SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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|_| Preliminary proxy statement
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|_| Definitive additional materials
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Berkshire Hills Bancorp, Inc.
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[LETTERHEAD OF BERKSHIRE HILLS BANCORP, INC.]
March 27, 2003
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Berkshire Hills Bancorp, Inc. The meeting will be held at the Crowne Plaza
Hotel, One West Street, Pittsfield, Massachusetts on Thursday, May 1, 2003 at
10:00 a.m., local time.
The notice of annual meeting and proxy statement appearing on the
following pages describe the formal business to be transacted at the meeting.
Directors and officers of the Company, as well as a representative of Wolf &
Company, P.C., the Company's independent auditors, will be present to respond to
appropriate questions of stockholders.
It is important that your shares are represented at this meeting, whether
or not you attend the meeting in person and regardless of the number of shares
you own. To make sure your shares are represented, we urge you to complete and
mail the enclosed proxy card promptly. If you attend the meeting, you may vote
in person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/S/ Michael P. Daly /S/ Robert A. Wells
----------------------- --------------------------
Michael P. Daly Robert A. Wells
President and Chairman of the Board
Chief Executive Officer
Berkshire Hills Bancorp, Inc.
24 North Street
Pittsfield, Massachusetts 01201
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Notice of Annual Meeting of Stockholders
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On Thursday, May 1, 2003, Berkshire Hills Bancorp, Inc. (the "Company")
will hold its annual meeting of stockholders at the Crowne Plaza Hotel, One West
Street, Pittsfield, Massachusetts. The meeting will begin at 10:00 a.m., local
time. At the meeting, the stockholders will consider and act on the following:
1. The election of four directors to serve for terms of three years and
one director to serve for a term of two years;
2. The approval of the Berkshire Hills Bancorp, Inc. 2003 Equity
Compensation Plan;
3. The ratification of the appointment of Wolf & Company, P.C. as
independent auditors for the Company for the fiscal year ending
December 31, 2003; and
4. The transaction of any other business that may properly come before
the meeting.
NOTE: The Board of Directors is not aware of any other business scheduled
to come before the meeting.
Only stockholders of record at the close of business on March 13, 2003 are
entitled to receive notice of and to vote at the meeting and any adjournment or
postponement of the meeting.
Please complete and sign the enclosed form of proxy, which is solicited by
the Board of Directors, and mail it promptly in the enclosed envelope. The proxy
will not be used if you attend the meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Gerald A. Denmark
----------------------------------
Gerald A. Denmark
Corporate Secretary
Pittsfield, Massachusetts
March 27, 2003
IMPORTANT: The prompt return of proxies will save the Company the expense of
further requests for proxies to ensure a quorum. A self-addressed envelope is
enclosed for your convenience. No postage is required if mailed in the United
States.
Berkshire Hills Bancorp, Inc.
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Proxy Statement
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This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Berkshire Hills Bancorp, Inc. (the
"Company" or "Berkshire Hills") to be used at the annual meeting of stockholders
of the Company. The Company is the holding company for Berkshire Bank (the
"Bank"). The annual meeting will be held at the Crowne Plaza Hotel, One West
Street, Pittsfield, Massachusetts on Thursday, May 1, 2003 at 10:00 a.m., local
time. This proxy statement and the enclosed proxy card are being mailed to
stockholders of record on or about March 27, 2003.
Voting and Proxy Procedure
Who Can Vote at the Meeting
You are entitled to vote your Company common stock if the records of the
Company show that you held your shares as of the close of business on March 13,
2003. If your shares are held in a stock brokerage account or by a bank or other
nominee, you are considered the beneficial owner of shares held in "street name"
and these proxy materials are being forwarded to you by your broker or nominee.
As the beneficial owner, you have the right to direct your broker how to vote.
As of the close of business on March 13, 2003, a total of 6,000,862 shares
of Company common stock was outstanding. Each share of common stock has one
vote. As provided in the Company's Certificate of Incorporation, a record owner
of the Company's common stock, which is beneficially owned, either directly or
indirectly, by a person who beneficially owns in excess of 10% of the Company's
outstanding shares, is not entitled to any vote in respect of the shares held in
excess of the 10% limit.
Attending the Meeting
If you are a stockholder as of the close of business on March 13, 2003,
you may attend the meeting. However, if you hold your shares in street name, you
will need proof of ownership to be admitted to the meeting. A recent brokerage
statement or a letter from a bank or broker are examples of proof of ownership.
If you want to vote your shares of Company common stock held in street name in
person at the meeting, you will have to get a written proxy in your name from
the broker, bank or other nominee who holds your shares.
Vote Required
A majority of the outstanding shares of common stock entitled to vote is
required to be represented at the meeting to constitute a quorum for the
transaction of business. If you return valid proxy instructions or attend the
meeting in person, your shares will be counted for purposes of determining
whether there is a quorum, even if you abstain from voting. Broker non-votes
also will be counted for purposes of determining the existence of a quorum. A
broker non-vote occurs when a broker, bank or other nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner.
In voting on the election of directors, you may vote in favor of all
nominees, withhold votes as to all nominees or withhold votes as to specific
nominees. There is no cumulative voting for the election of directors. Directors
are elected by a plurality of the votes cast. This means that the nominees
receiving the greatest number of votes will be elected. Votes that are withheld
and broker non-votes will have no effect on the outcome of the election.
In voting on the approval of the Berkshire Hills Bancorp, Inc. 2003 Equity
Compensation Plan and the ratification of the appointment of Wolf & Company,
P.C. as independent auditors, you may vote in favor of the proposal, against the
proposal or abstain from voting. To be approved, these matters require the
affirmative vote of a majority of the votes cast. Broker non-votes and
abstentions will not be counted as votes cast and will have no effect on the
voting on these proposals.
Voting by Proxy
The Company's Board of Directors is sending you this proxy statement to
request that you allow your shares of Company common stock to be represented at
the annual meeting by the persons named in the enclosed proxy card. All shares
of Company common stock represented at the meeting by properly executed and
dated proxies will be voted according to the instructions indicated on the proxy
card. If you sign, date and return a proxy card without giving voting
instructions, your shares will be voted as recommended by the Company's Board of
Directors. The Board of Directors recommends that you vote:
o FOR each of the nominees for director;
o FOR approval of the Berkshire Hills Bancorp, Inc. 2003 Equity
Compensation Plan; and
o FOR ratification of Wolf & Company, P.C. as the Company's
independent auditors for fiscal 2003.
If any matters not described in this proxy statement are properly
presented at the annual meeting, the persons named in the proxy card will use
their judgment to determine how to vote your shares. This includes a motion to
adjourn or postpone the meeting to solicit additional proxies. If the annual
meeting is postponed or adjourned, your Company common stock may be voted by the
persons named in the proxy card on the new meeting date as well, provided such
new meeting occurs within 30 days of the annual meeting and you have not revoked
your proxy. The Company does not know of any other matters to be presented at
the meeting.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy you must either advise the Corporate Secretary of
the Company in writing before your common stock has been voted at the annual
meeting, deliver a later dated proxy or attend the meeting and vote your shares
in person by ballot. Attendance at the annual meeting will not in itself
constitute revocation of your proxy.
If your Company common stock is held in street name, you will receive
instructions from your broker, bank or other nominee that you must follow to
have your shares voted. Your broker or bank may allow you to deliver your voting
instructions via the telephone or the Internet. Please review the proxy card or
instruction form that is provided by your broker, bank or other nominee which
accompanies this proxy statement.
2
Participants in Berkshire Bank's ESOP
If you participate in the Berkshire Bank Employee Stock Ownership Plan you
will receive a vote authorization form which permits you to instruct the ESOP
trustee how you would like the shares allocated to you under the ESOP voted on
the matters presented at the annual meeting. Shares of common stock held by the
ESOP which have not been allocated to participants and allocated shares for
which no timely voting instructions are received will be voted by the ESOP
trustee in the same proportion as shares for which the trustee has received
voting instructions, subject to the exercise of its fiduciary duties. The
deadline for returning your voting instructions to the ESOP trustee is April 21,
2003.
Stock Ownership
The following table provides information as of March 13, 2003, with
respect to persons known by the Company to be the beneficial owners of more than
5% of the Company's outstanding common stock. A person may be considered to own
any shares of common stock over which he or she has, directly or indirectly,
sole or shared voting or investing power.
Percent
Number of of Common
Shares Stock
Name and Address Owned Outstanding
---------------- --------- -----------
Berkshire Bank Employee Stock Ownership Plan 611,686(1) 10.2%
24 North Street
Pittsfield, Massachusetts 01201
Berkshire Hills Foundation 568,427(2) 9.5
24 North Street
Pittsfield, Massachusetts 01201
Private Capital Management 491,400(3) 8.2
8889 Pelican Bay Boulevard
Naples, Florida 34108
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(1) Under the terms of the ESOP, the ESOP trustee will vote shares allocated
to participants' accounts in the manner directed by the participants. The
ESOP trustee, subject to its fiduciary responsibilities, will vote
unallocated shares and allocated shares for which no timely voting
instructions are received in the same proportion as shares for which the
trustee has received proper voting instructions from participants. As of
March 13, 2003, 81,740 shares had been allocated to participants' accounts
and 529,946 shares remained unallocated under the ESOP.
(2) The terms of the foundation's gift instrument require that all shares of
common stock held by the foundation must be voted in the same ratio as all
other shares of Company common stock on all proposals considered by
stockholders of the Company.
(3) Based on information filed in a Schedule 13G with the U.S. Securities and
Exchange Commission on February 14, 2003.
3
The following table provides information about the shares of Company
common stock that may be considered to be owned by each director of the Company,
by the executive officers named in the Summary Compensation Table and by all
directors and executive officers of the Company as a group as of March 13, 2003.
A person may be considered to own any shares of common stock over which he or
she has, directly or indirectly, sole or shared voting or investment power.
Unless otherwise indicated, each of the named individuals has sole voting and
investment power with respect to the shares shown.
Number of Number of Shares
Shares Owned That May Be Percent of
(Excluding Options) Acquired Within 60 Days Common Stock
Name (1)(2)(3)(4) by Exercising Options Outstanding (5)
---- ------------------- ----------------------- ---------------
Thomas O. Andrews.......................... 30,755 4,604 *
Lawrence A. Bossidy........................ 35,755 -- *
Michael P. Daly............................ 69,269 15,348 1.41%
Thomas R. Dawson........................... 12,402 4,604 *
Gayle P. Fawcett........................... 27,287 6,140 *
A. Allen Gray.............................. 20,845 4,604 *
John Kittredge............................. 7,790 4,604 *
Peter J. Lafayette......................... 11,755(6) 4,604 *
Edward G. McCormick........................ 18,289 4,604 *
Catherine B. Miller........................ 17,463(7) 4,604 *
Corydon L. Thurston........................ 10,964(8) 4,604 *
Ann H. Trabulsi............................ 16,755(9) 4,604 *
Robert A. Wells............................ 68,173(10) 24,556 1.54%
James A. Cunningham, Jr.................... 76,043(11)(12) -- 1.27%
Charles F. Plungis, Jr..................... 9,230(12) 3,070 *
Susan M. Santora........................... 5,627(12) -- *
All Executive Officers and Directors
as a Group (17 persons) ................... 449,952 90,550 8.87%
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* Represents less than 1% of shares outstanding
(1) Includes unvested shares of restricted stock awards held in trust as part
of the Berkshire Hills Bancorp, Inc. 2001 Stock-Based Incentive Plan, with
respect to which the beneficial owner has voting but not investment power
as follows: Messrs. Andrews, Dawson, Gray, Kittredge, Lafayette, McCormick
and Thurston, Ms. Miller and Ms. Trabulsi, each--3,453 shares; Mr.
Bossidy--5,755 shares; Mr. Daly--48,025 shares; Ms. Fawcett--18,544
shares; and Mr. Wells--22,100 shares.
(2) Includes shares allocated under the Berkshire Bank Employee Stock
Ownership Plan, with respect to each individual has voting but not
investment power as follows: Mr. Cunningham--1,607 shares; Mr. Daly--2,335
shares; Ms. Fawcett--1,774 shares; Mr. Plungis--2,356 shares; Ms.
Santora--1,329 shares; and Mr. Wells--2,468 shares.
(3) Includes shares held in trust as part of the Berkshire Bank Supplemental
Executive Retirement Plan, with respect to which the beneficial owner has
shared voting power as follows: Mr. Cunningham--1,709 shares; and Mr.
Wells--1,899 shares;
(4) Includes shares held in trust in the Berkshire Bank 401(k) Plan as to
which each participant has investment but not voting power as follows: Mr.
Cunningham--26,253 shares; Mr. Daly--7,813 shares; Ms. Fawcett--2,500
shares; and Mr. Wells--25,772 shares.
(5) Based on 6,000,862 shares of Company common stock outstanding and entitled
to vote as of March 13, 2003, plus for each person, the number of shares
that such person may acquire within 60 days by exercising stock options.
(6) Includes 2,460 shares held by Mr. Lafayette's spouse's individual
retirement account.
(7) Includes 1,438 shares held by Ms. Miller's spouse.
(8) Includes 104 shares held by each of Mr. Thurston's two children.
(footnotes continued on following page)
4
(9) Includes 1,000 shares held by Ms. Trabulsi's spouse.
(10) Includes 1,100 shares held by Mr. Wells' spouse.
(11) Includes 500 shares held by Mr. Cunningham's child.
(12) The employment of each of Messrs. Cunningham, Plungis and Ms. Santora was
terminated on October 17, 2002, February 28, 2003 and November 13, 2002,
respectively. The beneficial ownership reported for such individuals is
based on information provided to the Company as of the time of the
individual's termination of employment, updated for transactions involving
employee benefit plans.
Proposal 1 -- Election of Directors
On October 17, 2002, in connection with his appointment as President and
Chief Executive Officer of the Company and the Bank, Michael P. Daly was
appointed to the Board of Directors to fill the vacancy which formed upon James
A. Cunningham, Jr.'s departure. Additionally, at that time, the Board of
Directors was increased to nineteen seats and Lawrence A. Bossidy was appointed
to the Board. On January 15, 2003, Henry D. Granger, Michael G. Miller, Raymond
B. Murray, III, Louis J. Oggiani, Robert S. Raser, William E. Williams and Anne
Everest Wojtkowski retired from the Board of Directors and were appointed to a
newly-formed advisory board. After their retirement, the Company's Board of
Directors consists of twelve members. Ten directors are independent and two
directors are officers. John M. Kittredge, having reached the age limit
established by the Board of Directors in the Company's bylaws, will retire at
the 2003 Annual Meeting of Stockholders at which point the Board of Directors
will be reduced to eleven members.
The Company's Certificate of Incorporation requires that the Board be
divided into three classes in equal as number as possible, each with three-year
staggered terms, with approximately one-third of the directors elected each
year. To preserve the division of directors into three classes as equal in
number as possible, the Board is nominating four directors to serve three-year
terms and one director to serve a two- year term. The nominees for election this
year are Lawrence A. Bossidy, Michael P. Daly, Thomas R. Dawson, Peter J.
Lafayette and Corydon L. Thurston, each of whom is a director of the Company and
the Bank.
It is intended that the proxies solicited by the Board of Directors will
be voted for the election of the nominees named above. If any nominee is unable
to serve, the persons named in the proxy card would vote your shares to approve
the election of any substitute proposed by the Board of Directors.
Alternatively, the Board of Directors may adopt a resolution to reduce the size
of the Board. At this time, the Board of Directors knows of no reason why any
nominee might be unable to serve.
The Board of Directors recommends a vote "FOR" the election of all of the
nominees.
Information regarding the nominees and the directors continuing in office
is provided below. Unless otherwise stated, each individual has held his current
occupation for the last five years. The age indicated in each nominee's
biography is as of December 31, 2002. There are no family relationships among
the directors or executive officers. The indicated period for service as a
director includes service as a director of the Bank.
5
Nominees for Election of Directors
The following nominees standing for election for terms ending in 2006 are:
Lawrence A. Bossidy was the Chairman of Allied Signal from 1991 to 1999
and its Chief Executive Officer from 1992 to 1999 when he became Chairman of
Honeywell International, Inc. following the merger of the two companies. Mr.
Bossidy served as the Chairman of Honeywell from December 1999 to April 2000 and
since July 2001. Mr. Bossidy was also the Chief Executive Officer of Honeywell
from July 2001 to February 2002. Mr. Bossidy serves as a director on the boards
of directors of J.P. Morgan Chase & Co. and Merck & Co., Inc. Age 67. Director
since 2002.
Thomas R. Dawson is a self-employed certified public accountant. Age 55.
Director since 1993.
Peter J. Lafayette has been the President of Berkshire Housing Development
Corporation, a non- profit housing developing and consulting organization since
1980 and the President of Berkshire Housing Services, Inc., a property
management company, since 2000. Both entities are located in Pittsfield,
Massachusetts. Age 55. Director since 1996.
Corydon L. Thurston serves as the President of Berkshire Broadcasting Co.,
Inc., which owns and operates three radio stations in North Adams and Great
Barrington, Massachusetts. Age 50. Director since 1988.
The following nominee standing for election has a term ending in 2005:
Michael P. Daly was appointed President and Chief Executive Officer of the
Company and the Bank in October 2002. Prior his appointment, Mr. Daly served as
Executive Vice President of the Company and the Bank from 2000 to October 2002
and Senior Vice President, Commercial Lending from 1997 until 2000. Age 41.
Director since 2002.
Directors Continuing in Office
The following directors have terms ending in 2004:
Edward G. McCormick is the managing partner of the law firm of McCormick,
Murtagh, Marcus & Smith, located in Great Barrington, Massachusetts. Age 55.
Director since 1994.
Robert A. Wells is the Chairman of the Boards of the Company and the Bank
and the Chairman of the Boards of Berkshire Hills Foundation and Greater
Berkshire Foundation, Inc. Mr. Wells served as the President and Chief Executive
Officer of Berkshire County Savings Bank prior to its merger with Great
Barrington Savings Bank in May 1997. Age 63. Director since 1976.
Ann H. Trabulsi is a community volunteer serving on various not-for-profit
boards, including Berkshire Medical Center and Berkshire Health Systems. Age 67.
Director since 1976.
The following directors have terms ending in 2005:
Thomas O. Andrews is the President and Chief Executive Officer of H.S.
Andrews Insurance Agency, Inc., located in Great Barrington, Massachusetts. Age
64. Director since 1980.
6
A. Allen Gray is a vice president and general counsel of General Dynamics
Defense Systems, Inc., a government contractor located in Pittsfield,
Massachusetts. Age 58. Director since 1996.
Catherine B. Miller is a former partner and vice president of Wheeler &
Taylor, Inc., an insurance agency with offices in Stockbridge, Great Barrington
and Sheffield, Massachusetts. Age 61. Director since 1983.
Meetings and Committees of the Board of Directors
The Company and the Bank conduct business through meetings of their Boards
of Directors and through activities of their committees. The Boards of Directors
of the Company and the Bank generally meet monthly and may have additional
meetings as needed. During 2002, the Boards of Directors of the Company and the
Bank each held 13 meetings. All of the current directors of the Company and the
Bank attended at least 75% of the total number of the Company's and the Bank's
board meetings held and committee meetings on which such directors served during
2002.
The Board of Directors of the Company maintains the following committees:
Executive Committee. The Executive Committee, consisting of Messrs. Daly,
Thurston, Wells, Ms. Miller and Ms. Trabulsi, reviews strategic issues and other
matters such as directors' and officers' compensation. All actions taken by the
Executive Committee are reported to the Board at its next meeting. The Executive
Committee meets as necessary between meetings of the Board of Directors. The
Executive Committee met 26 times in 2002.
Audit Committee. The Audit Committee, consisting of Messrs. Dawson, Gray
and Lafayette, assists the Board of Directors in its oversight of the Company's
accounting and reporting practices, the quality and integrity of the Company's
financial reports and the Company's compliance with applicable laws and
regulations. The Committee is also responsible for engaging the Company's
independent auditors and monitoring their conduct and independence. The Audit
Committee met six times in 2002.
Compensation Committee. The Compensation Committee, consisting of Messrs.
Bossidy and Thurston, Ms. Miller and Ms. Trabulsi, reviews and establishes the
compensation for all executive officers. The Committee also assists the Board of
Directors in evaluating potential candidates for executive positions. The
Compensation Committee met two times in 2002.
Corporate Governance/Nominating Committee. The Company's Corporate
Governance/Nominating Committee, consisting of Messrs. Bossidy and Thurston, Ms.
Miller and Ms. Trabulsi, assists the Board of Directors in identifying qualified
individuals to serve as Board members, in determining the composition of the
Board of Directors and its committees, in monitoring a process to assess Board
effectiveness and in developing and implementing the Company's corporate
governance guidelines. The Corporate Governance/Nominating Committee also
considers and recommends the nominees for director to stand for election at the
Company's annual meeting of stockholders. Messrs. Bossidy and Thurston did not
participate in the vote on their nominations. The Corporate
Governance/Nominating Committee will accept and consider stockholder
recommendations that are made pursuant to timely written notice to the Secretary
of the Company. All recommendations must include all information necessary for
the Corporate Governance/Nominating Committee to fully review the qualifications
and credentials of the candidate, including such candidate's satisfaction of the
director qualifications set forth in the Company's bylaws. The Corporate
Governance/Nominating Committee met on January 22, 2003.
7
Directors' Compensation
Fees. Non-employee directors of the Bank each receive an annual retainer
of $7,500 and members of the Executive Committee receive an additional $1,500.
In addition, non-employee directors receive $500 for each board meeting
attended, $750 for each Executive Committee meeting attended, $500 for each
Community Reinvestment Act or Audit Committee meeting attended and $250 for each
Trust Committee meeting attended. The Company does not pay separate fees for
service on its Board of Directors.
Executive Compensation
Summary Compensation Table
The following information is furnished for the current and former
President and Chief Executive Officer and the four other highest paid executive
officers of Berkshire Bank who received a salary and bonus of $100,000 or more
during the year ended December 31, 2002.
Annual Compensation Long-Term Compensation
-------------------------------------- ----------------------------
Awards
----------------------------
Other Securities
Annual Restricted Underlying All Other
Compensation Stock Awards Options/SARs Compensation
Name and Position Year Salary Bonus (1) ($)(2) (#) (3)
--------------------------- ------ ----------- ---------- --------------- ----------- ------------ -------------
Michael P. Daly........................... 2002 $ 260,000 $ 33,784 $ -- $ -- -- $ 32,512
President and Chief Executive Officer 2001 144,820 14,482 -- 359,924 38,369 66,253
2000 139,250 27,850 -- -- -- 78,645
Robert A. Wells........................... 2002 $ 250,000 $ 25,000 $ -- $ -- -- $ 72,810
Chairman of the Board 2001 250,000 25,000 -- 616,969 61,390 42,709
2000 250,000 50,000 -- -- -- 105,793
Gayle P. Fawcett.......................... 2002 $ 139,913 $ 13,487 $ -- $ -- -- $ 24,091
Senior Vice President (4)
James A. Cunningham Jr.................... 2002 $ 342,784 $ -- $ -- $ -- -- $ 4,355,666
Former President and Chief Executive 2001 332,800 33,280 -- 1,285,345 138,127 51,589
Officer (5) 2000 320,000 64,000 -- -- -- 99,331
Charles F. Plungis, Jr.................... 2002 $ 152,967 $ 12,237 $ -- $ -- -- $ 1,128,627
Former Senior Vice President, Treasurer 2001 146,380 14,638 -- 359,890 15,348 23,967
and Chief Financial Officer (6) 2000 140,750 35,187 -- -- -- 28,336
Susan M. Santora.......................... 2002 $ 137,710 $ -- $ -- $ -- -- $ 1,098,462
Former Executive Vice President-Retail 2001 130,531 13,053 -- 359,890 23,021 21,376
Banking (7) 2000 125,510 25,102 -- -- -- 25,738
--------------------
(1) Does not include the aggregate amount of perquisites and other benefits,
which was less than $50,000 or 10% of the total annual salary and bonus
reported.
(2) The number and value of all unvested shares of restricted stock held under
the Berkshire Hills Bancorp, Inc. 2001 Stock-Based Incentive Plan that are
allocated to each named executive officer as of December 31, 2002, is as
follows, based on $23.55, the closing price of the Company's common stock
on December 31, 2002:
Number of Value of
Unvested Unvested
Shares Shares
------ ------
Mr. Daly ............................. 17,190 $404,825
Mr. Wells ............................ 29,467 693,948
Ms. Fawcett .......................... 4,911 115,654
Mr. Cunningham ....................... -- --
Mr. Plungis .......................... -- --
Ms. Santora .......................... -- --
(footnotes continued on following page)
8
(3) Details of the amounts reported in the All Other Compensation column for
2002 is provided in the table below. Split-dollar life insurance
represents the economic benefit of employer-paid premiums. Berkshire Bank
expects to recover all of the premium payments it made with respect to the
life insurance policies purchased in connection with such arrangements.
Severance payments represent the amounts paid to Messrs. Cunningham and
Plungis and to Ms. Santora in the fourth quarter of 2002 in satisfaction
of existing contractual obligations of the Company and Berkshire Bank in
connection with each individual's termination of employment.
Mr. Mr. Ms. Mr. Mr. Ms.
Item Daly Wells Fawcett Cunningham Plungis Santora
---- ------- ------- ------- ---------- ---------- ----------
Employer contribution to 401(k) plan.................. $12,243 $14,000 $ 8,313 $ 14,000 $ 10,708 $ 14,000
Market value of allocations under the employee
stock ownership plan............................... 20,269 20,269 15,778 -- 20,269 --
Market value of allocations under the
supplemental executive retirement plan............. -- 21,138 -- -- -- --
Split-dollar life insurance........................... -- 17,403 -- 377,332 -- --
Severance payments.................................... -- -- 3,964,334 1,097,650 1,084,462
------- ------- ------- ---------- ---------- ----------
Total........................................ $32,512 $72,810 $24,091 $4,355,666 $1,128,627 $1,098,462
======= ======= ======= ========== ========== ==========
(4) Ms. Fawcett became an executive officer on October 17, 2002. Information
for the prior two years is not disclosed as Ms. Fawcett was not an
executive officer during that period.
(5) Mr. Cunningham's employment was terminated on October 17, 2002.
(6) Mr. Plungis' employment was terminated on February 28, 2003.
(7) Ms. Santora's employment was terminated on November 13, 2002.
Employment Agreements
Berkshire Bank and Berkshire Hills maintain employment agreements with
Messrs. Daly and Wells. The employment agreements are intended to ensure that
Berkshire Bank and Berkshire Hills will be able to maintain a stable and
competent management base. The continued success of Berkshire Bank and Berkshire
Hills depends to a significant degree on the skills and competence of these
officers.
The employment agreements provide for three-year terms that automatically
extend daily unless the Board of Directors or the executive gives the other
party written notice of non-renewal. The Board has provided Mr. Wells written
notice that his employment agreements will terminate on November 22, 2005. The
employment agreements provide for base salaries for Messrs. Daly and Wells of
$260,000 and $150,000, respectively, which are reviewed by the Berkshire Bank
Board of Directors at least annually. In addition to the base salary, the
employment agreements provide for, among other things, participation in stock
and employee benefit plans and fringe benefits applicable to executive
personnel.
The employment agreements provide for termination by Berkshire Bank or
Berkshire Hills for cause, as defined in the employment agreements, at any time.
If Berkshire Bank or Berkshire Hills chooses to terminate an executive's
employment for reasons other than for cause, or if an executive resigns from
Berkshire Bank or Berkshire Hills after specified circumstances that would
constitute constructive termination, the executive or, if the executive dies,
his beneficiary would be entitled to
9
receive an amount equal to the remaining base salary and incentive compensation
payments, including amounts related to stock-based compensation, due for the
remaining term of the employment agreement and the contributions that would have
been made on the executive's behalf to any employee benefit plans of Berkshire
Bank and Berkshire Hills during the remaining term of the employment agreement.
Berkshire Bank and Berkshire Hills would also continue and/or pay for the
executive's life, health, dental and disability coverage for the remaining term
of the employment agreement. Upon termination of the executive's employment
under these circumstances, the executive must adhere to a one year
non-competition restriction.
Under the employment agreements, if voluntary (upon circumstances
discussed in the agreements) or involuntary termination follows a change in
control of Berkshire Bank or Berkshire Hills, the executive or, if the executive
dies, his beneficiary would be entitled to a severance payment equal to the
greater of: (1) the payments due for the remaining term of the agreement; or (2)
three times the average of the executive's compensation for the five preceding
taxable years. Berkshire Bank and Berkshire Hills would also continue the
executive's life, health, and disability coverage for thirty-six months. Even
though both the Berkshire Bank and Berkshire Hills employment agreements provide
for a severance payment if a change in control occurs, the executive would not
receive duplicative payments or benefits under the agreements. The executive
would also be entitled to receive a certain tax indemnification payment if
payments under the employment agreements trigger liability under the Internal
Revenue Code for the excise tax applicable to "excess parachute payments." Under
applicable law, the excise tax is triggered by change in control-related
payments which equal or exceed three times the executive's average annual
compensation over the five years preceding the change in control. The excise tax
equals 20% of the amount of the payment in excess of the executive's average
compensation over that preceding five-year period.
Payments to the executive under the Bank's employment agreement are
guaranteed by Berkshire Hills if payments or benefits are not paid by the Bank.
Payment under Berkshire Hills' employment agreement would be made by Berkshire
Hills. All reasonable costs and legal fees paid or incurred by the executive in
any dispute or question of interpretation relating to the employment agreements
will be paid by Berkshire Bank or Berkshire Hills, respectively, if the
executive is successful on the merits in a legal judgment, arbitration or
settlement. The employment agreements also provide that Berkshire Bank and
Berkshire Hills will indemnify the executive to the fullest extent legally
allowable.
Change in Control Agreements
Berkshire Hills and Berkshire Bank each maintains a change in control
agreement with Ms. Fawcett. Each change in control agreement has a term of three
years and is renewable annually. The change in control agreements provide that
if involuntary termination, other than for cause, or voluntary termination (upon
the occurrence of circumstances specified in the agreements) follows a change in
control of Berkshire Hills or Berkshire Bank, Ms. Fawcett would be entitled to
receive a severance payment equal to three times her average annual compensation
(as described in the agreements) for the five most recent taxable years.
Berkshire Bank would also continue her health and welfare benefits coverage for
thirty-six months following termination.
10
Fiscal Year-End Option Values
The following table provides certain information regarding the exercise of
options during the past fiscal year and certain information with respect to the
number and value of shares of Berkshire Hills common stock represented by
outstanding options held by the named executive officers as of December 31,
2002.
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options at Fiscal In-the-Money Options
on Value Year End (#) at Fiscal Year End ($)(1)
Exercise Realized ---------------------------- ---------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ---------- ----------- ------------- ----------- -------------
Michael P. Daly .................... -- $ -- 7,674 30,695 $ 52,183 $208,726
Robert A. Wells .................... -- -- 12,278 49,112 83,490 333,962
Gayle P. Fawcett ................... -- -- 3,070 12,278 20,876 83,490
James A. Cunningham, Jr. ........... -- -- 27,626 -- 187,857 --
Charles F. Plungis, Jr. ............ -- -- 3,070 -- 20,876 --
Susan M. Santora ................... 4,605 33,386 -- -- -- --
--------------------
(1) Value of unexercisable in-the-money stock options equals the market value
of shares covered by in-the- money options on December 31, 2002, less the
option exercise price. Options are in-the-money if the market value of
shares covered by the options is greater than the exercise price.
Other Retirement Arrangements
Berkshire Bank maintains a supplemental retirement arrangement with Mr.
Wells to provide him with an annual retirement benefit at age 60 equal to 70% of
the average of the three consecutive years during which his compensation is the
highest. Benefits under the supplemental arrangement are reduced by the benefits
Mr. Wells would receive under the 401(k) plan, social security and through
split-dollar life insurance arrangements under which the executive is entitled
to share in the policy cash value at retirement.
The reports of the Compensation Committee and the Audit Committee and the
stock performance graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act or the Exchange Act, except as to the extent
that the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
Compensation Committee Report on Executive Compensation
Compensation Committee Report on Executive Compensation. Under the rules
established by the Securities and Exchange Commission, the Company is required
to provide certain data and information about the compensation and benefits
provided to the Company's Chief Executive Officer and the other executive
officers of the Company. The disclosure requirements for the Chief Executive
Officer and the other executive officers include the use of tables and a report
explaining the rationale and considerations that led to fundamental compensation
decisions affecting those individuals. In fulfillment of this requirement, the
Company's Compensation Committee, at the direction of the Board of Directors,
has prepared the following report for inclusion in this proxy statement.
Compensation Practices and Policies. The Company does not pay direct cash
compensation to the executive officers of the Company. However, the Company's
executives are also executives of the
11
Bank and are compensated by the Bank, as determined by the Compensation
Committee of the Bank. The members of the Compensation Committee are four
non-employee members of the Board of Directors.
The Company's executive compensation practices are intended to attract and
retain qualified executives, to recognize and reward individual contributions
and achievement and to offer a compensation package that is competitive in the
financial industry and motivational to each individual executive. In furtherance
of these objectives, the Company and the Bank maintain a compensation program
for executive officers which consists of a base salary and a bonus. The salary
levels are intended to be consistent and competitive with the practices of other
comparable financial institutions and each executive's level of responsibility.
In making its determination, the Compensation Committee utilized surveys of
compensation paid to executive officers performing similar duties for depository
institutions and their holding companies with particular focus on the level of
compensation paid by institutions of comparable size and characteristics
primarily in the New England Region of the United States. Salary increases are
aimed at reflecting the overall performance of the Company and the Bank and the
performance of the individual executive officer.
All executive officers participate in the Bank's Incentive Compensation
Plan (Bonus Plan). Factors included in determining a bonus include the Bank's
financial performance as well as the individual performance of those
participants. In addition, the named executive officers participate in other
benefit plans available to all employees including the 401(k) Plan and the
employee stock ownership plan. In addition, executive officers participate in
supplemental benefit plans as well as the Stock-Based Incentive Plan.
The decisions made by the Compensation Committee as to executive
compensation are discretionary. However, a written performance review is
prepared and includes an assessment of performance against certain individual
and Bank goals established at the beginning of the year which are adjusted as
necessary. All decisions by the Compensation Committee relating to compensation
affecting executive officers of the Bank are reviewed by the full Board of
Directors.
Chief Executive Compensation. The Chief Executive Officer's salary and
bonus are determined by the Compensation Committee substantially in accordance
with the policies described above relating to all executive officers of the
Company and the Bank. Certain quantitative and qualitative factors were reviewed
to determine the Chief Executive Officer's compensation. In addition to the
review of the Chief Executive's performance, the Compensation Committee
established the total compensation for the Chief Executive Officer after
reviewing an analysis of the Chief Executive Officer's base salary in comparison
to other institutions selected by the Compensation Committee with specific
considerations given to the level of the Bank's performance and operations in
comparison to peer institutions which consisted primarily of similarly
structured financial institutions operating in the New England Region of the
United States.
Lawrence A. Bossidy Corydon L. Thurston
Catherine B. Miller Ann H. Trabulsi
Audit Committee Report
The Audit Committee of the Company's Board of Directors is composed of
three non-employee directors and operates under a written charter adopted by the
Board of Directors, a copy of which is
12
attached hereto as Appendix A. The Board of Directors has determined that each
Audit Committee member is independent in accordance with the listing standards
of the American Stock Exchange.
The Company's management is responsible for the Company's internal
controls and financial reporting process. The independent auditors are
responsible for performing an independent audit of the Company's consolidated
financial statements and issuing an opinion on the conformity of those financial
statements with generally accepted accounting principles. The Audit Committee
oversees the Company's internal controls and financial reporting process on
behalf of the Board of Directors.
In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and the independent auditors. The Audit Committee discussed with the
independent auditors matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication With Audit Committees), including the quality,
not just the acceptability, of the accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the financial
statements.
In addition, the Audit Committee has received the written disclosures and
the letter from the independent auditors required by the Independence Standards
Board Standard No. 1 (Independence Discussions With Audit Committees) and has
discussed with the independent auditors the auditors' independence from the
Company and its management. In concluding that the auditors are independent, the
Audit Committee considered, among other factors, whether the non-audit services
provided by the auditors were compatible with its independence.
The Audit Committee discussed with the Company's independent auditors the
overall scope and plans for their audit. The Audit Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examination, their evaluation of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In performing all of these functions, the Audit Committee acts only in an
oversight capacity. In its oversight role, the Audit Committee relies on the
work and assurances of the Company's management, which has the primary
responsibility for financial statements and reports, and of the independent
auditors who, in their report, express an opinion on the conformity of the
Company's financial statements to generally accepted accounting principles. The
Audit Committee's oversight does not provide it with an independent basis to
determine that management has maintained appropriate accounting and financial
reporting principles or policies, or appropriate internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions with management and the independent auditors do
not assure that the Company's financial statements are presented in accordance
with generally accepted accounting principles, that the audit of the Company's
financial statements has been carried out in accordance with generally accepted
auditing standards or that the Company's independent auditors are in fact
"independent."
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the board has approved,
that the audited consolidated financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2002 for filing with
the Securities and Exchange Commission. The Audit Committee and the Board of
Directors also have approved, subject to stockholder ratification, the selection
of the Company's independent auditors.
Thomas R. Dawson, Chairman
A. Allen Gray
Peter J. Lafayette
13
Stock Performance Graph
The following graph compares the cumulative total stockholder return
on the Company common stock with the cumulative total return on the American
Stock Exchange Major Market Index and the SNL $1 Billion - $5 Billion Thrift
Index. The graph assumes that $100 was invested at the close of business on June
28, 2000, the initial day of trading of the Company's common stock. Total return
assumes the reinvestment of all dividends.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Period Ended
-------------------------------------------------------
6/28/00 12/31/00 12/31/01 12/31/02
----------- ----------- ---------- -----------
Berkshire Hills Bancorp, Inc.......................... $100.00 $128.78 $169.52 $201.25
The American Stock Exchange Major Market Index........ 100.00 95.91 91.35 80.36
The SNL $1 Billion - $5 Billion Thrift Index.......... 100.00 130.78 186.45 238.76
14
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% of
any registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
These individuals are required by regulation to furnish the Company with copies
of all Section 16(a) reports they file.
Based solely on its review of the copies of the reports it has received
and written representations provided to the Company from the individuals
required to file the reports, the Company believes that each of its executive
officers and directors has complied with applicable reporting requirements for
transactions in Company common stock during the fiscal year ended December 31,
2002.
Transactions with Management
Federal regulations generally require that all loans or extensions of
credit to executive officers and directors must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with the general public and must not involve
more than the normal risk of repayment or present other unfavorable features.
Loans made to a director or executive officer in excess of the greater of
$25,000 or 5% of the Bank's capital and surplus (up to a maximum of $500,000)
must be approved in advance by a majority of the disinterested members of the
Board of Directors.
All loans made to the Company's and Bank's officers and directors are made
on the same terms and conditions offered to the general public. Berkshire Bank's
policy provides that all loans made by Berkshire Bank to its executive officers
and directors be made in the ordinary course of business, on substantially the
same terms, including collateral, as those prevailing at the time for comparable
transactions with other persons and may not involve more than the normal risk of
collectibility or present other unfavorable features.
The Company intends that all transactions in the future between the
Company and its executive officers, directors, holders of 10% or more of the
shares of any class of its common stock and affiliates thereof, will contain
terms no less favorable to the Company than could have been obtained by it in
arms length negotiations with unaffiliated persons and will be approved by a
majority of independent outside directors of the Company not having any interest
in the transaction.
Proposal 2 -- Approval of Berkshire Hills Bancorp, Inc. 2003
Equity Compensation Plan
The Board of Directors of the Company adopted the Berkshire Hills Bancorp,
Inc. 2003 Equity Compensation Plan (the "2003 Plan"), subject to approval by the
Company's stockholders. A copy of the 2003 Plan is attached hereto as Appendix
B. The 2003 Plan will supplement the Company's 2001 Stock- Based Incentive Plan
(the "2001 Plan"), which provided for the issuance of 767,376 stock options and
306,950 shares of restricted stock. As of December 31, 2002, 159,611 shares of
Company common stock remained available for stock option grants and 100,681
shares remained available for restricted stock award grants under the 2001 Plan.
15
The ability to provide stock-based benefits in the future both to attract
people of experience and ability and to retain existing key employees and
directors is critical to sustain the Company's continued growth and success. The
granting of stock-based benefits advances the interests of the Company and its
stockholders by providing certain key employees and directors upon whose
judgment, initiative and efforts the successful conduct of the business of the
Company largely depends with additional incentive in the form of a proprietary
interest in the Company to perform in a superior manner. Furthermore, the
Company's Board of Directors believes that stock-based benefits are an important
component of the Company's overall compensation strategy. To continue to be able
to retain key employees and directors, the Company must have the ability to
offer market competitive, long-term compensation opportunities. Additionally,
stock options, because of their upside potential, are a key component in
retaining employees. For these reasons, the Company wishes to continue its
program of providing stock-based benefits.
Summary of the Plan
Type of Awards and Participants. The 2003 Plan provides for the grant of
non-statutory stock options and restricted stock awards to employees and
non-employee directors of the Company and its affiliates and for the grant of
incentive stock options to employees.
Number of Shares of Common Stock Available. A total of 300,000 shares of
common stock are reserved for issuance under the 2003 Plan. The Company may use
shares reserved under the 2003 Plan for grants of restricted stock and/or grants
of incentive or non-statutory stock options. These shares may come from either
authorized but unissued shares or shares held in treasury.
Administration. The 2003 Plan will be administered by a committee of the
Board of Directors of the Company. The committee has the power to decide: (1)
who will be granted restricted stock awards or stock options; (2) the number of
shares underlying each stock option and the number of shares of restricted
stock; (3) the date or dates when each award will vest in whole or in part and
the terms and conditions of vesting; and (4) any other terms and conditions, so
long as those other terms and conditions are not inconsistent with the 2003
Plan. The committee's determinations and interpretations of the 2003 Plan and
the stock options and restricted stock awards granted under the 2003 Plan are
final and binding upon all 2003 Plan participants.
Stock Options. All stock options granted under the 2003 Plan will be
granted with an exercise price at least equal to 100% of the fair market value
of the Company's common stock on the date of grant. No stock option will have a
term of longer than ten years from the date of grant. The 2003 Plan does not
permit the repricing of previously granted stock options or the cancellation and
regrant of stock options without stockholder approval. Currently, under
accounting principles generally accepted in the United States of America,
compensation expense is not recognized with respect to the grant of stock
options to officers and employees of the Company and its subsidiaries.
Restricted Stock Awards. Recipients of restricted stock awards are
entitled to receive cash and stock dividends or other distributions (if any) on
shares of Company common stock subject to their restricted stock. In addition,
restricted stock award recipients may direct the voting of shares of restricted
stock awarded to them.
Effect of Termination of Employment or Service. If a participant
terminates employment or service, he or she may exercise his or her options for
the period of time specified in the optionee's award
16
agreement. Additionally, upon such an event, any unvested shares of restricted
stock will be treated as specified in the restricted stock award recipient's
award agreement.
Effect of a Change in Control. If a change in control (as defined in the
2003 Plan) occurs, each outstanding stock option and restricted stock award will
become fully vested. The stock options will remain exercisable for their full
term.
Transferability. The 2003 Plan generally does not allow for the transfer
of stock options, except if specified in a written will of an optionee or by the
laws of descent and distribution. However, under limited circumstances,
non-statutory stock options may be transferred for valid estate planning
purposes, if approved by the committee. Restricted stock awards are transferable
only by will or the laws of descent and distribution.
Term of the 2003 Plan. The 2003 Plan will be effective upon shareholder
approval and expire on the tenth anniversary of the effective date, unless
terminated sooner by the Board.
Amendment of the 2003 Plan. The 2003 Plan allows the Board to amend the
2003 Plan in certain respects without stockholder approval, unless such approval
is required to comply with a tax law, regulatory requirement or specific
provision of the 2003 Plan.
Certain Federal Income Tax Consequences. The following brief description
of the material tax consequences of stock options and restricted stock awards
granted under the 2003 Plan is based on federal income tax laws currently in
effect and does not purport to be a complete description of such federal income
tax consequences.
The grant of a non-statutory stock option is not a taxable event. However,
upon the exercise of a non-statutory stock option, an optionee will recognize
ordinary income equal to the difference between the option exercise price and
the fair market value of the Company common stock on the date of exercise,
multiplied by the number of shares purchased upon the exercise of the option.
The Company will receive a tax deduction equal to the ordinary income recognized
by the optionee. Employees exercising non- statutory stock options are subject
to federal, state and local (if any) tax withholding on the option income.
Non-employee directors are not subject to tax withholding.
The grant of an incentive stock option is not a taxable event, nor is the
exercise of an incentive stock option, if an optionee does not dispose of the
common stock acquired upon exercise for a period of two years from the date of
grant or one year following the date of exercise. If the optionee disposes of
the shares prior to the expiration of the required holding periods, the optionee
will have a disqualifying disposition and will recognize ordinary income equal
to the difference between the option exercise price and the lesser of the price
realized upon disposition or the fair market value of the Company common stock
on the date of exercise, multiplied by the number of shares purchased upon the
exercise of the option. In such a case, the Company will receive a tax deduction
equal to the ordinary income recognized by the optionee. Currently, the Internal
Revenue Service does not require tax withholding on the exercise of incentive
stock options or upon disqualifying dispositions.
Taxable income will not be recognized by an individual upon the granting
of restricted stock, unless he or she makes an election under Section 83(b) of
the Internal Revenue Code. At the time any transfer or forfeiture restrictions
applicable to the restricted stock award lapse, the recipient will recognize
ordinary income and the Company will be entitled to a corresponding deduction
equal to the fair market
17
value of the stock at such time. A restricted stock award recipient who makes an
election under Section 83(b) of the Internal Revenue Code will recognize
ordinary income at the time of the award and the Company will be entitled to a
corresponding deduction equal to the fair market value of the stock at such
time. If the recipient makes a Section 83(b) election, there are no federal
income tax consequences either to the recipient or the Company at the time of
any applicable transfer or lapse of restrictions.
New Plan Benefits
The Company anticipates that awards will primarily be made to employees
and non-employee directors after the effective date of the 2003 Plan, as deemed
appropriate. As of the date of this proxy statement, no specific determinations
have been made regarding any future grants under the plan at this time.
Equity Compensation Plan Information
The following table sets forth information, as of December 31, 2002, about
Company common stock that may be issued upon exercise of options under the 2001
Plan. The 2001 Plan was approved by the Company's stockholders.
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation plans
exercise of exercise price of (excluding securities
outstanding options, outstanding options, reflected in the first
Plan category warrants and rights warrants and rights column)
---------------------------------- -------------------- -------------------- -------------------------
Equity compensation
plans approved by
security holders.................. 600,848 $16.75 159,611
Equity compensation
plans not approved by
security holders.................. -- -- --
------- ------ -------
Total............................. 600,848 $16.75 159,611
======= ====== =======
The Board of Directors recommends that you vote "FOR" the approval of the
Berkshire Hills Bancorp, Inc. 2003 Equity Compensation Plan.
Proposal 3 -- Ratification of Independent Auditors
The Board of Directors has appointed Wolf & Company, P.C. to be its
auditors for the 2003 fiscal year, subject to ratification by stockholders. A
representative of Wolf & Company P.C. is expected to be present at the annual
meeting to respond to appropriate questions from stockholders and will have the
opportunity to make a statement should he or she desire to do so.
If the ratification of the appointment of the auditors is not approved by
a majority of the votes cast by stockholders at the annual meeting, other
independent public accountants may be considered by the
18
Board of Directors. The Board of Directors recommends that stockholders vote
"FOR" the ratification of the appointment of auditors.
The following table sets forth the fees billed to the Company for the
fiscal year ending December 31, 2002 by Wolf & Company, P.C.:
Audit fees ................................. $200,000
Financial information systems design
and implementation fees .................. --
All other fees* ............................ 66,900
-------------------
* Includes fees for tax-related services and compliance training.
The Audit Committee has considered whether the provision of non-audit
services by Wolf & Company, P.C. is compatible with maintaining Wolf & Company,
P.C.'s independence.
Miscellaneous
The Company will pay the cost of this proxy solicitation. In addition to
the solicitation of proxies by mail, Regan & Associates, Inc., a proxy
solicitation firm, will assist the Company in soliciting proxies for the annual
meeting. The Company will pay a fee of $6,000, including expenses, for these
services. The Company will reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them in sending
proxy materials to the beneficial owners of the Company. Additionally,
directors, officers and other employees of the Company may solicit proxies
personally or by telephone. None of these persons will receive additional
compensation for these activities.
The Company's Annual Report to Stockholders has been mailed to all persons
who were stockholders as of the close of business on March 13, 2003. Any
stockholder who has not received a copy of the Annual Report may obtain a copy
by writing to the Secretary of the Company. The Annual Report is not to be
treated as part of the proxy solicitation material or as having been
incorporated by reference into this proxy statement.
A copy of the Company's Form 10-K (without exhibits) for the fiscal year
ended December 31, 2002, as filed with the Securities and Exchange Commission
will be furnished without charge to all persons who were stockholders as of the
close of business on March 13, 2003 upon written request to Gerald A. Denmark,
Corporate Secretary, Berkshire Hills Bancorp, Inc., 24 North Street, Pittsfield,
Massachusetts 01201.
Stockholder Proposals
To be considered for inclusion in the Company's proxy statement and form
of proxy relating to the 2004 annual meeting of stockholders, a stockholder
proposal must be received by the Secretary of the Company at the address set
forth on the Notice of Annual Meeting of Stockholders not later than November
27, 2003. If such Annual Meeting is held on a date more than 30 calendar days
from May 1, 2004, a stockholder proposal must be received by a reasonable time
before the Company begins to print and mail its proxy solicitation materials.
Any such proposal will be subject to the requirements of the proxy rules adopted
by the Securities and Exchange Commission.
19
The Bylaws of the Company, a copy of which may be obtained from the
Company, set forth the procedures by which a stockholder may properly bring
business before a meeting of stockholders. Pursuant to the Bylaws, only business
brought by or at the direction of the Board of Directors may be conducted at a
special meeting. The Bylaws of the Company provide an advance notice procedure
for a stockholder to properly bring business before an annual meeting. The
stockholder must give written notice to the Secretary of the Company not less
than ninety (90) days before the date originally fixed for such meeting;
provided, however, that in the event that less than one hundred (100) days
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the date on which the
Company's notice to stockholders of the annual meeting date was mailed or such
public disclosure was made.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Gerald A. Denmark
-----------------------------------
Gerald A. Denmark
Corporate Secretary
Pittsfield, Massachusetts
March 27, 2003
20
Appendix A
BERKSHIRE HILLS BANCORP, INC.
AUDIT COMMITTEE CHARTER
Role
The primary role of the Audit Committee is to provide assistance to the
Board of Directors (the "Board") in fulfilling its oversight responsibilities
relating to (1) corporate accounting and reporting practices of Berkshire Hills
Bancorp, Inc. and its subsidiaries (collectively, the "Company"), (2) the
quality and integrity of financial reports of the Company, (3) compliance by the
Company with legal and regulatory requirements related to accounting and
financial reporting, and (4) the independence and performance of the Company's
auditors.
In doing so, the Audit Committee shall maintain free and open
communication with the Board, the independent auditors, and management of the
Company. The Audit Committee shall be directly responsible for the appointment,
compensation and oversight of the work of the Company's independent auditors, as
well as the resolution of disagreements between management and the independent
auditors regarding financial reporting. The Audit Committee shall have the
authority to retain and determine funding for special legal, accounting or other
consultants to advise the Audit Committee or assist in any investigations it may
perform. The Audit Committee may request any officer or employee of the Company,
the Company's outside counsel, auditors, investment bankers or financial
analysts to meet with the Audit Committee.
Organization
The Audit Committee of the Board shall consist of at least three members
of the Board. Each member of the Audit Committee shall satisfy the independence,
experience and financial expertise requirements of American Stock Exchange and
Section 10A of the Securities and Exchange Act of 1934 (the "Exchange Act"), as
amended by the Sarbanes-Oxley Act of 2002, and the rules promulgated thereunder.
In particular, no member of the Audit Committee may be an "affiliated person" of
the Company as that term is defined by the Exchange Act. Director's fees are the
only compensation that an Audit Committee member may receive from the Company.
The membership of the Audit Committee shall consist of directors who are
generally knowledgeable in financial and auditing matters and are able to read
and understand financial statements at the time of their appointment. In
addition, the Board shall endeavor to include at least one financial expert (as
that term is defined by the Securities and Exchange Commission) among the Audit
Committee members. If the Audit Committee does not have a financial expert, the
Company shall disclose in appropriate Exchange Act reports why the Audit
Committee does not have a financial expert. The members of the Audit Committee
shall be appointed by, and serve at the discretion of, the Board.
Authority and Responsibility
The Audit Committee shall have the following authority and
responsibilities:
1. At least annually and as necessary, review and assess the adequacy of
this charter and recommend any proposed changes to the Board for approval.
2. The sole authority to appoint or replace the Company's independent
auditors (subject, if applicable, to stockholder ratification); and shall
approve all audit engagement fees and terms as well as all non-audit engagements
with the Company's independent auditors.
3. Inform the independent auditors that they shall report directly to the
Audit Committee.
4. Periodically meet with management, the internal auditors and the
independent auditors in separate executive sessions.
5. Make regular reports to the Board.
6. Report the results of the annual audit to the Board and submit the
minutes of all Audit Committee meetings to the Board.
7. Prepare a report of the Audit Committee each year for inclusion in the
proxy statement for the Company's annual meeting of stockholders in accordance
with the requirements of the Securities and Exchange Commission, and review and
approve all other disclosures regarding the Audit Committee and the performance
of its duties to be included in such proxy statement or in any other document or
report to be filed with the Securities and Exchange Commission.
8. Review with the independent auditors and management the following:
a) The annual audit scope and audit testing plan.
b) The Company's annual and quarterly financial statements and
independent auditors' report, prior to public distribution thereof,
to determine that the independent auditors are satisfied with the
disclosure and content of the financial statements and discuss any
other matters required to be communicated to the Audit Committee by
the independent auditors.
c) The financial statements contained in the annual report to
stockholders to determine that the independent auditors are
satisfied with the disclosure and content of the financial
statements.
d) The results of the independent auditors' analysis of significant
financial reporting issues and practices, including changes in, or
adoptions of, accounting principles and disclosure practices.
e) The independent auditors' judgment about the quality, not just the
acceptability, of accounting principles and the clarity of the
financial disclosure practices used or proposed to be used, and
particularly, the degree of aggressiveness or conservatism of the
Company's accounting principles and underlying estimates, and other
significant decisions made in preparing the financial statements.
f) The independent auditors' significant findings and recommendations
resulting from the audit, as well as management's responses to such
findings and recommendations.
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g) Matters related to the conduct of the audit that are required to be
communicated to the Audit Committee under generally accepted
auditing standards.
h) Accounting considerations arising from changes in GAAP or the
Company's operations.
i) The performance and qualifications of the Company's financial
personnel.
j) The adequacy of the Company's accounting and auditing practices as
well as the system of internal controls, policies and procedures.
k) Recommendations for improvement of internal controls or areas where
new controls and procedures are desirable. Particular emphasis shall
be given to the adequacy of controls to expose related party
transactions and any payments, transactions or procedures that might
be deemed illegal or improper.
l) Any material disagreements that may arise between the company's
management and its independent auditors.
9. Review reports received from regulators concerning legal or regulatory
matters that might have material effects on the financial statements or
compliance policies of the Company.
10. Inquire about significant financial or legal risks or exposures and
assess the steps management has taken to minimize such risks to the Company.
11. Provide opportunity for the independent auditors to meet with members
of the Audit Committee without members of management present. Among the items to
be discussed in these meetings are the independent auditors' evaluation of the
Company's financial, accounting auditing personnel including an evaluation of
the level of cooperation that the independent auditors received during the
course of any audits.
12. Conduct or authorize investigations into any matters within the Audit
Committee's scope of responsibility including any matter brought to its
attention by a third party.
13. Annually review the experience and qualifications of senior members of
the independent auditor team and the independent auditors' internal
quality-control procedures.
14. Ensure that the lead audit partner of the independent auditors and the
audit partner responsible for reviewing the audit are rotated every five years
as required by the Sarbanes-Oxley Act of 2002.
15. Take appropriate action to oversee the independence of the independent
auditors and the Company's hiring of employees or former employees of the
independent auditors who were engaged on the Company's account (recognizing that
the Sarbanes-Oxley Act of 2002 does not permit the CEO, controller, CFO or chief
accounting officer to have participated in the Company's audit as an employee of
the independent auditors during the preceding one-year period).
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16. Establish procedures for (a) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters and (b) the confidential, anonymous submission by
employees of the Company of concerns regarding questionable accounting or
auditing matters.
17. Review disclosures made by the Company's principal executive officer
or officers and principal financial officer of officers regarding compliance
with their certification obligations as required under the Sarbanes-Oxley Act of
2002, including the Company's internal controls for financial reporting and
evaluation thereof.
18. Review any reports of the independent auditors mandated by Section 10A
of the Exchange Act, and reports concerning (i) all critical accounting policies
and practices used; (ii) all alternative treatments of financial information
within GAAP that have been discussed with management, the ramifications of such
alternatives, and the accounting treatment preferred by the independent
auditors; (iii) any other material written communications with management; and
(iv) any information with respect to illegal acts in accordance with Section 10A
of the Exchange Act.
19. Review and approve all "related party transactions" as that term is
defined in SEC Regulation S-K, Item 404(a).
20. Review and approve, in advance, the retention of permissible non-audit
services from the Company's independent auditors.
21. Obtain on an annual basis from the independent auditors a formal
written statement delineating all relationships between the independent auditors
and the Company, consistent with Independence Standards Board Standard 1. The
Audit Committee shall engage in an open dialogue with the independent auditors
concerning the nature and the scope of any disclosed relationships or
professional services that may impact the objectivity and independence of the
independent auditors and, where necessary, take appropriate action to ensure the
continuing independence of the independent auditors.
22. Confirm with management and the independent auditors that the auditors
are not providing any impermissible services.
23. Review any code of ethics adopted by the Company.
24. Perform such other duties as the Board may delegate to it, or as the
Audit Committee may deem necessary or advisable in order to perform its role.
While the Audit Committee has the responsibilities and powers set forth in
this charter, it is not the duty of the Audit Committee to prepare financial
statements, plan or conduct audits or to determine that the Company's financial
statements and disclosures are complete, accurate and in accordance with
generally accepted accounting principles and applicable rules and regulations.
These are the responsibilities of management and independent auditors.
The Committee shall report its recommendations to the Board after each
committee meeting and shall review at least annually the adequacy of this
charter and recommend any proposed changes to the Board for approval.
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Appendix B
BERKSHIRE HILLS BANCORP, INC.
2003 EQUITY COMPENSATION PLAN
1. DEFINITIONS.
(a) "Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Company, as such terms are defined in Sections 424(e) and 424(f) of
the Code.
(b) "Award" means, individually or collectively, a grant under the Plan of
Non-Statutory Stock Options, Incentive Stock Options and Restricted Stock
Awards.
(c) "Bank" means Berkshire Bank, a Massachusetts-chartered savings bank.
(d) "Board of Directors" means the board of directors of the Company.
(e) "Change in Control" means with respect to the Bank or the Company, an
event of a nature that (i) would be required to be reported in response to
Item 1(a) of the current report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"); or (ii) results in a Change in Control of the
Company or the Bank within the meaning of the Home Owner's Loan Act of
1933, as amended, the Federal Deposit Insurance Act and the Rules and
Regulations promulgated by the Office of Thrift Supervision ("OTS") (or
its predecessor agency), as in effect on the date hereof (provided, that
in applying the definition of change in control as set forth under the
rules and regulations of the OTS, the Board shall substitute its judgment
for that of the OTS); or (iii) without limitation such a Change in Control
shall be deemed to have occurred at such time as (A) any "person" (as the
term is used in Sections 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of voting securities of the Bank or
the Company representing 20% or more of the Bank's or the Company's
outstanding voting securities or right to acquire such securities except
for any voting securities of the Bank purchased by the Company and any
voting securities purchased by any employee benefit plan of the Company or
its Subsidiaries, or (B) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election was approved by a vote of at
least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved
by a Nominating Committee solely composed of members who are Incumbent
Board members, shall be, for purposes of this clause (B), considered as
though he were a member of the Incumbent Board, or (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all
the assets of the Bank or the Company or similar transaction occurs or is
effectuated in which the Bank or Company is not the resulting entity, or
(D) a proxy statement has been distributed soliciting proxies from
stockholders of the Company, by someone other than the current management
of the Company, seeking stockholder approval of a plan of reorganization,
merger or consolidation of the Company or Bank with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to such plan or transaction are exchanged for or
converted into cash or property or securities not issued by the Bank or
the Company shall be distributed, or
(E) a tender offer is made for 20% or more of the voting securities of the
Bank or Company then outstanding.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the committee designated, pursuant to Section 3 of the
Plan, to administer the Plan.
(h) "Common Stock" means the common stock of the Company, par value $.01 per
share.
(i) "Company" means Berkshire Hills Bancorp, Inc. and any entity which
succeeds to the business of Berkshire Hills Bancorp, Inc.
(j) "Disability" means any mental or physical condition with respect to which
the Participant qualifies for and receives benefits under a long-term
disability plan of the Company or an Affiliate, or in the absence of such
a long-term disability plan or coverage under such a plan, "Disability"
shall mean a physical or mental condition which, in the sole discretion of
the Committee, is reasonably expected to be of indefinite duration and to
substantially prevent the Participant from fulfilling his duties or
responsibilities to the Company or an Affiliate.
(k) "Employee" means any person employed by the Company or an Affiliate.
Directors who are also employed by the Company or an Affiliate shall be
considered Employees under the Plan.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Exercise Price" means the price at which an individual may purchase a
share of Common Stock pursuant to an Option.
(n) "Fair Market Value" means the market price of Common Stock, determined by
the Committee as follows:
(i) If the Common Stock was traded on the date in question on the Nasdaq
Stock Market, then the Fair Market Value shall be equal to the
closing price reported for such date;
(ii) If the Common Stock was traded on a stock exchange for the date in
question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite transactions report for
such date; and
(iii) If neither of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on
such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in The Wall Street
Journal. The Committee's determination of Fair Market Value shall be
conclusive and binding on all persons.
(o) "Incentive Stock Option" means a stock option granted under the Plan, that
is intended to meet the requirements of Section 422 of the Code.
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(p) "Non-Statutory Stock Option" means a stock option granted to an individual
pursuant under the Plan that is not intended to be and is not identified
as an Incentive Stock Option, or a stock option granted under the Plan
that is intended to be and is identified as an Incentive Stock Option, but
that does not meet the requirements of Section 422 of the Code.
(q) "Option" means an Incentive Stock Option or a Non-Statutory Stock Option.
(r) "Outside Director" means a member of the board(s) of directors of the
Company or an Affiliate who is not also an Employee of the Company or an
Affiliate.
(s) "Participant" means any person who holds an outstanding Award.
(t) "Plan" means this Berkshire Hills Bancorp, Inc. 2003 Equity Compensation
Plan.
(u) "Restricted Stock Award" means an award of restricted stock granted to an
individual pursuant to Section 6 of the Plan.
(v) "Retirement" means retirement from employment with the Company or an
Affiliate in accordance with the then current retirement policies of the
Company or Affiliate, as applicable. "Retirement" with respect to an
Outside Director means the termination of service from the board(s) of
directors of the Company and any Affiliate following written notice to
such board(s) of directors of the Outside Director's intention to retire.
(w) "Termination for Cause" means termination because of a Participant's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or material breach of any
provision of any employment agreement between the Company and/or any
subsidiary of the Company and a Participant.
(x) "Trust" means a trust established by the Board of Directors in connection
with this Plan to hold Common Stock or other property for the purposes set
forth in the Plan.
(y) "Trustee" means any person or entity approved by the Board of Directors or
its designee(s) to hold any of the Trust assets.
2. PURPOSE AND ELIGIBILITY.
This Plan is intended to provide the Company and its Affiliates a means to
continue using Common Stock as a form of compensation for Employees and Outside
Directors. Pursuant to the terms of the Plan, the Committee may grant Options
and Restricted Stock Awards to Employees and Outside Directors to provide
additional incentive to continue to work for the success of the Company and its
Affiliates. The Committee may also grant eligibility to participate in the Plan
to consultants and advisors of the Company or an Affiliate.
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3. ADMINISTRATION.
(a) The Committee shall administer the Plan. The Committee shall consist of
two or more disinterested directors of the Company, who shall be appointed
by the Board of Directors. A member of the Board of Directors shall be
deemed to be "disinterested" only if he or she satisfies: (i) such
requirements as the Securities and Exchange Commission may establish for
non-employee directors administering plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act and
(ii) such requirements as the Internal Revenue Service may establish for
outside directors acting under plans intended to qualify for exemption
under Section 162(m)(4)(C) of the Code. The Board of Directors may also
appoint one or more separate committees of the Board of Directors, each
composed of one or more directors of the Company or an Affiliate who need
not be disinterested, that may grant Awards and administer the Plan with
respect to Employees, Outside Directors, and other individuals who are not
considered officers or directors of the Company under Section 16 of the
Exchange Act or for whom Awards are not intended to satisfy the provisions
of Section 162(m) of the Code.
(b) The Committee shall:
(i) select the individuals who are to receive Awards under the Plan;
(ii) determine the type, number, vesting requirements and other features
and conditions of such Awards made under the Plan;
(iii) interpret the Plan and Award Agreements (as defined below); and
(iv) make all other decisions related to the operation of the Plan.
(c) Each Award granted under the Plan shall be evidenced by a written
agreement ("Award Agreement"). Each Award Agreement shall constitute a
binding contract between the Company or an Affiliate and the Award holder,
and every Award holder, upon acceptance of an Award Agreement, shall be
bound by the terms and restrictions of the Plan and the Award Agreement.
The terms of each Award Agreement shall be set in accordance with the
Plan, but each Award Agreement may also include any additional provisions
and restrictions determined by the Committee. In particular, and at a
minimum, the Committee shall set forth in each Award Agreement:
(i) the type of Award granted;
(ii) the Exercise Price of any Option;
(iii) the number of shares subject to the Award;
(iv) the expiration date of the Award;
(v) the manner, time and rate (cumulative or otherwise) of exercise or
vesting of the Award; and
(vi) the restrictions, if any, placed on the Award, or upon shares which
may be issued upon the exercise or vesting of the Award.
The Chairman of the Committee and such other directors and Employees as
shall be designated by the Committee are hereby authorized to execute
Award Agreements on behalf of the Company or an Affiliate and to cause
them to be delivered to the recipients of Awards granted under the Plan.
(d) The Committee may delegate all authority for the determination of forms of
payment to be made or received by the Plan and for the execution of any
Award Agreement. The Committee may rely on the descriptions,
representations, reports and estimates provided to it by the management of
the Company or an Affiliate for determinations to be made pursuant to the
Plan.
B-4
4. STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 11 of the Plan, the number of
shares reserved for awards under the Plan is 300,000, including for purchase
pursuant to the exercise of Options (Incentive Stock Options and Non-Statutory
Stock Options) and grants of Restricted Stock Awards. The shares of Common Stock
issued under the Plan may be either authorized but unissued shares or authorized
shares previously issued and acquired or reacquired by the Company. Shares
underlying outstanding Awards will be unavailable for any other use, including
future grants under the Plan, except that, to the extent the awards terminate,
expire or are forfeited without vesting or having been exercised, new awards may
be granted with respect to these shares subject to the limitations set forth in
this Section 4.
5. OPTIONS.
The Committee may, subject to the limitations of this Plan and the availability
of shares of Common Stock reserved but not previously awarded under the Plan,
grant Options, subject to terms and conditions as it may determine, to the
extent that such terms and conditions are consistent with the following
provisions:
(a) Exercise Price. The Exercise Price shall not be less than one hundred
percent (100%) of the Fair Market Value of the Common Stock on the date of
grant.
(b) Terms of Options. In no event may an individual exercise an Option, in
whole or in part, more than ten (10) years from the date of grant.
(c) Non-Transferability. Unless otherwise determined by the Committee in
accordance with this Section 5(c), an individual may not transfer, assign,
hypothecate, or dispose of an Option in any manner, other than by will or
the laws of intestate succession. The Committee may, however, in its sole
discretion, permit transfer or assignment of a Non-Statutory Stock Option,
if it determines that the transfer or assignment is for valid estate
planning purposes and is permitted under the Code and Rule 16b-3 of the
Exchange Act. For purposes of this Section 5(c), a transfer for valid
estate planning purposes includes, but is not limited to, transfers:
(i) to a revocable inter vivos trust, as to which an individual is both
settlor and trustee;
(ii) for no consideration to: (1) any member of the individual's
Immediate Family; (2) a trust solely for the benefit of members of
the individual's Immediate Family; (3) any partnership whose only
partners are members of the individual's Immediate Family; or (4)
any limited liability corporation or other corporate entity whose
only members or equity owners are members of the individual's
Immediate Family; or
(iii) to the Greater Berkshire Foundation, Inc. or the Berkshire Hills
Foundation.
For purposes of this Section 5(c), "Immediate Family" includes, but is not
necessarily limited to, a Participant's parents, grandparents, spouse,
children, grandchildren, siblings (including half brothers and sisters),
and individuals who are family members by adoption. Nothing contained in
this Section 5(c) shall be construed to require the Committee to give its
approval to any transfer or assignment of any Non-Statutory Stock Option
or portion thereof, and approval to transfer or assign any Non-Statutory
Stock Option or portion thereof does not mean that such approval will
B-5
be given with respect to any other Non-Statutory Stock Option or portion
thereof. The transferee or assignee of any Non-Statutory Stock Option
shall be subject to all of the terms and conditions applicable to such
Non-Statutory Stock Option immediately prior to the transfer or assignment
and shall be subject to any other conditions prescribed by the Committee
with respect to such Non-Statutory Stock Option.
(d) Special Rules for Incentive Stock Options. Notwithstanding foregoing
provisions, the following rules apply to the grant of Incentive Stock
Options:
(i) If an Employee owns or is treated as owning, for purposes of Section
422 of the Code, Common Stock representing more than ten percent
(10%) of the total combined voting securities of the Company at the
time the Committee grants the Incentive Stock Option (a "10%
Owner"), the Exercise Price shall not be less than one hundred and
ten percent (110%) of the Fair Market Value of the Common Stock on
the date of grant.
(ii) An Incentive Stock Option granted to a 10% Owner shall not be
exercisable more than five (5) years from the date of grant.
(iii) To the extent the aggregate Fair Market Value of shares of Common
Stock with respect to which Incentive Stock Options are exercisable
for the first time by an Employee during any calendar year, under
the Plan or any other stock option plan of the Company, exceeds
$100,000, or such higher value as may be permitted under Section 422
of the Code, Options in excess of the limit shall be treated as
Non-Statutory Stock Options. Fair Market Value shall be determined
as of the date of grant for each Incentive Stock Option.
(iv) Each Award Agreement for an Incentive Stock Option shall require the
individual to notify the Committee within ten (10) days of any
disposition of shares of Common Stock under the circumstances
described in Section 421(b) of the Code (relating to certain
disqualifying dispositions).
(v) Incentive Stock Options exercised more than three (3) months
following the date an Employee terminates employment (for reasons
other than death or Disability) will be treated as Non-Statutory
Stock Options. In the event employment is terminated due to death or
Disability, Incentive Stock Options will remain exercisable for one
(1) year from the date the Employee terminates employment.
(e) Acceleration Upon a Change in Control. Upon a Change in Control, all
Options held by a Participant as of the date of the Change in Control
shall immediately become exercisable and shall remain exercisable until
the expiration of the Option term.
(f) Termination of Employment or Service. The following rules apply upon the
termination of a Participant's employment or other service:
(i) In General. Unless the Committee determines otherwise, upon
termination of employment or service for any reason other than
Retirement, Disability or death, or Termination for Cause, a
Participant may exercise only those Options that were
B-6
immediately exercisable by the Participant at the date of
termination, and only for a period of three (3) months from the date
of termination, or, if sooner, until the expiration of the Option
term.
(ii) Retirement. Unless the Committee determines otherwise, upon a
Participant's Retirement, the Participant may exercise only those
Options that were immediately exercisable by the Participant at the
date of Retirement, and only for a period of one (1) year from the
date of Retirement, or, if sooner, until the expiration of the
Option term.
(iii) Disability or Death. Unless the Committee determines otherwise, upon
termination of a Participant's employment or service due to
Disability or death, all Options shall become immediately
exercisable and shall remain exercisable for a period of one (1)
year from the date of termination, or, if sooner, until the
expiration of the Option term.
(iv) Termination for Cause. Unless the Committee determines otherwise,
upon Termination for Cause, all rights to a Participant's Options,
whether or not exercisable, shall expire immediately upon the
effective date of Termination for Cause.
6. RESTRICTED STOCK AWARDS.
The Committee may make grants of Restricted Stock Awards which shall consist of
the grant of some number of shares of Common Stock to an individual upon such
terms and conditions as it may determine to the extent such terms and conditions
are consistent with the following provisions:
(a) Grants of Stock. Restricted Stock Awards may only be granted in whole
shares of Common Stock.
(b) Non-Transferability. Except to the extent permitted by the Code, the rules
promulgated under Section 16(b) of the Exchange Act or any successor
statutes or rules:
(i) The recipient of a Restricted Stock Award grant shall not sell,
transfer, assign, pledge, or otherwise encumber shares subject to
the grant until full vesting of such shares has occurred. For
purposes of this section, the separation of beneficial ownership and
legal title through the use of any "swap" transaction is deemed to
be a prohibited encumbrance.
(ii) Unless determined otherwise by the Committee and except in the event
of the Participant's death or pursuant to a domestic relations
order, a Restricted Stock Award grant is not transferable and may be
earned in his or her lifetime only by the individual to whom it is
granted. Upon the death of a Participant, a Restricted Stock Award
grant is transferable by will or the laws of descent and
distribution. The designation of a beneficiary shall not constitute
a transfer.
(iii) If the recipient of a Restricted Stock Award is subject to the
provisions of Section 16 of the Exchange Act, shares of Common Stock
subject to the grant may not, without the written consent of the
Committee (which consent may be given in the Award
B-7
Agreement), be sold or otherwise disposed of within six (6) months
following the date of grant.
(c) Acceleration of Vesting Upon a Change in Control. Upon a Change in
Control, all Restricted Stock Awards held by a Participant as of the date
of the Change in Control shall immediately vest and any further
restrictions shall lapse.
(d) Termination of Employment or Service. The following rules will govern the
treatment of a Restricted Stock Award upon the termination of a
Participant's employment or other service:
(i) In General. Unless the Committee determines otherwise, upon the
termination of a Participant's employment or service for any reason
other than Retirement, Disability or death, or Termination for
Cause, all unvested Restricted Stock Awards held by the Participant
will be forfeited and any rights the Participant had to such
Restricted Stock Award will become null and void.
(ii) Retirement. Unless the Committee determines otherwise, upon a
Participant's Retirement, all unvested Restricted Stock Awards held
by the Participant will be forfeited as of his or her Retirement
date. All rights the Participant had to such unvested Restricted
Stock Awards will become null and void.
(iii) Disability or Death. Unless otherwise determined by the Committee,
in the event of a termination of a Participant's service due to
Disability or death, all unvested Restricted Stock Awards held by
such Participant shall immediately vest as of the date of such
termination.
(iv) Termination for Cause. Unless otherwise determined by the Committee,
in the event of a Participant's Termination for Cause, all unvested
Restricted Stock Awards held by the Participant as of the effective
date of such termination will be forfeited and any rights the
Participant had to such unvested Restricted Stock Awards will become
null and void.
(e) Issuance of Certificates. Unless otherwise held in trust and registered in
the name of the Plan trustee, reasonably promptly after the date of grant
with respect to shares of Common Stock pursuant to a Restricted Stock
Award, the Company shall cause to be issued a stock certificate,
registered in the name of the Participant to whom the Restricted Stock
Award was granted, evidencing such shares; provided, that the Company
shall not cause a stock certificate to be issued unless it has received a
stock power duly endorsed in blank with respect to such shares. Each such
stock certificate shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture provisions and restrictions against
transfer) contained in the Berkshire Hills Bancorp, Inc. 2003 Equity
Compensation Plan entered into between the registered owner of such
shares and Berkshire Hills Bancorp, Inc. or its Affiliates. A copy
of the Plan and Award Agreement is on file in the office of the
Corporate Secretary of Berkshire Hills Bancorp, Inc., 24 North
Street, Pittsfield, Massachusetts 01201."
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This legend shall not be removed until the individual becomes vested in
such shares pursuant to the terms of the Plan and Award Agreement. Each
certificate issued pursuant to this Section 6(e) shall be held by the
Company or its Affiliates, unless the Committee determines otherwise.
(f) Treatment of Dividends. Participants are entitled to all dividends and
other distributions declared and paid on Common Stock with respect to all
shares of Common Stock subject to a Restricted Stock Award, from and after
the date such shares are awarded or from and after such later date as may
be specified by the Committee in the Award Agreement, and the Participant
shall not be required to return any such dividends or other distributions
to the Company in the event of forfeiture of the Restricted Stock Award.
In the event the Committee establishes a trust for the Incentive Plan, the
Committee may elect to distribute dividends and other distributions at the
time the Restricted Stock Award vests or pay the dividends (or other
distributions) directly to the Participants.
(g) Voting of Restricted Stock Awards. Participants who are granted Restricted
Stock Awards are entitled to vote or to direct the Plan Trustee to vote,
as the case may be, all unvested shares of Common Stock subject to the
Restricted Stock Award.
7. DEFERRED PAYMENTS.
The Committee, in its discretion, may permit an individual to elect to defer the
receipt of all or any part of any cash or stock payment under the Plan, or the
Committee may determine to defer receipt by some or all individuals, of all or a
portion of any payment. The Committee shall determine the terms and conditions
of any permitted deferral, including the period of deferral, the manner of
deferral and the method used to measure appreciation on deferred amounts until
paid.
8. METHOD OF EXERCISING OPTIONS.
Subject to any applicable Award Agreement, an individual may exercise any
Option, in whole or in part, at such time or times as the Committee specifies in
the Award Agreement. The individual may make payment of the Exercise Price in
such form or forms as the Committee specifies in the Award Agreement, including,
without limitation, payment by delivery of cash, Common Stock or a cashless
exercise with a qualified broker. Any Common Stock used in full or partial
payment of the Exercise Price shall be valued at the Fair Market Value of the
Common Stock on the date of exercise. Delivery by the Company of the shares as
to which an Option has been exercised shall be made to the person exercising the
Option or the designee of such person. If so provided by the Committee upon
grant of the Option, the shares received upon exercise may be subject to certain
restrictions upon subsequent transfer or sale by the Participant. In the event
the Exercise Price is to be paid in full or in part by surrender of Common
Stock, in lieu of actual surrender of shares of Common Stock the Company may
waive such surrender and instead deliver to or on behalf of the Participant a
number of shares equal to the total number of shares as to which the Option is
then being exercised less the number of shares which would otherwise have been
surrendered by the Participant to the Company.
9. RIGHTS OF INDIVIDUALS.
No individual shall have any rights as a shareholder with respect to any shares
of Common Stock covered by a grant under this Plan until the date of issuance of
a stock certificate for such Common Stock.
B-9
Nothing contained in this Plan or in any Award Agreement confers on any person
the right to continue in the employ or service of the Company or an Affiliate or
interferes in any way with the right of the Company or an Affiliate to terminate
an individual's services.
10. DESIGNATION OF BENEFICIARY.
With the Committee's consent, an individual may designate a person or persons to
receive, upon the individual's death, any award to which the individual would
then be entitled. This designation shall be made upon forms supplied by and
delivered to the Company and it may be revoked in writing. If an individual
fails to effectively designate a beneficiary, the individual's estate shall be
deemed to be the beneficiary for purposes of the Plan.
11. DILUTION AND OTHER ADJUSTMENTS.
In the event of any change in the outstanding shares of Common Stock, by reason
of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, or any other increase or decrease in such shares, without
receipt or payment of consideration by the Company, or in the event an
extraordinary capital distribution is made, the Committee may make adjustments
to previously granted awards, to prevent dilution, diminution, or enlargement of
the rights of individuals, including any or all of the following:
(a) adjustments in the aggregate number or kind of shares of Common Stock or
other securities that may underlie future awards under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock or
other securities that underlie awards already made under the Plan; and
(c) adjustments in the Exercise Price of outstanding Options.
The Committee, however, shall not make adjustments that materially change the
value of benefits available to an individual under a previously granted award.
All Awards under this Plan shall be binding upon any successors or assigns of
the Company.
12. TAXES.
Under this Plan, whenever cash or shares of Common Stock are to be delivered,
the Committee is entitled to require as a condition of delivery that:
(a) the Participant remit an amount sufficient to satisfy all related federal,
state, and local withholding tax requirements;
(b) the withholding of such sums may come from compensation otherwise due to
the Participant or from shares of Common Stock due to the individual under
this Plan; or
(c) any combination of (i) and (ii), above; provided, however, that no amount
shall be withheld from any cash payment or shares of Common Stock related
to an Option transferred by the Participant in accordance with this Plan.
B-10
13. NOTIFICATION UNDER SECTION 83(b).
The Committee may, on the date of grant or at a later date, prohibit an
individual from making the election described below. If the Committee has not
prohibited an individual from making this election, and the individual shall, in
connection with the exercise of any award, make the election permitted under
Section 83(b) of the Code, the individual shall notify the Committee of the
election within ten (10) days of filing notice of the election with the Internal
Revenue Service. This requirement is in addition to any filing and notification
required under the regulations issued under the authority of Section 83(b) of
the Code.
14. AMENDMENT OF THE PLAN AND AWARD GRANTS.
(a) Except as provided in paragraph (c) of this Section 14, the Board of
Directors may at any time, and from time to time, modify or amend the Plan
in any respect, prospectively or retroactively; provided, however, that
provisions governing grants of Incentive Stock Options shall be submitted
for shareholder approval to the extent required by law, regulation, or
otherwise. Failure to ratify or approve amendments or modifications by
shareholders shall be effective only as to the specific amendment or
modification requiring shareholder ratification or approval. Other
provisions of this Plan shall remain in full force and effect. No
termination, modification, or amendment of this Plan may adversely affect
the rights of an individual under an outstanding award without the written
permission of the affected individual.
(b) Except as provided in paragraph (c) of this Section 14, the Committee may
amend any Award Agreement, prospectively or retroactively; provided,
however, that no amendment shall adversely affect the rights of an
individual under an outstanding Award Agreement without the written
consent of the affected individual.
(c) In no event shall the Board of Directors, without shareholder approval,
amend the Plan or shall the Committee amend an Award Agreement in any
manner that effectively:
(i) allows any Option to be granted with an Exercise Price below the
Fair Market Value of the Common Stock on the date of grant; or
(ii) allows the Exercise Price of any Option previously granted under the
Plan to be reduced after the date of grant.
15. EFFECTIVE DATE AND TERMINATION OF THE PLAN.
The Plan shall become effective upon approval by the Company's shareholders. The
right to grant awards under the Plan will terminate upon the earlier of: (i) ten
(10) years after the effective date; or (ii) the issuance of a number of shares
of Common Stock pursuant to the exercise of Options and vesting of Restricted
Stock Awards equal to the maximum number of shares reserved under the Plan, as
set forth in Section 4. The Board of Directors may suspend or terminate the Plan
at any time; provided, however, that no such action will adversely affect an
individual's vested rights under a previously granted award, without the consent
of the affected individual.
16. APPLICABLE LAW.
The Plan will be administered in accordance with the laws of the state of
Delaware, except to the extent that Federal law is deemed to apply.
B-11
REVOCABLE PROXY
BERKSHIRE HILLS BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 1, 2003
10:00 a.m. Local Time
-------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of Berkshire
Hills Bancorp, Inc. (the "Company"), consisting of Lawrence A. Bossidy,
Catherine B. Miller, Corydon L. Thurston and Ann H. Trabulsi or any of them,
with full power of substitution in each, to act as proxy for the undersigned,
and to vote all shares of common stock of the Company which the undersigned is
entitled to vote only at the Annual Meeting of Stockholders to be held on May 1,
2003 at 10:00 a.m., local time, at the Crowne Plaza Hotel, One West Street,
Pittsfield, Massachusetts and at any and all adjournments thereof, with all of
the powers the undersigned would possess if personally present at such meeting
as follows:
1. The election as directors of all nominees listed (unless the "For
All Except" box is marked and the instructions below are complied
with).
Lawrence A. Bossidy, Michael P. Daly, Thomas R. Dawson,
Peter J. Lafayette and Corydon L. Thurston
FOR ALL
FOR WITHHOLD EXCEPT
--- -------- ------
|_| |_| |_|
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name on the line provided below.
--------------------------------------------------------------------------------
2. The approval of the Berkshire Hills Bancorp, Inc. 2003 Equity
Compensation Plan.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
3. The ratification of the appointment of Wolf & Company, P.C. as
independent auditors of Berkshire Hills Bancorp, Inc. for the fiscal
year ending December 31, 2003.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSALS.
This proxy is revocable and will be voted as directed, but if no
instructions are specified, this proxy, properly signed and dated, will be voted
"FOR" each of the proposals listed. If any other business is presented at the
Annual Meeting, including whether or not to adjourn the meeting, this proxy will
be voted by the proxies in their judgment. At the present time, the Board of
Directors knows of no other business to be presented at the annual meeting. This
proxy also confers discretionary authority on the Proxy Committee of the Board
of Directors to vote with respect to the election of any person as director
where the nominees are unable to serve or for good cause will not serve and
matters incident to the conduct of the meeting.
Dated:_____________________________
----------------------------------
SIGNATURE OF SHAREHOLDER
----------------------------------
SIGNATURE OF CO-HOLDER (IF ANY)
The above signed acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders, a Proxy
Statement dated March 27, 2003 and an Annual Report to Stockholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
-----------------------------
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
[Berkshire Hills Bancorp, Inc. Letterhead]
Dear ESOP Participant:
On behalf of the Board of Directors of Berkshire Hills Bancorp, Inc. (the
"Company"), I am forwarding you the attached vote authorization form provided
for the purpose of conveying your voting instructions to Eastern Bank and Trust
Company (the "Trustee") on the proposals to be presented at the Annual Meeting
of Stockholders of Berkshire Hills Bancorp, Inc. to be held on May 1, 2003. Also
enclosed is a Notice and Proxy Statement for the Annual Meeting of Berkshire
Hills Bancorp, Inc. Stockholders and a copy of the Company's Annual Report to
Stockholders.
As a participant in the Berkshire Bank Employee Stock Ownership Plan (the
"ESOP"), you are entitled to vote all shares of Company common stock allocated
to your account as of March 13, 2003. All allocated shares of Company common
stock will be voted as directed by participants, so long as participant
instructions are received by the Trustee by April 21, 2003. If you do not direct
the Trustee as to how to vote the shares of Company common stock allocated to
your ESOP account, the Trustee will vote your shares in a manner calculated to
most accurately reflect the instructions it receives from other participants,
subject to its fiduciary duties.
In order to direct the voting of the shares of Company common stock
allocated to your account under the ESOP, please complete and sign the attached
vote authorization form and return it in the enclosed postage-paid envelope no
later than April 21, 2003. Your vote will not be revealed, directly or
indirectly, to any officer, employee or director of the Company or Berkshire
Bank.
Sincerely,
/S/ Michael P. Daly
-------------------------------------
Michael P. Daly
President and Chief Executive Officer
VOTE AUTHORIZATION FORM
I understand that Eastern Bank and Trust Company, the Trustee, is the
holder of record and custodian of all shares of Berkshire Hills Bancorp, Inc.
(the "Company") common stock allocated to me under the Berkshire Bank Employee
Stock Ownership Plan. Further, I understand that my voting instructions are
solicited on behalf of the Company's Board of Directors for the Annual Meeting
of Stockholders to be held on May 1, 2003.
Accordingly, please vote my shares as follows:
1. The election as directors of all nominees listed (unless the "For All
Except" box is marked and the instructions below are complied with).
Lawrence A. Bossidy, Michael P. Daly, Thomas R. Dawson, Peter J. Lafayette
and Corydon L. Thurston.
FOR ALL
FOR WITHHOLD EXCEPT
--- -------- ------
|_| |_| |_|
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name in the space provided below.
--------------------------------------------------------------------------------
2. The approval of the Berkshire Hills Bancorp, Inc. 2003 Equity Compensation
Plan.
FOR VOTE WITHHELD ABSTAIN
--- ------------- -------
|_| |_| |_|
--------------------------------------------------------------------------------
3. The ratification of the appointment of Wolf & Company, P.C. as independent
auditors of Berkshire Hills Bancorp, Inc. for the fiscal year ending
December 31, 2002.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
The Trustee is hereby authorized to vote any shares allocated to me as
indicated above.
--------------------------------- --------------------------------------
Date Signature
Please date, sign and return this form in the enclosed envelope no later than
April 21, 2003.
[Berkshire Hills Bancorp, Inc. Letterhead]
Dear Stock Award Recipient:
On behalf of the Board of Directors of Berkshire Hills Bancorp, Inc. (the
"Company"), I am forwarding you the attached vote authorization form provided
for the purpose of conveying your voting instructions to First Bankers Trust
Company (the "Trustee") on the proposals to be presented at the Annual Meeting
of Stockholders of Berkshire Hills Bancorp, Inc. to be held on May 1, 2003. Also
enclosed is a Notice and Proxy Statement for the Annual Meeting of Berkshire
Hills Bancorp, Inc. Stockholders and a copy of the Company's Annual Report to
Shareholders.
As a recipient of a Stock Award under the Berkshire Hills Bancorp, Inc.
2001 Stock-Based Incentive Plan (the "Incentive Plan"), you are entitled to vote
all shares of restricted Company common stock awarded to you under the Incentive
Plan that are unvested as of March 13, 2003. The Trustee will vote these shares
of Company common stock held in the Incentive Plan Trust in accordance with
instructions it receives from you and other Stock Award Recipients.
In order to direct the voting of the unvested shares of Company common
stock awarded to you under the Incentive Plan, you must complete and sign the
attached vote authorization form and return it in the enclosed postage-paid
envelope no later than April 21, 2003.
Sincerely,
/S/ Michael P. Daly
-------------------------------------
Michael P. Daly
President and Chief Executive Officer
VOTE AUTHORIZATION FORM
I understand that First Bankers Trust Company, the Trustee, is the holder
of record and custodian of all restricted shares of Berkshire Hills Bancorp,
Inc. (the "Company") common stock awarded to me under the Berkshire Hills
Bancorp, Inc. 2001 Stock-Based Incentive Plan that have not yet vested. Further,
I understand that my voting instructions are solicited on behalf of the
Company's Board of Directors for the Annual Meeting of Stockholders to be held
on May 1, 2003.
Accordingly, please vote my shares as follows:
1. The election as directors of all nominees listed (unless the "For All
Except" box is marked and the instructions below are complied with).
Lawrence A. Bossidy, Michael P. Daly, Thomas R. Dawson, Peter J. Lafayette
and Corydon L. Thurston.
FOR ALL
FOR VOTE WITHHELD EXCEPT
--- ------------- ------
|_| |_| |_|
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name in the space provided below.
--------------------------------------------------------------------------------
2. The approval of the Berkshire Hills Bancorp, Inc. 2003 Equity Compensation
Plan.
FOR VOTE WITHHELD ABSTAIN
--- ------------- -------
|_| |_| |_|
--------------------------------------------------------------------------------
3. The ratification of the appointment of Wolf & Company, P.C. as independent
auditors of Berkshire Hills Bancorp, Inc. for the fiscal year ending
December 31, 2002.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
The Trustee is hereby authorized to vote any unvested shares awarded to me
as indicated above.
--------------------------------- --------------------------------------
Date Signature
Please date, sign and return this form in the enclosed envelope no later than
April 21, 2003.