PROXY STATEMENT
VERMONT FINANCIAL SERVICES CORP.
100 MAIN STREET
BRATTLEBORO, VERMONT 05301
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 11, 1998
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 Quality Inn and Suites, Brattleboro, Vermont, on June 11,
1998, at 10:00 a.m.
Stockholders of record at the close of business on April 13, 1998 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
votingand 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 4
nominees named under the caption "Election of Directors for Class II" below and
for the ratification and approval of the "Amended and Restated 1994 Stock
Option Plan" 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 April 28, 1998.
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 (together the "Banks").
VOTING SECURITIES
As of April 13, 1998, the Company had 20,000,000 shares of Common
Stock authorized and 13,278,285 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. The total number of shares
outstanding, as well as the other references to share totals contained
elsewhere in this Proxy Statement, reflect the Company's 1:1 stock dividend
paid in October 1997.
As of April 13, 1998 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 with the Securities and Exchange Commission.
Amount of Form 13G
Beneficial Percent Filing Date
Name and Address Ownership of Class as of
John Hancock Advisers, Inc. 928,172 7.0% (1) 12/31/97
John Hancock Place, P.O. Box 111
Boston, MA 02117-0111
Wellington Management Company, LLP 745,792 5.6% (2) 12/31/97
75 State Street
Boston, MA 02109
(1) Includes sole voting and sole dispositive power for 928,172 shares.
(2) Includes shared voting power for 451,988 shares and shared dispositive power
for 745,792 shares.
PROPOSAL 1
ELECTION OF DIRECTORS FOR CLASS I
The Board of Directors of the Company consists of eighteen
Directorships, divided into three classes. The terms of office of the
Directors in Class II expire in 1998. The terms of the Directors in Class III
expire in 1999, and Class I in 2000. The nominees for Class II, for
election for terms to expire at the Company's 2001 Annual Meeting or until
their successors are elected and qualified, are as follows: Allyn W. Coombs,
Philip M. Drumheller, John K. Dwight and Stephan A Morse.
Although all nominees have agreed to serve if elected, if, at the time of
the Meeting, any of the nominees should be unable to serve or should decline to
serve, the discretionary authority provided in the proxy may be exercised by
the proxies named therein to vote for a substitute or substitutes designated
by the Board of Directors of the Company.
A majority of the shares of Common Stock of the Company, issued
and outstanding and entitled to vote at the Meeting, is necessary to 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 II 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.
PROPOSAL 2
Approval of Amended and Restated 1994 Stock Option Plan
1994 Stock Option Plan - General
On July 13, 1994, the Company's Board of Directors adopted the Vermont
Financial Services Corp. 1994 Stock Option Plan (the "1994 Plan"), which was
approved by stockholders on August 31, 1994. The purpose of the 1994 Plan is
to encourage directors, officers and other key employees of the Company and its
subsidiaries to continue their association with the Company and its subsidiaries
by providing opportunities for them to participate in the ownership of the
Company and in its future growth through the granting of options to acquire
shares of the Common Stock (the "Options"). In accordance with the terms of
the 1994 Plan, the Options that may be granted to eligible participants (as
further described below) shall be either Options that are intended by their
terms and conditions to qualify as incentive stock options ("ISOs") within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or Options that are not intended to qualify as ISOs (such
non-qualified stock options being referred to herein as "NSOs").
Amended and Restated 1994 Stock Option Plan
On August 13, 1997, the Board of Directors approved, subject to approval by
stockholders at the next annual meeting of stockholders, an amendment and
restatement of the 1994 Plan. Among other changes to the terms of the 1994
Plan, such amendment and restatement amends the terms of the 1994 Plan as
follows: ( i ) the total number of shares of Common Stock that may be issued by
the Company from time to time pursuant to Options granted under the 1994 Plan is
increased by 660,000 shares; (ii) a maximum number of shares of Common Stock
with respect to which Options may be granted to any individual is established at
300,000; (iii) the provisions relating to the administration of the 1994 Plan
are revised to ensure that the 1994 Plan complies with recent changes to the
requirements of Rule 16b-3 of the Securities Exchange Act of 1934 (the
"Exchange Act"); (iv) the transferability of Options granted under the 1994
Plan is permitted, subject to approval by the Compensation Committee of the
Board of Directors (which is authorized generally to administer the 1994
Plan), where such transfers are limited to members of the option holder's
immediate family, a trust or trusts for the exclusive benefit of such
immediate family members or a partnership in which such immediate family
members are the only partners; (v)the treatment of Options upon the
occurrence of a liquidation of the Company or a Reorganization Transaction
(as such term is defined in the 1994 Plan) affecting the Company is clarified
to provide that all outstanding Options may be canceled in connection with
any such liquidation or Reorganization Transaction in exchange for cash or
other property having a value equal to the value of such outstanding,
unexercised Options. As used in this summary, the term "1994 Plan" refers
to the Company's 1994 Stock Option Plan as in effect on the date hereof and,
where the context requires, to the Company's Amended and Restated 1994 Stock
Option Plan.
The following is a summary of the material features of the 1994 Plan, as
proposed to be amended and restated.
Shares Reserved for the 1994 Plan
The total number of shares of Common Stock which may be issued by the
Company pursuant to Options granted under the 1994 Plan shall not exceed
1,110,000, subject to adjustments for subdivisions, stock splits, dividends,
combinations of shares, recapitalizations, or other changes in the outstanding
shares of Common Stock. Any such adjustment will be made by the Board of
Directors. No eligible participant under the 1994 Plan may be granted Options
thereunder with respect to more than 300,000 shares of Common Stock.
Eligible Participants
Key employees, officers and directors of the Company or a subsidiary are
eligible to receive Options under the 1994 Plan. ISOs may be granted only to
those eligible participants who are employees of the Company or a subsidiary.
Approximately 31 individuals, including 17 officers and 14 directors, were
eligible to receive Options under the 1994 Plan on January 1, 1998.
Material Features of the 1994 Plan
Until the 1994 Plan is terminated or the number of shares reserved for
Options is exhausted, the Compensation Committee may grant all such Options to
those eligible participants ("Optionees") as the Compensation Committee
determines appropriate. All Optionees are required to execute an option
agreement within ten days of the date on which an Option is granted. The
Compensation Committee determines the duration of any Option, subject to
certain limitations. Optionees cannot transfer their Options (except by will
or under the laws of descent or distribution); provided, however, that the
Compensation Committee may, in its discretion, authorize all or a portion of
the Options to be granted to an Optionee to be on terms which permit transfer,
subject to the Compensation Committee's approval, by such Optionee to (i) the
spouse, children or grandchildren of the Optionee ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, or (iii) a partnership in which such Immediate Family Members
are the only partners, provided that (x) there may be no consideration for any
such transfer, (y) the option agreement pursuant to which such Options are
granted must be approved by the Compensation Committee, and must expressly
provide for transferability in a manner consistent with such provisions of
the 1994 Plan, and (z) subsequent transfers of transferred Options shall be
prohibited except those in accordance with such plan provisions. Following
any such transfer, any such Options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer,
including the termination provisions thereof, as if the Optionee had
continued to be the holder thereof.
The price at which the shares of Common Stock subject to an option may be
purchased shall be determined by the Compensation Committee, but this price can
never be less than 100% (or 110% for any ten percent owner of the capital stock
of the Company pursuant to an ISO) of the fair market value of the Common Stock
on the date of grant. Under the 1994 Plan, the "fair market value" of the
Common Stock as of a specified date is defined as the last reported sales price
on such day or, if no such sale takes place on that day, the average of the
reported closing bid and asked prices, as reported on the Nasdaq National
Market. The last sale price of a share of the Common Stock on the Nasdaq
National Market on April 6, 1998 was $29.375.
The duration of any Option shall be specified by the Compensation Committee
in the option agreement, but no Option may be exercisable after the expiration
of ten (10) years. In the case of any employee who owns (or is considered
under Section 424(d) of the Code as owning) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any
subsidiary, no ISO may be exercisable after the expiration of five (5) years
from the date such Option is granted. The aggregate fair market value
(determined as of the date on which the Option is granted) of the Common Stock
with respect to which ISOs may be exercisable for the first time by an Optionee
during any calendar year (whether granted under the 1994 Plan or any other
incentive stock option plan(s) of the Company or any subsidiary) may not exceed
under any circumstances $100,000.
Options shall be exercised by notifying the Company of the number of shares
of Common Stock under the option to be exercised, together with the payment of
the purchase price thereof. Payment may be made in cash or cash equivalents,
or, in certain circumstances, through a "cashless exercise" procedure through
which a broker retained by the Optionee transmits the entire purchase price to
the Company, and such broker retains that number of shares of Common Stock
which would have been issued to the Optionee with a fair market value equal
to the purchase price. The broker then shall deliver the remainder of the
shares to the Optionee.
In the event that any Optionee's employment with the Company is terminated,
or such Optionee retires, the Option expires three (3) moths after such
termination or retirement (unless it has already expired under the terms of the
Option). Generally, upon the death of an Optionee, the Option will terminate
one year following his or her death.
Options may contain terms to the effect that if the Optionee is terminated
from employment for certain reasons, the Option terminates immediately.
Subject to the discretion of the Compensation Committee, any option
agreement may provide that the shares of Common Stock acquired by an Optionee
pursuant to the 1994 Plan cannot be transferred without the prior consent of
the Compensation Committee and that the company shall have the right in certain
circumstances to repurchase any such shares.
Administration
The Compensation Committee has full power to administer the 1994 Plan. The
Compensation Committee's interpretation and construction of the 1994 Plan is
final and conclusive. For so long as Section 16 of the Exchange Act is
applicable to the Company, each member of the Compensation Committee shall be a
"non-employee director" or the equivalent within the meaning of Rule 16b-3 under
the Exchange Act, and, for so long as Section 162(m) of the Code is applicable
to the Company, each member of the Compensation Committee also shall be an
"outside director" within the meaning of Section 162 of the Code and the
regulations thereunder. The 1994 Plan shall be administered in such a manner as
to permit those Options granted thereunder and specifically designated as such
to qualify as "incentive stock options" as described in Section 422 of the Code.
The Board of Directors may at any time and from time to time modify, revise
or terminate the 1994 Plan, except that, without the further approval of the
shareholders of the Company, no modification or revision may (a) materially
increase the benefits granted to the Optionees or make any "modifications" as
that term is defined under Section 424(b)(3) of the Code if such increase in
benefits or modification would adversely affect (i) the availability to the 1994
Plan of the protections of Section 16(b) of the Exchange Act, if applicable to
the Company, or (ii) the qualification of the 1994 Plan or any Options granted
thereunder for "incentive stock option" treatment under Section 422 of the
Code, (b) change the aggregate number of shares reserved for issuance under
Options granted under the 1994 Plan, (c) reduce the option exercise price at
which ISOs may be granted to an amount less than the minimum amount
permitted under the 1994 Plan, or (d) change the class of persons eligible to
receive ISOs. The Board of Directors shall have the right to terminate the 1994
Plan at any time. Unless terminated earlier, and subject to stockholder approval
of this proposal, the 1994 Plan shall continue in effect through July 7, 2007.
Effect of Certain Corporate Transactions
If while unexercised Options remain outstanding under the 1994 Plan, the
Company merges or consolidates with one or more corporations (whether or not the
Company is the surviving corporation), or is liquidated or sells or otherwise
disposes of substantially all of its assets to another entity, then except as
otherwise specifically provided to the contrary in an Optionee's option
agreement, the Compensation Committee, in its discretion, shall amend the terms
of all outstanding Options so that either: (i) after the effective date of such
merger, consolidation or sale, as the case may be (each such event, a
"Reorganization Transaction"), each Optionee shall be entitled, upon exercise of
an Option, to receive in lieu of shares of Common Stock the number and class of
shares of such stock or other securities to which he or she would have been
entitled pursuant to the terms of the Reorganization Transaction if he or she
had been the holder of record of the number of shares of Common Stock as to
which the Option is being exercised, or shall be entitled to receive from the
successor entity a new stock option of comparable value; or (ii) all outstanding
Options shall be canceled as of the effective date of any such liquidation of
Reorganization Transaction provided that each Optionee shall have the right to
exercise his or her Option according to its terms during the period of twenty
(20) days ending on the day preceding the effective date of such liquidation or
Reorganization Transaction, and in addition to the foregoing, the Compensation
Committee may in its discretion, amend the terms of an Option by canceling some
or all of the restrictions on its exercise, to permit its exercise pursuant to
such provision to a greater extent than that permitted on its existing terms;
or (iii) all outstanding Options shall be canceled as of the effective date of
any such liquidation or Reorganization Transaction in exchange for consideration
in cash or in kind, which consideration in both cases shall be equal in value to
the value of those shares of Common Stock or other securities the Option would
have received had the Option been exercised (to the extent then exercisable)
and no disposition of the shares acquired upon such exercise had been made
prior to such liquidation or Reorganization Transaction, less the option price
thereof, and upon receipt of such consideration by the Optionee, his or her
Option shall immediately terminate and be of no further force or effect. Under
the circumstances described in the preceding clause (iii), the value of the
stock or other securities the Optionee would have received if the Option had
been exercised shall be determined in good faith by the Compensation Committee,
and in the case of shares of the Common Stock of the Company, in accordance
with the applicable provisions of the 1994 Plan.
The following description of the federal income tax consequences of Options
is general and does not purport to be complete.
Tax Treatment of Options
An Optionee realizes no taxable income when an NSO is granted. Instead,
the difference between the fair market value of the Common Stock subject to
the NSO and the exercise price paid is taxed as ordinary compensation income
when the NSO is exercised. The difference is measured and taxed as of the
date of exercise, if the stock is not subject to a "substantial risk of
forfeiture," or as of the date or dates on which the risk terminates in other
cases. Gain on the subsequent sale of the Common Stock is taxed as capital
gain. The Company receives no tax deduction on the grant of a NSO, but is
entitled to a tax deduction when the Optionee recognizes taxable income on or
after exercise of the NSO, in the same amount as the income recognized by the
Optionee.
Generally, an Optionee incurs no federal income tax liability on either
the grant or the exercise of an ISO, although an Optionee will generally have
taxable income for alternative minimum tax purposes at the time of exercise
equal to the excess of the fair market value of the stock subject to an ISO
over the exercise price. Provided that the shares of Common Stock are held
for at least one year after the date of exercise of the related ISO and at
least two years after its date of grant, any gain realized on subsequent sale
of the stock will be taxed as mid-term or long-term capital gain. If the stock
is disposed of within a shorter period of time, the Optionee will be taxed as
if the Optionee had then received ordinary compensation income in an amount
equal to the difference between the fair market value of the stock on the date
of exercise of the ISO and its fair market value on its date of grant, unless
the amount realized is less than the fair market value on the date of exercise.
The Company receives no tax deduction on the grant or exercise of an ISO, but
is entitled to a tax deduction if the Optionee recognizes taxable income on
account of a premature disposition of ISO stock, in the same amount and at
the same time as the Optionee's recognition of income.
Parachute Payments
Under certain circumstances, an accelerated vesting or granting of Options
in connection with a Reorganization Transaction (as defined above) affecting the
Company may give rise to an "excess parachute payment" for purposes of the
golden parachute tax provisions of Section 280G of the Code. To the extent it
is so considered, an Optionee may be subject to a 20% non-deductible federal
excise tax and the Company may be denied an income tax deduction.
Options Granted Subject to Stockholder Approval
The following table sets forth information as of December 31, 1997 with
respect to Options which were granted in the past year, pending approval of the
Amended and Restated 1994 Stock Option Plan by the Company's stockholders at the
Meeting, to (i) each of the Company's chief executive officer and the four other
executive officers of the Company named in the Summary Compensation Table, (ii)
all executive officers of the Company as a group, (iii) all directors of the
Company, other than those who are executive officers, as a group, and (iv) all
employees of the Company, excluding executive officers, as a group.
Number of Shares
Subject to Options
Name Granted in 1997
John D. Hashagen, Jr., President & CEO 28,000
Louis J. Dunham, Executive Vice President 13,000
W. Bruce Fenn, Executive Vice President 13,000
Richard O. Madden, Executive Vice President 14,000
Robert G. Soucy, Executive Vice President 14,000
All executive officers as a group 82,000
All directors of the Company, excluding
executive officers, as a group 28,000
All employees of the Company, excluding
executive officers, as a group 34,000
Recommendation of the Board of Directors
Adoption of this proposal requires the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock. The Board of Directors of
the Company recommends that you vote "FOR" the approval and ratification of the
Amended and Restated 1994 Stock Option Plan. Shares of Common Stock which are
present in person or by proxy but abstain from voting at the Meeting will be
included for purposes of determining a quorum at the Meeting. Shares of Common
Stock represented by "broker non-votes" (as defined below) also will be treated
as present for purposes of determining a quorum. Under applicable Delaware law,
in determining whether this proposal has received the requisite number of
affirmative votes, abstentions and broker non-votes will be counted and will
have the same effect as votes against this proposal. "Broker non-votes" are
proxies with respect to shares held in record name by brokers or nominees, as to
which (i) instructions have not been received from the beneficial owners or
persons entitled to vote, (ii) the broker or nominee does not have discretionary
voting power under applicable national securities exchange rules or the
instrument under which it serves in such capacity, or (iii) the record holder
has indicated on the proxy card or otherwise notified the Company, as the case
may be, that it does not have authority to vote such shares on that matter.
If this proposal is not approved at the Meeting, the 1994 Plan as
previously adopted by the Board of Directors and approved by stockholders in
1994, will continue to remain in full force and effect, including having an
expiration date of July 13, 2004.
MANAGEMENT OF THE COMPANY
Stock Ownership of Directors and Executive Management
The following table sets forth the name and address of each director,
nominee for director and 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 April 13, 1998, 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 (58) III 125,748(3) 0.95%
Attorney, Partner, Abatiell & 1982
Valerio Law Offices, Rutland, VT
Zane V. Akins (57) I 5,843(4) 0.04%
President, Akins & Associates, 1987
Brattleboro, VT
Charles A. Cairns (56) I 16,948(5) 0.13%
President, Champlain Oil Co., Inc. and 1986
Coco Mart, Inc., South Burlington, VT
William P. Cody (44) I 5,885(6) 0.04%
General Manager, Cody Chevrolet, Inc., 1996
Montpelier, VT
Allyn W. Coombs* (63) II 28,740(7) 0.22%
President and Treasurer of Allyn W. Coombs, 1994
Inc. (Real Estate Development & Management),
Amherst, MA
Philip M. Drumheller* (44) II 6,500(8) 0.05%
President, The Lane Press, Inc.,
Burlington, VT 1995
John K. Dwight *(53) II 24,058(9) 0.18%
President and CEO, Dwight Asset 1989
Management Co., Burlington, VT
James E. Griffin +(70) II 14,050(10) 0.11%
President, J. R. Resources, Inc. 1972
(Business Consultants), Rutland, VT
John D. Hashagen, Jr. (56) I 150,502(11) 1.13%
President & Chief Executive Officer of 1987
Vermont Financial Services Corp.,
Brattleboro; President & Chief Executive
Officer, Vermont National Bank,
Brattleboro, VT
Francis L. Lemay (65) III 211,266(12) 1.59%
Chairman, United Savings Bank, 1994
Greenfield, MA
Stephan A. Morse *(51) II 20,696(13) 0.16%
President and CEO, The Windham Foundation, 1986
Inc., Grafton, VT
Roger M. Pike (57) III 20,588(14) 0.16%
Consultant, Rutland, VT 1980
Ernest A. Pomerleau (50) I 21,428(15) 0.16%
President, Pomerleau Real Estate, 1990
Burlington, VT
Mark W. Richards (52) III 64,017(16) 0.48%
President, Richards, Gates, Hoffman 1988
& Clay (Insurance), Brattleboro, VT
James M. Sutton (56) III 448,674(17) 3.38%
Chairman, American Bankshares, Inc. 1995
Welch, W. VA
Executive Officers
Louis J. Dunham (43) 54,777(18) 0.41%
Executive Vice President, VNB
Senior Credit Officer
W. Bruce Fenn (56) 26,530(19) 0.20%
Executive Vice President, VNB Senior
Banking Officer
Richard O. Madden (49) 24,396(20) 0.18%
Executive Vice President, Treasurer and
Secretary
Robert G. Soucy (52) 78,282(21) 0.59%
Executive Vice President, VNB Senior
Operating Officer
__________
* Nominee for election at 1998 Annual Meeting
+ Not standing for reelection in 1998
(1) During the past five years, the principal occupation and employment of
each director and executive officer has been as set forth above, except as
follows: Francis L. Lemay was President & Chief Executive Officer and Chairman
of West Mass Bankshares,Inc. until June 14, 1994 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.
(2) Beneficial ownership means sole voting and investment powers, unless
otherwise noted.
(3) Mr. Abatiell's shares are held in a custodial capacity in VNB's trust
department in which Mr. Abatiell has sole voting and investment powers.
Includes options to acquire 8,000 additional shares, exercisable within
sixty (60) days, pursuant to the Directors' Non-Qualified Stock Option Plans,
of which 2,000 shares are subject to the approval of the Amended and Restated
1994 Stock Option Plan (see Proposal 2.).
(4) Includes options to acquire 2,000 shares, exercisable within sixty (60)
days, pursuant to the Directors' Non-Qualified Stock Option Plans, which are
subject to the approval of the Amended and Restated 1994 Stock Option Plan (see
Proposal 2).
(5) Includes options to acquire 8,000 shares, exercisable within sixty (60)
days, pursuant to the Directors' Non-Qualified Stock Option Plans, 2,000 of
which are subject to the approval of the Amended and Restated 1994 Stock
Option Plan (see Proposal 2).
(6) Includes options to acquire 4,000 shares, exercisable within sixty (60)
days, pursuant to the Directors' Non-Qualified Stock Option Plans, 2,000 of
which are subject to the approval of the Amended and Restated 1994 Stock
Option Plan (see Proposal 2).
(7) Includes 22,740 shares held jointly with a family member in which Mr.
Coombs shares voting and investment powers. Also includes options to acquire
6,000 shares, exercisable within sixty (60) days, pursuant to the
Directors' Non-Qualified Stock Option Plans, 2,000 of which are subject to
the approval of the Amended and Restated 1994 Stock Option Plan (see Proposal
2).
(8) Includes 2,000 shares held by The Lane Press which Mr. Drumheller shares
voting and investment powers. Also includes option to acquire 4,000 shares,
exercisable within sixty (60) days, pursuant to the Directors'Non-Qualified
Stock Option Plans, 2,000 of which are subject to the approval of the Amended
and Restated 1994 Stock Option Plan (see Proposal 2).
(9) Includes options to acquire 12,648 shares, exercisable within sixty (60)
days, pursuant to the Directors' Non-Qualified Stock Option Plans, 2000 of which
are subject to the approval of the Amended and Restated 1994 Stock Option Plan
(see Proposal 2).
(10) Includes options to acquire 8,000 shares, exercisable within sixty (60)
days, pursuant to the Directors' Non-Qualified Stock Option Plans, 2000 of
which are subject to the approval of the Amended and Restated 1994 Stock
Option Plan (see Proposal 2).
(11) Includes 400 shares held in the name of Green Mountain Investment Club
in which Mr. Hashagen shares voting and investment powers and 20,896 shares
held in the VNB Profit Sharing Plan, and options to acquire 111,600 shares,
exercisable within sixty (60) days, pursuant to the Officers' Non-Qualified
Stock Option Plans, 28,000 of which are subject to the approval of the
Amended and Restated 1994 Stock Option Plan (see Proposal 2).
(12) Includes 57,683 shares held in a trust in which Mr. Lemay has sole voting
and investment powers. Also includes 60,000 shares held by a family member in
a trust in which Mr. Lemay has no voting or investment powers. Also includes
options to acquire 4,000 shares, exercisable within sixty (60) days, pursuant to
the Directors' Non-Qualified Stock Option Plans, 2,000 of which are subject to
the approval of the Amended and Restated 1994 Stock Option Plan (see Proposal
2).
(13) Includes 1,010 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 6,000 shares, exercisable within
sixty (60) days, pursuant to the Directors' Non-Qualified Stock Option Plans,
2,000 of which are subject to the approval of the Amended and Restated 1994
Stock Option Plan (see Proposal 2).
(14) Includes 777 shares held jointly with family members. Also includes
2,211 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 8,000 shares, exercisable within sixty (60) days,
pursuant to the Directors' Non-Qualified Stock Option Plans, 2,000 of which
are subject to the approval of the Amended and Restated 1994 Stock Option Plan
(see Proposal 2).
(15) Includes options to acquire 12,648 shares, exercisable within sixty (60)
days, pursuant to the Directors' Non-Qualified Stock Option Plans, 2,000 of
which are subject to the approval of the Amended and Restated 1994 Stock Option
Plan (see Proposal 2).
(16) Includes 58,017 shares held jointly with family members in which Mr.
Richards shares voting and investment powers. Also includes options to
acquire 6,000 shares, exercisable within sixty (60) days, pursuant to
the Directors' Non-Qualified Stock Option Plans, 2,000 of which are subject
to the approval of the Amended and Restated 1994 Stock Option Plan (see
Proposal 2).
(17) Includes options to acquire 12,648 shares, exercisable within sixty (60)
days, pursuant to the Directors' Non-Qualified Stock Option Plans, 2,000 of
which are subject to the approval of the Amended and Restated 1994 Stock
Option Plan (see Proposal 2).
(18) Includes 10,577 shares in the VNB Profit Sharing Plan. Also includes
options to acquire 44,200 shares exercisable within sixty (60) days pursuant
to the Officers' Non-Qualified Stock Option Plans, 13,000 of which are subject
to the approval of the Amended and Restated 1994 Stock Option Plan (see Proposal
2).
(19) Includes 13,331 shares in the VNB Profit Sharing Plan and options to
acquire 13,200 shares, exercisable within sixty (60) days pursuant to the
Officers' Non-Qualified Stock Option Plans, 13,000 shares of which are
subject to the approval of the Amended and Restated 1994 Stock Option Plan
(see Proposal 2).
(20) Includes 59 shares held jointly with a family member in which Mr.
Madden shares voting and investment powers. Also includes 6,137 shares held
in the VNB Profit Sharing Plan and options to acquire 18,200 shares
exercisable within sixty (60) days pursuant to the Officers' Non-Qualified
Stock Option Plans, 14,000 shares of which are subject to the approval of the
Amended and Restated 1994 Stock Option Plan (see Proposal 2).
(21) Includes 9,849 shares in the VNB Profit Sharing Plan and options to
acquire 58,200 shares, exercisable within sixty (60) days pursuant to the
Officers' Non-Qualified Stock Option Plans, 14,000 shares of which are subject
to the approval of the Amended and Restated 1994 Stock Option Plan (see
Proposal 2).
On April 13, 1998, the directors and officers of the Company as a group (19)
had beneficial ownership of 1,348,927 shares of Company Common Stock, amounting
to 10.16% of the outstanding shares. This includes options to acquire 347,344
shares, or 2.61% of the outstanding shares, exercisable within sixty (60) days,
pursuant to the Directors' and Officers' Non-Qualified Stock Options Plans,
110,000 shares of which are subject to the approval of the Amended and Restated
1994 Stock Option Plan (see Proposal 2.)
Directors' 1988 Non-Qualified Stock Option Plan
The Company has a Directors' Non-Qualified Stock Option Plan under which
Directors were granted options to acquire an aggregate of 24,000 shares of the
Common Stock at a price of $9.50 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 five years from the
date of grant.
Officers' 1987 Non-Qualified Stock Option Plan
The Company has an Officers' Non-Qualified Stock Option Plan under which
officers were granted options to acquire an aggregate of 156,600 shares of the
Common Stock at a price of $9.50 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 five years from the
date of grant.
1994 Stock Option Plan
The Company has 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 previously granted options as follows: (i) to acquire
an aggregate of 96,000 and 13,000 shares, respectively, of the Common
Stock at prices of $9.50 and $10.125 per share, respectively; (ii) to
acquire an aggregate of 107,600 and 12,000 shares, respectively, of the
Common Stock at a price of $11.25 per share; and (iii) to acquire an
aggregate of 120,000 and 28,000 shares, respectively, of the Common Stock at
a price of $15.75. The exercise price of all 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. See also Proposal 2 - Approval of Amended and Restated 1994 Stock
Option Plan.
Attendance of Directors
The Board of Directors met 13 times during calendar year 1997. During
1997, all of the 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, except for John Dwight, who attended 68% of the required meetings.
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 has an Executive Committee which has Board of
Director nominating and non-executive officer review responsibilities.
Directors serving on the Executive Committee during 1997 were Anthony F.
Abatiell, Charles A. Cairns, Philip M. Drumheller, John K. Dwight, John D.
Hashagen, Jr. (President & CEO), Stephan A. Morse, Roger M. Pike, Ernest R.
Pomerleau and Mark W. Richards. The Committee met 11 times during 1997.
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
as made, whichever occurs first.
The Company has an Audit Committee whose members are appointed annually by
the Board of Directors. During 1996, these Directors served on the Audit
Committee: Charles A. Cairns, Philip M. Drumheller, John K. Dwight, Roger M.
Pike and Ernest R. Pomerleau. The Audit Committee appoints Independent
Public Accountants and supervises the Audit, Compliance and Loan Review
functions of the Company.
Compensation of Directors
Each director who is not an officer of VFSC, VNB or UB receives an
annual retainer of $6,000 and, in addition, a $600 fee for each regular
monthly Board of Directors' meeting attended and a $400 fee for each meeting
of a committee of the Board he or she attends.
In addition, the Chairman of the Board receives an annual retainer of
$5,000, the chairpersons of the Executive Committee, Audit Committee and Loan
Committee receive an annual retainer of $1,000 and the chairpersons of the
Compensation Committee and the Trust Committee receive an annual retainer of
$500. During 1997 non-officer directors each received options to purchase
2,000 shares of the Company's stock at an exercise price of the then current
market value of $24.44.
Compensation Committee Report
The Company's executive compensation program is administered by
the Compensation Committee of the Board of Directors (the Committee) which is
composed of five independent non-employee directors: Charles A. Cairns,
(Chair), Anthony F. Abatiell, Philip M. Drumheller, James E. Griffin and
Zane V. Akins.
The Committee is responsible for determining the compensation of the
executive officers of the Company, subject to review and approval by the full
Board of Directors. The executive officers of the Company subject to
Compensation Committee review are the five executive officers of Vermont
Financial Services Corp: John D. Hashagen, Jr., Louis J. Dunham, W. Bruce
Fenn, Richard O. Madden and Robert G. Soucy. These are the executives who
perform executive level policy-making functions for the Company and 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 to the Company's stock value
The Committee has retained Watson Wyatt & Company of Wellesley,
Massachusetts to assist in the design and implementation of the executive
compensation program. Watson 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 comparable sized commercial banking institutions.
The Committee has determined that total compensation for the executive officers
shall consist of three components: base salary, annual incentive payment and
stock options.
Base Salary. The Committee's practice is to target the base salaries of
the executive officers somewhat below the median base salary levels of similar
executives in its peer group. The Committee's objective in this regard is to
control the portion of executive compensation that is fixed, so that a larger
portion of compensation is on a variable, or at risk, basis. Base salaries are
reviewed annually and increases may be granted by the Committee and the Board
of Directors dependent on individual performance, the Company's performance and
peer group salary levels.
The Committee recommended, and the Board of Directors approved, an
increase in Mr. Hashagen's base salary from $234,000 for 1996 to $260,000 for
1997. The Committee based this increase on Mr. Hashagen's contribution to the
Company's strong financial performance for 1996 as measured by earnings per
share, return on assets, nonperforming assets, efficiency ratio and stock
price. Mr. Hashagen's 1997 base salary was set below the peer group's 1997
median base salary of $297,500 in accordance with the Committee's practice
regarding base salary levels. The base salaries of the other executive officers
of the Company were established in a similar manner.
Annual Incentive Payments. The 1997 Executive Management Annual
Incentive Plan provided for a targeted payout of 35% of base salary for all
five executive officers if the Company achieved earnings per share in the range
of $1.85 to $1.89 and return on assets in the range of 1.18% to 1.22%.
The Plan provided for lower and higher payouts, ranging from zero to 55% of
base salary, dependent on the Company's results. The Company's 1997 earnings
per share and its return on assets were both below the Plan's threshold for
incentive payments, so no incentive payments to executive management were
made for 1997.
Stock Options. The Company's stockholders approved the Vermont Financial
Services Corp. 1994 Stock Option Plan at the Annual Meeting of Stockholders
in August, 1994. The Board of Directors approved an Amended and Restated 1994
Stock Option Plan in August 1997, subject to ratification by the Company's
stockholders. (See Proposal #2 in this Proxy Statement). This Plan, as
amended, provides for the granting of stock options, not to exceed 1,110,000
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 1997, the Board of Directors, based
on the Committee's recommendations, granted non-qualified stock options for
144,000 shares. Mr. Hashagen was granted options for 28,000 shares, other
executive officers and senior officers of the Company and/or its subsidiaries
were granted options on 88,000 shares in aggregate and each of the 14
non-employee directors was granted an option for 2,000 shares, or 28,000
shares in aggregate.
In August 1997, the Board of Directors adopted stock ownership guidelines
for the Company's executive management and for the Board of Directors. This
was done to further align executive and director interests with those of the
Company's stockholders. The guidelines call for the executive officers to
own Company stock equal to specified multiples of their base salary. The
multiple for Mr. Hashagen is 3.5 times base salary and is 2.5 times base
salary for the other four executive officers. If an executive officer has
not attained this level of stock ownership within five years, the executive
may subsequently receive Company stock in lieu of cash incentive payments at
the Committee's discretion. The guidelines for the Board of Directors call
for each Director to own Company stock equal to five times their average
annual directors fees for the last three years. The Directors also have five
years to attain the guideline target. Stock options are excluded from stock
ownership calculations under the guidelines.
In the Committee's opinion, the compensation for executive management for
1997 was appropriate based on the Company's performance and was adequate to
retain and motivate the Company's executive management group.
Vermont Financial Services Corp. Compensation Committee
Charles A. Cairns, Chair
Anthony F. Abatiell
Philip M. Drumheller
James E. Griffin
Zane V. Akins
Executive Officers
The following tables contain a three-year summary of the total compensation
paid to the Chief Executive Officer of the Company and the other four executive
officers.
<TABLE>
I. SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Restric- All
Annual ted LTIP Other
Compen- Stock Options/ Pay Compen-
Salary Bonus sation Awards SARs outs sation
Name and Principal
Position Year $ $ $ $ # $ $(1)
John D. Hashagen 1997 $260,000 $0 N/A N/A 28,000 sh N/A $12,756(2)
President and Chief 1996 234,000 93,600 N/A N/A 27,000 N/A 15,108(3)
Executive Officer 1995 220,000b 66,000 N/A N/A 28,000 N/A 14,528(4)
Richard O. Madden 1997 $138,000 $0 N/A N/A 14,000 sh N/A $12,283
Executive Vice
President, 1996 120,000 48,000 N/A N/A 14,000 N/A 12,435
Treasurer, Secretary1995 112,000 33,600 N/A N/A 14,200 N/A 6,720
Robert G. Soucy 1997 $147,000 $0 N/A N/A 14,000 N/A $12,467(2)
Executive Vice
President, 1996 128,000 51,200 N/A N/A 14,800 N/A 13,167(3)
VNB Senior Operating
Officer 1995 120,000 36,000 N/A N/A 15,200 N/A 7,306(4)
Louis J. Dunham 1997 $125,000 $0 N/A N/A 13,000 N/A $12,299
Executive Vice
President, 1996 115,000 46,000 N/A N/A 13,400 N/A 11,696
VNB Senior Credit
Officer 1995 98,000 29,400 N/A N/A 12,400 N/A 5,961
W. Bruce Fenn 1997 $130,000 $0 N/A N/A 13,000 sh N/A $12,404(2)
Executive Vice
President, 1996 120,000 48,000 N/A N/A 14,000 N/A 13,838(3)
VNB Senior Banking
Officer 1995 111,077 33,000 N/A N/A 13,800 N/A 7,878(4)
</TABLE>
(1) Includes the 50% Company match of the respective employees' 401k
contribution and the employees' portion of the Company's contribution to the
Employees Profit Sharing Plan.
(2) Includes discounts received on purchase of common stock under the
Company's Employee Stock Purchase Plan of $541 for Mr. Hashagen, $89 for Mr.
Fenn and $165 for Mr. Soucy.
(3) Includes discounts received on purchase of common stock under the
Company's Employee Stock Purchase Plan of $2,597 for Mr. Hashagen, $1,352
for Mr. Fenn and $569 for Mr. Soucy.
(4) Includes discounts received on purchases of common stock under the
Company's Employee Stock Purchase Plan of $2,754 for Mr. Hashagen, $1,120
for Mr. Fenn and $452 for Mr. Soucy.
<TABLE>
II. OPTION/SAR GRANTS TABLE
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term (1)
<S> <C> <C> <C> <C> <C> <C>
% of Total
Options/SARs
# of Granted to Exercise
Securities Employees or base
Underlying in Fiscal Price Expiration
Name Options Granted Year ($/Sh) Date 5%($) 10%($)
John D. Hashagen, Jr. 28,000 24.1% $24.44 8/27/07 $430,365 $1,090,629
Richard O. Madden 14,000 12.1 24.44 8/27/07 215,183 545,315
Robert G. Soucy 14,000 12.1 24.44 8/27/07 215,183 545,315
Louis J. Dunham 13,000 11.2 24.44 8/27/07 199,812 506,364
W. Bruce Fenn 13,000 11.2 24.44 8/27/07 199,812 506,364
</TABLE>
(1) The assumed growth rates in price in the Company's stock are not necessarily
indicative of actual performance that may be expected.
III. OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
Aggregated Option Exercises in Last Fiscal Year, and FY-End Option Value
<S> <C> <C> <C> <C>
Number of Securities Value of
Underlying Unexercised Unexercised
Options at FY-End (#) In-the-Money
Options at FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/ (2)
Name on Exercise(#)Realized($)(1) Unexercisable Unexercisable
John D. Hashagen, Jr. 2,000 $23,250 83,600/28,000 $1,318,400/$96,180
Richard O. Madden 13,200 $224,900 36,200/14,000 $552,825/$48,090
Robert G. Soucy 8,000 $72,493 44,200/14,000 $693,075/$48,090
Louis J. Dunham 6,000 $76,943 37,200/13,000 $578,100/$44,655
W. Bruce Fenn 48,800 $654,192 200/13,000 $3,675/$44,655
</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, 1997.
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, 1992 in the common stock of VFSC,
NASDAQ and NBS
* Total return assumes reinvestment of dividends.
** Fiscal year ending December 31.
Table of Graph Points in Performance Graph
Investment Value at December 31,
1992 1993 1994 1995 1996 1997
VFSC $100.00 $112.71 $139.30 $239.06 $253.40 $408.45
NASDAQ 100.00 114.80 112.21 158.7 195.19 239.53
NBS 100.00 114.04 113.63 169.22 223.41 377.44
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. Dunham,
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.
Management Continuity Agreements
The Company and VNB have entered into agreements with the Company'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
$1,730,000. 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' 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 other employees of VNB and the
Company which provide for severance payments ranging from 100% to 200% of
the employee's base salary upon termination after a change in control.
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 then outstanding securities; (ii) during any two-year period
those persons, who at the beginning of such period were members of the
Company'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 approve a merger or
consolidation of the Company 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.
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.
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 1997,
the Company made a contribution of approximately $1,000,000 to the
Profit-Sharing Plan.
Retirement Plan
The VNB Retirement Plan covers substantially all eligible employees of VNB,
including officers, and provides for payment of retirement benefits generally
based upon an employee's years of credited service with VNB 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 VNB. The amounts
shown are after deduction of estimates for Social Security reductions based
on the Social Security law as of January 1, 1998.
Estimated Annual Benefits at Retirement
by Specified Remuneration and
Years of Service Classification
Final Average Years of Service
Compensation 5 10 15 20 25
$20,000 $1,486 $2,971 $4,457 $5,942 $7,428
40,000 3,380 6,761 10,141 13,522 16,902
60,000 5,622 11,244 16,866 22,488 28,110
80,000 7,990 15,979 23,969 31,958 39,948
100,000 10,390 20,779 31,169 41,558 51,948
120,000 12,790 25,579 38,369 51,158 63,948
140,000 15,190 30,379 45,569 60,758 75,948
160,000 17,590 35,179 52,769 70,358 87,948
180,000 * 19,990 39,979 59,969 79,958 99,948
200,000 * 22,390 44,779 67,169 89,558 111,948
220,000 * 24,790 49,579 74,369 99,158 123,948
240,000 * 27,190 54,379 81,569 108,758 135,948*
260,000 * 29,590 59,179 88,769 118,358 147,948*
* Under current regulations of the Internal Revenue Code, the maximum annual
benefit payable from a defined benefit plan during 1998 is $130,000 payable
as a life annuity for retirements at age 65. In addition, the maximum annual
compensation may not exceed $160,000. For those associates who are covered
under the Retirement Restoration Plan, amounts above these maximums will be
paid under the terms of the Retirement Restoration Plan, up to the amounts shown
in the table above.
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.
Retirement Restoration Plan
The Vermont Financial Services Corp. Retirement Restoration Plan was
approved by the Board of Directors in November 1996. It provides supplemental
retirement for employees whose benefits under the VNB Retirement Plan are
subject to limitations set forth in Sections 491(a)(17) and 415 of the Internal
Revenue Code. The Plan provides the participating employees with supplemental
benefits equal to the retirement benefit that the participating employee's
benefit under the VNB Retirement Plan is reduced by the limitations of Sections
401(a)(17) and 415 of the Internal Revenue Code.
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 1997. 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 1997. 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.
INDEPENDENT PUBLIC ACCOUNTANTS
For several years, the Company employed the accounting firm of Coopers &
Lybrand L.L.P. 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. The Board of Directors, upon the
recommendation of the Audit Committee, appointed KPMG Peat Marwick L.L.P. on
April 23, 1997 to perform these services for the Company in 1997.
During the two years ended December 31, 1996, and the subsequent interim
period through April 23, 1997, there were no disagreements with Coopers &
Lybrand L.L.P. on any matter of accounting principles or practices, financial
statement disclosure or auditing scope and procedures, which, if not resolved
to their satisfaction, would have caused them to make reference to the
subject matter of the disagreement in connection with their audit report for
either of such two years. Neither of the audit reports of Coopers & Lybrand
L.L.P. on the Company's consolidated financial statements for either of such
two years contained any adverse opinion or disclaimer of opinion, nor was
either such report qualified or modified in any way as to uncertainty, audit
scope or accounting principles, except that an explanatory paragraph regarding
the adoption of Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights", and Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation",
was contained in the report for the year ended December 31, 1996.
Representatives of KPMG Peat Marwick L.L.P. 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 1999 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 27, 1999, 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 10, 1998.
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, 1997, 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: April 20, 1998
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 Quality
Inn and Suites, Brattleboro, VT, on June 11, 1998 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 April 20, 1998
(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" ITEMS #1 AND #2.
1. Proposal to elect Class II 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:
Allyn W. Coombs, Philip M. Drumheller, John K. Dwight, Stephan A. Morse
2. To ratify and approve the Vermont Financial Services Corp. 1994 Amended
and Restated Stock Option Plan.
___ FOR ___ AGAINST ___ ABSTAIN
3. To act on whatever other business may properly be brought before the
Meeting or any adjournment thereof.
(over)
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" ITEM #1 AND #2 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
VERMONT FINANCIAL SERVICES CORP.
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
VERMONT FINANCIAL SERVICES CORP.
1994 STOCK OPTION PLAN
TABLE OF CONTENTS
Page 1. PURPOSE 1
2. ADMINISTRATION OF THE PLAN 1
3. STOCK SUBJECT TO THE PLAN 2
4. AUTHORITY TO GRANT OPTIONS 2
5. WRITTEN OPTION AGREEMENT 3
6. ELIGIBILITY 3
7. OPTION PRICE 3
8. DURATION OF OPTIONS 4
9. RESTRICTIONS ON EXERCISE OF OPTIONS 4
10. EXERCISE OF OPTIONS 4
11. TRANSFERABILITY OF OPTIONS 6
12. TERMINATION OF EMPLOYMENT OR INVOLVEMENT
OF OPTIONEE WITH THE COMPANY 6
13. SPECIAL BONUS GRANTS 7
14. REQUIREMENTS OF LAW, ETC. 7
15. LEGEND ON CERTIFICATES 8
16. NO RIGHTS AS STOCKHOLDER 8
17. EMPLOYMENT OBLIGATION 8
18. FORFEITURE AS A RESULT OF TERMINATION FOR CAUSE 8
19. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE 9
20. AMENDMENT OR TERMINATION OF PLAN 11
21. CERTAIN RIGHTS OF THE COMPANY 12
22. TAX WITHHOLDING 13
23. EFFECTIVE DATE AND DURATION OF THE PLAN 14
VERMONT FINANCIAL SERVICES CORP.
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
1. PURPOSE
The purpose of this Amended and Restated 1994 Stock Option Plan (the
"Plan") is to encourage directors, officers and other key employees of Vermont
Financial Services Corp. (the "Company") and its Subsidiaries (as hereinafter
defined) to continue their association with the Company and its Subsidiaries,
by providing opportunities for such persons to participate in the ownership of
the Company and in its future growth through the granting of stock options
(the "Options") which may be options designed to qualify as incentive stock
options (within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended [the "Code"]) (an "ISO"), or options not intended to qualify
for any special tax treatment under the Code (a "NQO"). The term "Subsidiary"
as used in the Plan means a corporation or other business organization of which
the Company owns, directly or indirectly through an unbroken chain of
ownership, fifty percent (50%) or more of the total combined voting power of
all classes of stock.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a committee (the "Committee") consisting
of those directors of the Company who shall at any time and from time to time
be serving as members of the Compensation Committee of the Board of Directors
(the "Board"). For so long as Section 16 of the Securities Exchange Act of
1934, as amended from time to time (the "Exchange Act"), is applicable to the
Company, each member of the Committee shall be a "non-employee director" or
the equivalent within the meaning of Rule 16b-3 under the Exchange Act, and,
for so long as Section 162(m) of the Internal Revenue Code of 1986, as amended
from time to time (the "Code"), is applicable to the Company, an "outside
director" within the meaning of Section 162 of the Code and the regulations
thereunder. The Committee shall select those persons to receive Awards under
the Plan and determine the terms and conditions of all Awards. The
Committee shall select one of its members as Chairman and shall hold
meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum and acts of the Committee at which a
quorum is present, or acts consented to or approved in writing by all of the
members of the Committee, shall be the valid acts of the Committee.
The Committee shall have the sole authority, in its absolute discretion,
to adopt, amend and rescind such rules and regulations as, in its opinion,
may be advisable in the administration of the Plan, and to interpret the Plan,
the rules and regulations, and the instruments evidencing options granted
under the Plan and to make all other determinations deemed necessary or
advisable for the administration of the Plan. All questions of interpretation
and application of such rules and regulations shall be subject to the
determination of the Committee, which shall be final and binding. The Plan
shall be administered in such a manner as to permit those Options granted
hereunder and specially designated under Section 4 as such to qualify as
incentive stock options as described in Section 422 of the Code.
3. STOCK SUBJECT TO THE PLAN
The total number of shares of stock which may be subject to Options
issued under the Plan shall be 550,000 shares of the Company's Common Stock,
$1.00 par value per share ("Stock"), from either authorized but unissued
shares or treasury shares; provided that the number of shares stated in this
Section 3 shall be subject to adjustment in accordance with the provisions
of Section 19. If any outstanding Option shall expire for any reason or shall
terminate by reason of the death or severance of employment of the Optionee,
the surrender of any such Option, or any other cause, the shares of Stock
allocable to the unexercised portion of such Option may again be subject to
an option under the Plan.
4. AUTHORITY TO GRANT OPTIONS
The Committee may determine, from time to time, which key employees of
the Company or any Subsidiary or other persons shall be granted Options
under the Plan, the terms of the Options (including without limitation
whether an Option shall be an ISO or a NQO) and the number of shares which
may be purchased under the Option provided, however, that if an individual
to whom a grant has been made fails to execute and deliver to the Committee
an Option Agreement, within ten (10) days after it is submitted to him, the
Option granted under the agreement shall be voidable by the Company at its
election, without further notice to the Optionee. Without limiting the
generality of the foregoing, the Committee may from time to time grant:
(a) to such eligible employees as it shall determine, an Option or Options
to buy a stated number of shares of Stock under the terms and conditions of
the Plan, which Option or Options will to the extent so designated at the
time of grant constitute an ISO; and (b) to such eligible directors,
employees or other persons as it shall determine an Option or Options to
buy a stated number of shares of Stock under the terms and conditions of
the Plan, which Option or Options shall constitute a NQO. The Committee
shall, from time to time, report to the Board the names of employees or
other persons to whom Options are granted, the type of Options granted,
the number of shares covered by each Option and the terms and conditions of
each such Option. No Optionee may be granted Options under the Plan with
respect to more than 150,000 shares of Stock. Subject only to any applicable
limitations set forth elsewhere in the Plan, the number of shares of Stock
to be covered by any Option shall be as determined by the Committee.
5. WRITTEN OPTION AGREEMENT
Each Option granted hereunder shall be embodied in an option agreement
(the "Option Agreement") substantially in the form of Exhibit 1, which shall be
signed by the Optionee and by the Chairman of the Board, the President, the
Chief Operating Officer, or the Chief Financial Officer of the Company for
and in the name and on behalf of the Company. An Option Agreement pertaining
to an ISO shall contain the restriction on exercisability set forth in Section 9
and any Option Agreement for any Option, whether ISO or NQO, may contain such
other provisions not inconsistent with the Plan as the Committee in its sole
and absolute discretion shall approve.
6. ELIGIBILITY
The individuals who shall be eligible for grant of Options under the Plan
shall be key employees, officers (including officers who may be members of
the Board), and directors who are not employees. The President and the five
Executive Vice Presidents shall be among the key employees eligible for such
grants. ISOs shall not be granted to any individual who is not an employee
of the Company or a Subsidiary. An employee, director or other person to
whom an Option has been granted under this Plan, and any successor to such
person who may be eligible to exercise such Option following the death of
the employee, is hereinafter referred to as an "Optionee."
7. OPTION PRICE
The price at which shares of Stock may be purchased pursuant to an Option
shall be specified by the Committee at the time the Option is granted, but
shall in no event be less than one hundred percent (100%) of the fair market
value of the Stock on the date the Option is granted. In the case of an
employee who owns (or is considered under Section 424(d) of the Code as owning)
stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Subsidiary, the price at
which shares of Stock may be so purchased pursuant to an ISO shall be not less
than one hundred and ten percent (110%) of the fair market value of the
Stock on the date the ISO is granted.
For purposes of the Plan, the "fair market value" of a share of Stock on
any date specified herein shall mean the last reported sales price, regular
way, or, in the event that no sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in either case as reported
on the NASDAQ National Market System.
8. DURATION OF OPTIONS
The duration of any Option shall be specified by the Committee in the
Option Agreement, but no Option shall be exercisable after the expiration of
ten (10) years. In the case of any employee who owns (or is considered under
Section 424(d) of the Code as owning) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or any Subsidiary, no ISO shall be exercisable after the expiration
of five (5) years from the date such Option is granted. The Committee,
in its sole and absolute discretion, may extend any Option theretofore
granted subject to the aforesaid limits and may provide that an Option shall
be exercisable during its entire duration or during any lesser period of time.
9. RESTRICTIONS ON EXERCISE OF OPTIONS
Notwithstanding any other provision of the Plan, the aggregate fair market
value (determined as of the time the Option is granted) of the Stock with
respect to which ISOs may be exercisable for the first time by an Optionee
during any calendar year (under the Plan or any other incentive stock option
plan(s) of the Company or any Subsidiary) shall not exceed $100,000. Subject
to the foregoing, each Option may be exercised so long as it is valid and
outstanding from time to time, in part or as a whole, in such manner and
subject to such conditions as the Committee, in its sole and absolute
discretion, may provide in the Option Agreement.
10. EXERCISE OF OPTIONS
Options shall be exercised by the delivery of written notice to the
Company setting forth the number of shares of Stock with respect to which the
Option is to be exercised, accompanied by payment of the option price of such
shares, which payment shall be made, subject to the alternative provisions of
this Section, in cash or by such cash equivalents, payable to the order of
the Company in an amount in United States dollars equal to the option price
of such shares, as the Committee in its sole and absolute discretion shall
consider acceptable. Such notice shall be delivered in person to the
Treasurer of the Company or shall be sent by registered mail, return receipt
requested, to the Treasurer of the Company, in which case delivery shall be
deemed made on the date such notice is deposited in the mail.
Options may also be exercised by means of a "cashless exercise" procedure
in which a broker (i) transmits the option price to the Company in cash or
acceptable cash equivalents, either (1) against the Optionee's notice of
exercise and the Company's confirmation that it will deliver to the broker
stock certificates issued in the name of the broker for at least that number
of shares having the fair market value equal to the option price, or (2) as
the proceeds of a margin loan to the Optionee; or (ii) agrees to pay the
option price to the Company in cash or acceptable cash equivalents upon the
broker's receipt from the Company of stock certificates issued in the name
of the broker for at least that number of shares having fair market value
equal to the option price. The Optionee's written notice of exercise of an
option pursuant to a "cashless exercise" procedure must include the name and
address of the broker involved, a clear description of the procedure, and
such other information or undertaking by the broker as the Board shall
reasonably require.
Alternatively, payment of the option price may be made, in whole or in
part, in shares of Stock owned by the Optionee; provided, however, that the
Optionee may not make payment in shares of Stock that he acquired upon the
earlier exercise of any ISO (or other "incentive stock option"), unless and
until he has held the shares until at least two (2) years after the date the
ISO (or such other incentive stock option) was granted and at least one (1)
year after the date the ISO (or such other incentive stock option) was
exercised. If payment is made in whole or in part in shares of Stock, then
the Optionee shall deliver to the Company in payment of the option price of
the shares in respect of which such Option is exercised (a) certificates
registered in the name of such Optionee representing a number of shares of
Stock legally and beneficially owned by such Optionee, fully vested and free
of all liens, claims and encumbrances of every kind, and having a fair
market value on the date of delivery of such notice equal to the option
price of the shares of Stock with respect to which such Option is to be
exercised, such certificates to be duly endorsed or accompanied by stock
powers duly endorsed in blank by the record holder of the shares of Stock
represented by such certificates; and (b) if the option price of the shares
in respect of which such Option is to be exercised exceeds such fair market
value, cash or such cash equivalents payable to the order to the Company,
in an amount in United States dollars equal to the amount of such excess,
as the Committee in its sole and absolute discretion shall consider
acceptable. Notwithstanding the foregoing provisions of this Section, the
Committee, in its sole and absolute discretion, may refuse to accept shares
of Stock in payment of the option price of the shares of Stock with respect
to which such Option is to be exercised and, in that event, any certificates
representing shares of Stock which were delivered to the Company with such
written notice shall be returned to such Optionee together with notice by
the Company to such Optionee of the refusal of the Committee to accept such
shares of Stock.
As promptly as practicable after the receipt by the Company of (a)
written notice from the Optionee setting forth the number of shares of Stock
with respect to which such Option is to be exercised and (b) payment of the
option price of such shares in the form required by the foregoing provisions
of this Section, the Company shall, subject to the provisions of Section 16
hereof, cause to be delivered to such Optionee certificates representing the
number of shares with respect to which such Option has been so exercised.
11. TRANSFERABILITY OF OPTIONS
Options shall not be transferable by the Optionee otherwise than by will
or under the laws of descent and distribution, and shall be exercisable
during his or her lifetime only by the Optionee, provided, however, that
the Committee may, in its discretion, authorize all or a portion of the
options to be granted to an Optionee to be on terms which permit transfer,
subject to the Committee's approval, by such Optionee to (i) the spouse,
children or grandchildren of the Optionee ("Immediate Family Members"),
(ii) a trust or trusts for the exclusive benefit of such Immediate Family
Members, or (iii) a partnership in which such Immediate Family Members are
the only partners, provided that (x) there may be no consideration for any
such transfer, (y) the Option Agreement pursuant to which such options are
granted must be approved by the Committee, and must expressly provide for
transferability in a manner consistent with this Section, and (z) subsequent
transfers of transferred options shall be prohibited except those in
accordance with this Section. Following transfer, any such Options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, including the termination provisions thereof,
as if the Optionee had continued to be the holder thereof.
12. TERMINATION OF EMPLOYMENT OR INVOLVEMENT OF OPTIONEE WITH THE COMPANY
For purposes of this Section, employment by or involvement with (in the
case of an Optionee who is not an employee) a Subsidiary shall be considered
employment by or involvement with the Company. Unless otherwise set forth
in the Option Agreement, after the Optionee's termination of employment with
the Company, including his retirement in good standing from the employ of
the Company for reasons of age under the then established rules of the
Company, the Option shall terminate on the earlier of the date of its
expiration or three (3) months after the date of such termination or
retirement. If the holder of an Option dies before the date of expiration
of such Option and while in the employ of the Company or during the three (3)
month period described in the preceding sentence, or in the event of the
retirement of the Optionee for reasons of disability (within the meaning of
Section 22(e)(3) of the Code), such Option shall terminate on the earlier of
such date of expiration or one (l) year following the date of such death or
disability retirement. After the death of the Optionee, his or her executors,
administrators or any persons to whom his or her Option may be transferred by
will or by the laws of descent and distribution shall have the right at any
time prior to such termination to exercise the Option to the extent to which
the Optionee was entitled to exercise the Option on the date of his or her
death.
Authorized leave of absence or absence on military or government service
shall not constitute severance of the employment relationship between the
Company and the Optionee for purposes of the Plan, provided that either (a)
such absence is for a period of no more than ninety (90) days or (b) the
Employee's right to re-employment after such absence is guaranteed either by
statute or by contract.
For Optionees who are not employees of the Company, options shall be
exercisable for such periods following the termination of the Optionee's
involvement with the Company as may be set forth in the specific written
option agreement with the Optionee.
13. SPECIAL BONUS GRANTS
In its discretion, the Committee may grant in connection with any NQO a
special bonus in an amount not to exceed the combined federal, state and
local income tax liability incurred by the Optionee as a consequence of his
acquisition of Stock pursuant to the exercise of the NQO. Any such special
bonus shall be payable solely to federal, state and local taxing authorities
for the benefit of the Optionee at such time or times as withholding payments
of income tax may be required. In the event that an NQO with respect to which
a special bonus has been granted becomes exercisable by the personal
representative of the estate of the Optionee, the bonus shall be payable to
or for the benefit of the estate in the same manner and to the same extent as
it would have been payable for the benefit of the Optionee had he survived to
the date of exercise. A special bonus may be granted simultaneously with a
related NQO or separately with respect to an outstanding NQO or granted at an
earlier date.
14. REQUIREMENTS OF LAW, ETC.
The Company shall not be required to transfer any Stock or to sell or issue
any shares upon the exercise of any Option if the transfer, sale or issuance
of such shares may result in a violation by the Optionee or the Company of
any provisions of any law, statute or regulation of any governmental
authority. Without limiting the generality of the foregoing, in connection
with the Securities Act of 1933, as amended (the "Securities Act") and any
applicable state securities or "blue sky" law (a "Blue Sky Law"), upon the
proposed transfer of Stock or the proposed exercise of any Option the
Company shall not be required to transfer or issue shares unless the Board has
received evidence or advice satisfactory to it to the effect that such
transfer or issuance of shares is pursuant to a registration statement in
effect under the Securities Act and applicable Blue Sky Laws or otherwise is
subject to an exemption from such registration. Any determination in this
connection by the Board shall be conclusive. The Company shall not be
obligated to take any other affirmative action in order to cause the
transfer of Stock or the exercise of an Option to comply with any law or
regulations of any governmental authority, including, without limitation,
the Securities Act or applicable Blue Sky Law.
Notwithstanding any other provision of the Plan to the contrary, the
Company may refuse to permit transfer of shares of Stock if in the opinion
of its legal counsel such transfer may violate federal or state securities
laws or subject the Company to liability thereunder. Any sale, assignment,
transfer, pledge or other disposition of shares of Stock received upon a
grant of stock hereunder or the exercise of any Option (or any other shares
or securities derived therefrom) which is not in accordance with the
provisions of this Section shall be void and of no effect and shall not be
recognized by the Company.
15. LEGEND ON CERTIFICATES
The Committee may cause any certificate representing shares of Stock
acquired upon exercise of an Option (and any other shares or securities
derived therefrom) to bear a legend to the effect that the securities
represented by such certificate have not been registered under the Securities
Act or any applicable Blue Sky Law, and may not be sold, assigned, transferred,
pledged or otherwise disposed of except in accordance with the Plan and
applicable agreements binding the holder and the Company or any of its
stockholders.
16. NO RIGHTS AS STOCKHOLDER
No Optionee shall have any rights as a stockholder with respect to
shares until the date of issuance of a stock certificate for such shares;
except as otherwise provided in Section 19, no adjustment for dividends or
otherwise shall be made if the record date therefor is prior to the date of
issuance of such certificate.
17. EMPLOYMENT OBLIGATION
The granting of any Option shall not impose upon the Company or any
Subsidiary any obligation to employ or continue to employ any Optionee, or
to engage or retain the services of any person, and the right of the Company
or any Subsidiary to terminate the employment or services of any person shall
not be diminished or affected by reason of the fact that an Option has been
granted to him or her. The existence of any Option shall not be taken into
account in determining any damages relating to termination of employment
or services for any reason.
18. FORFEITURE AS A RESULT OF TERMINATION FOR CAUSE
Any Option Agreement may, in the Committee's discretion, include a
provision substantially in the form of Clause I below or with such changes
or alternative provisions and for such period of time, as the Committee may
determine to be appropriate in the circumstances:
I. Notwithstanding any provision of the Plan to the contrary, if the
Committee determines, after full consideration of the facts presented on
behalf of the Company and an Optionee, that (a) the Optionee has been engaged
in fraud, embezzlement, theft, commission of a felony or dishonesty in the
course of his or her employment by or involvement with the Company or a
Subsidiary, which damaged the Company or a Subsidiary, or has made
unauthorized disclosure of trade secrets or other proprietary information
of the Company or a Subsidiary or of a third party who has entrusted such
information to the Company or a Subsidiary, or (b) the Optionee's employment
or involvement was otherwise terminated for "cause," as defined in any
employment agreement with the Optionee, if applicable, or if there is no
such agreement, as determined by the Committee, which may determine that
"cause" includes among other matters the failure or inability of the Optionee
to perform and carry out his or her assigned duties and responsibilities
diligently and in a manner satisfactory to the Committee, then, in the
Committee's discretion, the Optionee's right to exercise an Option shall
terminate as of the date of such act (in the case of (a)) or such
termination (in the case of (b)) and the Optionee shall forfeit all
unexercised Options. If an Optionee whose behavior the Company asserts
falls within the provisions of (a) or (b) above has exercised or attempts to
exercise an Option prior to a decision of the Committee, the Company shall
not be required to recognize such exercise until the Committee has made its
decision and, in the event any exercise shall have taken place, it shall be
of no force and effect (and void ab initio) if the Committee makes an
adverse determination; provided, however, if the Committee finds in favor of
the Optionee then the Optionee will be deemed to have exercised such Option
retroactively as of the date he or she originally gave written notice of his
or her attempt to exercise or actual exercise, as the case may be. The
decision of the Committee as to the cause of an Optionee's discharge and the
damage done to the Company or a Subsidiary and whether or not the Optionee's
Option shall be forfeited, shall be final, binding and conclusive. No
decision of the Committee, however, shall affect in any manner the finality
of the discharge of such Optionee by the Company or a Subsidiary.
19. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE
The existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business or any merger or
consolidation of the Company or any issue of bonds, debentures, preferred or
preference stock or Stock or other common stock, whether or not convertible
into Stock or other securities or ranking prior to Stock or affecting the
rights thereof, or warrants, rights or options to acquire the same, or the
dissolution or liquidation of the Company or any sale or transfer of all or
any part of its assets or business or any other corporate act or proceeding,
whether of a similar character or otherwise.
The number of shares of Stock subject to the Plan (less the number of
shares theretofore delivered or paid in respect of the exercise of Options)
and the number of shares of Stock covered by any outstanding Option and the
price per share payable upon or in respect of exercise thereof (provided
that in no event shall the option price be less than the par value of such
shares) shall be proportionately and appropriately adjusted for any increase
or decrease in the number of issued and outstanding shares of Stock
resulting from any subdivision, split, combination or consolidation of
shares of Stock or the payment of a dividend in shares of Stock or other
securities of the Company on the Stock. The decision of the Board as to the
adjustment, if any, required by the provisions of this Section shall be
final, binding and conclusive.
If the Company merges or consolidates with a wholly-owned subsidiary for
the purpose of reincorporating itself under the laws of another jurisdiction,
the Optionees will be entitled to acquire shares of Stock of the
reincorporated Company upon the same terms and conditions as were in effect
immediately prior to such reincorporation (unless such reincorporation
involves a change in the number of shares or the capitalization of the
Company, in which case proportional adjustments shall be made as provided
above) and the Plan, unless otherwise rescinded by the Board, will remain
the Plan of the reincorporated Company.
Except as otherwise provided in the preceding paragraph, if while
unexercised Options remain outstanding under the Plan the Company merges or
consolidates with one or more corporations (whether or not the Company is
the surviving corporation), or is liquidated or sells or otherwise disposes
of substantially all of its assets to another entity, then, except as
otherwise specifically provided to the contrary in an Optionee's Option
Agreement, the Committee, in its discretion, shall amend the terms of all
outstanding Options so that either:
(i) after the effective date of such merger, consolidation, sale as the case
may be, (each such event, a "Reorganization Transaction") each Optionee shall
be entitled, upon exercise of an Option, to receive in lieu of shares of
Stock the number and class of shares of such stock or other securities to
which he would have been entitled pursuant to the terms of the Reorganization
Transaction if he had been the holder of record of the number of shares
of Stock as to which the Option is being exercised, or shall be entitled to
receive from the successor entity a new stock option or stock appreciation
right of comparable value; or
(ii) all outstanding Options shall be canceled as of the effective date
of any such liquidation or Reorganization Transaction provided that each
Optionee shall have the right to exercise his Option according to its terms
during the period of twenty (20) days ending on the day preceding the effective
date of such liquidation or Reorganization Transaction; and in addition to
the foregoing, the Committee may in its discretion amend the terms of an
Option by canceling some or all of the restrictions on its exercise, to
permit its exercise pursuant to this paragraph (ii) to a greater extent than
that permitted on its existing terms; or
(iii) all outstanding Options shall be canceled as of the effective date of
any such liquidation or Reorganization Transaction in exchange for
consideration in cash or in kind, which consideration in both cases shall be
equal in value to the value of those shares of stock or other securities the
Optionee would have received had the Option been exercised (to the extent
then exercisable) and no disposition of the shares acquired upon such
exercise had been made prior to such liquidation or Reorganization
Transaction, less the option price therefor. Upon receipt of such
consideration by the Optionee, his or her Option shall immediately
terminate and be of no further force and effect. The value of the stock or
other securities the Optionee would have received if the Option had been
exercised shall be determined in good faith by the Committee, and in the
case of shares of the Stock of the Company, in accordance with the
provisions of Section 7.
Except as expressly provided herein, the issue by the Company of shares of
Stock or other securities of any class or series or securities convertible
into or exchangeable or exercisable for shares of Stock or other securities
of any class or series for cash or property or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company
convertible into shares of Stock or other securities, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number,
class or price of shares of Stock then subject to outstanding Options.
20. AMENDMENT OR TERMINATION OF PLAN
The Board may, in its sole and absolute discretion, modify, revise or
terminate the Plan at any time and from time to time; provided, however,
that without the further approval of the holders of at least a majority of
the outstanding shares of Stock, the Board may not (a) materially increase
the benefits accruing to Optionees or grantees under the Plan or make any
"modifications" as that term is defined under Section 424(h)(3) (or its
successor) of the Code if such increase in benefits or modifications would
adversely affect (i) the availability to the Plan of the protections of
Section 16(b) of the Exchange Act, if applicable to the Company, or (ii) the
qualification of the Plan or any Options for "incentive stock option"
treatment under Section 422 of the Code; (b) change the aggregate number of
shares of Stock which may be issued under Options pursuant to the provisions
of the Plan, except as provided in Section 19; (c) reduce the option price
at which ISOs may be granted to an amount less than the minimum amount
refined by Section 7; or (d) change the class of persons eligible to receive
ISOs. Notwithstanding the preceding sentence, the Board shall in all events
have the power and authority to make such changes in the Plan and in the
regulations and administrative provisions hereunder or in any outstanding
Option as, in the opinion of counsel for the Company, may be necessary or
appropriate from time to time to enable any Option granted pursuant to the
Plan to qualify as an incentive stock option or such other form of stock
option as may be defined under the Code, as amended from time to time, so
as to receive preferential federal income tax treatment.
21. CERTAIN RIGHTS OF THE COMPANY
(a) Any Stock Option Agreement may, in the Committee's discretion,
include a provision substantially in the form of Clause I below or with
such changes or alternative provisions and for such period of time as the
Committee may determine to be appropriate in the circumstances:
I. Voluntary or Involuntary Transfers of Stock. Shares of Stock acquired by
an Optionee pursuant to the Plan (or other shares or securities derived
therefrom) shall not be voluntarily transferred by the Optionee without the
prior written consent of the committee, which consent may be withheld or
conditioned as the Committee, in its sole and absolute discretion, may
determine. If such shares of Stock (or other shares or securities derived
therefrom) are subject to an involuntary transfer, including by reason of
death, a divorce settlement or judicial proceeding, the Company shall have
the right to repurchase all or any such shares (including any shares or
other securities of the Company derived therefrom) at a price equal to the
Repurchase Price at the time of the involuntary transfer event. The Company
may exercise its repurchase right no later than one hundred eighty (180)
days following the later of (a) the date of such involuntary transfer of
such shares of Stock, and (b) the Committee's receipt of written notice of
the occurrence of such transfer event. Any such shares of Stock (or other
shares or securities) as to which the Company does not exercise its
repurchase rights within such period shall thereafter be free of the
restrictions of this Section.
Termination of Employment or Involvement. If an Optionee's employment
by or involvement with the Company (including, for this purpose, any
Subsidiary) shall terminate for any reason other than the Optionee's death
or a Justifiable Termination (as defined below) or the Optionee's retirement
for reasons of age or disability in accordance with the then policy of the
Company, the Company shall have the right to repurchase all or any of such
shares of Stock (or other shares or securities derived therefrom) at a price
equal to the Repurchase Price at the time of such repurchase. In addition,
if at the time of such termination the Optionee holds an Option granted
under the Plan which is by its terms exercisable after such termination, the
Company shall have the right to repurchase all or any part of the shares of
Stock (or other shares or securities derived therefrom) acquired pursuant to
the exercise of such Option, at the Repurchase Price. In the case of a
termination on account of any circumstance listed in Clause I of Section 18(a)
or (b) (a "Justifiable Termination"), the Company shall have the right
to repurchase all or any of such shares of Stock (or other shares or
securities derived therefrom) at the lesser of (i) the Option exercise price
per share or (ii) the Repurchase Price. The Company's right to repurchase
shares of Stock (or other shares or securities) may be exercised at any time
during the period beginning on the date of the Optionee's termination of
employment or involvement and ending ninety (90) days after the later of
(a) the date of such termination and (b) the date on which shares of Stock
(or other shares or securities) subject to the repurchase rights of this
Clause I of Section 21(a) are acquired by the Optionee. Any such shares of
Stock (or other shares or securities) as to which the Company does not
exercise its repurchase rights within such period shall thereafter be free
of the restrictions of this Clause I.
Repurchase Price. As used herein the term "Repurchase Price" shall mean the
fair market value of a share of Stock (or other shares or securities) as
determined in accordance with the provisions of Section 7, except that in
making its determination of fair market value of a share of Stock (or other
shares and securities) the Committee shall be entitled to take into account
that the shares of Stock (or other shares and securities) may be illiquid,
may be subject to restrictions on transfer or may constitute a minority
interest in the Company.
(b) The Committee may, in its sole and absolute discretion, also require a
key employee, as a condition to receiving any option, to enter into a
noncompetition agreement and/or nondisclosure agreement in such form as the
Committee may, from time to time in its sole and absolute discretion,
determine.
22. TAX WITHHOLDING
To the extent required by law the Company shall withhold income and
other taxes with respect to any income recognized by an Optionee or other
person relating to any Options granted under this Plan. It shall be a
condition to the Optionee's receipt of any Options that the Optionee
acknowledges and agrees to the Company's withholding of taxes and further
that if the amount of any consideration payable to the Optionee is
insufficient to pay such taxes, upon the request of the Company the Optionee
shall pay to the Company an amount sufficient for the Company to satisfy tax
withholding requirements.
Without limiting the foregoing, the Committee may in its discretion
permit any withholding obligation to be paid in whole or in part in the form
of Stock, by withholding from the shares to be issued upon exercise of
an NQO or by accepting delivery from the Optionee of shares already owned by
the Optionee in connection with withholding in respect of exercise of an
NQO. The fair market value of the shares for such purposes shall be
determined exclusively by the Committee. However, an Optionee may not make
any such payment of withholding taxes in the form of shares of Stock
previously acquired by him pursuant to the exercise of any ISO unless and
until such shares shall have been held by him for at least two (2) years from
the date such option was granted and at least one (1) year from the date the
option was exercised. If payment of withholding taxes is made in whole or
in part in shares of Stock already owned by the Optionee, then the Optionee
shall deliver to the Company certificates registered in the name of the
Optionee representing shares of Stock legally and beneficially owned by such
Optionee, fully vested and free of all liens, claims and encumbrances of
every kind, such certificates to be duly endorsed or accompanied by stock
powers duly endorsed in blank by the record holder of the shares represented
by such certificates.
23. EFFECTIVE DATE AND DURATION OF THE PLAN
This Amended and Restated 1994 Plan shall become effective and shall be
deemed to have been adopted on August 13, 1997, subject only to ratification
by the holders of a majority of the outstanding shares of capital stock
entitled to vote thereon (voting as a single class) within twelve (12)
months after such date. Unless the Plan shall have terminated earlier, the
Plan shall terminate on the tenth (10th) anniversary of its effective date,
and no Option shall be granted or awarded pursuant to the Plan after the day
preceding the tenth (10th) anniversary of its effective date.
Exhibit 1 to Amended and Restatedm 1994 Stock Option Plan
Form of Stock Option Agreement
Vermont Financial Services Corp.
Stock Option Agreement
Specific Terms of the Option
Subject to the terms and conditions hereinafter set forth and the terms and
conditions of the Vermont Financial Services Corp. Amended and Restated 1994
Stock Option Plan (the "Plan"), Vermont Financial Services Corp., a Delaware
corporation (the "Company", which term shall include, unless the context
otherwise clearly requires, all Subsidiaries [as defined in the Plan] of the
Company) hereby grants the following option (the "Option") to purchase
Common Stock, par value, $___ per share (the "Stock") of the Company:
1. Name of Person to Whom the Option is granted (the "Optionee"):
__________________________.
2. Date of Grant of Option: _______________.
3. An Option for _______ shares of Stock.
4. Option Exercise Price (per share): $ .
5. Term of Option: Subject to Section 9 below, this Option expires at
5:00 p.m. Eastern Time on _________.
6. Exercise Schedule: Provided that on the dates set forth below the
Optionee is still employed by the Company the Option will become
exercisable as follows and as provided in Section 9 below:
Date Number of Shares Cumulative Number
____________________ ________________ ________________
____________________ ________________ ________________
____________________ ________________ ________________
____________________ ________________ ________________
____________________ ________________ ________________
____________________ ________________ ________________
Vermont Financial Services Corp. The undersigned hereby
accepts the grant of the Option on all the terms set forth herein and
in the Plan
By:__________________________ X_______________________
Title:____________________ (Signature of Optionee)
Date:___________________
Optionee's Address:
________________________
________________________
OTHER TERMS OF THE OPTION
WHEREAS, the Compensation Committee (the "Committee") of the Board of
Directors of the Company has authorized the grant of this stock option
pursuant and subject to the terms of the Plan, a copy of which is the
Optionee acknowledges has been delivered to the Optionee and is hereby
incorporated herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the Company and the Optionee, intending to
be legally bound, covenant and agree as set forth on the first page hereof
and as follows:
1I Grant. Pursuant and subject to the Plan, the Company does hereby grant
to the Optionee a stock option (the "Option") to purchase from the Company
the number of shares of Stock set forth in Section 3 on the first page
hereof upon the terms and conditions set forth in the Plan and upon the
additional terms and conditions contained herein. This Option is a
[incentive] [nonqualified] stock option and [is] [is not] intended to
qualify for special federal income tax treatment as an "incentive stock
option" pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
2I Option Price. This Option may be exercised at the option price per share
of Stock set forth in Section 4 on the first page hereof, subject to
adjustment as provided herein and in the Plan.
3I Term and Exercisability of Option. This Option shall expire on the date
determined pursuant to Section 5 on first page hereof and shall be
exercisable prior to that date in accordance with and subject to the
conditions set forth in the Plan and those conditions, if any, set forth in
Section 6 on first page hereof. If before this Option has been exercised in
full, the Optionee ceases to be employed by the Company for any reason other
than a termination for a reason specified in Section 18 of the Plan, the
Optionee may exercise this Option to the extent that he or she might have
exercised it on the date of termination of his or her employment, but only
during the period ending on the earlier of (x) the date on which the Option
expires in accordance with Section 5 of this Agreement or (y) three (3)
months after the date of termination of the Optionee's employment with the
Company. If the Optionee dies before the date of expiration of this Option
and while in the employ of the Company or during the three month period
described in the preceding sentence, or in the event of the retirement of
the Optionee for reasons of disability (within the meaning of
Code \'a7 22(e)(3)), the Option shall terminate on the earlier of such date
of expiration or one year following the date of such death or disability
retirement. If the Optionee dies before this Option has been exercised in
full, the personal representative of the Optionee may exercise this Option
as set forth in the preceding sentence.
4I
Method of Exercise. To the extent that the right to purchase shares of
Stock has accrued hereunder, this Option may be exercised from time to time
by written notice to the Company substantially in the form attached hereto
as Exhibit A, stating the number of shares with respect to which this Option
is being exercised, and accompanied by payment in full of the option price
for the number of shares to be delivered, by means of payment acceptable to
the Company in accordance with Section 10 of the Plan.
As soon as practicable after its receipt of such notice, the Company
shall, without transfer or issue tax to the Optionee (or other person entitled
to exercise this Option), deliver to the Optionee (or other person entitled
to exercise this Option), at the principal executive offices of the Company
or such other place as shall be mutually acceptable, a certificate or
certificates for such shares out of theretofore authorized but unissued shares
or reacquired shares of its Stock as the Company may elect; provided,
however, that the time of such delivery may be postponed by the Company for
such period as may be required for it with reasonable diligence to determine
whether the exercise of the Option and issuance of the shares will comply
with any applicable requirements of law, including the securities Act of 1933,
as amended (the "Securities Act") and applicable state securities laws, and
further, provided, that the exercise of the Option and issuance of the shares
must be either pursuant to a registration statement under the Securities Act
and applicable state securities laws or otherwise is subject to an exemption
from registration under the Securities Act and applicable Blue Sky Laws.
Payment of the option price may be made in cash or cash equivalents, or, in
accordance with the terms and conditions of Section 10 of the Plan, (a) in whole
or in part in shares of Common Stock of the Company, or (b) by means of the
"cashless exercise" procedure described in Section 10 of the Plan. If the
Optionee (or other person entitled to exercise this Option) fails to pay for
and accept delivery of all of the shares specified in such notice upon tender
of delivery thereof, his or her right to exercise this Option with respect
to such shares not paid for may be terminated by the Company.
5I Nonassignability of Option Rights. Unless expressly set forth herein in
accordance with Section 11 of the Plan, this Option shall not be assignable
or transferable by the Optionee except by will or by the laws of descent and
distribution, and during the life of the Optionee, this Option shall be
exercisable only by him or her.
6I Compliance with Securities Act. The Company shall not be obligated to
sell or issue any shares of Stock or other securities pursuant to the
exercise of this Option unless the shares of Stock or other securities with
respect to which this Option is being exercised are at that time effectively
registered or exempt from registration under the Securities Act and
applicable state securities laws. In the event shares or other securities
shall be issued which shall not be so registered, the Optionee hereby
represents, warrants and agrees that he or she will receive such shares or
other securities for investment and not with a view to their resale or
distribution, and will execute an appropriate investment letter satisfactory
to the Company and its counsel.
7I Legends. The Optionee hereby acknowledges that the stock certificate or
certificates evidencing shares of Stock or other securities issued pursuant
to any exercise of this Option will bear a legend setting forth the restrictions
on their transferability described in Section 12 hereof, in Section 15 of
the Plan, and under any applicable agreements between the Optionee and the
Company or any of its stockholders.
8I Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to any shares of Stock or other securities covered
by this Option until the date of issuance of a certificate to him or her for
such shares or other securities. No adjustment shall be made for dividends
or other rights for which the record date is prior to the date such stock
certificate is issued.
9I Withholding Taxes. The Optionee hereby agrees, as a condition to any
exercise of this Option, to provide to the Company an amount sufficient to
satisfy its obligation to withhold certain federal, state and local taxes
arising by reason of such exercise (the "Withholding Amount") by (a)
authorizing the Company to withhold the Withholding Amount from his or her
cash compensation, or (b) remitting the Withholding Amount to the Company in
cash; provided, however, that to the extent that the Withholding Amount is
not provided by one or a combination of such methods, the Company in its
sole and absolute discretion may refuse to issue such shares of Stock or may
withhold from the shares of Stock delivered upon exercise of this Option that
number of shares having a fair market value, on the date of exercise,
sufficient to eliminate any deficiency in the Withholding Amount.
10I Termination or Amendment of Plan. The Board of Directors of the Company
may in its sole and absolute discretion at ant time terminate or from time
to time modify and amend the Plan, but no such termination or amendment will
affect rights and obligations under this Option.
11I Effect Upon Employment. Nothing in this Option or the Plan shall be
construed to impose any obligation upon the Company to employ or retain in
its employ, or continue its involvement with, the Optionee.
12I Time for Acceptance. Unless the Optionee shall evidence his or her
acceptance of this Option by execution of this Agreement within ten (10) days
after its delivery to him or her, the Option and this Agreement shall at the
option of the Company be null and void.
13I General Provisions.
(a) Amendment; Waivers. This Agreement, including the Plan, contains the
full and complete understanding and agreement of the parties hereto as to the
subject matter hereof and may not be modified or amended, nor may any
provision hereof be waived, except by a further written agreement duly
signed by each of the parties. The waiver by either of the parties hereto
of any provision hereof in any instance shall not operate as a waiver of any
other provision hereof or in any other instance.
(b) Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and, to the extent provided herein and in
the Plan, their respective heirs, executors, administrators, representatives,
successors and assigns.
(c)Construction. This Agreement is to be construed in accordance with the
terms of the Plan. In case of any conflict between the Plan and this
Agreement, the Plan shall control. The titles of the sections of this
Agreement and of the Plan are included for convenience only and shall not be
construed as modifying or affecting their provisions. The masculine gender
shall include both sexes; the singular shall include the plural and the
plural the singular unless the context otherwise requires.
(d)Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the United State of
America and the law (other than the law governing conflict of law questions)
of the State of Vermont except to the extent the laws of any other
jurisdiction are mandatorily applicable.
(e) Notices. Any notice in connection with this Agreement shall be deemed
to have been properly delivered if it is in writing and is delivered in hand
or sent by registered mail to the party addressed as follows, unless another
address has been substituted by notice so given:
To the Optionee: To his or her address as
listed on the books of the Company.
To the Company: Vermont Financial Services Corp.
100 Main Street
Brattleboro, VT 05301
Attention: Richard O. Madden, Treasurer
Copy to:
Sullivan & Worcester
One Post Office Square
Boston, MA 02109
Attention: Christopher Cabot, Esq.
Exhibit A to Stock Option Agreement
[FORM FOR EXERCISE OF STOCK OPTION]
Vermont Financial Services Corp.
[Address as specified in Section 20(e)
of the Option Agreement]
RE: Exercise of Option under Vermont Financial Services Corp. Amended and
Restated 1994 Stock Option Plan (the "Plan")
Gentlemen:
Please take notice that the undersigned hereby elects to exercise the stock
option granted to on
, 199 by and to the extent of purchasing
shares of Common Stock, par value $.01 per share, of Vermont Financial
Services Corp. (the "Company") for the option exercise price of $__________
per share, subject to the terms and conditions of the Stock Option Agreement
between and the
Company dated as of , 199 (the "Option Agreement") and the Plan.
The undersigned encloses herewith payment, in cash or in such other property
as is permitted under the Plan, of the purchase price for said shares. If
the undersigned is making payment of any part of the purchase price by
delivery of shares of Common Stock of the Company, he or she hereby
confirms that he or she has investigated and considered the possible income
tax consequences to him or her of making such payments in that form. The
undersigned hereby agrees to provide the Company an amount sufficient to
satisfy the obligation of the Company to withhold certain taxes, as provided
in Section 16 of the Option Agreement.
The undersigned hereby specifically confirms to the Company that he or she
shall hold said shares subject to all of the terms and conditions of said
Stock Option Agreement and the Plan.
Very truly yours,
Date (Signed by or other party duly exercising
option)
F:\\JBD\\VFSC9\\AR94OPT.PLN
(ii)
- -9-
}
