UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ______)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant toss.240.14A-12
Berkshire Hills Bancorp, Inc.
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
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[Berkshire Hills Bancorp, Inc. Logo]
April 1, 2004
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 6, 2004 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/ Lawrence A. Bossidy
------------------- -----------------------
Michael P. Daly Lawrence A. Bossidy
President and Chief Executive Non-Executive Chairman of the
Officer Board
Berkshire Hills Bancorp, Inc.
24 North Street
Pittsfield, Massachusetts 01201
(413) 443-5601
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Notice of Annual Meeting of Stockholders
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On Thursday, May 6, 2004, 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 three directors to serve for terms of three years;
2. The ratification of the appointment of Wolf & Company, P.C. as
independent auditors for the Company for the fiscal year ending
December 31, 2004; and
3. 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 18, 2004 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 proxy card, 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
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Gerald A. Denmark
Corporate Secretary
Pittsfield, Massachusetts
April 1, 2004
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 6, 2004 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 April 1, 2004.
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 18,
2004. 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 18, 2004, there were 5,936,061 shares
of Company common stock outstanding. Each share of common stock has one vote.
The Company's Certificate of Incorporation provides that a record owner of the
Company's common stock who beneficially owns, either directly or indirectly, 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 18, 2004,
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 at the annual meeting. 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 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, this matter requires the
affirmative vote of a majority of the votes cast at the annual meeting. 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 "FOR" each of the
nominees for director and "FOR" ratification of Wolf & Company, P.C. as the
Company's independent auditors for the 2004 fiscal year.
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 currently 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, bank or other nominee may allow you to
deliver your voting instructions via the telephone or the Internet. Please
review the proxy card or instruction form provided by your broker, bank or other
nominee that accompanies this proxy statement.
2
Participants in Berkshire Bank's ESOP
If you participate in the Berkshire Bank Employee Stock Ownership Plan
(the "ESOP"), you will receive a vote authorization form that reflects all
shares you may vote under the ESOP. Under the terms of the ESOP, the ESOP
trustee votes all shares held by the ESOP, but each ESOP participant may direct
the trustee how to vote the shares of common stock allocated to his or her
account. The ESOP trustee, subject to the exercise of its fiduciary duties, will
vote all unallocated shares of Company common stock held by the ESOP and
allocated shares for which no voting instructions are received in the same
proportion as shares for which it has received timely voting instructions. The
deadline for returning your voting instructions to the ESOP trustee is April 28,
2004.
Corporate Governance
General
The Company periodically reviews its corporate governance policies and
procedures to ensure that the Company meets the highest standards of ethical
conduct, reports results with accuracy and transparency and maintains full
compliance with the laws, rules and regulations that govern the Company's
operations. As part of this periodic corporate governance review, the Board of
Directors reviews and adopts best corporate governance policies and practices
for the Company.
Code of Business Conduct
The Company has adopted a Code of Business Conduct that is designed to
promote the highest standards of ethical conduct by the Company's directors,
executive officers and employees. The Code of Business Conduct requires that the
Company's directors, executive officers and employees avoid conflicts of
interest, comply with all laws and other legal requirements, conduct business in
an honest and ethical manner and otherwise act with integrity and in the
Company's best interest. Under the terms of the Code of Business Conduct,
directors, executive officers and employees are required to report any conduct
that they believe in good faith to be an actual or apparent violation of the
Code of Business Conduct. A copy of the Code of Business Conduct can be found in
the Corporate Governance portion of the Investor Relations section of the
Company's website (www.berkshirebank.com).
As a mechanism to encourage compliance with the Code of Business Conduct,
the Company has established procedures to receive, retain and treat complaints
regarding accounting, internal accounting controls and auditing matters. These
procedures ensure that individuals may submit concerns regarding questionable
accounting or auditing matters in a confidential and anonymous manner. The Code
of Business Conduct also prohibits the Company from retaliating against any
director, executive officer or employee who reports actual or apparent
violations of the Code of Business Conduct.
Meetings of the Board of Directors
The Company conducts business through meetings of its Board of Directors
and through activities of its committees. The Board of Directors generally meets
monthly and may have additional meetings as needed. During 2003, the Board of
Directors held 12 meetings. All of the current directors attended at least 75%
of the total number of the board meetings held and committee meetings on which
such directors served during 2003.
3
Committees of the Board of Directors
Audit Committee. The Audit Committee, consisting of Thomas R. Dawson
(Chair), A. Allen Gray, Peter J. Lafayette and Corydon L. Thurston, 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 five times in 2003. Each
member of the Audit Committee is independent in accordance with the listing
standards of the American Stock Exchange. The Board of Directors has designated
Thomas R. Dawson as an audit committee financial expert under the rules of the
Securities and Exchange Commission. The report of the Audit Committee required
by the rules of the Securities and Exchange Commission is included in this proxy
statement. See "Proposal 2 - Ratification of Independent Auditors - Audit
Committee Report." The charter of the Audit Committee is attached to this proxy
statement as Appendix A and is available in the Corporate Governance portion of
the Investor Relations section of the Company's website (www.berkshirebank.com).
Compensation Committee. The Compensation Committee, consisting of
Catherine B. Miller (Chair), Lawrence A. Bossidy and Edward G. McCormick,
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 five times in 2003. Each
member of the Compensation Committee is independent in accordance with the
listing standards of the American Stock Exchange. The report of the Compensation
Committee required by the rules of the Securities and Exchange Commission is
included in this proxy statement. See "Compensation Committee Report on
Executive Compensation." The charter of the Compensation Committee is available
in the Corporate Governance portion of the Investor Relations section of the
Company's website (www.berkshirebank.com).
Corporate Governance/Nominating Committee. The Company's Corporate
Governance/Nominating Committee, consisting of Messrs. Bossidy (Chair) and
McCormick, Ms. Miller and Ann H. 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. The Corporate
Governance/Nominating Committee met five times in 2003. Each member of the
Corporate Governance/Nominating Committee is independent in accordance with the
listing standards of the American Stock Exchange. The procedures of the
Corporate Governance/Nominating Committee required to be disclosed by the rules
of the Securities and Exchange Commission are included in this proxy statement.
See "Corporate Governance/Nominating Committee Procedures." The charter of the
Corporate Governance/Nominating Committee is available in the Corporate
Governance portion of the Investor Relations section of the Company's website
(www.berkshirebank.com).
Attendance at the Annual Meeting. The Board of Directors encourages each
director to attend annual meetings of stockholders. All but two of the directors
attended the 2003 annual meeting of stockholders.
4
Directors' Compensation
Fees. Non-employee directors of the Bank each receive an annual retainer
of $10,000 for board service and an annual retainer of $7,200 for each committee
on which they serve. Additionally, the Clerk of the Bank receives an annual
retainer of $500. The Bank does not pay separate fees for attending board or
committee meetings. The Company does not pay separate fees for service on its
Board of Directors.
Award Grants. In connection with his appointment to the Boards of
Directors of the Company and the Bank, Mr. Bossidy received non-statutory stock
options to acquire 11,510 shares of common stock at an exercise price of $22.30
per share, the fair market value of the common stock on the date of grant.
Additionally, Mr. Bossidy was granted 5,755 shares of restricted stock. The
options become exercisable and the stock awards vest in five equal annual
installments commencing on January 30, 2004.
Stock Ownership
The following table provides information as of March 18, 2004, 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.
Number of Shares Percent of Common
Name and Address Owned Stock Outstanding
---------------- --------------- -----------------
Berkshire Bank Employee Stock Ownership Plan 606,281(1) 10.2%
24 North Street
Pittsfield, Massachusetts 01201
Private Capital Management 583,300(2) 9.8%
8889 Pelican Bay Boulevard
Naples, Florida 34108
Berkshire Bank Foundation 568,427(3) 9.6%
24 North Street
Pittsfield, Massachusetts 01201
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(1) Includes 454,240 shares that have not been allocated to participants'
accounts. 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.
(2) Based on information filed in a Schedule 13G/A with the U.S. Securities
and Exchange Commission on February 13, 2004.
(3) 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.
5
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 18, 2004.
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) by Exercising Options Outstanding(4)
---- ------------------- ----------------------- --------------
Thomas O. Andrews.................... 31,042 6,906 *
Lawrence A. Bossidy.................. 36,042 2,302 *
Michael P. Daly...................... 70,484(5) 31,318 1.71%
Thomas R. Dawson..................... 12,689 6,906 *
Gayle P. Fawcett..................... 28,612 11,141 *
A. Allen Gray........................ 21,132 6,906 *
Peter J. Lafayette................... 12,042(6) 6,906 *
Edward G. McCormick.................. 18,791 6,906 *
Catherine B. Miller.................. 17,305(7) 4,604 *
Wayne F. Patenaude................... 12,387(8) 5,000 *
Corydon L. Thurston.................. 11,255(9) 6,906 *
Ann H. Trabulsi...................... 17,042(10) 6,906 *
Robert A. Wells...................... 70,617(11) 8,078 1.32%
All Executive Officers and Directors
as a Group (13 persons)............ 359,440 110,785 7.78%
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*Represents less than 1% of the Company's outstanding shares.
(1) Includes unvested shares of restricted stock awards held in trust, with
respect to which the beneficial owner has voting but not investment power
as follows: Messrs. Andrews, Dawson, Gray, Lafayette, McCormick and
Thurston, Ms. Miller and Ms. Trabulsi, each--2,589 shares; Mr.
Bossidy--4,891 shares; Mr. Daly--39,700 shares; Ms. Fawcett--15,843
shares; Mr. Patenaude--9,500 shares; and Mr. Wells--15,020 shares.
(2) Includes shares allocated under the Berkshire Bank Employee Stock
Ownership Plan, with respect to which each individual has voting but not
investment power as follows: Mr. Daly--3,158 shares; Ms. Fawcett--2,592
shares; and Mr. Wells--3,291 shares.
(3) 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.
Daly--8,082 shares; Ms. Fawcett--2,830 shares; and Mr. Wells--26,660
shares.
(4) Based on 5,936,061 shares of Company common stock outstanding and entitled
to vote as of March 18, 2004, plus the number of shares that each person
may acquire within 60 days by exercising stock options.
(5) Includes 874 shares held in trust as part of the Berkshire Bank
Supplemental Executive Retirement Plan, with respect to which Mr. Daly has
shared voting power.
(6) Includes 2,460 shares held by Mr. Lafayette's spouse's individual
retirement account.
(7) Includes 1,056 shares held by Ms. Miller's spouse.
(8) Includes 950 shares held by Mr. Patenaude's spouse's individual retirement
account.
(9) Includes 106 shares held by each of Mr. Thurston's two children.
(10) Includes 1,000 shares held by Ms. Trabulsi's spouse.
(11) Includes 1,100 shares held by Mr. Wells' spouse and 2,345 shares held in
trust as part of the Berkshire Bank Supplemental Executive Retirement
Plan, with respect to which Mr. Wells has shared voting power.
6
Proposal 1 -- Election of Directors
The Company's Board of Directors currently consists of eleven members. All
of the directors are independent under the current listing standards of the
American Stock Exchange, except for Michael P. Daly and Robert A. Wells. Mr.
Daly is not independent because he is an employee of the Company and Berkshire
Bank. Mr. Wells is not independent because he is a former employee of the
Company and Berkshire Bank. The Board is 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. The nominees for election this
year are Edward G. McCormick, Ann H. Trabulsi and Robert A. Wells, 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 will 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 or her
current occupation for the last five years. The age indicated in each nominee's
biography is as of December 31, 2003. 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.
Nominees for Election of Directors
The nominees standing for election are:
Edward G. McCormick is the managing partner of the law firm of McCormick,
Murtagh, Marcus & Smith, located in Great Barrington, Massachusetts. Age 56.
Director since 1994.
Ann H. Trabulsi is a community volunteer serving on various non-profit
boards, including Berkshire Medical Center and Berkshire Health Systems. Age 68.
Director since 1976.
Robert A. Wells was the Chairman of the Boards of the Company, the Bank,
Berkshire Bank Foundation and Greater Berkshire Foundation, Inc. until his
retirement from all Chairman positions, effective December 19, 2003. 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 64.
Director since 1976.
Directors Continuing in Office
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
65. Director since 1980.
7
Michael P. Daly was appointed President and Chief Executive Officer of the
Company and the Bank in October 2002. Prior to his appointment, Mr. Daly served
as Executive Vice President of the Company and the Bank from January 2000 to
October 2002 and as Senior Vice President, Commercial Lending from October 1997
until January 2000. Age 42. Director since 2002.
A. Allen Gray is a former vice president and general counsel of General
Dynamics Defense Systems, Inc., a government contractor located in Pittsfield,
Massachusetts. Age 59. 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 62. Director since 1983.
The following directors have terms ending in 2006:
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
from July 2001 until June 2002. 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
68. Director since 2002.
Thomas R. Dawson is a self-employed certified public accountant. Age 56.
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 56. 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 51. Director since 1988.
Proposal 2 -- Ratification of Independent Auditors
The Audit Committee of the Board of Directors has appointed Wolf &
Company, P.C. to be its auditors for the 2004 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 Audit Committee of the
Board of Directors.
The Board of Directors recommends that stockholders vote "FOR" the
ratification of the appointment of Wolf & Company, P.C. as independent auditors.
8
Audit Fees
The following table sets forth the fees billed to the Company for the
fiscal years ending December 31, 2003 and December 31, 2002 by Wolf & Company,
P.C.:
2003 2002
---- ----
Audit Fees.................. $203,250 $214,600
Audit-Related Fees(1)....... 14,400 10,400
Tax Fees(2)................. 45,000 47,675
All other fees.............. -- --
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(1) Consists primarily of the audit of the Bank's employee
benefit plan.
(2) Consists of tax filings and tax-related compliance and
other advisory services.
Pre-Approval of Services by the Independent Auditor
The Audit Committee will consider on a case-by-case basis and, if
appropriate, approve all audit and non-audit services to be provided by the
Company's independent auditors. Alternatively, the Audit Committee may adopt a
policy for pre-approval of audit and permitted non-audit services by the
Company's independent auditor.
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 to the extent that
the Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
Audit Committee Report
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.
9
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, 2003 for filing with
the Securities and Exchange Commission. The Audit Committee also has approved,
subject to stockholder ratification, the selection of the Company's independent
auditors, for the fiscal year ended December 31, 2004.
Audit Committee of the Board of Directors of
Berkshire Hills Bancorp, Inc.
Thomas R. Dawson, Chair
A. Allen Gray
Peter J. Lafayette
Corydon L. Thurston
10
Executive Compensation
Summary Compensation Table
The following information is furnished for the President and Chief
Executive Officer and all other executive officers of Berkshire Bank who
received a salary and bonus of $100,000 or more during the year ended December
31, 2003.
Long-Term Compensation
Annual Compensation Awards
----------------------------------------- -------------------------
Securities
Other Annual Restricted Underlying All Other
Compensation Stock Awards Options/SARs Compensation
Name and Position Year Salary Bonus (1) ($)(2) (#) (3)
----------------- ---- ------ ----- ------------ ------------ ------------ ------------
Michael P. Daly............................ 2003 $285,000 $85,000 $ -- $783,466 41,481 $ 75,432
President and Chief Executive Officer 2002 174,894 33,784 -- -- -- 32,512
2001 132,042 14,482 -- 359,924 38,369 66,253
Wayne F. Patenaude......................... 2003 $135,834 $42,000 $ 26,567(5) $229,500 25,000 $ --
Senior Vice President and Chief
Financial Officer (4)
Gayle P. Fawcett........................... 2003 $151,888 $42,000 $ -- $331,400 9,652 $ 40,315
Senior Vice President (6) 2002 118,759 13,487 -- -- -- 24,091
Robert A. Wells............................ 2003 $151,731 $ -- $ -- $ -- -- $ 239,379(7)
Former Chairman of the Board 2002 250,000 25,000 -- -- -- 72,810
2001 250,000 25,000 -- 616,969 61,390 42,709
----------
(1) For Messrs. Daly and Wells and Ms. Fawcett, 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) Reflects 35,133, 10,000 and 14,861 shares granted to Messrs. Daly and
Patenaude and Ms. Fawcett, respectively, under the Berkshire Hills
Bancorp, Inc. 2001 Stock-Based Incentive Plan. The dollar amount set forth
in the table represents the market value of the shares on the date of the
grant. The restricted stock awards vest in five equal annual installments
beginning on the first anniversary of the date of grant. When shares
become vested and are distributed from the trust in which they are held,
the recipient will also receive an amount equal to accumulated cash and
stock dividends (if any) paid with respect thereto, plus earnings thereon.
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, 2003, is as
follows, based on $36.20, the closing price of the Company's common stock
on December 31, 2003:
Number of Value of
Unvested Shares Unvested Shares
--------------- ---------------
Mr. Daly .................. 48,025 $1,738,505
Mr. Patenaude ............. 10,000 362,000
Ms. Fawcett ............... 18,544 671,293
Mr. Wells ................. 22,100 800,020
(footnotes continued on the following page)
11
(3) Details of the amounts reported in the "All Other Compensation" column for
2003 are provided in the table below.
Mr. Mr. Ms. Mr.
Item Daly Patenaude Fawcett Wells
---- -------- --------- --------- ---------
Employer contribution to 401(k) plan................ $14,000 $ -- $ 10,703 $ 11,045
Market value of allocations under the employee
stock ownership plan............................. 29,793 -- 29,612 29,793
Market value of allocations under the
supplemental executive retirement plan........... 31,639 -- -- 19,041
-------- --------- --------- ---------
Total...................................... $75,432 $ -- $ 40,315 $ 59,879
======= ========= ========= =========
(4) Mr. Patenaude became an executive officer on February 24, 2003.
Information for the 2002 and 2001 fiscal years is not disclosed as Mr.
Patenaude was not an executive officer during that period.
(5) Includes moving expenses of $17,781 and housing expenses of $8,786.
(6) Ms. Fawcett became an executive officer on October 17, 2002. Information
for the 2001 fiscal year is not disclosed as Ms. Fawcett was not an
executive officer during that period.
(7) Includes $179,500, which represents the amount paid to Mr. Wells in the
fourth quarter of 2003 in satisfaction of existing contractual obligations
of the Company and Berkshire Bank in connection with his retirement as
Chairman of the Company and the Bank on December 19, 2003.
Employment Agreements
Berkshire Bank and Berkshire Hills entered into amended and restated
employment agreements with Mr. Daly effective as of June 1, 2003. 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 Mr. Daly.
The employment agreements provide for a two-year term that extends daily
unless the Board of Directors or Mr. Daly gives the other party written notice
of non-renewal. The employment agreements provide for a base salary for Mr. Daly
of $310,000, which is reviewed 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.
In the event of Mr. Daly's death during the agreement term, the Bank will
pay his beneficiary his base salary, and continue his dependents' medical
coverage for six months. If Mr. Daly becomes disabled, the Bank may reduce his
base salary by amounts he receives under Berkshire Bank's disability insurance.
If Mr. Daly becomes incapacitated as a result of disability and can no longer
perform his duties, the Bank may terminate the agreement and pay him severance
in the same manner as for involuntary termination, as discussed below. Upon such
termination, Mr. Daly will receive continued medical and life insurance coverage
for two years following his termination of employment.
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 Mr. Daly's employment
for reasons other than for cause (including his incapacity due to disability as
discussed above), or if he resigns from Berkshire Bank or Berkshire Hills under
specified circumstances that would constitute constructive termination, Mr. Daly
(or, upon his death, his
12
beneficiary) would be entitled to 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 his 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 life, health, dental and disability coverage for Mr. Daly and his
covered dependents until the earliest of his death, employment with another
employer or the end of 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 and non-disclosure
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, Mr. Daly (or, upon his death, 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 his annual compensation (as described in the agreements) for the
five preceding taxable years. Berkshire Bank and Berkshire Hills would also
continue Mr. Daly'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, Mr. Daly would
not receive duplicative payments or benefits under the agreements. Mr. Daly
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 that equal or exceed a "base" amount that is three times the
executive's average taxable income 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 base amount.
Payments to Mr. Daly under the Bank's employment agreement are guaranteed
by Berkshire Hills if payments or benefits are not paid by the Bank. All
reasonable costs and legal fees paid or incurred by Mr. Daly in any dispute or
question of interpretation relating to the employment agreements will be paid by
Berkshire Bank or Berkshire Hills, respectively, if he 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 Mr. Daly to
the fullest extent legally allowable.
Change in Control Agreements
Berkshire Hills and Berkshire Bank entered into change in control
agreements with Mr. Patenaude and Ms. Fawcett effective as of October 22, 2003.
Each change in control agreement has a term of three years and is renewable
annually for an additional year. 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, Mr. Patenaude and Ms. Fawcett will
be entitled to receive a severance payment equal to three times his or her
average annual compensation (as described in the agreements) for the five most
recent taxable years. Berkshire Bank will also continue their health and welfare
benefits coverage for thirty-six months following termination. Mr. Patenaude and
Ms. Fawcett must comply with a one-year non-competition and non-disclosure
provision following their receipt of severance payments under the agreements.
Although both the Berkshire Bank and Berkshire Hills agreements provide
for severance payments upon termination in connection with a change in control,
Mr. Patenaude and Ms. Fawcett would not receive any duplicative payments. Mr.
Patenaude and Ms. Fawcett would
13
receive tax indemnification if their individual severance payments trigger
liability for the excise tax on excess parachute payments under the Internal
Revenue Code.
Option Grants in Last Fiscal Year
The following table lists all grants of options to the named executive
officers in 2003 and contains certain information about the potential value of
those options based upon certain assumptions as to the appreciation of the
Company's stock over the life of the option.
Potential Realizable Value at
Assumed Annual Rates of
Number of % of Total Stock Price Appreciation
Securities Options for Options (2)
Underlying Granted to Exercise or -----------------------------
Options Granted Employees in Base Price Expiration
Name (#)(1) Fiscal Year Per Share Date 5% 10%
------------------------ --------------- ----------- ----------- ----------- -------- -----------
Michael P. Daly......... 41,481 36.1% $22.30 January 30, 2013 $581,564 $1,474,235
Wayne F. Patenaude...... 25,000 21.8 22.95 February 24, 2013 360,750 914,500
Gayle P. Fawcett........ 9,652 8.4 22.30 January 30, 2013 135,321 343,032
Robert A. Wells......... -- -- -- -- -- --
----------
(1) Options become exercisable in five equal annual installments commencing on
the first anniversary of the date of grant; provided, however, that
options become immediately exercisable upon a change in control or if the
optionee terminates employment due to death or disability.
(2) The dollar gains under these columns result from calculations required by
the Securities and Exchange Commission's rules and are not intended to
forecast future price appreciation of the common stock. Options have value
only if the stock price increases above the exercise price shown in the
table during the effective option period. In order for the executive to
realize the potential values set forth in the 5% and 10% columns in the
table, the price per share of the Company's common stock would be
approximately $36.32 and $57.84 for Mr. Daly and Ms. Fawcett and $37.38
and $59.53 for Mr. Patenaude, respectively, as of the expiration date of
the options.
Fiscal Year-End Option Values
The following table provides certain information regarding the exercise of
options during the past fiscal year and certain information with respect to the
number and value of shares of Berkshire Hills common stock represented by
outstanding options held by the named executive officers as of December 31,
2003.
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at Fiscal Year End (#) at Fiscal Year End ($)(1)
on Exercise Value ------------------------------ ------------------------------
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
Michael P. Daly ......... -- $ -- 15,348 64,502 $298,519 $1,024,344
Wayne F. Patenaude ...... -- -- -- 25,000 -- 331,250
Gayle P. Fawcett ........ -- -- 6,140 18,860 119,362 313,166
Robert A. Wells ......... 24,556 450,296 -- 36,834 -- 716,421
----------
(1) Value of unexercisable in-the-money stock options equals the market
value of shares covered by in-the-money options on December 31, 2003,
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.
14
Other Retirement Arrangements
Berkshire Bank entered into a supplemental retirement arrangement with Mr.
Daly, effective as of December 1, 2003, to provide him with an annual retirement
benefit at age 62 equal to 70% of his average compensation, calculated based on
the three consecutive years during which his compensation is the highest.
Benefits under the supplemental arrangement are reduced by the benefits Mr. Daly
would receive under the 401(k) plan and ESOP, and by 50% of his social security
benefits.
The supplemental retirement arrangement also provides for a reduced
benefit upon Mr. Daly's early retirement after age 55 but prior to age 62, and
upon his death or disability. If Mr. Daly terminates employment in connection
with a change in control, he would receive an annual benefit equal to the
retirement benefit he would have received if he retired on the date immediately
preceding his termination and had attained age 62, regardless of his actual age
on the termination date. Mr. Daly may elect to receive supplemental retirement
benefits in the form of an annuity with ten annual payments guaranteed, or in an
actuarial equivalent lump sum.
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 (the "CEO") 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.
Policies and Practices. The Compensation Committee approves the
compensation policies and objectives for all employees of the Company and the
Bank and establishes the compensation for the Chief Executive Officer and other
executives. However, because all of the executive officers of the Company are
also executives of the Bank, the Bank pays their compensation.
The Company's executive compensation program is designed to attract,
retain, motivate and reward the highly qualified individuals required to achieve
the Company's objectives. In determining the appropriate level of compensation,
the Compensation Committee reviewed the total compensation of peer banks within
the industry, with a particular focus on institutions in New England. In
addition, the Compensation Committee periodically retains an outside
compensation consultant to compare the total compensation and components of
compensation for the Company's executive officers with other financial
institutions of similar size and characteristics to ensure that compensation is
consistent and competitive with such other financial institutions and that
compensation serves as an appropriate incentive for individuals to achieve the
Company's objectives.
Base salaries are tied to the level of responsibility of each executive
officer and are established to be consistent and competitive with the practices
of comparable financial institutions in the region. All executive officers
participate in the Bank's Incentive Compensation Plan, which provides
performance-based cash payments. Targets are established each year with
individual awards dependent upon Company, department and individual performance.
In addition, executive officers participate in other
15
benefit plans available to all employees including the 401(k) Plan and the
Employee Stock Ownership Plan. Executive officers may, at the discretion of the
Compensation Committee, also participate in supplemental benefit plans, as well
as the Stock-Based Incentive Plan and the Equity Compensation Plan.
The executive incentive awards paid for 2003 reflect each individual's
level of accomplishment, as based on the preparation of a written performance
review, and the Company's performance, including earnings per share, asset
growth and return on capital. Decisions by the Compensation Committee with
respect to compensation of executive officers are reviewed by the full Board of
Directors.
Compensation of the Chief Executive Officer. The compensation for the CEO
in 2003 was determined in the same manner as that established for all other
executive officers. A written performance review was prepared, which included an
assessment of the CEO's performance against certain individual leadership goals
and financial and growth objectives for the Company. The CEO's base salary and
incentive award reflected the results of such assessment.
Compensation Committee of the Board of Directors of
Berkshire Hills Bancorp, Inc.
Catherine B. Miller, Chair
Lawrence A. Bossidy
Corydon L. Thurston
Ann H. Trabulsi
16
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.
[LINE GRAPH OMITTED]
Period Ended
------------------------------------------------------------------
6/28/00 12/31/00 12/31/01 12/31/02 12/31/03
------- -------- -------- -------- --------
Berkshire Hills Bancorp, Inc.......................... $100.00 $128.78 $169.52 $201.25 $314.63
The American Stock Exchange Major Market Index........ 100.00 95.91 91.35 80.36 99.34
The SNL $1 Billion - $5 Billion Thrift Index.......... 100.00 130.78 186.45 238.76 358.11
17
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,
2003.
Transactions with Management
The Sarbanes-Oxley Act generally prohibits loans by Berkshire Bank to its
executive officers and directors. However, the Sarbanes-Oxley Act contains a
specific exemption from such prohibition for loans by Berkshire Bank to its
executive officers and directors in compliance with federal banking regulations.
Federal banking regulations require that all loans or extensions of credit to
executive officers and directors of insured financial institutions must be made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons,
except for loans made under programs generally available to all employees and
must not involve more than the normal risk of repayment or present other
unfavorable features. Berkshire Bank is therefore prohibited from making any new
loans or extensions of credit to executive officers and directors at different
rates or terms than those offered to the general public, except for loans made
pursuant to programs generally available to all employees, and has adopted a
policy to this effect. In addition, loans made to a director or executive
officer in an amount that, when aggregated with the amount of all loans to such
person and his or her related interests, are 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.
Corporate Governance/Nominating Committee Procedures
General
It is the policy of the Corporate Governance/Nominating Committee of the
Board of Directors of the Company to consider director candidates recommended by
stockholders who appear to be qualified to serve on the Company's Board of
Directors. The Corporate Governance/Nominating Committee may choose not to
consider an unsolicited recommendation if no vacancy exists on the Board of
Directors and the Corporate Governance/Nominating Committee does not perceive a
need to increase the size of the Board of Directors. To avoid the unnecessary
use of the Corporate Governance/Nominating Committee's resources, the Corporate
Governance/Nominating Committee will consider only those director candidates
recommended in accordance with the procedures set forth below.
18
Procedures to be Followed by Stockholders
To submit a recommendation of a director candidate to the Corporate
Governance/Nominating Committee, a stockholder should submit the following
information in writing, addressed to the Chairman of the Corporate
Governance/Nominating Committee, care of the Corporate Secretary, at the main
office of the Company:
1. The name of the person recommended as a director candidate;
2. All information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended;
3. The written consent of the person being recommended as a director
candidate to being named in the proxy statement as a nominee and to
serving as a director if elected;
4. As to the stockholder making the recommendation, the name and
address of such stockholder as they appear on the Company's books;
provided, however, that if the stockholder is not a registered
holder of the Company's common stock, the stockholder should submit
his or her name and address along with a current written statement
from the record holder of the shares that reflects ownership of the
Company's common stock; and
5. A statement disclosing whether such stockholder is acting with or on
behalf of any other person and, if applicable, the identity of such
person.
In order for a director candidate to be considered for nomination at the
Company's annual meeting of stockholders, the recommendation must be received by
the Corporate Governance/Nominating Committee at least 120 calendar days prior
to the date the Company's proxy statement was released to stockholders in
connection with the previous year's annual meeting, advanced by one year.
Process for Identifying and Evaluating Nominees
The process that the Corporate Governance/Nominating Committee follows to
identify and evaluate individuals to be nominated for election to the Board of
Directors is as follows:
Identification. For purposes of identifying nominees for the Board of
Directors, the Corporate Governance/Nominating Committee relies on personal
contacts of the committee members and other members of the Board of Directors,
as well as its knowledge of members of the communities served by Berkshire Bank.
The Corporate Governance/Nominating Committee will also consider director
candidates recommended by stockholders in accordance with the policy and
procedures set forth above. The Corporate Governance/Nominating Committee has
not previously used an independent search firm to identify nominees.
Evaluation. In evaluating potential nominees, the Corporate
Governance/Nominating Committee determines whether the candidate is eligible and
qualified for service on the Board of Directors by evaluating the candidate
under certain criteria, which are described below. If such individual fulfills
these criteria, the Corporate Governance/Nominating Committee will conduct a
check of the
19
individual's background and interview the candidate to further assess the
qualities of the prospective nominee and the contributions he or she would make
to the Board.
Qualifications
The Corporate Governance/Nominating Committee has adopted a set of
criteria that it considers when it selects individuals to be nominated for
election to the Board of Directors. A candidate must meet the eligibility
requirements set forth in the Company's Bylaws, which include a residency
requirement, an age limitation and a requirement that the candidate not have
been subject to certain criminal or regulatory actions. A candidate also must
meet any qualification requirements set forth in any Board or committee
governing documents.
If the candidate is deemed eligible for election to the Board of
Directors, the Corporate Governance/Nominating Committee will then evaluate the
prospective nominee to determine if he or she possesses the following
qualifications, qualities or skills:
o financial, regulatory and business experience;
o familiarity with and participation in the local community;
o integrity, honesty and reputation;
o dedication to the Company and its stockholders; and
o independence.
The Committee will also consider any other factors the Corporate
Governance/Nominating Committee deems relevant, including age, diversity, size
of the Board of Directors and regulatory disclosure obligations.
With respect to nominating an existing director for re-election to the
Board of Directors, the Corporate Governance/Nominating Committee will consider
and review an existing director's Board and committee attendance and
performance; length of Board service; experience, skills and contributions that
the existing director brings to the Board; and independence.
20
Submission of Business Proposals and Stockholder Nominations
The Company must receive proposals that stockholders seek to include in
the proxy statement for the Company's next annual meeting no later than December
2, 2004. If next year's annual meeting is held on a date more than 30 calendar
days from May 6, 2005, a stockholder proposal must be received by a reasonable
time before the Company begins to print and mail its proxy solicitation for such
annual meeting. Any stockholder proposals will be subject to the requirements of
the proxy rules adopted by the Securities and Exchange Commission.
The Company's bylaws provides that in order for a stockholder to make
nominations for the election of directors or proposals for business to be
brought before the annual meeting, a stockholder must deliver notice of such
nominations and/or proposals to the Secretary not less than 90 days prior to the
date of the annual meeting; provided that if less than 100 days' notice or prior
public disclosure of the date of the annual meeting is given to stockholders,
such notice must be received not later than the close of business of the tenth
day following the day on which notice of the date of the annual meeting was
mailed to stockholders or prior public disclosure of the meeting date was made.
A copy of the bylaws may be obtained from the Company.
Stockholder Communications
The Company encourages stockholder communications to the Board of
Directors and/or individual directors. All communications from stockholders
should be addressed to Berkshire Hills Bancorp, Inc., 24 North Street,
Pittsfield, Massachusetts 01201. Communications to the Board of Directors should
be in the care of Gerald A. Denmark, Corporate Secretary. Communications to
individual directors should also be sent to such director at the Company's
address. Stockholders who wish to communicate with a Committee of the Board
should send their communications to the care of the Chair of the particular
committee, with a copy to Lawrence A. Bossidy, the Chair of the Corporate
Governance/Nominating Committee. It will be in the discretion of the Corporate
Governance/Nominating Committee whether to bring to the attention of the full
Board any communication sent to the full Board.
Miscellaneous
The Company will pay the cost of this proxy solicitation. 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 included with this
proxy statement. Any stockholder who has not received a copy of the Annual
Report may obtain a copy by writing to the Corporate 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, 2003, 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 18,
21
2004 upon written request to Gerald A. Denmark, Corporate Secretary, Berkshire
Hills Bancorp, Inc., 24 North Street, Pittsfield, Massachusetts 01201.
If you and others who share your address own your shares in "street name,"
your broker or other holder of record may be sending only one annual report and
proxy statement to your address. This practice, known as "householding," is
designed to reduce our printing and postage costs. However, if a shareholder
residing at such an address wishes to receive a separate annual report or proxy
statement in the future, he or she should contact the broker or other holder of
record. If you own your shares in "street name" and are receiving multiple
copies of our annual report and proxy statement, you can request householding by
contacting your broker or other holder of record.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gerald A. Denmark
---------------------
Gerald A. Denmark
Corporate Secretary
Pittsfield, Massachusetts
April 1, 2004
22
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, 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
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. As a
minimum requirement, each member of the Audit Committee shall be "financially
literate" and at least one member shall be "financially sophisticated" as
proscribed by the rules of the American Stock Exchange. Each member shall
possess the ability to read and understand the Company's balance sheet, income
statement and cash flow statement at the time of his or her appointment to the
Audit Committee, or will be able to do so within a reasonable period of time
thereafter. The members of the Audit Committee shall be appointed by, and serve
at the discretion of, the Board.
Authority and Responsibility
The Audit Committee is vested with all responsibilities and authority
required by Rule 10A-3 under the Exchange Act and 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 select, evaluate and replace the Company's
independent auditors (subject, if applicable, to shareholder 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 the Company's President and Chief Executive
Officer, Chief Financial Officer, General Counsel and other members of Company
management, as the Committee shall deem advisable, the internal auditors and the
independent auditors in separate executive session.
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.
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.
A-2
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 and 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).
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
A-3
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.
A-4
REVOCABLE PROXY
BERKSHIRE HILLS BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 6, 2004
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 Michael P. Daly, Edward G.
McCormick, Catherine B. Miller 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 6, 2004 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).
Edward G. McCormick, Ann H. Trabulsi and Robert A. Wells
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 ratification of the appointment of Wolf & Company, P.C. as
independent auditors of Berkshire Hills Bancorp, Inc. for the fiscal
year ending December 31, 2004.
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 STOCKHOLDER
___________________________________
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 April 1, 2004 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 First Bankers Trust
Company, N.A. (the "Trustee") on the proposals to be presented at the Annual
Meeting of Stockholders of Berkshire Hills Bancorp, Inc. to be held on May 6,
2004. 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 18, 2004. 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 28, 2004. 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 28, 2004. 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 First Bankers Trust Company, N.A., 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 6, 2004.
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).
Edward G. McCormick, Ann H. Trabulsi and Robert A. Wells
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 ratification of the appointment of Wolf & Company, P.C. as independent
auditors of Berkshire Hills Bancorp, Inc. for the fiscal year ending
December 31, 2004.
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 28, 2004.
[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, N.A. (the "Trustee") on the proposals to be presented at the Annual
Meeting of Stockholders of Berkshire Hills Bancorp, Inc. to be held on May 6,
2004. 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.
You are entitled to vote all shares of restricted Company common stock
awarded to you under the Berkshire Hills Bancorp, Inc. 2001 Stock-Based
Incentive Plan and/or 2003 Equity Compensation Plan (collectively referred to as
the "Incentive Plan") that are unvested as of March 18, 2004. The Incentive Plan
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 28, 2004.
Sincerely,
/s/ Michael P. Daly
-------------------------------------
Michael P. Daly
President and Chief Executive Officer
VOTE AUTHORIZATION FORM
I understand that First Bankers Trust Company, N.A., 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 and/or 2003 Equity
Compensation Plan (collectively referred to as the "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 6, 2004.
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).
Edward G. McCormick, Ann H. Trabulsi and Robert A. Wells
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 ratification of the appointment of Wolf & Company, P.C. as independent
auditors of Berkshire Hills Bancorp, Inc. for the fiscal year ending
December 31, 2004.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSALS.
The Incentive Plan 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 28, 2004.
VOTE AUTHORIZATION FORM
I understand that First Bankers Trust Company, N.A., 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
Supplemental Executive Retirement 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 6, 2004.
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).
Edward G. McCormick, Ann H. Trabulsi and Robert A. Wells
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 ratification of the appointment of Wolf & Company, P.C. as independent
auditors of Berkshire Hills Bancorp, Inc. for the fiscal year ending
December 31, 2004.
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 28, 2004.