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 |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Bay State Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
|_| 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 number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
(032796DTI)
<PAGE>
BAY STATE BANCORP, INC.
1299 BEACON STREET
BROOKLINE, MASSACHUSETTS 02446
(617) 739-9500
August 14, 1998
Fellow Shareholders:
You are cordially invited to attend the 1998 annual meeting of shareholders
(the "Annual Meeting") of Bay State Bancorp, Inc. (the "Company"), the holding
company for Bay State Federal Savings Bank (the "Bank"), Brookline,
Massachusetts, which will be held on September 29, 1998 at 2:00 p.m., Eastern
Time, at the Royal Sonesta Hotel Cambridge, 5 Cambridge Parkway, Cambridge,
Massachusetts.
The attached Notice of the Annual Meeting and the Proxy Statement describe
the business to be transacted at the Annual Meeting. Directors and Officers of
the Company as well as a representative of Shatswell, MacLeod & Company, P.C.,
the Company's independent auditors, will be present at the Annual Meeting to
respond to any questions that our shareholders may have regarding the business
to be transacted.
The Board of Directors of the Company has determined that matters to be
considered at the Annual Meeting are in the best interests of the Company and
its shareholders. FOR THE REASONS SET FORTH IN THE PROXY STATEMENT, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE NOMINEES AS
DIRECTORS SPECIFIED UNDER PROPOSAL 1, AND THAT YOU VOTE "FOR" APPROVAL OF THE
BAY STATE BANCORP, INC. 1998 STOCK-BASED INCENTIVE PLAN (THE "PLAN") AS
SPECIFIED UNDER PROPOSAL 2, AND THAT YOU VOTE "FOR" PROPOSAL 3, THE RATIFICATION
OF INDEPENDENT AUDITORS.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR COOPERATION
IS APPRECIATED SINCE A MAJORITY OF THE COMMON STOCK MUST BE REPRESENTED, EITHER
IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM FOR THE CONDUCT OF BUSINESS AT THE
ANNUAL MEETING.
On behalf of the Board of Directors and all of the employees of the Company
and the Bank, I thank you for your continued interest and support.
Sincerely yours,
/s/ John F. Murphy
John F. Murphy
Chairman of the Board, Chief Executive
Officer and President
<PAGE>
BAY STATE BANCORP, INC.
1299 BEACON STREET
BROOKLINE, MASSACHUSETTS 02446
----------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 29, 1998
----------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the "Annual
Meeting") of Bay State Bancorp, Inc. (the "Company"), the holding company for
Bay State Federal Savings Bank (the "Bank"), will be held on September 29, 1998
at 2:00 p.m., Eastern Time, at the Royal Sonesta Hotel Cambridge, 5 Cambridge
Parkway, Cambridge, Massachusetts.
The purpose of the Annual Meeting is to consider and vote upon the
following matters:
1. The election of three directors to a three-year term of office;
2. The approval of the Bay State Bancorp, Inc. 1998 Stock-Based Incentive
Plan;
3. The ratification of the appointment of Shatswell, MacLeod & Company,
P.C. as independent auditors of the Company for the fiscal year ending
March 31, 1999; and
4. Such other matters as may properly come before the meeting and at any
adjournments thereof, including whether or not to adjourn the meeting.
The Board of Directors has established August 3, 1998 as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the Annual Meeting and at any adjournments thereof. Only record holders of
the common stock of the Company as of the close of business on such record date
will be entitled to vote at the Annual Meeting or any adjournments thereof. In
the event there are not sufficient votes for a quorum or to approve the
foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies by the Company. A
list of shareholders entitled to vote at the Annual Meeting will be available at
Bay State Bancorp, Inc., 1299 Beacon Street, Brookline, Massachusetts 02446, for
a period of ten days prior to the Annual Meeting and will also be available at
the Annual Meeting itself.
By Order of the Board of Directors
/s/ Jill W. MacDougall
Jill W. MacDougall
Corporate Secretary
Brookline, Massachusetts
August 14, 1998
<PAGE>
BAY STATE BANCORP, INC.
-----------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 29, 1998
-----------------------
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being furnished to shareholders of Bay State
Bancorp, Inc. (the "Company") in connection with the solicitation by the Board
of Directors ("Board of Directors" or "Board") of proxies to be used at the
annual meeting of shareholders (the "Annual Meeting"), to be held on September
29, 1998, at 2:00 p.m., Eastern Time, at the Royal Sonesta Hotel Cambridge, 5
Cambridge Parkway, Cambridge, Massachusetts, and at any adjournments thereof.
The 1998 Annual Report to Stockholders, including the consolidated financial
statements of the Company for the fiscal year ended March 31, 1998, accompanies
this Proxy Statement which is first being mailed to record holders on or about
August 14, 1998.
Regardless of the number of shares of common stock owned, it is important
that record holders of a majority of the shares be represented by proxy or in
person at the Annual Meeting. Shareholders are requested to vote by completing
the enclosed proxy card and returning it signed and dated in the enclosed
postage-paid envelope. Shareholders are urged to indicate their vote in the
spaces provided on the proxy card. PROXIES SOLICITED BY THE BOARD OF DIRECTORS
OF THE COMPANY WILL BE VOTED BY THE BOARD OF DIRECTORS IN ACCORDANCE WITH THE
DIRECTIONS GIVEN THEREIN. WHERE NO INSTRUCTIONS ARE INDICATED, SIGNED PROXY
CARDS WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED IN
THIS PROXY STATEMENT, "FOR" THE APPROVAL OF THE BAY STATE BANCORP, INC. 1998
STOCK-BASED INCENTIVE PLAN (THE "INCENTIVE PLAN") AND "FOR" THE RATIFICATION OF
SHATSWELL, MACLEOD & COMPANY, P.C. AS INDEPENDENT AUDITORS OF THE COMPANY FOR
THE FISCAL YEAR ENDING MARCH 31, 1999.
Other than the matters listed on the attached Notice of Annual Meeting of
Shareholders, the Board of Directors knows of no additional matters that will be
presented for consideration at the Annual Meeting. EXECUTION OF A PROXY,
HOWEVER, CONFERS ON THE DESIGNATED PROXY HOLDERS DISCRETIONARY AUTHORITY TO VOTE
THE SHARES IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH OTHER BUSINESS, IF
ANY, THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND AT ANY ADJOURNMENTS
THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE ANNUAL MEETING.
A proxy may be revoked at any time prior to its exercise by filing a
written notice of revocation with the Corporate Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
shareholder whose shares are not registered in your own name, you will need
appropriate documentation from your record holder to attend the Annual Meeting
and vote personally at the Annual Meeting.
The cost of solicitation of proxies on behalf of management will be borne
by the Company. In addition to the solicitation of proxies by mail, Kissel-Blake
Inc., a proxy solicitation firm, will assist the Company in soliciting proxies
for the Annual Meeting and will be paid a fee of $3,500, plus out-of-pocket
expenses. Proxies may also be solicited personally or by telephone by directors,
officers and other employees of the Company and its subsidiary, Bay State
Federal Savings Bank (the "Bank"), without additional compensation therefor. The
Company will also request persons, firms and corporations holding
<PAGE>
shares in their names, or in the name of their nominees, which are beneficially
owned by others, to send proxy material to, and obtain proxies from, such
beneficial owners, and will reimburse such holders for their reasonable expenses
in doing so.
Voting Securities
The securities which may be voted at the Annual Meeting consist of shares
of common stock of the Company ("Common Stock"), with each share entitling its
owner to one vote on all matters to be voted on at the Annual Meeting, except as
described below.
The close of business on August 3, 1998, has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
shareholders of record entitled to notice of and to vote at the Annual Meeting
and at any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 2,535,232 shares.
As provided in the Company's Certificate of Incorporation, for voting
purposes, holders of Common Stock who beneficially own in excess of 10% of the
outstanding shares of Common Stock (the "Limit") are not entitled to any vote in
respect of the shares held in excess of the Limit and are not treated as
outstanding for voting purposes. A person or entity is deemed to beneficially
own shares owned by an affiliate of, as well as, by persons acting in concert
with, such person or entity. The Company's Certificate of Incorporation
authorizes the Board of Directors (i) to make all determinations necessary to
implement and apply the Limit, including determining whether persons or entities
are acting in concert, and (ii) to demand that any person who is reasonably
believed to beneficially own stock in excess of the Limit to supply information
to the Company to enable the Board of Directors to implement and apply the
Limit.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote (after
subtracting any shares in excess of the Limit pursuant to the Company's
Certificate of Incorporation) is necessary to constitute a quorum at the Annual
Meeting. In the event that there are not sufficient votes for a quorum or to
approve or ratify any proposal at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit the further solicitation of proxies.
As to the election of directors (Proposal 1), the proxy card being provided
by the Board of Directors enables a shareholder to vote "FOR" the election of
the nominees proposed by the Board, or to "WITHHOLD" authority to vote for one
or more of the nominees being proposed. Under Delaware law and the Company's
Bylaws, directors are elected by a plurality of votes cast, without regard to
either (i) broker non-votes or (ii) proxies as to which authority to vote for
one or more of the nominees being proposed is withheld.
As to the proposed approval of the Incentive Plan (Proposal 2) submitted
for shareholder action, the proxy card being provided by the Board of Directors
enables a shareholder to check the appropriate box on the proxy card to (i) vote
"FOR" the item, (ii) vote "AGAINST" the item, or (iii) "ABSTAIN" from voting on
such item.
As to the ratification of Shatswell, MacLeod & Company, P.C. as independent
auditors of the Company (Proposal 3) and all other matters that may properly
come before the Annual Meeting, by checking the appropriate box, a shareholder
may (i) vote "FOR" the item, (ii) vote "AGAINST" the item, or (iii) "ABSTAIN"
from voting on such item.
2
<PAGE>
Under the Company's Bylaws and Delaware law, an affirmative vote of the
holders of a majority of the votes cast at the Annual Meeting on Proposal 2 and
Proposal 3 is required to constitute shareholder approval of each such Proposal.
Shares underlying broker non-votes or in excess of the Limit will not be counted
as present and entitled to vote or as votes cast and will have no effect on the
vote. For further information on the vote required to implement Proposal 2
during the first year following the conversion from mutual to stock form of the
Company's subsidiary, the Bank, which was completed on March 27, 1998 (the
"Conversion"), see the discussion under Proposal 2 herein. For purposes of the
rules and regulations of the Securities and Exchange Commission ("SEC"), shares
as to which the "ABSTAIN" box has been selected on the proxy card with respect
to Proposal 2 have the effect of a vote against Proposal 2 and shares underlying
broker non-votes or in excess of the Limit are not counted as entitled to vote
on Proposal 2 and have no effect on the vote on the Proposal.
Proxies solicited hereby are to be returned to the Company's transfer
agent, Registrar and Transfer Company ("RTC"). The Board of Directors has
designated RTC to act as the inspector of election and tabulate the votes at the
Annual Meeting. RTC is not otherwise employed by, or a director of, the Company
or any of its affiliates. After the final adjournment of the Annual Meeting, the
proxies will be returned to the Company.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to those persons believed by
management to be beneficial owners of more than 5% of the Company's outstanding
shares of Common Stock on the Record Date or as disclosed in certain reports
received to date regarding such ownership filed by such persons with the Company
and with the SEC, in accordance with Sections 13(d) and 13(g) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"). Other than those persons
listed below, the Company is not aware of any person, as such term is defined in
the Exchange Act, that owns more than 5% of the Company's Common Stock as of the
Record Date.
3
<PAGE>
<TABLE>
<CAPTION>
Name and Address of
Title of Class Beneficial Owner Number of Shares Percent of Class
- ------------------------ ----------------------------------------- ------------------ ------------------
<S> <C> <C> <C>
Common Stock Bay State Federal Savings Bank Employee 202,818(1) 8.0%
Stock Ownership Plan (the "ESOP")
1299 Beacon Street
Brookline, Massachusetts 02446
Common Stock The Bay State Federal Savings Charitable 187,795(2) 7.4%
Foundation (the "Foundation")
1299 Beacon Street
Brookline, Massachusetts 02446
Common Stock Jeffrey L. Gendell 169,000(3) 6.7%
200 Park Avenue
Suite 3900
New York, New York 10166
</TABLE>
- ----------
(1) Shares of Common Stock were acquired by the ESOP in the Bank's conversion.
The ESOP Committee administers the ESOP. BankBoston, N.A. has been
appointed as the corporate trustee for the ESOP ("ESOP Trustee"). The ESOP
Trustee, subject to its fiduciary duty, must vote all allocated shares held
in the ESOP in accordance with the instructions of the participants. As of
August 3, 1998, 20,282 shares have been allocated under the ESOP and
182,536 shares remain unallocated. Under the ESOP, unallocated shares and
allocated shares as to which voting instructions are not given by
participants are to be voted by the ESOP Trustee in a manner calculated to
most accurately reflect the instructions received from participants
regarding the allocated stock so long as such vote is in accordance with
the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(2) The Foundation was established and funded by the Company in connection with
the Bank's Conversion with an amount of the Company's Common Stock equal to
7.4% of the total amount of Common Stock issued in the Conversion. The
Foundation is a Delaware non-stock corporation and is dedicated to the
promotion of charitable purposes within the communities in which the Bank
operates. The Foundation is governed by a board of directors with four
members, all of whom are directors or officers of the Company or the Bank.
Pursuant to the terms of the contribution of Common Stock, as mandated by
the Office of Thrift Supervision ("OTS"), all shares of Common Stock held
by the Foundation must be voted in the same ratio as all other shares of
the Company's Common Stock on all proposals considered by shareholders of
the Company.
(3) Based on information filed in a Schedule 13D filed on July 29, 1998, Mr.
Gendell may be deemed the beneficial owner of 169,000 shares.
Interest of Certain Persons in Matters to be Acted Upon
After obtaining shareholder approval, the Company and the Bank intend to
grant to directors, officers and employees of the Bank and the Company, stock
options and awards in the form of shares of Common Stock under the Incentive
Plan being presented for approval in Proposal 2.
4
<PAGE>
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of nine (9)
directors and is divided into three classes. Each of the nine members of the
Board of Directors also presently serves as a director of the Bank. Directors
are elected for staggered terms of three years each, with the term of office of
only one of the three classes of directors expiring each year. Directors serve
until their successors are elected and qualified.
The three nominees proposed for election at the Annual Meeting are Robert
B. Cleary, Jerome R. Dangel and Kent T. Spellman. No person being nominated as a
director is being proposed for election pursuant to any agreement or
understanding between any such person and the Company.
In the event that any such nominee is unable to serve or declines to serve
for any reason, it is intended that proxies will be voted for the election of
the balance of those nominees named and for such other persons as may be
designated by the present Board of Directors. The Board of Directors has no
reason to believe that any of the persons named will be unable or unwilling to
serve. UNLESS AUTHORITY TO VOTE FOR THE DIRECTORS IS WITHHELD, IT IS INTENDED
THAT THE SHARES REPRESENTED BY THE ENCLOSED PROXY CARD WILL BE VOTED "FOR" THE
ELECTION OF ALL NOMINEES PROPOSED BY THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL NOMINEES
NAMED IN THIS PROXY STATEMENT.
Information with Respect to Nominees, Continuing Directors and Certain Executive
Officers
The following table sets forth, as of the Record Date, the names of
nominees and continuing directors and the Named Executive Officers (as defined
below), their ages, a brief description of their recent business experience,
including present occupations and employment, the year in which each became a
director of the Bank and the year in which their terms (or, in the case of
nominees, their proposed terms) as director of the Company expire. This table
also sets forth the amount of Common Stock and the percent thereof beneficially
owned by each director and all directors and executive officers as a group as of
the Record Date.
<TABLE>
<CAPTION>
Amount and
Expiration Nature of Ownership
Name and Principal Occupation at Director of Term as Beneficial as a Percent
Present and for Past Five Years Age Since(1) Director Ownership(2)(3) of Class(4)
- ------------------------------------------- ------- ------------ ------------- ------------------ --------------
NOMINEES
<S> <C> <C> <C> <C> <C>
Robert B. Cleary 62 1987 2001 1,000 *
Principal of the Robert Cleary
Insurance Group, Boston,
Massachusetts
Jerome R. Dangel 54 1996 2001 20,413 *
President of Investment Properties
Ltd., Newton, Massachusetts
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Amount and
Expiration Nature of Ownership
Name and Principal Occupation at Director of Term as Beneficial as a Percent
Present and for Past Five Years Age Since(1) Director Ownership(2)(3) of Class(4)
- ------------------------------------------- ------- ------------ ------------- ------------------ --------------
NOMINEES CONT'D
<S> <C> <C> <C> <C> <C>
Kent T. Spellman 49 1988 2001 36,780 1.45%
Founder and President of Telluride
Clothing Corporation, Inc., Needham,
Massachusetts
CONTINUING DIRECTORS
John F. Murphy 58 1975 2000 12,529 *
President, Chief Executive Officer and
Chairman of the Board of Directors of
the Bank and the Company
Denise M. Renaghan 41 1997 2000 5,991 *
Executive Vice President and Chief
Operating Officer of the Bank and the
Company
Leo F. Grace 67 1997 1999 11,250 *
Former Chairman of the Board,
President and Chief Executive Officer
of Union Federal Savings Bank,
Boston, Massachusetts
Richard F. Hughes 66 1997 1999 2,850 *
Founder and President of Hughes &
Associates, Inc., Quincy,
Massachusetts
Richard F. McBride 69 1994 2000 20,263 *
Owner of R.F. McBride Insurance
Agency and H.R. McBride Realtor,
Watertown, Massachusetts
H. Chester Webster 87 1959 1999 600 *
Retired, former President of the Bank
All directors and executive officers as a
group (10 persons)......................... -- -- -- 116,200 4.58%
</TABLE>
- ----------
* Does not exceed 1.0% of the Company's voting securities.
(1) Includes years of service as a director of the Bank.
(2) Each person effectively exercises sole (or shares with spouse or other
immediate family members) voting or dispositive power as to shares
reported.
(3) Does not include options and awards intended to be granted under the
Incentive Plan, which is subject to shareholder approval. For a discussion
of the options and awards that are intended to be granted under the
Incentive Plan, see Proposal 2.
(4) As of the Record Date, there were 2,535,232 shares of Common Stock
outstanding.
6
<PAGE>
Meetings of the Board of Directors and Committees of the Board of Directors
The Board of Directors of the Company and the Board of Directors of the
Bank conduct business through meetings of the Board of Directors and through
activities of their committees. The Board of Directors of the Company and Bank
generally meet on a monthly basis and may have additional meetings as needed.
During the fiscal year ended March 31, 1998, the Board of Directors of the
Company, which was formed on October 24, 1997, held 6 meetings primarily related
to organizational and other matters in connection with the formation of the
Company and the acquisition of the Bank through the Conversion. The Board of
Directors of the Bank held 12 meetings during fiscal 1998. All of the directors
of the Company and Bank attended at least 75% of the total number of the
Company's Board meetings held and committee meetings on which such directors
served during the fiscal year ended March 31, 1998. The Board of Directors of
the Company and Bank maintain committees, the nature and composition of which
are described below:
Audit and Compliance Committee. The Audit and Compliance Committee of the
Company consists of Messrs. Cleary, Spellman and Webster. This committee
generally meets on an annual basis and is responsible for the review of audit
reports and management's actions regarding the implementation of audit findings
and to review compliance with all relevant laws and regulations. Due to the
timing of the Conversion, the Audit and Compliance Committee of the Company did
not meet in fiscal 1998.
Nominating Committee. The Company's Nominating Committee for the 1998
Annual Meeting consists of Messrs. Murphy, McBride and Hughes. The committee
considers and recommends the nominees for director to stand for election at the
Company's annual meeting of shareholders. The Company's Certificate of
Incorporation and Bylaws provide for shareholder nominations of directors. These
provisions require such nominations to be made pursuant to timely notice in
writing to the Secretary of the Company. The shareholder's notice of nomination
must contain all information relating to the nominee which is required to be
disclosed by the Company's Bylaws and by the Exchange Act. See "Additional
Information Notice of Business to be Conducted at a Special or Annual Meeting."
Due to the timing of the Conversion, the Nominating Committee of the Company did
not meet in fiscal 1998, and has met one time during fiscal 1999.
Compensation Committee. The Compensation Committee of the Company consists
of Messrs. Cleary, Dangel, McBride and Murphy. The Advisory Committee of the
Bank consists of Messrs. Cleary, Murphy, Spellman and Webster. Such committees
are responsible for all matters regarding compensation and fringe benefits for
officers and employees of the Company and the Bank and meet on an as needed
basis. The Compensation Committee of the Company and the Advisory Committee of
the Bank met 2 and 1 times in fiscal 1998, respectively.
Directors' Compensation
Directors' Fees. All directors of the Bank are currently paid an annual
retainer of $4,000 and receive a fee of $500 for each regularly scheduled
monthly and special Board meeting attended. Members of the Executive Committee
of the Bank additionally receive an annual retainer of $4,000 and a fee of $500
for each meeting attended. For fiscal 1998, there were two special meetings of
the Board of Directors and 12 meetings of the Executive Committee. All directors
of the Company are paid an annual retainer fee of $4,000.
7
<PAGE>
CONSULTING AGREEMENT. Pursuant to the Bank's merger with Union Federal
Savings Bank, Boston, Massachusetts, in February 1997, the Bank entered into a
consulting agreement (the "Consulting Agreement") with Mr. Grace, who at the
time of the merger was Union Federal's President and Chief Executive Officer.
The agreement, which is for a three-year term, commenced on February 21, 1997
and provides that Mr. Grace be paid an annual amount of $127,000 for consulting
services to the Bank. The Consulting Agreement also provides for his termination
for cause (as defined in the consulting agreement) or without cause upon a vote
of the Board of Directors. During the term of the Consulting Agreement and for a
period of 12 months after the termination of the agreement, Mr. Grace is subject
to a covenant not to compete, either directly or indirectly, with the Bank.
INCENTIVE PLAN. The Company is presenting the Incentive Plan to
shareholders for approval, under which all directors of the Company and the Bank
are eligible to receive awards. See Proposal 2 for a summary of the material
terms of the Incentive Plan.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the cash
compensation paid as well as other compensation paid or accrued for services
rendered in all capacities during fiscal years ended March 31, 1998, 1997 and
1996 to the Chief Executive Officer and the highest paid executive officer who
earned and/or received salary and bonus in excess of $100,000 ("Named Executive
Officers").
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------
Annual Compensation(1) Awards Payouts
-------------------------------- ---------------------- ------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Fiscal Salary Bonus Compensation Awards Options/SARs Payouts Compensation
Principal Positions Year ($) ($) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
- ------------------- ------- -------- -------- ------------ -------- ------------ ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John F. Murphy 1998 $241,223 $60,000 -- -- -- -- $147,450
President and Chief 1997 228,813 82,145 -- -- -- -- 29,093
Executive Officer.... 1996 213,701 30,025 -- -- -- -- 28,829
Denise M. Renaghan 1998 $136,000 $39,846 -- -- -- -- $7,473
Executive Vice 1997 116,640 58,325 -- -- -- -- 7,206
President and Chief 1996 108,000 16,200 -- -- -- -- 3,060
Operating Officer....
</TABLE>
- ----------
(1) Under Annual Compensation, the column titled "Salary" includes directors'
fees for Mr. Murphy and Ms. Renaghan.
(2) For fiscal years 1998, 1997 and 1996, there were no (a) perquisites over
the lesser of $50,000 or 10% of the individual's total salary and bonus for
the year; (b) payments of above-market preferential earnings on deferred
compensation; (c) payments of earnings with respect to long-term incentive
plans prior to settlement or maturation; (d) tax payment reimbursements; or
(e) preferential discounts on stock. For fiscal years 1998, 1997 and 1996,
the Bank had no restricted stock or stock related plans in existence.
(3) No stock awards were granted or earned in fiscal years 1998, 1997 or 1996.
See Proposal 2.
(4) No stock options or SARs were earned or granted in fiscal years 1998, 1997
and 1996. See Proposal 2.
(5) For fiscal years 1998, 1997 and 1996, there were no payouts or awards under
any long-term incentive plan.
(6) Other Compensation includes matching contributions under the Bank's 401(a)
Plan of $6,450 for Mr. Murphy, and $3,573 for Ms. Renaghan, and life
insurance premiums of $141,000 for Mr. Murphy and $3,900 for Ms. Renaghan
for fiscal year 1998. Such life insurance policies provide that Mr. Murphy
and Ms. Renaghan may receive a benefit, if any, equal to the difference
between the cash surrender value of the policy and the premiums paid by the
Bank.
Employment Agreements. The Company and the Bank intend to enter into
employment agreements (collectively, the "Employment Agreements") with Mr.
Murphy and Ms. Renaghan (individually, the "Executive"). The Employment
Agreements are intended to ensure that the Bank and the Company will
8
<PAGE>
be able to maintain a stable and competent management base. The continued
success of the Bank and the Company depends to a significant degree on the
skills and competence of Mr. Murphy and Ms. Renaghan.
The Bank Employment Agreements provide for a three-year term for each
Executive and are renewable on an annual basis, unless written notice of
non-renewal is given by the Board of Directors of the Bank after conducting a
performance evaluation of the Executive. The terms of the Company Employment
Agreements shall be extended on a daily basis unless written notice of
non-renewal is given by the Board of Directors of the Company. The Employment
Agreements provide that the Executive's base salary will be reviewed annually.
The base salaries, which are currently effective for such Employment Agreements
for Mr. Murphy and Ms. Renaghan are $250,000 and $150,000, respectively. In
addition to the base salary, the Employment Agreements provide for, among other
things, participation in stock benefits plans and other employee benefit
programs and fringe benefits applicable to similarly situated executive
personnel. The Employment Agreements provide for termination by the Bank or the
Company for cause (as described in the agreements) at any time. In the event the
Bank or the Company chooses to terminate the Executive's employment for reasons
other than for cause, or in the event of the Executive's resignation from the
Bank or the Company upon (i) the failure to re-elect the Executive to his/her
current office(s); (ii) a material change in the Executive's functions, duties
or responsibilities; (iii) a relocation of the Executive's principal place of
employment by more than 25 miles; (iv) liquidation or dissolution of the Bank or
the Company; or (v) a breach of the Employment Agreement by the Bank or the
Company; the Executive or, in the event of death, the Executive's beneficiary,
would generally be entitled to receive an amount equal to the remaining base
salary payments due to the Executive and the contributions that would have been
made on the Executive's behalf to any employee benefit plans of the Bank or the
Company during the remaining term of the Employment Agreements. The Bank and the
Company would also continue and pay for the Executive's life, health and
disability coverage for the remaining term of the Employment Agreement. Upon any
voluntary termination by the Executive, the Executive is subject to a covenant
not to compete with the Company or the Bank for one year.
Under the Employment Agreements, upon termination or, under certain
circumstances, voluntary termination of the Executive following a change in
control of the Bank or the Company, the Executive or, in the event of the
Executive's death, the Executive's beneficiary, would be entitled to a severance
payment equal to the greater of: (i) the payments due under the Employment
Agreement for the remaining terms of the agreement; or (ii) three times the
average of the five preceding taxable years' annual compensation. The Bank and
the Company would also continue the Executive's life, health, and disability
coverage for thirty-six months following the change in control. Notwithstanding
that both Employment Agreements provide for a severance payment in the event of
a change in control, the Executive would only be entitled to receive a severance
payment under one agreement. In the event of a change in control of the Bank or
Company, the total amount of payments due under the Agreements, based solely on
the base salaries currently paid Mr. Murphy and Ms. Renaghan and excluding any
benefits under any employee benefit plan which may be payable, would be
approximately $1.2 million.
Payments to the Executive under the Bank Employment Agreement will be
guaranteed by the Company in the event that payments or benefits are not paid by
the Bank. Payment under the Company Employment Agreement would be made by the
Company. All reasonable costs and legal fees paid or incurred by the Executive
pursuant to any dispute or question of interpretation relating to the Employment
Agreements shall be paid by the Bank or Company, respectively, if the Executive
is successful on the merits pursuant to a legal judgment, arbitration or
settlement. The Employment Agreements also provide that the Bank and Company
shall indemnify the Executive to the fullest extent allowable under federal and
Delaware law, respectively. The terms of the agreements as described herein may
be revised as a result of OTS review.
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Change in Control Agreements. The Company and the Bank intend to enter into
Change in Control Agreements (the "CIC Agreements") with certain officers of the
Company and the Bank, none of whom will be covered by an Employment Agreement.
The CIC Agreements provide for either a two-year or three-year term and are
renewable on an annual basis in the case of a Bank CIC Agreement, and on a daily
basis in the case of a company CIC Agreement. The CIC Agreements will provide
that in the event of involuntary termination or, under certain circumstances,
voluntary termination of the officer following a change in control of the Bank
or the Company, the officer would be entitled to receive a severance payment
equal to two times or three times (as the case may be) the officer's average
annual compensation for the five years preceding termination. The Bank would
also continue and pay for the officer's life, health and disability coverage for
24 or 36 months (as the case may be) following termination. Payments to the
officer under the CIC Agreements will be guaranteed by the Company in the event
that payments or benefits are not paid by the Bank. In the event of a change in
control of the Bank or Company, the total payments that would be due under the
CIC Agreements, based solely on the current annual compensation paid to the
officers covered by the CIC Agreements and excluding any benefits under any
employee benefit plan which may be payable, would be approximately $1.3 million.
Retirement Plan. The Bank maintains the Financial Institutions Retirement
Fund (the "Retirement Plan") to provide retirement benefits for eligible
employees. Employees are generally eligible to participate in the Retirement
Plan after the completion of 12 consecutive months of employment with the Bank
and the attainment of age 21. Hourly paid employees are excluded from
participation in the Retirement Plan. Benefits payable to a participant under
the Retirement Plan are based on the participant's years of service and salary.
The formula for normal retirement benefits payable annually under the Retirement
Plan is 2% multiplied by years of benefit service multiplied by the average of
the participant's highest three years of salary paid by the Bank. A participant
may elect early retirement as early as age 45. However, such participant's
normal retirement benefits will be reduced by an early retirement factor based
on age at early retirement.
Participants generally have no vested interest in Retirement Plan benefits
prior to the completion of five years of service with the Bank. Following the
completion of five years of vesting service, or in the event of a participant's
attainment of age 65, death or termination of employment due to disability, a
participant will become 100% vested in the accrued benefit under the Retirement
Plan. The amounts of benefits paid under the Retirement Plan are not reduced for
any social security benefit payable to participants. As of January 1, 1998, Mr.
Murphy and Ms. Renaghan had credited years of service of 32 years and 24 years,
respectively.
Management Supplemental Executive Retirement Plan. The Bank maintains a
non-tax qualified Management Supplemental Executive Retirement Plan ("SERP") to
provide certain officers and highly compensated employees with additional
retirement benefits. The SERP benefit is intended to make up benefits lost under
the ESOP allocation procedures to participants who retire prior to the complete
repayment of the ESOP loan. At the retirement of a participant, the benefits
under the SERP are determined by first: (i) projecting the number of shares that
would have been allocated to the participant under the ESOP if they had been
employed throughout the period of the ESOP loan (measured from the participant's
first date of ESOP participation); and (ii) reducing the number determined by
(i) above by the number of shares actually allocated to the Participant's
account under the ESOP; and second, by multiplying the number of shares that
represent the difference between such figures by the average fair market value
of the Common Stock over the preceding five years. Benefits under the SERP vest
in 20% annual increments over a five year period commencing as of the date of a
Participant's participation in the SERP. The vested portion of the SERP
Participant's benefits are payable upon the retirement of the Participant upon
or after the attainment of age
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65 or in accordance with the requirements of early retirement under the
Retirement Plan. A separate trust may be established to hold assets of the Bank
for the purpose of paying benefits under the SERP or the Bank may hold assets
for SERP payments through a common trust established for the Retirement Benefit
Equalization Plan discussed below.
Benefit Equalization Plan. The Bank maintains a retirement benefit
equalization plan to provide selected employees with retirement benefits which
would have been payable under the Retirement Plan and Thrift Plan (the "Benefit
Equalization Plan" or "BEP"), but for the limits imposed by the Code on the
amount of benefits accrued or allocated under tax-qualified plans. In connection
with the Conversion, the Bank amended the Benefit Equalization Plan to provide
participants with benefits which would be payable under the ESOP but for such
limits imposed by the Code.
A participant's benefit under the BEP generally equals the excess of the
benefit that would otherwise be accrued or allocated under the tax-qualified
plans for the benefit of the participant, but for the limitations imposed by the
Code over the benefit that is actually accrued or allocated under such plans
after giving effect to any reduction of such benefit by the limitations imposed
by the Code. The Bank has established a grantor trust (also known as a "rabbi
trust") to hold assets of the Bank for the purpose of paying benefits under the
BEP, provided that, in the event of the insolvency of the Bank, the assets of
the trust are subject to the claims of the Bank's creditors. The assets of this
trust may be used to acquire shares of Common Stock to be used to satisfy the
obligations of the Bank for the payment of benefits under the BEP.
Transactions With Certain Related Persons
The Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA")
requires 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. In addition, 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.
Prior to FIRREA, the Bank made loans to its executive officers and
Directors which were secured by their primary residences. The rates of interest
charged by the Bank on such loans were the Bank's cost of funds. Pursuant to
FIRREA, in 1989, the Bank discontinued its practice of making such preferential
loans to its officers and Directors. However, all such pre-FIRREA preferential
loans were "grandfathered" under FIRREA. Since the enactment of FIRREA, the Bank
has not made any loans to its executive officers or Directors. The Bank has
recently revised its policies whereby it will be permitted to make loans to
executive officers and Directors. Pursuant to such policy, such loans, as well
as loans made to Bank employees, must be made on the same terms and conditions
offered to the general public, in the ordinary course of business, on
substantially the same terms, including collateral, as those prevailing at the
time for comparable transactions with other person and may not involve more than
the normal risk of collectibility or present other unfavorable features. As of
March 31, 1998, the Bank had $4.4 million of loans to executive officers or
Directors. With the exception of loans to Messrs. Cleary and Murphy, which are
secured by mortgage liens on their primary residences and, at March 31, 1998,
had balances of $515,000 and $387,000, respectively, all other of the Bank's
loans to executive officers and Directors had balances of less than $60,000 as
of March 31, 1998 or were made by the Bank in the ordinary course of business
with no favorable terms and do not involve more than the normal risk of
collectibility or present unfavorable features. Although such loans to Messrs.
Cleary and Murphy were made prior to the enactment of FIRREA and do
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not involve more than the normal risk of collectibility or present unfavorable
features, such loans were made with interest rates which were below the interest
rates otherwise available to the Bank's customers at the time such loans were
made.
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 THE BAY STATE BANCORP, INC.
1998 STOCK-BASED INCENTIVE PLAN
The Board of Directors of the Company is presenting for shareholder
approval the Bay State Bancorp, Inc. 1998 Stock-Based Incentive Plan ("Incentive
Plan"), in the form attached hereto as Appendix A. The purpose of the Incentive
Plan is to attract and retain qualified personnel in key positions, provide
officers, employees and non-employee directors ("Outside Directors") of the
Company and any of its affiliates, including the Bank, with a proprietary
interest in the Company as an incentive to contribute to the success of the
Company, promote the attention of management to other shareholder's concerns and
reward employees for outstanding performance. The following is a summary of the
material terms of the Incentive Plan which is qualified in its entirety by the
complete provisions of the Incentive Plan attached as Appendix A.
General
The Incentive Plan authorizes the granting of options to purchase Common
Stock of the Company ("Options"), awards of restricted shares of Common Stock
("Stock Awards") (collectively, Options and Stock Awards are referred to as
"Awards"). Subject to certain adjustments to prevent dilution of Awards to
participants, the maximum number of shares of Common Stock reserved for Awards
under the Incentive Plan is 354,932 shares, consisting of 253,523 shares
reserved for Options and 101,409 shares reserved for Stock Awards. All employees
and Outside Directors of the Company and its affiliates, including the Bank, are
eligible to receive Awards and limited rights under the Incentive Plan. The
Incentive Plan will be administered by a committee (the "Committee") consisting
of four members of the Board of Directors, three of which are not employees of
the Company or its affiliates. Authorized but unissued shares or shares
previously issued and reacquired by the Company may be used to satisfy Awards
under the Incentive Plan. If authorized but unissued shares are used to satisfy
the grant of Stock Awards and the exercise of Options granted under the
Incentive Plan, it will result in an increase in the number of shares
outstanding and will have a dilutive effect on the holdings of existing
shareholders. It is currently anticipated that a trust (the "Incentive Plan
Trust") will be established which will purchase previously issued shares to fund
the Company's obligation for Stock Awards which such stock will be purchased by
the Incentive Plan trustee with contributions from the Company or Bank. As of
the date of this Proxy Statement, no Awards have been granted under the
Incentive Plan.
Types of Awards
General. The Incentive Plan authorizes the grant of Awards in the form of:
(i) Options intended to qualify as incentive stock options under Section 422 of
the Code (Options which afford certain tax benefits
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to the recipients upon compliance with certain conditions and which do not
result in tax deductions to the Company), referred to as "Incentive Stock
Options"; (ii) Options that do not so qualify (Options which do not afford
certain income tax benefits to recipients, but which may provide tax deductions
to the Company), referred to as "Non-Statutory Stock Options"; and (iii) Stock
Awards. Each type of Award may be subject to vesting or service requirements or
other conditions imposed by the Committee.
Options. The Committee has the authority to determine the date or dates on
which each Option shall become exercisable and any other conditions applicable
to the exercisability of an Option; provided, however, certain regulatory
limitations on exercisability will apply to any Option granted prior to March
27, 1999. See "Amendments" and "Shareholder Approval, Effective Date of Plan and
OTS Compliance." The exercise price (described below) of any Option may
generally be paid in cash or in Common Stock at the discretion of the Committee.
See "Alternate Option Payments." The term of Options shall be determined by the
Committee, but in no event shall an Option be exercisable more than ten years
from the date of grant.
All Options granted under the Incentive Plan to officers and employees may
qualify as Incentive Stock Options to the extent permitted under Section 422 of
the Code and to the extent awarded as such by the Committee. In order to qualify
as Incentive Stock Options under Section 422 of the Code, the Option must be
granted only to an employee, the exercise price must not be less than 100% of
the fair market value on the date of grant (except in the case of "10% owners,"
as described below), the term of the Option may not exceed ten years from the
date of grant (except in the case of "10% owners," as described below), no more
than $100,000 of options may become exercisable for the first time in any
calendar year and the options must not be transferable except by the laws of
descent and distribution. Incentive Stock Options granted to any person who is
the beneficial owner of more than 10% of the outstanding voting stock (a "10%
owner") may be exercised only for a period of five years from the date of grant
and the exercise price must be at least equal to 110% of the fair market value
of the underlying Common Stock on the date of grant.
Each Outside Director of the Company or its affiliates will be eligible to
receive Non-Statutory Stock Options to purchase shares of Common Stock.
Additionally, officers and employees are also eligible to receive Non-Statutory
Stock Options.
Unless otherwise determined by the Committee and subject to applicable
regulation, upon termination of an optionee's services for any reason other than
death, disability, retirement or termination for cause, all then exercisable
Options shall remain exercisable for a period of three months following
termination and all unexercisable Options shall be cancelled. In the event of
the death or disability of an optionee, all unexercisable Options held by such
optionee will become fully exercisable and remain exercisable for up to one year
thereafter. In the event of termination for cause, all exercisable and
unexercisable Options held by the optionee shall be cancelled. In the event of
retirement, all exercisable options held by such optionee will remain generally
exercisable for a period of one year following the optionee's termination from
service. However, in the event of the retirement of an optionee, the Committee
shall, subject to applicable regulation, have the discretion to allow
unexercisable Options to continue to vest or become exercisable in accordance
with their original terms.
Stock Awards. The Committee has the authority to determine the dates on
which Stock Awards granted will vest or any other conditions which must be
satisfied prior to vesting; provided, however, certain regulatory conditions on
vesting will apply to any Stock Award granted prior to March 27, 1999. See
"Amendments" and "Shareholder Approval, Effective Date of Plan, and OTS
Compliance."
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When Stock Awards are distributed (i.e., vest) in accordance with the
Incentive Plan, the recipients will receive an amount equal to accumulated cash
and stock dividends (if any) with respect thereto plus earnings thereon minus
any required tax withholding amounts. Prior to vesting, recipients of Stock
Awards may direct the voting of shares of Common Stock granted to them and held
in the Incentive Plan Trust. Shares of Common Stock held by the Incentive Plan
Trust which have not been allocated or for which voting has not been directed
are voted by the trustee in the same proportion as the awarded shares are voted
in accordance with the directions given by all recipients of Stock Awards.
Unless otherwise determined by the Committee and subject to applicable
regulation, upon termination of the services of a holder of a Stock Award for
any reason other than death, disability, retirement or termination for cause,
all such holder's rights in unvested Stock Awards shall be cancelled. In the
event of the death or disability of the holder of the Stock Award, all unvested
Stock Awards held by such individual will become fully vested. In the event of
termination for cause of a holder of a Stock Award, all unvested Stock Awards
held by such individual shall be cancelled. In the event of retirement of the
holder of a Stock Award, the Committee shall, subject to applicable regulation,
have the discretion to determine that all unvested Stock Awards shall continue
to vest in accordance with their original terms.
Tax Treatment
Options. An optionee will generally not be deemed to have recognized
taxable income upon grant or exercise of any Incentive Stock Option, provided
that shares transferred in connection with the exercise are not disposed of by
the optionee for at least one year after the date the shares are transferred in
connection with the exercise of the Option and two years after the date of grant
of the Option. If these holding periods are satisfied, upon disposal of the
shares, the aggregate difference between the per share Option exercise price and
the fair market value of the Common Stock is recognized as income taxable at
capital gains rates. No compensation deduction may be taken by the Company as a
result of the grant or exercise of Incentive Stock Options, assuming these
holding periods are met.
In the case of the exercise of a Non-Statutory Stock Option, an optionee
will recognize ordinary income upon exercise of the Option in an amount equal to
the aggregate amount by which the per share exercise price is exceeded by the
fair market value of the Common Stock. In the event shares received through the
exercise of an Incentive Stock Option are disposed of prior to the satisfaction
of the holding periods (a "disqualifying disposition"), the exercise of the
Option will essentially be treated as the exercise of a Non-Statutory Stock
Option, except that the optionee will recognize the ordinary income for the year
in which the disqualifying disposition occurs. The amount of any ordinary income
recognized by the optionee upon the exercise of a Non-Statutory Stock Option or
due to a disqualifying disposition will be a deductible expense of the Company
for federal income tax purposes, subject to the limitations imposed by Code
Section 162(m) (discussed below).
Stock Awards. When shares of Common Stock, as Stock Awards, are
distributed, the recipient recognizes ordinary income equal to the fair market
value of such shares at the date of distribution plus any dividends and earnings
on such shares (provided such date is more than six months after the date of
grant) and the Company is permitted a commensurate compensation expense
deduction for income tax purposes.
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Performance Awards.
General. The Incentive Plan provides the Committee with the ability to
condition or restrict the vesting or exercisability of any Award upon the
achievement of performance targets or goals as set forth under the Incentive
Plan. Any Award subject to such conditions or restrictions is considered to be a
"Performance Award." Subject to the express provisions of the Plan and as
discussed in this paragraph, the Committee has discretion to determine the terms
of any Performance Award, including the amount of the award, or a formula for
determining such, the performance criteria and level of achievement related to
these criteria which determine the amount of the award granted, issued,
retainable and/or vested, the period as to which performance shall be measured
for determining achievement of performance (a "performance period"), the timing
of delivery of any awards earned, forfeiture provisions, the effect of
termination of employment for various reasons, and such further terms and
conditions, in each case not inconsistent with the Plan, as may be determined
from time to time by the Committee. The performance criteria upon which
Performance Awards are granted, issued, retained and/or vested may be based on
financial performance and/or personal performance evaluations, except that for
any Performance Award that is intended by the Committee to satisfy the
requirements for "performance based compensation" under Code Section 162(m), the
performance criteria shall be a measure based on one or more Qualifying
Performance Criteria (as defined below). Notwithstanding satisfaction of any
performance goals, the number of Shares granted, issued, retainable and/or
vested under a Performance Award may be adjusted by the Committee on the basis
of such further considerations as the Committee in its sole discretion shall
determine. However, the Committee may not increase the amount earned upon
satisfaction of any performance goal by any Participant who is a "covered
employee" within the meaning of Section 162(m) of the Code.
Qualifying Performance Criteria and Section 162(m) Limits. Subject to
shareholder approval of the Plan, the Performance Criteria for any Performance
Award that is intended to satisfy the requirements for "performance based
compensation" under the Code Section 162(m) shall be based upon any one or more
of the following Performance Criteria, either individually, alternatively or in
any combination, applied to either the Company as a whole or to a business unit
or subsidiary, either individually, alternatively or in any combination, and
measured either on an absolute basis or relative to a pre-established target, to
previous years' results or to a designated comparison group, in each case as
preestablished by the Committee under the terms of the Award: net income, as
adjusted for non-recurring items; cash earnings; earnings per share; cash
earnings per share; return on equity; return on assets; assets; stock price;
total shareholder return; capital; net interest income; market share; cost
control or efficiency ratio; and asset growth.
Maximum Awards. The aggregate amount of Options granted under the Plan
during any 60 month period to any one Participant may not exceed 25% of the
total amount of options available to be granted under the Incentive Plan. The
aggregate amount of shares of Common Stock issuable under a Stock Award granted
under the Plan for any 60 month period to any one Participant may not exceed 25%
of the total amount of Stock Awards available to be granted under the Incentive
Plan.
Payout Alternatives
Any shares of Common Stock tendered in payment of an obligation arising
under the Incentive Plan or applied to tax withholding amounts shall be valued
at the fair market value of the Common Stock. The Committee may use treasury
stock, authorized but unissued stock or it may direct the market purchase of
shares of Common Stock to satisfy its obligations under the Incentive Plan.
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Alternate Option Payments
Subject to the terms of the Incentive Plan, the Committee also has
discretion to determine the form of payment for the exercise of an Option. The
Committee may indicate acceptable forms in the Award Agreement covering such
Options or may reserve its decision to the time of exercise. No Option is to be
considered exercised until payment in full is accepted by the Committee. The
Committee may permit the following forms of payment for Options: (a) in cash or
by certified or cashiers check; (b) by tendering previously acquired shares of
Common Stock; or (c) some other method acceptable to it. Any shares of Common
Stock tendered in payment of the exercise price of an Option shall be valued at
the fair market value of the Common Stock on the date prior to the date of
exercise.
Amendments
Subject to limitations imposed by the Incentive Plan, the Board of
Directors or Committee may amend the Incentive Plan in any respect, at any time,
provided that no amendment may affect the rights of the holder of an Award
without his or her permission and such amendment must comply with applicable law
and regulation. Applicable OTS regulations provide that any stock based benefit
plan, such as the Incentive Plan, that is adopted by a converted institution
within the first year after conversion may not provide for the granting of
awards which shall vest or become exercisable in installments at a rate greater
than 20% per year and may not permit the acceleration of vesting, except in the
case of death or disability. The Board of Directors intends to any necessary
action, including the amendment or modification of the Incentive Plan, to
provide for the acceleration of vesting or exercisability of Awards upon the
occurrence of a change in control of the Company or the Bank (as defined in the
Incentive Plan) and other circumstances. It is intended that any such
modification or amendment shall be submitted to shareholders for approval to the
extent required by applicable OTS regulations.
Adjustments
In the event of any change in the outstanding shares of Common Stock of the
Company 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 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, including the payment of an
extraordinary dividend, the Committee may make such adjustments to previously
granted Awards, to prevent dilution, diminution or enlargement of the rights of
the holder; provided, however, that in the case of an extraordinary dividend,
the Committee may be required to obtain OTS approval prior to any such
adjustment. All Awards under the Incentive Plan shall be binding upon any
successors or assigns of the Company.
Nontransferability
Unless determined otherwise by the Committee, Awards under the Incentive
Plan shall not be transferable by the recipient other than by will or the laws
of intestate succession or pursuant to a domestic relations order. With the
consent of the Committee, an Award recipient may permit transferability or
assignment of Non-Statutory Stock Options for valid estate planning purposes as
permitted under the Code or Rule 16b-3 under the Exchange Act and a participant
may designate a person or his or her estate as beneficiary of any Award to which
the recipient would then be entitled, in the event of the death of the
participant.
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Shareholder Approval, Effective Date of Plan and OTS Compliance
The Company believes the Incentive Plan complies with the applicable
regulations of the OTS. However, the OTS has not in any way endorsed or approved
the Incentive Plan. Pursuant to OTS regulations, the Incentive Plan may not be
implemented prior to March 27, 1999 unless it is approved by a majority of the
votes eligible to be cast by the Company's shareholders at a duly called meeting
of shareholders which may be held no sooner than six months after the completion
of the Conversion.
The Incentive Plan provides that it shall become effective upon the earlier
of: (i) the date that it is approved by a majority of votes eligible to be cast
by the Company's shareholders at a duly called meeting of shareholders; or (ii)
March 28, 1999. Accordingly, if the Incentive Plan is not approved by a majority
of the votes eligible to be cast by shareholders at the Annual Meeting, the
Incentive Plan and any grants thereunder shall become effective on March 28,
1999 without further shareholder approval unless it is terminated by the Board
of Directors. In the absence of the approval of the Incentive Plan by a majority
of shares cast at the Annual Meeting, the Options granted under the Incentive
Plan would not qualify as Incentive Stock Options under the Code and the Common
Stock of the Company may no longer be eligible for listing on the American Stock
Exchange. Applicable OTS regulations also impose certain limitations on the
vesting or exercisability of Awards under the Incentive Plan. See "Amendments."
New Plan Benefits
As of the date of this Proxy Statement, no determination had been made
regarding the granting of Awards under the Incentive Plan.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD, IF EXECUTED AND RETURNED, WILL BE VOTED "FOR" THE APPROVAL OF THE BAY
STATE BANCORP, INC. 1998 STOCK-BASED INCENTIVE PLAN.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
BAY STATE BANCORP, INC. 1998 STOCK-BASED INCENTIVE PLAN.
PROPOSAL 3. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended March 31, 1998
were Shatswell, MacLeod & Company, P.C. The Company's Board of Directors has
reappointed Shatswell, MacLeod & Company, P.C. to continue as independent
auditors for the Bank and the Company for the fiscal year ending March 31, 1999,
subject to ratification of such appointment by the shareholders.
Representatives of Shatswell, MacLeod & Company, P.C. will be present at
the Annual Meeting. They will be given an opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions
from shareholders present at the Annual Meeting.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF SHATSWELL, MACLEOD &
COMPANY, P.C. AS THE INDEPENDENT AUDITORS OF THE COMPANY.
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF SHATSWELL, MACLEOD & COMPANY AS THE INDEPENDENT AUDITORS OF THE
COMPANY.
ADDITIONAL INFORMATION
Shareholder Proposals
To be considered for inclusion in the Company's proxy statement and form of
proxy relating to the 1998 Annual Meeting of Shareholders, a shareholder
proposal must be received by the Secretary of the Company at the address set
forth on the Notice of Annual Meeting of Shareholders not later than June 1,
1999. Any such proposal will be subject to 17 C.F.R. ss. 240.14a-8 of the Rules
and Regulations under the Exchange Act.
Notice of Business to be Conducted at a Special or Annual Meeting
The Bylaws of the Company set forth the procedures by which a shareholder
may properly bring business before a meeting of shareholders. 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 shareholder to properly bring business before an
annual meeting. The shareholder must give written advance 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 shareholders, notice by the shareholder 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 shareholders of the annual
meeting date was mailed or such public disclosure was made. The advance notice
by shareholders must include the shareholder's name and address, as they appear
on the Company's record of shareholders, a brief description of the proposed
business, the reason for conducting such business at the annual meeting, the
class and number of shares of the Company's capital stock that are beneficially
owned by such shareholder and any material interest of such shareholder in the
proposed business. In the case of nominations to the Board of Directors, certain
information regarding the nominee must be provided. Nothing in this paragraph
shall be deemed to require the Company to include in its proxy statement or the
proxy relating to any Annual Meeting any shareholder proposal which does not
meet all of the requirements for inclusion established by the SEC in effect at
the time such proposal is received.
Other Matters Which May Properly Come Before the Meeting
The Board of Directors knows of no business which will be presented for
consideration at the Annual Meeting other than as stated in the Notice of Annual
Meeting of Shareholders. If, however, other matters are properly brought before
the Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the Annual
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Annual Meeting. However, if you are a shareholder whose
shares are not registered in your own name, you will need appropriate
documentation from your recordholder to vote personally at the Annual Meeting.
18
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A COPY OF THE FORM 10-KSB (WITHOUT EXHIBITS) FOR THE FISCAL YEAR ENDED
MARCH 31, 1998, AS FILED WITH THE SEC, WILL BE FURNISHED WITHOUT CHARGE TO
SHAREHOLDERS OF RECORD UPON WRITTEN REQUEST TO MICHAEL O. GILLES, BAY STATE
BANCORP, INC., 1299 BEACON STREET, BROOKLINE, MASSACHUSETTS 02446.
By Order of the Board of Directors
/s/ Jill W. MacDougall
Jill W. MacDougall
Corporate Secretary
Brookline, Massachusetts
August 14, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, YOU ARE REQUESTED TO SIGN, DATE AND PROMPTLY
RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
19
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APPENDIX A
BAY STATE BANCORP, INC.
1998 STOCK-BASED INCENTIVE PLAN
1. DEFINITIONS.
(a) "Affiliate" means any "parent corporation" or "subsidiary corporation"
of the Holding 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 Stock Awards.
(c) "Award Agreement" means an agreement evidencing and setting forth the
terms of an Award.
(d) "Bank" means Bay State Federal Savings Bank.
(e) "Board of Directors" means the board of directors of the Holding
Company.
(f) "Change in Control" of the Holding Company or the Bank means an event
of a nature that: (i) would be required to be reported in response to Item 1 of
the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Exchange; or (ii) results in a "change in control" of
the Bank or the Holding Company within the meaning of the Home Owners' 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 of directors shall substitute its judgment for that of the
OTS); or (iii) without limitation 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 Holding Company representing 25% or more of the
Bank's or the Holding Company's outstanding voting securities or right to
acquire such securities except for any voting securities of the Bank purchased
by the Holding Company and any voting securities purchased by any employee
benefit plan of the Bank or the Holding Company, 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 Holding Company's stockholders
was approved by the same Nominating Committee serving under an Incumbent Board,
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 Holding Company
or similar transaction occurs in which the Bank or Holding Company is not the
resulting entity; provided, however, that such an event listed above will be
deemed to have occurred or to have been effectuated upon the receipt of all
required regulatory approvals not including the lapse of any statutory waiting
periods.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the committee designated by the Board of Directors,
pursuant to Section 2 of the Plan, to administer the Plan.
(i) "Common Stock" means the Common Stock of the Holding Company, par
value, $.01 per share.
(j) "Date of Grant" means the effective date of an Award.
(k) "Disability" means any mental or physical condition with respect to
which the Participant qualifies for and receives benefits for under a long-term
disability plan of the Holding 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
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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 Holding Company or an
Affiliate.
(l) "Effective Date" means the earlier of the date the Plan is approved by
shareholders or March 27, 1999.
(m) "Employee" means any person employed by the Holding Company or an
Affiliate. Directors who are employed by the Holding Company or an Affiliate
shall be considered Employees under the Plan.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Exercise Price" means the price at which a Participant may purchase a
share of Common Stock pursuant to an Option.
(p) "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 last transaction price quoted for such date by The Nasdaq
Stock Market;
(ii) If the Common Stock was traded on a stock exchange on 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.
(q) "Holding Company" means Bay State Bancorp, Inc.
(r) "Incentive Stock Option" means a stock option granted to a Participant,
pursuant to Section 7 of the Plan, that is intended to meet the requirements of
Section 422 of the Code.
(s) "Non-Statutory Stock Option" means a stock option granted to a
Participant pursuant to the terms of the Plan but which is not intended to be
and is not identified as an Incentive Stock Option or a stock option granted
under the Plan which is intended to be and is identified as an Incentive Stock
Option but which does not meet the requirements of Section 422 of the Code.
(t) "Option" means an Incentive Stock Option or Non-Statutory Stock Option.
(u) "Outside Director" means a member of the board(s) of directors of the
Holding Company or an Affiliate who is not also an Employee of the Holding
Company or an Affiliate.
(v) "Participant" means any person who holds an outstanding Award.
(w) "Performance Award" means an Award granted to a Participant pursuant to
Section 9 of the Plan.
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(x) "Plan" means this Bay State Bancorp, Inc. 1998 Stock-Based Incentive
Plan.
(y) "Retirement" means retirement from employment with the Holding Company
or an Affiliate in accordance with the then current retirement policies of the
Holding 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 Holding Company and any Affiliate following written notice to such
board(s) of directors of the Outside Director's intention to retire.
(z) "Stock Award" means an Award granted to a Participant pursuant to
Section 8 of the Plan.
(aa) "Termination for Cause" shall mean, in the case of an Outside
Director, removal from the board(s) of directors of the Holding Company and its
Affiliates in accordance with the applicable by-laws of the Holding Company and
its Affiliates or, in the case of an Employee, as defined under any employment
agreement with the Holding Company or an Affiliate; provided, however, that if
no employment agreement exists with respect to the Employee, Termination for
Cause shall mean termination of employment because of a material loss to the
Holding Company or an Affiliate, as determined by and in the sole discretion of
the Board of Directors or its designee(s).
(bb) "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.
(cc) "Trustee" means any person or entity approved by the Board of
Directors or its designee(s) to hold any of the Trust assets.
2. ADMINISTRATION.
(a) The Committee shall administer the Plan. The Committee shall consist of
two or more disinterested directors of the Holding 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 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 Holding Company or an
Affiliate who need not be disinterested and who may grant Awards and administer
the Plan with respect to Employees and Outside Directors who are not considered
officers or directors of the Holding 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 Employees and Outside Directors who
are to receive Awards under the Plan, (ii) determine the type, number, vesting
requirements and other features and conditions of such Awards, (iii) interpret
the Plan and Award Agreements in all respects and (iv) make all other decisions
relating to the operation of the Plan. The Committee may adopt such rules or
guidelines as it deems appropriate to implement the Plan. The Committee's
determinations under the Plan shall be final and binding on all persons.
(c) Each Award shall be evidenced by a written agreement ("Award
Agreement") containing such provisions as may be required by the Plan and
otherwise approved by the Committee. Each Award Agreement shall constitute a
binding contract between the Holding Company or an Affiliate and the
Participant, and every Participant, 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 in accordance with the Plan, but each
Award Agreement may include any additional provisions and restrictions
determined by the Committee, in its discretion, provided that such additional
provisions and restrictions are not inconsistent with the terms of the Plan. 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
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manner, time, and rate (cumulative or otherwise) of exercise or vesting of such
Award; and (vi) the restrictions, if any, placed upon such Award, or upon shares
which may be issued upon exercise of such Award. The Chairman of the Committee
and such other directors and officers as shall be designated by the Committee is
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.
(d) The Committee may delegate all authority for: (i) the determination of
forms of payment to be made by or received by the Plan and (ii) 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
Holding Company or an Affiliate for determinations to be made pursuant to the
Plan, including the satisfaction of any conditions of a Performance Award.
However, only the Committee or a portion of the Committee may certify the
attainment of any conditions of a Performance Award intended to satisfy the
requirements of Section 162(m) of the Code.
3. TYPES OF AWARDS AND RELATED RIGHTS.
The following Awards may be granted under the Plan:
(a) Non-Statutory Stock Options.
(b) Incentive Stock Options.
(c) Stock Awards.
4. STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 14 of the Plan, the maximum
number of shares reserved for Awards under the Plan is 354,932, which number
shall not exceed 14% of the outstanding shares of the Common Stock determined
immediately as of the Effective Date. Subject to adjustment as provided in
Section 14 of the Plan, the maximum number of shares reserved hereby for
purchase pursuant to the exercise of Options granted under the Plan is 253,523,
which number shall not exceed 10% of the outstanding shares of Common Stock as
of the Effective Date. The maximum number of the shares reserved for Stock
Awards is 101,409, which number shall not exceed 4% of the outstanding shares of
Common Stock as of the Effective Date. 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 Trustee or the Holding
Company, respectively. To the extent that Options and Stock Awards are granted
under the Plan, the shares underlying such Awards will be unavailable for any
other use including future grants under the Plan except that, to the extent that
Stock Awards or Options terminate, expire or are forfeited without having vested
or without having been exercised, new Awards may be made with respect to these
shares.
5. ELIGIBILITY.
Subject to the terms of the Plan, all Employees and Outside Directors shall
be eligible to receive Awards under the Plan. In addition, the Committee may
grant eligibility to consultants and advisors of the Holding Company or an
Affiliate, as it sees fit.
6. NON-STATUTORY STOCK 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 Non-Statutory Stock Options to eligible individuals upon such
terms and conditions as it may determine to the extent such terms and conditions
are consistent with the following provisions:
(a) Exercise Price. The Committee shall determine the Exercise Price of
each Non-Statutory Stock Option. However, the Exercise Price shall not be less
than 100% of the Fair Market Value of the Common Stock on the Date of Grant.
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(b) Terms of Non-statutory Stock Options. The Committee shall determine the
term during which a Participant may exercise a Non-Statutory Stock Option, but
in no event may a Participant exercise a Non-Statutory Stock Option, in whole or
in part, more than ten (10) years from the Date of Grant. The Committee shall
also determine the date on which each Non-Statutory Stock Option, or any part
thereof, first becomes exercisable and any terms or conditions a Participant
must satisfy in order to exercise each Non-Statutory Stock Option. The shares of
Common Stock underlying each Non-Statutory Stock Option may be purchased in
whole or in part by the Participant at any time during the term of such
Non-Statutory Stock Option, or any portion thereof, once the Non-Statutory Stock
Option becomes exercisable.
(c) Non-Transferability. Unless otherwise determined by the Committee in
accordance with this Section 6(c), a Participant may not transfer, assign,
hypothecate, or dispose of in any manner, other than by will or the laws of
intestate succession, a Non-Statutory Stock Option. The Committee may, however,
in its sole discretion, permit transferability or assignment of a Non-Statutory
Stock Option if such transfer or assignment is, in its sole determination, for
valid estate planning purposes and such transfer or assignment is permitted
under the Code and Rule 16b-3 under the Exchange Act. For purposes of this
Section 6(c), a transfer for valid estate planning purposes includes, but is not
limited to: (a) a transfer to a revocable intervivos trust as to which the
Participant is both the settlor and trustee, (b) a transfer for no consideration
to: (i) any member of the Participant's Immediate Family, (ii) any trust solely
for the benefit of members of the Participant's Immediate Family, (iii) any
partnership whose only partners are members of the Participant's Immediate
Family, and (iv) any limited liability corporation or corporate entity whose
only members or equity owners are members of the Participant's Immediate Family,
or (c) a transfer to the Bay State Federal Savings Charitable Foundation. For
purposes of this Section 6(c), "Immediate Family" includes, but is not
necessarily limited to, a Participant's parents, grandparents, spouse, children,
grandchildren, siblings (including half bothers and sisters), and individuals
who are family members by adoption. Nothing contained in this Section 6(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 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 proscribed by the Committee with
respect to such Non-Statutory Stock Option.
(d) Termination of Employment or Service (General). Unless otherwise
determined by the Committee, upon the termination of a Participant's employment
or other service for any reason other than Retirement, Disability or death, a
Change in Control, or Termination for Cause, the Participant may exercise only
those Non-Statutory Stock Options that were immediately exercisable by the
Participant at the date of such termination and only for a period of three (3)
months following the date of such termination.
(e) Termination of Employment or Service (Retirement). In the event of a
Participant's Retirement, the Participant may exercise only those Non-Statutory
Stock Options that were immediately exercisable by the Participant at the date
of Retirement and only for a period of one (1) year following the date of
Retirement; provided, however, that upon the Participant's Retirement, the
Committee, in its discretion, may determine that all Non- Statutory Stock
Options that were not exercisable by the Participant as of such date shall
continue to become exercisable in accordance with the terms of the Award
Agreement if the Participant is immediately engaged by the Holding Company or an
Affiliate as a consultant or advisor or continues to serve the Holding Company
or an Affiliate as a director, advisory director, or director emeritus.
(f) Termination of Employment or Service (Disability or death). Unless
otherwise determined by the Committee, in the event of the termination of a
Participant's employment or other service due to Disability or death, all
Non-Statutory Stock Options held by such Participant shall immediately become
exercisable and remain exercisable for a period one (1) year following the date
of such termination.
(g) Termination of Employment or Service (Change in Control). Unless
otherwise determined by the Committee, in the event of the termination of a
Participant's employment or service due to a Change in Control,
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whether such termination is actual, constructive, or otherwise, the Participant
may exercise only those Non-Statutory Stock Options that were immediately
exercisable by the Participant at the date of such termination and only for a
period of one (1) year following the date of such termination.
(h) Termination of Employment or Service (Termination for Cause). Unless
otherwise determined by the Committee, in the event of a Participant's
Termination for Cause, all rights with respect to the Participant's Non-
Statutory Stock Options shall expire immediately upon the effective date of such
Termination for Cause.
(i) Payment. Payment due to a Participant upon the exercise of a
Non-Statutory Stock Option shall be made in the form of shares of Common Stock.
(j) Maximum Individual Award. No individual Employee shall be granted an
amount of Non-Statutory Stock Options which exceeds 25% of all Options eligible
to be granted under the Plan within any 60-month period.
7. INCENTIVE STOCK OPTIONS.
The Committee may, subject to the limitations of the Plan and the
availability of shares of Common Stock reserved but unawarded under this Plan,
grant Incentive Stock Options to an Employee upon such terms and conditions as
it may determine to the extent such terms and conditions are consistent with the
following provisions:
(a) Exercise Price. The Committee shall determine the Exercise Price of
each Incentive Stock Option. However, the Exercise Price shall not be less than
100% of the Fair Market Value of the Common Stock on the Date of Grant;
provided, however, that if at the time an Incentive Stock Option is granted, the
Employee owns or is treated as owning, for purposes of Section 422 of the Code,
Common Stock representing more than 10% of the total combined voting securities
of the Holding Company ("10% Owner"), the Exercise Price shall not be less than
110% of the Fair Market Value of the Common Stock on the Date of Grant.
(b) Amounts of Incentive Stock Options. To the extent the aggregate Fair
Market Value of shares of Common Stock with respect to which Incentive Stock
Options that are exercisable for the first time by an Employee during any
calendar year under the Plan and any other stock option plan of the Holding
Company or an Affiliate exceeds $100,000, or such higher value as may be
permitted under Section 422 of the Code, such Options in excess of such limit
shall be treated as Non-Statutory Stock Options. Fair Market Value shall be
determined as of the Date of Grant with respect to each such Incentive Stock
Option.
(c) Terms of Incentive Stock Options. The Committee shall determine the
term during which a Participant may exercise an Incentive Stock Option, but in
no event may a Participant exercise an Incentive Stock Option, in whole or in
part, more than ten (10) years from the Date of Grant; provided, however, that
if at the time an Incentive Stock Option is granted to an Employee who is a 10%
Owner, the Incentive Stock Option granted to such Employee shall not be
exercisable after the expiration of five (5) years from the Date of Grant. The
Committee shall also determine the date on which each Incentive Stock Option, or
any part thereof, first becomes exercisable and any terms or conditions a
Participant must satisfy in order to exercise each Incentive Stock Option. The
shares of Common Stock underlying each Incentive Stock Option may be purchased
in whole or in part at any time during the term of such Incentive Stock Option
after such Option becomes exercisable.
(d) Non-Transferability. No Incentive Stock Option shall be transferable
except by will or the laws of descent and distribution and is exercisable,
during his lifetime, only by the Employee to whom the Committee grants the
Incentive Stock Option. The designation of a beneficiary does not constitute a
transfer of an Incentive Stock Option.
(e) Termination of Employment (General). Unless otherwise determined by the
Committee, upon the termination of a Participant's employment or other service
for any reason other than Retirement, Disability or death, a Change in Control,
or Termination for Cause, the Participant may exercise only those Incentive
Stock Options that
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were immediately exercisable by the Participant at the date of such termination
and only for a period of three (3) months following the date of such
termination.
(f) Termination of Employment (Retirement). In the event of a Participant's
Retirement, the Participant may exercise only those Incentive Stock Options that
were immediately exercisable by the Participant at the date of Retirement and
only for a period of one (1) year following the date of Retirement; provided
however, that upon the Participant's Retirement, the Committee, in its
discretion, may determine that all Incentive Stock Options that were not
otherwise exercisable by the Participant as of such date shall continue to
become exercisable in accordance with the terms of the Award Agreement if the
Participant is immediately engaged by the Holding Company or an Affiliate as a
consultant or advisor or continues to serve the Holding Company or an Affiliate
as a director, advisory director, or director emeritus. Any Option originally
designated as an Incentive Stock Option shall be treated as a Non-Statutory
Stock Options to the extent the Participant exercises such Option more than
three (3) months following the Date of the Participant's Retirement.
(g) Termination of Employment (Disability or Death). Unless otherwise
determined by the Committee, in the event of the termination of a Participant's
employment or other service due to Disability or death, all Incentive Stock
Options held by such Participant shall immediately become exercisable and remain
exercisable for a period one (1) year following the date of such termination.
(h) Termination of Employment (Change in Control). Unless otherwise
determined by the Committee, in the event of the termination of a Participant's
employment or service due to a Change in Control, the Participant may exercise
only those Incentive Stock Options that were immediately exercisable by the
Participant at the date of such termination and only for a period of three (3)
months following the date of such termination.
(i) Termination of Employment (Termination for Cause). Unless otherwise
determined by the Committee, in the event of an Employee's Termination for
Cause, all rights under such Employee's Incentive Stock Options shall expire
immediately upon the effective date of such Termination for Cause.
(j) Payment. Payment due to a Participant upon the exercise of an Incentive
Stock Option shall be made in the form of shares of Common Stock.
(k) Maximum Individual Award. No individual Employee shall be granted an
amount of Incentive Stock Options which exceeds 25% of all Options eligible to
be granted under the Plan within any 60-month period.
(l) Disqualifying Dispositions. Each Award Agreement with respect to an
Incentive Stock Option shall require the Participant to notify the Committee of
any disposition of shares of Common Stock issued pursuant to the exercise of
such Option under the circumstances described in Section 421(b) of the Code
(relating to certain disqualifying dispositions), within 10 days of such
disposition.
8. STOCK AWARDS.
The Committee may make grants of Stock Awards, which shall consist of the
grant of some number of shares of Common Stock, to a Participant 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 the Stock Awards. Stock Awards may only be made in whole
shares of Common Stock. Stock Awards may only be granted from shares reserved
under the Plan and available for award at the time the Stock Award is made to
the Participant.
(b) Terms of the Stock Awards. The Committee shall determine the dates on
which Stock Awards granted to a Participant shall vest and any terms or
conditions which must be satisfied prior to the vesting of any Stock
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Award or portion thereof. Any such terms or conditions shall be determined by
the Committee as of the Date of Grant.
(c) Termination of Employment or Service (General). Unless otherwise
determined by the Committee, upon the termination of a Participant's employment
or service for any reason other than Retirement, Disability or death, a Change
in Control, or Termination for Cause, any Stock Awards in which the Participant
has not become vested as of the date of such termination shall be forfeited and
any rights the Participant had to such Stock Awards shall become null and void.
(d) Termination of Employment or Service (Retirement). In the event of a
Participant's Retirement, any Stock Awards in which the Participant has not
become vested as of the date of Retirement shall be forfeited and any rights the
Participant had to such unvested Stock Awards shall become null and void;
provided however, that upon the Participant's Retirement, the Committee, in its
discretion, may determine that all unvested Stock Awards shall continue to vest
in accordance with the Award Agreement if the Participant is immediately engaged
by the Holding Company or an Affiliate as a consultant or advisor or continues
to serve the Holding Company or an Affiliate as a director, advisory director,
or director emeritus.
(e) Termination of Employment or Service (Disability or death). Unless
otherwise determined by the Committee, in the event of a termination of the
Participant's service due to Disability or death all unvested Stock Awards held
by such Participant shall immediately vest as of the date of such termination.
(f) Termination of Employment or Service (Change in Control). Unless
otherwise determined by the Committee, in the event of a termination of the
Participant's service due to a Change in Control any Stock Awards in which the
Participant has not become vested as of the date of such termination shall be
forfeited and any rights the Participant had to such unvested Stock Awards shall
become null and void.
(g) Termination of Employment or Service (Termination for Cause). Unless
otherwise determined by the Committee, or in the event of the Participant's
Termination for Cause, all Stock Awards in which the Participant had not become
vested as of the effective date of such Termination for Cause shall be forfeited
and any rights such Participant had to such unvested Stock Awards shall become
null and void.
(h) Maximum Individual Award. No individual Employee shall be granted an
amount of Stock Awards which exceeds 25% of all Stock Awards eligible to be
granted under the Plan within any 60-month period.
(i) Issuance of Certificates. Unless otherwise held in Trust and registered
in the name of the Trustee, reasonably promptly after the Date of Grant with
respect to shares of Common Stock pursuant to a Stock Award, the Holding Company
shall cause to be issued a stock certificate, registered in the name of the
Participant to whom such Stock Award was granted, evidencing such shares;
provided, that the Holding Company shall not cause such 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 Bay State Bancorp, Inc. 1998
Stock-Based Incentive Plan and Award Agreement entered
into between the registered owner of such shares and
Bay State Bancorp, Inc. or its Affiliates. A copy of
the Plan and Award Agreement is on file in the office
of the Corporate Secretary of Bay State Bancorp, Inc.
located at 1299 Beacon St., Brookline, MA 02146.
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Such legend shall not be removed until the Participant becomes vested in such
shares pursuant to the terms of the Plan and Award Agreement. Each certificate
issued pursuant to this Section 8(i), in connection with a Stock Award, shall be
held by the Holding Company or its Affiliates, unless the Committee determines
otherwise.
(j) 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 Stock Award shall not sell, transfer, assign,
pledge, or otherwise encumber shares subject to the Stock Award
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 Stock Award is not transferable and may be
earned in his lifetime only by the Participant to whom it is
granted. Upon the death of a Participant, a Stock Award is
transferable by will or the laws of descent and distribution. The
designation of a beneficiary shall not constitute a transfer.
(iii)If a recipient of a Stock Award is subject to the provisions of
Section 16 of the Exchange Act, shares of Common Stock subject to
such Stock Award may not, without the written consent of the
Committee (which consent may be given in the Award Agreement), be
sold or otherwise disposed of within six (6) months following the
date of grant of the Stock Award.
(k) Accrual of Dividends. To the extent Stock Awards are held in Trust and
registered in the name of the Trustee, unless otherwise specified by the Trust
Agreement whenever shares of Common Stock underlying a Stock Award are
distributed to a Participant or beneficiary thereof under the Plan, such
Participant or beneficiary shall also be entitled to receive, with respect to
each such share distributed, a payment equal to any cash dividends and the
number of shares of Common Stock equal to any stock dividends, declared and paid
with respect to a share of the Common Stock if the record date for determining
shareholders entitled to receive such dividends falls between the date the
relevant Stock Award was granted and the date the relevant Stock Award or
installment thereof is issued. There shall also be distributed an appropriate
amount of net earnings, if any, of the Trust with respect to any dividends paid
out on the shares related to the Stock Award.
(l) Voting of Stock Awards. After a Stock Award has been granted but for
which the shares covered by such Stock Award have not yet been vested, earned
and distributed to the Participant pursuant to the Plan, the Participant shall
be entitled to vote or to direct the Trustee to vote, as the case may be, such
shares of Common Stock which the Stock Award covers subject to the rules and
procedures adopted by the Committee for this purpose and in a manner consistent
with the Trust agreement.
(m) Payment. Payment due to a Participant upon the redemption of a Stock
Award shall be made in the form of shares of Common Stock.
9. PERFORMANCE AWARDS.
(a) The Committee may determine to make any Award under the Plan contingent
upon the satisfaction of any conditions related to the performance of the
Holding Company, an Affiliate of the Participant. Each Performance Award shall
be evidenced in the Award Agreement, which shall set forth the applicable
conditions, the maximum amounts payable and such other terms and conditions as
are applicable to the Performance Award. Unless otherwise determined by the
Committee, each Performance Award shall be granted and administered to comply
with the requirements of Section 162(m) of the Code and subject to the following
provisions:
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<PAGE>
(b) Any Performance Award shall be made not later than 90 days after the
start of the period for which the Performance Award relates and shall be made
prior to the completion of 25% of such period. All determinations regarding the
achievement of any applicable conditions will be made by the Committee. The
Committee may not increase during a year the amount of a Performance Award that
would otherwise be payable upon satisfaction of the conditions but may reduce or
eliminate the payments as provided for in the Award Agreement.
(c) Nothing contained in the Plan will be deemed in any way to limit or
restrict the Committee from making any Award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
(d) A Participant who receives a Performance Award payable in Common Stock
shall have no rights as a shareholder until the Company Stock is issued pursuant
to the terms of the Award Agreement. The Common Stock may be issued without cash
consideration.
(e) A Participant's interest in a Performance Award may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(f) No Award or portion thereof that is subject to the satisfaction of any
condition shall be distributed or considered to be earned or vested until the
Committee certifies in writing that the conditions to which the distribution,
earning or vesting of such Award is subject have been achieved.
10. DEFERRED PAYMENTS.
The Committee, in its discretion, may permit a Participant to elect to
defer 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 Participants, of all
or part of any such payment. The Committee shall determine the terms and
conditions of any such deferral, including the period of deferral, the manner of
deferral, and the method for measuring appreciation on deferred amounts until
their payout.
11. METHOD OF EXERCISE OF OPTIONS.
Subject to any applicable Award Agreement, any Option may be exercised by
the Participant in whole or in part at such time or times, and the Participant
may make payment of the Exercise Price in such form or forms permitted by the
Committee, including, without limitation, payment by delivery of cash, Common
Stock or other consideration (including, where permitted by law and the
Committee, Awards) having a Fair Market Value on the day immediately preceding
the exercise date equal to the total Exercise Price, or by any combination of
cash, shares of Common Stock and other consideration, including exercise by
means of a cashless exercise arrangement with a qualifying broker-dealer, as the
Committee may specify in the applicable Award Agreement.
12. RIGHTS OF PARTICIPANTS.
No Participant shall have any rights as a shareholder with respect to any
shares of Common Stock covered by an Option until the date of issuance of a
stock certificate for such Common Stock. Nothing contained herein or in any
Award Agreement confers on any person any right to continue in the employ or
service of the Holding Company or an Affiliate or interferes in any way with the
right of the Holding Company or an Affiliate to terminate a Participant's
services.
13. DESIGNATION OF BENEFICIARY.
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any Award to which the Participant
would then be entitled. Such designation will be made upon forms
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<PAGE>
supplied by and delivered to the Holding Company and may be revoked in writing.
If a Participant fails effectively to designate a beneficiary, then the
Participant's estate will be deemed to be the beneficiary.
14. 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 other increase or decrease in such shares without receipt
or payment of consideration by the Holding Company, or in the event an
extraordinary capital distribution is made, the Committee may make such
adjustments to previously granted Awards, to prevent dilution, diminution, or
enlargement of the rights of the Participant, 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 underlying Awards already made under the Plan;
(c) adjustments in the Exercise Price of outstanding Incentive and/or
Non-Statutory Stock Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. All Awards under
this Plan shall be binding upon any successors or assigns of the Holding
Company. Notwithstanding the above, in the event of an extraordinary capital
distribution, any adjustment under this Section 14 shall be subject to required
approval by the Office of Thrift Supervision.
15. TAX WITHHOLDING.
(a) Whenever under this Plan, cash or shares of Common Stock are to be
delivered upon exercise or payment of an Award or any other event with respect
to rights and benefits hereunder, the Committee shall be entitled to require as
a condition of delivery (i) that the Participant remit an amount sufficient to
satisfy all federal, state, and local withholding tax requirements related
thereto, (ii) that the withholding of such sums come from compensation otherwise
due to the Participant or from any shares of Common Stock due to the Participant
under this Plan or (iii) any combination of the foregoing provided, however,
that no amount shall be withheld from any cash payment or shares of Common Stock
relating to an Award which was transferred by the Participant in accordance with
this Plan.
(b) If any disqualifying disposition described in Section 7(l) is made with
respect to shares of Common Stock acquired under an Incentive Stock Option
granted pursuant to this Plan, or any transfer described in Section 6(c) is
made, or any election described in Section 16 is made, then the person making
such disqualifying disposition, transfer, or election shall remit to the Holding
Company or its Affiliates an amount sufficient to satisfy all federal, state,
and local withholding taxes thereby incurred; provided that, in lieu of or in
addition to the foregoing, the Holding Company or its Affiliates shall have the
right to withhold such sums from compensation otherwise due to the Participant,
or, except in the case of any transfer pursuant to Section 6(c), from any shares
of Common Stock due to the Participant under this Plan.
16. NOTIFICATION UNDER SECTION 83(b).
The Committee may, on the Date of Grant or any later date, prohibit a
Participant from making the election described below. If the Committee has not
prohibited such Participant from making such election, and the Participant
shall, in connection with the exercise of any Option, or the grant of any Stock
Award, make the election permitted under Section 83(b) of the Code, such
Participant shall notify the Committee of such election within 10 days of filing
notice of the election with the Internal Revenue Service, in addition to any
filing and notification required pursuant to regulations issued under the
authority of Section 83(b) of the Code.
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<PAGE>
17. AMENDMENT OF THE PLAN AND AWARDS.
(a) Except as provided in paragraph (c) of this Section 17, 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 such 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 such ratification.
Other provisions of this Plan will remain in full force and effect. No such
termination, modification or amendment may adversely affect the rights of a
Participant under an outstanding Award without the written permission of such
Participant.
(b) Except as provided in paragraph (c) of this Section 17, the Committee
may amend any Award Agreement, prospectively or retroactively; provided,
however, that no such amendment shall adversely affect the rights of any
Participant under an outstanding Award without the written consent of such
Participant.
(c) In no event shall the Board of Directors amend the Plan or shall the
Committee amend an Award Agreement in any manner that has the effect of:
(i) Allowing any Option to be granted with an exercise below the Fair
Market Value of the Common Stock on the Date of Grant.
(ii) Allowing the exercise price of any Option previously granted
under the Plan to be reduced subsequent to the Date of Award.
(d) Notwithstanding anything in this Plan or any Award Agreement to the
contrary, if any Award or right under this Plan would, in the opinion of the
Holding Company's accountants, cause a transaction to be ineligible for pooling
of interest accounting that would, but for such Award or right, be eligible for
such accounting treatment, the Committee, at its discretion, may modify, adjust,
eliminate or terminate the Award or right so that pooling of interest accounting
is available.
18. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon approval by the Holding Company's
shareholders in accordance with OTS and Internal Revenue Service ("IRS")
regulations or March 27, 1999, whichever is earlier. The failure to obtain
shareholder ratification for such purposes will not effect the validity of the
Plan and any Awards made under the Plan; provided, however, that if the Plan is
not ratified by stockholders in accordance with IRS regulations, the Plan shall
remain in full force and effect, and any Incentive Stock Options granted under
the Plan shall be deemed to be Non- Statutory Stock Options and any Award
intended to comply with Section 162(m) of the Code shall not comply with Section
162(m) of the Code.
19. TERMINATION OF THE PLAN.
The right to grant Awards under the Plan will terminate upon the earlier
of: (i) ten (10) years after the Effective Date; (ii) the issuance of a number
of shares of Common Stock pursuant to the exercise of Options or the
distribution of Stock Awards (is equivalent to the maximum number of shares
reserved under the Plan as set forth in Section 4 hereof. The Board of Directors
has the right to suspend or terminate the Plan at any time, provided that no
such action will, without the consent of a Participant, adversely affect a
Participant's vested rights under a previously granted Award.
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<PAGE>
20. APPLICABLE LAW.
The Plan will be administered in accordance with the laws of the state of
Delaware to the extent not pre- empted by applicable federal law.
21. COMPLIANCE WITH OFFICE OF THRIFT SUPERVISION CONVERSION REGULATIONS.
Notwithstanding any other provision contained in this Plan:
(a) No Award under the Plan shall be made which would be prohibited by 12
CFRss.563b.3(g)(4);
(b) Unless the Plan is approved by a majority vote of the outstanding
shares of the total votes eligible to be cast at a duly called meeting
of stockholders to consider the Plan, as required by 12 CFR
ss.563b.3(g)(4)(vii), the Plan shall not become effective or
implemented prior to one year from the date of the Bank's conversion
from the mutual to stock form ("Conversion");
(c) No Option or Stock Award granted prior to one year from the date of
the Bank's Conversion shall become vested or exercisable at a rate in
excess of 20% per year of the total number of Stock Awards or Options
(whichever may be the case) granted to such Participant, provided,
that Awards shall become fully vested or immediately exercisable in
the event of a Participant's termination of service due to death or
Disability;
(d) No Option or Stock Award granted to any individual Employee prior to
one year from the date of the Bank's Conversion may exceed 25% of the
total amount of Stock Awards or Options (whichever may be the case)
which may be granted under the Plan;
(e) No Option or Stock Award granted to any individual Outside Director
prior to one year from the date of the Bank's Conversion may exceed 5%
of the total amount of Stock Awards or Options (whichever may be the
case) which may be granted under the Plan; and
(f) The aggregate amount of Option or Stock Award granted to all Outside
Directors prior to one year from the date of the Bank's Conversion may
not exceed 30% of the total amount of Stock Awards or Options
(whichever may be the case) which may be granted under the Plan.
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<PAGE>
BAY STATE BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 29, 1998
2:00 P.M. EASTERN TIME
-------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of the Board
of Directors of Bay State Bancorp, Inc. (the "Company"), each with full power of
substitution, 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 Shareholders, to be held on September 29, 1998, at 2:00
p.m. Eastern Time, at the Royal Sonesta Hotel Cambridge, 5 Cambridge Parkway,
Cambridge, 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 (except as marked to
the contrary below).
Robert B. Cleary Jerome R. Dangel Kent T. Spellman
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 on the line provided below.
- --------------------------------------------------------------------------------
2. The approval of the Bay State Bancorp, Inc. 1998 Stock-Based Incentive
Plan.
FOR AGAINST ABSTAIN
|_| |_| |_|
3. The ratification of the appointment of Shatswell, MacLeod & Company,
P.C. as independent auditors of Bay State Bancorp, Inc. for the fiscal year
ending March 31, 1999.
FOR AGAINST ABSTAIN
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSALS.
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY 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 BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
The abovesigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Shareholders and of a
Proxy Statement dated August 14, 1998 and of the Annual Report to Shareholders.
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.
Dated:___________________________
--------------------------------
SIGNATURE OF SHAREHOLDER
--------------------------------
SIGNATURE OF SHAREHOLDER
-----------------------------
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
