<PAGE>
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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
HERITAGE BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
HERITAGE BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[_] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[_] 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:
N/A
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(2) Aggregate number of securities to which transactions applies:
N/A
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
[_] 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:
N/A
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(2) Form, schedule or registration statement no.:
N/A
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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<PAGE>
January 4, 1999
Dear Stockholder:
You are cordially invited to attend the first Annual Meeting of
Stockholders of Heritage Bancorp, Inc. The meeting will be held at the main
office of Heritage Federal Bank, 201 West Main Street, Laurens, South Carolina
on Wednesday, February 3, 1999 at 11:00 a.m., local time.
The Notice of Annual Meeting of Stockholders and Proxy Statement appearing
on the following pages describe the formal business to be transacted at the
meeting. During the meeting, we will also report on the operations of the
Company. Directors and officers of the Company, as well as a representative of
Deloitte & Touche LLP, the Company's independent auditors, will be present to
respond to appropriate questions of shareholders.
It is important that your shares are represented at this meeting, whether
or not you attend the meeting in person and regardless of the number of shares
you own. To make sure your shares are represented, we urge you to complete and
mail the enclosed proxy card. If you attend the meeting, you may vote in person
even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ J. Edward Wells
J. Edward Wells
President and Chief Executive Officer
<PAGE>
HERITAGE BANCORP, INC.
201 W. MAIN STREET
LAURENS, SOUTH CAROLINA 29360
(864) 984-4581
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 3, 1999
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Heritage
Bancorp, Inc. ("Company") will be held at the main office of Heritage Federal
Bank, 201 West Main Street, Laurens, South Carolina, on Wednesday, February 3,
1999, at 11:00 a.m., local time, for the following purposes:
(1) To elect two directors of the Company;
(2) To consider and vote upon a proposal to adopt the Heritage Bancorp,
Inc. 1998 Stock Option Plan;
(3) To consider and vote upon a proposal to adopt the Heritage Bancorp,
Inc. Management Recognition and Development Plan;
(4) To ratify the appointment of Deloitte & Touche LLP as auditors for the
Company for the fiscal year ending September 30, 1999; and
(5) To consider and act upon such other matters as may properly come before
the meeting or any adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to come
before the meeting.
Any action may be taken on the foregoing proposals at the meeting on the
date specified above or on any date or dates to which, by original or later
adjournment, the meeting may be adjourned. Stockholders of record at the close
of business on December 7, 1998 are entitled to notice of and to vote at the
meeting and any adjournments or postponements thereof.
Please complete and sign the enclosed form of proxy, which is solicited by
the Board of Directors, and mail it promptly in the enclosed envelope. The
proxy will not be used if you attend the meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J. Edward Wells
J. Edward Wells
President and Chief Executive Officer
Laurens, South Carolina
January 4, 1999
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
<PAGE>
- --------------------------------------------------------------------------------
PROXY STATEMENT
OF
HERITAGE BANCORP, INC.
201 W. MAIN STREET
LAURENS, SOUTH CAROLINA 29360
(864) 984-4581
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 3, 1999
- --------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Heritage Bancorp, Inc. ("Company") to be
used at the Annual Meeting of Stockholders of the Company. The Company is the
holding company for Heritage Federal Bank ("Bank"). The Annual Meeting will be
held at the main office of Heritage Federal Bank, 201 West Main Street, Laurens,
South Carolina on Wednesday, February 3, 1999, at 11:00 a.m., local time. This
Proxy Statement and the enclosed proxy card are being first mailed to
shareholders on or about January 4, 1999.
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VOTING AND PROXY PROCEDURE
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Stockholders Entitled to Vote. Stockholders of record as of the close of
business on December 7, 1998 are entitled to one vote for each share of common
stock ("Common Stock") of the Company then held. As of December 7, 1998, the
Company had 4,623,750 shares of Common Stock issued and outstanding.
Quorum. The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares of Common Stock entitled to vote is necessary
to constitute a quorum at the Annual Meeting. Abstentions will be counted as
shares present and entitled to vote at the Annual Meeting for purposes of
determining the existence of a quorum. Broker non-votes also will be considered
shares present and will be included in determining whether a quorum is present.
Voting. The Board of Directors solicits proxies so that each stockholder
has the opportunity to vote on the proposals to be considered at the Annual
Meeting. When a proxy card is returned properly signed and dated the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. Where no instructions are indicated, proxies will be voted in
accordance with the recommendations of the Board of Directors. If a stockholder
of record attends the Annual Meeting, he or she may vote by ballot. The Board
recommends a vote:
. FOR the election of the nominees for director;
. FOR adoption of the Heritage Bancorp, Inc. 1998 Stock Option Plan;
. FOR adoption of the Heritage Bancorp, Inc. Management Recognition and
Development Plan; and
. FOR ratification of the appointment of Deloitte & Touche LLP.
The affirmative vote of a plurality of the votes cast at the Annual Meeting
is required for the election of directors. Stockholders are not permitted to
cumulate their votes for the election of directors. With respect to the
election of directors, votes may be cast for or withheld from each nominee.
Votes that are withheld and broker non-votes will have no effect on the outcome
of the election because the nominees receiving the greatest number of votes will
be elected. With respect to the other proposals to be voted upon, stockholders
may vote for a proposal, against a proposal or may abstain from voting. All
matters to be voted on, other than the election of directors, will be decided by
the affirmative vote of a majority of the shares present in person or by proxy
at the Annual Meeting. On any such matter, abstentions will have the same
effect as a negative vote, while broker non-votes will have no effect on the
voting.
<PAGE>
Revocation of a Proxy. Stockholders who execute proxies retain the right
to revoke them at any time before they are voted. Proxies may be revoked by
written notice delivered in person or mailed to the Secretary of the Company or
by filing a later proxy prior to a vote being taken on a particular proposal at
the Annual Meeting. Attendance at the Annual Meeting will not automatically
revoke a proxy, but a stockholder of record in attendance may request a ballot
and vote in person, thereby revoking a prior granted proxy.
Participants in the Bank's ESOP or 401(k) Plan. If you are a participant
in the Heritage Federal Bank Employee Stock Ownership Plan (the "ESOP") or if
you hold shares through the Bank's 401(k) Plan, the proxy card represents a
voting instruction to the trustees as to the number of shares in your plan
account. Each participant in the ESOP and 401(k) Plan may direct the trustees
as to the manner in which shares of Common Stock allocated to the participant's
plan account are to be voted. Unallocated shares of Common Stock held by the
ESOP and allocated shares for which no voting instructions are received will be
voted by the trustees in the same proportion as shares for which the trustees
have received voting instructions.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
Persons and groups who beneficially own in excess of 5% of the Company's
Common Stock are required to file certain reports disclosing such ownership
pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act").
Based on such reports, the following table sets forth, as of December 7, 1998,
certain information as to those persons who were beneficial owners of more than
5% of the outstanding shares of Common Stock. Management knows of no persons
other than those set forth below who beneficially owned more than 5% of the
outstanding shares of Common Stock at December 7, 1998.
The following table also sets forth, as of December 7, 1998, information as
to shares of Common Stock beneficially owned by the Company's directors, by the
Chief Executive Officer and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
Number of Shares Percent of Shares
Name Beneficially Owned (1) Outstanding
- ----- ---------------------- -----------------
<S> <C> <C>
BENEFICIAL OWNERS OF MORE THAN 5%
Heritage Federal Bank
Employee Stock Ownership Plan Trust 370,300 8.0%
DIRECTORS
Aaron H. King 33,334(2) *
J. Riley Bailes 43,884(3) *
John H. Lake 13,334 *
John C. Owings, II 14,826 *
J. Edward Wells(4) 36,668(5) *
All Executive Officers and
Directors as a Group (9 persons) 234,731 5.1
</TABLE>
- ------------------
* Less than 1 percent of shares outstanding.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner, for purposes of this table, of any shares of
Common Stock if he or she has voting and/or investment power with respect
to such security. The table includes shares owned by spouses, other
immediate family members in
2
<PAGE>
trust, shares held in retirement accounts or funds for the benefit of the
named individuals, and other forms of ownership, over which shares the
persons named in the table may possess voting and/or investment power.
(2) Includes 13,334 shares owned by Mr. King's spouse.
(3) Includes 9,167 shares owned by Mr. Bailes' spouse.
(4) Mr. Wells is also the President and Chief Executive Officer of the Company.
(5) Includes 14,668 shares owned by Mr. Wells' spouse.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Company's Board of Directors consists of five members. The Board is
divided into three classes with three-year staggered terms, with approximately
one-third of the directors elected each year. Two directors will be elected at
the Annual Meeting to serve for a three-year term, or until their respective
successors have been elected and qualified. The nominees for election this year
are John H. Lake and John C. Owings, II. The nominees are current members of
the Boards of Directors of the Company and the Bank.
It is intended that the proxies solicited by the Board of Directors will be
voted for the election of the above named nominees. If any nominee is unable to
serve, the shares represented by all valid proxies will be voted for the
election of such substitute as the Board of Directors may recommend or the Board
of Directors may adopt a resolution to amend the Bylaws and reduce the size of
the Board. At this time the Board of Directors knows of no reason why any
nominee might be unavailable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF MESSRS. LAKE
AND OWINGS.
The following table sets forth certain information regarding the nominees for
election at the Annual Meeting, as well as information regarding those directors
continuing in office after the Annual Meeting.
<TABLE>
<CAPTION>
Year First
Elected Term to
Name Age(1) Director(2) Expire
---- ------ ----------- ------
BOARD NOMINEES
<S> <C> <C> <C>
John H. Lake 70 1977 2002(3)
John C. Owings, II 46 1998 2002(3)
<CAPTION>
DIRECTORS CONTINUING IN OFFICE
<S> <C> <C> <C>
Aaron H. King 74 1972 2000
J. Riley Bailes 59 1986 2000
J. Edward Wells 59 1971 2001
- --------------------
</TABLE>
(1) As of September 30, 1998.
(2) Includes prior service on the Board of Directors of the Bank.
(3) Assuming the individual is elected.
3
<PAGE>
The present principal occupation and other business experience during the last
five years of each nominee for election and each director continuing in office
is set forth below:
John H. Lake is a retired dentist.
John C. Owings, II is the owner of Laurens Lumber Co. in Laurens, South
Carolina.
Aaron H. King retired as Senior Vice President and Branch Manager of the Bank
in 1996 after 34 years with the Bank.
J. Riley Bailes is the retired owner of a retail clothing store in Laurens,
South Carolina.
J. Edward Wells is the President and Chief Executive Officer of the Bank,
positions he has held since 1972. Mr. Wells joined the Bank in 1967.
- --------------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
The Boards of Directors of the Company and the Bank conduct their business
through meetings of the Boards and through their committees. During the fiscal
year ended September 30, 1998, the Board of Directors of the Company held six
meetings, and the Board of Directors of the Bank held twelve meetings. No
director of the Company or the Bank attended fewer than 75% of the total
meetings of the Boards and committees on which such person served during this
period.
The Audit Committee, consisting of the non-employee members of the Board of
Directors, receives and reviews all reports prepared by the Bank's external
auditor. The Audit Committee met one time during the year ended September 30,
1998.
The full Board of Directors acts as a Nominating Committee for the annual
selection of management's nominees for election as directors. The full Board of
Directors met once in its capacity as Nominating Committee in October 1998.
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
- --------------------------------------------------------------------------------
Directors of the Bank receive a monthly retainer and a monthly attendance fee.
First term members receive a retainer of $425 and attendance fee of $425.
Second term members receive a retainer of $475 and attendance fee of $475. For
subsequent terms, directors receive a retainer of $625 and attendance fee of
$625. No additional fees are paid for service on committees. If the Board of
Directors declares a bonus for employees, then each Director who is not also an
employee receives a bonus based on their annual remuneration and computed at the
same rate as the employee bonus. For the year ended September 30, 1998, the
Bank paid an aggregate of $1,944 in bonuses to non-employee Directors. No
separate fees are paid for service on the Company's Board of Directors.
4
<PAGE>
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EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
The following information is furnished for Mr. Wells for the year ended
September 30, 1998. No other executive officer of the Bank received salary and
bonus of $100,000 or more during the year ended September 30, 1998.
<TABLE>
<CAPTION>
Annual Compensation(1)
---------------------------------------------
Name and Other Annual All Other
Position Year Salary Bonus Compensation(2) Compensation
- ------------------------ ---- -------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
J. Edward Wells 1998 $150,138 $4,740 $ -- $ 9,061(3)
President and Chief 1997 145,052 4,372 -- 21,754
Executive Officer
</TABLE>
- ---------------------------------
(1) Compensation information for the year ended September 30, 1996 has been
omitted as the Bank was neither a public company nor a subsidiary thereof
at such time.
(2) The aggregate amount of perquisites and other personal benefits was less
than 10% of the total annual salary and bonus reported.
(3) Consists of $3,678 contribution to 401(k) plan, $3,848 contribution to
money purchase pension plan and $1,535 of life insurance premiums.
EMPLOYMENT AGREEMENT. The Company and the Bank (collectively, the
"Employers") have entered into a three-year employment agreement ("Employment
Agreement") with Mr. Wells. Under the Employment Agreement, the initial salary
level for Mr. Wells is $151,000, which amount is paid by the Bank and may be
increased at the discretion of the Board of Directors or an authorized committee
of the Board. On each anniversary of the commencement date of the Employment
Agreement, the term of each agreement may be extended for an additional year at
the discretion of the Board. The agreement is terminable by the Employers at
any time, by Mr. Wells if he is assigned duties inconsistent with his initial
position, duties, responsibilities and status (a "constructive termination
event"), or upon the occurrence of certain events specified by federal
regulations. In the event that Mr. Wells' employment is terminated without
cause or upon Mr. Wells' voluntary termination following the occurrence of a
constructive termination event, the Bank would be required to honor the terms of
the agreement through the expiration of the current term, including payment of
current cash compensation and continuation of employee benefits.
The Employment Agreement also provides for a severance payment and
other benefits in the event of involuntary termination of employment in
connection with any change in control of the Employers. A severance payment
also will be provided on a similar basis in connection with a constructive
termination event following a change in control. The term "change in control"
is defined in the agreement as having occurred when, among other things, (a) a
person other than the Company purchases shares of the Company's common stock
pursuant to a tender or exchange offer for such shares, (b) any person (as such
term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended ("Exchange Act")) is or becomes the beneficial owner, directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities, (c) the
membership of the Board of Directors changes as the result of a contested
election, or (d) shareholders of the Company approve a merger, consolidation,
sale or disposition of all or substantially all of the Company's assets, or a
plan of partial or complete liquidation.
The maximum value of the severance benefits under the Employment
Agreement is 2.99 times Mr. Wells' average annual compensation during the five-
year period preceding the effective date of the change in control (the "base
amount"). The Employment Agreement provides that the value of the maximum
benefit may be distributed, at Mr.
5
<PAGE>
Wells' election, (i) in the form of a lump sum cash payment equal to 2.99 times
Mr. Wells' base amount or (ii) a combination of a cash payment and continued
coverage under the Employers' health, life and disability programs for a 36-
month period following the change in control, the total value of which does not
exceed 2.99 times the Executive's base amount. Assuming that a change in control
had occurred at September 30, 1998 and that Mr. Wells elected to receive a lump
sum cash payment, he would have been entitled to a payment of approximately
$428,000. Section 280G of the Internal Revenue Code of 1986, as amended
("Code"), provides that severance payments that equal or exceed three times the
individual's base amount are deemed to be "excess parachute payments" if they
are contingent upon a change in control. Individuals receiving excess parachute
payments are subject to a 20% excise tax on the amount of such excess payments,
and the Employers would not be entitled to deduct the amount of such excess
payments.
The Employment Agreement restricts Mr. Wells' right to compete against
the Employers for a period of one year from the date of termination of the
agreement if he voluntarily terminates employment, except in the event of a
change in control.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Exchange Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Report of the Compensation
Committee of the Company and Performance Graph shall not be incorporated by
reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE OF THE COMPANY.
Under rules established by the Securities and Exchange Commission, the
Company is required to provide certain data and information in regard to the
compensation and benefits provided to the Company's Chief Executive Officer and
other executive officers of the Company. The disclosure requirements for the
Chief Executive Officer and other executive officers include the use of tables
and a report explaining the rationale and consideration that led to the
fundamental executive compensation decisions affecting those individuals.
No separate compensation is currently payable by the Company,
consequently the Compensation Committee of the Board of Directors of the Bank as
directed by the Company's Board of Directors is responsible for establishing and
implementing policies governing executive compensation. Furthermore, this
Committee evaluates the performance of executive officers and approves
appropriate levels of compensation. The Compensation Committee of the Board of
Directors consists entirely of the non-employee directors, that is, Messrs.
Bailes, King, Lake and Owings. This Committee is responsible for establishing
and implementing policies governing executive compensation. Furthermore, it
evaluates the performances of these officers and approves appropriate levels of
compensation.
The Committee believes that compensation policy should reflect both
executives' management skills as well as Company performance and shareholder
returns. To this end, the following goals underlie the Committee's policies:
1) To attract and retain key executives who possess the
management skills and experience vital to the long-term
success of the Company and the Bank.
2) To provide compensation that is competitive and consistent
with executive compensation levels found in the financial
and banking industries.
3) To motivate executives to enhance long-term shareholder
value by building their ownership in the Company.
4) To make the compensation program an integral part of the
Company's long-term planning and management process.
The Bank's current executive compensation involves a combination of
base salary and cash bonuses. With shareholder approval, the Company intends to
implement the Management Recognition and Development Plan and 1998
6
<PAGE>
Stock Option Plan to enhance its long-term, stock-based incentive compensation
program for key personnel. These proposed plans are more fully described within
this Proxy Statement.
During the fiscal year ended September 30, 1998, the base salary of J.
Edward Wells was $150,138. In addition, he received a bonus in the amount of
$4,470 based on 1997 fiscal year-end operating results. The Committee believes
that current level of executive salary is appropriate based on a review of peer
group compensation within the industry and the Company's performance.
COMPENSATION COMMITTEE:
John H. Lake
John C. Owings, II
Aaron H. King
J. Riley Bailes
7
<PAGE>
PERFORMANCE GRAPH. The following graph compares the cumulative total
shareholder return on the Company's Common Stock with the cumulative total
return on the Nasdaq Index (U.S. Companies) and with the Nasdaq Bank Index.
Total return assumes the reinvestment of all dividends. The base amount for the
Company's Common Stock is $22.313 per share, which was the closing price on the
initial day of trading on April 7, 1998. The initial offering price for the
Company's Common Stock was $15.00 per share.
COMPARISON OF CUMULATIVE TOTAL RETURN*
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
04/07/98 04/30/98 05/29/98 06/30/98 07/31/98 08/31/98 09/30/98
-------- -------- -------- -------- -------- -------- --------
Heritage Bancorp, Inc 100.0 99.2 94.1 85.2 87.4 74.5 78.5
The Nasdaq Index 100.0 104.0 98.3 105.2 104.0 83.7 95.3
Nasdaq Bank Index 100.0 100.4 97.0 97.2 94.3 76.9 82.0
</TABLE>
- ------------------
* Assumes $100 invested in the Company's Common Stock at the closing price per
share and each index on April 7, 1998 (the date on which the Company's Common
Stock was first traded publicly) and that all dividends were reinvested.
8
<PAGE>
- --------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- --------------------------------------------------------------------------------
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of any registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Executive officers, directors and greater than 10%
shareholders are required by regulation to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on its review of the copies of such forms it has received and
written representations provided to the Company by the above referenced persons,
the Company believes that during the fiscal year ended September 30, 1998 all
filing requirements applicable to its reporting officers, directors and greater
than 10% shareholders were properly and timely complied with.
- --------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
- --------------------------------------------------------------------------------
Federal regulations require that all loans or extensions of credit to
executive officers and directors of insured financial institutions must be made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons,
except for loans made pursuant to programs generally available to all employees,
and must not involve more than the normal risk of repayment or present other
unfavorable features. The Company's subsidiary financial institution is
therefore prohibited from making any new loans or extensions of credit to
executive officers and directors at different rates or terms than those offered
to the general public, except for loans made pursuant to programs generally
available to all employees, and has adopted a policy to this effect. In
addition, loans made to a director or executive officer in an amount that, when
aggregated with the amount of all other loans to such person and his or her
related interests, are in excess of the greater of $25,000 or 5% of the
institution'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.
- --------------------------------------------------------------------------------
PROPOSAL 2 -- RATIFICATION OF 1998 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
GENERAL
The Company's Board of Directors adopted the Heritage Bancorp, Inc. 1998 Stock
Option Plan ("Plan") on November 17, 1998, subject to approval by the Company's
stockholders. The objective of the Plan is to reward performance and build the
participant's equity interest in the Company by providing long-term incentives
and rewards to officers, key employees and other persons who provide services to
the Company and its subsidiaries and who contribute to the success of the
Company by their innovation, ability, industry, loyalty and exceptional service.
The following summary is a brief description of the material features of the
Plan. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN, A
COPY OF WHICH IS ATTACHED AS EXHIBIT A.
SUMMARY OF THE PLAN
Type of Stock Option Grants. The Plan provides for the grant of incentive
stock options ("ISOs"), within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"), and Non-Qualified Stock Options
("NQSOs"), which do not satisfy the requirements for ISO treatment.
Administration. The Plan is administered by the Company's Board of Directors.
Subject to the terms of the Plan and resolutions of the Board, the Board
interprets the Plan and is authorized to make all determinations and decisions
thereunder. The Board also determines the participants to whom stock options
will be granted, the type and amount of stock options that will be granted and
the terms and conditions applicable to such grants.
9
<PAGE>
Participants. All officers and employees of the Company and its subsidiaries,
as well as other persons who render services to the Company, are eligible to
participate in the Plan. In addition, non-employee directors of the Company are
eligible to participate in the Plan.
Number of Shares of Common Stock Available. The Company has reserved 462,875
shares of Common Stock for issuance under the Plan in connection with the
exercise of options. Shares of Common Stock to be issued under the Plan may be
either authorized but unissued shares, or reacquired shares held by the Company
in its treasury. Any shares subject to an award which expires or is terminated
unexercised will again be available for issuance under the Plan.
Stock Option Grants. The exercise price of each ISO or NQSO will not be less
than the fair market value of the Common Stock on the date the ISO or NQSO is
granted. The aggregate fair market value of the shares for which ISOs granted
to any employee may be exercisable for the first time by such employee during
any calendar year (under all stock option plans of the Company and its
subsidiaries) may not exceed $100,000.
Under generally accepted accounting principles, compensation expense is
generally not recognized with respect to the award of options to officers and
employees of the Company and its subsidiaries. However, the Financial
Accounting Standards Board recently indicated that it would propose rules during
1999 that would generally require recognition of compensation expense with
respect to awards made to non-employees, including non-employee directors of
the Company, and that the proposed changes would apply to awards made after
December 15, 1998.
The exercise price of an option may be paid in cash, Common Stock or other
property, by the surrender of all or part of the option being exercised, by the
immediate sale through a broker of the number of shares being acquired
sufficient to pay the purchase price, or by a combination of these methods, as
and to the extent permitted by the Board.
Under the Plan, the Board may permit participants to transfer options to
eligible transferees (as such eligibility is determined by the Board). Each
option may be exercised during the holder's lifetime, only by the holder or the
holder's guardian or legal representative, and after death only by the holder's
beneficiary or, absent a beneficiary, by the estate or by a person who acquired
the right to exercise the option by will or the laws of descent and
distribution. Options may become exercisable in full at the time of grant or at
such other times and in such installments as the Board determines or as may be
specified in the Plan. Options may be exercised during periods before and after
the participant terminates employment, as the case may be, to the extent
authorized by the Board or specified in the Plan. However, no option may be
exercised after the tenth anniversary of the date the option was granted. The
Board may, at any time and without additional consideration, accelerate the date
on which an option becomes exercisable.
Effect of a Change in Control. In the event of a change in control (as
defined in the Plan) of the Company, each outstanding stock option grant will
become fully vested and immediately exercisable. In addition, in the event of a
change in control, the Plan provides for the cash settlement of any outstanding
stock option if provision is not made for the assumption of the options in
connection with the change in control.
Term of the Plan. The Plan will be effective on April 7, 1999 but only if,
before that date, the Plan is approved by the stockholders of the Company. By
postponing the effective date of the Plan, options granted under the Plan will
not be subject to certain restrictions under Office of Thrift Supervision
("OTS") regulations (including a limitation on the acceleration of vesting in
the event of a change in control) otherwise applicable to stock compensation
plans implemented prior to the first anniversary of the Bank's mutual-to-stock
conversion. The Plan will expire on the tenth anniversary of the effective
date, unless terminated sooner by the Board.
Amendment of the Plan. The Plan allows the Board to amend the Plan without
stockholder approval unless such approval is required to comply with a tax law
or regulatory requirement.
Certain Federal Income Tax Consequences. The following brief description of
the tax consequences of stock option grants under the Plan is based on federal
income tax laws currently in effect and does not purport to be a complete
description of such federal income tax consequences.
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There are no federal income tax consequences either to the optionee or to the
Company upon the grant of an ISO or and NQSO. On the exercise of an ISO during
employment or within three months thereafter, the optionee will not recognize
any income and the Company will not be entitled to a deduction, although the
excess of the fair market value of the shares on the date of exercise over the
option price is includible in the optionee's alternative minimum taxable income,
which may give rise to alternative minimum tax liability for the optionee.
Generally, if the optionee disposes of shares acquired upon exercise of an ISO
within two years of the date of grant or one year of the date of exercise, the
optionee will recognize ordinary income, and the Company will be entitled to a
deduction, equal to the excess of the fair market value of the shares on the
date of exercise over the option price (limited generally to the gain on the
sale). The balance of any gain or loss will be treated as a capital gain or
loss to the optionee. If the shares are disposed of after the two year and one
year periods mentioned above, the Company will not be entitled to any deduction,
and the entire gain or loss for the optionee will be treated as a capital gain
or loss.
On exercise of an NQSO, the excess of the date-of-exercise fair market value
of the shares acquired over the option price will generally be taxable to the
optionee as ordinary income and deductible by the Company, provided the Company
properly withholds taxes in respect of the exercise. This disposition of shares
acquired upon the exercise of a NQSO will generally result in a capital gain or
loss for the optionee, but will have no tax consequences for the Company.
NEW PLAN BENEFITS
The Company anticipates that option grants will be made to non-employee
directors, officers and employees on or after the effective date of the Plan at
levels consistent with other recently converted thrift institutions. However,
the Board has not made specific determinations regarding the size of individual
awards.
BOARD OF DIRECTORS RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE PLAN
ATTACHED AS EXHIBIT A.
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PROPOSAL 3 -- RATIFICATION OF THE
MANAGEMENT RECOGNITION AND DEVELOPMENT PLAN
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GENERAL
Subject to approval by the Company's stockholders, the Board of Directors of
the Company adopted the Heritage Bancorp, Inc. Management Recognition and
Development Plan ("MRDP") on November 17, 1998 for the benefit of officers,
employees and non-employee directors of the Company and its subsidiaries. The
objective of the MRDP is to reward performance and build the participant's
equity interest in the Company by providing long-term incentives and rewards to
officers, key employees and other persons who provide services to the Company
and its subsidiaries and who contribute to the success of the Company by their
innovation, ability, industry, loyalty and exceptional service. In addition,
the company believes that the MRDP will provide an important retention incentive
for key personnel.
The following summary is a brief description of the material features of the
MRDP. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MRDP, A
COPY OF WHICH IS ATTACHED AS EXHIBIT B.
SUMMARY OF THE MRDP
Type of Stock Awards. The MRDP provides for the award of Common Stock in the
form of restricted stock awards which are subject to the restrictions specified
in the MRDP or as determined by the Company's Board of Directors.
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Administration. The MRDP is administered by the Board. Subject to the terms
of the MRDP and resolutions of the Board, the Board interprets the MRDP and is
authorized to make all determinations and decisions thereunder. The Board also
determines the participants to whom restricted stock awards will be made, the
number of shares of Common Stock covered by each award and the terms and
conditions applicable to such award.
Participants. All officers and employees of the Company and its subsidiaries,
as well as other persons who render services to the Company, are eligible to
participate in the MRDP. In addition, non-employee directors of the Company are
eligible to participate in the MRDP.
Number of Shares of Common Stock Available. The Company has reserved 185,150
shares of Common Stock for issuance under the MRDP in the form of restricted
stock. Shares of Common Stock to be issued under the MRDP may be either
authorized but unissued shares, or reacquired shares held by the Company in its
treasury. Any shares subject to an award which is forfeited or is terminated
will again be available for issuance under the MRDP.
Restricted Stock Awards. Awards under the MRDP will be made in the form of
restricted shares of Common Stock that are subject to restrictions on transfer
of ownership. It is anticipated that the initial awards under the MRDP will
vest in equal installments over a three- to five-year period beginning on the
first anniversary of the date of grant. Compensation expense in the amount of
the fair market value of the Common Stock at the date of the grant to the
officer or director will be recognized during the period over which the shares
vest. If a recipient terminates employment or service with the Company or its
subsidiaries for reasons other than death or disability, the recipient forfeits
all rights to shares under restriction. If such termination is caused by death
or disability, all restrictions expire and all shares allocated become
unrestricted. A recipient will be entitled to voting and other stockholder
rights with respect to the shares while restricted. Dividends paid during the
period of restriction will, at the Board's discretion, be distributed to the
recipient when paid or held in escrow for the benefit of the recipient until the
shares to which the dividends relate are vested.
Effect of a Change in Control. In the event of a change in control (as
defined in the MRDP) of the Company, each outstanding award under the MRDP will
become fully vested.
Term of the MRDP. The MRDP will be effective on April 7, 1999 but only if,
before that date, the MRDP is approved by the stockholders of the Company. By
postponing the effective date of the MRDP, awards under the MRDP will not be
subject to certain restrictions under OTS regulations (including a limitation on
the acceleration of vesting in the event of a change in control) otherwise
applicable to stock compensation plans implemented prior to the first
anniversary of the Bank's mutual-to-stock conversion. The MRDP will expire on
the tenth anniversary of the effective date, unless sooner terminated by the
Board.
Amendment of the MRDP. The MRDP allows the Board to amend the MRDP without
stockholder approval unless such approval is required to comply with a tax law
or regulatory requirement.
Certain Federal Income Tax Consequences. The following brief description of
the tax consequences of awards of restricted stock under the MRDP is based on
federal income tax laws currently in effect and does not purport to be a
complete description of such federal income tax consequences.
A participant who has been awarded restricted stock under the MRDP and does
not make an election under Section 83(b) of the Code will not recognize taxable
income at the time of the award. At the time any transfer or forfeiture
restrictions applicable to the restricted stock award lapse, the recipient will
recognize ordinary income and the Company will be entitled to a corresponding
deduction equal to the excess of the fair market value of such stock at such
time over the amount paid therefor. Any dividend paid to the recipient on the
restricted stock at or prior to such time will be ordinary compensation income
to the recipient and deductible as such by the Company.
A recipient of a restricted stock award who makes an election under
Section 83(b) of the Code will recognize ordinary income at the time of the
award and the Company will be entitled to a corresponding deduction equal to the
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fair market value of such stock at such time over the amount paid therefor. Any
dividends subsequently paid to the recipient on the restricted stock will be
dividend income to the recipient and not deductible by the Company. If the
recipient makes a Section 83(b) election, there are no federal income tax
consequences either to the recipient or the Company at the time any transfer or
forfeiture restrictions applicable to the restricted stock award lapse.
NEW PLAN BENEFITS
The Company anticipates that stock awards will be made to non-employee
directors, officers and employees on or after the effective date of the MRDP at
levels consistent with other recently converted thrift institutions. However,
the Board has not made specific determinations regarding the size of individual
awards.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE MRDP
ATTACHED AS EXHIBIT B.
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PROPOSAL 4 -- RATIFICATION OF AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors has appointed Deloitte & Touche LLP to be its auditors
for the 1999 fiscal year, subject to the ratification by stockholders. A
representative of Deloitte & Touche LLP is expected to be present at the Annual
Meeting to respond to appropriate questions from stockholders and will have the
opportunity to make a statement should he or she desire to do so.
If the ratification of the appointment of the auditors is not approved by a
majority of the votes cast by stockholders at the Annual Meeting, other
independent public accountants will be considered by the Board of Directors. THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF AUDITORS.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the Annual
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Annual Meeting, it
is intended that proxies in the accompanying form will be voted in respect
thereof in accordance with the judgment of the person or persons voting the
proxies.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of the Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telephone without additional compensation. The Company has
retained Kissel-Blake, Inc. to assist in soliciting proxies for a fee of $3,500,
plus reimbursable expenses.
The Company's Annual Report to Stockholders has been mailed to stockholders as
of the close of business on December 7, 1998. Any stockholder who has not
received a copy of such Annual Report may obtain a copy by writing to the
Secretary of the Company. The Annual Report is not to be treated as part of the
proxy solicitation material or as having been incorporated herein by reference.
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A COPY OF THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
1998, AS FILED WITH THE SEC WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS
OF THE CLOSE OF BUSINESS ON DECEMBER 7, 1998 UPON WRITTEN REQUEST TO CORPORATE
SECRETARY, HERITAGE BANCORP, INC., 201 W. MAIN STREET, LAURENS, SOUTH CAROLINA
29360.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
Proposals of stockholders intended to be presented at the Company's annual
meeting expected to be held in February 2000 must be received by the Company no
later than September 6, 1999 to be considered for inclusion in the proxy
materials and form of proxy relating to such meeting. Any such proposals shall
be subject to the requirements of the proxy rules adopted under the Exchange
Act.
The Company's Certificate of Incorporation provides that in order for a
shareholder to make nominations for the election of directors or proposals for
business to be brought before the Annual Meeting, a shareholder must deliver
notice of such nominations and/or proposals to the Secretary not less than 30
nor more than 60 days prior to the date of the Annual Meeting; provided that if
less than 31 days' notice of the Annual Meeting is given to shareholders, such
notice must be delivered not later than the close of the tenth day following the
day on which notice of the Annual Meeting was mailed to shareholders. Based on
the date of the 1999 Annual Meeting, the Company anticipates that, in order to
be timely, shareholder nominations or proposals intended to be made at the 2000
Annual Meeting must be made by January 4, 2000. A copy of the Certificate of
Incorporation may be obtained from the Company.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J. Edward Wells
J. Edward Wells
President and Chief Executive Officer
Laurens, South Carolina
January 4, 1999
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EXHIBIT A
HERITAGE BANCORP, INC.
1998 STOCK OPTION PLAN
SECTION 1. PURPOSE
The Heritage Bancorp, Inc. 1998 Stock Option Plan (the "Plan") is hereby
established to foster and promote the long-term success of Heritage Bancorp,
Inc. and its shareholders by providing directors, officers and employees of the
Corporation and its subsidiaries with an equity interest in the Corporation. The
Plan will assist the Corporation in attracting and retaining the highest quality
of experienced persons as directors, officers and employees and in aligning the
interests of such persons more closely with the interests of the Corporation's
shareholders by encouraging such parties to maintain an equity interest in the
Corporation.
SECTION 2. DEFINITIONS
For purposes of this Plan, the capitalized terms set forth below shall have
the following meanings:
BOARD means the Board of Directors of the Corporation.
CHANGE IN CONTROL shall mean an event deemed to occur if and when (a) an
offeror other than the Corporation purchases shares of the stock of the
Corporation pursuant to a tender or exchange offer for such shares, (b) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the beneficial owner, directly or indirectly, of securities of the
Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities, (c) the
membership of the board of directors of the Corporation changes as the result of
a contested election, such that individuals who were directors at the beginning
of any twenty-four (24) month period (whether commencing before or after the
date of adoption of this Plan) do not constitute a majority of the Board at the
end of such period, or (d) shareholders of the Corporation approve a merger,
consolidation, sale or disposition of all or substantially all of the
Corporation's assets, or a plan of partial or complete liquidation. If any of
the events enumerated in clauses (a) - (d) occur, the Board shall determine the
effective date of the change in control resulting therefrom, for purposes of the
Plan.
CODE means the Internal Revenue Code of 1986, as amended from time to time,
and the regulations promulgated thereunder.
CORPORATION means Heritage Bancorp, Inc., a Delaware corporation.
DIRECTOR shall mean a director of the Corporation who is not also an employee
of the Corporation or its subsidiaries.
DISABILITY means any physical or mental injury or disease of a permanent
nature which renders a Participant incapable of meeting the requirements of the
employment or service performed by such Participant immediately prior to the
commencement of such disability. The determination of whether a Participant is
disabled shall be made by the Board in its sole and absolute discretion.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended from time
to time, and the rules and regulations promulgated thereunder.
FAIR MARKET VALUE shall be determined as follows:
(a) If the Stock is traded or quoted on the Nasdaq Stock Market or other
national securities exchange on any date, then the Fair Market Value shall be
the average of the highest and lowest selling price on such exchange on such
date or, if there were no sales on such date, then on the next prior business
day on which there was a sale.
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(b) If the Stock is not traded or quoted on the Nasdaq Stock Market or other
national securities exchange, then the Fair Market Value shall be a value
determined by the Board in good faith on such basis as it deems appropriate.
INCENTIVE STOCK OPTION means an option to purchase shares of Stock granted to
a Participant under the Plan which is intended to meet the requirements of
Section 422 of the Code.
NON-QUALIFIED STOCK OPTION means an option to purchase shares of Stock granted
to a Participant under the Plan which is not intended to be an Incentive Stock
Option.
OPTION means an Incentive Stock Option or a Non-Qualified Stock Option.
PARTICIPANT means a Director or employee of the Corporation or its
subsidiaries selected by the Board to receive an Option under the Plan.
PLAN means this Heritage Bancorp, Inc. 1998 Stock Option Plan.
STOCK means the common stock, $0.01 par value, of the Corporation.
TERMINATION FOR CAUSE shall mean termination because of a Participant's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or material breach of any provision of any employment
agreement between the Corporation and/or any subsidiary of the Corporation and a
Participant.
SECTION 3. ADMINISTRATION
(a) The Plan shall be administered by the Board. Among other things, the Board
shall have authority, subject to the terms of the Plan, to grant Options, to
determine the individuals to whom and the time or times at which Options may be
granted, to determine whether such Options are to be Incentive Stock Options or
Non-Qualified Stock Options (subject to the requirements of the Code), to
determine the terms and conditions of any Option granted hereunder, and the
exercise price thereof.
(b) Subject to the other provisions of the Plan, the Board shall have
authority to adopt, amend, alter and repeal such administrative rules,
guidelines and practices governing the operation of the Plan as it shall from
time to time consider advisable, to interpret the provisions of the Plan and any
Option and to decide all disputes arising in connection with the Plan. The Board
may correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any option agreement in the manner and to the extent it shall
deem appropriate to carry the Plan into effect, in its sole and absolute
discretion. The Board's decision and interpretations shall be final and binding.
Any action of the Board with respect to the administration of the Plan shall be
taken pursuant to a majority vote or by the unanimous written consent of its
members.
SECTION 4. ELIGIBILITY AND PARTICIPATION.
Officers and employees of the Corporation and its subsidiaries and Directors
shall be eligible to participate in the Plan. The Participants under the Plan
shall be selected from time to time by the Board, in its sole discretion, from
among those eligible, and the Board shall determine, in its sole discretion, the
numbers of shares to be covered by the Option or Options granted to each
Participant. Options intended to qualify as Incentive Stock Options shall be
granted only to persons who are eligible to receive such options under Section
422 of the Code.
SECTION 5. SHARES OF STOCK AVAILABLE FOR OPTIONS
(a) The maximum number of shares of Stock which may be issued and purchased
pursuant to Options granted under the Plan is 462,875, subject to the
adjustments as provided in Section 5 and Section 9, to the extent
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applicable. If an Option granted under this Plan expires or terminates before
exercise or is forfeited for any reason, the shares of Stock subject to such
Option, to the extent of such expiration, termination or forfeiture, shall again
be available for subsequent Option grants under Plan. Shares of Stock issued
under the Plan may consist in whole or in part of authorized but unissued shares
or treasury shares.
(b) In the event that the Board determines, in its sole discretion, that any
stock dividend, stock split, reverse stock split or combination, extraordinary
cash dividend, creation of a class of equity securities, recapitalization,
reclassification, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, or other similar transaction affects the Stock
such that an adjustment is required in order to preserve the benefits or
potential benefits intended to be granted or made available under the Plan to
Participants, the Board shall have the right to proportionately and
appropriately adjust equitably any or all of (i) the maximum number and kind of
shares of Stock in respect of which Options may be granted under the Plan to
Participants, (ii) the number and kind of shares of Stock subject to outstanding
Options held by Participants, and (iii) the exercise price with respect to any
Options held by Participants, without changing the aggregate purchase price as
to which such Options remain exercisable, provided that no adjustment shall be
made pursuant to this Section if such adjustment would cause the Plan to fail to
comply with Section 422 of the Code with regard to any Incentive Stock Options
granted hereunder. No fractional Shares shall be issued on account of any such
adjustment.
(c) Any adjustments under this Section will be made by the Board, whose
determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive.
SECTION 6. NON-QUALIFIED STOCK OPTIONS
The Board may, from time to time, grant Non-Qualified Stock Options to
Participants upon such terms and conditions as the Board may determine. Non-
Qualified Stock Options granted under this Plan are subject to the following
terms and conditions:
(a) Price. The purchase price per share of Stock deliverable upon the exercise
of each Non-Qualified Stock Option shall be determined by the Board on the date
the option is granted. Such purchase price shall not be less than one hundred
percent (100%) of the Fair Market Value of the Stock on the date of grant.
Shares may be purchased only upon full payment of the purchase price. Payment of
the purchase price may be made, in whole or in part, through the surrender of
shares of the Stock at the Fair Market Value of such shares on the date of
surrender or through a "cashless exercise" involving a stock brokerage firm.
(b) Terms of Options. The term during which each Non-Qualified Stock Option
may be exercised shall be determined by the Board, but in no event shall a Non-
Qualified Stock Option be exercisable in whole or in part more than ten (10)
years from the date of grant. Except as provided herein, no Non-Qualified Stock
Option granted under this Plan is transferable except by will or the laws of
descent and distribution. The Board shall have discretionary authority to
permit the transfer of any Non-Qualified Stock Option to members of a
Participant's immediate family, including trusts for the benefit of such family
members and partnerships in which such family members are the only partners;
provided, however, that a transferred Non-Qualified Stock Option may be
exercised by the transferee on any date only to the extent that the Participant
would have been entitled to exercise the Non-Qualified Stock Option on such date
had the Non-Qualified Stock Option not been transferred. Any transferred Non-
Qualified Stock Option shall remain subject to the terms and conditions of the
Participant's stock option agreement.
(c) Termination of Service. Unless otherwise determined by the Board, upon
the termination of a Participant's employment (or, in the case of a Director,
service as a member of the Board) for any reason other than Disability, death or
Termination for Cause, the Participant's Non-Qualified Stock Options shall be
exercisable only as to those shares which were immediately exercisable by the
Participant at the date of termination and only for a period of one (1) year
following termination. Notwithstanding any provision set forth herein nor
contained in any Agreement relating to the award of an Option, in the event of
Termination for Cause, all rights under the Participant's Non-Qualified Stock
Options shall expire upon termination. In the event of death or termination as a
result of Disability of any Participant, all Non-Qualified Stock Options held by
the Participant, whether or not exercisable at such time, shall be
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exercisable by the Participant or his legal representatives or beneficiaries of
the Participant for two (2) years or such longer period as determined by the
Board following the date of the Participant's death or termination of service
due to Disability, provided that in no event shall the period extend beyond the
expiration of the Non-Qualified Stock Option term.
SECTION 7. INCENTIVE STOCK OPTIONS
The Board may, from time to time, grant Incentive Stock Options to eligible
employees. Incentive Stock Options granted pursuant to the Plan shall be subject
to the following terms and conditions:
(a) Price. The purchase price per share of Stock deliverable upon the
exercise of each Incentive Stock Option shall be not less than one hundred
percent (100%) of the Fair Market Value of the Stock on the date of grant.
However, if a Participant owns (or, under Section 422(d) of the Code, is deemed
to own) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of Stock, the purchase price per share of Stock
deliverable upon the exercise of each Incentive Stock Option shall not be less
than one hundred ten percent (110%) of the Fair Market Value of the Stock on the
date of grant. Shares may be purchased only upon payment of the full purchase
price. Payment of the purchase price may be made, in whole or in part, through
the surrender of shares of the Stock at the Fair Market Value of such shares on
the date of surrender or through a "cashless exercise" involving a stock
brokerage firm.
(b) Amounts of Options. Incentive Stock Options may be granted to any
eligible employee in such amounts as determined by the Board. In the case of an
option intended to qualify as an Incentive Stock Option, the aggregate Fair
Market Value (determined as of the time the option is granted) of the Stock with
respect to which Incentive Stock Options granted are exercisable for the first
time by the Participant during any calendar year shall not exceed $100,000. The
provisions of this Section 7(b) shall be construed and applied in accordance
with Section 422(d) of the Code and the regulations, if any, promulgated
thereunder. To the extent an award is in excess of such limit, it shall be
deemed a Non-Qualified Stock Option. The Board shall have discretion to
redesignate options granted as Incentive Stock Options as Non-Qualified Stock
Options.
(c) Terms of Options. The term during which each Incentive Stock Option may
be exercised shall be determined by the Board, but in no event shall an
Incentive Stock Option be exercisable in whole or in part more than ten (10)
years from the date of grant. If at the time an Incentive Stock Option is
granted to an employee, the employee owns Stock representing more than ten
percent (10%) of the total combined voting power of the Corporation (or, under
Section 422(d) of the Code, is deemed to own Stock representing more than ten
percent (10%) of the total combined voting power of all such classes of Stock,
by reason of the ownership of such classes of Stock, directly or indirectly, by
or for any brother, sister, spouse, ancestor or lineal descendent of such
employee, or by or for any corporation, partnership, estate or trust of which
such employee is a shareholder, partner or beneficiary), the Incentive Stock
Option granted to such employee shall not be exercisable after the expiration of
five (5) years from the date of grant. No Incentive Stock Option granted under
this Plan is transferable except by will or the laws of descent and
distribution.
(d) Termination of Employment. Upon the termination of a Participant's
service for any reason other than Disability, death or Termination for Cause,
the Participant's Incentive Stock Options which are then exercisable at the date
of termination may only be exercised by the Participant for a period of three
(3) months following termination, after which time they shall be void.
Notwithstanding any provisions set forth herein nor contained in any Agreement
relating to an award of an Option, in the event of Termination for Cause, all
rights under the Participant's Incentive Stock Options shall expire immediately
upon termination.
Unless otherwise determined by the Board, in the event of death or termination
of service as a result of Disability of any Participant, all Incentive Stock
Options held by such Participant, whether or not exercisable at such time, shall
be exercisable by the Participant or the Participant's legal representatives or
the beneficiaries of the Participant for one (1) year following the date of the
Participant's death or termination of employment as a result of Disability. In
no event shall the exercise period extend beyond the expiration of the Incentive
Stock Option term.
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(e) Compliance with Code. The options granted under this Section 7 of the
Plan are intended to qualify as incentive stock options within the meaning of
Section 422 of the Code, but the Corporation makes no warranty as to the
qualification of any option as an incentive stock option within the meaning of
Section 422 of the Code. A Participant shall notify the Board in writing in the
event that he disposes of Stock acquired upon exercise of an Incentive Stock
Option within the two-year period following the date the Incentive Stock Option
was granted or within the one-year period following the date he received Stock
upon the exercise of an Incentive Stock Option and shall comply with any other
requirements imposed by the Corporation in order to enable the Corporation to
secure the related income tax deduction to which it will be entitled in such
event under the Code.
SECTION 8. EXTENSION
The Board may, in its sole discretion, extend the dates during which all or
any particular Option or Options granted under the Plan may be exercised;
provided, however, that no such extension shall be permitted without the
Participant's consent if it would cause Incentive Stock Options issued under the
Plan to fail to comply with Section 422 of the Code.
SECTION 9. GENERAL PROVISIONS APPLICABLE TO OPTIONS
(a) Each Option under the Plan shall be evidenced by a writing delivered to
the Participant specifying the terms and conditions thereof and containing such
other terms and conditions not inconsistent with the provisions of the Plan as
the Board considers necessary or advisable to achieve the purposes of the Plan
or comply with applicable tax and regulatory laws and accounting principles.
(b) Each Option may be granted alone, in addition to or in relation to any
other Option. The terms of each Option need not be identical, and the Board need
not treat Participants uniformly. Except as otherwise provided by the Plan or a
particular Option, any determination with respect to an Option may be made by
the Board at the time of grant or at any time thereafter.
(c) Notwithstanding anything in this Plan to the contrary, in the event of a
Change in Control, all then outstanding Options shall become one hundred percent
vested and exercisable as of the effective date of the Change in Control. If,
in connection with or as a consequence of a Change in Control, the Corporation
is merged into or consolidated with another corporation, if the Corporation
becomes a subsidiary of another corporation or if the Corporation sells or
otherwise disposes of substantially all of its assets to another corporation,
then unless provisions are made in connection with such transactions for the
continuance of the Plan and/or the assumption or substitution of then
outstanding Options with new options covering the stock of the successor
corporation, or parent or subsidiary thereof, with appropriate adjustments as to
the number and kind of shares and prices, such Options shall be canceled as of
the effective date of the merger, consolidation, or sale and the Participant
shall be paid in cash an amount equal to the difference between the Fair Market
Value of the Stock subject to the Options on the effective date of such
corporate event and the exercise price of the Options. Notwithstanding anything
in this Section 9(c) or any Option agreement to the contrary, in the event that
the consummation of a Change in Control is contingent on using pooling of
interests accounting methodology, the Board may, in its discretion, take any
action necessary to preserve the use of pooling of interests accounting.
(d) The Corporation shall be entitled to withhold (or secure payment from the
Participant in lieu of withholding) the amount of any withholding or other tax
required by law to be withheld or paid by the Corporation with respect to any
Options exercised under this Plan, and the Corporation may defer issuance of
Stock hereunder until and unless indemnified to its satisfaction against any
liability for any such tax. The amount of such withholding or tax payment shall
be determined by the Board or its delegate and shall be payable by the
Participant at such time as the Board determines. To the extent authorized by
the Board, such withholding obligation may also be satisfied by the payment of
cash by the Participant to the Corporation, the tendering of previously acquired
shares of Stock of the Participant or the withholding, at the appropriate time,
of shares of Stock otherwise issuable to the Participant, in a number
sufficient, based upon the Fair Market Value of such Stock, to satisfy such tax
withholding requirements. The Board shall be authorized, in its sole
discretion, to establish such rules and procedures relating to any such
withholding
A-5
<PAGE>
methods as it deems necessary or appropriate, including, without limitation,
rules and procedures relating to elections by Participants who are subject to
the provisions of Section 16 of the Exchange Act.
(e) Subject to the terms of the Plan, the Board may at any time, and from time
to time, amend, modify or terminate the Plan or any outstanding Option held by a
Participant, including substituting therefor another Option of the same or a
different type or changing the date of exercise or realization, provided that
the Participant's consent to each action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
SECTION 10. MISCELLANEOUS
(a) No person shall have any claim or right to be granted an Option, and the
grant of an Option shall not be construed as giving a Participant the right to
continued employment or service on the Board. The Corporation expressly reserves
the right at any time to dismiss a Participant free from any liability or claim
under the Plan, except as expressly provided in the Plan or the applicable
Option.
(b) Nothing contained in the Plan shall prevent the Corporation from adopting
other or additional compensation arrangements.
(c) Subject to the provisions of the applicable Option, no Participant shall
have any rights as a shareholder (including, without limitation, any rights to
receive dividends, or non cash distributions with respect to such shares) with
respect to any shares of Stock to be distributed under the Plan until he or she
becomes the holder thereof.
(d) Notwithstanding anything to the contrary expressed in this Plan, any
provisions hereof that vary from or conflict with any applicable Federal or
State securities laws (including any regulations promulgated thereunder) shall
be deemed to be modified to conform to and comply with such laws.
(e) No member of the Board shall be liable for any action or determination
taken or granted in good faith with respect to this Plan nor shall any member of
the Board be liable for any agreement issued pursuant to this Plan or any grants
under it. Each member of the Board shall be indemnified by the Corporation
against any losses incurred in such administration of the Plan, unless his
action constitutes serious and willful misconduct.
(f) The Plan shall be effective on April 7, 1999 but only if, prior to such
date, the Plan is approved by the Corporation's shareholders. The Plan will be
so approved if at an annual or special meeting of shareholders held prior to
such date a quorum is present and the votes of the holders of a majority of the
securities of the Corporation present or represented by proxy and entitled to
vote on such matter shall be cast in favor of its approval.
(g) The Board may amend, suspend or terminate the Plan or any portion thereof
at any time, provided that no amendment shall be made without shareholder
approval if such approval is necessary to comply with any applicable tax laws or
regulatory requirement.
(h) Options may not be granted under the Plan after the tenth anniversary of
the effective date of the Plan, but then outstanding Options may extend beyond
such date.
(i) To the extent that State laws shall not have been preempted by any laws of
the United States, the Plan shall be construed, regulated, interpreted and
administered according to the other laws of the State of Delaware.
A-6
<PAGE>
EXHIBIT B
HERITAGE BANCORP, INC.
MANAGEMENT RECOGNITION AND DEVELOPMENT PLAN
SECTION 1. PURPOSE AND ADOPTION OF THE PLAN
(a) PURPOSE. The purpose of the Heritage Bancorp, Inc. Management Recognition
and Development Plan is to assist the Corporation and its subsidiaries in
attracting, retaining and motivating key management employees and non-employee
directors who will contribute to the Corporation's success. The Plan is
intended to recognize the contributions of key management personnel to the
success of the Corporation and its subsidiaries, to link the benefits paid to
eligible employees and directors who have substantial responsibility for the
successful operation, administration and management of the Corporation with the
enhancement of shareholder value and to provide eligible employees and directors
with an opportunity to acquire a greater proprietary interest in the Corporation
through the grant of restricted shares of Stock which, in accordance with the
terms and conditions set forth below, will vest only if the employees meet the
vesting criteria established by the Board and this Plan.
(b) ADOPTION AND EFFECTIVE DATE. The Plan shall be effective on April 7, 1999
but only if, prior to such date, the Plan is approved by the Corporation's
shareholders. The Plan will be so approved if at an annual or special meeting
of shareholders held prior to such date a quorum is present and the votes of the
holders of a majority of the securities of the Corporation present or
represented by proxy and entitled to vote on such a matter shall be cast in
favor of its approval.
SECTION 2. DEFINITIONS
For purposes of this Plan, the capitalized terms set forth below shall have
the following meanings:
AWARD AGREEMENT means a written agreement between the Corporation and a
Participant specifically setting forth the terms and conditions of an award of
Restricted Stock granted to a Participant pursuant to Section 5 of the Plan.
BOARD means the Board of Directors of the Corporation.
CHANGE IN CONTROL shall mean an event deemed to occur if and when (a) an
offeror other than the Corporation purchases shares of the common stock of the
Corporation pursuant to a tender or exchange offer for such shares, (b) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the beneficial owner, directly or indirectly, of securities of the
Corporation representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities, (c) the
membership of the board of directors of the Corporation changes as the result of
a contested election, such that individuals who were directors at the beginning
of any twenty-four (24) month period (whether commencing before or after the
date of adoption of this Plan) do not constitute a majority of the Board at the
end of such period, or (d) shareholders of the Corporation approve a merger,
consolidation, sale or disposition of all or substantially all of the
Corporation's assets or a plan of partial or complete liquidation. If any of
the events enumerated in clauses (a) - (d) occur, the Board shall determine the
effective date of the change in control resulting therefrom.
CORPORATION means Heritage Bancorp, Inc., a Delaware corporation, and its
successors.
DATE OF GRANT means the date as of which an award of Restricted Stock is
granted in accordance with Section 5.
DIRECTOR means a member of the Board of Directors of the Corporation who is
not also an employee of the Corporation or its subsidiaries.
B-1
<PAGE>
DISABILITY means any physical or mental injury or disease of a permanent
nature which renders a Participant incapable of meeting the requirements of the
employment or service performed by such Participant immediately prior to the
commencement of such disability. The determination of whether a Participant is
disabled shall be made by the Board in its sole and absolute discretion.
EFFECTIVE DATE means the date as of which the Plan shall become effective, as
determined in accordance with Section 1(b).
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
FAIR MARKET VALUE shall be determined as follows:
(a) If the stock is traded or quoted on the Nasdaq Stock Market or other
national securities exchange on any date, then the Fair Market Value shall be
the average of the highest and lowest selling price on such exchange on such
date or, if there were no sales on such date, then on the next prior business
day on which there was a sale.
(b) If the stock is not traded or quoted on the Nasdaq Stock Market or other
national securities exchange, then the Fair Market Value shall be a value
determined by the Board in good faith on such basis as it deems appropriate.
PARTICIPANT means any person selected by the Board, pursuant to Section 3(b),
to participate under the Plan.
PLAN means this Heritage Bancorp, Inc. Management Recognition and Development
Plan, as the same may be amended from time to time.
RESTRICTED STOCK means shares of Stock awarded to a Participant subject to
restrictions as described in Section 5.
STOCK means the common stock, par value $0.01 per share, of the Corporation.
SECTION 3. ADMINISTRATION AND PARTICIPATION
(a) ADMINISTRATION. The Plan shall be administered by the Board which shall
have exclusive and final authority and discretion in each determination,
interpretation or other action affecting the Plan and its Participants. The
Board shall have the sole and absolute authority and discretion to interpret the
Plan, to establish and modify administrative rules for the Plan, to select, in
accordance with Section 3(b), the persons who will be Participants hereunder, to
impose, in accordance with Section 5(a), such conditions and restrictions as it
determines appropriate and to take such other actions and make such other
determinations in connection with the Plan as it may deem necessary or
advisable.
(b) DESIGNATION OF PARTICIPANTS. Participants in the Plan shall be such
employees of the Corporation and its subsidiaries or Directors as the Board, in
its sole discretion, may designate. The Board shall consider such factors as it
deems pertinent in selecting Participants.
SECTION 4. STOCK ISSUABLE UNDER THE PLAN
(a) NUMBER OF SHARES OF STOCK ISSUABLE. Subject to adjustments as provided in
Section 6(c), the maximum number of shares of Stock available for issuance under
the Plan shall be 185,150. The Stock to be offered under the Plan shall be
authorized and unissued Stock, Stock which shall have been reacquired by the
Corporation and held in its treasury, or Stock held in a trust established by
the Corporation for the purpose of funding awards under the Plan with shares
acquired on the open market with funds contributed by the Corporation or any
subsidiary.
B-2
<PAGE>
(b) SHARES SUBJECT TO TERMINATED AWARDS. Shares of Stock forfeited as
provided in Section 5(b) may again be issued under the Plan.
SECTION 5. RESTRICTED STOCK
Subject to the terms of this Plan, the Board may grant to any Participant an
award of Restricted Stock in respect of such number of shares of Stock, and
subject to such terms and conditions relating to forfeitability and restrictions
on delivery and transfer (whether based on performance standards, periods of
service or otherwise), as the Board shall determine in its sole discretion. The
terms of all such Restricted Stock awards shall be set forth in an Award
Agreement between the Corporation and the Participant which shall contain such
provisions, not inconsistent with this Plan, as shall be determined by the
Board.
(a) ISSUANCE OF RESTRICTED STOCK. As soon as practicable after the Date of
Grant of Restricted Stock, the Corporation shall cause to be transferred on the
books of the Corporation shares of Stock, registered on behalf of the
Participant, evidencing such Restricted Stock, but subject to forfeiture to the
Corporation retroactive to the Date of Grant if an Award Agreement delivered to
the Participant by the Corporation with respect to the Restricted Stock is not
duly executed by the Participant and timely returned to the Corporation. Unless
the Board determines otherwise, until the lapse or release of all restrictions
applicable to an award of Restricted Stock, the stock certificates representing
such Restricted Stock shall be held in custody by the Corporation or its
designee. Notwithstanding the foregoing, the Corporation may, in its sole
discretion, establish a trust for the purpose of holding Restricted Stock
awarded pursuant to this Plan. In the event that a trust is established, the
Corporation may elect to hold any or all shares of Stock subject to awards in
the name of the trust for the benefit of the Participant and subject to the
forfeiture conditions applicable to the award.
(b) SHAREHOLDER RIGHTS. Beginning on the Date of Grant of the Restricted
Stock and subject to execution of the Award Agreement as provided in Section
5(a), the Participant shall become a shareholder of the Corporation with respect
to all Stock subject to the Award Agreement and shall have all of the rights of
a shareholder, including, but not limited to, the right to vote such Stock and
the right to receive dividends and other distributions paid with respect to such
Stock; provided, however, that any Stock distributed as a dividend or otherwise
with respect to any Restricted Stock as to which the restrictions have not yet
lapsed shall be subject to the same restrictions as such Restricted Stock and
shall be held as prescribed in Section 5(a). Cash dividends paid with respect
to Restricted Stock may, at the Board's discretion, be held by the Corporation
in escrow until such time as the Participant vests in such shares or distributed
to the Participant during the forfeiture period. The Corporation may credit a
reasonable rate of interest to such cash dividends prior to distribution.
(c) RESTRICTION ON TRANSFERABILITY. None of the Restricted Stock may be
assigned, transferred (other than by will or the laws of descent and
distribution), pledged, sold or otherwise disposed of prior to lapse or release
of the restrictions applicable thereto.
(d) DELIVERY OF STOCK UPON RELEASE OF RESTRICTIONS. Upon expiration or
earlier termination of the forfeiture period without a forfeiture, and the
satisfaction of or release from any other conditions prescribed by the Board,
the restrictions applicable to the Restricted Stock shall lapse. As promptly as
administratively feasible thereafter, subject to the requirements of Section
6(b), the Corporation shall deliver to the Participant or, in case of the
Participant's death, to the Participant's legal representatives, one or more
stock certificates for the appropriate number of shares of Stock, free of all
such restrictions, except for any restrictions that may be imposed by law.
(e) TERMS OF RESTRICTED STOCK; FORFEITURE OF RESTRICTED STOCK. All Restricted
Stock shall be forfeited and returned to the Corporation and all rights of the
Participant with respect to such Restricted Stock shall cease and terminate in
their entirety if during the forfeiture period the employment (or, in the case
of a Director, service) of the Participant with the Corporation and/or its
subsidiaries terminates for any reason. Subject to the terms of the Plan, the
Board, in its sole discretion, shall establish the forfeiture period for each
grant of Restricted Stock, and may provide for the forfeiture period to lapse in
installments. Notwithstanding the foregoing, upon the termination of a
Participant's employment (or, in the case of a Director, service) by reason of
death or Disability, all forfeiture
B-3
<PAGE>
restrictions imposed on Restricted Stock shall immediately and fully lapse. In
addition, upon the effective date of a Change in Control, all forfeiture
restrictions imposed on outstanding Restricted Stock awards shall immediately
and fully lapse.
SECTION 6. MISCELLANEOUS
(a) LIMITATIONS ON TRANSFER. The rights and interest of a Participant under
the Plan may not be assigned or transferred other than by will or the laws of
descent and distribution. During the lifetime of a Participant, only the
Participant personally may exercise rights under the Plan.
(b) TAXES. The Corporation shall be entitled to withhold (or secure payment
from the Participant in lieu of withholding) the amount of any withholding or
other tax required by law to be withheld or paid by the Corporation with respect
to any Stock issuable under this Plan, or with respect to any income recognized
upon the lapse of restrictions applicable to Restricted Stock and the
Corporation may defer issuance of Stock hereunder until and unless indemnified
to its satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Board or its delegate and
shall be payable by the Participant at such time as the Board determines. To
the extent authorized by the Board, such withholding obligation may be satisfied
by the payment of cash by the Participant to the Corporation, the tendering of
previously acquired shares of Stock of the Participant or the withholding, at
the appropriate time, of shares of Stock otherwise issuable to the Participant,
in a number sufficient, based upon the Fair Market Value of such Stock, to
satisfy such tax withholding requirements. The Board shall be authorized, in
its sole discretion, to establish such rules and procedures relating to any such
withholding methods as it deems necessary or appropriate, including, without
limitation, rules and procedures relating to elections by Participants who are
subject to the provisions of Section 16 of the Exchange Act.
(c) ADJUSTMENTS TO REFLECT CAPITAL CHANGES. The amount and kind of Stock
available for issuance under the Plan and the limit on the number of shares of
Stock in respect of which awards may be made to any Participant in any calendar
year shall be appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Plan. The Board shall
have the power and sole discretion to determine the nature and amount of the
adjustment, if any, to be made pursuant to this Section 6(c).
(d) NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT. No employee or other person
shall have any claim of right to be permitted to participate or be granted an
award under this Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any employee any right to be retained in the employ of the
Corporation.
(e) GOVERNING LAW. The Plan and all determinations made and actions taken
pursuant to the Plan shall be governed by the laws of the State of Delaware
other than the conflict of laws provisions of such laws, and shall be construed
in accordance therewith.
(f) CAPTIONS. The captions (i.e., all Section and subsection headings) used
in the Plan are for convenience only, do not constitute a part of the Plan, and
shall not be deemed to limit, characterize or affect in any way any provisions
of the Plan, and all provisions of the Plan shall be construed as if no captions
had been used in the Plan.
(g) SEVERABILITY. Whenever possible, each provision in the Plan and every
Award Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of the Plan or any Award Agreement
shall be held to be prohibited by or invalid under applicable law, then (x) such
provision shall be deemed amended to accomplish the objectives of the provision
as originally written to the fullest extent permitted by law and (y) all other
provisions of the Plan and every Award Agreement shall remain in full force and
effect.
(h) LEGENDS. All certificates for Stock delivered under the Plan shall be
subject to such transfer restrictions set forth in the Plan and such other
restrictions as the Board may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then
B-4
<PAGE>
listed and any applicable federal or state securities law, and the Board may
cause a legend or legends to be endorsed on any such certificates making
appropriate references to such restrictions.
(i) AMENDMENT AND TERMINATION.
(A) AMENDMENT. Subject to applicable law and regulations, the Board shall
have complete power and authority to amend the Plan at any time it is deemed
necessary or appropriate; provided, however, that no amendment shall be made
without shareholder approval if such approval is necessary for the Corporation
to comply with an applicable tax law or regulatory requirement. No termination
or amendment of the Plan may, without the consent of the Participant to whom any
award shall theretofore have been granted under the Plan, adversely affect the
right of such individual under such award.
(B) TERMINATION. The Board shall have the right and the power to terminate
the Plan at any time. Unless sooner terminated by action of the Board, the Plan
shall automatically terminate, without further action of the Board or the
Corporation's shareholders, on the tenth anniversary of the Effective Date. No
award shall be granted under the Plan after the termination of the Plan, but the
termination of the Plan shall not have any other effect and any award
outstanding at the time of the termination of the Plan shall continue in effect
in accordance with its terms as if the Plan has not terminated.
* * *
B-5
<PAGE>
REVOCABLE PROXY
HERITAGE BANCORP, INC.
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 3, 1999
- --------------------------------------------------------------------------------
The undersigned hereby appoints the official Proxy Committee of the Board of
Directors of Heritage Bancorp, Inc. with full powers of substitution, as
attorneys and proxies for the undersigned, to vote all shares of common stock of
Heritage Bancorp, Inc. ("Company") which the undersigned is entitled to vote at
the Annual Meeting of Stockholders ("Meeting"), to be held at the main office of
Heritage Federal Bank, 201 West Main Street, Laurens, South Carolina, on
Wednesday, February 3, 1999, at 11:00 a.m., local time, and at any and all
adjournments thereof, as indicated.
<TABLE>
<CAPTION>
VOTE
FOR WITHHELD
--- --------
<S> <C> <C>
1. The election as director of the nominees [ ] [ ]
listed below (except as marked to the
contrary below).
John H. Lake
G. Edwin Owings, II
INSTRUCTIONS: TO WITHHOLD YOUR VOTE
FOR ANY INDIVIDUAL NOMINEE, WRITE THE
NOMINEE'S NAME ON THE LINE BELOW.
<CAPTION>
- -----------------------
FOR AGAINST ABSTAIN
----- ------- -------
<S> <C> <C> <C>
2. The ratification of the adoption of the [ ] [ ] [ ]
Heritage Bancorp, Inc. 1998 Stock Option
Plan.
3. The ratification of the adoption of the [ ] [ ] [ ]
Heritage Bancorp, Inc. Management
Recognition and Development Plan.
4. The ratification of the appointment of [ ] [ ] [ ]
Deloitte & Touche LLP as auditors
for the year ending September 30, 1999.
5. In their discretion, upon such other matters
as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE PROPOSALS.
</TABLE>
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at any
adjournment thereof and after notification to the Secretary of the Company at
the Meeting of the shareholder's decision to terminate this proxy, then the
power of said attorneys and proxies shall be deemed terminated and of no further
force and effect.
The undersigned acknowledges receipt from the Company prior to the execution
of this proxy of the Notice of the Annual Meeting of Stockholders, a Proxy
Statement for the Annual Meeting of Stockholders, and the 1998 Annual Report to
Stockholders.
Dated: , 199
---------------------- --
<TABLE>
<S> <C>
- ---------------------------------- ------------------------------------------
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
- ---------------------------------- ------------------------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
</TABLE>
Please sign exactly as your name appears on the enclosed card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, only one signature is required, but each
holder should sign, if possible.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
