SCHEDULE 14-A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material
under Rule 14a-12
FIRST SENTINEL BANCORP, INC.
(Name of Registrant as Specified In Its Charter)
----------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
....................................................................
2) Aggregate number of securities to which transaction applies:
....................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
....................................................................
4) Proposed maximum aggregate value of transaction:
....................................................................
5) Total fee paid:
....................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
...........................
2) Form, Schedule or Registration Statement No.:
...........................
3) Filing Party:
...........................
4) Date Filed:
...........................
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FIRST SENTINEL BANCORP, INC.
1000 WOODBRIDGE CENTER DRIVE
WOODBRIDGE, NEW JERSEY 07095
(732) 726-9700
March 24, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of First Sentinel Bancorp, Inc. ("First Sentinel" or the "Company"), the holding
company for First Savings Bank (the "Bank") which will be held on April 19,
2000, at 10:00 a.m., at the Sheraton at Woodbridge Place, 515 Route 1 South,
Iselin, New Jersey.
The attached Notice of Annual Meeting of Stockholders and the Proxy
Statement describe the formal business to be transacted at the Annual Meeting.
Directors and officers of First Sentinel as well as representatives of KPMG LLP,
the Company's independent auditors, will be present at the Annual Meeting to
make a statement if they desire to do so and to respond to any questions that
our stockholders may have regarding the business to be transacted.
The Board of Directors of the Company has determined that the matters
to be considered at the Annual Meeting are in the best interests of the Company
and its stockholders. For the reasons set forth in the proxy statement, the
Board unanimously recommends a vote "FOR" each of the nominees for director
specified under Proposal I, and "FOR" Proposal II, the ratification of KPMG LLP
as the Company's auditors.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR
COOPERATION IS APPRECIATED SINCE A MAJORITY OF THE COMMON STOCK MUST BE
REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM FOR THE
CONDUCT OF BUSINESS.
On behalf of the Board of Directors and all the employees of the
Company and the Bank, I wish to thank you for your continued support. We
appreciate your interest.
Sincerely,
/s/ John P. Mulkerin
John P. Mulkerin
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<PAGE>
FIRST SENTINEL BANCORP, INC.
1000 WOODBRIDGE CENTER DRIVE
WOODBRIDGE, NEW JERSEY 07095
(732) 726-9700
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 19, 2000
---------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of First Sentinel Bancorp, Inc. ("First Sentinel" or the
"Company") will be held at the Sheraton at Woodbridge Place, 515 Route 1 South,
Iselin, New Jersey, on April 19, 2000, at 10:00 a.m.
A proxy statement and proxy card for this Annual Meeting are enclosed
herewith. The Annual Meeting is for the purpose of considering and voting upon
the following matters:
1. The election of three directors; and
2. The ratification of KPMG LLP as the independent auditors of the
Company for the year ending December 31, 2000.
In addition, such other matters as may properly come before the Annual
Meeting or any adjournments thereof will be considered and voted upon at the
Annual Meeting.
The Board of Directors has established February 21, 2000, as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting and at any adjournments thereof. Only record holders of the
Common Stock of the Company as of the close of business on that date will be
entitled to vote at the Annual Meeting or any adjournments thereof. In the event
there are not sufficient votes for a quorum or to approve or ratify any of the
foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies by the Company. A
list of stockholders entitled to vote at the Annual Meeting will be available at
First Sentinel Bancorp, Inc., 1000 Woodbridge Center Drive, Woodbridge, New
Jersey, for a period of ten days prior to the Annual Meeting and also will be
available for inspection at the Annual Meeting itself.
By Order of the Board of Directors,
/s/ Christopher Martin
Christopher Martin
Secretary
Woodbridge, New Jersey
March 24, 2000
<PAGE>
FIRST SENTINEL BANCORP, INC.
---------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 19, 2000
---------------------------
SOLICITATION AND VOTING OF PROXIES
This proxy statement is being furnished to stockholders of First
Sentinel Bancorp, Inc. ("First Sentinel" or the "Company") in connection with
the solicitation by the Company's board of directors (the "Board of Directors"
or "Board") of proxies to be used at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Sheraton at Woodbridge Place, 515 Route 1
South, Iselin, New Jersey, on April 19, 2000, at 10:00 a.m., and at any
adjournments thereof. The 1999 Annual Report to Stockholders, including
financial statements for the fiscal year ended December 31, 1999, accompanies
this proxy statement, which is first being mailed to stockholders on or about
March 24, 2000.
Regardless of the number of shares of Common Stock owned, it is
important that stockholders be represented by proxy or present in person at the
Annual Meeting. Stockholders are requested to vote by completing the enclosed
proxy card and returning it signed and dated in the enclosed postage-paid
envelope. Stockholders are urged to indicate their vote in the spaces provided
on the proxy card. PROXIES SOLICITED BY THE BOARD OF DIRECTORS OF FIRST SENTINEL
WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN THEREIN. WHERE NO
INSTRUCTIONS ARE INDICATED, SIGNED PROXIES WILL BE VOTED "FOR" PROPOSAL I AND
"FOR" PROPOSAL II.
Other than the matters listed on the attached Notice of Annual Meeting
of Stockholders, the Board of Directors knows of no additional matters that will
be presented for consideration at the Annual Meeting. EXECUTION OF A PROXY CARD,
HOWEVER, CONFERS ON THE DESIGNATED PROXYHOLDERS DISCRETIONARY AUTHORITY TO VOTE
THE SHARES OF COMMON STOCK IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH OTHER
BUSINESS, IF ANY, THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENTS THEREOF.
A proxy may be revoked at any time prior to its exercise by the filing
of written notice of revocation with the Secretary of the Company, by delivering
to the Company a duly executed proxy bearing a later date, or by attending the
Annual Meeting, filing a notice of revocation with the Secretary and voting in
person. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORDHOLDER TO
VOTE PERSONALLY AT THE ANNUAL MEETING.
The cost of solicitation of proxies on behalf of management will be
borne by First Sentinel. In addition to the solicitation of proxies by mail,
Georgeson Shareholder Communications Inc., a proxy solicitation firm, will
assist the Company in soliciting proxies for the Annual Meeting and will be paid
a fee of $10,000, plus out-of-pocket expenses. Proxies may also be solicited
personally or by telephone by directors, officers and regular employees of the
<PAGE>
Company and First Savings Bank (the "Bank" or "First Savings"), without
additional compensation therefor. First Sentinel will also request persons,
firms and corporations holding shares in their names, or in the name of their
nominees, which are beneficially owned by others, to send proxy material to, and
obtain proxies from such beneficial owners, and will reimburse such holders for
their reasonable expenses in doing so.
VOTING SECURITIES
The securities which may be voted at the Annual Meeting consist of
shares of common stock of First Sentinel (the "Common Stock"), with each share
entitling its owner to one vote on all matters to be voted on at the Annual
Meeting except as described below. The close of business on February 21, 2000
has been established by the Board of Directors as the record date (the "Record
Date") for the determination of stockholders entitled to notice of and to vote
at this Annual Meeting and any adjournments thereof. The total number of shares
of Common Stock outstanding on the Record Date was 37,280,545 shares.
In accordance with the provisions of the Company's certificate of
incorporation, record holders of Common Stock who beneficially own in excess of
ten percent (10%) of the outstanding shares of Common Stock (the "Limit") are
not entitled to vote with respect to the shares held in excess of the Limit. A
person or entity is deemed to beneficially own shares owned by an affiliate of,
as well as by persons acting in concert with, such person or entity. The
Company's certificate of incorporation authorizes the Board of Directors (i) to
make all determinations necessary to implement and apply the Limit, including
determining whether persons or entities are acting in concert, and (ii) to
demand that any person who is reasonably believed to beneficially own stock in
excess of the Limit supply information to the Company to enable the Board of
Directors to implement and apply the Limit.
The presence, in person or by proxy, of at least a majority of the
total number of shares of Common Stock entitled to vote (after giving effect to
the Limit described above, if applicable) is necessary to constitute a quorum at
the Annual Meeting. In the event there are not sufficient votes for a quorum or
to approve or ratify any proposal at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit the further solicitation of proxies.
As to the election of directors, the proxy card being provided by the
Board of Directors enables a stockholder to vote "FOR" the election of the
nominees proposed by the Board, or to "WITHHOLD AUTHORITY" to vote for one or
more of the nominees being proposed. Under Delaware law and the Company's
certificate of incorporation and bylaws, directors are elected by a plurality of
votes cast, without regard to either (i) broker non-votes, or (ii) proxies as to
which authority to vote for one or more of the nominees being proposed is
withheld.
As to the ratification of KPMG LLP as independent auditors and all
other matters that may properly come before the Annual Meeting, by checking the
appropriate box, a stockholder may: (i) vote "FOR" the item; (ii) vote "AGAINST"
the item; or (iii) "ABSTAIN" from voting on such item. Under the Company's
certificate of incorporation and bylaws, unless otherwise required by law, such
matters shall be determined by a majority of votes cast without regard to (a)
broker non-votes, or (b) proxies marked "ABSTAIN" as to that matter.
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Proxies solicited hereby will be returned to the proxy solicitors or
the Company's transfer agent, and will be tabulated by inspectors of election
designated by the Company, who will not be employed by, or be a director of, the
Company or any of its affiliates. After the final adjournment of the Annual
Meeting, the proxies will be returned to the Company for safekeeping.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as to those persons
believed by management to be beneficial owners of more than 5% of the Company's
shares of Common Stock outstanding on the Record Date. Persons and groups owning
in excess of 5% of the Company's Common Stock are required to file certain
reports regarding such ownership with the Company and with the Securities and
Exchange Commission ("SEC"), in accordance with Sections 13(d) and 13(g) of the
Securities Exchange Act of 1934 ("Exchange Act"). Other than those persons
listed below, the Company is not aware of any person or group that owns more
than 5% of the Company's Common Stock as of the Record Date.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock First Savings Bank 2,164,918(1) 5.8%
Employee Stock Ownership Plan and Trust
c/o First Savings Bank
</TABLE>
(1) The ESOP Trustee, subject to its fiduciary duty, must vote all allocated
shares held in the ESOP in accordance with the instructions of the
participating employees. At February 21, 2000, 827,732 shares of Common
Stock had been allocated to participating employee accounts. As of this same
date, 1,337,186 unallocated shares remained in the ESOP.
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL I. ELECTION OF DIRECTORS
The number of directors of First Sentinel is currently set at nine.
Each of the nine members of the Board of Directors of First Sentinel also serves
as a director of the Bank. Directors are elected for staggered terms of three
years each, with a term of office of only one class of directors expiring in
each year. Directors serve until their successors are elected and qualified.
Messrs. Christopher Martin, Keith H. McLaughlin and Philip T. Ruegger,
Jr. have been nominated to stand for election at the Annual Meeting. Each of the
nominees named are presently directors of the Company and the Bank. No person
being nominated by the Nominating Committee of the Board of Directors as a
director is being proposed for election pursuant to any agreement or
understanding between any person and First Sentinel. UNLESS AUTHORITY TO VOTE
FOR THE DIRECTORS IS WITHHELD, IT IS INTENDED THAT THE SHARES REPRESENTED BY
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THE ENCLOSED PROXY CARD IF EXECUTED AND RETURNED WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES.
In the event that any nominee is unable or declines to serve for any
reason, it is intended that proxies will be voted for the election of the other
nominees named and for such other persons as may be designated by the present
Board of Directors. The Board of Directors has no reason to believe that any of
the persons named will be unable or unwilling to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF THE NOMINEES NAMED IN THIS PROXY STATEMENT.
INFORMATION WITH RESPECT TO NOMINEES, CONTINUING DIRECTORS
AND EXECUTIVE OFFICERS
The following table sets forth, as of the Record Date, the names of the
nominees, continuing directors, executive officers and their ages, the year in
which each became a director or officer of the Bank and the year in which their
term (or in the case of the nominees, their proposed term) as director of the
Company expires. This table also sets forth the number of shares of Common Stock
and the percentage thereof beneficially owned by each director and executive
officer and all directors and executive officers as a group. Ownership
information is based upon information furnished by the respective individuals as
of the Record Date.
<TABLE>
<CAPTION>
DIRECTOR/
EXECUTIVE SHARES OF
OFFICER EXPIRATION COMMON STOCK PERCENT
SINCE (1) OF BENEFICIALLY OF
AGE TERM OWNED(2) Class(10)
------ ------------ --------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NOMINEES:
---------
Christopher Martin 43 1984 2000 435,129(6)(7) 1.2%
Keith H. McLaughlin 64 1983 2000 302,550(3)(4) *
Philip T. Ruegger, Jr. 73 1983 2000 688,097(3)(4) 1.8
CONTINUING DIRECTORS:
---------------------
Donald T. Akey, M.D. 77 1979 2002 173,967(3)(4) *
Joseph Chadwick 57 1999 2002 431,048(3)(4)(5) 1.2
George T. Hornyak, Jr. 50 1999 2001 793,741(3)(4)(5) 2.1
John P. Mulkerin 62 1987 2001 589,196(6)(7) 1.6
Jeffries Shein 60 1985 2001 901,624(3)(4)(8) 2.4
Walter K. Timpson 77 1964 2002 582,908(3)(4) 1.6
EXECUTIVE OFFICERS:
Richard Spengler 38 1983 -- 177,605(6)(7) *
John F. Cerulo, Jr. 49 1988 -- 91,716(6)(7) *
Ann C. Clancy 36 1998 -- 17,170(6)(7) *
Karen I. Martino 40 1984 -- 79,055(6)(7) *
Stock ownership of all directors -- -- -- 5,263,807(9) 13.9
And executive officers as a group
(13 persons)
</TABLE>
* Less than 1 percent.
(footnotes on next page)
4
<PAGE>
(1) Includes years of service as a director or executive officer of the
Bank.
(2) Each person or relative of such person whose shares are included
herein, exercises sole (or shared with spouse, relative or affiliate)
voting and dispositive powers as to the shares reported.
(3) Includes 26,480 shares of unvested restricted stock awarded to each of
Messrs. Akey, Chadwick, Hornyak, McLaughlin, Ruegger, Shein and Timpson
under the First Sentinel Bancorp, Inc. Amended and Restated 1998
Stock-Based Incentive Plan ("1998 Incentive Plan"). Awards granted
under the 1998 Incentive Plan vest at a rate of 20% per year commencing
December 16, 1999; provided, however, that 50% of each annual
installment will only vest if the performance criteria established by
the Compensation Committee of the Board of Directors is satisfied. Each
participant has voting power as to the shares awarded.
(4) Includes 14,205 options to purchase Common Stock granted to each of
Messrs. Akey, McLaughlin, Ruegger, Shein and Timpson under the First
Sentinel Bancorp, Inc. 1996 Omnibus Incentive Plan ("1996 Incentive
Plan") which are currently exercisable. Also includes 16,550 options to
purchase Common Stock granted to each of Messrs. Akey, Chadwick,
Hornyak, McLaughlin, Ruegger, Shein and Timpson under the 1998
Incentive Plan. Excludes 66,200 options granted to each of Messrs.
Akey, Chadwick, Hornyak, McLaughlin, Ruegger, Shein and Timpson under
the 1998 Incentive Plan which have not yet vested. Options granted
under the 1998 Incentive Plan vest at a rate of 20% per year commencing
December 16, 1999.
(5) Includes 84,494 and 133,426 options to purchase Common Stock that were
granted by Pulse Bancorp, Inc. to Messrs. Chadwick and Hornyak,
respectively, prior to the merger of Pulse with and into First
Sentinel. First Sentinel assumed all stock compensation plans of Pulse,
and each outstanding option to purchase Pulse common stock was
exchanged for options to purchase 3.764 shares of First Sentinel Common
Stock. All such options are currently exercisable.
(6) Includes 82,400, 76,000, 33,600, 12,000, 8,000 and 16,000 shares of
unvested restricted stock awarded to Messrs. Mulkerin, Martin,
Spengler, Cerulo, Ms. Clancy and Ms. Martino under the 1998 Incentive
Plan, respectively. Awards granted under the 1998 Incentive Plan vest
at a rate of 20% per year commencing December 16, 1999; provided,
however, that 50% of each annual installment will only vest if the
performance criteria established by the Compensation Committee of the
Board of Directors is satisfied. Each participant has voting power as
to the shares awarded.
(7) Includes 54,454 options to purchase Common Stock granted to each of
Messrs. Mulkerin and Martin and 9,470 options to purchase Common Stock
granted to each of Messrs. Spengler and Cerulo and Ms. Martino under
the 1996 Incentive Plan which are currently exercisable. Also includes
60,000, 52,000, 17,500, 7,000, 4,000 and 9,000 options to purchase
Common Stock granted to each of Messrs. Mulkerin, Martin, Spengler,
Cerulo, Ms. Clancy and Ms. Martino, respectively, under the 1998
Incentive Plan. Excludes 240,000, 208,000, 70,000, 28,000, 16,000 and
36,000 options granted to Messrs. Mulkerin, Martin, Spengler, Cerulo,
Ms. Clancy and Ms. Martino, respectively, under the 1998 Incentive Plan
which have not yet vested. Options granted under the 1998 Incentive
Plan vest at a rate of 20% per year commencing December 16, 1999.
(8) Includes 107,931 shares held in six trust accounts over which Mr.
Shein, as trustee, has voting power.
(9) Includes 413,360 shares of unvested restricted stock awarded under the
1998 Incentive Plan. Excludes 1,061,400 options granted under the 1998
Incentive Plan which are not currently exercisable.
(10) Under applicable regulations, a person is deemed to have beneficial
ownership of any share of Common Stock that may be acquired within 60
days of February 21, 2000 pursuant to the exercise of outstanding
options. Shares of Common Stock which are subject to stock options are
deemed to be outstanding for the purpose of computing the percentage of
Common Stock owned by such person or group, but not deemed outstanding
for the purpose of computing the percentage of Common Stock owned by
any other person or group.
BIOGRAPHICAL INFORMATION
DIRECTORS
JOHN P. MULKERIN is the President and Chief Executive Officer and a
member of the Board of Directors of both the Company and the Bank. Mr. Mulkerin
joined the Bank in 1987 as Executive Vice President, Chief Operating Officer and
Corporate Secretary. He was named
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<PAGE>
General Counsel of the Bank in 1993 and became the President and Chief Executive
Officer in 1996. Mr. Mulkerin also serves as President and director of FSB
Financial Corp. and 1000 Woodbridge Center Drive, Inc., two wholly-owned
subsidiaries of the Bank. Mr. Mulkerin is also a member of the Board of
Directors of Middlesex Water Company, Raritan Bay Medical Center and Daytop
Village Foundation.
CHRISTOPHER MARTIN is the Executive Vice President, Chief Financial and
Operating Officer of both the Company and the Bank. He also serves as Corporate
Secretary of the Company, and is a member of both Boards of Directors. He joined
the Bank in 1984 and served as Controller of the Bank until 1989, when he was
named Senior Vice President and Chief Financial Officer. He was named Executive
Vice President in 1994. In 1996, he was named the Chief Operating Officer and
elected to the Board of Directors of the Bank. Mr. Martin is also the Executive
Vice President, Treasurer and a director of FSB Financial Corp., and serves as
the Executive Vice President and director of 1000 Woodbridge Center Drive, Inc.
DONALD T. AKEY, M.D. joined the Board of First Savings in 1979. Dr.
Akey is a surgeon who had practiced in Metuchen, New Jersey, for over forty
years. Dr. Akey retired from active practice in 1993.
JOSEPH CHADWICK, a former director of Pulse, joined the Board of First
Sentinel in 1999 following the merger of Pulse with and into the Company. Mr.
Chadwick is President of Thomas and Chadwick/Riverside Supply Company, a
retailer of building supplies and fuel oil. He has held this position since
1971.
GEORGE T. HORNYAK, JR. also joined the Board of First Sentinel in 1999
following the merger of Pulse with and into the Company. Mr. Hornyak was
formerly the President, Chief Executive Officer and a director of Pulse. He is
also a director of Mercer Mutual Insurance Company.
KEITH H. MCLAUGHLIN joined the Board of First Savings in 1983. He is
the President and Chief Executive Officer of Raritan Bay Medical Center, which
operates acute care hospitals in Perth Amboy and Old Bridge, New Jersey. Mr.
McLaughlin also serves as a director of Princeton Insurance Company.
PHILIP T. RUEGGER, JR. joined the Board of First Savings in 1983. Mr.
Ruegger is now an investor. Previously, he was President of Northwest
Construction Co., a real estate construction and management firm. Mr. Ruegger
served as director of the National Bank of New Jersey, a commercial bank, from
1968 through 1981.
JEFFRIES SHEIN joined the Board of First Savings in 1985. He is a
partner with Jacobson, Goldfarb and Tanzman Associates, L.L.C., a commercial
real estate brokerage firm. Mr. Shein serves on the Board of Directors of
Middlesex Water Company and is Chairman of the Board of Raritan Bay Medical
Center.
WALTER K. TIMPSON joined the Board of First Savings in 1964 and was
appointed Chairman of the Bank's Board of Directors in June 1996. He also serves
as the Chairman of the
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<PAGE>
Board of First Sentinel. Mr. Timpson has operated a real estate appraisal firm
in Metuchen, New Jersey, for over forty years.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
RICHARD SPENGLER serves as Executive Vice President and Chief Lending
Officer of the Bank. Mr. Spengler joined the Bank in 1983. He was appointed Vice
President of Mortgage Operations in 1991. In January 1995, Mr. Spengler was
named Senior Vice President-Chief Lending Officer. He was promoted to his
current position in April 1999. Mr. Spengler also serves as a director of 1000
Woodbridge Center Drive, Inc., a subsidiary of the Bank.
JOHN F. CERULO, JR. joined the Bank in 1988 as a Senior Vice
President-Retail Banking. Prior to joining First Savings, Mr. Cerulo worked for
another savings institution for 16 years as a Branch Administrator.
ANN C. CLANCY joined the Bank in 1998 as Vice President and General
Counsel. She was named Senior Vice President, General Counsel and Corporate
Secretary in April 1999. Ms. Clancy also serves as the Company's Investor
Relations Officer. Prior to joining the Bank, Ms. Clancy was an attorney with a
Washington, D.C. law firm for 10 years.
KAREN I. MARTINO joined the Bank in 1984. She is now Senior Vice
President and Auditor, a position she has held since 1990.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers (as defined in regulations promulgated by
the Securities and Exchange Commission ("SEC") thereunder) and directors, and
persons who own more than ten percent (10%) of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on a review of copies of such reports of ownership
furnished to the Company, or written representations that no forms were
necessary, the Company believes that during the past fiscal year it complied
with all filing requirements applicable to its officers, directors and greater
than ten percent beneficial owners, with the exception of Dr. Donald T. Akey,
who, due to an oversight, did not report one transaction on a timely basis.
MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held 13 regular and special
meetings in 1999. The Board of Directors of the Bank also held 13 regular and
special meetings in 1999. The Boards of Directors of the Company and the Bank
jointly maintain standing Audit, Compensation and Nominating Committees. No
director of the Company attended fewer than
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<PAGE>
seventy-five percent (75%) in the aggregate of the total number of the Board
meetings held and the total number of committee meetings on which such director
served during 1999.
The joint Audit Committee of the Company and the Bank is comprised of
Dr. Akey (Chairman) and Messrs. Chadwick, McLaughlin, Ruegger and Timpson. This
committee is responsible for reviewing and reporting to the Board on the
Company's financial condition and reviewing the audit reports of the Company
from its internal and independent auditors. The committee met four times in
1999.
The Compensation Committee consists of Messrs. Timpson (Chairman),
McLaughlin, Ruegger and Shein. The Compensation Committee meets at least
annually to review the performance and remuneration of the officers and
employees of the Bank. The Committee reviews and approves all compensation
programs to be implemented by the Bank and the Company. The Compensation
Committee met four times in 1999.
The full Board of Directors of the Company acts as a nominating
committee (the "Nominating Committee") for the annual selection of nominees for
election as directors. While the Board of Directors will consider nominees
recommended by stockholders, it has not actively solicited recommendations from
stockholders for nominees, nor established procedures for this purpose.
Nominations by stockholders must comply with certain procedural and
informational requirements set forth in the Company's bylaws. See "ADDITIONAL
INFORMATION--Notice of Business to Be Conducted at an Annual Meeting." The Board
of Directors met once during the past fiscal year in its capacity as the
Nominating Committee.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. Directors of the Company received an annual retainer
of $2,000. Directors of the Bank received a monthly retainer of $1,750. Outside
directors of the Bank received $750 for each Board meeting attended and $300 for
each committee meeting attended.
DIRECTORS' DEFERRED FEE PLAN. Directors may elect to defer all or part
of their fees under the Agreement for Deferment of Directors' Fees (the
"Deferred Fee Agreement"). The fees so deferred are recorded on the books of the
Bank as a liability in the year the fees are earned; however, the Bank does not
specifically fund the amount so deferred. The Bank pays the deferred fees to the
directors not earlier than the time they cease to be a director, retirement or
when they attain age 65 (or some other age specifically elected by the
director), unless the Bank determines it serves its best interests or the best
interests of the director to disburse these funds at an earlier date.
The Bank also maintains the First Savings Bank Directors' Deferred Fee
Stock Unit Plan (the "Deferred Fee Stock Unit Plan"). Pursuant to this plan,
directors who defer fees under the Deferred Fee Agreement have the opportunity
to elect to defer the fees under the Deferred Fee Stock Unit Plan. Each director
who elects to participate in the Deferred Fee Stock Unit Plan has his deferred
fees credited with a number of shares of Common Stock based on the fair market
value of the stock as of the date such fees are earned. Messrs. Martin and Shein
currently participate in the Plan.
8
<PAGE>
RETIREMENT PLAN. First Savings also maintains a nonqualified, unfunded
retirement plan for directors who are not employees, have served as a director
for five (5) years, and who retire from the Board of Directors within the time
specified under the Retirement Plan. Benefits, in general, are either equal to
all or a portion of the current annual retainer received by Board members,
depending upon the director's age and length of service at retirement. Benefits
are paid monthly, commencing in the month following the director's retirement
from the Board and ending in the month following the director's death.
EXECUTIVE COMPENSATION
THE REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK PERFORMANCE
GRAPH SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE EXCHANGE ACT, EXCEPT AS TO
THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY
REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
COMPENSATION COMMITTEE REPORT
GENERAL
In accordance with the rules of the Securities and Exchange Commission,
the Compensation Committee of the Board of Directors (the "Committee") presents
the following information regarding the compensation and benefit arrangements
for the Company's President and Chief Executive Officer and the other executive
officers of the Company, including those who are "Named Executive Officers" as
defined elsewhere herein.
The Compensation Committee of the Board of Directors is comprised of
four non-employee directors, namely Messrs. Walter K. Timpson (Chairman), Keith
H. McLaughlin, Philip T. Ruegger, Jr., and Jeffries Shein. The Committee
generally meets at least twice a year to review the current levels and structure
of compensation and benefits for the executive officers and other senior
officers of the Company and the Bank in relation to industry practices, to
determine formal salary ranges and individual adjustments in base salary and
benefit arrangements in the context of competitive trends, performance results
for the Company and individual executives and other relevant circumstances, and
to approve specific performance goals and earned incentive awards for each year
as required under the Bank's Annual Incentive Plan. The Committee also
administers the Company's 1996 Incentive Plan, the 1998 Incentive Plan, the
Incentive Savings Plan (401(k)) and the Employee Stock Ownership Plan ("ESOP")
as they apply to all employees of the Company and the Bank.
EXECUTIVE COMPENSATION POLICIES
The underlying principle that governs the executive compensation
policies of First Sentinel is to provide competitive financial reward
opportunities that are tied to the performance of the Company, the Bank and
members of the executive team. As a result, the Company's compensation programs
are structured to generate total compensation levels approximating
9
<PAGE>
market average when financial results are comparable to average performance in
the regional savings institution industry, and to increase or decrease
compensation, as appropriate, if performance varies significantly from these
industry averages. Performance measurement for these comparative purposes is
based on return on equity and the Company's success in maintaining capital
strength while achieving strategic growth in targeted markets.
BASE SALARY
The basic elements of the executive compensation program are base
salary, annual incentives, equity-based, long-term incentives and certain other
benefits. The Committee reviews the executives' base salary levels and salary
ranges on an annual basis and reviews the other compensation programs on a
periodic basis to ensure their market competitiveness and continued
effectiveness. These reviews are performed primarily by comparing compensation
levels to those of the Company's peer group. Individual executive salaries are
determined relative to the ranges of salaries reflected in the peer group
analysis and on the basis of a subjective assessment of each executive's
knowledge, experience and contribution to the Company's success. The Committee
is assisted in this review process by outside compensation consultants who
provide reports on practices among comparable asset-size savings banks in the
Mid-Atlantic States of New Jersey, New York and Pennsylvania.
ANNUAL INCENTIVE PLAN
The Company and the Bank offer the opportunity for additional
compensation through a formal annual incentive program that was first adopted
for the Bank's senior officers in 1983. The annual incentive program is based
upon the achievement of predetermined goals and annual return on equity. The
annual incentive plan has minimum performance requirements for the Company's
results of operations, below which no bonuses may be awarded. The performance
goals are structured with a target level that the Committee determines as an
expected industry average for the coming year through the use of peer group
analysis and published surveys of compensation in the banking industry. Actual
annual incentive awards are determined by measuring an executive's performance
relative to the achievement of both the Company's and the individual's goals for
that year.
EQUITY-BASED COMPENSATION
The Company and the Bank have also utilized equity-based compensation
over the years in connection with each of the Company's and the Bank's public
stock offerings. Equity-based compensation has been provided in the form of
stock options and restricted stock awards. The purpose of these awards is to
align executives' long-term compensation opportunities with the interests of
stockholders in the value of the Company's stock. In each case, the number of
stock options and restricted stock awards granted to executives has been
determined on the basis of peer group analysis, published compensation surveys
for the banking industry and on the basis of the individual's performance and
relative contribution to the Company's success.
In connection with the 1998 Conversion and Reorganization, and upon the
recommendation of the Compensation Committee, the Company established the 1998
Incentive Plan. Pursuant to the 1998 Incentive Plan, the Board of Directors
authorized grants of options
10
<PAGE>
and restricted stock awards to key employees and outside directors of the
Company and the Bank in 1998. The awards granted under the plan vest in equal
installments over a five-year period. The awards are also subject to the
attainment of certain performance goals. The stock options awarded under the
plan were granted with an exercise price greater than the fair market value of
the stock on the date of grant. In addition, realization of 50% of the amount of
the restricted stock awards each year is subject to the Company's attainment of
certain financial targets for the year, as established by the Board of
Directors. The specific options and awards granted under the 1998 Incentive Plan
are set forth in the "Summary Compensation Table." The options and awards were
allocated by the Committee based upon regulatory practices and policies, a
survey of the practices of other recently converted financial institutions and
each executive officer's level of responsibility and contributions to the
Company and the Bank. While no options or awards were made in 1999, the
Committee considers outstanding stock incentives when determining annual
compensation.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. John P. Mulkerin has served as the President and Chief Executive
Officer of the Company and the Bank since 1996. The cash compensation provided
to Mr. Mulkerin is predicated upon the performance of the Company and the Bank
as compared to other regional savings banks of comparable asset size and the
salary and total cash compensation trends for similar executive positions in the
same group of banks. In setting Mr. Mulkerin's base salary, the Committee
reviewed both the current profitability of the Bank and the attainment of
predetermined short- and long-term objectives as contained in the Company's
strategic business plan. The performance measures used in this overall
assessment are: return on equity, the attainment of stated objectives and the
Company's capital strength. The Committee set Mr. Mulkerin's base salary for
1999 at $286,000, which represented a 10% increase over his base salary of
$260,000 for 1998.
Mr. Mulkerin also received an annual incentive award in 1999. The
annual incentive award earned by Mr. Mulkerin represented the target award
amount based upon the attainment of specific Company performance objectives
predetermined by the Compensation Committee and individual goals established at
the beginning of the year. Mr. Mulkerin's total compensation for 1999 reflected
the Company's achievement of its target levels and goals and the Committee's
evaluation of Mr. Mulkerin's contribution to attaining those goals. Although no
additional options or awards were made to Mr. Mulkerin in 1999, the Committee
considered options and awards previously granted to Mr. Mulkerin in determining
his overall compensation.
COMPENSATION COMMITTEE
Walter K. Timpson, Chairman Philip T. Ruegger, Jr.
Keith H. McLaughlin Jeffries Shein
11
<PAGE>
STOCK PERFORMANCE GRAPH. The following graph shows a five year
comparison of stockholder return on the Company's Common Stock based on the
market price of the Common Stock assuming an initial investment of $100 and
reinvestment of dividends, with the cumulative total returns of companies on the
S&P 500 index, The Nasdaq Stock Market and the SNL Thrift Index. The Company's
performance includes the performance of its predecessor, First Savings, as
adjusted to reflect the exchange of 3.9133 shares of Company Common Stock for
each share of the Bank's common stock in connection with the 1998 Conversion and
Reorganization. The Company chose this year to add the S&P 500 index to provide
another measure of performance. The Company believes that the performance of the
Nasdaq index is largely attributable to its heavy concentration of technology
stocks, which recently have outperformed many of the other market sectors.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
FIRST SENTINEL BANCORP, INC.,
THE S&P 500, THE NASDAQ STOCK MARKET AND THE SNL THRIFT INDEX
(PERFORMANCE RESULTS THROUGH 12/31/99)
- -------------------------------------------------------------------------------
FIRST SENTINEL BANCORP, INC.
- -------------------------------------------------------------------------------
[OBJECT OMITTED]
[FIGURES BELOW REPRESENT GRAPH IN ITS PRINTED FORM]
<TABLE>
<CAPTION>
PERIOD ENDING
------------------------------------------------------------------------
INDEX 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Sentinel Bancorp, Inc. 100.00 134.73 182.72 633.50 378.72 380.58
S&P 500 100.00 137.58 169.03 225.44 289.79 350.78
NASDAQ - Total US* 100.00 141.33 173.89 213.07 300.25 542.43
SNL Thrift Index 100.00 155.74 202.92 345.28 303.68 248.07
*SOURCE: CRSP, CENTER FOR RESEARCH IN SECURITY PRICES, GRADUATE SCHOOL OF BUSINESS, THE
UNIVERSITY OF CHICAGO 1999. USED WITH PERMISSION. ALL RIGHTS RESERVED. CRSP.COM.
</TABLE>
12
<PAGE>
SUMMARY COMPENSATION TABLE. The following table sets forth certain information
as to the total remuneration paid by the Company to the Chief Executive Officer
and four other executive officers who received salary and bonuses in excess of
$100,000 during the year ended December 31, 1999 ("Named Executive Officers").
In addition, the table sets forth information regarding total remuneration for
the years ended December 31, 1998 and 1997. All share information has been
adjusted to reflect all stock dividends, splits and the 1998 Conversion and
Reorganization Exchange Ratio of 3.9133.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
--------------------------------------- --------------------------- ---------
FISCAL OTHER RESTRICTED SECURITIES
NAME AND PRINCIPAL YEARS ANNUAL STOCK UNDERLYING LTIP ALL OTHER
POSITIONS ENDED SALARY(1)(2) BONUS(3) COMPENSATION(4) AWARDS(5) OPTIONS/SARS(6) PAYOUTS(7) COMPENSATION(8)
--------- ----- ------------ -------- --------------- ---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John P. Mulkerin 1999 $307,000 $107,250 $ -- $ -- -- -- $ 37,110
President and Chief 1998 281,000 78,000 -- 785,375 300,000 -- 40,022
Executive Officer 1997 257,250 70,875 -- -- -- -- 52,004
Christopher Martin 1999 247,000 84,825 -- -- -- -- 29,830
Executive Vice President, 1998 231,000 63,000 -- 724,375 260,000 -- 33,276
Chief Financial Officer, 1997 201,250 56,700 -- -- -- -- 52,004
Chief Operating Officer
and Corporate Secretary
Richard Spengler 1999 130,000 29,250 -- -- -- -- 18,073
Executive Vice President, 1998 115,000 17,250 -- 320,250 87,500 -- 18,018
Chief Lending Officer 1997 105,000 15,750 -- -- -- -- 34,176
Ann C. Clancy 1999 125,000 21,875 -- -- -- -- --
Senior Vice President 1998(9) 23,077 15,000 -- 76,250 20,000 -- --
and General Counsel 1997 -- -- -- -- -- -- --
Karen I. Martino 1999 95,000 16,625 -- -- -- -- 13,208
Senior Vice President, 1998 91,500 13,725 -- 152,500 45,000 -- 14,336
Audit and Compliance 1997 88,000 13,200 -- -- -- -- 27,558
</TABLE>
(1) Includes directors' fees paid to Mr. Mulkerin and Mr. Martin in 1999, 1998
and 1997.
(2) Includes amounts of salary deferred pursuant to the Incentive Savings Plan
for Employees of First Savings Bank 401(k).
(3) Includes bonuses granted pursuant to First Savings' Annual Incentive Plan.
Under this plan, bonuses are awarded by the Compensation Committee of the
Board of Directors based upon achieving certain predetermined profit levels
and other identifiable goals.
(4) For 1999, there were no: (a) perquisites over the lesser of $50,000 or 10%
of the individual's total salary and bonus for the year; (b) payments of
above-market preferential earnings on deferred compensation; (c) payments
of earnings with respect to long-term incentive plans prior to settlement
or maturation; (d) tax payment reimbursements; nor (e) preferential
discounts on stock.
(5) Pursuant to the 1998 Incentive Plan, Messrs. Mulkerin, Martin, Spengler,
Ms. Clancy and Ms. Martino were awarded 103,000 shares, 95,000 shares,
42,000 shares, 10,000 shares and 20,000 shares of Common Stock,
respectively, in December 1999, which had a market value of $804,430,
$741,950, $328,020, $78,100 and $156,200, respectively, at December 31,
1999. Shares awarded under the 1998 Incentive Plan vest in equal
installments over a five-year period beginning on December 16, 1999;
provided, however, that 50% of each annual installment will only vest if
the performance criteria established by the Compensation Committee of the
Board of Directors is satisfied. Dividends paid by the Company will be
accrued for plan share awards until such awards have vested, at which time
all accrued dividends will be paid to the award recipient. The dollar
amounts set forth in the table represent the market value of the shares
awarded on the date of grant.
(6) For a discussion of options granted under the 1998 Incentive Plan, see the
Fiscal Year-End Option/SAR Values table.
(7) For 1999, 1998 and 1997, the Company had no long-term incentive plan;
accordingly, there were no payouts or awards under any long-term incentive
plan.
(8) Includes $2,300, $2,300, $2,025 and $1,480 contributed by First Savings in
1999 to the accounts of Messrs. Mulkerin, Martin, Spengler, and Ms.
Martino, respectively, under the Incentive Savings Plan for Employees of
First Savings Bank 401(k). Also includes $19,020, $19,020, $16,048 and
$11,728 contributed by First Savings pursuant to First Savings' ESOP in
1999 allocated for the benefit of Messrs. Mulkerin, Martin, Spengler and
Ms. Martino, respectively. Ms. Clancy was not a participant in either plan
in 1999. Also includes $15,790 and $8,510 contributed by First Savings in
1999 to the accounts of Messrs. Mulkerin and Martin, respectively, under
the Bank's Supplemental Executive Retirement Plan II established in 1998.
(9) Ms. Clancy joined First Savings Bank in October 1998.
<PAGE>
EMPLOYMENT AGREEMENTS. First Sentinel and First Savings have entered into
employment agreements (collectively, the "Employment Agreements") with Messrs.
Mulkerin and Martin (the "Executives"). The Employment Agreements are intended
to ensure that First Sentinel and First Savings will be able to maintain a
stable and competent management base. The continued success of First Sentinel
and First Savings depends to a significant degree on the skills and competence
of Messrs. Mulkerin and Martin.
The Employment Agreements provide for a three-year term for the Executives.
Commencing on the first anniversary date and continuing each anniversary date
thereafter, the Board of Directors of First Sentinel and First Savings will
review the agreements and the Executive's performance for purposes of
determining whether to extend the agreements with First Sentinel and First
Savings for an additional year such that the remaining terms would be the amount
of the original terms. In addition to the base salary, the Employment Agreements
provide for, among other things, participation in stock benefit plans and other
fringe benefits applicable to executive personnel.
The Employment Agreements provide for termination by First Sentinel or
First Savings for cause, as defined in the agreements, at any time. In the event
First Sentinel or First Savings chooses to terminate the Executive's employment
for reasons other than for cause, or in the event of the Executive's resignation
from First Sentinel and First Savings upon: (i) failure to re-elect the
Executive to his current offices; (ii) a material change in the Executive's
functions, duties or responsibilities; (iii) a relocation of the Executive's
principal place of employment by more than 25 miles; (iv) liquidation or
dissolution of First Sentinel or First Savings; or (v) a breach of the agreement
by First Sentinel or First Savings, the Executive or, in the event of death, his
beneficiary, is entitled to receive the remaining base salary payments due to
the Executive and the contributions that would have been made on the Executive's
behalf to any employee benefit plans of First Sentinel or First Savings during
the remaining term of the agreement. First Sentinel and First Savings would also
continue and pay for the Executive's life, health and disability coverage for
the remaining term of the Employment Agreements.
Under the Employment Agreements, if voluntary or involuntary termination
follows a "change in control" of First Sentinel or First Savings, as defined in
the Employment Agreements, the Executive or, in the event of death, his
beneficiary, will be entitled to a payment equal to the greater of: (1) the
payments due for the remaining term of the agreement; or (2) a severance payment
equal to three times the average of the five preceding taxable years'
compensation. First Sentinel and First Savings would also continue the
Executive's life, health, and disability coverage for 36 months. Notwithstanding
that both agreements will provide for a severance payment in the event of a
change in control, the Executive would only be entitled to receive a severance
payment under one agreement. In the event of a "change in control" of First
Sentinel or First Savings, based solely upon 1999 base salary and bonuses as
reported in the Summary Compensation Table, Messrs. Mulkerin and Martin would
receive approximately $1.2 million and $932,000, respectively, in addition to
other cash and noncash benefits.
Payments to the Executives under First Savings' Employment Agreement are
guaranteed by First Sentinel in the event that payments or benefits are not paid
by First Savings. Payment under First Sentinel's Employment Agreement will be
made by First Sentinel. All reasonable
14
<PAGE>
costs and legal fees paid or incurred by the Executive pursuant to any dispute
or question of interpretation relating to the Employment Agreements will be paid
by First Savings or First Sentinel, respectively, if the Executive is successful
on the merits pursuant to a legal judgment, arbitration or settlement. The
Employment Agreements also provide that First Sentinel and First Savings
indemnify the Executive to the fullest extent allowable under federal and
Delaware law, respectively.
CHANGE IN CONTROL AGREEMENTS. First Savings has also entered into Change in
Control Agreements ("CIC Agreements") with certain other officers of First
Savings. Such agreements have terms of two or three years. The CIC Agreements
provide that commencing on the first anniversary date and continuing on each
anniversary thereafter, First Savings' CIC Agreements may be renewed by the
Board of Directors for an additional year. The CIC Agreements with First Savings
also provide that in the event voluntary or involuntary termination follows a
change in control of First Savings or First Sentinel, the officer is entitled to
receive a severance payment equal to two to three times the officer's average
annual compensation for the five years preceding termination, depending on the
term of the officers' CIC Agreement. First Sentinel and First Savings will also
continue, and pay for, the officer's life, health and disability coverage for 24
to 36 months following termination. Payments to the officer under First Savings'
CIC Agreements will be guaranteed by First Sentinel in the event that payments
or benefits are not paid by First Savings. In the event of a change in control
of First Savings or First Sentinel, the total payments that would be due under
the CIC Agreements, based upon gross compensation paid to the officers covered
by the CIC Agreements over the past three fiscal years would be approximately
$2.8 million.
EMPLOYEE SEVERANCE COMPENSATION PLAN. First Savings' Board of Directors has
also established the First Savings Bank Employee Severance Compensation Plan
("Severance Plan"), which provides eligible employees with severance pay
benefits in the event of a change in control of First Savings or First Sentinel.
Management personnel with Employment or CIC Agreements are not eligible to
participate in the Severance Plan. Generally, all employees are eligible to
participate in the Severance Plan. Under the Severance Plan, in the event of a
change in control of First Savings or First Sentinel, eligible employees who are
terminated from or terminate their employment within one year of the change in
control (for reasons specified under the Severance Plan), are entitled to
receive a severance payment. The participant is entitled to a cash severance
payment equal to one-twelfth of annual compensation for each year of service up
to a maximum of 100% of annual compensation. Such payments may tend to
discourage takeover attempts by increasing costs to be incurred by First Savings
in the event of a takeover. In the event the provisions of the Severance Plan
were triggered, the total amount of payments that would be due thereunder, based
solely upon salary levels at December 31, 1999, would be approximately $3.3
million.
OPTION PLANS. The Company maintains the 1998 Incentive Plan and the 1996
Incentive Plan which provide discretionary awards to officers and employees of
the Bank as determined by the Compensation Committee. The following table shows
options exercised by the Named Executive Officers during 1999, including the
aggregate value of gains on the date of exercise. In addition, the table
provides certain information with respect to the number of shares of Common
Stock represented by outstanding stock options held by the Named Executive
Officers
15
<PAGE>
as of December 31, 1999. Also reported are the values for "in-the-money" options
which represent the positive spread between the exercise price of any such
existing stock options and the year-end price of the Common Stock.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS/SARS AT OPTIONS/SARS AT
ON EXERCISE REALIZED DECEMBER 31, 1999 DECEMBER 31, 1999
NAME (#)(1) ($) (#)(1) ($)(2)
- ---------------------------------------------------------------------------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John P. Mulkerin -- $ -- 114,454 240,000 $219,450 $ --
Christopher Martin -- -- 106,454 208,000 219,450 --
Richard Spengler -- -- 26,970 70,000 38,164 --
Ann C. Clancy -- -- 4,000 16,000 -- --
Karen I. Martino -- -- 18,470 36,000 38,164 --
</TABLE>
(1) Options are subject to limited stock appreciation rights pursuant to which
options, to the extent outstanding for at least six months, may be
exercised in the event of a change in control of the Company. Upon the
exercise of a limited right, the optionee would receive a cash payment
equal to the difference between the exercise price of the related option on
the date of grant and the fair market value of the underlying shares of
Common Stock on the date the limited right is exercised.
(2) The value of the in-the-money options represents the difference between the
fair market value of the Common Stock of $7.81 per share as of December 31,
1999 and the exercise price of $3.78 per share. All options granted under
the 1998 Incentive Plan had an exercise price greater than the fair market
value of the Common Stock at December 31, 1999, and are therefore not
reflected in the total value.
PENSION PLAN. First Savings is a participant in the Financial Institutions
Retirement Fund, a multi-employer defined benefit plan (the "Plan"). All
employees age 21 or older who have completed one year of service are eligible to
participate in this Plan. Retirement benefits are based upon a formula utilizing
years of service and average compensation. Participants are vested 100% upon the
completion of five years of service.
The Financial Institutions Retirement Fund does not segregate its assets,
liabilities or costs by participating employer. Therefore, disclosure of the
accumulated benefit obligations, plan assets and the components of annual
pension expense attributable to First Savings cannot be ascertained.
The following table illustrates annual pension benefits at age 65 under the
most advantageous plan provisions available at various levels of compensation
and years of service. The benefits listed in the table are not subject to a
deduction for Social Security or any other offset amount.
16
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFIT PAYABLE AT AGE 65
TEN YEAR CERTAIN AND LIFE ANNUITY TO AN EMPLOYEE
RETIRING IN 1999
-----------------------------------------------------
YEARS OF CREDITED SERVICE(1)
-----------------------------------------------------
HIGH-5 AVERAGE
COMPENSATION(2)(4) 10 15 20 25
- --------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
$ 20,000 $4,000 $6,000 $8,000 $10,000
30,000 6,000 9,000 12,000 15,000
50,000 10,000 15,000 20,000 25,000
75,000 15,000 22,500 30,000 37,500
100,000 20,000 30,000 40,000 50,000
150,000 30,000 45,000 60,000 75,000
200,000 40,000 60,000 80,000 100,000
300,000 and over (3) 60,000 90,000 120,000 150,000
</TABLE>
- ----------
(1) As of December 31, 1999, John P. Mulkerin, Christopher Martin, Richard
Spengler, Ann C. Clancy and Karen I. Martino had 11 years, 14 years, 14
years, 1 year and 15 years of credited service, respectively.
(2) Under current law, the average final compensation for computing benefits
under the Pension Plan cannot exceed $170,000 (indexed for inflation).
However, benefits are not reduced below the level of benefits accrued as of
December 31, 1992.
(3) Under current law, the maximum benefit is limited to $128,327 per year.
(4) The compensation utilized for formula purposes include salary amounts
listed under "Summary Compensation Table."
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Effective as of January 1, 1994,
the Board of Directors revised a previously existing plan entitled the
Retirement Benefit Maintenance Plan (the "Maintenance Plan") and restated it as
the First Savings Bank Supplemental Executive Retirement Plan ("SERP"). The SERP
provides a post-employment supplemental retirement benefit for participants who
retire on or after their "Normal Retirement Age" (age 65) equal to (i)
seventy-five percent (75%) of the participant's base salary during the twelve
months prior to retirement, (ii) less the amount of the participant's "Pension
Plan Annual Benefit" and "Primary Social Security Benefit," as defined in the
plan. The plan allows for benefits, reduced according to actuarial
considerations, for early retirement. The SERP is not a tax-qualified employee
benefit plan. Pursuant to the SERP, the estimated additional annual benefits
payable upon retirement at normal retirement age for Messrs. Mulkerin and
Martin, the only participants in the SERP, are $121,326 and $71,164,
respectively.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
In the ordinary course of business, the Bank has made loans, and may
continue to make loans in the future, to its officers, directors and employees.
Loans to executive officers and directors are made in the ordinary course of
business, on substantially the same terms including interest rate and
collateral, as those prevailing at the time for comparable transactions with
other persons and do not involve more than the normal risk of collectibility or
present other unfavorable features except as noted below.
17
<PAGE>
Prior to the enactment of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), First Savings provided loans to directors
and executive officers at reduced rates and/or with points waived or reduced.
FIRREA required that all loans made to directors and executive officers be made
on substantially the same terms as those prevailing at the time for comparable
transactions with the general public and not involve more than the normal risk
of repayment or present other unfavorable features. Federal regulations were
recently modified to permit loans to be made to officers and directors on terms
not available to the public, provided such terms are available to other
full-time employees.
During 1999, the Bank had outstanding one loan to a director with a balance
exceeding $60,000, which loan was made on terms not available to the general
public. As of December 31, 1999, Mr. Walter K. Timpson had a credit line with a
variable rate of interest equal to the prime rate of interest. The highest
balance outstanding on such credit line during 1999 was $321,767. The balance of
the loan at December 31, 1999 was $320,286.
PROPOSAL II. RATIFICATION OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December 31,
1999 were KPMG LLP. The Company's Board of Directors has re-appointed KPMG LLP
to continue as independent auditors for the Bank and the Company for the fiscal
year ending December 31, 2000, subject to ratification of such appointment by
the stockholders. Representatives of KPMG LLP are expected to attend the Annual
Meeting. They will be given an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
stockholders present at the Annual Meeting.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
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ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
To be included in the proxy statement and form of proxy for the annual
meeting of stockholders to be held in 2001, a stockholder proposal must be
received by the Secretary of the Company at the address set forth on the
attached Notice of Annual Meeting of Stockholders, not later than November 24,
2000. Any such proposal will be subject to Rule 14a-8 of the rules and
regulations of the SEC.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The bylaws of the Company set forth the procedures by which a stockholder
may properly bring business before a meeting of stockholders. The bylaws of the
Company provide an advance notice procedure for a stockholder to properly bring
business before an annual meeting. The stockholder must give written advance
notice to the Secretary of the Company not less than ninety (90) days before the
date originally fixed for such meeting; provided, however, that in the event
that less than one hundred (100) days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be received not later than the close of business on the tenth
day following the date on which the Company's notice to stockholders of the
annual meeting date was mailed or such public disclosure was made. The advance
notice by stockholders must include the stockholder's name and address, as they
appear on the Company's record of stockholders, a brief description of the
proposed business, the reason for conducting such business at the annual
meeting, the class and number of shares of the Company's capital stock that are
beneficially owned by such stockholder and any material interest of such
stockholder in the proposed business. Nothing in this paragraph shall be deemed
to require the Company to include in its proxy statement or the proxy relating
to any annual meeting any stockholder proposal which does not meet all of the
requirements for inclusion established by the Securities and Exchange Commission
in effect at the time such proposal is received.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which will be presented for
consideration at the Annual Meeting other than as stated in the Notice of Annual
Meeting of Stockholders. If, however, other matters are properly brought before
the Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
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Whether or not you intend to be present at this Annual Meeting, you are
urged to return your proxy promptly. If you are present at this Annual Meeting
and wish to vote your shares in person, your proxy may be revoked upon request.
A COPY OF THE FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AS FILED WITH
THE SEC WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE
UPON WRITTEN REQUEST TO THE SECRETARY, FIRST SENTINEL BANCORP, INC., 1000
WOODBRIDGE CENTER DRIVE, WOODBRIDGE, NEW JERSEY 07095.
By Order of the Board of Directors
/s/ Christopher Martin
Christopher Martin
SECRETARY
Woodbridge, New Jersey
March 24, 2000
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU HAD PLANNED TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED
TO SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
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<TABLE>
<CAPTION>
REVOCABLE PROXY
[X] PLEASE MARK VOTES FIRST SENTINEL BANCORP, INC.
AS IN THIS EXAMPLE
<S> <C>
ANNUAL MEETING OF STOCKHOLDERS With- For All
For hold Except
The undersigned appoints the official proxy committee 1. The election as directors of all [_] [_] [_]
consisting of all the members of the Board of Directors of First nominees listed (except as marked
Sentinel Bancorp, Inc. (the "Company"), each with full power of to the contrary below);
substitution, to act as attorneys and proxies for the
undersigned, and to vote all shares of Common Stock of the Christopher Martin Keith H. McLaughlin
Company which the undersigned is entitled to vote only at the Philip T. Ruegger, Jr.
Annual Meeting of Stockholders, to be held at the Sheraton at
Woodbridge Place, 515 Route 1 South, Iselin, New Jersey, on April INSTRUCTION: To withhold authority to vote for any
19, 2000, at 10:00 a.m. and at any and all adjournments thereof, individual nominee, mark "For All Except" and write that
as follows: nominee's name in the space provided below.
2. The ratification of KPMG LLP as the independent auditors
of the Company for the year ending December 31, 2000.
For Against Abstain
[_] [_] [_]
PLEASE CHECK BOX IF YOU PLAN TO ATTEND
THE ANNUAL MEETING --------> [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE LISTED PROPOSALS.
This Proxy is revocable and will be voted as
directed, but if no instructions are specified, this
Proxy will be voted FOR the proposals listed. If any
other business is presented at the Annual Meeting,
including whether or not to adjourn the meeting, this
Proxy will be voted by 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 Annual Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
---------------------------- The undersigned acknowledges receipt from the Company,
Please be sure to sign and date | Date | prior to the execution of this Proxy, of a Notice of
this Proxy in the box below. | | Annual Meeting and a Proxy Statement dated March 24, 2000.
- ------------------------------------------------------------------|
| | Please sign exactly as your name appears hereon. When
| | signing as attorney, executor, administrator, trustee or
| | guardian, please give your full title. If shares are held
| Stockholder sign above Co-holder (if any) sign | jointly, each holder may sign, but only one signature is
- ------------------------------------------------------------------ required.
- ------------------------------------------------------------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
FIRST SENTINEL BANCORP, INC.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY TODAY
</TABLE>
