SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 8-K
CURRENT REPORT
_________________________
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 19, 1994
SHAWMUT NATIONAL CORPORATION
Delaware 1-10102 06-1212629
(State or other
jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification No.)
777 Main Street, Hartford, Connecticut 06115
One Federal Street, Boston, Massachusetts 02211
(Address of principal executive offices) (Zip Code)
(203) 986-2000
Registrant's telephone number, including area code: (617) 292-2000
Not Applicable
(Former name or former address, if changed since last report)
Exhibit Index located on Page 4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
The following exhibits are filed with this Current
Report on Form 8-K:
EXHIBIT
NUMBER DESCRIPTION
99.1 Notice of Annual Meeting of Shareholders April 26,
1994 and Proxy Statement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
SHAWMUT NATIONAL CORPORATION
By: /s/ Joel B. Alvord
Joel B. Alvord
Chairman and Chief Executive Officer
Dated: April 19, 1994
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
99.1 Notice of Annual Meeting of Shareholders
April 26, 1994 and Proxy Statement.
[LOGO OF SHAWMUT NATIONAL CORPORATION APPEARS HERE]
Notice of
Annual Meeting
of Shareholders
April 26, 1994
and
Proxy Statement
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YOUR VOTE IS IMPORTANT
You are urged to exercise your right to vote by indicating your choices on the
enclosed proxy card. Please date, sign and promptly return your proxy card in
the enclosed postage-paid envelope. You may, nevertheless, vote in person if
you attend the meeting.
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<PAGE>
[LOGO OF SHAWMUT NATIONAL CORPORATION APPEARS HERE]
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777 MAIN STREET, HARTFORD, CONNECTICUT 06115
ONE FEDERAL STREET, BOSTON, MASSACHUSETTS 02211
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Shawmut National Corporation which will be held at the Federal Reserve Bank of
Boston, 600 Atlantic Avenue, Boston, Massachusetts, on Tuesday, April 26, 1994,
at 10:30 a.m. We look forward to seeing as many shareholders as possible at
this meeting.
Resolutions pertaining to the annual election of your board of directors, the
appointment of independent accountants for 1994, and an amendment to the
restated certificate of incorporation will be acted upon at this year's
meeting. Your board of directors unanimously recommends a vote for each of
these matters.
We hope you will attend the meeting, but whether or not you plan to be with us,
please sign and return the enclosed proxy card as soon as possible so that your
shares will be represented. You can revoke your proxy at any time and, if you
do attend the meeting, you may vote in person.
Sincerely,
/s/ Joel B. Alvord
Chairman and Chief
Executive Officer
March 19, 1994
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<PAGE>
[LOGO OF SHAWMUT NATIONAL CORPORATION APPEARS HERE]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of Shawmut National Corporation (the
"Corporation") will be held at the Federal Reserve Bank of Boston, 600 Atlantic
Avenue, Boston, Massachusetts 02106, on Tuesday, April 26, 1994, at 10:30 a.m.,
for the following purposes:
1. To elect directors for the ensuing year.
2. To act upon the appointment of Price Waterhouse as independent
accountants for the Corporation for 1994.
3. To act upon a proposal to amend the restated certificate of
incorporation.
4. To transact such other business as may properly be brought before the
meeting or any adjournments thereof.
Shareholders of record at the close of business on March 2, 1994 are entitled
to vote at the meeting and at any adjournments thereof.
A list of shareholders of record will be available for examination by any
shareholder for purposes germane to the meeting at the Corporation's
headquarters located at 777 Main Street, Hartford, Connecticut and One Federal
Street, Boston, Massachusetts during ordinary business hours for a period of at
least ten days prior to the meeting and at the meeting.
By order of the board of directors
Raymond A. Guenter
General Counsel and
Secretary
777 Main Street
Hartford, Connecticut 06115
One Federal Street
Boston, Massachusetts 02211
March 19, 1994
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<PAGE>
<TABLE>
<CAPTION>
PROXY STATEMENT TABLE OF CONTENTS PAGE
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<S> <C>
Board of directors 1
Committees of the board 1
Common stock ownership 2
Election of directors 3
Transactions with directors and executive officers 6
Executive compensation 6
Appointment of independent accountants 15
Proposal to amend the restated certificate of incorporation 16
Voting of proxy 17
Cost of solicitation 17
Shareholder proposals for next year's meeting 17
Annual report 17
Other matters 17
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</TABLE>
<PAGE>
PROXY STATEMENT
MARCH 19, 1994
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BOARD OF DIRECTORS
The directors are elected annually by the shareholders and represent the
interests of shareholders as a whole. The board holds regular meetings to
review significant matters affecting the Corporation and to act on matters
requiring board consideration. Board and committee meetings are held
alternately in Hartford and Boston. The board met 17 times during 1993. Each
director attended at least 75% of the aggregate of the number of board meetings
and meetings of the committees on which he or she served. Background
information about each nominee for director appears on pages 3 through 6 of
this proxy statement.
Directors will be elected by a plurality of the votes of the shares present in
person or represented by proxy and entitled to vote. "Plurality" means that the
nominees who receive the largest number of votes cast "For" are elected as
directors, up to the maximum number of directors to be chosen at the meeting.
Under applicable Delaware law, in tabulating the vote, votes withheld and
broker nonvotes will be disregarded and will have no effect on the outcome of
the vote.
COMMITTEES OF THE BOARD
The board has established three standing committees to assist it in the
discharge of its responsibilities--the audit committee, the human resources
committee and the nominating committee. In April 1993, the credit review
committee was disbanded, and its function was merged with the audit committee.
Membership on the committees is set forth in the personal information
concerning each director in the proxy statement, except for two members of the
audit committee who are nonemployee directors of the Corporation's principal
subsidiaries--Shawmut Bank Connecticut, National Association, Hartford,
Connecticut ("SBC") and Shawmut Bank, National Association, Boston,
Massachusetts ("SBM"). The two members of the audit committee who are not
directors of the Corporation are Mr. S. Caesar Raboy and Mr. Graves D. Hewitt,
both of whom are directors of SBC and SBM. Additional information concerning
the committees is presented below.
The audit committee consists of seven nonemployee directors: five directors
from the Corporation (including Mr. Bernard M. Fox, who joined the committee in
January 1994), and two directors who are directors of SBC and SBM. The
committee has primary oversight responsibility for specific functions within
the Corporation and its subsidiaries, including (i) the integrity of financial
information and the financial reporting process, (ii) the adequacy of the
internal control environment, (iii) the objectivity of the internal and
independent audit processes, (iv) review of reports of examination and
inspection by regulatory agencies and responses thereto, (v) review of
performance under the Corporation's compliance program, including the review of
the Corporation's overall processes for establishing and updating policies and
procedures and (vi) oversight of an independent credit review function charged
with the review of credit and loan administration policies and procedures
review of the Corporation's loan portfolio, compliance with the credit review
systems policies and procedures, and evaluation of the quality and trends in
the loan portfolio. Each year it recommends the appointment of independent
accountants for the Corporation and meets with representatives of that firm and
with the internal auditor. The committee met six times during 1993.
The human resources committee consists of six nonemployee directors (Mr.
Herbert W. Jarvis, a member of the committee, is retiring from the board of
directors, and is not standing for reelection.) The committee advises the board
on all matters pertaining to compensation programs and policies and establishes
guidelines for employee incentive and benefits programs, which it reviews on a
continuing basis. It makes specific recommendations relating to salaries of
officers with general management responsibility and relating to all incentive
awards, including equity-based awards. The committee met five times during
1993.
The nominating committee consists of three nonemployee directors. It advises
the board on all matters with respect to (i) the appropriate number of
directors to serve on the board; (ii) identification of qualified people to sit
on the board; (iii) assessment of director performance; and (iv) other
recommendations related to the composition or selection of directors for the
board. The committee met once during 1993.
Shareholders who wish to have the board consider individuals for nomination as
directors should submit to the secretary a written statement detailing the
qualifications of each such person together with relevant biographical
information and a written statement by the candidate of his or her willingness
to serve. The secretary will refer each such statement to the nominating
committee, which will consider the nominee's demonstrated achievements and
recognized abilities in conjunction with corporate needs and any pertinent
regulatory considerations.
<PAGE>
In addition, a shareholder may directly nominate a person for election as a
director by complying with Section 4 of the Corporation's by-laws, which
provides for timely notice of such nomination in writing to the secretary of
the Corporation, and a written statement by the candidate of his or her
willingness to serve. Said notice shall include the information required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended, along
with the name, record address, class and number of shares of the Corporation
beneficially owned by the shareholder giving such notice. To be timely, notice
must be delivered to the Corporation not less than 50 nor more than 75 days
prior to the meeting, or, if the Corporation gives less than 65 days' notice
of the meeting, then notice by the shareholder must be received by the close
of business on the 15th day following the earlier of the date notice of the
meeting was mailed or public disclosure was made. The foregoing summary is not
intended to be complete and is qualified in its entirety by the Corporation's
by-laws, a copy of which may be obtained from the secretary of the
Corporation.
COMMON STOCK OWNERSHIP
The ownership of the Corporation's common stock is widely diversified. On
March 2, 1994, approximately 30,245 shareholders of record owned 95,876,557
shares, excluding 20,427 shares that are reserved for issuance in connection
with the completion of the exchange of the securities of certain previously
acquired companies. Holders of outstanding shares are entitled to one vote per
share. The holders of a majority of the total shares issued and outstanding,
whether present in person or represented by proxy, will constitute a quorum
for the transaction of business at the annual meeting. The following table
sets forth information as to the only persons known to the board to be the
beneficial owners of 5% or more of the Corporation's outstanding common stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
------------------- ----------------------- ----------
<S> <C> <C>
FMR Corp. 6,133,406(1) 6.44%(1)
82 Devonshire Street
Boston, MA 02109
</TABLE>
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(1) Based upon information contained in a Schedule 13G dated February 11, 1994
and filed under the Securities Exchange Act of 1934 by FMR Corp. ("FMR").
Based upon the information contained in the Schedule 13G, FMR is a
beneficial owner of these shares as a result of various of its
subsidiaries and affiliates providing investment advisory and management
services and has sole voting power with respect to 156,706 of the shares,
shared voting power with respect to none of the shares, sole dispositive
power with respect to 6,133,406 of the shares and shared dispositive power
with respect to none of the shares.
The table below sets forth beneficial ownership of the Corporation's common
stock by each director, and by all directors and executive officers as a group
as of January 31, 1994. As of that date all directors and executive officers
as a group (19 in number) controlled 413,350 shares directly and controlled
75,782 shares indirectly, or a total of 489,132 shares representing .51% of
the outstanding shares. No director or executive officer beneficially owns or
controls directly or indirectly more than 1% of the outstanding shares. The
group (19 in number) would have beneficially owned or controlled 716,883
shares, representing .75% of outstanding shares, if all stock options
exercisable within 60 days of January 31, 1994 had been exercised. Except as
may be indicated below, each director possesses sole voting and investment
power with respect to the number of shares described as beneficially owned.
All of the directors are being nominated for reelection, except Mr. Jarvis,
who is retiring from the board.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP
------------------------ --------------------
<S> <C>
Joel B. Alvord 206,352(1)
Stillman B. Brown 16,193
John T. Collins 16,142
Ferdinand Colloredo-Mansfeld 9,543
Bernard M. Fox 2,981
Herbert W. Jarvis 16,445
Robert J. Matura 8,312
Gunnar S. Overstrom, Jr. 195,237(2)
Lois D. Rice 2,287
Maurice Segall 27,098
Paul R. Tregurtha 24,543
Wilson Wilde 11,742
Directors and executive officers as a group 716,883(3)
</TABLE>
2
<PAGE>
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(1) Includes 94,258 shares that are subject to unexercised stock options which
are exercisable within 60 days of January 31, 1994, 21,258 of which are at
option prices in excess of the market price of the Corporation's common
stock on January 31, 1994; 27,451 shares held in the employees' thrift
plan; 8,666 restricted shares; and 1,279 shares held in the names of his
wife and children.
(2) Includes 72,933 shares that are subject to unexercised stock options which
are exercisable within 60 days of January 31, 1994, 15,933 of which are at
option prices in excess of the market price of the Corporation's common
stock on January 31, 1994; 24,075 shares held in the employees' thrift
plan; 6,666 restricted shares; and 2,976 shares held in the names of his
wife and children.
(3) With respect to executive officers not named above, this number includes
60,500 shares that are subject to unexercised stock options which are
exercisable within 60 days of January 31, 1994, 24,500 of which are at
option prices in excess of the market price of the Corporation's common
stock on January 31, 1994; 20,001 shares held in the employees' thrift
plan; 34,665 restricted shares; and 0 shares held in the names of family
members.
ELECTION OF DIRECTORS
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Under the Corporation's by-laws, the board of directors can increase the number
of directorships between annual meetings by not more than eight and fill any
vacancy thus created. All of the nominees named below are members of the
present board and were elected by the Corporation's shareholders at the last
annual meeting. At the 1994 annual meeting, directors are to be elected for a
term of one year, each to hold office until the expiration of his or her term
and until his or her successor is elected and qualified. Unless authority is
withheld, it is the intention of the persons named in the proxy, or authorized
substitutes, to vote for the election of the following 11 nominees.
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JOEL B. ALVORD, 55, is chairman and chief executive officer of the Corporation.
He has served as a director of the Corporation since 1987, and additionally as
a director of SBC since 1978, and SBM since 1988.
Mr. Alvord began his 30-year SBC tenure in 1963. He became an officer in 1965,
a vice president in 1967, and executive vice president in 1976. In January
1978, he was elected president and director of both the bank and its parent
holding company, Hartford National Corporation. From 1986 to 1988, he was
president, chief executive officer, and director of Hartford National
Corporation and chairman, chief executive officer, and director of SBC. In
February 1988, when Shawmut Corporation ("SC") and Hartford National
Corporation ("HNC") merged and became subsidiaries of Shawmut National
Corporation, Mr. Alvord was named president and chief executive officer of the
new combined corporation. In August 1988, he additionally assumed his current
title of chairman of the Corporation. He is also a member of the community
affairs, trust, and loan and investment committees of SBC and SBM. Mr. Alvord
is active in numerous community, civic, and industry organizations. He is
director of the Institute of Living, the Hartford Steam Boiler Inspection and
Insurance Company, and Jobs for Massachusetts. He also serves as a trustee of
the Wadsworth Atheneum, and is a member of the Museum of Fine Arts (Boston),
the Wang Center for Performing Arts, the Massachusetts Business Roundtable, and
The Bankers Roundtable.
A native of Manchester, Connecticut, Mr. Alvord is a graduate of Dartmouth
College where he received his undergraduate degree and earned a Master of
Business Administration from the Amos Tuck School of Business Administration in
1961.
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STILLMAN B. BROWN, 60, is President of Harcott Corporation (investments), Lake
Worth, Florida.
Before joining Harcott Corporation (formerly Harcott Associates), Mr. Brown was
executive vice president, chief financial officer and a director of United
Technologies Corporation, where he served in a variety of executive positions
from 1978 to 1986. He is a director of The Stanley Works, and former chairman
of the board of regents of the University of Hartford.
Mr. Brown has served as a director of the Corporation since 1987 and SBC from
1979 to 1988. He is chairman of the audit committee and a member of the human
resources committee of the Corporation, and a member of the loan and investment
committees of SBC and SBM.
3
<PAGE>
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JOHN T. COLLINS, 47, is chairman and chief executive officer of The Collins
Group, Inc. (acquisition company), Boston, Massachusetts.
Previously, Mr. Collins was president and chief executive officer of Quebecor
Printing, (USA) Corp. Mr. Collins joined Quebecor Printing, (USA) Corp in 1990.
From 1986 to 1990 he served as president and chief executive officer of
Quebecor America, Inc. (printing). Mr. Collins is an advisory board member of
Pell Rudman Venture Partners (investments), board member of the National
Association of Printers and Lithographers, and a trustee of Bentley College,
Beth Israel Hospital, and the Massachusetts Chapter of the Lukemia Society of
America. Mr. Collins is also on the advisory council of Junior Achievement of
Northern New England.
Mr. Collins has served as a director of the Corporation and SBC since 1992, and
SBM since 1987. He is a member of the audit committee and the human resources
committee of the Corporation.
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FERDINAND COLLOREDO-MANSFELD, 54, is chairman and chief executive officer of
Cabot Partners (investment management company), Boston, Massachusetts.
Mr. Colloredo-Mansfeld has held his present position since 1990. From 1986
through October 1990 he served as chairman and chief executive officer of
Cabot, Cabot & Forbes Realty Advisors, Inc. (predecessor of Cabot Partners) and
chairman, chief executive officer and president of the development company
Cabot, Cabot & Forbes. He is also a director of Data General Corporation and
Raytheon Company.
Mr. Colloredo-Mansfeld has served as a director of the Corporation since 1988
and SC from 1983 to 1988. He is a member of the nominating committee of the
Corporation.
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BERNARD M. FOX, 51, is president and chief executive officer and a trustee of
the Northeast Utilities System, Hartford, Connecticut.
Mr. Fox is a director of The Dexter Corporation (specialties materials), The
Connecticut Business and Industry Association, and Mount Holyoke College. He is
also chairman of the board of the Institute of Living. In addition, Mr. Fox is
a fellow and founder of the American Leadership Forum.
Mr. Fox has served as a director of the Corporation since January 1993, SBC
since 1988, and SBM since May 1992. He is a member of the audit committee of
the Corporation, and a member of the trust committees of SBC and SBM.
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ROBERT J. MATURA, 60, is chairman and chief executive officer of Robert J.
Matura Associates and its subsidiary, Treefort Fellows (consulting firms
specializing in textiles and apparel), Stamford, Connecticut.
Mr. Matura has held his present position since June 1992. From July 1988 to May
1992 he served as chairman, president and chief executive officer of The
William Carter Company (manufacturer of infants' and childrens' apparel). From
July 1986 through June 1988 he served as chief executive officer and chancellor
of Sacred Heart University. From March 1976 to June 1986 Mr. Matura was chief
executive officer and chairman of the board of Warnaco, Inc. (an international
diversified apparel company). He is a director, investor and consultant at
Unisa, Inc. (women's shoe manufacturer) and a director of EMI and Ed
Mitchell's, Inc. (clothing retailer). Mr. Matura is chairman of the executive
committee of the board of trustees and a trustee of Sacred Heart University and
a regent of St. Peter's College.
Mr. Matura has served as a director of the Corporation and SBM since 1992 and
SBC since 1984. He is a member of the audit committee and the human resources
committee of the Corporation.
4
<PAGE>
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GUNNAR S. OVERSTROM, JR., 51, is president and chief operating officer of the
Corporation and chairman, chief executive officer and a director of SBC and
SBM. He has served as a director of the Corporation since 1987, SBC since 1986
and SBM since 1989.
Mr. Overstrom joined SBC in 1975 as vice president and was promoted to senior
vice president in 1977. In 1979 he was appointed SBC's executive vice president
and chief financial officer. That same year he was named chief financial
officer of HNC and became a director and its executive vice president in 1982.
From 1986 to October 1992, Mr. Overstrom served as president of SBC. In 1988,
he also served as chief executive officer of SBC; and in October 1992, he
became chairman of SBC and chairman and chief executive officer of SBM. In
February 1988, when SC and HNC merged and became subsidaries of Shawmut
National Corporation, he was appointed vice chairman and chief financial
officer of the Corporation, responsible for Connecticut operations. In August
1988, he assumed his current title of president and chief operating officer of
the Corporation. Mr. Overstrom is also a member of the community affairs,
trust, and loan and investment committees of SBC and SBM. An active supporter
of numerous organizations, Mr. Overstrom is a corporator of Hartford Hospital,
Saint Francis Hospital, Mount Sinai Hospital and The Institute of Living. He is
a trustee of Babson College and of the Museum of Science, a director of
Connecticut Health Systems, Inc., president of the Old State House in Hartford,
and a member of the Emerging Issues Committee of The Bankers Roundtable. He is
also a member of Boston's Private Industry Council and serves on its Corporate
Diversity Committee.
Mr. Overstrom received his undergraduate degree from Babson College, a law
degree from Suffolk University, and a master's degree in economics from Trinity
College.
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LOIS D. RICE, 61, is a guest scholar at the Brookings Institution, Program in
Economic Studies, in Washington, D.C.
Mrs. Rice joined the Brookings Institution in 1991. From 1981 to 1991 she was a
director and senior vice president of Government Affairs at Control Data
Corporation. She is a director of Bell Atlantic--Washington, D.C.,
International Multifoods, McGraw Hill, The Hartford Steam Boiler Inspection and
Insurance Company, Unum Corp. (insurance company) and the Center for Naval
Analysis. Mrs. Rice is a trustee of George Washington University, the German
Marshall Fund of the United States, The Urban Institute, The Harry Frank
Guggenheim Foundation, an overseer at the Tuck School of Management, Dartmouth
College and a member of the President's Foreign Intelligence Advisory Board.
Mrs. Rice has served as a director of the Corporation since 1992. She is a
member of the nominating committee of the Corporation, and a member of the
community affairs committees of SBC and SBM.
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MAURICE SEGALL, 64, is a senior lecturer at the MIT--Sloan School of
Management, Cambridge, Massachusetts.
Previously, Mr. Segall was chairman, chief executive officer, president and a
director of Zayre Corporation (department stores), Framingham, Massachusetts.
He retired from Zayre Corporation in June, 1989. Mr. Segall joined Zayre
Corporation as president and chief executive officer in 1978. He is a director
of AMR Corporation and Harcourt General Corporation (publishing and specialty
retailing).
Mr. Segall has served as a director of the Corporation since 1988 and SC from
1983 to 1988. He is a member of the audit committee and the human resources
committee of the Corporation.
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PAUL R. TREGURTHA, 58, is chairman, chief executive officer and a director of
Mormac Marine Group, Inc. (marine shipping), Stamford, Connecticut.
Mr. Tregurtha joined Mormac in 1988. Prior to that, he had served as chairman,
president and chief executive officer of Moore McCormack Resources, Inc.
(construction materials and oil and gas exploration). He is a director and vice
chairman of Interlake Holding Company and Lakes Shipping Company, Inc. (marine
shipping) and a director of Brown & Sharpe Manufacturing Company and FPL Group,
Inc. (Florida utilities). Mr. Tregurtha is a trustee of Teachers Insurance and
Annuity Association of America.
Mr. Tregurtha has served as a director of the Corporation since 1987 and SBC
from 1979 to 1988. He is chairman of the human resources committee of the
Corporation.
5
<PAGE>
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WILSON WILDE, 66, is chairman, chief executive officer and a director of The
Hartford Steam Boiler Inspection and Insurance Company, Hartford, Connecticut.
Mr. Wilde joined Hartford Steam Boiler in 1953, and served as president from
November 1971 until November 1993, and chief executive officer since November
1971. In November 1993, he was appointed chairman. He is a director of GenRad,
Inc., Phoenix Home Life Mutual Insurance Company, Phoenix Re Corp. and Phoenix
Reinsurance Co.
Mr. Wilde has served as a director of the Corporation since 1987 and HNC and
SBC from 1972 to 1988. He is chairman of the nominating committee of the
Corporation, and a member of the trust committees of SBC and SBM.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
Certain directors and executive officers of the Corporation and their
associates are customers of and have had transactions with SBC and SBM and
their subsidiaries and affiliates in the ordinary course of business during the
last fiscal year. All loans and commitments included in such transactions were
made 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 normal risk of collectibility or present other
unfavorable features. Additional transactions may be expected to take place
between such persons and these banks in the ordinary course of business.
Directors' remuneration
Directors' remuneration for 1993 was fixed by the board of directors at the
board meeting following the annual meeting of shareholders, and subsequently
amended by the board of directors at its June 1993 board meeting. Effective
July 1993, each nonemployee director received an annual retainer of $25,000,
payable in common stock of the Corporation pursuant to the restricted stock
plan described below, and a fee of $1,500 per meeting attended. In addition,
the chairmen of the audit, human resources and nominating committees each
received an additional cash retainer of $4,000. Employees who are also
directors do not receive any compensation for service as directors other than
salary and related benefits. Pursuant to the Corporation's deferred
compensation plan for directors, directors may elect to defer all of their
compensation as directors in any one year.
On April 25, 1989, the shareholders of the Corporation approved the adoption of
a restricted stock plan for nonemployee members of the board of directors,
which plan is administered by the human resources committee. The maximum number
of shares of common stock of the Corporation that may be granted under the plan
is 125,000. Awards of restricted stock are made automatically, on the date of
the annual meeting of shareholders, to each nonemployee director who is elected
at the meeting or otherwise continues in office. The number of shares of
restricted stock awarded will equal the amount payable to the nonemployee
director as an annual retainer for the calendar year within which the award
date falls, divided by the fair market value of each such share. The annual
retainer does not include fees paid for attendance at any board or committee
meeting or for chairing a committee of the board. In 1993, 842 shares of the
common stock of the Corporation were awarded under the plan to each nonemployee
director. Directors who are not employees are not eligible to participate in
any of the plans presently in effect for employees of the Corporation.
EXECUTIVE COMPENSATION
The tables, graph and descriptive information set forth below are being
furnished with respect to those persons who, at December 31, 1993, were the
Corporation's chief executive officer and its four most highly compensated
executive officers, other than the chief executive officer, whose salary and
bonus exceeded $100,000 for the most recent fiscal year (together, the "named
executive officers").
6
<PAGE>
TABLE I
Table I sets forth certain information concerning the annual and long-term
compensation for services in all capacities to the Corporation for the fiscal
years ended December 31, 1993, 1992 and 1991 of the named executive officers.
SUMMARY COMPENSATION TABLE
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<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------- ------------------------------------------
AWARDS PAYOUTS
--------------------- -------
RESTRICTED SECURITIES ALL OTHER
OTHER ANNUAL STOCK UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS COMPENSATION(1)(2) AWARDS(3) OPTIONS(4) PAYOUTS SATION(5)(6)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
------------------ ---- -------- -------- ------------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joel B. Alvord.......... 1993 $650,000 $650,000 $ 9,663 $ 0 117,558 $0 $ 19,827
Chairman and Chief Ex- 1992 650,000 200,000 255,753 276,250 50,000 0 33,750
ecutive Officer 1991 650,000 0 -- 0 0 0 --
Gunnar S. Overstrom..... 1993 $510,000 $400,000 $ 9,640 $ 0 83,047 $0 $ 12,803
President and Chief Op- 1992 510,000 150,000 127,544 212,500 40,000 0 19,672
erating Officer 1991 510,000 0 -- 0 0 0 --
David L. Eyles.......... 1993 $330,000 $230,000 $ 13,099 $ 0 35,740 $0 $ 9,016
Vice Chairman and 1992 258,300 155,000(7) 81,624 154,000 16,000 0 94,305
Credit Policy Officer
Eileen S. Kraus......... 1993 $330,000 $210,000 $ 4,259 $ 0 35,142 $0 $ 13,109
Vice Chairman; 1992 310,000 100,000 36,871 148,750 16,000 0 23,138
President of SBC 1991 280,000 0 -- 0 0 0 --
Allen W. Sanborn........ 1993 $360,000 $180,000 $ 3,033 $ 0 20,000 $0 $ 8,897
Vice Chairman; 1992 240,000 180,000(7) 1,235 146,250 30,000 0 125,498
President of SBM
</TABLE>
- -------
(1) 1993 amounts represent payments made to the federal and state taxing
authorities for tax liabilities imputed to the named executive officers
with respect to transportation and relocation.
(2) 1992 amounts represent payments made to the federal and state taxing
authorities for tax liabilities imputed to the named executive officers
with respect to transportation, relocation and increases in their accounts
in the trust described below under Table V. The trust-related tax payments
will cause a corresponding reduction in the benefits to which the named
executive officers will be entitled under the plans funded by the trust.
(3) Based upon the closing price per share on date of grant. The number and
value of the aggregate restricted stock holdings at December 31, 1993 of
the named executive officers, based upon the closing price per share on
such date, are as follows: Mr. Alvord, 17,333 shares, $376,993; Mr.
Overstrom, 13,333 shares, $289,993; Mr. Eyles, 9,333 shares, $202,993; Mrs.
Kraus, 9,333 shares, $202,993; and Mr. Sanborn, 6,666 shares, $144,986.
Dividends are paid on restricted shares at the same rate as on other shares
of the Corporation's stock. 1992 grants vest in thirds at one-year
intervals from the date of grant. Such aggregate holdings at December 31,
1993 also include the following number and value of performance equity
share units granted in 1993 (see Table IV), based upon the closing price
per share on such date: Mr. Alvord, 46,000 shares, $1,000,500; Mr.
Overstrom, 23,000 shares, $500,250; and Mr. Eyles, Mrs. Kraus and Mr.
Sanborn each, 11,400 shares, $247,950. Dividend equivalent units accrue on
performance equity share units at the same rate as on shares of the
Corporation's common stock.The maturation of all performance equity share
units granted and dividend equivalent units accrued from the date of grant
is contingent upon corporate performance.
(4) Includes both original options and restoration options granted during 1993.
See Table II.
(5) 1993 amounts represent (a) Corporation matching contributions to employees'
thrift plan and (b) aggregate insurance premiums (executive group life and
split-dollar life policies), respectively, as follows; Mr. Alvord, (a)
$5,392, (b) $14,435; Mr. Overstrom, (a) $5,392, (b) $7,411; Mr. Eyles, (a)
$3,598, (b) $5,418; Mrs. Kraus, (a) $5,392, (b) $7,717 and Mr. Sanborn, (a)
$3,598, (b) $5,299.
(6) 1992 amounts represent (a) Corporation matching contributions to employees'
thrift plan and (b) aggregate insurance premiums (executive group life and
split-dollar life policies), respectively, as follows; Mr. Alvord, (a)
$5,237, (b) $28,513; Mr. Overstrom, (a) $5,237, (b) $14,435; Mr. Eyles, (a)
$0, (b) $4,294; Mrs. Kraus (a) $5,237, (b) $17,901 and Mr. Sanborn, (a) $0,
(b) $498. Also includes (i) payments of $90,011 to Mr. Eyles for services
rendered and expenses incurred as a consultant during the first two months
of 1992, and (ii) relocation payment of $125,000 to Mr. Sanborn.
(7) Bonus commitments made upon hiring in 1992.
7
<PAGE>
TABLE II
Table II sets forth certain information concerning stock options granted during
1993 by the Corporation to the named executive officers. The hypothetical
present value on date of grant shown below for stock options granted in 1993
are presented pursuant to the rules of the Securities and Exchange Commission
(the "SEC") and are calculated under the modified Black-Scholes model for
pricing options. The actual before-tax amount, if any, realized upon the
exercise of stock options will depend upon the the excess, if any, of the
market price of the Corporation's common stock over the exercise price per
share of common stock of the stock option at the time the stock option is
exercised. There is no assurance that the hypothetical present values of the
stock options reflected in this table will be realized.
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF SECURITIES PERCENT OF TOTAL GRANT DATE
UNDERLYING OPTIONS GRANTED EXERCISE OR PRESENT
OPTIONS GRANTED(1) TO EMPLOYEES BASE PRICE EXPIRATION VALUE(3)
NAME (#) IN FISCAL YEAR(2) ($/SHARE) DATE(1) ($)
- ---- -------------------- ----------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Joel B.
Alvord 70,000 5.0% $20.250 1/28/2003 $282,083
17,762* 1.3% 22.000 1/17/1999 75,027
29,796* 2.1% 22.000 12/7/1997 95,049
Gunnar S.
Overstrom 45,000 3.2% $20.250 1/28/2003 $181,339
14,210* 1.0% 22.000 1/17/1999 60,023
23,837* 1.7% 22.000 12/7/1997 76,040
David L.
Eyles 30,000 2.2% $20.250 1/28/2003 $120,893
5,740* 0.4% 22.000 1/28/1999 24,246
Eileen
Kraus 20,000 1.4% $20.250 1/28/2003 $ 80,595
5,664* 0.4% 22.000 1/17/1999 23,925
9,478* 0.7% 22.000 12/7/1997 30,235
Allen W.
Sanborn 20,000 1.4% $20.250 1/28/2003 $ 80,595
</TABLE>
- -------
* Restoration options replace shares tendered to exercise prior options and
shares withheld for tax liability.
(1) Ten year stock options granted in 1993 will become exercisable in annual
one-third increments, beginning two years from the date of grant.
Restoration options will become exercisable one year after grant and will
expire at the same time as the original option. All options will become
exercisable upon a change in control of the Corporation.
(2) During 1993 a total of 1,386,187 stock options were granted.
(3) The hypothetical present values on grant date are calculated under the
modified Black-Scholes Model, which is a mathematical formula used to value
options traded on stock exchanges. This formula considers a number of
factors in hypothesizing an option's present value. Factors used to value
options include the stock's expected volatility rate (30%), risk free rate
of return (6%), dividend yield (5%), projected time of exercise (7 years)
and projected risk of forfeiture rate for vesting period (5% per annum).
Restoration option values are calculated using the same model and factors
as original options, except that the projected date of exercise is the
remaining term of the original grant and the assumed risk free rate of
return is 5%.
8
<PAGE>
TABLE III
Table III sets forth certain information concerning stock options exercised
during 1993 by the named executive officers and the number and value of
specified options at December 31, 1993. The value of unexercised in-the-money
stock options at December 31, 1993 shown below are presented pursuant to SEC
rules. The actual amount, if any, realized upon exercise of stock options will
depend upon the excess, if any, of the market price of the Corporation's common
stock over the exercise price per share of common stock of the stock option at
the time the stock option is exercised. There is no assurance that the values
of unexercised in-the-money stock options reflected in this table will be
realized.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND FISCAL YEAR-END OPTION VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
SHARES ACQUIRED VALUE ------------------------- -------------------------
ON EXERCISE(1) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ---- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joel B. Alvord.......... 75,000 $1,078,125 94,258 142,558 $ 0 $383,125
Gunnar B. Overstrom..... 60,000 862,500 72,933 103,047 0 290,000
David L. Eyles.......... 8,000 88,000 0 43,740 0 131,000
Eileen Kraus............ 24,000 345,000 20,000 43,142 0 119,000
Allen W. Sanborn........ 0 0 15,000 35,000 106,875 136,875
</TABLE>
- -------
(1) The named executive officers used already owned shares to pay the exercise
price of options exercised during 1993. The options noted above were
exercised under the restoration option program, pursuant to which such
officers are required to retain, for a minimum of three years, the number
of newly acquired shares equal in value to the after-tax value realized on
the option exercise.
(2) Based upon the difference between exercise price and closing price per
share at December 31, 1993.
TABLE IV
Table IV sets forth certain information concerning long-term incentive awards
granted to the named executive officers during 1993.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER
NON-STOCK PRICE-BASED
PLANS (3)
------------------------
NUMBER OF PERFORMANCE OR
SHARE UNITS (2) OTHER PERIOD UNTIL THRESHOLD TARGET MAXIMUM
NAME (#) MATURATION OR PAYMENT (#) (#) (#)
---- --------------- --------------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Joel B. Alvord.......... 23,000 12/31/95 0 23,000 23,000
Gunnar S. Overstrom..... 11,500 12/31/95 0 11,500 11,500
David L. Eyles.......... 5,700 12/31/95 0 5,700 5,700
Eileen Kraus............ 5,700 12/31/95 0 5,700 5,700
Allen W. Sanborn........ 5,700 12/31/95 0 5,700 5,700
</TABLE>
- -------
(1) The performance equity plan was adopted during 1993 to provide significant
and fully competitive long-term reward opportunities for key senior members
of management. Participants have the opportunity to earn their target
performance equity share units if predetermined strategic business goals
are achieved, and shareholder value is thereby created.
(2) Under the 1994-1995 cycle, the named executive officers received awards of
target performance equity share units based on individual performance as
determined by the human resources committee.
(3) Awards are earned, based on an accelerating scale, if the Corporation
achieves a preestablished threshold return on average common equity. If the
target return on average common equity is met, the number of shares of the
Corporation's common stock paid out will equal the number of performance
equity share units granted. Performance below the threshold goal will
result in no payout; there is no minimum payout under the plan.
9
<PAGE>
TABLE V
PENSION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Final
Compensation Years of Credited Service
- ------------ ---------------------------------------
15 20 25 30 35
-- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 400,000.............................. 120,000 160,000 200,000 240,000 240,000
500,000.............................. 150,000 200,000 250,000 300,000 300,000
600,000.............................. 180,000 240,000 300,000 360,000 360,000
700,000.............................. 210,000 280,000 350,000 420,000 420,000
800,000.............................. 240,000 320,000 400,000 480,000 480,000
900,000.............................. 270,000 360,000 450,000 540,000 540,000
1,000,000.............................. 300,000 400,000 500,000 600,000 600,000
</TABLE>
- --------------------------------------------------------------------------------
Table V sets forth information for determining the estimated annual retirement
benefits commencing at age 65 that would be payable to participants under the
Corporation's defined benefit plans pursuant to which benefits are determined
by final compensation and years of service ("retirement plans"). Compensation
for purposes of the pension table means the final year's salary and the average
of the short-term incentive awards for the five highest consecutive calendar
years after 1984 (see summary compensation table for salary). The amounts set
forth in the table are offset by social security benefits and assume payment in
the form of a 50% joint and survivor annuity, but do not reflect the reduction
for tax payments discussed below. As of December 31, 1993, remuneration covered
by the retirement plans and years of credited service as defined therein are as
follows for the named executive officers: Mr. Alvord, $939,000 and 34 years;
Mr. Overstrom, $728,600 and 23 years; Mr. Eyles, $483,333 and 6 years; Mrs.
Kraus, $386,600 and 14 years and Mr. Sanborn, $540,000 and 1 year.
The Corporation also maintains a split-dollar life insurance program which, in
addition to supplemental insurance benefits, provides a choice of
postretirement death benefits or supplemental retirement income. The formula by
which any retirement benefits for executive officers are determined under the
split-dollar life insurance program is 4% of cumulative base salary for all
years of participation in the plan.
The retirement plans include a tax-qualified pension plan and a supplemental,
nonqualified pension plan. At the election of individual participants, the
Corporation funds the supplemental plan and the split-dollar life insurance
plan discussed above through contributions to an irrevocable trust (the
"trust"). Such contributions will constitute taxable income to an electing
participant to the extent and at the time that the participant's benefit
becomes vested; income of the trust may also constitute taxable income to such
participants. The trust provides for the distribution annually to each electing
participant (or the remittance by the Corporation to the appropriate tax
authority on behalf of the participant) of an amount sufficient to pay all
income taxes imposed on the participant in connection with the trust; the trust
also provides for the retirement benefits to which electing participants will
be entitled to be reduced to their after-tax equivalents.
Executive severance and employment agreements
Messrs. Alvord, Overstrom, Eyles, Mrs. Kraus and Mr. Sanborn have severance
agreements which provide that if termination of employment occurs within the
two-year period following a change in control of the Corporation and such
termination is by the Corporation for other than cause (as defined in the
agreements) or by the executive for good reason (as defined in the agreements),
the executive will be entitled to receive, among other things, (i) an amount
equal to the sum of base salary and any amount awarded under the short-term
incentive plan for the year preceding the year of termination multiplied by
three or the number of years remaining to the executive's 65th birthday,
whichever is the shorter ("applicable period"); (ii) a pro rata portion of any
award related to any uncompleted performance award period under the performance
plan and, at the completion of any such performance award period, an amount
equal to the difference, if any, between the award that would have been paid
had the executive continued employment until the end of the award period and
the pro rata award actually paid to the executive; and (iii) an amount in cash
(not included in calculation below) generally equal to the
10
<PAGE>
aggregate difference between the exercise price of certain stock options held
by the executive and the higher of the closing price of the common stock on the
date of termination of employment or the highest per share price paid in
connection with any changes in control. These agreements also provide for the
continuation of health, medical and life insurance coverage for each executive
after termination of employment until the expiration of the applicable period
or (as amended), if sooner, until such benefits are provided through the
executive's reemployment, and provide each executive with pension benefits
equal to the amount which the executive would have received under the
applicable pension plans had said executive been fully vested and remained
employed for the applicable period, reduced by the pension benefits the
executive will actually receive under such pension plans. These agreements
confer no benefits prior to a change in control. In the event that any payments
received by Messrs. Alvord and Overstrom in connection with a change in control
are subjected to the excise tax imposed under federal tax laws, these
agreements provide for an additional payment sufficient to restore the
executive to the same after-tax position the executive would have had if the
excise tax had not been imposed. The agreements of Mr. Eyles, Mrs. Kraus and
Mr. Sanborn provide that payments received in connection with a change in
control will be reduced to the extent necessary to avoid the imposition of any
such excise tax. The Corporation estimates that the amount that would have been
payable in the aggregate to Messrs. Alvord, Overstrom, Eyles, Mrs. Kraus and
Mr. Sanborn under these agreements, exclusive of the effect of state and local
taxes, in the event that payment under such agreements had been triggered as of
the date of this proxy statement, would have been approximately $13.4 million.
The Corporation has entered into an employment agreement with each of Mr.
Alvord and Mr. Overstrom, effective as of February 24, 1994, each of which
contains the following terms and conditions: (i) an initial term of three
years, subject to extension for an additional one-year period on each
successive anniversary of the effective date unless the Corporation gives
notice of nonrenewal at least 60 days prior to such anniversary, (ii) annual
salary at least equal to that in effect on the effective date, (iii)
participation in all compensation and employee benefit arrangements available
to other executive officers of the Corporation, and (iv) noncompetition and
confidentiality covenants by the officers. In the event that one of the
following triggering events occurs: (i) reduction in responsibility as defined
in the agreements, (ii) the officer is not nominated for and elected to
membership on the Corporation's board of directors, or (iii) the Corporation
gives notice of nonrenewal, then each agreement provides that the officer will
be entitled to receive, for the then remaining term of the agreement, salary,
short- and long-term incentive compensation and coverage or credited service,
as applicable, under the Corporation's employee benefit plans; in such event,
outstanding equity awards would vest, but would continue to become exercisable
or nonrestricted, as applicable, as originally scheduled.
The Corporation entered into two-year employment agreements with Messrs. Eyles
and Sanborn on March 1, 1992 and May 11, 1992, respectively, providing for
annual salaries of $310,000 and $360,000, respectively. Mr. Eyles's agreement
may be extended under specified circumstances. These agreements also prescribe
the 1993 grants of stock options, awards of restricted stock and awards of
short-term bonuses made to the executives for 1993, as disclosed above on the
summary compensation table. In the event of termination of employment by the
Corporation other than for cause (as defined in the agreements) or by the
executive for good reason (as defined in the agreements), these agreements
provide for the continuation of salary payments for the remainder of their
terms and, with respect to other matters, generally provide as set forth in the
employment agreements described above.
Compensation committee interlocks and insider participation
Mr. Alvord is chairman of the compensation committee of the board of directors
of The Hartford Steam Boiler Inspection and Insurance Company ("HSB"). Mr.
Wilde, who is chairman, chief executive officer and a director of HSB, is a
director of the Corporation; however, Mr. Wilde does not serve on the
Corporation's human resources committee. The following directors, all of whom
are nonemployees of the Corporation, serve on the human resources committee of
the Corporation: Stillman B. Brown, John T. Collins, Herbert W. Jarvis, Robert
J. Matura, Maurice Segall, and Paul R. Tregurtha (chairman). Mr. Jarvis, a
member of the committee, is not standing for reelection.
11
<PAGE>
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation policies applicable to executive officers
The human resources committee of the board of directors, which is composed
entirely of independent outside directors, is responsible for establishing,
implementing and monitoring the Corporation's strategy, policies and plans for
executive compensation. The Corporation's strategy is to (i) attract high-
caliber managerial and professional talent at both entry level and mid-career
to meet the organization's growing needs, (ii) assess and develop such talent
for careers at the Corporation through internal promotion under its performance
planning and evaluation policy, (iii) select and retain top-performing
executive officers at the corporate level and in each sector of the
Corporation's financial services businesses, (iv) provide compensation
opportunities that are fair and competitive with those provided by comparable
organizations, and (v) motivate and reward its executives based on corporate,
business line and individual annual performance and long-term creation of
shareholder value.
In accordance with its responsibilities, at the beginning of each performance
year, the committee reviews the Corporation's overall mission, strategy and
objectives. The Corporation's 1993 profit plan objectives included
profitability, improved asset quality, expense control, continued MIS
advancements, and enhanced management processes. Using these objectives, the
individual business lines develop performance initiatives that directly align
business line goals to overall corporate performance. Executive officers are
assessed by the committee on the basis of the accomplishments of their
individual business lines vis-a-vis their goals and results. No specific
numerical weight was assigned to any factor.
The committee determines the elements and levels of compensation on the basis
of this assessment, taking into consideration prevailing economic conditions
and opportunities, shareholder well-being and performance and marketplace pay
levels and practices among a peer group of 29 banks considered comparable for
compensation purposes. This peer group is composed of a national sample of
financial institutions with similar regional bank emphasis and business mix and
is therefore representative of pay practices at institutions against which the
Corporation competes for talented, experienced executives. Of the eleven
eastern regional institutions (other than the Corporation) included in the
Keefe, Bruyette & Woods Eastern Regional Index used on the performance graph
set forth below, nine are included in the national peer group that is used to
assess competitive pay practices. The committee is assisted in its review and
evaluation by an independent outside executive compensation consultant retained
by the committee.
New section 162(m) of the Internal Revenue Code of 1986, as amended, imposes an
annual, individual limit of $1 million on the deductibility of the
Corporation's compensation payments (excluding "performance-based"
compensation) to the named executive officers. Although the analysis of this
matter is not yet complete, it is the Corporation's present intention to
preserve the deductibility of its compensation payments to the named executive
officers, to the extent consistent with the Corporation's overall compensation
philosophy.
For 1993, the compensation of the Corporation's named executive officers is
consistent with the policies and plans in place for several years, which
provide for three major elements of compensation, all subject to board
approval:
1. COMPETITIVE BASE SALARIES, which reflect the competitive marketplace at the
appropriate job level, the individual performance of each executive officer,
time in position, prior experience and accomplishments, and the relative
importance of the job to the Corporation. Base salaries are reviewed
periodically for adjustment by the committee. Adjustments may be recommended
based on individual performance and overall corporate results, subject to
the minimum amount set forth in any applicable employment agreement.
2. ANNUAL INCENTIVE AWARDS, which are based on the committee's year-end
assessment of annual performance achievement for the year. All executive
officers are eligible to participate in the Corporation's short-term
incentive plan under which such awards are generally made in cash early in
the following year.
For 1993, corporate profit plan goals for executive officers included
profitability, expense control, expansion through acquisitions and asset
quality. Individual performance evaluation factors included leadership,
organizational management, administration and control. Executive officers
managing specific business lines/subsidiaries were also responsible for
profit plan goals in their areas of responsibility. Based on 1993 results,
which witnessed three proposed acquisitions, improvements in the efficiency
ratio, dramatic reduction
12
<PAGE>
in problem assets and other major achievements, bonuses were awarded by the
committee as shown in Table I to the named executive officers in accordance
with the committee's assessment of their performance and relative
contribution. Executive officers influence corporate performance depending
upon their specific responsibilities and their effective execution of those
responsibilities. Therefore, individual performance factors receive different
emphasis depending on the particular executive officer being assessed. In all
instances (except in the case of the chief executive officer as discussed
below), performance factors specific to each business line's profit plan were
the principal determinants of annual incentive awards. Comparative pay
practices in the peer group of 29 banks discussed above provided context and
served as useful benchmarks in making these decisions.
3. EQUITY PARTICIPATION in the form of stock options, restricted stock, and
performance equity share units, which strengthen the coincidence of interest
of executive officers and the Corporation's shareholders in the
Corporation's growth in real value over the long term. Options granted in
1993 will become exercisable over four years from the date of grant, and
expire ten years after date of grant.
Stock Options
Stock option grants have generally been made annually to executive officers at
100% of fair market value at date of grant. These grants to executive officers
are discretionary within a guideline range based on competitive practice and
reflect the relative value of the individual's position as well as the current
performance assessment, continuing contribution and prospective effect of that
executive officer on the Corporation's future success.
The value of stock options granted to executive officers is fixed at a
percentage of salary, with the value of the options established by using the
Black-Scholes option valuation model. This percentage varies, within the
guideline range discussed above, based on each executive's prior year
performance as judged on individual performance evaluation factors including
leadership, organizational management, administration and control. The
percentages are set at levels which, together with the performance equity
share unit grants, are designed to provide target long-term incentive
compensation opportunities at approximately the (average) level of executives
in similar positions in the peer group of 29 banks discussed above. Options
which will become exercisable in annual one-third increments, beginning two
years from the date of grant, and expire ten years after date of grant were
granted in 1993 as shown in Table II. No stock options were granted to the
named executives in 1991.
The committee also decided in 1993 to include a restoration option feature to
specific existing grants to encourage early exercise of stock options and
further increase actual ownership to provide greater linkage to stockholder
interests. The restoration option feature allows a participant who exercises
the original stock option prior to the participant's retirement, and who pays
all or a part of the exercise price of the stock option with shares of the
Corporation's common stock held by the participant for at least six months, to
receive a restoration option to purchase the number of the Corporation's
common stock equal to the number of whole shares used by the participant in
payment of the exercise price and applicable taxes of the original stock
option. A restoration option may be exercised between the date of its grant
and the date of expiration of the original stock option to which the
restoration option is related, and the exercise price may not be less than
100% of the fair market value of the common stock on the date the restoration
option is granted. A participant must retain for a minimum of three years that
number of newly acquired shares equal in value to the after-tax gain realized
on the option exercised. The principal factors taken into account in
determining these awards were the need to retain and motivate these key
employees to recognize the Corporation's successful transition, to increase
alignment of managers' and shareholders' interests and to increase managers'
ownership, but did not include the level of outstanding awards.
Restoration options were granted in 1993 as shown in Table II.
Restricted Stock
Restricted stock, which provides executive officers with an immediate at-risk
equity interest in the Corporation, may be granted annually to executive
officers; however, restricted stock has generally been granted less
frequently. Such awards, which may require attainment of financial performance
objectives, always impose future service requirements of up to ten years.
Vesting may occur ratably over the restriction period or 100% on completion of
the period.
No restricted stock awards were made to the named executive officers in 1991
or 1993.
Performance Equity Share Units
Performance equity share units, which provide executive officers with a
partnership-oriented, long-term performance incentive, may be granted
annually. Award opportunities, payable in stock, focus executives on
13
<PAGE>
earning an equity stake in the corporation and enhance team motivation. The
committee meets each year to select the key executives who will participate
based upon its evaluation of a potential participant's current performance and
future ability to contribute. It also looks at the critical nature of the
skills and the strategic importance of a participant's position in the
organization.
The committee selects financial performance targets taking into account the
Corporation's long-range strategic plan, the current economic climate, and
stock market price, dividend and profit expectations for the Corporation. For
each selected performance criteria, the committee will determine a performance
objective and a minimum performance level. Full achievement of the performance
objectives will result in the award of the entire share target plus reinvested
dividends accrued during the cycle on that number of shares. Performance below
the minimum level will result in no award for the cycle.
Performance equity share units were awarded in 1993 as shown in Table IV.
Bases for the compensation of the chief executive officer
As discussed above, the chief executive officer participates in the
Corporation's executive compensation program. The chief executive officer's
1993 performance was assessed on the basis of nine specific corporate
objectives, the most important of which were the Corporation's improved net
income, increased dividend, expense reduction and control (improved efficiency
ratio), and achievement of other annual objectives in the Corporation's 1993
profit plan, as well as fulfillment of his personal performance initiatives. As
a result of the successful achievement of these key objectives, the chief
executive officer was awarded an annual bonus for 1993 performance as set forth
above in Table I. Based upon the Corporation's results, and strategic
repositioning in order to compete effectively in the years ahead, the chief
executive officer was granted the stock options described above in Table II and
the performance equity share unit award described above in Table IV.
Like those of other executives, the chief executive officer's options were
granted at 100 percent of fair market value at date of grant, will become
exercisable over a four-year vesting period, and will expire ten years after
the date of grant; his performance equity share unit award will earn-out on
completion of the 1994-1995 performance cycle.
PAUL R. TREGURTHA, CHAIRMAN
STILLMAN B. BROWN
JOHN T. COLLINS
HERBERT W. JARVIS
ROBERT J. MATURA
MAURICE SEGALL
14
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Corporation's
cumulative total shareholder return on its common stock over the prior five
years (assuming reinvestment of dividends at date of payment into common stock
of the Corporation) with the cumulative total return on the published Standard
& Poor's 500 Stock Index and the cumulative total return on the Keefe, Bruyette
& Woods Eastern Regional Index, described in note (1) below. The Corporation
believes that while total shareholder return is a most important criterion of
corporate performance, it is subject to the vagaries of the market. In addition
to the creation of shareholder value, the Corporation's executive compensation
program is based on operating and strategic results, and the other factors set
forth and discussed in the committee report on page 12.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG SHAWMUT NATIONAL, S&P 500 INDEX AND KBW INDEX
<CAPTION>
Measurement period Shawmut S&P KBW
(Fiscal year Covered) National Index Index
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
12/31/88 $100 $100 $100
FYE 12/31/89 $ 91 $132 $102
FYE 12/31/90 $ 25 $128 $ 63
FYE 12/31/91 $ 47 $166 $111
FYE 12/31/92 $ 94 $179 $153
FYE 12/31/93 $113 $197 $159
(1) Keefe, Bruyette & Woods is a brokerage firm specializing in bank stocks.
The KBW total return index is based on the KBW 50, but assumes quarterly
reinvestment of dividends. This total return index is a market-
capitalization-weighted bank-stock index composed from data of five
regions of the United States. The data above for the KBW total return
index is taken from 12 banks which make up the eastern region.
</TABLE>
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The board of directors, on recommendation of the audit committee, favors the
appointment of Price Waterhouse as independent accountants for the Corporation
for the year ending December 31, 1994 and, unless otherwise directed, the
proxies will be voted in favor of this appointment. Price Waterhouse has
advised that neither the firm nor any present member or associate of it has any
financial interest, direct or indirect, in the Corporation or its subsidiaries,
nor has had any connection with the Corporation or its subsidiaries in the
capacity of promoter, underwriter, voting trustee, director, officer or
employee. Representatives of Price Waterhouse will be present at the meeting,
as in the past, to make a statement if they should desire to do so and to
respond to appropriate questions raised by shareholders at the meeting.
Adoption of this proposal requires the affirmative vote of a majority of the
votes cast at the meeting.
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<PAGE>
PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION
The board of directors has unanimously approved an amendment to Article Fourth
of the Corporation's restated certificate of incorporation which would increase
from 150,000,000 to 300,000,000 the aggregate number of shares of common stock,
$.01 par value, which the Corporation is authorized to issue.
As of February 23, 1994, the number of authorized shares of common stock
remaining available for future issuance was approximately 54,063,925. Of the
54,063,925 shares, a total of 44,658,612 shares of common stock have been
reserved for the pending acquisitions of New Dartmouth Bank, Peoples Bancorp of
Worcester, Inc., and Gateway Financial Corporation, as well as the
Corporation's various employee benefit plans and Dividend Reinvestment and
Stock Purchase Plan, and 1,329,115 shares of common stock have been reserved
for issuance upon the exercise of warrants issued in connection with the
settlement of certain litigation, reducing the number of shares otherwise
remaining available for future issuance to 8,075,568. The board of directors
considers it prudent and in the best interests of the Corporation, without the
delay and expense of a special meeting of shareholders, to have available a
reasonable amount of common stock to provide sufficient flexibility in the
Corporation's capital structure.
The additional shares to be authorized by the proposed amendment would be
available for issuance from time to time for any proper corporate purpose,
including, as appropriate, acquisitions, stock dividends, stock splits, stock
distributions, the raising of additional capital, or other corporate purposes.
The Corporation does not now have any agreement, understanding or arrangement
that would result in the issuance of any of the additional common shares. If
the proposed amendment is adopted, no further action or authorization by the
shareholders would be necessary, unless required by applicable laws or
regulations or the rules of the New York Stock Exchange, and the board of
directors would be empowered to authorize the issuance of an additional
150,000,000 shares of common stock.
The additional common shares authorized by the proposed amendment would have
the same rights and privileges as the shares of common stock currently
authorized and outstanding. Holders of the Corporation's common shares have no
preemptive rights and, accordingly, existing shareholders would not have any
preferential right to purchase any of the additional common shares. Article
Fourth provides that the number of authorized shares of any class of the
Corporation's capital stock shall be subject to increase or decrease by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote.
A potential effect of the proposed increase in the number of authorized common
shares would be a dilution of present shareholders' interest in the Corporation
if the Corporation issues a substantial number of the newly authorized shares.
In addition, any issuance of additional common shares could have the effect of
diluting the earnings per share and book value per share of existing common
shares.
Although the Corporation has no intention at the present time of doing so, the
Corporation could issue previously authorized but unissued shares of common
stock that could, depending on the terms of such issue, preclude or make
difficult merger or takeover attempts. The amendment to Article Fourth
increasing the number of authorized shares of common stock would enhance the
ability of the Corporation to deter potential acquirors and lessen their
ability to obtain control of the Corporation. Although the board of directors
would make such a determination based on its judgment as to the best interests
of the shareholders, the board could so act to discourage an acquisition
attempt or other transaction viewed favorably by the holders of a majority of
the outstanding voting stock of the Corporation. On balance, however, the board
of directors believes that the advantages of increasing its flexibility to act
in the face of a proposed transaction outweigh any resulting disadvantages to
the shareholders.
The proposal would amend the first sentence of Article Fourth to read in its
entirety as follows:
"Fourth: The total number of shares of stock which the Corporation shall have
authority to issue is 310,000,000, of which 300,000,000 shares with a par value
of $.01 shall be common stock and of which 10,000,000 shares without par value
shall be preferred stock."
The affirmative vote of the holders of a majority of the shares entitled to
vote is required to adopt this proposal. In accordance with Delaware law, in
determining whether the proposal has received the requisite number of
affirmative votes, abstentions and broker nonvotes will be counted as being
present and will have the same effect as a vote against this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 3.
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<PAGE>
VOTING OF PROXY
The enclosed proxy is designed to permit each shareholder of record on March 2,
1994 to vote in the election of directors and on other matters described in
this statement. Your proxy is solicited by the board of directors of the
Corporation. The giving of a proxy does not affect your right to vote should
you attend the meeting, since you may revoke your proxy at any time before it
is voted at the meeting. Proxies may be revoked by (i) filing with the
secretary of the Corporation, at or before the taking of the vote at the
meeting, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a later dated proxy relating to the same shares and
delivering it to the secretary of the Corporation at or before the taking of
the vote at the meeting or (iii) attending the meeting and voting in person.
Attendance at the meeting will not in and of itself constitute a revocation of
a proxy. In addition, shareholders whose shares of common stock are not
registered in their own name will need additional documentation from the record
holder of such shares to vote personally at the meeting. Any written notice of
revocation or subsequent proxy should be sent so as to be delivered to the
secretary of the Corporation, Raymond A. Guenter, at 777 Main Street, Hartford,
Connecticut 06115, or hand-delivered to the secretary of the Corporation at the
foregoing address, at or before the taking of the vote at the meeting.
Unless otherwise specified, it is intended that proxies will be voted for the
11 nominees whose names appear on pages 3 through 6. Although the board of
directors does not contemplate that any of the nominees named will be
unavailable for election, in the event a vacancy in the slate of nominees is
occasioned by death or other unexpected occurrence, it is presently intended
that proxies will be voted for the election of a nominee who shall be
designated by the board of directors. It also is intended that proxies will be
voted for the appointment of Price Waterhouse as independent accountants for
1994 and for the proposal to amend the restated certificate of incorporation.
COST OF SOLICITATION
The cost of soliciting proxies on the accompanying form has been or will be
borne by the Corporation. In addition to solicitation by mail, the Corporation
will request banks, brokers and other custodians, nominees and fiduciaries to
send proxy material to the beneficial owners and to secure their voting
instructions, if necessary. The Corporation will reimburse them for their
expenses in so doing. Directors, officers and regular employees of the
Corporation may solicit proxies personally, by telephone and by telegram from
shareholders if proxies are not received promptly. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses incurred in connection with such
solicitation. The Corporation has retained Morrow & Co. to assist in this
solicitation at an estimated cost of $11,000, which will be borne by the
Corporation.
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S MEETING
Any eligible shareholder who wishes to submit written proposals for possible
inclusion in next year's proxy statement must be sure that all such proposals
are received by the secretary of the Corporation on or before November 19,
1994. It is expected that next year's proxy statement will be mailed on or
about March 14, 1995, and the annual shareholders' meeting will be held on
April 25, 1995.
ANNUAL REPORT
The 1993 annual report of the Corporation, including financial statements, is
being mailed to each shareholder of record together with this notice of annual
meeting of shareholders, proxy statement and proxy on or about March 19, 1994.
OTHER MATTERS
The board of directors of the Corporation knows of no other matters that are to
be presented for action at the meeting. If any other matters are properly
presented to the meeting, the proxies, who are all directors of the Corporation
and who were appointed to this capacity by the board of directors and are named
in the enclosed proxy, or authorized substitutes, will vote on such matters in
accordance with their best judgment.
By order of the board of directors
Raymond A. Guenter
General Counsel and
Secretary
March 19, 1994 Hartford, Connecticut 06115
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