SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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 |_| Confidential, for Use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SEACOAST FINANCIAL SERVICES CORPORATION
-------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(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:
<PAGE>
(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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[Seacoast Financial Services Corporation Letterhead]
April 15, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Seacoast Financial Services Corporation to be held on
Thursday, May 20, 1999 at 10:00 a.m., local time, at the Hawthorne Country Club,
970 Tucker Road, North Dartmouth, Massachusetts.
At the Annual Meeting, you will be asked to consider and vote upon the
election of a class of five Directors and the approval of the Seacoast Financial
Services Corporation 1999 Stock Incentive Plan ("Stock Incentive Plan"). The
Board of Directors has fixed the close of business on Thursday, April 1, 1999 as
the record date for determining stockholders entitled to notice of and to vote
at the Annual Meeting.
Approval of the Stock Incentive Plan requires the affirmative vote of
the holders of at least two-thirds of the shares of the Company's common stock
outstanding and entitled to vote thereon. Therefore, failure to return a
properly executed proxy card or to vote at the Annual Meeting will have the same
effect as a vote against the Stock Incentive Plan.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
Sincerely,
KEVIN G. CHAMPAGNE
President and Chief Executive Officer
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION
791 Purchase Street
New Bedford, Massachusetts 02740
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
May 20, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Seacoast Financial Services Corporation, a Massachusetts
bank holding company (the "Company"), will be held at the Hawthorne Country
Club, 970 Tucker Road, North Dartmouth, Massachusetts, on Thursday, May 20,
1999, beginning at 10:00 a.m., local time, for the following purposes:
1. To elect a class of five Directors of the Company;
2. To approve the Seacoast Financial Services Corporation 1999 Stock
Incentive Plan; and
3. To transact such further business as may properly come before the
Annual Meeting, or any adjournment or postponement thereof.
The Board of Directors recommends that you vote FOR the nominees for
Director listed in the accompanying proxy statement and FOR approval of the 1999
Stock Incentive Plan.
The Board of Directors has fixed the close of business on April 1, 1999
as the record date for determining the stockholders of the Company entitled to
notice of and to vote at the Annual Meeting and any adjournments thereof.
Accordingly, only stockholders of record on such date are entitled to notice of
and to vote at the Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
J. Louis LeBlanc, Clerk
New Bedford, Massachusetts
April 15, 1999
IMPORTANT
Even though you may plan to attend the Annual Meeting in person, please
complete, sign, and date the enclosed proxy card and return it promptly in the
enclosed envelope, which requires no postage if mailed in the United States. If
you attend the Annual Meeting and desire to withdraw your proxy and vote in
person, you may do so.
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 20, 1999
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Seacoast Financial Services Corporation
(the "Company") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at the Hawthorne Country Club, 970 Tucker Road, North
Dartmouth, Massachusetts, on Thursday, May 20, 1999, beginning at 10:00 a.m.,
local time, and at any adjournments thereof.
This Proxy Statement and the accompanying Notice and Proxy are first
being mailed to stockholders of the Company on or about April 15, 1999 in
connection with the solicitation of proxies for the Annual Meeting. The Board of
Directors has fixed the close of business on Thursday, April 1, 1999 as the
record date for the Annual Meeting (the "Record Date"). Only stockholders of
record as of the close of business on the Record Date will be entitled to notice
of and to vote at the Annual Meeting and any adjournments thereof. On the Record
Date, there were 26,758,134 shares of the Company's common stock, $.01 par value
per share (the "Common Stock"), issued, outstanding and entitled to vote at the
Annual Meeting and approximately 7,000 holders of record of Common Stock. The
holders of the Common Stock on the Record Date will be entitled to one vote for
each share held of record upon each matter properly submitted to the Annual
Meeting or any adjournments thereof.
The presence, in person or by proxy, of at least a majority in interest
of all Common Stock issued, outstanding and entitled to vote is necessary to
constitute a quorum for transaction of business at the Annual Meeting. The
affirmative vote of the holders of a plurality of the Common Stock present and
voting, in person or by proxy, is required to elect each of the nominees for
Director and the affirmative vote of two-thirds of the total number of
outstanding shares of Common Stock is required to approve the Seacoast Financial
Services Corporation 1999 Stock Incentive Plan ("Stock Incentive Plan"). Any
abstentions or broker nonvotes will count as "present" toward formation of a
quorum for transaction of business at the Annual Meeting. With respect to the
proposal to approve the Stock Incentive Plan, abstentions and broker nonvotes
will have the effect of a negative vote. Votes will be tabulated by the
Company's transfer agent, Registrar and Transfer Company.
Stockholders of the Company are requested to complete, date, sign and
promptly return the accompanying form of proxy in the enclosed envelope.
Properly executed proxies received by the Company and not revoked will be voted
at the Annual Meeting in accordance with the instructions contained therein. If
instructions are not given in such proxies, they will be voted FOR the election
of the five nominees for Director listed in this Proxy Statement and FOR the
approval of the Stock Incentive Plan.
Any properly completed proxy may be revoked at any time before the
commencement of voting on any matter at the Annual Meeting or any adjournment
thereof by giving written notice of revocation to the Clerk of the Company (791
Purchase Street, New Bedford, Massachusetts 02740), or by signing and duly
delivering a proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Attendance at the Annual Meeting will not in and of itself
constitute revocation of a proxy.
ANNUAL REPORT TO STOCKHOLDERS; OTHER INFORMATION
The Company's Annual Report to Stockholders for the fiscal year ended
October 31, 1998 accompanies this Proxy Statement, but is not incorporated
herein and is not to be deemed a part hereof.
Additional copies of the Company's Annual Report on Form 10-K for the
year ended October 31, 1998 (excluding exhibits) are available without charge
upon request. Such requests should be directed to Shareholder Relations,
Seacoast Financial Services Corporation, 791 Purchase Street, New Bedford,
Massachusetts 02740.
<PAGE>
GENERAL
Seacoast Financial Services Corporation is the holding company for
Compass Bank for Savings (the "Bank").
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board of Directors of the Company consists of 14 members and is
divided into three classes. The first and second classes have five members and
the third class has four members. Directors serve for three-year terms with one
class of Directors being elected by the Company's stockholders at each annual
meeting.
Pursuant to the Company's By-laws, the Board of Directors acted as a
nominating committee for selecting nominees for election as Directors. The Board
has nominated Manuel G. Camacho, Kevin G. Champagne, Mary F. Hebditch, Carl
Ribeiro and Gerald H. Silvia as Directors for a three-year term. Each of the
nominees is currently serving as a Director of the Company.
Unless authority is withheld, proxies in the accompanying form will be
voted FOR the election of the five nominees, to hold office until the 2002
annual meeting of stockholders or special meeting in lieu thereof and until
their respective successors are elected and qualified. If the proxy withholds
authority to vote for one or more nominees for Director, the stockholder's
instructions will be followed.
The Company has no reason to believe that any of the nominees will not
be able to serve. In the event that any nominee is unable to serve at the time
of the election, the shares represented by the proxy will be voted for the other
nominees and may be voted for a substitute for that nominee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
FIVE NOMINEES FOR DIRECTOR LISTED IN THIS PROXY STATEMENT.
Information Regarding Nominees and Directors
The following table sets forth certain information (as of April 15,
1999) regarding the current Directors and the nominees for Director of the
Company:
<TABLE>
<CAPTION>
Director Term as Director
Name Age Since* Will Expire
- ------------------------------------------------------ ----------- ------------------ -------------------------
<S> <C> <C> <C>
**Manuel G. Camacho 73 1979 1999
David P. Cameron 73 1976 2000
**Kevin G. Champagne 49 1993 1999
Howard C. Dyer, Jr. 70 1963 2000
**Mary F. Hebditch 67 1998 1999
Glen F. Johnson 74 1972 2001
Thornton P. Klaren, Jr. 63 1968 2000
J. Louis LeBlanc 59 1982 2001
Frederic D. Legate 57 1998 2001
Reale J. Lemieux 60 1998 2000
A. William Munro 65 1986 2001
**Carl Ribeiro 52 1991 1999
Joseph H. Silverstein 72 1980 2000
**Gerald H. Silvia 64 1990 1999
</TABLE>
- ------------------------------------------------------
* Includes service as a trustee of the Bank prior to its reorganization into
the mutual holding company form of organization (the "Reorganization") and
as a trustee of the Company from the date of Reorganization until the
conversion of the Company from a mutual to a stock holding company.
** Nominees for Director.
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The principal occupation and business experience during at least the
last five years for each Director and nominee is set forth below.
Manuel G. Camacho is a dentist in private practice in New Bedford,
Massachusetts. He is semi-retired.
David P. Cameron was President of Morse Cutting Tools in New Bedford,
Massachusetts until his retirement in 1982.
Kevin G. Champagne has served as President and Chief Executive Officer
of the Company since its formation in 1994 and as President and Chief Executive
Officer of the Bank since 1994. Prior to 1994, Mr. Champagne was Executive Vice
President/Retail Banking of the Bank. He joined the Bank's Management Training
Program in 1971.
Howard C. Dyer, Jr. was General Manager, New Bedford Storage Warehouse,
New Bedford, Massachusetts, until his retirement in 1996.
Mary F. Hebditch has been a self-employed public accountant and auditor
in Sandwich, Massachusetts since 1983. Ms. Hebditch served as a director of
Sandwich Co-operative Bank and Sandwich Bancorp, Inc. prior to the Company's
acquisition of Sandwich Bancorp, Inc.
Glen F. Johnson was a General Manager, Goodyear Tire and Rubber, New
Bedford, Massachusetts, until his retirement in 1985.
Thornton P. Klaren, Jr. is retired.
J. Louis LeBlanc is an attorney in private practice in New Bedford,
Massachusetts.
Frederic D. Legate has been retired since the Company acquired Sandwich
Bancorp, Inc. in December 1998. Prior to his retirement, he served as President
and Chief Executive Officer of Sandwich Co-operative Bank and of Sandwich
Bancorp, Inc., positions he held since 1981 and 1997, respectively.
Reale J. Lemieux has owned and operated Bay Beach, a bed and breakfast
establishment in Sandwich, Massachusetts since 1988. Mr. Lemieux served as a
director of Sandwich Co-operative Bank and Sandwich Bancorp, Inc. prior to the
Company's acquisition of Sandwich Bancorp, Inc.
A. William Munro is President of Munro Distributing, Inc., Fall River,
Massachusetts.
Carl Ribeiro is President, Luzo Foodservice Corp., New Bedford,
Massachusetts.
Joseph H. Silverstein was the President of Silverstein's Family Store,
a retail clothing store located in New Bedford, Massachusetts, until his
retirement in 1992.
Gerald H. Silvia is the owner of Americana Travel, a travel agency
located in Fall River, Massachusetts.
Committees and Meetings of the Board of Directors
For the year ended December 31, 1998, the Company's Board of Directors
met 11 times and the Bank's Board of Directors met 19 times. Each incumbent
Director attended at least 75% of all meetings of the Company's and the Bank's
Board and any committees thereof of which he was a member.
The Board of Directors has an Executive Committee, an Audit Committee
and a Compensation Committee, but does not have a nominating committee or
another committee performing a similar function.
The Executive Committee, of which Messrs. Champagne, Dyer, Johnson,
LeBlanc, Legate, Munro and Silverstein are current members, is the primary
operating committee of the Board of Directors and is vested with the authority
of the Board in most matters, except those powers which by law may not be
delegated. The Executive Committee also serves as the Executive Committee of the
Bank. Prior to January 1, 1999, the Executive Committee was also the
Compensation Committee. During 1998, the Executive Committee met 12 times.
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The Audit Committee, which is comprised of Messrs. Camacho, Cameron,
Klaren, Ribeiro and Silvia, is responsible for recommending the selection of the
Company's independent public accountants, oversight of the internal audit
function, reviewing the scope of the annual audit of the Company's financial
statements, reviewing the report of the independent public accountants,
reviewing the independent public accountants' recommendations to management
concerning auditing, accounting and tax matters, reviewing, reporting on and
compliance with the Federal Deposit Insurance Corporation Improvements Act's
(FDICIA) requirements, aiding the Board in discharging its responsibility in
financial reporting and related matters and reviewing the services and fees of
the independent certified public accountants. The Audit Committee also serves as
the Audit Committee of the Bank. During 1998, the Audit Committee met 4 times.
The Compensation Committee, of which Messrs. Champagne, Dyer, Johnson,
LeBlanc, Legate, Munro and Silverstein are current members, reviews and
establishes salaries and other compensation of certain officers and employees of
the Company. The Compensation Committee also serves as the Compensation
Committee of the Bank. During 1998, the Compensation Committee met 1 time.
The Board of Directors of the Company nominates candidates for election
as Directors. In accordance with the Company's By-laws, the Board will consider
nominees recommended by a stockholder of the Company, provided that the
stockholder notifies the Clerk of the Company of the proposed nominee in
writing, setting forth certain required information regarding the nominee. Such
notification must be made in a timely manner, as set forth in the By-laws. To be
timely, such notice must be received by the Company not less than 60 nor more
than 150 days prior to the scheduled date of the annual meeting of stockholders,
or, if less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made, within 10 days of the date notice of the scheduled
annual meeting was mailed or the day on which public disclosure of the date of
the annual meeting was made. The Board, a designated committee thereof, or the
presiding officer may reject any stockholder nomination that is not timely made
or does not otherwise satisfy the requirements of the Company's By-laws in any
material respect.
Compensation of Directors
Members of the Company and Bank Boards receive $500 for each Board
meeting that they attend. Prior to his death on September 10, 1998, the Chairman
of the Board of the Company received an annual retainer of $50,000. The
Company's Board has not elected a new Chairman nor has it determined what the
compensation of any future Chairman would be. Members of the Bank's Executive
Committee receive an annual retainer of $13,000 and members of the Bank's Audit
Committee receive an annual retainer of $5,000. In addition, members of the
Audit Committee (other than the Chairman) are paid $500 for each Company Audit
Committee meeting that they attend and the Chairman of the Audit Committee is
paid $600 for each Company Audit Committee meeting that he attends. The most
senior member of the Board of Directors of the Bank receives an annual retainer
of $7,000 for duties performed in connection with his appointment as a
non-operating Vice President of the Company. Mr. Champagne does not receive any
fees for service on the Board of Directors of the Company or the Bank or for
service on any committees of either Board. Directors may participate in the
Company's directors' deferred compensation plan pursuant to which directors may
defer any compensation or fees earned from their position as a director of the
Company.
PROPOSAL 2 -- 1999 STOCK INCENTIVE PLAN
The Board of Directors of the Company has adopted the 1999 Stock
Incentive Plan ("Stock Incentive Plan"), subject to approval by the
stockholders. Under the Internal Revenue Code of 1986, as amended (the "Code"),
stockholder approval is necessary for stock options relating to the shares
issuable under the Stock Incentive Plan to qualify as incentive stock options
under Section 422 of the Code. In addition, Nasdaq rules (the "Nasdaq Rules")
and the Code of Massachusetts Regulations ("CMR") require stockholder approval
of the Stock Incentive Plan. Approval for purposes of the Code and the Nasdaq
Rules requires the affirmative vote of a majority of the shares of Common Stock
present or represented at the meeting and voting on the Stock
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Incentive Plan. Approval for the purposes of CMR requires the affirmative vote
of two-thirds of the total number of outstanding shares of Common Stock. The
full text of the Stock Incentive Plan as adopted by the Board of Directors is
printed as Appendix A, beginning on page A-1. The following is a summary of some
of its provisions.
The Stock Incentive Plan will be administered by the Stock Incentive
Plan Committee (the "Committee") of the Board of Directors consisting of all
members of the Compensation Committee who qualify as Outside Directors and shall
consist of at least two (2) members at all times. Outside Directors means any
director who (i) is not an employee of the Company or of any "affiliated group,"
as such term is defined in Section 1504(a) of the Code, which includes the
Company (an "Affiliate"), (ii) is not a former employee of the Company or any
Affiliate who is receiving compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the Company's or any Affiliate's
taxable year, (iii) has not been an officer of the Company or any Affiliate and
(iv) does not receive remuneration from the Company or any Affiliate, either
directly or indirectly, in any capacity other than as a director. An Outside
Director is also determined in accordance with Section 162(m) of the Code and
the Treasury regulations issued thereunder. Except as specifically reserved to
the Board under the terms of the Stock Incentive Plan, the Committee shall have
full and final authority to operate, manage and administer the Stock Incentive
Plan on behalf of the Company. Awards may be granted under the Stock Incentive
Plan to officers, directors and key employees of the Company or its
subsidiaries. In addition, the Committee may grant eligibility to consultants
and advisors of the Company or its subsidiaries.
The Stock Incentive Plan authorizes the grant of (i) options to
purchase Common Stock intended to qualify as incentive stock options ("Incentive
Options"), as defined in Section 422 of the Code, (ii) options that do not so
qualify ("Nonqualified Options"), (iii) shares of stock at no cost or at a
purchase price set by the Committee, subject to restrictions and conditions
determined by the Committee ("Conditioned Stock Awards"), (iv) unrestricted
shares of stock free of any restrictions under the Stock Incentive Plan at
prices set by the Committee ("Unrestricted Stock Awards"), (v) rights to acquire
shares of Common Stock upon attainment of performance goals specified by the
Committee ("Performance Share Awards"), (vi) payment rights which are
exercisable only upon a "change in control" of the Company (which term shall be
defined by the Committee in the applicable agreement granting the change of
control payment right) ("Change of Control Payment Rights") and (vii) rights to
receive cash payments based on or measured by appreciation in the market price
of the Common Stock ("Stock Appreciation Rights"). Up to 1,960,000 shares of
Common Stock (subject to adjustment upon certain changes in the capitalization
of the Company) may be issued pursuant to awards granted under the Stock
Incentive Plan which number equals 14% of the aggregate number of shares of
Common Stock issued by the Company in connection with its conversion from mutual
to stock form ("Conversion Shares"). The maximum number of shares which may be
issued under Conditioned Stock Awards is 560,000 (which number equals 4% of the
aggregate number of Conversion Shares). The maximum number of shares which may
be issued as a result of other awards under the Stock Incentive Plan is
1,400,000 (which number equals 10% of the aggregate number of Conversion
Shares). No Stock Incentive Plan participant may be granted awards (including
Stock Appreciation Rights) with respect to more than 490,000 shares of Common
Stock in any calendar year.
If any option is exercised by the delivery of a number of shares of
Common Stock, either actually or by attestation, to the Company as full or
partial payment in connection with the exercise of an option under this Stock
Incentive Plan, only the number of shares of Common Stock issued net of the
shares of Common Stock delivered shall be deemed issued for purposes of
determining the maximum number of shares of Common Stock available for issuance
under the Stock Incentive Plan.
No Incentive Options may extend for more than ten years from the date
of grant (five years in the case of an optionee who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company ("greater-than-ten-percent-stockholders"). The exercise price of
Incentive Options granted under the Stock Incentive Plan must be at least equal
to the fair market value of the Common Stock on the date of grant (110% of fair
market value in the case of a greater-than-ten-percent-stockholder). The
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aggregate fair market value (determined at the time of grant) of shares issuable
pursuant to Incentive Options which first become exercisable by an optionee in
any calendar year may not exceed one hundred thousand dollars ($100,000). Any
excess shall be treated as a Nonqualified Option.
Unless otherwise provided in the applicable agreement pursuant to which
the options were granted, options generally may not be exercised (i) in the case
of voluntary resignation after thirty (30) days from the last day of the
optionee's employment or, in the case of a director, after thirty (30) days from
the effective date of the optionee's resignation from the Board of Directors (or
such longer period as the Committee shall specify at any time) or after the
expiration of the stated term of the option, if earlier, (ii) in the case of
termination for cause, after the end of the last day of the optionee's
employment or directorship provided, however, that the Committee may, in its
sole discretion provide that such option can be exercised for such longer period
as the Committee shall specify at any time or after the expiration of the stated
term of the option, if earlier, (iii) in the case of termination without cause,
after thirty (30) days from the last day of the optionee's employment or
directorship (or such longer period as the Committee shall specify at any time),
(iv) three months after termination of the optionee's employment or directorship
with the Company by retirement in accordance with the Company's retirement
policies (or such longer period as the Committee shall specify at any time) or
after the expiration of the stated term of the option, if earlier, (v) six
months following the optionee's termination of employment or directorship with
the Company by reason of disability (or such longer period as the Committee
shall specify at any time) or after the expiration of the stated term of the
option, if earlier, or (vi) one year following the optionee's termination of
employment or directorship with the Company by reason of death (or such longer
period as the Committee shall specify at any time) or after the expiration of
the stated term of the option, if earlier. All awards other than Incentive
Options granted under the Stock Incentive Plan shall contain such terms and
conditions with respect to its termination as the Committee in its discretion
may from time to time determine. Payment of the exercise price of the shares
subject to the option may be made (i) in cash or by certified or bank check or
other instrument acceptable to the Committee for an amount equal to the option
price for such shares, (ii) with the consent of the Committee, in the form of
shares of Common Stock having a fair market value equal to the option price of
such shares, (iii) if permitted by the Committee, by the optionee delivering to
the Company a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a check
payable and acceptable to the Company to pay the purchase price, provided that
the optionee and the broker comply with any procedures and enter into any
agreements prescribed by the Committee as a condition of such payment procedure,
(iv) if permitted by the Committee, in its discretion, by reducing the number of
option shares otherwise issuable to the optionee upon exercise of the option by
a number of shares having a fair market value equal to such aggregate exercise
price, or (v) by any other means which the Committee determines are consistent
with the purpose of the Stock Incentive Plan and with applicable laws and
regulations.
Unless determined otherwise by the Committee, options under the Stock
Incentive Plan shall not be transferable other than by will or by the laws of
descent and distribution, and all options shall be exercisable, during the
optionee's lifetime only by the optionee. The Committee may, however, permit
transferability or assignment of a Nonqualified Option for valid estate planning
purposes as permitted under the Code or Rule 16b-3 under the Exchange Act.
At the discretion of the Committee, options granted under the Stock
Incentive Plan may include a so-called "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Common
Stock would automatically be granted an additional option (with an exercise
price equal to the fair market value of the Common Stock on the date the
additional option is granted and with the same expiration date as the original
option being exercised, and with such other terms as the Committee may provide)
to purchase that number of shares of Common Stock equal to the number delivered
to exercise the original option.
The Committee in its discretion may grant Conditioned Stock Awards
which are awards entitling the recipient to acquire, at no cost or for a
purchase price determined by the Committee, shares of Common Stock subject to
such restrictions and conditions as the Committee may determine at the time of
grant and may be based on continuing employment and/or achievement of
performance goals. The Committee also has the
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discretion to grant to any eligible person Unrestricted Stock Awards which may
be granted or sold in respect of past services or other valid consideration. The
Committee also has the discretion to grant Performance Share Awards based upon
the achievement of specified performance goals. Performance Share Awards are
intended to constitute "performance-based" compensation within the meaning of
Section 162(m) of the Code and shall be based on one or more of the following
criteria: net income, as adjusted for non-recurring items, cash earnings,
earnings per share, cash earnings per share, return on equity, return on assets,
assets, stock price, total shareholder return, capital, net interest income,
market share, cost control or efficiency ratio and asset growth.
The Stock Incentive Plan also authorizes the Committee to grant Stock
Appreciation Rights which entitle the holder to receive cash or any combination
of Common Stock and cash (subject to the approval of the Committee in its sole
discretion) equal in value to the excess of the fair market value of a specified
number of shares of Common Stock on the date the Stock Appreciation Right is
exercised over the grant price of such Stock Appreciation Right.
Contemporaneously with the grant of any option, the Plan also provides for the
Committee to grant a Change of Control Payment Right. Change of Control Payment
Rights are related to specific options granted and become exercisable only upon
a change in control of the Company. Upon exercise, the holder will be entitled
to receive in lieu of purchasing the Common Stock underlying the option, a lump
sum cash payment equal to the difference between the exercise price of the
underlying option and the fair market value of the shares of Common Stock
subject to such option on the date the Change of Control Payment Right is
exercised.
Any participant may elect, with the concurrence of the Committee and
consistent with any rules and regulations established by the Committee, to defer
the delivery of the proceeds of the exercise of any Nonqualified Option,
Conditioned Stock Award, Unrestricted Stock Award, Performance Share Award and
Stock Appreciation Rights.
No award can be made under the Stock Incentive Plan that would be
prohibited by 209 CMR ss.33.28(1)(u). Notwithstanding any other provision
contained in the Stock Incentive Plan, no award granted before the date which is
one (1) year from the date of the conversion of the Company from mutual to stock
form shall become vested or exercisable before the date which is one year after
the approval of the Stock Incentive Plan by the stockholders of the Company or
at a rate in excess of 20% per year of the total number of stock awards or
options (whichever may be the case) granted to such participant, provided, that
the Committee may provide that such awards shall become fully vested or
immediately exercisable in the event of a participant's termination of
employment or service due to death or disability or with the permission of the
Massachusetts Commissioner of Banks ("Commissioner").
The Stock Incentive Plan complies with the regulations of the
Commissioner. THE COMMISSIONER IN NO WAY ENDORSES OR APPROVES THE STOCK
INCENTIVE PLAN, AND NO REPRESENTATION TO THE CONTRARY IS MADE IN THIS PROXY
STATEMENT.
Federal Income Tax Information with Respect to the Stock Incentive Plan.
Incentive and Non-Qualified Stock Options. The grantee of a
Nonqualified Option recognizes no income for federal income tax purposes on the
grant thereof. On the exercise of a Nonqualified Option, the difference between
the fair market value of the underlying shares of Common Stock on the exercise
date and the option exercise price is treated as compensation to the holder of
the option taxable as ordinary income in the year of exercise, and such fair
market value becomes the basis for the underlying shares which will be used in
computing any capital gain or loss upon disposition of such shares.
The grantee of an Incentive Option recognizes no income for federal
income tax purposes on the grant thereof. Except as provided below with respect
to the alternative minimum tax, there is no tax upon exercise of an Incentive
Option. If no disposition of shares acquired upon exercise of the Incentive
Option is made by the option holder within two years from the date of the grant
of the Incentive Option or within one year after
7
<PAGE>
exercise of the Incentive Option, any gain realized by the option holder on the
subsequent sale of such shares is treated as long-term capital gain for federal
income tax purposes. If the shares are sold prior to the expiration of such
two-year and one-year periods (a "Disqualifying Disposition"), the difference
between the lesser of the value of the shares at the date of exercise or at the
date of sale and the exercise price of the Incentive Option is treated as
compensation to the option holder taxable as ordinary income and the excess
gain, if any, is treated as capital gain (which will be long-term capital gain
if the shares are held for more than one year). The excess of the fair market
value of the underlying shares over the option price at the time of exercise of
an Incentive Option will constitute an item of tax preference for purposes of
the alternative minimum tax. Taxpayers who incur the alternative minimum tax are
allowed a credit which may be carried forward indefinitely to be used as a
credit against the taxpayer's regular tax liability in a later year; however,
the alternative minimum tax credit can not reduce the regular tax below the
alternative minimum tax for that carryover year.
Conditioned Stock Awards. The grantee of a Conditioned Stock Award
recognizes no income for federal income tax purposes on the grant thereof.
Furthermore, a grantee of a Conditioned Stock Award recognizes no income for
federal income tax purposes upon the receipt of Common Stock pursuant to that
award, unless, as described below, he otherwise elects. Instead, the grantee
will recognize ordinary income in an amount equal to the fair market value of
the Common Stock acquired pursuant to the Conditioned Stock Award on the date
that it is no longer subject to a substantial risk of forfeiture less the
amount, if any, the grantee paid for such stock. Such fair market value becomes
the basis for the underlying shares and will be used in computing any capital
gain or loss upon the disposition of such shares. Such capital gain will be
long-term capital gain if the grantee held the Common Stock acquired pursuant to
the Conditioned Stock Award for more than one year after the date on which the
shares are no longer subject to a substantial risk of forfeiture, and short-term
capital gain if the recipient held the Common Stock acquired pursuant to the
Conditioned Stock Award for one year or less after the date on which the shares
are no longer subject to a substantial risk of forfeiture.
Alternatively, the grantee of a Conditioned Stock Award may elect,
pursuant to Section 83(b) of the Code, within 30 days of the acquisition of
Common Stock pursuant to the Conditioned Stock Award, to include in gross income
as ordinary income for the year in which the Common Stock is received, the fair
market value of the Common Stock on the date it is received less the amount, if
any, the grantee paid for such stock, determined without regard to any
restriction other than a restriction which by its terms will never lapse. Such
fair market value will become the basis for the shares and will be used in
determining any capital gain or loss upon the disposition of such shares. The
proceeds of a disposition of Common Stock acquired pursuant to a Conditioned
Stock Award will be taxable as capital gain to the extent that the proceeds
exceed the grantee's basis in such shares. This capital gain will be long-term
capital gain if the disposition is more than one year after the date the Common
Stock is received, and short-term capital gain if the disposition is one year or
less after the date of receipt. In the event that the Common Stock acquired
pursuant to a Conditioned Stock Award is forfeited after the grantee has made an
election pursuant to Section 83(b), the grantee will not be entitled to a
deduction. Grantees of Conditioned Stock Awards who wish to make an election
pursuant to Section 83(b) of the Code are advised to consult their own tax
advisors.
Unrestricted Stock Awards. The grantee of an Unrestricted Stock Award
will recognize as ordinary income the difference between the fair market value
of the Common Stock granted pursuant to an Unrestricted Stock Award less the
amount, if any, the grantee paid for such stock in the taxable year the grantee
receives such Common Stock. The grantee's basis in any Common Stock received
pursuant to the grant of an Unrestricted Stock Award will be equal to the fair
market value of the Common Stock on the date of receipt of the Common Stock. Any
gain realized by the grantee of an Unrestricted Stock Award upon a subsequent
disposition of such Common Stock will be treated as long-term capital gain if
the recipient held the shares for more than one year, and short-term capital
gain if the recipient held the shares for one year or less.
Performance Share Awards. The federal income tax laws applicable to
Performance Share Awards are identical to those applicable to Conditioned Stock
Awards. See "-- Conditioned Stock Awards."
8
<PAGE>
Stock Appreciation Rights. The grantee of a Stock Appreciation Right
recognizes no income for federal income tax purposes on the grant thereof. On
the exercise of a Stock Appreciation Right, the difference between the fair
market value of the Company's Common Stock on the date of exercise and the
exercise price of the Stock Appreciation Right, multiplied by the number of
shares of Common Stock subject to the Stock Appreciation Right, is treated as
compensation to the grantee and is taxable as ordinary income in the year of
exercise. If the grantee of a Stock Appreciation Right does not exercise such
right, the excess of the fair market value of the Company's Common Stock on the
last day of the term of the Stock Appreciation Right over the exercise price of
the Stock Appreciation Right, if any, multiplied by the number of shares of
Common Stock subject to the Stock Appreciation Right, is treated as compensation
to the grantee and is taxable as ordinary income in the year the Stock
Appreciation Right lapses.
If upon the exercise of a Stock Appreciation Right or upon the lapse of
a Stock Appreciation Right the grantee receives Common Stock, the grantee's
basis in those shares which will be used in computing any capital gain or loss
upon disposition of such shares will be equal to the fair market value of those
shares on the date of exercise or lapse. Any gain recognized by the recipient
upon a subsequent disposition of such shares is treated as long-term capital
gain if the recipient held such shares for more one year, and short-term capital
gain if the recipient held the shares for one year or less.
Change of Control Payment Rights. The grantee of a Change of Control
Payment Right recognizes no income for federal income tax purposes on the grant
thereof. On the exercise of a Change of Control Payment Right, the difference
between the fair market value of the Common Stock on the date of exercise and
the exercise price of the Option to which the Change of Control Payment Right
relates, multiplied by the number of shares of Common Stock with respect to
which such Change of Control Payment Right is exercised, is treated as
compensation to the grantee and is taxable as ordinary income in the year of
exercise.
Taxation of the Company. Generally, subject to certain limitations, the
Company may deduct on its corporate income tax returns, in the year in which a
Stock Incentive Plan participant recognizes ordinary income upon the occurrence
of any of the following events, an amount equal to the amount recognized by the
grantee as ordinary income upon the occurrence of these events: (1) the exercise
of a Nonqualified Stock Option, (2) a Disqualifying Disposition of an Incentive
Option, (3) a lapse of a substantial risk of forfeiture of a Conditioned Stock
Award or a Performance Share Award, (4) a grantee's election to include in
income the fair market value of Common Stock received in connection with a
Conditioned Stock Award or a Performance Share Award, (5) the grant of an
Unrestricted Stock Award; (6) the exercise or lapse of a Stock Appreciation
Right; and (6) the exercise of a Change of Control Payment Right.
The Stock Incentive Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, nor is the Stock Incentive Plan
qualified under Section 401(a) of the Code.
Unless authority to do so has been limited in a proxy, it is the
intention of the persons named as proxies to vote the shares represented by the
proxy FOR the approval of the Stock Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
SEACOAST FINANCIAL SERVICES CORPORATION 1999 STOCK INCENTIVE PLAN.
9
<PAGE>
MANAGEMENT
Executive Officers
The names and ages of all executive officers of the Company and the
Bank and the principal occupation and business experience during at least the
last five years for each are set forth below as of April 15, 1999.
Each of Messrs. Short, Kelleher, Rigby, Taber, Camara and Rice and Ms.
Belanger serve as a Vice President of the Company, a position each (except
Messrs. Short and Rice) has held since the formation of the Company in 1994. Mr.
Short has served as Vice President of the Company since 1997 and Mr. Rice has
served as Vice President of the Company since October 1998.
Kevin G. Champagne. See "Information Regarding Nominees and Directors"
above.
Arthur W. Short served as Treasurer of the Company since its formation
in 1994 until 1997. He currently serves as Executive Vice President of the Bank,
a position he has held since 1993, and as Chief Operating Officer of the Bank, a
position he has held since 1997. Prior to 1997, Mr. Short served as Treasurer
and Chief Financial Officer of the Bank. He joined the Bank in 1981. Mr. Short
is 58 years old.
John D. Kelleher has served as Executive Vice President of the Bank
since 1993 and has headed the Bank's Lending Division since 1984. Mr. Kelleher
joined the Bank's Management Training Program in 1971. Mr. Kelleher is 53 years
old.
Francis S. Mascianica, Jr. has served as Senior Vice
President/Treasurer and Chief Financial Officer of the Bank since 1997 and as
Treasurer of the Company since 1997. Mr. Mascianica has held various positions
with the Bank since he joined the Bank in 1981. He is 51 years old.
Carolyn A. Belanger has served as Senior Vice President and head of the
Retail Banking Division of the Bank since 1994. Ms. Belanger has held various
positions with the Bank since she joined the Bank in 1966. She is 50 years old.
William D. Rigby has served as Senior Vice President since 1994 and
Manager of the Consumer Lending Department of the Bank since 1985, when he
joined the Bank. He is 51 years old.
Carl W. Taber has served as Senior Vice President since 1993 and head
of Mortgage Lending of the Bank since 1984. Mr. Taber joined the Bank's
Management Training Program in 1975. He is 45 years old.
Robert J. Camara has served as Senior Vice President and Loan Servicing
Manager of the Bank since 1997. He joined the Bank in 1987 as Assistant Vice
President and Auditor and became Vice President and Loan Servicing Manager in
1990. Mr. Camara is 42 years old.
James R. Rice has served as Senior Vice President of Marketing of the
Bank since December 1998. He joined the Bank in 1997 as Vice President of
Marketing. Prior to joining the Bank, Mr. Rice served as a Senior Marketing
Manager for BankBoston from 1995 to 1997 and as Vice President of Marketing for
Medford Savings Bank from 1988 to 1995. Mr. Rice is 37 years old.
All executive officers of the Company and the Bank hold office until
the first meeting of the Board of Directors following the annual meeting of
stockholders or special meeting in lieu thereof and until their successors are
chosen and qualified, unless a shorter term is specified in the vote appointing
them. Officers may generally be removed from office by vote of a majority of the
full Board of Directors.
Executive Compensation
Summary Compensation Table. The following table sets forth the cash
compensation paid by the Bank as well as certain other compensation paid or
accrued for services rendered in all capacities during the fiscal years ended
October 31, 1997 and 1998 and for the "stub period" of November 1, 1998 to
December 31, 1998
10
<PAGE>
to the Chief Executive Officer of the Bank and the four other executive officers
of the Company or the Bank who received total annual compensation in excess of
$100,000.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
November
1, 1998 to
December Annual Compensation
Fiscal 31, 1998 ---------------------------------- All Other(5)
Name and Principal Position Year(1) Salary(2) Salary Bonus(3) Other(4) Compensation
- --------------------------- ------- --------- ------ -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Kevin G. Champagne.................. 1998 $54,412 $263,849 $75,601 0 $48,506
President and Chief Executive 1997 225,387 59,801 0 5,794
Officer of the Company and the
Bank
Arthur W. Short..................... 1998 33,940 155,275 34,431 0 7,700
Vice President of the Company; 1997 143,505 34,750 0 6,912
Executive Vice President and
Chief Operating Officer of the
Bank
John D. Kelleher.................... 1998 31,652 140,686 31,164 0 6,649
Vice President of the Company; 1997 133,920 31,568 0 6,125
Executive Vice President/Lending
of the Bank
James E. Lambert(6)................. 1998 24,231 125,079 23,940 0 6,182
Vice President of the Company; 1997 120,002 23,400 0 5,996
Executive Vice
President/Commercial Lending of
the Bank
Carolyn A. Belanger................. 1998 21,220 109,577 24,276 0 5,593
Vice President of the Company; 1997 102,561 24,651 0 4,588
Senior Vice President/Retail
Banking of the Bank
</TABLE>
- ------------------
(1) Because the Company did not become a public company until November 20, 1998,
Summary Compensation information is not provided for 1996 in accordance with
the rules of the SEC.
(2) Salary information for the "stub period" is disclosed because of the change
in fiscal year from October 31 to December 31 and includes salary earned for
five (5) pay periods.
(3) Represents bonuses paid in December of each year for the preceding fiscal
year ended October 31.
(4) Perquisites and other personal benefits paid to each officer included in the
Summary Compensation Table in each instance aggregated less than 10% of the
total annual salary and bonus set forth in the columns entitled "Salary" and
"Bonus" for each officer, and accordingly, are omitted from the table in
accordance with the rules of the SEC.
(5) For 1998, includes the Bank's matching contributions under its 401(k) plan
of $5,000, $5,000, $4,921, $4,454 and $4,027 for Messrs. Champagne, Short,
Kelleher and Lambert and Ms. Belanger, respectively. Also includes premiums
paid by the Bank for group term life insurance of $1,044, $2,700, $1,728,
$1,728 and $1,566 for Messrs. Champagne, Short, Kelleher and Lambert and Ms.
Belanger, respectively. For Mr. Champagne, includes $42,462 contributed to
his account under the Bank's executive deferred compensation plan as a
supplemental retirement benefit.
(6) Mr. Lambert passed away on March 9, 1999.
11
<PAGE>
Compensation Committee Report on Executive Compensation
The Company's Compensation Committee is Messrs. Champagne, Dyer, Johnson,
LeBlanc, Legate, Munro and Silverstein who are each also members of the
Company's Executive Committee. The Company's compensation policies are designed
to pay executives an annual salary that is industry competitive and an annual
bonus that is based on the performance of the Company (as compared to its annual
business plan). The Committee reviews both components of compensation to ensure
salaries remain competitive and bonuses reward performance.
Salaries for executive officers are based on the duties and
responsibilities of the position held by the executive compared with executive
officers of other companies in the industry and were reviewed and established in
December 1997 for 1998. In setting 1998 compensation levels, the committee
reviewed executive officer compensation data contained in the Massachusetts
Bankers Association 1997 Banking Compensation Report conducted by W. M. Sheehan
& Company Inc. ("Sheehan Survey"), which contained data from over 140 banks in
the New England area and the 1997 Northeast Banking Industry Compensation Survey
prepared by KPMG Peat Marwick LLP ("KPMG Survey") which included data from 174
banking organizations located in nine northeastern states. The Chief Executive
Officer prepared a performance review, including an assessment of prior-year
performance for each executive officer, then communicated this information to
the Compensation Committee. Based on this information and its performance review
of the Chief Executive Officer, which is based on its assessment of the degree
to which the Chief Executive Officer accomplished strategic and financial
achievements, the Compensation Committee made recommendations to the Board of
Directors, which establishes annual executive salaries for the next year.
All employees of the Company participate in the Bank's Incentive
Compensation Plan ("Bonus Plan"). Payments under the Bonus Plan are contingent
on the Bank meeting its strategic and operational objectives for the fiscal
year. Bonuses may be awarded for the achievement of the Bank's financial
performance goals. Bonus awards are determined by a defined formula; factors
considered in this formula include financial performance of the Bank and Bank
performance compared to both a return-on-assets and a return-on-equity basis.
The 1998 performance goals for the Bank were a return-on-equity target of 10% to
15% and a return-on-assets target of .90% to 1.35%. Based on the extent to which
the Bank achieves those objectives, participants may receive from 0% to 40% of
base salary depending on their Bonus Plan group. The Compensation Committee
reviews both individual performance and Bank goals annually, however, the Board
of Directors has final authority with respect to all bonus awards.
Chief Executive Officer Compensation. Mr. Champagne's salary and bonus
are determined by the Compensation Committee substantially in accordance with
the policies described above relating to all executives of the Company. In
particular, the Compensation Committee considered, among other things, the
following performance criteria in determining Mr. Champagne's 1998 base salary:
(1) return on assets and return on equity of the Company; (2) selection and
management of staff; (3) development of regional business relationships; (4)
effective management of budgets and asset growth; and (5) development of new
opportunities for business expansion. The grant of a cash bonus to Mr. Champagne
for fiscal 1998 reflects the Company's achievement of certain performance
objectives as specified in the Bonus Plan.
In December 1997, the Compensation Committee increased Mr. Champagne's
salary for fiscal 1998. This salary increase reflected a review of both the
Sheehan Survey and KPMG Survey for Chief Executive Officer salaries in the peer
group, the continuing improvement in the performance of the Company, recognized
Mr. Champagne's achievement of certain strategic goals including building an
experienced management team,
12
<PAGE>
improving asset quality and developing a strategic plan for the Company, and
established Mr. Champagne's salary at a level that is comparable to that of
other chief executive officers of similarly situated banks.
COMPENSATION COMMITTEE
Kevin Champagne Frederic D. Legate
Howard C. Dyer, Jr. A. William Munro
Glen F. Johnson Joseph H. Silverstein
J. Louis LeBlanc
Compensation Committee Interlocks and Insider Participation
Until January 1, 1999, the Executive Committee served as the Compensation
Committee. Its current members are Messrs. Champagne, Dyer, Johnson, LeBlanc,
Legate, Munro and Silverstein. Mr. Champagne, the President and Chief Executive
Officer of the Company does not participate in deliberations involving his own
compensation.
No executive officer of the Company or the Bank served (i) as a member of
the compensation committee of another entity, one of whose executive officers
served on the Executive Committee of the Company and the Bank; (ii) as a
director of another entity, one of whose executive officers served on the
Executive Committee of the Company and the Bank; or (iii) as a member of the
compensation committee of another entity, one of whose executive officers served
as a trustee or director of the Company or the Bank.
Performance Graph
The Company completed its mutual to stock conversion and its initial
public offering on November 20, 1998, after the end of the Company's fiscal year
end of October 1998. Since the Company was not public during its most recently
completed fiscal year, a performance graph comparing the performance of the
Company's cumulative stockholder return with that of a broad market index and a
published industry index has not been included.
401(k) Plan
The Bank maintains a Savings Banks Employees Retirement Association
401(k) Plan, which is a qualified, tax-exempt plan. All employees who have
attained age 21 and have completed one year of employment during which they
worked at least 1,000 hours are eligible to participate.
Under the 401(k) Plan, participants are permitted to make salary
reduction contributions up to the lesser of 15% of compensation or $10,000 (as
indexed annually). All employee contributions and earnings thereon are fully and
immediately vested. A participant may withdraw salary reduction contributions in
the event the participant suffers a financial hardship. The 401(k) Plan permits
employees to direct the investment of their own accounts into various investment
options. The Bank matches 50% of the first 6% of compensation that a participant
contributes to the 401(k) Plan.
Plan benefits will be paid to each participant in the form of a life
annuity (or joint and survivor annuity if married) upon retirement or death
unless an alternate form of distribution (lump sum or equal payments over a
fixed period) is selected. If a participant terminates employment prior to
retirement, his vested benefit will be held by the 401(k) Plan until the
participant elects to receive his benefit from the plan. If a participant (and
the participant's spouse, if married) elects to receive benefits after
termination of employment prior to normal or early retirement age, benefits will
be paid in a lump sum. Normal retirement age under the plan is age 65. Early
retirement age is age 59 1/2.
13
<PAGE>
Employee Stock Ownership Plan
The Bank has established an Employee Stock Ownership Plan (the "ESOP"),
effective as of January 1, 1998. Employees with at least one year of employment
with the Bank and who have attained age 21 are eligible to participate. The ESOP
has borrowed funds from the Company to purchase 1,120,000 shares of the
Company's stock, which shares serve as collateral for the loan. The loan will be
repaid principally from the Bank's contributions to the ESOP, over a period of
20 years. Shares purchased by the ESOP will be held in a suspense account for
allocation among participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense account
in an amount proportional to the repayment of the ESOP loan will be allocated
among ESOP participants on the basis of compensation in the year of allocation.
Participants in the ESOP will receive credit for years of service prior to the
effective date of the ESOP. Benefits generally vest at the rate of 20% per year
beginning in the second year of service until a participant is 100% vested after
six years or upon normal retirement (as such term is defined in the ESOP),
disability or death of the participant or a change in control (as such term is
defined in the ESOP). A participant who terminates employment for reasons other
than death, retirement or disability prior to seven years of credited service
will forfeit the nonvested portion of his benefits under the ESOP. Benefits will
be payable in the form of the Company's common stock and cash upon death,
retirement, early retirement, disability or separation from service. Benefits
payable under the ESOP will depend on a number of factors, including the Bank's
contributions to the ESOP and the market value of the Company's common stock.
The Bank is required to record compensation expense in an amount equal to the
fair market value of the shares released from the suspense account.
The Bank has established a committee of three officers of the Bank to
administer the ESOP, and has appointed its President and Chief Executive Officer
to serve as trustee of the ESOP. The ESOP committee may instruct the trustee
regarding investment of funds contributed to the ESOP. The ESOP trustee, subject
to his fiduciary duty, must vote all allocated shares held in the ESOP in
accordance with the instructions of participating employees. Under the ESOP,
nondirected shares and shares held in the suspense account will be voted in a
manner calculated to most accurately reflect the instructions it has received
from participants regarding the allocated stock so long as such vote is in
accordance with the provisions of ERISA. Currently no shares have been allocated
to participants and as a result the shares are entitled to be voted by the
trustee in his discretion.
Employment and Change in Control Agreements
The Company and the Bank have entered into certain employment agreements
(each such agreement, an "Employment Agreement" and, such agreements
collectively, the "Employment Agreements") and certain change in control
agreements (the "Change in Control Agreements") with Messrs. Champagne, Short,
Kelleher and Mascianica and Ms. Belanger (collectively, the "Officers"). The
Employment Agreements provide that the Officers will receive certain benefits
and a base salary equal to $270,000, $156,500, $141,650, $103,380 and $110,346,
respectively, subject to increases in accordance with the usual practices of the
Company and the Bank with respect to review of compensation of their senior
executives.
Mr. Champagne's Employment Agreement has a three-year term and the
Employment Agreements of the other Officers have two-year terms. The terms all
commenced on November 20, 1998, and each term extends by one day for each day
that an Officer remains employed by the Bank or (in the case of Mr. Champagne)
by the Bank or the Company until either of the officer or the Bank or (in the
case of Mr. Champagne) the Bank or the Company give a notice of non-renewal.
Under each of the Employment Agreements, the Company (in the case of Mr.
Champagne) and the Bank (in the case of the other Officers) may terminate an
Officer's employment at any time for "cause," as such term is defined in such
agreements, without incurring any continuing obligations to the Officer. If the
Company or the Bank terminates an Officer's employment for any reason other than
for cause or if the Officer terminates the Officer's employment for "good
reason," as such term is defined in the Employment Agreements, the Company and
the Bank will become obligated to provide the Officer: (i) an amount equal to
the sum of (a) the Officer's base salary or other compensation earned through
14
<PAGE>
the date of termination, (b) the Officer's pro rata share of the Officer's
highest annual bonus paid during the three fiscal years preceding such
termination and (c) all accrued vacation and deferred compensation; (ii) a lump
sum severance benefit equal to three times (in the case of Mr. Champagne) or two
times (in the case of the other Officers) the sum of (a) the Officer's annual
base salary and (b) the highest annual bonus paid to the Officer in the three
fiscal years preceding the termination; (iii) disability and medical benefits
specified in the Officer's Employment Agreement for the duration of what
otherwise would have been the remaining term of the Employment Agreement (which,
as a result of the daily extension of the term of the Agreements, will always be
three years for Mr. Champagne and two years for the other Officer); and (iv) a
pension adjustment as specified in the Employment Agreement. The Employment
Agreements also provide certain retirement, death and disability benefits. Mr.
Champagne's Employment Agreement includes a provision reimbursing him, on an
after-tax basis, for any "golden parachute" excise taxes.
The Change in Control Agreements provide that an Officer may receive
certain benefits if the Officer is terminated within three years of a "Change in
Control" (as such term is defined in the Change in Control Agreements) of either
the Company or the Bank. An Officer would receive such termination benefits if
the Company or the Bank terminated the Officer for any reason other than death
or "cause," as such term is defined in the Employment Agreements, or if the
Officer terminated the Officer's employment following: (i) a significant change
in the nature or scope of the Officer's responsibilities, authorities, powers,
functions or duties; (ii) a determination by the Officer that, as a result of a
Change in Control, the Officer is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the Officer immediately
prior to such Change in Control; (iii) a reduction in the Officer's annual base
salary; (iv) a significant relocation of the offices of the Company or the Bank;
(v) a failure of either the Company or the Bank to pay any portion of
compensation due to the Officer; (vi) the termination of or a material reduction
in the Officer's benefits; or (vii) a failure of the Company or the Bank to
obtain a satisfactory agreement from any successor to assume and agree to
perform the Officer's Change in Control Agreement. The benefits in the case of
both Mr. Champagne and the other Officers are: (i) a lump sum severance payment
equal to three times the "base amount," as such term is defined in Section
280G(b)(3) of the Code, applicable to the Officer minus $1.00 and (ii) for a
period of three years, the Officer's disability and medical benefits existing on
the date of the termination. Alternatively, an Officer could elect to receive
such termination benefits as the Officer would be entitled to under the
Officer's Employment Agreement, but may not receive payments under both
agreements. The Company has also entered into Change in Control Agreements with
three other officers that are substantially similar to the foregoing, except
that the benefit is equal to two (rather than three) times the "base amount" and
is payable only if employment terminates within one year after the Change in
Control.
Cash and benefits paid to each Officer under the Change in Control
Agreements together with payments under other benefit plans following a change
in control of the Company or the Bank may constitute an "excess parachute"
payment under Section 280G of the Code, resulting in the imposition of a 20%
excise tax on the recipient and the denial of the deduction for such excess
amounts to the Company or the Bank. The Change in Control Agreements place
limitations on the salary and benefits the Officers can receive so that such
payments do not exceed the Section 280G limits. However, such limitations would
not apply if an Officer elects to receive payments under his or her Employment
Agreement instead of his or her Change in Control Agreement.
15
<PAGE>
Compensation of Officers and Directors Through Benefit Plans
Defined Benefit Pension Plan. The Bank maintains the Savings Banks
Employees Retirement Association Pension Plan, which is a qualified, tax-exempt
defined benefit plan (the "Retirement Plan"). All employees age 21 or older who
have worked at the Bank for a period of two years and have been credited with
1,000 or more hours of service with the Bank during the year are eligible to
accrue benefits under the Retirement Plan. The Bank contributes annually an
amount to the Retirement Plan necessary to satisfy the actuarially determined
minimum funding requirements in accordance with ERISA.
The retirement benefit provided is an amount equal to 1.25% of a
participant's average compensation based on the average of the three consecutive
years providing the highest average compensation multiplied by the participant's
years of service (up to a maximum of 25 years) plus 0.6% of such average
compensation in excess of covered compensation multiplied by the participant's
total number of years of service (up to a maximum of 25 years). Normal
retirement age is 65. Retirement benefits are also payable upon disability or
death. A reduced benefit is payable upon early retirement at age 62, at age 55
and the completion of ten years of service with the Bank or at age 50 and the
completion of 15 years of such service. Benefits under the Retirement Plan are
payable in various annuity forms as well as in the form of a single lump sum
payment. As of October 31, 1998, the most recent date for which information is
available, the market value of the Retirement Plan's assets was $9.8 million.
The following table indicates the annual retirement benefit that would be
payable under the Retirement Plan upon retirement by existing employees at age
65 between November 1, 1997 and October 31, 1998, expressed in the form of a
single life annuity for the final average salary and benefit service
classifications specified below:
Projected Annual Pension Benefit
Based on Years of Service
--------------------------------
<TABLE>
<CAPTION>
Average 25 Years
Compensation 10 Years 15 Years 20 Years and After
------------ -------- -------- -------- ---------
<S> <C> <C> <C> <C>
$ 20,000 $ 2,500 $ 3,750 $ 5,000 $ 6,250
40,000 5,532 8,298 11,065 13,831
60,000 9,232 13,848 18,465 23,081
80,000 12,932 19,398 25,865 32,331
100,000 16,632 24,948 33,265 41,581
120,000 20,332 30,498 40,665 50,831
125,000 21,257 31,886 42,515 53,143
140,000 24,032 36,048 48,065 60,081
150,000 25,882 38,823 51,765 64,706
160,000(1) 27,732 41,598 55,465 69,331
</TABLE>
- ----------
(1) Beginning November 1, 1997, Federal law does not permit defined benefit
pension plans to recognize compensation in excess of $160,000 for plan
years (for SBERA plans).
At October 31, 1998, the approximate years of credited service for the
executive officers named in the Summary Compensation Table were as follows:
<TABLE>
<CAPTION>
Years of Credited
Name Service at Age 65
------------------ -----------------
<S> <C>
Kevin G. Champagne 25
Arthur W. Short 25
John D. Kelleher 25
Carolyn A. Belanger 25
</TABLE>
16
<PAGE>
Executive Salary Continuation Agreements.
The Bank has entered into a salary continuation agreement with four of
its executive officers: Messrs. Champagne, Short, Kelleher and Mascianica. The
agreements provide each officer with a supplemental retirement benefit in an
amount equal to 25% of the average of the three highest years of compensation
(including salary and bonuses) paid to the officer in the ten years of
employment immediately preceding the officer's retirement. The benefit is
payable monthly, for a period of 15 years, commencing on the first day of the
month next following the officer's retirement. A reduced benefit is payable if
the officer retires prior to the age of 65, but after age 55. If the officer
dies while employed by the Bank, a monthly benefit will be paid to the officer's
beneficiary for a period of 15 years in an amount equal to 25% of the officer's
salary on the date of his death. If the officer's employment with the Bank is
terminated prior to the age of 55 other than for cause, the officer is entitled
to a benefit equal to 5% of the benefit he would have received upon retirement
at age 65, multiplied by the number of years of service between the age of 35
and termination of employment. The agreements provide that the Bank may not
merge or consolidate into another corporation or sell substantially all of its
assets to another corporation unless such corporation agrees to assume and
discharge the obligations of the Bank under the agreements. The agreements are
funded by life insurance policies, of which the Bank is the owner and
beneficiary, held in a "rabbi" trust.
The Bank has agreed to calculate each year the additional amount that
would need to be accrued in order to result in the executive receiving 70% of
the average of the three highest years of compensation paid to the officer in
the ten years of employment immediately preceding the officer's retirement from
a combination of the Bank's defined benefit plan, executive salary continuation
agreement, the Bank's contribution to the executive's 401(k) plan, the ESOP,
social security and any supplemental funding. This amount, if any, is added to
the executive's account under the Bank's deferred compensation plan.
Executive Deferred Compensation Plan.
The Bank has a deferred compensation plan for the benefit of certain of
its senior management employees, as designated from time to time by the
President of the Bank. At the current time, 17 employees are eligible to
participate in the plan. Participants may defer 1% to 15% of their base salary
and 1% to 100% of any bonus to which they are entitled. Deferred amounts are
credited to each participant's account and are held in a "rabbi" trust. The
deferred compensation plan permits employees to direct the investment of their
own accounts into various investment options. Distributions to a participant are
made upon the earliest of the participant's retirement, death or other
termination of employment, in the form requested by the participant in his or
her salary reduction deferral election. The plan permits, at the Committee's
discretion, withdrawals in the event of a financial hardship caused by an
unforeseeable emergency.
Certain Transactions with Management and Others
The Bank makes loans to non-officer directors of the Company and the
Bank. Such loans are made on the same terms and conditions as those of
comparable transactions with the general public and do not present more than the
normal risk of collectibility.
17
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of April 1, 1999
regarding each Director of the Company, each executive officer named in the
Summary Compensation Table, all Directors and executive officers of the Company
as a group and each person known by the Company to own beneficially more than 5%
of the Company's common stock.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name Beneficial Ownership(1) Class (2)
- ------------------------------------- ------------------------------- ----------------
<S> <C> <C>
Wellington Management Company, LLP 1,467,000(3) 5.48
75 State Street
Boston, Massachusetts 02109
Carolyn A. Belanger 5,940(4) *
Manuel G. Camacho 10,000(5) *
David P. Cameron 5,000 *
Kevin G. Champagne 24,977(6) *
Howard C. Dyer, Jr. 5,500 *
Mary F. Hebditch 32,360(7) *
Glen F. Johnson 15,000 *
John D. Kelleher 15,000(8) *
Thornton P. Klaren, Jr. 5,740(9) *
J. Louis LeBlanc 47,900(10) *
Frederic D. Legate 553,928(11) 2.07
Reale J. Lemieux 17,731(12) *
A. William Munro 135,000(13) *
Carl Ribeiro 30,000(14) *
Arthur W. Short 4,702(15) *
Joseph H. Silverstein 10,000 *
Gerald H. Silvia 11,500(16) *
Directors and executive officers as a group (22
persons) 950,855 3.55
</TABLE>
- ----------
* Less than 1%
(1) Except as otherwise noted, all persons have sole voting and investment
power over their shares.
(2) Calculated based on outstanding shares of Common Stock on April 1, 1999 of
26,758,134.
(3) The Company has received a copy of a report on Schedule 13G with a
signature dated December 31, 1998, filed by Wellington Management Company,
LLP. ("WMC"). The report states that on December 31, 1998, the shares were
held of record by clients of WMC which acts as an investment adviser. WMC
held a shared power to vote or to direct the disposition of 744,900 shares
and the shared power to dispose or to direct the disposition of all the
shares listed in this table.
(4) Shares held by 401(k) plan.
(5) Includes 5,000 shares owned by spouse.
(6) Includes 2,700 shares owned by spouse, 8,939 shares held by executive
deferred compensation plan, 7,388 shares held by 401(k) plan and 50 shares
held as custodian for daughter and does not include the 1,120,000 held by
the ESOP, for which Mr. Champagne serves as trustee. See "Employee Stock
Ownership Plan" above.
(7) Includes 4,469 shares held in IRA.
18
<PAGE>
(8) Includes 13,570 held in IRA, 500 shares held as custodian for son and 930
shares held in spouse's IRA.
(9) Includes 2,800 shares owned by spouse and 240 shares owned by daughter.
(10) Includes 35,000 shares held in trust of which Mr. LeBlanc is the sole
trustee and over which he has sole voting and investment power but in which
he has no pecuniary interest; and includes 7,400 shares held by IRA; 3,000
shares held by spouse; and 1,000 shares held in spouse's IRA.
(11) Includes 31,925 shares owned by spouse, 3,566 held in IRA, 4,578 held in
spouse's IRA and 11,085 held by Sandwich Co-operative Bank ESOP which has
now been merged with the Bank's ESOP.
(12) Includes 3,270 held by IRA and 3,095 held in spouse's IRA.
(13) Includes 50,000 shares held by company of which Mr. Munro is the principal
owner and 75,000 shares held jointly with his spouse in an IRA.
(14) Includes 6,000 shares held by spouse and 5,000 shares held by company of
which Mr. Ribeiro is the principal owner.
(15) Represents 1,072 shares held by 401(k) plan and 3,630 shares held by
executive deferred compensation plan.
(16) Includes 6,200 shares held by spouse.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
The Company did not have a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") during
the fiscal year ended October 31, 1998. Therefore, no Forms 3, 4 or 5 were
required to be filed for the fiscal year then ended.
INFORMATION CONCERNING AUDITORS
The Board of Directors has selected Arthur Andersen LLP to audit the
Company's financial statements for the current fiscal year. That firm also
served as the auditors for the Company during the past fiscal year. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if he or she desires to
do so and will be available to respond to appropriate questions.
SOLICITATION
Brokers, banks and other nominees will be reimbursed for out-of-pocket
expenses and other reasonable clerical expenses incurred in obtaining
instructions from beneficial owners of Common Stock. In addition to the
solicitation by mail, solicitations of proxies may be made personally or by
telephone by Directors, officers and certain employees of the Company. The
Company also intends to employ the services of Kissel-Blake to solicit proxies.
It is estimated that Kissel-Blake will receive approximately $6,500 in
connection with such solicitation of proxies. All expenses incurred in
connection with this solicitation will be borne by the Company.
SUBMISSION OF STOCKHOLDER PROPOSALS
FOR 2000 ANNUAL MEETING
In order to be included in proxy materials for the 2000 annual meeting of
stockholders or special meeting in lieu thereof, qualifying stockholder
proposals must be delivered to the Company at its principal executive offices on
or after December 20, 1999 Any such proposal should be mailed to: Clerk,
Seacoast Financial Services Corporation, 791 Purchase Street, New Bedford,
Massachusetts 02740. If the date of the next annual meeting is subsequently
changed by more than 30 calendar days from the date of this year's Annual
Meeting, the Company will, in a timely manner, inform its stockholders of such
change and the date by which proposals of stockholders must be received.
19
<PAGE>
In addition, Section 3 of Article II of the Company's by-laws requires
that a stockholder who wishes to propose an item of business for consideration
at the annual meeting must provide notice of such item of business to the
Company at its principal executive offices not less than 60 days nor more than
150 days before the date for such meeting. For next year's scheduled annual
meeting, the deadline for submission of notice is March 20, 2000. Section 3 of
Article III of the by-laws imposes the same deadline on the nomination by a
stockholder of a candidate for election to the Board of Directors. Any proposal
or nomination submitted after March 20, 2000 will be untimely. The by-laws
contain a number of other substantive and procedural requirements which should
be reviewed by any interested stockholder. A copy of the Company's by-laws will
be provided to any stockholder of the Company at no cost upon written request to
the Clerk of the Company.
MISCELLANEOUS
The Board was not aware, a reasonable time before mailing this Proxy
Statement to stockholders, of any business that may properly be presented at the
Annual Meeting, other than the matters specifically listed in the Notice of
Annual Meeting of Stockholders. However, if any further business is properly
presented, the persons present will have discretionary authority to vote the
shares they own or represent by proxy in accordance with their judgment.
<PAGE>
Appendix A
- --------------------------------------------------------------------------------
SEACOAST FINANCIAL SERVICES CORPORATION
1999 STOCK INCENTIVE PLAN
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. General Purpose of the Plan; Definitions..................................A-1
SECTION 2. Administration of Plan; Committee Authority to Select Participants and
Determine Awards..........................................................A-3
(a) Committee............................................................A-3
(b) Powers of Committee..................................................A-3
(c) Decisions Binding....................................................A-3
SECTION 3. Shares Issuable under the Plan; Mergers; Substitution.....................A-3
(a) Shares Issuable......................................................A-3
(b) Limitation on Awards.................................................A-4
(c) Stock Dividends, Mergers, etc........................................A-4
(d) Substitute Awards....................................................A-4
SECTION 4. Eligibility...............................................................A-4
SECTION 5. Stock Options.............................................................A-5
(a) Grant of Stock Options...............................................A-5
(b) Reload Options.......................................................A-7
SECTION 6. Conditioned Stock Awards..................................................A-7
(a) Nature of Conditioned Stock Award....................................A-7
(b) Acceptance of Award..................................................A-7
(c) Rights as a Shareholder..............................................A-7
(d) Restrictions.........................................................A-7
(e) Vesting of Conditioned Stock.........................................A-7
(f) Waiver, Deferral and Reinvestment of Dividends.......................A-8
SECTION 7. Unrestricted Stock Awards.................................................A-8
(a) Grant or Sale of Unrestricted Stock..................................A-8
(b) Restrictions on Transfers............................................A-8
SECTION 8. Performance Share Awards..................................................A-8
(a) Nature of Performance Shares.........................................A-8
(b) Restrictions on Transfer.............................................A-8
(c) Rights as a Shareholder..............................................A-8
(d) Termination..........................................................A-8
(e) Acceleration, Waiver, Etc............................................A-8
SECTION 9. Stock Appreciation Rights.................................................A-8
SECTION 10. Change of Control Payment Rights..........................................A-10
(a) Terms of Rights.....................................................A-10
(b) Payment.............................................................A-10
SECTION 11. Deferred Payments.........................................................A-10
(a) Election Timing......................................................A-10
(b) Stock Option Deferral................................................A-10
A-i
<PAGE>
(c) Stock Appreciation Right Deferral....................................A-11
(d) Conditioned Stock Awards.............................................A-11
(e) Accelerated Distributions............................................A-11
(f) Assignability........................................................A-11
(g) Unfunded Status......................................................A-11
SECTION 12. Termination of Stock Options and Stock Appreciation Rights................A-12
(a) Incentive Stock Options..............................................A-12
(b) Other Awards..........................................................A-13
SECTION 13. Tax Withholding...........................................................A-13
(a) Payment by Participant...............................................A-13
(b) Payment in Shares....................................................A-13
SECTION 14. Transfer, Leave of Absence, Etc...........................................A-13
SECTION 15. Amendments and Termination................................................A-13
SECTION 16. Status of Plan............................................................A-14
SECTION 17. Compliance with Conversion Regulations....................................A-14
SECTION 18. General Provisions........................................................A-14
(a) No Distribution; Compliance with Legal Requirements..................A-14
(b) Delivery of Stock Certificates.......................................A-14
(c) Other Compensation Arrangements; No Employment Rights................A-14
(d) Delegation by Committee...............................................A-14
SECTION 19. Effective Date of Plan....................................................A-15
SECTION 20. Governing Law.............................................................A-15
</TABLE>
A-ii
<PAGE>
SEACOAST FINANCIAL SERVICES CORPORATION
1999 STOCK INCENTIVE PLAN
SECTION 1. General Purpose of the Plan; Definitions
The name of the plan is the Seacoast Financial Services Corporation 1999
Stock Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, directors and employees of (and consultants to) Seacoast
Financial Services Corporation (the "Company") and its Subsidiaries upon whose
judgment, initiative and efforts the Company largely depends for the successful
conduct of its business to acquire a proprietary interest in the Company. It is
anticipated that providing such persons with a direct stake in the Company's
welfare will assure a closer identification of their interests with those of the
Company and its shareholders, thereby stimulating their efforts on the Company's
behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards", except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Conditioned Stock Awards, Unrestricted Stock Awards, Performance Share
Awards, Change of Control Payment Rights and Stock Appreciation Rights.
"Board" means the Board of Directors of the Company.
"Cause" means personal dishonesty, 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 final cease and desist order.
"Change of Control" shall have the meaning set forth in Section 17.
"Change of Control Payment Rights" shall have the meaning set forth in
Section 10.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" shall have the meaning set forth in Section 2.
"Conditioned Stock Award" means an Award granted pursuant to Section 6.
"Disability" means disability as set forth in Section 22(e)(3) of the
Code.
"Effective Date" shall have the meaning set forth in Section 19.
"Eligible Person" shall have the meaning set forth in Section 4.
"Exchange Act" shall have the meaning set forth in Section 2(a).
"Fair Market Value" on any given date means the closing bid price per
share of the Stock on the trading day immediately preceding such date as
reported by the NASDAQ Stock Market or another nationally recognized stock
exchange, or, if the Stock is not listed on such an exchange, the fair market
value of the Stock as determined by the Committee.
"Incentive Stock Option" means any Stock Option designated and qualified
as an "incentive stock option" as defined in Section 422 of the Code.
"Merger" shall have the meaning set forth in Section 3(c).
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Normal Retirement" means retirement from active employment with the
Company and its Subsidiaries in accordance with the retirement policies of the
Company and its Subsidiaries then in effect.
A-1
<PAGE>
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Original Option" shall have the meaning set forth in Section 5(b).
"Outside Director" means any director who (i) is not an employee of the
Company or of any "affiliated group," as such term is defined in Section 1504(a)
of the Code, which includes the Company (an "Affiliate"), (ii) is not a former
employee of the Company or any Affiliate who is receiving compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
Company's or any Affiliate's taxable year, (iii) has not been an officer of the
Company or any Affiliate and (iv) does not receive remuneration from the Company
or any Affiliate, either directly or indirectly, in any capacity other than as a
director. "Outside Director" shall be determined in accordance with Section
162(m) of the Code and the Treasury regulations issued thereunder.
"Performance Goal" means an objective for the Company or any Subsidiary or
any unit thereof or any individual that may be established by the Committee for
a Performance Share Award to become vested, earned or exercisable. Performance
Goals applicable to Performance Share Awards are intended to constitute
"performance-based" compensation within the meaning of Section 162(m) of the
Code and shall be based on one or more of the following criteria:
(i) net income, as adjusted for non-recurring items
(ii) cash earnings
(iii) earnings per share
(iv) cash earnings per share
(v) return on equity
(vi) return on assets
(vii) assets
(viii) stock price
(ix) total shareholder return
(x) capital
(xi) net interest income
(xii) market share
(xiii) cost control or efficiency ratio
(xiv) asset growth
"Performance Share Award" means an Award granted pursuant to Section 8.
"Request" shall have the meaning set forth in Section 9(d).
"Stock" means the Common Stock, $0.01 par value per share, of the Company,
subject to adjustments pursuant to Section 3.
"Stock Appreciation Right" means an Award granted pursuant to Section 9.
"Subsidiary" means a subsidiary as defined in Section 424 of the Code.
A-2
<PAGE>
"Unrestricted Stock Award" means Awards granted pursuant to Section 7.
SECTION 2. Administration of Plan; Committee Authority to Select Participants
and Determine Awards.
(a) Committee. The Plan shall be administered by a Stock Incentive Plan
Committee (the "Committee") consisting of all members of the Compensation
Committee of the Company who qualify as Outside Directors. The Committee shall
have at least two (2) members at all times. It is the intention of the Company
that the Plan shall be administered to comply with the provisions of Rule 16b-3
under the Securities Exchange Act of 1934 (the "Exchange Act"), but the
authority and validity of any act taken or not taken by the Committee shall not
be affected if any person administering the Plan is not a Non-Employee Director
as defined in the Rule. Except as specifically reserved to the Board under the
terms of the Plan, the Committee shall have full and final authority to operate,
manage and administer the Plan on behalf of the Company. Action by the Committee
shall require the affirmative vote of a majority of all members thereof.
(b) Powers of Committee. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:
(i) to select the directors, officers and employees of (and
consultants to) the Company and its Subsidiaries to whom Awards may from
time to time be granted;
(ii) to determine the time or times of grant, and the extent, if
any, of Incentive Stock Options, Non-Qualified Stock Options, Conditioned
Stock, Unrestricted Stock, Performance Share Awards, Stock Appreciation
Rights and Change of Control Payment Rights, or any combination of the
foregoing, granted to any one or more participants;
(iii) to determine the number of shares to be covered by any
Award;
(iv) to determine and modify the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award,
which terms and conditions may differ among individual Awards and
participants, and to approve the form of written instruments evidencing
the Awards; provided, however, that no such action shall adversely affect
rights under any outstanding Award without the participant's consent;
(v) to accelerate the exercisability or vesting of all or any
portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend the
period in which any outstanding Stock Option or Stock Appreciation Right
may be exercised;
(vii) to determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts equal to interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
(c) Decisions Binding. All decisions and interpretations of the Committee
shall be binding on all persons, including the Company and Plan participants.
SECTION 3. Shares Issuable under the Plan; Mergers; Substitution.
(a) Shares Issuable. The maximum number of shares of Stock which may be
issued as a result of Awards granted under the Plan shall be 1,960,000 (which
number equals 14% of the aggregate number of shares of Common Stock issued by
the Company in connection with its conversion from mutual to stock form
A-3
<PAGE>
("Conversion Shares")). The maximum number of shares which may be issued under
Conditioned Stock Awards (granted pursuant to Section 6) is 560,000 (which
number equals 4% of the aggregate number of Conversion Shares). The maximum
number of shares which may be issued as a result of other Awards under the Plan
is 1,400,000 (which number equals 10% of the aggregate number of Conversion
Shares). For purposes of this limitation, the shares of Stock underlying any
Awards which are forfeited, canceled, reacquired by the Company or otherwise
terminated (other than by exercise) shall be added back to the shares of Stock
with respect to which Awards may be granted under the Plan so long as the
participants to whom such Awards had been previously granted received no
benefits of ownership of the underlying shares of Stock to which the Award
related. Likewise, if any Option is exercised by the delivery of a number of
shares of Stock, either actually or by attestation, to the Company as full or
partial payment in connection with the exercise of an Option under this Plan,
only the number of shares of Stock issued net of the shares of Stock delivered
shall be deemed issued for purposes of determining the maximum number of shares
of Stock available for issuance under the Plan. Subject to such overall
limitation, any type or types of Award may be granted with respect to shares,
including Incentive Stock Options. Shares issued under the Plan may be
authorized but unissued shares or shares reacquired by the Company.
(b) Limitation on Awards. In no event may any Plan participant be granted
Awards (including Stock Appreciation Rights) with respect to more than four
hundred and ninety thousand (490,000) shares of Stock in any calendar year. The
number of shares of Stock relating to an Award granted to a Plan participant in
a calendar year that is subsequently forfeited, canceled or otherwise terminated
shall continue to count toward the foregoing limitation in such calendar year.
In addition, if the exercise price of an Award is subsequently reduced, the
transaction shall be deemed a cancellation of the original Award and the grant
of a new one so that both transactions shall count toward the maximum shares
issuable in the calendar year of each respective transaction.
(c) Stock Dividends, Mergers, etc. In the event that after approval of the
Plan by the stockholders of the Company in accordance with Section 19, the
Company effects a stock dividend, stock split or similar change in
capitalization affecting the Stock, the Committee shall make appropriate
adjustments in (i) the number and kind of shares of stock or securities with
respect to which Awards may thereafter be granted (including without limitation
the limitations set forth in Sections 3(a) and 3(b) above), (ii) the number and
kind of shares remaining subject to outstanding Awards, and (iii) the option or
purchase price in respect of such shares. In the event of any merger,
consolidation, dissolution or liquidation of the Company, the Committee in its
sole discretion may, as to any outstanding Awards, make such substitution or
adjustment in the aggregate number of shares reserved for issuance under the
Plan and in the number and purchase price (if any) of shares subject to such
Awards as it may determine and as may be permitted by the terms of such
transaction, or accelerate, amend or terminate such Awards upon such terms and
conditions as it shall provide (which, in the case of the termination of the
vested portion of any Award, shall require payment or other consideration which
the Committee deems equitable in the circumstances), subject, however, to the
provisions of Section 17.
(d) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation (collectively, "Merger"). The
Committee may direct that the substitute awards be granted on such terms and
conditions as the Committee considers appropriate in the circumstances. Shares
which may be delivered under such substitute awards may be in addition to the
maximum number of shares provided for in Section 3(a).
SECTION 4. Eligibility.
Awards may be granted to directors, officers or other key employees of the
Company or its Subsidiaries and to consultants and advisors of the Company or
its Subsidiaries (collectively, "Eligible Persons").
A-4
<PAGE>
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve. Stock Options granted under the Plan
may be either Incentive Stock Options or Non-Qualified Stock Options. To the
extent that any option does not qualify as an Incentive Stock Option, it shall
constitute a Non-Qualified Stock Option. No Incentive Stock Option shall be
granted under the Plan after the tenth anniversary of the Effective Date.
(a) Grant of Stock Options. The Committee in its discretion may determine
the effective date of Stock Options. Grants of Incentive Stock Options shall be
made only to persons who are, on the effective date of the grant, employees of
the Company or any Subsidiary. Stock Options granted pursuant to this Section
5(a) shall be subject to the following terms and conditions and the terms and
conditions of Section 13 and shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Committee shall deem
desirable.
(i) Exercise Price. The exercise price per share for the Stock
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall be, in the case
of Incentive Stock Options, not less than one hundred percent (100%) of
Fair Market Value on the date of grant. If an employee owns or is deemed
to own (by reason of the attribution rules applicable under Section 424(d)
of the Code) more than ten percent (10%) of the combined voting power of
all classes of stock of the Company or any Subsidiary or parent
corporation and an Incentive Stock Option is granted to such employee, the
option price shall be not less than one hundred ten percent (110%) of Fair
Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by
the Committee but no Incentive Stock Option shall be exercisable more than
ten (10) years after the date the option is granted. If an employee owns
or is deemed to own (by reason of the attribution rules of Section 424(d)
of the Code) more than ten percent (10%) of the combined voting power of
all classes of stock of the Company or any Subsidiary or parent
corporation and an Incentive Stock Option is granted to such employee, the
term of such option shall be no more than five (5) years from the date of
grant.
(iii) Exercisability; Rights of a Shareholder. Stock Options
shall become vested and exercisable at such time or times, whether or not
in installments, as shall be determined by the Committee at or after the
grant date. The Committee may at any time accelerate the exercisability of
all or any portion of any Stock Option. An optionee shall have the rights
of a shareholder only as to shares acquired upon the exercise of a Stock
Option and not as to unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole
or in part, by delivering written notice of exercise to the Company,
specifying the number of shares to be purchased. Payment of the purchase
price may be made by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) If permitted by the Committee, in its discretion, in the
form of shares of Stock that are not then subject to restrictions
under any Company plan. Such surrendered shares shall be valued
at Fair Market Value on the exercise date; or
(C) If permitted by the Committee, in its discretion, by the
optionee delivering to the Company a properly executed exercise
notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and
acceptable to the Company to pay the purchase price; provided
that in the event the optionee chooses to pay the purchase price
as so provided, the optionee and the broker shall comply with
such procedures and enter into such agreements of indemnity and
other agreements as the Committee shall prescribe as a condition
of such payment procedure. The Company need not act upon such
exercise notice until the Company receives full payment of the
exercise price; or
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(D) If permitted by the Committee, in its discretion, by
reducing the number of Option shares otherwise issuable to the
optionee upon exercise of the Option by a number of shares having
a Fair Market Value equal to such aggregate exercise price (it
being understood that this alternative will be available only if
the optionee holds sufficient "mature" shares as defined in
Financial Accounting Standards Board's Emerging Issues Task Force
Issue 84-18);
(E) By any other means (including, without limitation, by
delivery of a promissory note of the optionee payable on such
terms as are specified by the Committee, in its discretion) which
the Committee determines are consistent with the purpose of the
Plan and with applicable laws and regulations.
The delivery of certificates representing shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt from
the Optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price for
such shares and the fulfillment of any other requirements contained in the Stock
Option or applicable provisions of laws.
(v) Non-transferability of Options. Except as otherwise may be
provided in this Section 5(a)(v) or in an option agreement governing an
Option granted under the Plan, no Stock Option shall be transferable other
than by will or by the laws of descent and distribution, and all Stock
Options shall be exercisable, during the optionee's lifetime, only by the
optionee. The Committee may, however, in its sole discretion, permit
transferability or assignment of a Non-Qualified Stock Option if such
transfer or assignment is, in its sole determination, for valid estate
planning purposes and such transfer or assignment is permitted under the
Code and Rule 16b-3 under the Exchange Act. For purposes of this Section
5(a)(v), a transfer for valid estate planning purposes includes, but is
not limited to: (a) a transfer to a revocable inter-vivos trust as to
which the participant is both the settlor and trustee, (b) a transfer for
no consideration to: (i) any member of the participant's Immediate Family,
(ii) any trust solely for the benefit of members of the participant's
Immediate Family, and (iii) any partnership whose only partners are
members of the participant's Immediate Family, or (iv) any limited
liability corporation or corporate entity whose only members or equity
owners are members of the Participant's Immediate Family. For purposes of
this Section 5(a)(v), "Immediate Family" includes, but is not necessarily
limited to, a Participant's parents, spouse, children, grandchildren and
great-grandchildren. Nothing contained in this Section 5(a)(v) shall be
construed to require the Committee to give its approval to any transfer or
assignment of any Non-Qualified Stock Option or portion thereof, and
approval to transfer or assign any Non-Qualified Stock Option or portion
thereof does not mean that such approval will be given with respect to any
other Non-Qualified Stock Option or portion thereof. The transferee or
assignee of any Non-Qualified Stock Option shall be subject to all of the
terms and conditions applicable to such Non-Qualified Stock Option
immediately prior to the transfer or assignment and shall be subject to
any conditions proscribed by the Committee with respect to such
Non-Qualified Stock Option.
(vi) Annual Limit on Incentive Stock Options. To the extent
required for "incentive stock option" treatment under Section 422 of the
Code, the aggregate Fair Market Value (determined as of the time of grant)
of the Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its Subsidiaries become
exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000. Notwithstanding the foregoing, to the extent
that the aggregate Fair Market Value (determined as of the time of grant)
of the Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its Subsidiaries become
exercisable for the first time by an optionee during any calendar year
exceeds $100,000 said excess shall be treated as a Non-Qualified Stock
Option.
(vii) Form of Settlement. Shares of Stock issued upon exercise of
a Stock Option shall be free of all restrictions under the Plan, except as
otherwise provided in this Plan.
(b) Reload Options. At the discretion of the Committee, Options granted
under Section 5(a) may include a so-called "reload" feature pursuant to which an
optionee exercising an option (the "Original Option") by
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the delivery of a number of shares of Stock in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Stock equal to the
number delivered to exercise the Original Option; provided, however, that the
grant of such additional Option shall be subject to the availability of shares
of Stock under the Plan at the time of the exercise of the Original Option.
SECTION 6. Conditioned Stock Awards.
(a) Nature of Conditioned Stock Award. The Committee in its discretion may
grant Conditioned Stock Awards to any Eligible Person. A Conditioned Stock Award
is an Award entitling the recipient to acquire, at no cost or for a purchase
price determined by the Committee, shares of Stock subject to such restrictions
and conditions as the Committee may determine at the time of grant ("Conditioned
Stock"). Conditions may be based on continuing employment and/or achievement of
Performance Goals. In addition, a Conditioned Stock Award may be granted to an
employee by the Committee in lieu of a cash bonus due to such employee pursuant
to any other plan of the Company.
(b) Acceptance of Award. A participant who is granted a Conditioned Stock
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within sixty (60) days (or such shorter date as
the Committee may specify) following the award date by making payment to the
Company, if required, by certified or bank check or other instrument or form of
payment acceptable to the Committee in an amount equal to the specified purchase
price, if any, of the shares covered by the Award and by executing and
delivering to the Company a written instrument that sets forth the terms and
conditions of the Conditioned Stock in such form as the Committee shall
determine.
(c) Rights as a Shareholder. Upon complying with Section 6(b) above, a
participant shall have all the rights of a shareholder with respect to the
Conditioned Stock, including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained in
the written instrument evidencing the Conditioned Award. Unless the Committee
shall otherwise determine, certificates evidencing shares of Conditioned Stock
shall remain in the possession of the Company until such shares are vested as
provided in Section 6(e) below.
(d) Restrictions. Shares of Conditioned Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment by (or
termination of service with) the Company and its Subsidiaries for any reason
(including death, Disability, Normal Retirement and for Cause), the Company
shall have the right, at the discretion of the Committee, to repurchase shares
of Conditioned Stock with respect to which conditions have not lapsed at their
purchase price, or to require forfeiture of such shares to the Company if
acquired at no cost, from the participant or the participant's legal
representative. The Company must exercise such right of repurchase or forfeiture
within ninety (90) days following such termination of employment or service
(unless otherwise specified, in the written instrument evidencing the
Conditioned Award).
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(e) Vesting of Conditioned Stock. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Conditioned Stock and the Company's right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such
preestablished performance goals, objectives and other conditions, the shares on
which all restrictions have lapsed shall no longer be Conditioned Stock and
shall be deemed "vested." The Committee at any time may accelerate such date or
dates and otherwise waive or, subject to Section 15, amend any conditions of the
Award.
(f) Waiver, Deferral and Reinvestment of Dividends. The written instrument
evidencing the Conditioned Stock Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Stock.
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SECTION 7. Unrestricted Stock Awards.
(a) Grant or Sale of Unrestricted Stock. The Committee in its discretion
may grant or sell to any Eligible Person shares of Stock free of any
restrictions under the Plan ("Unrestricted Stock") at a purchase price
determined by the Committee. Shares of Unrestricted Stock may be granted or sold
as described in the preceding sentence in respect of past services or other
valid consideration.
(b) Restrictions on Transfers. The right to receive unrestricted Stock may
not be sold, assigned, transferred, pledged or otherwise encumbered, other than
by will or the laws of descent and distribution.
SECTION 8. Performance Share Awards.
(a) Nature of Performance Shares. A Performance Share Award is an award
entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. Performance Share Awards may be granted under the Plan to any Eligible
Person including those who qualify for awards under other performance plans of
the Company. The Committee in its discretion shall determine whether and to whom
Performance Share Awards shall be made, the Performance Goals applicable under
each such Award, the periods during which performance is to be measured, and all
other limitations and conditions applicable to the awarded Performance Shares;
provided, however, that the Committee may rely on the Performance Goals and
other standards applicable to other performance-based plans of the Company in
setting the standards for Performance Share Awards under the Plan.
(b) Restrictions on Transfer. Performance Share Awards and all rights with
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
(c) Rights as a Shareholder. A participant receiving a Performance Share
Award shall have the rights of a shareholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the written instrument evidencing the Performance Share Award (or
in a performance plan adopted by the Committee).
(d) Termination. Except as may otherwise be provided by the Committee at
any time prior to termination of employment, a participant's rights in all
Performance Share Awards shall automatically terminate upon the participant's
termination of employment by the Company and its Subsidiaries for any reason
(including death, Disability, Normal Retirement and for Cause).
(e) Acceleration, Waiver, Etc. At any time prior to the participant's
termination of employment, the Committee may in its sole discretion accelerate,
waive or, subject to Section 15, amend any or all of the goals, restrictions or
conditions imposed under any Performance Share Award.
SECTION 9. Stock Appreciation Rights
(a) The Committee in its discretion may grant Stock Appreciation Rights to
any Eligible Person (i) alone, (ii) simultaneously with the grant of a Stock
Option and in conjunction therewith or in the alternative thereto or (iii)
subsequent to the grant of a Non-Qualified Option and in conjunction therewith
or in the alternative thereto.
(b) The exercise price per share of a Stock Appreciation Right granted
alone shall be determined by the Committee. A Stock Appreciation Right granted
simultaneously with or subsequent to the grant of a Stock Option and in
conjunction therewith or in the alternative thereto shall have the same exercise
price as the related Stock Option, shall be transferable only upon the same
terms and conditions as the related Stock Option, and shall be exercisable only
to the same extent as the related Stock Option; provided, however, that a Stock
Appreciation Right, by its terms, shall be exercisable only when the Fair Market
Value per share of Stock exceeds the exercise price per share thereof.
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(c) Upon any exercise of a Stock Appreciation Right which has been issued
in conjunction with a Stock Option, the number of shares of Stock for which any
related Stock Option shall be exercisable shall be reduced by the number of
shares for which the Stock Appreciation Right shall have been exercised. The
number of shares of Stock with respect to which a Stock Appreciation Right shall
be exercisable shall be reduced upon any exercise of any related Stock Option by
the number of shares for which such Option shall have been exercised. Any Stock
Appreciation Right shall be exercisable upon such additional terms and
conditions as may from time to time be prescribed by the Committee.
(d) A Stock Appreciation Right shall entitle the participant upon exercise
thereof to receive from the Company, upon written request to the Company at its
principal offices (the "Request"), a number of shares of Stock (with or without
restrictions as to substantial risk of forfeiture and transferability, as
determined by the Committee in its sole discretion), an amount of cash, or any
combination of Stock and cash, as specified in the Request (but subject to the
approval of the Committee in its sole discretion, at any time up to and
including the time of payment, as to the making of any cash payment), having an
aggregate Fair Market Value equal to the product of (i) the excess of Fair
Market Value, on the date of such Request, over the exercise price per share of
Stock specified in such Stock Appreciation Right or its related Option,
multiplied by (ii) the number of shares of Stock for which such Stock
Appreciation Right shall be exercised. Notwithstanding the foregoing, the
Committee may specify at the time of grant of any Stock Appreciation Right that
such Stock Appreciation Right may be exercisable solely for cash and not for
Stock.
(e) Within thirty (30) days of the receipt by the Company of a Request to
receive cash in full or partial settlement of a Stock Appreciation Right or to
exercise such Stock Appreciation Right for cash, the Committee shall, in its
sole discretion, either consent to or disapprove, in whole or in part, such
Request. A Request to receive cash in full or partial settlement of a Stock
Appreciation Right or to exercise a Stock Appreciation Right for cash may
provide that, in the event the Committee shall disapprove such Request, such
Request shall be deemed to be an exercise of such Stock Appreciation Right for
Stock.
(f) If the Committee disapproves in whole or in part any election by a
participant to receive cash in full or partial settlement of a Stock
Appreciation Right or to exercise such Stock Appreciation Right for cash, such
disapproval shall not affect such participant's right to exercise such Stock
Appreciation Right at a later date, to the extent that such Stock Appreciation
Right shall be otherwise exercisable, or to elect the form of payment at a later
date, provided that an election to receive cash upon such later exercise shall
be subject to the approval of the Committee. Additionally, such disapproval
shall not affect such participant's right to exercise any related Option.
(g) A Stock Appreciation Right shall be deemed exercised on the last day
of its term, if not otherwise exercised by the holder thereof, provided that the
fair market value of the Stock subject to the Stock Appreciation Right exceeds
the exercise price thereof on such date.
(h) No Stock Appreciation Right shall be transferable other than by will
or by the laws of descent and distribution and all Stock Appreciation Rights
shall be exercisable, during the holder's lifetime, only by the holder.
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SECTION 10. Change of Control Payment Rights.
Contemporaneously with the grant of any Option, the Committee may grant a
Change of Control Payment Right with respect to all or some of the shares of
common stock covered by such Option. Change of Control Payment Rights granted
under this Plan are subject to the following terms and conditions:
(a) Terms of Rights. A Change of Control Payment Right may be exercised
only in the event of a Change in Control (which term shall be defined by the
Committee in the applicable agreement granting the Change in Control Payment
Right), provided, however, in no event shall a Change of Control Payment Right
be exercisable in whole or in part before the expiration of six (6) months from
the date of grant of the Change of Control Payment Right. The Change of Control
Payment Right may be exercised only when (i) the underlying Option is eligible
to be exercised, and (ii) the Fair Market Value of the underlying shares of
Stock on the date of exercise is greater than the exercise price of the
underlying Option. Upon exercise of a Change of Control Payment Right, the
underlying Option shall cease to be exercisable and shall be terminated. Upon
exercise or termination of an Option, any related Change of Control Payment
Right shall terminate. The Change of Control Payment Right is transferable only
when the underlying Option is transferable and under the same terms and
conditions.
(b) Payment. Upon exercise of a Change of Control Payment Right, the
holder shall promptly receive from the Company or its Subsidiaries an amount of
cash equal to the difference between the exercise price of the underlying Option
and the Fair Market Value of the shares of Stock subject to such Option on the
date the Change of Control Payment Right is exercised, multiplied by the number
of shares of Stock with respect to which such Change of Control Payment Right is
being exercised.
SECTION 11. Deferred Payments.
Notwithstanding any other provision of this Plan, any participant may
elect, with the concurrence of the Committee and consistent with any rules and
regulations established by the Committee, to defer the delivery of the proceeds
of the exercise of any Non-Qualified Stock Option, Conditioned Stock Awards,
Unrestricted Stock Awards, Performance Share Awards and Stock Appreciation
Rights.
(a) Election Timing. The election to defer the delivery of the proceeds
from any eligible Non-Qualified Stock Option or Stock Appreciation Right must be
made at least six (6) months prior to the date such Award is exercised or at
such other time as the Committee may specify. The election to defer the delivery
of any Conditioned Stock Award, Unrestricted Stock Award or Performance Share
Award must be made no later than the last day of the calendar year preceding the
calendar year in which the participant would otherwise have an unrestricted
right to receive such Conditioned Stock Award, Unrestricted Stock Award or
Performance Share Award. Deferrals of eligible Awards shall only be allowed for
exercises of Options and lapses of restrictions on Conditioned Stock Awards,
Unrestricted Stock Awards or Performance Share Award that occur while the
participant is in active service with the Company or its Subsidiaries. Any
election to defer the proceeds from an eligible Award shall be irrevocable as
long as the participant remains an employee or director of the Company or its
Subsidiaries.
(b) Stock Option Deferral. The deferral of the proceeds of Non-Qualified
Stock Options may be elected by a participant subject to the rules and
regulations established by the Committee. The proceeds from such an exercise
shall be credited to a deferred stock option account established for the
participant. The proceeds shall be credited to the deferred stock option account
as a number of deferred shares or share units equivalent in value to those
proceeds. Deferred share units shall be valued at the Fair Market Value on the
date of exercise. Subsequent to exercise, the deferred shares or share units
shall be valued at the Fair Market Value of Common Stock; provided, however,
that at the discretion of the Committee, the participant may elect to have the
value of his deferred stock option account valued on some other basis of
measurement approved by the Committee. Unless the participant's deferred stock
option account is valued using a basis of measurement other than Common Stock,
deferred share units shall accrue dividends at the rate paid upon the Common
Stock credited in the form of additional deferred share units. Deferred shares
or share units shall be distributed in shares of Common Stock
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or cash, at the discretion of the Committee, upon the termination of service of
the Participant or at such other date, as may be approved by the Committee, over
a period of no more than ten (10) years.
(c) Stock Appreciation Right Deferral. The deferral of the proceeds of
Stock Appreciation Rights may be made by a Participant subject to the rules and
regulations established by the Committee. Upon exercise, the Committee will
credit the Participant's deferred stock option account with a number of deferred
shares or share units equivalent in value to the difference between the Fair
Market Value of a share of Common Stock on the exercise date and the Exercise
Price of the Stock Appreciation Right multiplied by the number of shares
exercised. Deferred shares or share units shall be valued at the Fair Market
Value on the date of exercise. Subsequent to exercise, the deferred shares or
share units shall be valued at the Fair Market Value of Common Stock; provided,
however, that at the discretion of the Committee, the Participant may elect to
have the value of his deferred stock option account valued on some other basis
of measurement approved by the Committee. Unless the Participant's deferred
stock option account is valued using a basis of measurement other than Common
Stock, deferred shares or share units shall accrue dividends at the rate paid
upon the Common Stock credited in the form of additional deferred shares or
share units. Deferred shares or share units shall be distributed in shares of
Common Stock or cash, at the discretion of the Committee, upon the Participant's
termination of service or at such other date, as may be approved by the
Committee, over a period of no more than ten (10) years.
(d) Conditioned Stock Awards, Unrestricted Stock Awards and Performance
Share Awards Deferrals. The deferral of Conditioned Stock Awards, Unrestricted
Stock Awards or Performance Share Awards may be elected by a Participant subject
to the rules and regulations established by the Committee. Upon the lapsing of
restrictions on such an Award, the Committee shall credit to a deferred stock
award account established for the Participant a number of deferred shares or
share units equivalent in value to the number of deferred Conditioned Stock
Awards, Unrestricted Stock Awards or Performance Share Awards multiplied by the
Fair Market Value of Common Stock. Deferred shares or share units shall be
valued at the Fair Market Value on the date all restrictions on the Conditioned
Stock Awards, Unrestricted Stock Awards or Performance Share Awards lapse or are
waived. Subsequent to the lapsing of all restrictions, the deferred shares or
share units shall be valued at the Fair Market Value of Common Stock; provided,
however, that at the discretion of the Committee, the Participant may elect to
have the value of his deferred stock award account valued on some other basis of
measurement approved by the Committee. Unless the Participant's deferred stock
award account is valued using a basis of measurement other than Common Stock,
deferred shares or share units shall accrue dividends at the rate paid upon the
Common Stock credited in the form of additional deferred share units. Deferred
share units shall be distributed in shares of Common Stock or cash, at the
discretion of the Committee, upon the termination of service of the Participant
or at such other date, as may be approved by the Committee, over a period of no
more than ten (10) years.
(e) Accelerated Distributions. The Committee may, at its sole discretion,
allow for the early payment of a Participant's deferred stock option account
and/or deferred stock award account in the event of an "unforeseeable emergency"
or in the event of the death or Disability of the Participant. An "unforeseeable
emergency" means an unanticipated emergency caused by an event beyond the
control of the Participant that would result in severe financial hardship if the
distribution were not permitted. Such distributions shall be limited to the
amount necessary to sufficiently address the financial hardship. Any
distributions under this provision, shall be consistent with the Code and the
regulations promulgated thereunder. Additionally, the Committee may use its
discretion to cause stock option deferral accounts and/or deferred stock award
accounts to be distributed when continuing the program is no longer in the best
interest of the Company or any Subsidiary.
(f) Assignability. No rights to deferred stock option accounts or deferred
stock award accounts may be assigned or subject to any encumbrance, pledge or
charge of any nature except that a Participant may designate a beneficiary
pursuant to any rules established by the Committee.
(g) Unfunded Status. No Participant or other person shall have any
interest in any fund or in any specific asset of the Company or its Subsidiaries
by reason of any amount credited hereunder. Any amounts payable hereunder shall
be paid from the general assets of the Company or its Subsidiaries and no
participant or other
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person shall have any rights to such assets beyond the rights afforded general
creditors of the Company and its Subsidiaries. However, the Company or any
Subsidiary shall have the right to establish a reserve, trust or make any
investment for the purpose of satisfying the obligations created under this
Section 11 of the Plan; provided, however, that no participant or other person
shall have any interest in such reserve, trust or investment.
SECTION 12. Termination of Stock Options and Stock Appreciation Rights.
Unless otherwise provided in the applicable agreement pursuant to which
the Award was granted,
(a) Incentive Stock Options:
(i) Termination by Death. If any participant's employment or
directorship with the Company and its Subsidiaries terminates by reason of
death, any Stock Option owned by such participant may thereafter be
exercised to the extent exercisable at the date of death, by the legal
representative or legatee of the participant, for a period of one year
from the date of death (or such longer period as the Committee shall
specify at any time, it being understood that any Incentive Stock Options
that are so extended shall thereafter become Non-Qualified Stock Options
to the extent provided by applicable law), or until the expiration of the
stated term of the Incentive Stock Option, if earlier.
(ii) Termination by Reason of Disability. Any Stock Option held
by a participant whose employment or directorship with the Company and its
Subsidiaries has terminated by reason of Disability may thereafter be
exercised, to the extent it was exercisable at the time of such
termination, for a period of six months from the date of such termination
of employment or directorship (or such longer period as the Committee
shall specify at any time, it being understood that any Incentive Stock
Options that are so extended shall thereafter become Non-Qualified Stock
Options to the extent provided by applicable law), or until the expiration
of the stated term of the Stock Option, if earlier. The Committee shall
have sole authority and discretion to determine whether a participant's
employment or directorship has been terminated by reason of Disability.
Except as otherwise provided by the Committee at the time of grant, the
death of a participant during a period provided in this Section 12(a)(ii)
for the exercise of a Stock Option shall extend such period for one year
from the date of death, subject to termination on the expiration of the
stated term of the Stock Option, if earlier.
(iii) Termination by Reason of Normal Retirement. Any Stock
Option held by a participant whose employment or directorship with the
Company and its Subsidiaries has terminated by reason of Normal Retirement
may thereafter be exercised, to the extent it was exercisable at the time
of such termination, for a period of three months from the date of such
termination of employment or directorship (or such longer period as the
Committee shall specify at any time, it being understood that any
Incentive Stock Options that are so extended shall thereafter become
Non-Qualified Stock Options to the extent provided by applicable law) or
until the expiration of the stated term of the Option, if earlier. The
Committee shall have sole authority and discretion to determine whether a
participant's employment or directorship has been terminated by reason of
Normal Retirement. Except as otherwise provided by the Committee at the
time of grant, the death of a participant during a period provided in this
Section 12(a)(iii) for the exercise of an Stock Option shall extend such
period for one year from the date of death, subject to termination on the
expiration of the stated term of the Stock Option, if earlier.
(iv) Voluntary Termination. Any Stock Option held by a
participant whose employment or directorship by the Company and its
Subsidiaries has terminated by reason of voluntary resignation by the
optionee may thereafter be exercised, to the extent it was exercisable at
the time of such termination, for a period of thirty (30) days from the
last day of the optionee's employment or, in the case of a director, for a
period of thirty (30) days from the effective date of the optionee's
resignation from the Board of Directors (or in either case for such longer
period as the Committee shall specify at any time, it being understood
that any Incentive Stock Options that are so extended shall thereafter
become Non-Qualified Stock Options to
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the extent provided by applicable law) or until the expiration of the
stated term of the Stock Option, if earlier.
(v) Termination for Cause. If any participant's employment or
directorship with the Company and its Subsidiaries has been terminated by
the Company or any of its Subsidiaries for cause, any Stock Option held by
such participant shall immediately terminate at the end of the last day of
the optionee's employment or directorship and shall thereafter be of no
further force and effect; provided, however, that the Committee may, in
its sole discretion, provide that such Stock Option can be exercised for
such longer period as the Committee shall specify at any time (it being
understood that any Incentive Stock Options so extended shall thereafter
become Non-Qualified Stock Options to the extent provided by applicable
law) or until the expiration of the stated term of the Stock Option, if
earlier. The Committee shall have sole authority and discretion to
determine whether a participant's employment has been terminated for
cause.
(vi) Termination Without Cause. Unless otherwise determined by
the Committee, if a participant's employment or directorship with the
Company and its Subsidiaries is terminated by the Company or any of its
Subsidiaries without cause, any Stock Option held by such participant may
thereafter be exercised, to the extent it was exercisable on the date of
termination of employment or directorship, for thirty (30) days from the
last day of the optionee's employment or directorship (or such longer
period as the Committee shall specify at any time, it being understood
that any Incentive Stock Options that are so extended shall thereafter
become Non-Qualified Stock Options to the extent provided by applicable
law).
(b) Other Awards. All Awards other than Incentive Stock Option granted
under the Plan shall contain such terms and conditions with respect to its
termination as the Committee, in its discretion, may from time to time
determine.
SECTION 13. Tax Withholding.
(a) Payment by Participant. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any Federal, state or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(b) Payment in Shares. A Participant may elect, with the consent of the
Committee, in its discretion, to have such tax withholding obligation satisfied,
in whole or in part, by authorizing the Company to withhold from shares of Stock
to be issued pursuant to an Award a number of shares with an aggregate Fair
Market Value (as of the date the withholding is effected) that would satisfy the
withholding amount due with respect to such Award.
SECTION 14. Transfer, Leave of Absence, Etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another;
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
SECTION 15. Amendments and Termination.
The Board may at any time amend or discontinue the Plan and the Committee
may at any time amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price
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<PAGE>
or with no exercise or purchase price, but such price, if any, must satisfy the
requirements which would apply to the substitute or amended Award if it were
then initially granted under this Plan) for the purpose of responding to
comments of banking regulators satisfying changes in law or for any other lawful
purpose, but no such action shall adversely affect rights under any outstanding
Award without the holder's consent. However, no such amendment, unless approved
by the stockholders of the Company, shall be effective if it would cause the
Plan to fail to satisfy the "incentive stock option" requirements of the Code,
or cause transactions under the Plan to fail to satisfy the requirements of Rule
16b-3 or any successor rule under the Act as in effect on the date of such
amendment.
SECTION 16. Status of Plan.
With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provision of the foregoing sentence.
SECTION 17. Compliance with Conversion Regulations.
(a) No award shall be made under this Plan that would be prohibited by 209
CMR ss.33.28(1)(u).
(b) Notwithstanding any other provision contained in this Plan no Award
granted before the date which is one (1) year from the date of the conversion of
the Company from mutual to stock form shall become vested or exercisable before
the date which is one year after the approval of this Plan by the stockholders
of the Company or at a rate in excess of 20% per year of the total number of
Stock Awards or Options (whichever may be the case) granted to such Participant,
provided, that the Committee may provide that such Awards shall become fully
vested or immediately exercisable in the event of a Participant's termination of
employment or service due to death or Disability or with the permission of the
Massachusetts Commissioner of Bank.
SECTION 18. General Provisions.
(a) No Distribution; Compliance with Legal Requirements. The Committee may
require each person acquiring shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof. No shares of Stock shall be issued
pursuant to an Award until all applicable securities laws and other legal and
stock exchange requirements have been satisfied. The Committee may require the
placing of such stop orders and restrictive legends on certificates for Stock
and Awards as it deems appropriate.
(b) Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to stockholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan or any
Award under the Plan does not confer upon any employee any right to continued
employment with the Company or any Subsidiary.
(d) Delegation by Committee. The Committee may delegate to the Chief
Financial Officer or other officer of the Company the authority to make
decisions relating to the exercise of Options or other Awards, including without
limitation (i) the authority to permit the holder of an Award to deliver Stock
in payment of the exercise price, and (ii) the authority to permit a holder of
an Award to satisfy a tax withholding obligation by authorizing
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<PAGE>
the Company to withhold shares from the shares of Stock to be issued pursuant to
an Award. However, only the Committee or a portion of the Committee may certify
the attainment of a Performance Goal.
SECTION 19. Effective Date of Plan.
The Effective Date of the Plan shall be the date of its adoption by the
Board of Directors provided that the stockholders of the Company shall have
approved the Plan within twelve months following the adoption of the Plan.
SECTION 20. Governing Law.
This Plan shall be governed by, and construed and enforced in accordance
with, the substantive laws of The Commonwealth of Massachusetts without regard
to its principles of conflicts of laws.
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<PAGE>
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOCABLE PROXY
SEACOAST FINANCIAL SERVICES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders
May 20, 1999
The undersigned hereby appoints Kevin G. Champagne and Arthur W. Short
and each or either of them, as proxies, with full power of substitution to each
and to each substitute appointed pursuant to such power, of the undersigned to
vote all shares of stock of Seacoast Financial Services Corporation (the "Bank")
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders (the "Annual Meeting") of the Bank to be held on Thursday, May 20,
1999, and at any and all adjournments thereof, with all powers the undersigned
would possess if personally present. The proxies are authorized to vote as
indicated hereon upon the matters set forth herein and in their discretion upon
all other matters which may properly come before said Meeting. The undersigned
hereby acknowledges receipt of a copy of the accompanying Notice and Proxy
Statement for the Annual Meeting of Stockholders and hereby revokes any proxy or
proxies, if any, heretofore given by him to others for said Meeting.
1. Election of directors. With- For All
For hold Except
Nominees: [ ] [ ] [ ]
Manuel G. Camacho, Kevin G. Champagne, Mary F. Hebditch, Carl Ribeiro
and Gerald H. Silvia
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark "For all Except" and write that nominee's name in the space provided
below.
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2. Approval of the Seacoast Financial Services Corporation 1999 Stock
Incentive Plan.
For Against Abstain
[ ] [ ] [ ]
If this proxy is properly executed and returned, the shares represented
hereby will be voted. If a choice is specified above by the stockholder with
respect to any matter to be acted upon, the shares will be voted upon that
matter in accordance with the specification so made. IN THE
<PAGE>
ABSENCE OF ANY SPECIFICATION, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 and 2.
Please sign exactly as your name appears on this card. Joint owners should
sign. When signing as an attorney, administrator, trustee, guardian or custodian
for a minor, please give full title as such. If a corporation, please sign full
corporate name and indicate the signer's office. If a partner, sign in
partnership name.
Date
------------------------
Please be sure to sign and date
this Proxy in the box below.
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Stockholder sign above Co-holder (if any) sign above
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Detach above card, sign, date and mail in postage paid envelope provided.
SEACOAST FINANCIAL SERVICES CORPORATION
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
