received within 10 days of the date the notice of the meeting was mailed or
such public disclosure was made, whichever occurs first.
The Company has an Audit Committee whose members are appointed
annually by the Board of Directors. During 1993, these Directors served on
the Audit Committee: Charles A. Cairns, Daniel C. Lyons, Stephan A. Morse,
Donald E. O'Brien and Mark W. Richards.
Compensation of Directors
Each director who is not an officer of VFSC, VNB or USB receives
an annual retainer of $4,800 and, in addition, a $400 fee for each regular
monthly Board of Directors' meeting attended, and a $300 fee for each meet-
ing of a committee of the Board he or she attends.
Compensation Committee Report
The Board of Directors at its October, 1993 meeting appointed a
Compensation Committee composed of four non-employee directors: Charles A.
Cairns, Chairman, Anthony F. Abatiell, James E. Griffin and Daniel C. Ly-
ons. This Committee was given the responsibility for evaluating the per-
formance of the executive officers of the Company, including the Chief Ex-
ecutive Officer, and for setting their compensation, subject to approval by
the full Board of Directors.
Prior to the establishment of the Compensation Committee, the Ex-
ecutive Committee of the Board of Directors served as the Company's Compen-
sation Committee fulfilling the responsibilities described above.
Therefore, it was the Executive Committee, that evaluated the performance
of the executive officers of the Company and set their compensation levels
for 1993. In its compensation review the Committee considered the follow-
ing factors:
o The individual performance of each executive officer
o The compensation levels of similar executives at comparable
banking companies in Vermont and in the Northeast region
o The trend and level of the Company's earnings performance
o The Company's return to it stockholders, including stock
price performance and cash dividends paid.
Although the total compensation of the Company's executive officers was be-
low that of similar executives at comparable banking companies in its peer
group, the Committee decided not to grant increases in base salaries for
1993 due to the Company's below standard earnings level and stock perfor-
mance. Robert G. Soucy received an increase in base salary in July, 1992
when he was elected an Executive Vice President of the Company and given
additional management responsibilities. Richard O. Madden received an in-
crease in base salary in May, 1993 when he assumed additional management
responsibilities.
In lieu of any base salary increases the Committee approved a
1993 Executive Management Incentive Plan whereby the executive officers
could receive a cash incentive payment ranging from 2% to 4% of base salary
if earnings objectives were met. The objectives were met and the 1993 in-
centive payments were made to the executive officers.
Since its inception in October, 1993, the Compensation Committee
has met six times for the purpose of reviewing the Company's executive com-
pensation policies and practices and recommended to the full Board of Di-
rectors a comprehensive Executive Compensation Plan. Its principal objec-
tives in determining the plan are:
o To attract and retain quality management
o To increase management's focus on maximizing current earn-
ings
o To increase management's focus on enhancing long term stock-
holder value
The Compensation Committee has retained The Wyatt Company to assist in the
establishment of the Plan. Representatives of The Wyatt Company have at-
tended Committee meetings, have consulted with the Committee by telephone
and have provided peer group information and written recommendations to the
Committee.
Based on the recommendations of The Wyatt Company and its own de-
liberations, the Committee has determined that the Executive Compensation
Plan shall consist of the following three key elements: Base Salary; an
Annual Incentive Plan and a Stock Option Plan. The policies with respect
to each of these elements are described below.
The Base Salaries of executive officers will be targeted to be
somewhat below the median of the northeastern banking company peer group
used for comparison. Base salaries will be reviewed annually and increases
may be granted based on individual performance, the Company's performance
and peer group salary levels.
The Annual Incentive Plan will provide for annual cash incentive
payments based on the Company or subsidiaries meeting annual objectives for
return on average assets. The range of possible incentive payments for
1994 has been set at 5% to 20% of base salary for all executive officers.
The Compensation Committee has approved a Vermont Financial Ser-
vices Corp. 1994 Stock Option Plan subject to ratification by the Company's
stockholders. This Plan provides for awards of stock options to executive
officers within the terms of the Plan at the discretion of the Compensation
Committee. (See "1994 Stock Option Plan" section above).
The Compensation Committee
Charles A. Cairns, Chairman
Anthony F. Abatiell
James E. Griffin
Daniel C. Lyons
Executive Officers
The following tables contain three-year summary of the total compensa-
tion paid to the CEO of the Company and the other four executive officers
whose salary and bonus exceeded $100,000 in 1993.
I. SUMMARY COMPENSATION TABLE
<TABLE>
Long Term Compensation
Annual Compensation Awards Payouts
<CAPTION> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restric- All
Annual ted LTIP Other
Name and Compen- Stock Options/ Pay Compen-
Principal Salary Bonus sation Awards SARs outs sations
Position Year $ $ $(1) $ # $ $
John D. Hashagen 1993 $184,000 $7,360 $25,785 N/A 5,000 sh N/A $2,249(2)
President and 1992 184,000 N/A 4,685 N/A N/A N/A N/A
Chief Executive 1991 184,000 N/A 4,602 N/A N/A N/A N/A
Officer
Francis L. Lemay 1993 $195,338 $33,500 N/A N/A N/A N/A $20,675(3)
Chairman, USB 1992 183,531 N/A N/A N/A N/A N/A 9,325(3)
Pres & Chief 1991 175,225 N/A N/A N/A N/A N/A 5,779(3)
Executive Officer
Richard O. Madden1993 $ 99,209 $4,040 $12,760 N/A N/A N/A $1,488(2)
Exec. Vice Pres. 1992 96,000 N/A 1,786 N/A N/A N/A N/A
Tres. Secretary 1991 96,000 N/A 1,634 N/A N/A N/A N/A
Robert G. Soucy 1993 $110,000 $4,400 $15,732 N/A 4,000 sh N/A $1,100(2)
Exec. Vice Pres. 1992 105,671 N/A 2,339 N/A N/A N/A N/A
VNB, Senior 1991 101,000 N/A 2,167 N/A N/A N/A N/A
Banking Executive
W. Bruce Fenn 1993 $105,000 $2,100 $17,717 N/A 4,000 sh N/A $1,575(2)
Exec. Vice Pres. 1992 105,000 N/A 3,347 N/A N/A N/A N/A
VNB Regional 1991 105,000 N/A 3,119 N/A N/A N/A N/A
Banking Executive
</TABLE>
(1) In December, 1993 the discount rate used to compute the liability
under the officers' deferred compensation plan (See "Deferred Compen-
sation Agreements" following) was reduced from 9% to 7-1/2%. The
associated expenses attributable to Messrs.. Hashagen, Madden, Soucy and
Fenn due to this change were $19,597, $10,799, $12,211 and $13,998,
respectively.
(2) Represents the 25% Company match of the respective employees' 401k
contribution.
(3) Represents the market value as of December 31 of each year of the
shares allocated to the officers account under the USB ESOP plan for the
respective year.
II. OPTION/SAR GRANTS TABLE
<TABLE>
Option/SAR Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term (1)
<CAPTION> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g)
% of
Total
Options/
SARs
# of Granted to Exercise
Securities Employees or base Expira-
Underlying in Fiscal Price tion
Name Options Granted Year ($/Sh) Date 5%($) 10%($)
John D.
Hashagen 5,000 13.9 $19.00 10/13/98 $26,247 $57,998
Francis L.
Lemay 0 0 N/A N/A N/A N/A
Richard O.
Madden 0 0 N/A N/A N/A N/A
Robert G.
Soucy 4,000 11.1 19.00 10/13/98 20,997 46,399
W. Bruce
Fenn 4,000 11.1 19.00 10/13/98 20,997 46,399
</TABLE>
(1) The assumed growth rates in price in the Company's stock are not nec-
essarily indicative of actual performance that may be expected.
III. OPTION EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option Exercises in Last Fiscal Year, and FY-End Option Value
<TABLE>
<CAPTION> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Options at FY-End ($)
FY-End (#)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
John D.
Hashagen N/A N/A 5,000/0 $0
Francis L.
Lemay 9,000 $33,750 60,000/0 $465,000/$0 (2)
Richard O.
Madden N/A N/A 0/0 $0
Robert G.
Soucy N/A N/A 4,000/0 $0
W. Bruce
Fenn N/A N/A 4,000/0 $0
</TABLE>
(1) Represents the difference between the aggregate exercise price
and the aggregate market value on the date of the exercise.
(2) Represents the difference between the aggregate exercise price
and the aggregate market value as of December 31, 1993.
Performance Graph
The following graph compares the cumulative total shareholder re-
turn (return) of the shareholders of Vermont Financial Services Corp.
(VFSC) to the return of the NASDAQ Stock Market U. S. Index (NASDAQ), which
is a broad-based market index, and to the return of the NASDAQ Bank Stock
Index (NBS), a national peer group index.
Assumes $100 invested on December 31, 1988 in the common stock of VFSC,
NASDAQ and NBS
* Total return assumes reinvestment of dividends.
** Fiscal year ending December 31.
<TABLE>
Table of Graph Points in Performance Graph
Investment Value at December 31,
<CAPTION> <C> <C> <C> <C> <C> <C>
1988 1989 1990 1991 1992 1993
VFSC $100 $ 97.99 $ 41.60 $ 58.54 $ 95.51 $108.29
NASDAQ 100 121.24 102.96 165.21 192.10 219.21
NBS 100 111.15 81.40 133.57 194.19 221.32
</TABLE>
Deferred Compensation Agreements
VNB has entered into Executive Deferred Compensation Agreements
with certain officers, including Mr. Hashagen and the other executive offi-
cers in the group referred to in the above table. The agreements provide
for monthly payments for a ten-year period from retirement after age 60 but
before age 65, and for a fifteen-year period from retirement after age 65,
subject to certain conditions. The conditions include the requirements
that the officer refrain from competitive activities, be available for cer-
tain advisory and consulting services subsequent to retirement and continue
in the employment of VNB until retirement. The agreements also provide for
payments upon disability prior to retirement and payments to beneficiaries
of the officers under certain circumstances. Mr. Hashagen's agreement pro-
vides for payments in the amount of $1,944.44 per month, and the agreements
of Messrs. Madden, Soucy and Fenn provide for payments of $1,388.89 per
month. Vermont National Bank has purchased life insurance policies on the
lives of these officers which, in effect, will provide the funds to make
payments to reimburse VNB for payments made under the agreements.
Mr. Lemay is covered under a Supplemental Executive Retirement
Plan (SERP) which is designed to augment his retirement benefit from USB's
pension plan and his social security benefit so that his aggregate retire-
ment benefit will approximate 70% of his highest 3-year average salary pri-
or to retirement. Under the terms of his SERP, it is anticipated that Mr.
Lemay will receive an annual supplemental retirement benefit of $50,656 at
age 65.
Management Continuity Agreements
The Company and VNB have entered into agreements with VNB's six
executive officers, Messrs. Hashagen, Madden, Soucy, Fenn, Dunham and
George which provide for the payment of certain severance benefits if such
officer's employment with the Company or VNB is terminated within thirty-
six months after a change of control of the Company or VNB. The agreements
provide for severance payments to Mr. Hashagen equal to 250% of his base
salary upon termination after a change of control and for payments to each
of the other executive officers equal to 200% of his base salary upon ter-
mination after a change of control as defined in the agreements.
The management continuity agreements do not provide for severance
benefits in instances where termination is due to death, disability or re-
tirement. Further, no benefits are payable in instances of termination for
cause, or after a change of control if the officer voluntarily terminates
his employment with both the Company and VNB, unless such termination is
for a "good reason" as defined in the agreements.
Severance benefits payable in the event of a qualifying termina-
tion after a change of control are to be paid in equal consecutive biweekly
installments. If severance payments due in the event of termination after
a change of control were payable to each of the executive officers on the
date of this filing, the aggregate amount of such severance payments would
be $1,540,000. These severance payments are subject to up to a 50% reduc-
tion if the officer works for or participates in the management, operation
or control of a commercial or savings bank, or bank holding company, which
does business in Vermont, unless such officer's activities are substantial-
ly outside Vermont. Additionally, the officer will be entitled to continu-
ation of life, disability, accident and health insurance benefits and a
cash adjustment to compensate the executive for the market value of any
stock options under the Company's Officers' or Directors' Non-Qualified
Stock Option Plans in excess of their exercise price.
The agreements contain each officer's undertaking to remain in
the employ of the Company and VNB if a potential change of control occurs
until the earlier of six months, retirement (at normal age), disability or
the occurrence of a change of control.
Similar agreements have been executed by certain employees of VNB
and the Company which provide for severance payments ranging from 100% to
150% of the employee's base salary upon termination after a change in
control.
The Company and USB have entered into agreements with USB's five
executive officers, Messrs. Lemay, Cole, Neill, Phillips and Noska. It was
agreed that Mr. Lemay will be President and Chief Executive Officer of USB
until December 31, 1994. Thereafter, the Company has agreed that Mr. Lemay
shall continue as Chairman and a Director of USB until December 31, 1997.
Mr. Lemay's contract also provides that he will serve as a consultant to
the Company from December 31, 1994 through December 31, 1997. Mr. Lemay's
base salary under the foregoing agreement until December 31, 1994 is
$219,000. His compensation for consulting services after December 31, 1994
is to be $25,000 per year. Mr. Lemay is also on the Company's Board of Di-
rectors. Currently, each director of the Company who is not an officer of
the Company or a subsidiary receives an annual retainer of $4,800 and, in
addition, a $400 fee for each regular monthly Board meeting attended as
well as a $300 fee for each meeting of a committee of the Board attended.
Mr. Lemay will not receive any such director's fees while serving as an op-
erating officer of USB.
Additionally, the Company and USB have entered into agreements to
employ the following USB officers: Kenneth R. Cole as Senior Vice Presi-
dent & Treasurer of USB; James Neill as Senior Vice President of USB; and
Robert W. Phillips and Matthew W. Noska as Vice Presidents of USB. Under
these agreements, Mr. Cole is to receive a base salary of $82,500, Mr.
Neill a base salary of $76,300, Mr. Phillips a base salary of $59,700 and
Mr. Noska a base salary of $52,000, all subject to annual increases. Each
agreement is to expire May, 1997, except that Mr. Noska's agreement is to
expire May, 1995.
In addition to and as part of the foregoing agreements, Messrs.
Cole, Neill, Phillips and Noska have entered management continuity agree-
ments which are similar in form to agreements currently in force between
the Company and VNB and their senior officers. Each agreement's term ends
on January 31, 1995 and is automatically renewable thereafter unless the
Company and USB elect not to renew it. Under the management continuity
agreements, the above officers would be entitled to the following severance
payments if terminated under certain circumstances after a change of con-
trol of the Company or USB: Messrs. Cole, Phillips and Neill - 200% of base
salary at the time of termination; Mr. Noska - 100% of base salary at the
time of termination.
The management continuity agreements define a "change of control"
as (i) the acquisition by a person or group of 25% of the combined voting
power of the Company's or USB's then outstanding securities; (ii) during
any two-year period those persons, who at the beginning of such period were
members of the Company's or USB's Board of Directors and any new director
whose election was approved by at least two-thirds of the directors then
still in office who either were directors at the beginning of such period
or whose election or nomination was previously so approved, cease to con-
stitute a majority of such board; or (iii) the stockholders of the Company
or USB approve a merger or consolidation of the Company or USB which would
result in such stockholders holding less than 70% of the combined voting
power of the surviving entity immediately thereafter, or if such stockhold-
ers approve the sale of all or substantially all of the assets of the Com-
pany or USB.
The management continuity agreements do not provide for severance
benefits in instances where termination is due to death, disability or re-
tirement. Further, no benefits are payable in instances of termination for
cause, defined as (i) the willful and continued failure of the officer to
perform his duties and (ii) willful conduct materially injurious to the
Company or USB.
Profit-Sharing Plan
Each employee of VNB, including executive officers, becomes eli-
gible to participate in the Bank's Profit-Sharing Plan on January 1 of the
Plan year in which he or she completes one full year of continuous service
of 1,000 hours or more. Upon completion of three years of continuous ser-
vice, a participant becomes 30% vested, increasing to 40% after four years,
60% after five years, 80% after six years, and fully vested after seven
years. Vested participants may elect to receive, in cash, up to 50% of
their annual allocation of the Bank's contribution to the Profit-Sharing
Plan. Vested amounts not so received in cash are distributed to partici-
pants upon their retirement or earlier upon termination of employment.
During 1993, the Bank did not make a contribution to the Profit-Sharing
Plan.
Retirement Plan
The VNB Retirement Plan covers substantially all eligible employ-
ees of the Bank, including officers, and provides for payment of retirement
benefits generally based upon an employee's years of credited service with
the Bank and his or her salary level, reduced by a portion of the Social
Security benefits to which it is estimated the employee will be entitled.
The following table represents estimated annual benefits upon re-
tirement at age 65 to employees at specified salary levels (based upon the
average annual rate of salary during the highest five years within the fi-
nal ten years of employment) at stated years of service with the Bank. The
amounts shown are after deduction of estimates for Social Security reduc-
tions based on the Social Security law as of January 1, 1994.
<TABLE>
Estimated Annual Benefits at Retirement
by Specified Remuneration and
Years of Service Classification
Years of Service
<CAPTION> <C> <C> <C> <C> <C>
Final Average
Compensation 5 10 15 20 25
$ 20,000 1,516 3,031 4,547 6,062 7,578
40,000 3,515 7,030 10,544 14,059 17,574
60,000 5,824 11,647 17,471 23,294 29,118
80,000 8,224 16,447 24,671 32,894 41,118
100,000 10,624 21,247 31,871 42,494 53,118
120,000 13,024 26,047 39,071 52,094 65,118
140,000 15,424 30,847 46,271 61,694 77,118
160,000 * 17,824 35,647 53,471 71,294 89,118
180,000 * 20,224 40,447 60,671 80,894 101,118
200,000 * 22,624 45,247 67,871 90,494 113,118
220,000 * 25,024 50,047 75,071 100,094 125,118 *
240,000 * 27,424 54,847 82,271 109,694 137,118 *
260,000 * 29,824 59,647 89,471 119,294 * 149,118 *
</TABLE>
* Under current regulations of the Internal Revenue Code, the maxi-
mum annual benefit payable from a defined benefit plan during 1994 is
$118,800 payable as a life annuity for retirements at age 65. In addition,
the maximum annual compensation may not exceed $150,000. The amounts shown
above in excess of $118,800 and those using compensation in excess of
$150,000 are shown for exhibit purposes only.
The description of the Retirement Plan in this Proxy Statement is
intended solely to provide shareholders of the Company with general infor-
mation concerning the Plan as it relates to management remuneration. Under
no circumstances should the description be construed as indicative of the
rights of any particular employee, or as conferring any right upon any em-
ployee, which rights will in all cases be determined by the appropriate le-
gal documents governing the Plan.
USB provides a retirement plan for all eligible employees through
the Savings Bank Employees Retirement Association ("SBERA"), an unincorpo-
rated association of savings banks operating within Massachusetts and other
organizations providing services to or for savings banks, SBERA's sole pur-
pose if to enable the participating employers to provide pensions and other
benefits for their employees.
Each employee age 21 or older who has completed at least 1,000
hours of service in the last 12 month period beginning with such employee's
date of employment becomes a participant of the retirement plan. All par-
ticipants are fully vested when they have been credited with three (3)
years of service or at age 62 if earlier.
The retirement plan is a qualified defined benefit plan which
does not require an employee to make any contributions to become a partici-
pant and earn benefits under the Plan. The benefits provide for a pension
equal to 1.25% of Average Compensation (the average of the three highest
consecutive years of Compensation) for each year of service up to 25 years,
plus .6% of compensation above the Covered Compensation (defined below) for
each year of Service up to 25 years. For example, under the above benefit
formula, a Participant attaining age 65 in 1992 with 25 years of service,
will be entitled to a benefit equal to 31.25% (1.25% x 25 years) of Average
Compensation plus 15% (.6% x 25 years) of the difference (if any) between
the participant's Average Compensation and the Covered Compensation for a
participant turning age 65 in 1993 which is $22,716. Covered Compensation
is the average of the 35 years of Social Security taxable wages up to and
including the year in which a Participant reaches Social Security retire-
ment age. Normal retirement age under the plan is 65; a reduced early re-
tirement benefit is payable from age 50 to 65 under certain conditions. On
December 31, 1993, the latest date for which retirement plan information is
available, the present value of accumulated benefits was fully funded by
the market value of plan assets. The Bank contributed $167,162.52 to the
Pension Plan during 1993:
The following table illustrates annual pension benefits for re-
tirement at age 65 under the most advantageous plan provisions available
for various levels of compensation and years of service. The figures in
this table are based upon the assumption that the plan continues in its
present form and certain other assumptions regarding compensation trends
and social security.
<TABLE>
Annual Pension Benefit Based on Years of Service
<CAPTION> <C> <C> <C> <C>
Average Compensation 10 years 15 years 20 years 25 years
$ 60,000 $ 9,737 $14,606 $19,474 $24,343
100,000 17,137 25,706 34,274 42,843
200,000 35,637 53,456 71,274 89,093
</TABLE>
_________________________
As of December 31, 1993 Messrs. Lemay, Cole, and Neill had 38, 8
and 10 years of credited service, respectively.
Interest of Directors and Officers in Certain Transactions
Some directors and officers of VNB, USB and the Company and their
associates were customers of and had transactions with the Banks and the
Company in the ordinary course of business during 1993. Additional trans-
actions may be expected to take place in the ordinary course of business in
the future. Some of the Company's directors are directors, officers,
trustees, or principal security holders of corporations or other organiza-
tions which were customers of or had transactions with the Bank in the or-
dinary course of business during 1993. All outstanding loans and commit-
ments included in such transactions were made in the ordinary course of
business on substantially the same terms, including interest rates and col-
lateral, as those prevailing at the time for comparable transactions with
other person and did not involve more than the normal risk of collectibil-
ity nor present other unfavorable features.
In addition to banking and financial transactions, the Banks and
the Company have had other transactions with, or used products or services
of, various organizations of which directors of the Company are directors
or officers. The amounts involved have in no case been material in rela-
tion to the business of the Banks or the Company, and it is believed that
they have not been material in relation to the business of such other orga-
nizations or to the individuals concerned. It is expected that the Banks
and the Company will continue to have similar transactions with, and use
products or services or, such organizations in the future.
Two directors of the Company are attorneys who have been retained
in the past to represent VNB Bank or the Company in appropriate circum-
stances. During 1993, no director was retained by the Banks or Company as
legal counsel.
INDEPENDENT PUBLIC ACCOUNTANTS
For several years, the Company has employed the accounting firm
of Coopers & Lybrand to serve as tax consultants, to prepare annually its
federal and state income tax returns, to conduct an annual examination of
the Company and to certify its financial statements. It is anticipated
that Coopers & Lybrand will be employed by the Company in 1994 to audit the
consolidated financial statements of VNB and the Company, and for other
services.
Representatives of Coopers & Lybrand will be present at the Meet-
ing, will have the opportunity to make a statement if they desire to do so,
and will be available to respond to questions directed to them.
OTHER MATTERS
The Board of Directors knows of no business which will be pres-
ented for consideration at the Meeting other than those items set forth in
this Proxy Statement. The enclosed proxy confers upon each person entitled
to vote the shares represented thereby discretionary authority to vote such
shares in accordance with his or her best judgment with respect to any oth-
er matter which may be properly presented for action at the meeting.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Shareholders who may desire to submit proposals for the consider-
ation of the Company's shareholders at its Annual Meeting of Shareholders
in 1994, scheduled to be held on April 25, 1995, will be required, pursuant
to Rule 14a-8 of the Securities and Exchange Commission, to deliver the
proposal to the Company on or prior to November 8, 1994.
EXPENSES OF SOLICITATION
Solicitations of the proxies will be made initially by mail. The
proxies may also be solicited personally by telephone or by telegraph by
the directors, officers, and other employees of the Company, VNB or USB.
The Company will bear the cost of printing, assembling, and mailing this
Proxy Statement, the enclosed form of proxy, and the related proxy materi-
als, and other charges and expenses incurred in connection with the solici-
tation of the shareholders of the Company, including the expenses, charges,
and fees of brokers, custodians, nominees, and other fiduciaries who, at
the request of the management of the Company, mail material to, or other-
wise communicate with, the beneficial owners of the shares of Common Stock
of the Company held of record by such brokers, custodians, nominees, or
other fiduciaries.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10k for the year
ending December 31, 1993, as filed with the Securities & Exchange Commis-
sion, may be obtained, without charge, by any shareholder of the Company on
written request to the Treasurer of the Company, at the address indicated
above.
Your continued interest in and support of the Company is sincere-
ly appreciated. Your management has prepared an interesting and informa-
tional presentation about the Company's performance, and we urge you to at-
tend the Annual Meeting. Please join us for a continental breakfast
preceeding the meeting at 9:00 a.m.
By Order of the Board of Directors
John D. Hashagen, Jr., President
Brattleboro, Vermont
Dated:________________________
