PROXY STATEMENT
VERMONT FINANCIAL SERVICES CORP.
100 MAIN STREET
BRATTLEBORO, VERMONT 05301
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 30, 1996
Accompanying this Proxy Statement is a Notice of the Annual Meeting
of Stockholders (the "Meeting") of Vermont Financial Services Corp. (the
"Company") to be held at The Woodstock Inn, Woodstock, Vermont, on April
30, 1996, at 10:00 a.m. Stockholders of record at the close of business on
March 1, 1996 will be entitled to vote at the Meeting.
GENERAL INFORMATION
Proxies in the form enclosed are solicited by the Board of Directors
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 stockholder indicated thereon. If no instructions
are given on the proxy, an executed proxy will be voted FOR the election of
the four nominees named under the caption "Election of Directors for Class
III" below.
Management knows of no other matters to be 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 March 15, 1996.
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 stockholder of the Company
entitled to vote at the Meeting may attend the Meeting and vote in person
on any matter presented for a vote to the stockholders of the Company at
such meeting, whether or not such stockholder has previously given a proxy.
If a stockholder attends the Meeting and wishes to vote in person, but has
previously submitted his proxy, he or she must revoke or withdraw such
proxy 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,
Vermont and United Bank ("UB") headquartered in Greenfield, Massachusetts.
VOTING SECURITIES
As of March 1, 1996, the Company had 20,000,000 shares of Common Stock
authorized and 4,789,770* 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 stockholders voting as one class.
* Includes 114,189 shares which would have been issued to
certain stockholders of West Mass Bankshares, Inc. ("West Mass") in
connection with the June 1994 merger of West Mass into the Company had not
such stockholders perfected dissenters appraisal rights in respect of the
merger. As dissenters, such stockholders are entitled to receive the cash
fair value for their shares and an action for determination of such value
is currently pending in superior court in Greenfield, Massachusetts. Until
the appraisal action is resolved, the Company's books assume for reporting
purposes that the dissenting West Mass stockholders received the same
consideration in the merger as all other West Mass stockholders.
As of March 1, 1996 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, 1995 with the Securities and
Exchange Commission.
Amount of
Beneficial Percent
Name and Address Ownership of Class
Vermont National Bank . . . . . . . . . . . 297,201 6.2% (1)
Trust Department
100 Main Street
Brattleboro, VT 05301
David L. Babson & Company, Inc. . . . . . . 248,200 5.2% (2)
One Memorial Drive
Cambridge, MA 02142-1300
(1) Includes sole voting power for 16,026 shares, shared voting power for
281,175 shares, sole dispositive power for 206,011 shares and shared
dispositive power for 91,190 shares.
(2) Includes sole voting power for 155,600 shares, shared voting power for
92,600 shares and sole dispositive power for 248,200 shares.
PROPOSAL 1
ELECTION OF DIRECTORS FOR CLASS III
The Board of Directors of the Company consists of fifteen Director-
ships, divided into three classes. The terms of office of the Directors in
Class III expire in 1996. The terms of the Directors in Class I expire in
1997, and Class II in 1998. The nominees for Class III, for election for
terms to expire at the Company's 1999 Annual Meeting or until their
successors are elected and qualified, are as follows: Anthony F. Abatiell,
Francis L. Lemay, Roger M. Pike, and Mark W.Richards.
As currently constituted, each of Classes I, II and III presently has
five directors. One Class III director, Donald E. O'Brien, has notified
the Board that he plans to retire and does not wish to stand for reelection
in 1996. If all nominees for Class III are elected at the Annual Meeting,
there will be one vacancy in Class III. Pursuant to the Company's By-laws,
this vacancy can be filled by the Board, although there are no immediate
plans to do so.
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 sub-
stitutes 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 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. The vote of a majority of the quorum, represented in person or by
proxy at the Meeting, is necessary to elect the four nominees for Class III
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 four directors.
MANAGEMENT OF THE COMPANY
Stock Ownership of Management
The following table sets forth the name and address of each director,
nominee for director or executive officer of the Company, his or her age
and principal occupation, all positions or offices held by such individual
within the Company, the year in which he or she first became a director 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 March
1, 1996, 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 UB. 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 (56)*. . . . . . III 60,169(3) 1.26%
Attorney, Partner, Abatiell, 1982
Wysolmerski & Valerio Law Offices
Rutland, VT
Zane V. Akins (55) . . . . . . . . . I 3,399(4) 0.07%
President, Akins & Associates, 1987
Brattleboro, VT
Charles A. Cairns (54) . . . . . . . I 6,189(5) 0.13%
President, Champlain Oil Co., Inc. & 1986
Coco Mart, Inc., South Burlington, VT
William P. Cody (42) . . . . . . . . II 100(6) 0.00%
General Manager, Cody Chevrolet, Inc.,1996
Montpelier, VT
Allyn W. Coombs (61) . . . . . . . . II 12,370(7) 0.26%
President & Treasurer of 1994
Allyn W. Coombs, Inc. (Real Estate
Development & Management), Amherst, MA
Beverly G. Davidson (64) . . . . . . I 4,214(8) 0.09%
Secretary, Treasurer of RCAS, Inc., 1980
(Vermont State Fair), Rutland, VT
Philip M. Drumheller (42). . . . . . II 150(9) 0.00%
President, The Lane Press, Inc., 1995
Burlington, VT
James E. Griffin (68) . . . . . . . II 4,683(10) 0.10%
President, J. R. Resources, Inc. 1972
(Business Consultants), Rutland, VT
John D. Hashagen, Jr. (54) . . . . . I 46,529(11) 0.97%
President & Chief Executive Officer 1987
of Vermont Financial Services Corp.,
Brattleboro; President & Chief Executive
Officer, Vermont National Bank,
Brattleboro, VT
Francis L. Lemay (63)* . . . . . . . III 106,487(12) 2.22%
Chairman, United Savings Bank, 1994
Greenfield, MA
Kimball E. Mann (61) . . . . . . . . I 13,013(13) 0.27%
President, J. E. Mann, Inc., (Women's 1969
Department Store), Brattleboro, VT
Stephan A. Morse (49). . . . . . . . II 7,248(14) 0.15%
President and CEO, The Windham 1986
Foundation, Inc., Grafton, VT
Donald E. O'Brien (70)+. . . . . . . III 6,771(15) 0.14%
Attorney, Burlington, VT 1978
Roger M. Pike (55)*. . . . . . . . . III 8,924(16) 0.19%
Vice President, Kinney, Pike, Bell & 1980
Conner, Inc. (Insurance), Rutland, VT
Mark W. Richards (50)* . . . . . . . III 28,206(17) 0.59%
President, Richards, Gates, Hoffman 1988
& Clay (Insurance), Brattleboro, VT
Executive Officers
Kenneth R. Cole (49) . . . . . . . . 18,204(18) 0.38%
President, United Bank
Louis J. Dunham (41) . . . . . . . . 19,416(19) 0.41%
Executive Vice President, VNB
Senior Credit Officer
W. Bruce Fenn (54) . . . . . . . . . 26,132(20) 0.55%
Executive Vice President, VNB Senior
Banking Officer
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
Richard O. Madden (47) . . . . . . . . . . . 20,113(21) 0.42%
Executive Vice President, Treasurer and
Secretary
Robert G. Soucy (50) . . . . . . . . . . . . 27,951(22) 0.58%
Executive Vice President, VNB Senior
Operating Officer
__________
* Nominee for election at 1996 Annual Meeting
+ Not standing for reelection in 1996
(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 until June 14, 1994
and was President and Chief Executive Officer of UB until
December 31, 1994; 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 58,169 shares held in a custodial capacity in VNB's
trust department in which Mr. Abatiell has sole voting and
investment powers. Also includes options to acquire 2,000
additional shares, exercisable within sixty (60) days, pursuant
to the Directors' Non-Qualified Stock Option Plans.
(4) Includes options to acquire 2,000 shares, exercisable within
sixty (60) days, pursuant to the Directors' Non-Qualified Stock
Option Plans.
(5) Includes options to acquire 2,000 shares, exercisable within
sixty (60) days, pursuant to the Directors' Non-Qualified Stock
Option Plans.
(6) Mr. Cody has sole voting and investment powers on 100 shares.
(7) Includes 8,370 shares held jointly with a family member in which
Mr. Coombs shares voting and investment powers. Also includes
options to acquire 1,000 shares, exercisable within sixty (60)
days, pursuant to the Directors' Non-Qualified Stock Option
Plans.
(8) Ms. Davidson shares voting and investment powers on 2,214 shares.
Includes options to acquire 2,000 shares, exercisable within
sixty (60) days, pursuant to the Directors' Non-Qualified Stock
Option Plans.
(9) Mr. Drumheller has sole voting and investment powers on 150
shares.
(10) Includes options to acquire 2,000 shares, exercisable within
sixty (60) days, pursuant to the Directors' Non-Qualified Stock
Option Plans.
(11) 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 9,494 shares held in the
VNB Profit Sharing Plan, and options to acquire 31,300 shares,
exercisable within sixty (60) days, pursuant to the Officers'
Non-Qualified Stock Option Plans.
(12) Includes 29,100 shares held in a trust in which Mr. Lemay has
sole voting and investment powers. Also includes 30,000 shares
held by a family member in a trust in which Mr. Lemay has no
voting or investment powers. Also includes options to acquire 500
shares, exercisable within sixty (60) days, pursuant to the
Directors' Non-Qualified Stock Option Plans.
(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 powers and as to which Mr. Mann disclaims beneficial
ownership and also includes options to acquire 2,000 shares,
exercisable within sixty (60) days, pursuant to the Directors'
Non-Qualified Stock Option Plans.
(14) Includes 505 shares held by a family member in which Mr. Morse
has no voting or investment powers and as to which Mr. Morse
disclaims beneficial ownership and includes options to acquire
2,000 shares, exercisable within sixty (60) days, pursuant to
the Directors' Non-Qualified Stock Option Plans.
(15) Includes options to acquire 2,000 shares, exercisable within
sixty (60) days, pursuant to the Directors' Non-Qualified Stock
Option Plans.
(16) Includes 777 shares held jointly with family members and 1,203
shares held by Kinney, Pike, Bell & Conner, Inc. in which Mr.
Pike shares voting and investment powers. Also includes 1,052
shares held by a family member in which Mr. Pike has no voting
power and as to which Mr. Pike disclaims beneficial ownership and
includes options to acquire 2,000 shares, exercisable within
sixty (60) days, pursuant to the Directors' Non-Qualified Stock
Option Plans.
(17) Includes 26,206 shares held jointly with family members in
which Mr. Richards shares voting and investment powers. Also
includes options to acquire 2,000 shares, exercisable within
sixty (60) days, pursuant to the Directors' Non-Qualified Stock
Option Plans.
(18) Includes 14,226 shares held jointly with family members in which
Mr. Cole shares voting and investment powers. Also includes
4,070 shares in VNB's Profit Sharing Plan.
(19) Includes 4,516 shares in the VNB Profit Sharing Plan. Also
includes options to acquire 14,900 shares exercisable within
sixty (60) days pursuant to the Officers' Non-Qualified Stock
Option Plans.
(20) Includes 101 shares in which Mr. Fenn has no voting or investment
powers. Also includes 2,228 shares held jointly with a family
member in which Mr. Fenn shares voting and investment powers,
6,303 shares in the VNB Profit Sharing Plan and options to
acquire 17,500 shares, exercisable within sixty (60) days
pursuant to the Officers' Non-Qualified Stock Option Plans.
(21) Includes 28 shares held jointly with a family member in which Mr.
Madden shares voting and investment powers. Also includes 2,386
sharesheld in the VNB Profit Sharing Plan and options to acquire
17,700 shares exercisable within sixty (60) days pursuant to the
Officers' Non-Qualified Stock Option Plans.
(22) Includes 346 shares held by a family member in which Mr. Soucy
has no voting or investment powers. Also includes 4,138 shares
in the VNB Profit Sharing Plan and options to acquire 18,700
shares, exercisable within sixty (60) days pursuant to the
Officers' Non-Qualified Stock Option Plans.
On March 1, 1996, the directors and officers of the Company as a
group (20) had beneficial ownership of 420,268 shares of Company Common
Stock, amounting to 8.78% of the outstanding shares. This includes options
to acquire 121,600 shares, or 2.54% of the outstanding shares, exercisable
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
aggregate 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.
Officers' Non-Qualified Stock Option Plan
The Company maintains an Officers' Non-Qualified Stock Option
Plan under which officers have been granted options to acquire an aggregate
of 36,000 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.
1994 Stock Option Plan
The Company maintains a stock option plan for key employees,
officers and directors of the Company or its subsidiaries which was
approved by stockholders at the 1994 Annual Meeting ("1994 Plan"). Under
the 1994 Plan, officers and directors have been granted options to acquire
an aggregate of 48,000 and 6,500 shares, respectively, of the Company's
Common Stock at prices of $19.00 and $20.25 per share, respectively, and
officers and directors have been granted options, to acquire an aggregate
of 53,800 and 6,000 shares, respectively, of the Company's common stock at
a price of $22.50 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 ten years from the
date of the grant.
Attendance of Directors
The Board of Directors met fourteen (14) times during calendar
year 1995. During 1995, all directors of the Company attended at least 75%
of the aggregate of (1) the total number of meetings of the Board of
Directors 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.
The Board of Directors maintains an Executive Committee which has
Board of Director nominating, investment portfolio strategy and review, and
non-executive officer review functions. Directors serving on the Executive
Committee during 1995 were Anthony F. Abatiell, Zane V. Akins, Philip M.
Drumheller, James E. Griffin,John D. Hashagen, Jr. (President & CEO),
Francis L. Lemay, Donald E. O'Brien and Mark W. Richards. The Committee
met 11 times during 1995. 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 candidates 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 information 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 stockholders, 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 1995, these Directors
served on the Audit Committee: Zane V. Akins, James E. Griffin, Stephan
A. Morse, Donald E.O'Brien and Mark W. Richards. The Audit Committee
appoints Independent Public Accountants and supervises the Audit function
of the Company.
Compensation of Directors
Each director who is not an officer of VFSC, VNB or UB
receives an annual retainer of $5,000 and, in addition, a $500 fee for
each regular monthly Board of Directors' meeting attended, a $400 fee
for the first meeting of a committee of the Board he or she attends on
any particular day and a $300 fee for each subsequent meeting of a
committee of the Board he or she attends on any such day. In addition,
the Chairman of the Board receives an annual retainer of $5,000 and each
committee chairperson receives an annual retainer of $500.
Compensation Committee Report
The Company's executive compensation program is administered
by the Compensation Committee of the Board of Directors ("the
Committee") which is comprised of four independent non-employee
directors: Charles A. Cairns, Chairman, Anthony F. Abatiell, James E.
Griffin and Zane V. Akins, who succeeded Daniel C.Lyons as a Committee
member in November 1995.
The Committee is responsible for evaluating the performance
of the executive officers of the Company and for setting their
compensation, subject to consideration and review by the full Board of
Directors. The executive officers of the Company subject to
Compensation Committee review are the three executive officers of
Vermont Financial Services Corp. and Vermont National Bank, John
D.Hashagen, Jr., Richard O. Madden and Robert G. Soucy, two other
executive officers of Vermont National Bank, Louis J. Dunham and W. Bruce
Fenn and the President and CEO of United Bank, Kenneth R. Cole. These are
the officers who perform executive level policy-making functions for the
holding company and/or its subsidiary banks.
The Committee, with concurrence from the Company's Board of
Directors, has established the following principal objectives of the
executive compensation program:
* Attract and retain quality management
* Increase management's focus on maximizing current earnings
* Encourage management to develop long-term earnings growth plans
* Motivate management to take actions that will enhance
long-term stockholders' value
* Link executive compensation to the financial performance of
the Company and/or its subsidiaries and the Company's stock
value
The Committee has engaged The Wyatt Company of Wellesley,
Massachusetts to assist in the development and maintenance of the executive
compensation program. Wyatt Company representatives have attended Committee
meetings, have consulted with the Committee by telephone and have
provided peer group information and written recommendations for the
various components of the executive compensation program.
The Committee has designed the Company's executive compensation
program based on the principle that the total compensation of each
executive shall be comparable to that of similar executives of banking
companies in the Company's peer group of commercial banking institutions in
the Northeast with comparable financial performance and characteristics.
The Committee has determined that total compensation for the executive
officers shall consist of three components: base salary, an annual
incentive payment, and stock options. A discussion of each of these
components follows:
Base Salary. It is the practice of the Committee to set the
base salaries of the executive officers somewhat below the median base
salary levels of similar executives in the northeaster commercial bank
peer group used for comparison. The Committee's objective is to
decrease the proportion of executive compensation that is fixed and to
have a larger proportion of compensation on a variable, or at risk,
basis. Base salaries are reviewed annually and increases or decreases may
be granted by the Committee and the Board dependent on individual
performance, the Company's and/or its subsidiaries' performance and
peer group salary levels.
The Committee recommended, and the board approved, an increase
in Mr.Hashagen's base salary from $200,000 in 1994 to $220,000 in 1995.
The Committee based this increase on Mr. Hashagen's contribution to the
Company, the improved financial performance of the Company, its increased
stock price and an analysis of base salaries of other President's and
CEOs in the Company's peer group. Mr.Hashagen's 1995 base salary was set
somewhat below the peer group's 1995 median base salary of $265,000 in
accordance with the Committee's practice regarding base salary levels.
The base salaries of the other executive officers of the Company and its
subsidiaries were established in a similar manner.
Annual Incentive Payments. In early 1995 the Committee
recommended, and the Board approved, a 1995 annual incentive plan for the
President and CEO and four other executive officers of the Company
and/or its subsidiaries. This plan established eight levels of
potential incentive payouts ranging from 0% to 40% of the executive's
base salary, dependent upon the Company and/or its subsidiaries achieving
a certain return on assets targets. The Company achieved a return on
assets of 1.23% and Vermont National Bank achieved a return on assets of
1.21%. In accordance with the plan, the five executives participating in
the annual incentive plan received an annual incentive payment equal to
30% of their base salary for 1995.
Stock Options. The Company's stockholders ratified and
approved the Vermont Financial Services Corp. 1994 Stock Option Plan at
the Annual Meeting of stockholders in August, 1994. This Plan provides
for the granting of stock options, not to exceed 225,000 shares of
common stock in aggregate, to key employees, officers and directors of
the Company and its subsidiaries at option prices no less than 100% of
market value on the day granted. During 1995, the Board of Directors,based
on the Committee's recommendations, issued non-qualified stock options
for 59,800 shares. Mr. Hashagen was granted options for 14,000 shares,
sixteen other executive officers and senior officers of the Company and/or
its subsidiaries were granted options on 39,800 shares in aggregate and
each of the 12 non-employee directors was granted an option for 500
shares.
The Committee concluded that the Company's financial performance
and the returns to its stockholders showed substantial improvement in
1995. In its judgement the total compensation for executive management
for 1995 was appropriate for such performance and was adequate to retain
and motivate these executives for the future.
Vermont Financial Services Corp. Compensation Committee
Charles A. Cairns, Chairman
Anthony F. Abatiell
James E. Griffin
Zane V. Akins
Executive Officers
The following tables contain a three-year summary of the total
compensation paid to the CEO of the Company and the other five executive
officers.
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 Restr- All
Annual icted LTIP Other
Name and Compen- Stock Options/Pay Compen-
Principal Salary Bonus sation Awards SARs outs sations
Position Year $ $ $(1) $ # $ $
John D. Hashagen 1995 $220,000 $66,000 N/A N/A 14,000 sh N/A $14,528(2)(5)
President and 1994 200,000 30,000 N/A N/A 12,300 N/A 7,298(2)(4)
Chief Executive 1993 184,000 7,360$25,785 N/A 5,000 N/A 2,249(2)
Officer
Kenneth R. Cole 1995 $109,727 $12,540 N/A N/A N/A N/A $611(2)
UB President and 1994 88,009 11,000 N/A N/A N/A N/A N/A
Chief Exec. Off. 1993 80,538 20,000 N/A N/A N/A N/A 3,763(3)
Richard O. Madden1995 $112,000 $33,600 N/A N/A 7,100 sh N/A $6,720(2)
Exec. Vice Pres.,1994 108,000 16,200 N/A N/A 10,600 N/A 4,111(2)
Treas., Secretary1993 99,209 4,040 12,760 N/A N/A N/A 1,488(2)
Robert G. Soucy 1995 $120,000 $36,000 N/A N/A 7,600 sh N/A $7,306(2)(5)
Exec. Vice Pres.,1994 115,000 17,250 N/A N/A 7,100 N/A 3,620(2)
VNB Sr. Operating1993 110,000 4,400 15,732 N/A 4,000 N/A 1,100(2)
Officer
Louis J. Dunham 1995 $98,000 $29,400 N/A N/A 6,200 sh N/A $5,961(2)
VNB Exec. V.P. 1994 94,000 14,100 N/A N/A 5,700 N/A 3,550(2)
and Sr. Credit 1993 85,000 1,700 5,568 N/A 3,000 N/A 638(2)
Officer
W. Bruce Fenn 1995 $111,077 $33,000 N/A N/A 6,900 sh N/A $7,878(2)(5)
VNB Exec. V.P. 1994 108,000 16,200 N/A N/A 6,600 N/A 4,065(2)
and Sr. Banking 1993 105,000 2,100 17,717 N/A 4,000 N/A 1,575(2)
Officer
</TABLE>
(1) In December, 1993 the discount rate used to compute the liability
under the officers' deferred compensation plan (See "Deferred
Compensation Agreements" following) was reduced from 9% to 7-1/2%.
The associated expenses attributable to Messrs.. Hashagen, Madden,
Soucy, Dunham and Fenn due to this change were $19,597, $10,799,
$12,211, $5,568 and $13,998, respectively, for 1993.
(2) Represents the 25% Company match of the respective employees' 401k
contribution and the employees portion of the Company's contribution
to the Employees Profit Sharing Plan. No Profit Sharing Plan
contribution was made in 1993.
(3) Represents the market value as of December 31 of each year of the
shares allocated to the officers account under the UB ESOP plan for
the respective year.
(4) Includes $778 discount received on purchases of common stock under the
Company's Employee Stock Purchase Plan.
(5) Includes discounts received on purchase of common stock under the
Company's Employee Stock Purchase Plan of $2,754 for Mr. Hashagen,
$1,120 for Mr. Fenn and $452 for Mr. Soucy.
II. OPTION/SAR GRANTS TABLE
<TABLE>
Option/SAR Grants in Last Fiscal Year
PotentialRealizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term (1)
<CAPTION> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g)
% of
Total
Options/
SARs
# of Granted to Exercise
Securities Employees or base Expira-
Underlying in Fiscal Price tion
Name Options Granted Year ($/Sh) Date 5%($) 10%($)
John D.
Hashagen 14,000 26.5% $22.50 5/10/05 $198,102 $502,029
Kenneth R.
Cole 0 0 N/A N/A N/A N/A
Richard O.
Madden 7,100 13.4 22.50 5/10/05 100,466 $254,600
Robert G.
Soucy 7,600 14.4 22.50 5/10/05 107,541 272,530
Louis J.
Dunham 6,200 11.7 22.50 5/10/05 87,731 222,327
W. Bruce
Fenn 6,900 13.1 22.50 5/10/05 97,636 247,429
</TABLE>
(1) The assumed growth rates in price in the Company's stock are not
necessarily indicative of actual performance that may be expected.
III. OPTION EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option Exercises in Last Fiscal Year, and FY-End Option Value
<TABLE>
<CAPTION> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Options at FY-End ($)
FY-End (#)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable(2)
John D.
Hashagen N/A N/A 31,300/0 $438,106/$0
Kenneth R.
Cole 13,800 $191,475(1) 0/0 $0/$0
Richard O.
Madden N/A N/A 17,700/0 $250,606/$0
Robert G.
Soucy N/A N/A 18,700/0 $264,419/$0
Louis P.
Dunham N/A N/A 14,900/0 $210,181/$0
W. Bruce
Fenn N/A N/A 17,500/0 $248,194/$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, 1995.
Performance Graph
The following graph compares the cumulative total stockholder
return (return) of the stockholders 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, 1990 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>
1990 1991 1992 1993 1994 1995
VFSC $100 $138.53 $227.38 $256.27 $316.73 $543.57
NASDAQ 100 160.56 186.87 214.51 209.69 296.30
NBS 100 164.09 238.85 272.39 271.41 404.35
</TABLE>
Deferred Compensation Agreements
VNB has entered into Executive Deferred Compensation Agreements
with certain officers, including Mr. Hashagen and the other executive
officers 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 certain 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 provides 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. Cole is covered under a Supplemental Executive Retirement
Plan (SERP) which is designed to augment his retirement benefit from UB's
pension plan and his social security benefit so that his aggregate annual
retirement benefit will approximate 70% of his highest 3-year average
salary prior to retirement. Under the terms of his SERP, it is
anticipated that Mr. Cole will receive an annual supplemental
retirement benefit of $46,239 at age 65. UB has purchased a
split-dollar life insurance policy which will provide this benefit to Mr.
Cole.
Management Continuity Agreements
The Company and VNB have entered into agreements with VNB's
five executive officers, Messrs. Hashagen, Madden, Soucy, Fenn and Dunham
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 termination 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 retirement. 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
termination 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 $1,430,000. These severance payments are subject to up
to a 50% reduction 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 substantially outside Vermont. Additionally, the
officer will be entitled to continuation 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 UB have entered into agreements to employ the
following UB officers: Kenneth R. Cole as Senior Vice President &
Treasurer of UB; James Neill as Senior Vice President of UB; and Robert
W. Phillips as Vice President of UB. Under these agreements, Mr. Cole
was to receive a base salary of $82,500, Mr.Neill a base salary of
$76,300 and Mr. Phillips a base salary of $59,700, all subject to annual
increases. Each agreement is to expire May, 1997. On January 1,1995, Mr.
Cole became President and Chief Executive Officer of UB at an annual
salary of $110,000.
In addition to and as part of the foregoing agreements, Messrs.
Cole,Neill, Phillips and Noska have entered management continuity
agreements which are similar in form to agreements currently in force
between the Company and VNB and their senior officers. Each agreement's
term ended on January 31, 1995 and was renewed. These agreements are
automatically renewable thereafter unless the Company and UB elect not to
renew it. Under the management continuity agreements,the above officers
would be entitled to severance payments of 200% of base salary at the time
of termination if terminated under certain circumstances after a change of
control of the Company or UB.
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 UB'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 UB'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 constitute a majority of such board; or (iii) the stockholders
of the Company or UB approve a merger or consolidation of the Company or
UB which would result in such stockholders holding less than 70% of the
combined voting power of the surviving entity immediately thereafter, or
if such stockholders approve the sale of all or substantially all of the
assets of the Company or UB.
The management continuity agreements do not provide for
severance benefits in instances where termination is due to death,
disability or retirement. 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 UB.
Profit-Sharing Plan
Each employee of VNB and UB, including executive officers,
becomes eligible to participate in the Company'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 service, 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 Company's
contribution to the Profit-Sharing Plan. Vested amounts not so received in
cash are distributed to participants upon their retirement or earlier
upon termination of employment. During 1995, the Company made a
contribution of approximately $500,000 to the Profit-Sharing Plan.
Retirement Plan
The VNB Retirement Plan covers substantially all eligible
employees 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
retirement at age 65 to employees at specified salary levels (based upon
the average annual rate of salary during the highest five years within
the final ten years of employment) at stated years of service with the
Bank. The amounts shown are after deduction of estimates for Social
Security reductions based on the Social Security law as of January 1, 1996.
<TABLE>
Estimated Annual Benefits at Retirement
By Specified Remuneration and
Years of Service Classification
<CAPTION> <C> <C> <C> <C> <C>
Final Average Years of Service
Compensation 5 10 15 20 25
$ 20,000 $ 1,480 $ 2,959 $ 4,439 $ 5,918 $ 7,398
40,000 3,430 6,859 10,289 13,718 17,148
60,000 5,702 11,405 17,107 22,810 28,512
80,000 8,102 16,205 24,307 32,410 40,512
100,000 10,502 21,005 31,507 42,010 52,512
120,000 12,902 25,805 38,707 51,610 64,512
140,000 15,302 30,605 45,907 61,210 76,512
160,000 * 17,702 35,405 53,107 70,810 88,512
180,000 * 20,102 40,205 60,307 80,410 100,512
200,000 * 22,502 45,005 67,507 90,010 112,512
220,000 * 24,902 49,805 74,707 99,610 124,512 *
240,000 * 27,302 54,605 81,907 109,210 136,512 *
260,000 * 29,702 59,405 89,107 118,810 148,512 *
</TABLE>
* Under current regulations of the Internal Revenue Code, the
maximum annual benefit payable from a defined benefit plan during 1996 is
$120,000 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 $120,000 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 stockholders of the Company with general
information 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 employee, which rights will in all cases be determined
by the appropriate legal documents governing the Plan.
UB provides a retirement plan for all eligible employees
through the Savings Bank Employees Retirement Association ("SBERA"),
an unincorporated association of savings banks operating within
Massachusetts and other organizations providing services to or for
savings banks SBERA's sole purpose is to enable the participating
employers to provide pensions and other benefits for their employees.
Each UB 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 participants 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
participant 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 1995 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 1994 which is $24,312. 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 retirement age. Normal
retirement age under the plan is 65; a reduced early retirement benefit
is payable from age 50 to 65 under certain conditions.
The following table illustrates annual pension benefits for
retirement 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 and age 65 Retirement
<CAPTION> <C> <C> <C> <C>
Average Compensation 10 years 15 years 20 years 25 years
$ 20,000 $ 2,500 $ 3,750 $ 5,000 $ 6,250
40,000 5,845 8,767 11,690 14,612
60,000 9,545 14,317 19,090 23,882
80,000 13,245 19,867 26,490 33,112
100,000 16,945 25,417 33,890 42,362
120,000 20,645 30,967 41,290 51,612
140,000 24,345 36,517 48,690 60,862
* 150,000 26,105 39,292 52,390 65,487
</TABLE>
* Federal law does not permit defined benefit pension plans to
recognize compensation in excess of $150,000 for plan years
beginning in 1994 (11/01/94 for SBERA).
As of December 31, 1995 Messrs. Cole and Neill had 10 and 12
years of credited service, respectively.
Interest of Directors and Officers in Certain Transactions
Some directors and officers of VNB, UB 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 1995. Additional
transactions 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 organizations which were customers of or had transactions with the
Banks in the ordinary course of business during 1995. All outstanding
loans and commitments included in such transactions were made in the
ordinary course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than
the normal risk of collectibility 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 relation 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 organizations 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 of, such organizations in
the future.
Two directors of the Company are attorneys who have been retained
in the past to represent VNB or the Company in appropriate circumstances.
During 1995, 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 1996
to audit the consolidated financial statements of the Company, and for
other services.
Representatives of Coopers & Lybrand will be present at the
Meeting, 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
presented 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 other matter which may be properly presented for
action at the meeting.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholders who may desire to submit proposals for the
consideration of the Company's stockholders at its Annual Meeting of
Stockholders in 1997,scheduled to be held on April 29, 1997, 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 12, 1996.
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 UB. The Company will bear the cost of printing,
assembling, and mailing this Proxy Statement, the enclosed form of
proxy, and the related proxy materials, and other charges and expenses
incurred in connection with the solicitation of the stockholders 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 otherwise 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, 1995, as filed with the Securities & Exchange
Commission, may be obtained, without charge, by any stockholder 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
sincerely appreciated. Your management has prepared an interesting
and informational presentation about the Company's performance, and we
urge you to attend the Annual Meeting. Please join us for a continental
breakfast preceding the meeting at 9:00 a.m.
By Order of the Board of Directors
John D. Hashagen, Jr., President
Brattleboro, Vermont
Dated: March 15, 1996
VERMONT FINANCIAL SERVICES CORP.
Proxy Solicited on Behalf of Board of Directors
The undersigned hereby appoints John D. Hashagen, Jr., Anthony F.
Abatiell and Richard O. Madden, and each of them, attorneys and proxies
with full power of substitution in each, to vote all of the stock of
Vermont Financial Services Corp. (the "Company") which the undersigned
is/are entitled to vote at the Annual Meeting of Stockholders of the
Company to be held at The Woodstock Inn, Woodstock, VT, on April 30, 1996
at 10:00 a.m. and at any and all adjournments thereof. All powers may be
exercised by a majority of said proxyholders or substitutes voting or
acting, or if only one votes and acts, by that one. Receipt of the
Company's Proxy Statement dated March 15, 1996 (the "Proxy Statement") is
acknowledged. If not revoked, this Proxy shall be voted, unless authority
specifically to the contrary is provided, as specified below, and as to any
other business which may legally come before the meeting, in accordance
with the recommendation of the Board of Directors.
IF NO SPECIFICATION IS MADE, SUCH SHARES WILL BE VOTED "FOR" ITEM #1.
1. Proposal to elect Class III Directors
___ FOR ALL NOMINEES BELOW
___ WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES BELOW
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE
THROUGH HIS NAME ON THE LIST BELOW.
Nominees:
Anthony F. Abatiell, Francis L. Lemay, Roger M. Pike, and Mark W.
Richards
2. To act on whatever business may properly be brought before the Meeting
or any adjournment thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ITEM #1 ON THE
REVERSE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE.
Date: ______________________
Signature(s) ______________________
______________________
______________________
Please sign here exactly as name(s) appear(s) on
the left. When signing as attorney, executor,
administrator, trustee, guardian, or in any
other fiduciary capacity, give full title.
If more than one person acts as trustee, all
should sign. ALL JOINT OWNERS MUST SIGN.
___ I/We plan to attend the Annual Meeting: ___ Number
PLEASE MARK (ON REVERSE SIDE), SIGN AND DATE, AND MAIL IN THE
ENCLOSED POSTAGE PAID ENVELOPE
