Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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VERMONT FINANCIAL SERVICES CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 03-0284445
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OF INCORPORATION OR ORGANIZATION)
100 MAIN STREET, BRATTLEBORO, VERMONT 05301
802-257-7151
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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Vermont Federal Bank, FSB Stock Option Plan
Eastern Bancorp, Inc. Stock Option Plan
(FULL TITLE OF THE PLANS)
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JOHN D. HASHAGEN, JR.
VERMONT FINANCIAL SERVICES CORP.
100 Main Street
Brattleboro, Vermont 05301
802-257-7151
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPY TO:
STEPHEN J. COUKOS, ESQ.
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
(617) 338-2800
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to Amount to be Proposed Maximum Offering Proposed Maximum Aggregate Amount of
be Registered(1) Registered Price Per Security(2) Aggregate Offering Price(2) Registration Fee
- ------------------------------------ ------------ ------------------------- --------------------------- -------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 9,682 shares $ 5.16 $ 49,959.12 $ 15.14
Common Stock, par value $1.00 1,936 shares $ 8.78 $ 16,998.08 $ 5.15
Common Stock, par value $1.00 20,333 shares $ 9.03 $ 183,606.99 $ 55.64
Common Stock, par value $1.00 9,485 shares $ 13.94 $ 132,220.90 $ 40.07
Common Stock, par value $1.00 17,426 shares $ 14.21 $ 247,623.46 $ 75.04
Common Stock, par value $1.00 118,366 shares $ 14.72 $ 1,742,347.52 $ 527.98
Common Stock, par value $1.00 21,780 shares $ 18.33 $ 399,227.40 $ 120.98
Common Stock, par value $1.00 968 shares $ 21.04 $ 20,366.72 $ 6.17
Common Stock, par value $1.00 6,776 shares $ 21.81 $ 147,784.56 $ 44.78
Common Stock, par value $1.00 11,390 shares $ 24.52 $ 279,282.80 $ 84.63
Common Stock, par value $1.00 7,744 shares $ 25.82 $ 199,950.08 $ 60.59
Total 225,886 shares $ 3,419,367.63 $ 1,036.17
<FN>
(1) Options to purchase Common Stock under the Vermont Federal Bank, FSB Stock Option Plan and the Eastern Bancorp, Inc. Stock
Option Plan were assumed by Vermont Financial Services Corp. (the "Company") pursuant to a certain Agreement and Plan of
Reorganization by and among the Company, Eastern Bancorp, Inc. and Vermont Federal Bank, FSB, dated as of November 13, 1996.
(2) The Proposed Maximum Offering Price Per Share was estimated pursuant to Rule 457(h) under the Securities Act solely for the
purpose of calculating the registration fee. With respect to 226,222 shares which are subject to outstanding options to
purchase Common Stock under the Vermont Federal Bank, FSB Stock Option Plan and the Eastern Bancorp, Inc. Stock Option Plan,
the Proposed Maximum Offering Price Per Share was estimated pursuant to Rule 457(h), under which the per share price of options
to purchase stock under an employee stock option plan may be estimated by reference to the exercise price of such options.
</FN>
</TABLE>
<PAGE>
VERMONT FINANCIAL SERVICES CORP.
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents which have been filed by the Company with the
Securities and Exchange Commission are incorporated by reference in and made a
part of this Registration Statement, as of their respective dates:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
(b) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997; and
(c) The description of the Common Stock of the Company contained
in the Company's Prospectus dated April 16, 1997 and filed
with the Commission pursuant to Rule 424(b) (File No.
333-21023).
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be part
hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
herein, or in any subsequently filed document which also is or is deemed to be
incorporated by reference, modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Registration Statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides, in effect, that any person made a party to any action by reason of the
fact that he is or was a director, officer, employee or agent of the Company may
and, in certain cases, must be indemnified by the Company against, in the case
of a non-derivative action, judgments, fines, amounts paid in settlement and
reasonable expenses (including attorney's fees), if in either type of action he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company and, in a non-derivative action,
which involves a criminal proceeding, in which such person had no reasonable
cause to believe his conduct was unlawful. This indemnification does not apply,
in a derivative action, to matters as to which it is adjudged that the director,
officer, employee or agent is liable to the Company, unless upon court order it
is determined that, despite such adjudication of liability, but in view of all
the circumstances of the case, he is fairly and reasonably entitled to indemnity
for expenses.
II - 1
<PAGE>
Article Nine of the Company's Certificate of Incorporation provides
that VFSC shall indemnify each person who is or was an officer or director of
VFSC to the fullest extent permitted by Section 145 of the DGCL.
Article Nine of the Company's Certificate of Incorporation states that
no director of the Company shall be liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent that exculpation from liability is not permitted under the DGCL as in
effect when such breach occurred.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits.
Exhibit No. Description
4.1 Vermont Federal Bank, FSB Stock Option Plan
4.2 Eastern Bancorp, Inc. Stock Option Plan
5.1 Opinion of Sullivan & Worcester LLP
23.1 Consent of Coopers & Lybrand LLP
23.2 Consent of Sullivan & Worcester LLP (contained in Exhibit 5.1)
24 Power of Attorney (included in signature page of this
Registration Statement)
Item 9. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement:
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement;
(2) that, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering;
II - 2
<PAGE>
(b) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Company's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in that
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Brattleboro, State of Vermont, on June 25, 1997.
VERMONT FINANCIAL SERVICES CORP.
By: /s/ John D. Hashagen, Jr.
Name: John D. Hashagen, Jr.
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated. By so signing, each of the
undersigned in his capacity as a director or officer, or both, as the case may
be, of the registrant, does hereby appoint John D. Hashagen, Jr., and Richard O.
Madden, and each of them, with full power of substitution, his true and lawful
attorneys or attorney in-fact and agent to execute in his name, place or stead,
in his capacity as a director or officer or both, as the case may be, of the
registrant, any and all amendments thereto and all instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission. Each of said attorneys shall have full power and authority
to do and perform in the name and on behalf of each of the undersigned, in any
and all capacities, every act whatsoever requisite or necessary to be done in
the premises as fully and to all intents and purposes as each of the undersigned
might or could do in person, hereby ratifying and approving the acts of said
attorney and each of them.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John D. Hashagen, Jr. President, Director and Chief June 25, 1997
John D. Hashagen, Jr. Executive Officer (Principal Executive
Officer)
/s/ Richard O. Madden Executive Vice President, June 25, 1997
Richard O. Madden Treasurer and Chief Financial
Officer (Principal Financial and
Accounting Officer)
/s/ Anthony F. Abatiell Director June 25, 1997
Anthony F. Abatiell
Director June __, 1997
Zane V. Akins
Director June __, 1997
Charles A. Cairns
II - 4
<PAGE>
/s/ William P. Cody Director June 25, 1997
William P. Cody
Director June __, 1997
Allyn W. Coombs
Director June __, 1997
Beverly G. Davidson
/s/ Philip M. Drumheller Director June 25, 1997
Philip M. Drumheller
/s/ James E. Griffin Director June 25, 1997
James E. Griffin
Director June __, 1997
Francis L. Lemay
/s/ Kimball E. Mann Director June 25, 1997
Kimball E. Mann
/s/ Stephan A. Morse Director June 25, 1997
Stephan A. Morse
Director June __, 1997
Roger M. Pike
/s/ Mark W. Richards Director June 25, 1997
Mark W. Richards
</TABLE>
II - 5
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
4.1 Vermont Federal Bank, FSB Stock Option Plan
4.2 Eastern Bancorp, Inc. Stock Option Plan
5.1 Opinion of Sullivan & Worcester LLP
23.1 Consent of Coopers & Lybrand LLP
23.2 Consent of Sullivan & Worcester LLP (contained in Exhibit 5)
24 Power of Attorney (included in signature page of this
Registration Statement)
II - 6
Exhibit 4.1
VERMONT FEDERAL BANK, FSB
STOCK OPTION PLAN
1. Purpose
This Stock Option Plan (the "Option Plan") is intended as a performance
incentive and to encourage stock ownership by officers, other key employees and
directors of Vermont Federal Bank, FSB (the "Bank") or of other corporations in
which stock possessing 50 percent or more of the total combined voting power is
owned by the Bank (the "Subsidiaries"), so that the person to whom the option is
granted (the "Optionee") may acquire or increase his or her proprietary interest
in the success of the Bank, and to encourage the Optionee to remain in the
employ or service of the Bank or its Subsidiaries. It is intended that options
granted under the Option Plan will qualify as incentive stock options (the
"Incentive Options"), as defined in Section 422A of the Internal Revenue Code of
1954, as amended (the "Code"), except for options granted to key employees in
excess of the limitations provided in paragraph (d) of Section 4 hereof and
options granted to directors who are not key employees of the Bank or its
Subsidiaries.
2. Administration
(a) The Option Plan shall be administered by a committee of not less
than three directors of the Bank, none of whom is an officer or other salaried
employee of the Bank. The members of this committee (the "Option Committee")
shall be appointed by the Board of Directors. A majority vote of the members of
the Option Committee shall be required for all its actions.
(b) The Option Committee shall have the power, subject to, and within
the limits of, the express provisions of the Option Plan:
(i) To determine from time to time which of the eligible
persons (other than members of the Option Committee shall be granted
options under the Option Plan, and the time or times when, and the
number of shares for which an option or options shall be granted to
such persons;
(ii) To prescribe the other terms and provisions (which need
not be identical) of each option granted under the Option Plan to
eligible persons (other than members of the Option Committee);
(iii) To constitute and interpret the Option Plan and options
granted under it, and to establish, amend, and revoke rules and
regulations for administration. The Option Committee, in the exercise
of this power, may correct any defect or supply any omission, or
reconcile any inconsistency in the Option Plan, or in any option
agreement, in the manner and to the extent it shall deem necessary or
expedient to make the Option Plan
<PAGE>
2
fully effective. In exercising this power, the Option Committee may
retain counsel at the expense of the Bank. All decisions and
determinations by the Option Committee in exercising this power shall
be final and binding upon the Bank and the Optionee;
(iv) To determine the duration and purposes of leaves of
absence which may be granted to an Optionee (other than a member of the
Option Committee) without constituting a termination of his or her
employment or service for purposes of the Option Plan; and
(v) Generally, to exercise such powers and to perform such
acts as are deemed necessary or expedient to promote the best interest
of the Bank with respect to the Option Plan.
(c) The Board of Directors (with members of the Option Committee not
voting) shall administer the Option Plan with respect to options granted to
members of the Option Committee in accordance with the provisions of Section
4(c).
3. Stock
(a) The stock subject to the options shall be shares of the Bank's
authorized but unissued common stock, par value $1.00 per share (the "Common
Stock"). The number of shares for which options may be granted, excluding the
shares involved in the unexercised portion of any cancelled, terminated or
expired options, shall not exceed an aggregate of 84,007* shares of Common
Stock. Such number shall be subject to adjustment as provided in Section 8
hereof.
(b) Whenever any outstanding option under the Option Plan expires, is
cancelled or is otherwise terminated, the shares of Common Stock allocable to
the unexercised portion of such option may again be subjected to options under
the Option Plan.
4. Eligibility
(a) The persons who shall be eligible to receive options shall be
officers, other key employees and directors of the Bank or its Subsidiaries. It
is intended that the Option Plan be used as an incentive for those officers and
other key employees responsible for the decision making policy formation and
personnel supervision which most directly affect the earnings of the Bank and
the welfare of its stockholders. Directors who are not full-time salaried
employees of the Bank will be eligible to be granted options only in connection
with the Bank's conversion from the mutual to stock form of organization, and
not thereafter. The Option Committee may from time to time grant options to one
or more eligible persons (other than members of the Option Committee. An
optionee may hold more than one option.
- --------
1 Such number equals 10% of the number of shares of Common Stock outstanding
after the Bank's conversion to stock form.
<PAGE>
3
(b) No person shall be granted any Incentive Option if, at the time of
the grant, such person owns, directly or indirectly, more than ten percent of
the total combined voting power or value of the Bank or of its parent or
subsidiary unless the option price is at least 110 percent of the fair market
value of the common stock and the exercise period of such Incentive Option is by
its terms limited to five years.
(c) The maximum number of shares of Common Stock for which options may
be granted to any director who is not full-time salaried employee of the Bank or
its Subsidiaries, shall not exceed one percent of the shares of Common Stock
covered by the Option Plan. The total number of shares of Common Stock which may
be granted under the Option Plan to all eligible persons, not employed on a
full-time salaried basis by the Bank or its Subsidiaries, shall not in the
aggregate exceed nine percent of the shares of Common Stock covered by the
Option Plan. The maximum number of shares of Common Stock for which options may
be granted to any employee-director shall not exceed 30 percent of the shares of
Common Stock covered by the Option Plan.
(d) No person shall be eligible to receive Incentive Options under this
Option Plan and all other such options plans of the Bank (or a parent or
subsidiary as defined in ss.425 of the Code) in any calendar year covering stock
having an aggregate fair market value (determined at the time the option is
granted) in excess of $100,000, plus any unused limit carryover to such year as
defined in ss.422A(c)(4) of the Code. Any option granted in excess of the
foregoing limitations shall be clearly and specifically designated as not being
an Incentive Option.
5. Term of the Option Agreement
Each option agreement shall contain such provisions as the Option
Committee (or the Board of Directors with respect to members of the Option
Committee) shall from time to time deem appropriate. Option agreements need not
be identical, but each option agreement by appropriate language shall include
the substance of all of the following provisions:
(a) Any option shall expire on the date specified in the option
agreement, which date shall not be later than the tenth anniversary of the date
on which the option was granted. All options must be granted by the tenth
anniversary of the effective date of the Option Plan.
(b) The minimum number of shares with respect to which an option may be
exercised at any one time shall be 100 shares, unless the number purchased is
the total number at the time available for purchase under the option.
(c) Each option shall be exercisable in such installments (which need
not be equal) and at such times as designated by the Option Committee (or the
Board of Directors with respect to the Option Committee). To the extent not
exercised, installments shall accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the date the
option expires. Notwithstanding any other provision of this Option Plan, no
Incentive Option shall be exercisable by an Optionee while there is outstanding
within the meaning of ss.422A(c)(7) of the Code any other Incentive Option
granted, before the granting of such option, to such optionee to purchase stock
in the Bank, or in a parent, subsidiary or predecessor
<PAGE>
4
corporation referred to in ss.422A(b)(7) of the Code. Unless otherwise
designated, no option shall be exercisable within one year of the date on which
the option was granted except in the event of a change in control or threatened
change in control (as defined in Section 5(h) hereof) of the Bank. In such
event, all options granted prior to such change in control or threatened change
in control shall become immediately exercisable.
(d) The purchase price per share of Common Stock under each option
shall be not less than the fair market value of the Common Stock subject to the
option on the date the option is granted. For this purpose, the fair market
value of the Common Stock shall be determined by the Option Committee (or by the
Board of Directors with respect to members of the Option Committee), provided,
however, that (i) if the Common Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System on the date the
option is granted, fair market value shall not be less than the average of the
highest bid and lowest asked prices of the Common Stock on such System on such
date, or (ii) if the Common Stock is admitted to trading on a national
securities exchange on the date the option is granted, fair market value shall
not be less than the last sale price reported for the Common Stock on such
exchange on such date or on the last date preceding such date on which a sale
was reported.
(e) The Optionee shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares of Common Stock
subject to such option unless and until the option shall have been exercised
pursuant to the terms thereof, the Bank shall have issued and delivered the
shares to the Optionee, and the Optionee's name shall have been entered as a
stockholder of record on the books of the Bank. Thereupon, the Optionee shall
have full voting, dividend and other ownership rights with respect to such
shares of Common Stock.
(f) Except as provided in Section 9 hereof:
(i) All options granted pursuant to the Option Plan shall not
be transferable except by will or the laws of descent and distribution,
and shall be exercisable during the Optionee's lifetime only by the
Optionee; and
(ii) No assignment or transfer of the option, or of the rights
represented thereby, whether voluntary or involuntary, by option of law
or otherwise, shall vest in the assignee or transferee any interest or
right in the option whatsoever, but immediately upon any attempt to
assign or transfer the option the same shall terminate and be of no
force or effect.
(g) The option shall be subject to any provision necessary to assure
compliance with federal and state securities laws.
(h) For purposes of the Option Plan, the term "change in control" shall
be deemed to have taken place if: (i) a third person, including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the
beneficial owner of shares of the Bank having 20% or more of the total number of
votes that may be cast for the election of directors of the Bank; or (ii) as the
result of, or in connection with, any cash tender or exchange offer, merger or
other business combination, sale of assets or contested election, or any
combination of the
<PAGE>
5
foregoing transactions, the persons who were directors of the Bank before such
transaction shall cease to constitute a majority of the Board of Directors of
the Bank or any successor institution.
6. Method of Exercise, Payment of Purchase Price
(a) An option may be exercised by the Optionee delivering to the Option
Committee (or the Board of Directors with respect to members of the Optionee
Committee) on any business day a written notice specifying the number of shares
of Common Stock the Optionee then desires to purchase (the "Notice").
(b) Payment for the shares of Common Stock purchased pursuant to the
exercise of an option shall be in either (i) cash equal to the option price for
the number of shares specified in the Notice (the "Total Option Price"), or (ii)
in the discretion of the Option Committee (or the Board of Directors with
respect to members of the Option Committee) shares of Common Stock of the Bank
with a fair market value, determined as provided in Section 5 hereof, equal to
or less than the Total Option Price, plus cash, for an amount equal to the
amount, if any, by which the Total Option Price exceeds the fair market value of
the Common Stock.
7. Use of Proceeds from Stock
Proceeds from the sale of Common Stock pursuant to options granted
under the Option Plan shall constitute general funds of the Bank to be used
primarily for home mortgage and other lending activities.
8. Adjustment Upon Changes in Capitalization
(a) If the shares of the Bank's Common Stock as a whole are increased,
decreased or changed into, or exchanged for, a different number or kind of
shares or securities of the Bank, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or the
like, an appropriate and proportionate adjustment shall be made in the number
and kinds of shares subject to the Option Plan and in the number, kinds, and per
share exercise price of shares subject to unexercised options or portions
thereof granted prior to any such change. Any such adjustment in an outstanding
option, however, shall be made without a change in the total price applicable to
the unexercised portion of the option but with a corresponding adjustment in the
price for each shares of Common Stock covered by the option.
(b) Upon dissolution or liquidation of the Bank, or upon a
reorganization, merger or consolidation in which the Bank is not the surviving
corporation, or upon the sale of substantially all of the property of the Bank
to another corporation, the Option Plan and the options issued thereunder shall
terminate, unless provision is made in connection with such transaction for the
assumption of options theretofore granted, or the substitution for such options
of new options of the successor employer corporation or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds of shares and
the per share exercise prices. In the event of such termination, all outstanding
options shall be exercisable in full for at least 30 days prior to the
termination date whether or not exercisable during such period.
<PAGE>
6
(c) Adjustments under this Section shall be made by the Option
Committee whose determination as to what adjustment shall be made, and the
extent thereof, shall be conclusive. The Option Committee shall have the
discretion and power in any such event to determine and to make effective
provision for the acceleration of the time during which the option may be
exercised, notwithstanding the provisions of the option setting forth the date
or dates of which all or any part of it may be exercised. No fractional shares
of Common Stock shall be issued under the Option Plan on account of any
adjustment specified above.
9. Termination of Employment or Service
(a) In the event of the death of an Optionee while in the employ or
service of the Bank or its Subsidiaries, the option, whether or not exercisable
at the time of the death of the Optionee, may be exercised, as provided in
Section 6 hereof, by the estate of the Optionee or by a person who acquired the
right to exercise such option by bequest or inheritance from such Optionee,
within one year after the date of such death but not later than the date on
which the option would otherwise expire.
(b) If the employment or service of an Optionee is terminated by reason
of disability as defined in ss.105(d)(4) of the Code, the options held by such
Optionee may be exercised, whether or not exercisable at the time of such
termination, within one year after such termination but not later than the date
on which the options would otherwise expire.
(c) If the employment or service of an Optionee is terminated for any
reason other than such death or disability, options held by such Optionee shall,
to the extent not theretofore exercised, be canceled upon such termination and
shall not thereafter be exercisable; provided, however, that an Optionee whose
employment is terminated by retirement in accordance with the Bank's normal
retirement policies, as determined by the Option Committee, shall be permitted
to exercise Incentive Options, whether or not exercisable at the time of such
termination, within three months after the date of such termination, but not
later than the date on which the Incentive Options would otherwise expire, and
shall be permitted to exercise any options which are not Incentive Options not
later than the date on which options would otherwise expire; and, provided
further, that an Optionee whose employment or service is voluntary or
involuntarily terminated within six months after a change in control of the
Bank, as defined in Section 5(c) hereof, shall be permitted to exercise options,
whether or not exercisable at the time of such termination, within three months
after the date of such termination but not later than the date on which the
options would otherwise expire.
10. Amendment of the Option Plan
The Board of Directors at any time, and from time to time, may amend
the Option Plan, subject to any required regulatory approval and to the
limitation that, except as provided in Section 8 hereof, no amendment shall be
effective unless approved by the affirmative vote of a majority of the
outstanding shares of the Bank at an annual or special meeting held within
twelve months before or after the date of such amendment's adoption, where such
amendment will:
<PAGE>
7
(a) Increase the number of shares of Common Stock as to which options
may be granted under the Option Plan;
(b) Change in substance Section 4 hereof relating to eligibility to
participate in the Option Plan;
(c) Change the minimum option price; or
(d) Increase the maximum term of options provided herein.
Except as provided in Section 8 hereof, rights and obligations under
any option granted before amendment of the Option Plan shall not be altered or
impaired by amendment of the Option Plan, except with the consent of the person
to whom the option was granted.
11. Termination of Suspension of Option Plan
The Board of Directors at any time may terminate or suspend the Option
Plan. Unless sooner terminated, the Option Plan shall terminate on the tenth
anniversary of the effective date specified in Section 14 hereof, but such
termination shall not affect any option theretofore granted. An option may not
be granted while the Option Plan is suspended or after it is terminated.
Rights and obligations under any option granted while the Option Plan
is in effect shall not be altered nor impaired by suspension or termination of
the Option Plan except with the consent of the Optionee. An option may be
terminated by agreement between an Optionee and the Bank and, in lieu of the
terminated option, a new option may be granted with an exercise price which may
be higher or lower than the exercise price of the termination option.
12. Nonexclusivity of the Plan
Neither the adoption of the Option Plan by the Board of Directors nor
the submission of the Plan to the stockholders of the Bank for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the
Option Plan, and such arrangements may be either applicable generally or only in
specific cases.
13. Government and other Regulations
(a) The obligation of the Bank to seal and deliver shares of Common
Stock under options granted under the Option Plan shall be subject to all
applicable laws, rules and regulations and the obtaining of all such approvals
by governmental agencies as may be deemed necessary or appropriate by the Board
of Directors of the Bank.
(b) The Option Plan is intended to comply with Rule 16b-3 under the
Securities Exchange Act of 1934. Any provision inconsistent with such Rule shall
be inoperative and shall not affect the validity of the Option Plan.
<PAGE>
8
14. Effective Date of Option Plan
The Option Plan shall become effective upon commencement of the public
offering in connection with the conversion of the Bank from mutual to stock
form, or if no public offering is held, upon consummation of the conversion;
provided, however, that the Option Plan shall be subject to approval by a
majority of the votes cast at an annual or special meeting of the stockholders
of the Bank held within twelve months of such effective date. No options granted
under the Option Plan prior to such stockholder approval may be exercised until
such approval has been obtained.
Exhibit 4.2
EASTERN BANCORP, INC.
STOCK OPTION PLAN
Eastern Bancorp, Inc. (the "Company") sets forth herein the terms of
this Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Company
by providing eligible individuals (as designated pursuant to Section 4 below)
with an opportunity to acquire or increase a proprietary interest in the
Company, which thereby will create a stronger incentive to expend maximum effort
for the growth and success of the Company and its subsidiaries, and will
encourage such eligible individuals to remain in the employ or service of the
Company or that of one or more of its subsidiaries. Each stock option granted
under the Plan (an "Option") is intended to be an "incentive stock option"
within the meaning of Section 422A of the Internal Revenue Code of 1986, or the
corresponding provision of any subsequently enacted tax statue, as amended from
time to time (the "Code") ("Incentive Stock Option"), except (i) to the extent
that any such Option would exceed the limitations set forth in Section 7 below;
(ii) for Options specifically designated at the time of grant as not being
"incentive stock options"; and (iii) for Options granted to directors who are
not officers or other salaried employees of the Company or any of its
subsidiaries.
2. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board of
Directors of the Company (the "Board"), which shall have the full power and
authority to take all actions, and to make all determinations required or
provided for under the Plan or any Option granted or Option Agreement (as
defined in Section 8 below) entered into hereunder and all such other actions
and determinations not inconsistent with the specific terms and provisions of
the Plan deemed by the Board to be necessary or appropriate to the
administration of the Plan or any Option granted or Option Agreement entered
into hereunder. All such actions and determinations shall be by the affirmative
vote of a majority of the members of the Board present at a meeting at which any
issue relating to the Plan is properly raised for consideration or by unanimous
consent of the Board executed in writing in accordance with the Company's
Certificate of Incorporation and By-Laws, and with applicable law. The
interpretation and construction by the Board of any provision of the Plan or of
any Option granted or Option Agreement entered into hereunder shall be final and
conclusive.
(b) Committee. The Board may from time to time appoint a Stock
Option Committee (the "Committee") consisting of not less than three members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any of its subsidiaries,
<PAGE>
and each of whom shall qualify in all respects as a "disinterested person" as
defined in Rule 16b-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934. The Board, in its sole discretion, may provide
that the role of the committee shall be limited to making recommendations to the
Board concerning any determinations to be made and actions to be taken by the
Board pursuant to or with respect to the Plan, as set forth in Section 2(a)
above, as the Board shall determine, consistent with the Certificate of
Incorporation and By-Laws of the Company and applicable law. The Board may
remove members, add members, and fill vacancies on the committee from time to
time, all in accordance with the Company's Certificate of Incorporation and
By-Laws, and with applicable law. The majority vote of the Committee, or acts
reduced to or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.
(c) No Liability. No member of the Board or of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option granted or Option Agreement entered into hereunder.
(d) Delegation to the Committee. In the event that the Plan or
any Option granted or Option Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may
be taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in Section 2(b) above. Unless otherwise expressly determined by the Board,
any such action or determination by the Committee shall be final and conclusive.
(e) Action by the Board. The Board may act under the Plan
other than by, or in accordance with the recommendation of, the Committee,
constituted as set forth in Section 2(b) above, only if a majority of the Board
and a majority of the directors acting in any matter hereunder are
"disinterested persons" as defined in Rule 16b-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
3. STOCK
The stock that may be issued pursuant to Options granted under
the Plan shall be shares of Common Stock, par value $.01 per share, of the
Company (the "Stock"), which shares may be treasury shares of authorized but
unissued shares. The number of shares of Stock that may be issued pursuant to
Options granted under the plan shall not exceed in the aggregate 125,000 shares,
which number of shares is subject to adjustment as hereinafter provided in
Section 17 below. If any Option expires, terminates, or is terminated for any
reason prior to exercise in full, the shares of Stock that were subject to the
unexercised portion of such Option shall be available for future Options granted
under the Plan.
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<PAGE>
4. ELIGIBILITY
(a) Employees. Options may be granted under the Plan to any
salaried employee of the Company or any "subsidiary corporation" thereof within
the meaning of Section 425(f) of the Code (a "Subsidiary") (including any such
employee who is an officer or director of the Company or any Subsidiary) as the
Board shall determine and designate from time to time prior to expiration of
termination of the Plan.
(b) Non-Employee Directors. On the effective date of the Plan
as described in Section 5(a) hereof, each person then serving on the Board of
Directors of the Company who is not an officer or other salaried employee of the
Company or any Subsidiary (a "Non-Employee Director") shall be granted an Option
to purchase 1,000 shares of the Stock at the price and upon the other terms and
conditions specified in the Plan. Thereafter, subject to the availability of
shares and to the aggregate percentage limitation on option grants to
Non-Employee Directors set forth in the next sentence below, an Option to
purchase 1,000 shares of Stock, at the price and upon the other terms and
conditions specified in the Plan, shall be granted under the Plan to each
Non-Employee Director of the Company elected after the effective date of the
Plan upon such Non-Employee Director completing three years of service. The
maximum number of Options that may be granted to all directors who are not
full-time salaried employees of the Company or a Subsidiary shall not exceed 30
percent of the shares covered by the Plan. Except as provided in this Section
4(b), no Non-Employee Director shall be eligible to be granted Options under
this Plan. Non-employee directors of a Subsidiary who are not also Non-Employee
Directors of the Company may be granted Options at the discretion of the Board.
An individual may hold more than one Option, subject to such
restrictions as are provided herein.
5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) Effective Date. The Plan shall be effective as of April 8,
1987, the date of its adoption by the Board of Directors of the Company, subject
to approval of the Plan within one year so such effective date by an affirmative
vote of shareholders who hold at least a majority of the outstanding shares of
stock of the Company entitled to vote thereon, in person or by proxy, at a duly
called meeting of the shareholders; provided, however, that upon approval of the
Plan by the shareholders of the Company as set forth above, all Options granted
under the Plan on or after the effective date shall be fully effective as if the
shareholders of the Company had approved the Plan on the effective date. If the
shareholders fail to approve the Plan within one year of such effective date,
any options granted hereunder shall be null and void and of no effect.
(b) Term. The Plan shall terminate on the date ten years from
the effective date.
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<PAGE>
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board
may, at any time and from time to time, prior to the date of termination of the
Plan, grant to such eligible individuals as the Board may determine
("Optionees"), Options to purchase such number of shares of the Stock on such
terms and conditions as the Board may determine, including any terms or
conditions which may be necessary to qualify such option as Incentive Stock
Options. The date on which the Board approves the grant of an Option shall be
considered the date on which such Option is granted.
7. LIMITATION ON OPTIONS EXERCISABLE IN CALENDAR YEAR
The aggregate fair market value (determined at the time the
option is granted) of the stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
(under the Plan and all other plans of the Optionee's employer corporation and
its parent and subsidiary corporations within the meaning of Section 422A(b)(7)
of the Code) shall not exceed $100,000. If an Option is granted which would
exceed the limitation of this Section 7, the excess shares shall be included
under a separate Option which shall be designated as not being an Incentive
Stock Option.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by
written agreements ("Option Agreements"), to be executed by the Company and by
the Optionee, in such form or forms as the Board shall from time to time
determine. Option Agreements covering Options granted from time to time or at
the same time need not contain similar provisions; provided, however, that all
such Option Agreements shall comply with all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an
Option (the "Option Price") shall be fixed by the Board and stated in each
Option Agreement, and shall be not less than the greater of par value or 100
percent of the fair market value of a share of the Stock on the date the Option
is granted (as determined in good faith by the Board); provided, however, that
in the event the Optionee would otherwise be ineligible to receive an Incentive
Stock Option by reason of the provisions of Sections 422A(b)(6) and 425(d) of
the Code (relating to stock ownership of more than ten percent), the Option
Price of an Option which is intended to be an Incentive Stock Option shall be
not less than the greater of par value or 110 percent of the fair market value
of a share of Stock at the time such Option is granted. In the event that the
Stock is listed on an established national or regional stock exchange, is
admitted to quotation on the National Association of Securities Dealers
Automated Quotation System, or is publicly traded in an established securities
market, in determining the fair market value of the Stock, the Board shall use
the closing price of the Stock on such exchange or System or in such market (the
highest such closing price if there is more than one such exchange or market) on
the trading date immediately before the Option is granted (or, if there is no
such closing price, then the Board shall use the
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<PAGE>
mean between the highest bid and lowest asked prices or between the high and low
prices on such date), or, if no sale of the Stock has been made on such day, on
the next preceding day on which any such sale shall have been made.
10. TERM AND EXERCISE OF OPTIONS
(a) Term. Each Option granted under the Plan shall terminate
and all rights to purchase shares thereunder shall cease upon the expiration of
ten years (ten years and 30 days, in the case of an Option granted to an
employee of the Company or a Subsidiary which is not designated as an Incentive
Stock Option) from the date such Option is granted, or, with respect to Options
granted to persons other than Non-Employee Directors, on such date prior thereto
as may be fixed by the Board and stated in the Option Agreement relating to such
Option; provided, however, that in the event the Optionee would otherwise be
ineligible to receive an Incentive Stock Option by reason of the provisions of
Sections 422A(b)(6) and 425(d) of the Code (relating to stock ownership of more
than ten percent), an Option granted to such Optionee which is intended to be an
Incentive Stock Option shall in no event be exercisable after the expiration of
five years from the date it is granted.
(b) Option Period and Limitations on Exercise. Each Option
granted to persons other than Non-Employee Directors under the Plan shall be
exercisable, in whole or in part, at any time and from time to time, over a
period commencing on or after the date of grant and ending upon the expiration
or termination of the Option, as the Board shall determine and set forth in the
Option Agreement relating to such Option. Without limiting the foregoing, the
Board, subject to the terms and conditions of the Plan, may in its sole
discretion provide that an Option may not be exercised in whole or in part for
any period or periods of time during which such Option is outstanding; provided,
however, that any such limitation on the exercise of an Option contained in any
Option Agreement may be rescinded, modified or waived by the Board, in its sole
discretion, at any time and from time to time after the date of grant of such
Option, so as to accelerate the time at which the Option may be exercised.
Except as provided in Sections 12 and 13 below, each Option Granted to a
Non-Employee Director shall be exercisable, in whole or in part, at any time and
from time to time, over a period commencing on the date on year after the date
of grant and ending upon the expiration of the Option. Notwithstanding any other
provision the Plan, (i) no Option granted to an Optionee under the Plan shall be
exercisable in whole or in part prior to the date the Plan is approved by the
shareholders of the Company as provided in Section 5 above, and (iii) an
Incentive Stock Option shall be exercisable in any calendar year only to the
extent permitted by Section 7 above.
(c) Method of Exercise. An Option that is exercisable
hereunder maybe exercised by delivery to the Company on any business day, at its
principal office, addressed tot the attention of the Committee, of written
notice of exercise, which notice shall specify the number of shares with respect
to which the Option is being exercised, and shall be accompanied by payment in
full of the Option Price of the shares for which the Option is being exercised.
The minimum number of shares of Stock with respect to which an Option may be
exercised, in whole
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or in part, at any time shall be the lesser of 100 shares or the maximum number
of shares available for purchase under the Option at the time of exercise.
Payment of the Option Price for the shares of Stock purchased pursuant to the
exercise of an Option shall be made either (i) in cash or in cash equivalents;
(ii) through the tender to the Company of shares of Stock, which shares shall be
valued, for purposes of determining the extent to which the Option Price has
been paid thereby, at their fair market value (determined in the manner
described in Section 9 above) on the date of exercise; or (iii) by a combination
of the methods described in (i) and (ii). An attempt to exercise any Option
granted hereunder other than as set forth above shall be invalid and of no force
and effect. Promptly after the exercise of an option and the payment in full of
the Option Price of the shares of Stock covered thereby, the individual
exercising the Option shall be entitled to the issuance of a Stock certificate
or certificates evidencing his ownership of such shares. A separate Stock
certificate or certificates shall be issued for any shares purchased pursuant to
the exercise of an Option which is an Incentive Stock Option, which certificate
or certificates shall not include any shares which were purchased pursuant to
the exercise of an Option which is not an Incentive Stock Option. An individual
holding or exercising an Option shall have none of the rights of a shareholder
until the shares of Stock covered thereby are fully paid and issued to him and,
except as provided in Section 17 below, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date of such
issuance.
11. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee to whom an Option is
granted, only such Optionee (or, in the event of legal incapacity or
incompetency, the Optionee's guardian or legal representative) may exercise the
Option. No Option shall be assignable or transferable by the Optionee to whom it
is granted, other than by will or the laws of descent and distribution.
12. TERMINATION OF SERVICE OR EMPLOYMENT
Upon the Optionee's termination of service or employment with
the Company or a Subsidiary, other than by reason of the death or "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, any Option granted to an Optionee pursuant to the Plan shall remain
subject to any installment limitation imposed pursuant to Section 10(b) above
unless the termination of service or employment is by reason of retirement with
the consent of the Board, in which case the Option shall become immediately
exercisable in full (subject to the general limitations on exercise set forth in
Section 10(b) above). An Incentive Stock Option shall terminate three months
after the date of such termination of service or employment, unless earlier
terminated pursuant to Section 10(a) above. A non-incentive stock option granted
to an Optionee who is not a Non-Employee Director shall terminate on the same
basis as provided in the preceding sentence; provided, however, that if the
termination of service or employment is by reasons of retirement with the
consent of the Board, the Option shall not terminate until the expiration of the
Option is provided in Section 10(a) above; and provided, further, that the Board
may provide, by including of appropriate language in the Option Agreement, that
the Optionee may (subject to the general limitations on exercise set forth in
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<PAGE>
Section 10(b) above), in the event of termination of service or employment of
the Optionee with the Company or a Subsidiary, exercise the Option in whole or
in part, at any time after such termination of service or employment and prior
to termination of the Option as provided in Section 10(a) above, either subject
to or without regard to any installment limitation on exercise imposed pursuant
to Section 10(b) above. Any Option granted to a Non-Employee Director shall not
terminate until the expiration of the Option under Section 10(a) above,
notwithstanding the Non-Employee Director's termination of service on the Board.
Whether a leave of absence or leave on military or government service shall
constitute a termination of service or employment for purposes of the plan shall
be determined by the Board, which determination shall be final and conclusive.
For purposes of the Plan, a termination of service or employment with the
Company or a Subsidiary shall not be deemed to occur if the Optionee is
immediately thereafter in the service or employ of the Company or any other
Subsidiary.
13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
(a) Death. If an Optionee dies while employed by or in the
service of the company or a Subsidiary or within the period following the
termination of service or employment or Section 13(b) below, the executors or
administrators or legatees or distributes of such Optionee's estate shall have
the right (subject to the general limitations on exercise set forth in Section
10(b) above), (i) to exercise any incentive Stock Option held by such Optionee
at the date of such Optionee's death at any time within one year after the date
of such Optionee's death and prior to termination of the Option as provided in
Section 10(a) above, and (ii) to exercise any non-incentive stock option held by
such Optionee at the date of such Optionee's death at any time prior to the
termination of the Option as provided in Section 10(a) above, whether or not any
such Option was exercisable immediately prior to such Optionee's death.
(b) Disability. If an Optionee terminates service or
employment with the Company or a Subsidiary by reason of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of the code) of such
Optionee, then such Optionee shall have the right (subject to the general
limitations on exercise set forth in Section 10(b) above), (i) to exercise, in
whole or in part, any Incentive stock Option held by such Optionee at the date
of such termination of service or employment at any time within one year after
such termination of service or employment and prior to termination of the Option
as provided in Section 10(a) above, and (ii) to exercise, in whole or in part,
any non-incentive stock option held by such Optionee at the date of such
termination of service or employment at any time prior to the termination of the
Option as provided in Section 10(a) above, whether or not such Option was
exercisable immediately prior to such termination of service or employment.
Whether a termination of service or employment is to be considered by reason of
"permanent and total disability" for purposes of this Plan shall be determined
by the Board, which determination shall be final and conclusive.
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14. USE OF PROCEEDS
The proceeds received by the Company from the sale of Stock pursuant to
Options granted under the Plan shall constitute general funds of the Company.
15. REQUIREMENTS OF LAW
(a) Violations of Law. The Company shall not be required to
sell or issue any shares of Stock under any Option if the sale or issuance of
such shares would constitute a violation by the individual exercising the Option
or the Company of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. Specifically in connection with the Securities Act of 1933 (as now
in effect or as hereafter amended), upon exercise of any Option, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered by such Option, the Company shall not be required to sell or issue
such shares unless the Board has received evidence satisfactory to it that the
holder of such Option may acquire such shares pursuant to an exemption from
registration under such Act. Any determination in this connection by the Board
shall be final, binding, and conclusive. The Company may, but shall in no event
be obligated to, register any securities covered hereby pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended). The Company
shall not be obligated to take any affirmative action in order to cause the
exercise of an Option or the issuance of shares pursuant thereto to comply with
any law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an Option shall not be exercisable unless
and until the shares of Stock covered by such Options are registered or are
subject to an available exemption from registration, the exercise of such Option
(under circumstances in which the laws of such jurisdiction apply) shall be
deemed conditioned upon the effectiveness of such registration or the
availability of such an exemption.
(b) Compliance with Rule 16b-3. The Plan is intended to comply
with Rule 16b-3 under the Securities Exchange Act of 1934. Any provision
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan.
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend,
suspend or terminate the Plan as to any shares of Stock as to which Options have
not been granted; provided, however, that no amendment by the Board shall,
without approval by the affirmative vote of shareholders who hold at least a
majority of outstanding shares of stock of the Company entitled to vote thereon
and who vote in person or by proxy at a duly constituted shareholders' meeting,
(a) materially change the requirements as to eligibility to receive Options; (b)
increase the maximum number of shares of Stock in the aggregate that my be sold
pursuant to Options granted under the Plan (except as permitted under Section 17
hereof); (c) change the maximum Option Price set forth in Section 9 hereof
(except as permitted under Section 17 hereof); (d) increase the maximum period
during which Options may be exercised; (e) extend the term of the Plan; or (f)
materially increase the
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benefits accruing to eligible individuals under the Plan. Except as permitted
under Section 17 hereof, no amendment, suspension or termination of the Plan
shall, without the consent of the holder of the Option, alter or impair rights
or obligations under any Option theretofore granted under the Plan.
17. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Stock. If the outstanding shares of Stock are
increased or decreased or changed into or exchanged for a different number of
kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of
consideration by the Company, occurring after the effective date of the Plan,
the number and kinds of shares for the purchase of which Options may be granted
under the Plan shall be adjusted proportionately and accordingly by the Company.
In addition, the number and kind of shares for which Options are outstanding
shall be adjusted proportionately and accordingly so that the proportionate
interest of the holder of the Option immediately following such event shall, to
the extent practicable, be the same as immediately prior to such event. Any such
adjustment in outstanding Options shall not change the aggregate Option Price
payable with respect to shares subject to the unexercised portion of the Option
outstanding but shall include a corresponding proportionate adjustment in the
Option Price per share.
(b) Reorganization in Which the Company Is the Surviving
Corporation. Subject to subsection (c) hereof, if the Company shall be the
surviving corporation in any reorganization, merger, or consolidation of the
Company with one or more other corporations, any Option theretofore granted
pursuant tot eh Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
(c) Reorganization in Which the Company Is Not the Surviving
Corporation of Sale of Assets or Stock. Upon the dissolution or liquidation of
the Company, or upon a merger, consolidation or reorganization of the Company
with one or more other corporations in which the Company is not the surviving
corporation, or upon a sale of substantially all of the assets of the Company to
another corporation, or upon any transaction (including, without limitation, a
merger or reorganization in which the Company is the surviving corporation)
approved by the Board which results in any person or entity owning 80 percent or
more of the combined voting power of all classes of stock of the Company, the
Plan and all Options outstanding hereunder shall terminate, except to the extent
provision is made in writing in connection with such transaction for the
continuation of the Plan and/or the assumption of the Options theretofore
granted, or for the substitution for such Options of new options covering the
stock of a successor corporation, or
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a parent or subsidiary thereof, with appropriate adjustments as to the number
and kinds of shares and exercise prices, in which event the Plan and Options
theretofore granted shall continue in the manner and under the terms so
provided. In the event of any such termination of the Plan, each individual
holding an Option shall have the right (subject to the general limitations of
exercise set forth in Section 10(b) above), immediately prior to the occurrence
of such termination and during such period occurring prior to such termination
as the Board in its sole discretion shall determine and designate, to exercise
such Option in whole or in part, whether or not such Option was otherwise
exercisable at the time such termination occurs and without regard to any
installment limitation on exercise imposed pursuant to Section 10(b) above. The
Board shall send written notice of an event that will result in such a
termination to all individuals who hold Options not later than the time at which
the Company gives notice thereof to its shareholders.
(d) Adjustments. Adjustments under this Section 17 related to
stock or securities of the Company shall be made by the Board, whose
determination in that respect shall be final, binding, and conclusive. No
fractional shares of Stock or units of other securities shall be issued pursuant
to any such adjustment, and any fractions resulting from any such adjustment
shall be eliminated in each case by rounding downward to the nearest whole share
or unit.
(e) No Limitations on Company. The grant of an Option pursuant
to the Plan shall not affect or limit in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, consolidate, dissolve or
liquidate, or to sell or transfer all or any part of this business or assets.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option
Agreement entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the employ or service of the Company or
any Subsidiary, or to interfere in any way with the right and authority of the
Company or any Subsidiary either to increase or decrease the compensation of any
individual at any time, or to terminate any employment or other relationship
between any individual and the Company or any Subsidiary.
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the
Plan to the shareholders of the Company for approval shall be construed as
creating any limitations upon the right and authority of the Board to adopt such
other incentive compensation arrangements (which arrangements may be applicable
either generally to a class or class of individuals or specifically to a
particular individual or individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
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<PAGE>
Amendment to 1987 Stock Option Plan adopted by the Board of Directors of the
Company on November 18, 1993 and the Shareholders of the Company on January 27,
1993.
Upon motion made and seconded it was: Unanimously voted to replenish
the 1987 Stock Option plan through addition of 150,000 options for shares of
stock and be it further voted to seek the approval of the Shareholders of
Eastern Bancorp at the Annual Meeting of the Shareholders of January 27, 1993.
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<PAGE>
EASTERN BANCORP, INC.
Amendment to 1987 Stock Option Plan
Adopted by the Board of Directors of December 15, 1993
Section 4(b) as amended and restated
4(b) Non-Employee Directors.
1. On the effective date of the Plan as described in Section 5(a)
hereof, each person then serving on the Board of Directors of the Company who is
not an officer or other salaried employee of the Company or any Subsidiary
(a"Non-Employee Director") shall be granted a non-incentive Option to Purchase
1,000 shares of the Stock at the price and upon the other terms and conditions
specified in the plan. Thereafter, through February 9, 1994, subject to the
availability of shares and to the aggregate percentage limitation on option
grants to Non-Employee Directors set forth in subsection (3) below, each
Non-Employee Director of the Company elected after the effective date of the
Plan shall be entitled to receive an Option to purchase 1,000 shares of the
Stock, at the price and upon the other terms and conditions specified in the
Plan, upon such Non-Employee Director completing three years of service.
2. Effective from and after the Annual Meeting held on February 9,
1994:
(a) each Non-Employee Director elected to the Board for the
first time at or after the 1994 Annual Meeting shall be granted an Option for
2,500 shares of the Stock on the date of each of the Company's next five Annual
Meetings, provided that such persons shall not be granted any Option at any such
Annual Meeting unless he or she continues as a director following such Annual
Meeting;
(b) each Non-Employee Director elected or reelected during
1993 shall be granted on the date of the 1994 Annual Meeting (i) an initial
Option for 2,500 shares of the Stock and (ii) an additional Option for 1,000
shares of the Stock; thereafter, each such director shall be granted an Option
for 1,000 shares of the Stock on the date of each of the Company's next four
Annual Meetings, provided that such person shall not be granted any Option at
any such Annual Meeting unless he or she continues as a director following such
Annual Meeting; and
(c) each Non-Employee Director elected prior to 1993 who has
already received a grant of Options for 1,000 shares of the Stock prior to the
1994 Annual Meeting (or is scheduled to receive such a grant at the 1994 Annual
Meeting) pursuant to the terms of the Plan a in effect prior to the effective
date of this amendment shall be granted on the date of the 1994 Annual Meeting
(i) on Option for 1,000 shares of the Stock if such an Option is scheduled to be
granted at the 1994 Annual Meeting, (ii) an Option for 1,500 shares of the
Stock, representing the difference between the 1,000 shares of the Stock already
granted (or to be granted) to such director pursuant to the Plan and the 2,500
shares of the Stock contemplated under this amendment and (iii) an additional
Option for 1,000 shares of the Stock; thereafter, each such director shall
<PAGE>
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be granted an Option fro 1,000 shares of the Stock at each of the Company's next
four Annual Meetings, provided that such person shall not be granted any Option
at any such Annual Meeting unless he or she continues as a director following
such Annual Meeting.
3. The maximum number of Options that may be granted to all directors
who are not full-time salaried employees of the Company or a Subsidiary shall
not exceed 30 percent of the shares covered by the Plan. Except as provided in
this Section 4(b), no Non-Employee Director shall be eligible to be granted
Options under this Plan. Non-Employee Directors of a Subsidiary who are not also
Non-Employee Directors of the Company any be granted Options at the discretion
of the Board.
4. An individual may hold more than one Option, subject to such
restrictions as are provided herein.
SULLIVAN & WORCESTER LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
FAX NO. 617-338-2880
IN WASHINGTON, D.C. IN NEW YORK CITY
1025 CONNECTICUT AVENUE, N.W. 767 THIRD AVENUE
WASHINGTON, D.C. 20036 NEW YORK, NEW YORK 10017
(202) 775-8190 (212) 486-8200
FAX NO. 202-293-2275 FAX NO. 212-758-2151
June 27, 1997
Vermont Financial Services Corp.
100 Main Street
Brattleboro, Vermont 05301
Re: Registration Statement on Form S-8
225,886 Shares of Common Stock
Dear Sir or Madam:
The following opinion is furnished to you in connection with the
registration by Vermont Financial Services Corp., a Delaware corporation
("VFSC"), of 225,886 shares (the "Registered Shares") of its Common Stock, par
value $1.00 per share (the "Common Stock"), on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act").
The Registered Shares underlie options that were issued to purchase shares of
Common Stock of Eastern Bancorp, Inc. ("Eastern") under the Vermont Federal
Bank, FSB Stock Option Plan and the Eastern Bancorp, Inc. Stock Option Plan, as
amended (collectively, the "Plans"), which Plans were assumed by VFSC pursuant
to the Agreement and Plan of Reorganization dated November 13, 1996 by and among
VFSC, Eastern and Vermont Federal Bank, FSB.
We have acted as counsel to VFSC in connection with the preparation of
the Registration Statement, and we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Registration Statement, the
Certificate of Incorporation of VFSC, as amended (the "Certificate"), the
Agreement and Plan of Reorganization dated as of November 13, 1996, as amended,
by and among VFSC, Eastern and Vermont Federal Bank, FSB, and certain related
documents, the Plans, corporate records, certificates and statements of officers
and accountants of VFSC and of public officials, and such other documents as we
have considered necessary in order to furnish the opinion hereinafter set forth.
We express no opinion herein as to any law other than the General Corporation
Law of the State of Delaware.
<PAGE>
Vermont Financial Services Corp.
June 27, 1997
Page 2
We have assumed that the options offered from time to time pursuant to
the Plans were duly authorized by proper action of the Board of Directors, or a
committee thereof, of Eastern and that the Registered Shares to be issued from
time to time pursuant to the exercise of such options will be isseued in
accordance with the terms and conditions described in the Plans and in
accordance with the Certificate and applicable Delaware law. We further assume
that prior to the issuance of any Registered Shares, there will exist under the
Certificate the requisite number of authorized shares of Common Stock that are
unissued and not otherwise reserved for issuance.
Based on and subject to the foregoing, we are of the opinion that, when
the Registration Statement has become effective under the Securities Act, upon
issuance by VFSC of Registered Shares pursuant to the exercise of such options
and upon delivery of certificates representing the Registered Shares against
payment therefor in the manner contemplated by the Plans, the Registration
Statement and any applicable amendment of any thereof, the Registered Shares
represented by such certificates will be validly issued, fully paid and
nonassessable by VFSC.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act or the Rules and Regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/Sullivan & Worcester LLP
SULLIVAN & WORCESTER LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Vermont Financial Services Corp. on Form S-8 of our report, dated January 21,
1997, on our audits of the consolidated financial statements of Vermont
Financial Services Corp., as of December 31, 1996 and 1995 and for each of the
three years in the period ended December 31, 1996, which report is included in
the Company's 1996 Form 10-K.
/s/ Coopers & Lybrand LLP
Springfield, Massachusetts
June 27, 1997
