September 16, 1999
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of Service
Bancorp, Inc. (the "Company"). The Annual Meeting will be held at the Courtyard
by Marriott Hotel, 10 Fortune Boulevard, Milford, Massachusetts on October 26,
1999, at 3:00 p.m., local time.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. During the Annual Meeting we will also report on the
operations of the Company. Directors and officers of the Company will be present
to respond to any questions that stockholders may have. Also enclosed for your
review is our Annual Report to Stockholders, which contains detailed information
concerning the activities and operating performance of the Company.
The business to be conducted at the Annual Meeting consists of the election of
four directors, the approval of each of the Company's 1999 Stock Option Plan and
1999 Recognition and Retention Plan, and the ratification of Wolf & Company,
P.C. as the Company's auditors for the fiscal year ending June 30, 2000. For the
reasons set forth in the Proxy Statement, the Board of Directors of the Company
has determined that the matters to be considered at the Annual Meeting are in
the best interest of the Company and its stockholders, and the Board of
Directors unanimously recommends a vote "FOR" each matter to be considered.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible, even if you currently plan to attend
the Annual Meeting. This will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the meeting. Your
vote is important, regardless of the
number of shares that you own.
Sincerely,
/s/Eugene G. Stone
Eugene G. Stone
President and Chief Executive Officer
<PAGE>
Service Bancorp, Inc.
81 Main Street
Medway, Massachusetts 02053
(508) 533-4343
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On October 26, 1999
Notice is hereby given that the Annual Meeting of Service Bancorp, Inc.
(the "Company") will be held at the Courtyard by Marriott Hotel, 10 Fortune
Boulevard, Milford, Massachusetts, on October 26, 1999 at 3:00 p.m., local time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. election of four Directors to the Board of Directors;
2. the approval of the Company's 1999 Stock Option Plan;
3. the approval of the Company's 1999 Recognition and Retention
Plan;
4. the ratification of the appointment of Wolf & Company, P.C. as
auditors for the Company for the fiscal year ending June 30,
2000; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual Meeting on
the date specified above, or on the date or dates to which the Annual Meeting
may be adjourned. Stockholders of record at the close of business on August 31,
1999, are the stockholders entitled to vote at the Annual Meeting, and any
adjournments thereof.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE
HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL
MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN
ORDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ Eugene G. Stone
Eugene G. Stone
President and Chief Executive Officer
September 16, 1999
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
Service Bancorp, Inc.
81 Main Street
Medway, Massachusetts 02053
(508) 533-4343
ANNUAL MEETING OF STOCKHOLDERS
October 26, 1999
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Service Bancorp, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting"), which will be held at the Courtyard by Marriott Hotel, 10
Fortune Boulevard, Milford, Massachusetts on October 26, 1999, at 3:00 p.m.,
local time, and all adjournments of the Annual Meeting. The accompanying Notice
of Annual Meeting of Stockholders and this Proxy Statement are first being
mailed to stockholders on or about September 21, 1999.
- --------------------------------------------------------------------------------
REVOCATION OF PROXIES
- --------------------------------------------------------------------------------
Stockholders who execute proxies in the form solicited hereby retain
the right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Annual Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon. WHERE
NO INSTRUCTIONS ARE INDICATED, VALIDLY EXECUTED PROXIES WILL BE VOTED "FOR" THE
PROPOSALS SET FORTH IN THIS PROXY STATEMENT FOR CONSIDERATION AT THE ANNUAL
MEETING.
At the Annual Meeting, stockholders are being asked to consider and
vote upon the election of four directors, the approval of each of the Company's
1999 Stock Option Plan and 1999 Recognition and Retention Plan, and the
ratification of Wolf & Company, P.C. as the Company's auditors for the year
ending June 30, 2000. The Board of Directors knows of no additional matters that
will be presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares in accordance with their best judgment on such other business, if
any, that may properly come before the Annual Meeting or any adjournments
thereof.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Company, at the address shown above. The presence at the Annual
Meeting of any stockholder who had returned a proxy shall not revoke such proxy
unless the stockholder delivers his or her ballot in person at the Annual
Meeting or delivers a written revocation to the Secretary of the Company prior
to the voting of such proxy.
- --------------------------------------------------------------------------------
VOTE REQUIRED
- --------------------------------------------------------------------------------
Holders of record of the Company's common stock, par value $0.01 per
share (the "Common Stock") as of the close of business on August 31, 1999 (the
"Record Date") are entitled to one vote for each share then held. As of the
Record Date, the Company had 1,690,330 shares of Common Stock issued and
outstanding. The presence in person or by proxy of a majority of the outstanding
shares of Common Stock entitled to vote is necessary to constitute a quorum at
the Annual Meeting. Abstentions and broker non-votes are counted for purposes of
determining a quorum.
Directors are elected by a plurality of votes cast, without regard to
either broker non-votes, or proxies as to which the authority to vote for the
nominees being proposed is withheld. Approval of each of the 1999 Stock Option
Plan and the 1999 Recognition and Retention Plan requires the affirmative vote
of a majority of votes cast. The affirmative vote of a majority of the votes
cast is required for approval of the proposal to ratify Wolf & Company, P.C.
<PAGE>
as the Company's auditors for the fiscal year ending June 30, 2000. Abstentions
and broker non-votes will not affect the vote on Proposals II, III and IV.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- --------------------------------------------------------------------------------
Persons and groups who beneficially own in excess of five percent of
the Common Stock are required to file certain reports with the Securities and
Exchange Commission (the "SEC") regarding such ownership pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"). The following table sets
forth, as of August 31, 1999, the shares of Common Stock known by management of
the Company to be beneficially owned by executive officers and Directors as a
group and by each person who was the beneficial owner of more than five percent
of the Company's outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owners(1) Ownership(2) Outstanding
-------------------- ---------------- ------------------
<S> <C> <C>
Service Bancorp, MHC 907,694 53.7%
81 Main Street
Summit, MA 02053
Service Bancorp, MHC 985,200 58.3%
and all Directors and Executive Officers
as a Group (15 persons)
- --------------------------------
</TABLE>
* Less than 1%.
(1) The business address of all named persons is 81 Main Street, Summit,
Massachusetts 02053. Certain of the Company's executive officers and
directors are also executive officers and trustees of Service Bancorp, MHC.
(2) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner for purposes of this table, of
any shares of Common Stock if he has shared voting or investment power with
respect to such security, or has a right to acquire beneficial ownership at
any time within 60 days from the date as of which beneficial ownership is
being determined. As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the power to dispose
or direct the disposition of shares, and includes all shares held directly
as well as by spouses and minor children, in trust and other indirect
ownership, over which shares the named individuals effectively exercise
sole or shared voting or investment power.
- --------------------------------------------------------------------------------
PROPOSAL I--ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Company's Board of Directors is currently composed of 14 members.
The Company's bylaws provide that approximately one-third of the Directors are
to be elected annually. Directors of the Company are generally elected to serve
for three-year periods and until their respective successors shall have been
elected and shall qualify. Four Directors will be elected at the Annual Meeting
to serve for three-year periods and until their respective successors shall have
been elected and shall qualify. The Board of Directors has nominated to serve as
Directors Eugene G. Stone, Richard Giusti, Thomas R. Howie and James W. Murphy.
2
<PAGE>
The table below sets forth certain information, as of August 31, 1999,
regarding members of the Company's Board of Directors, including the terms of
office of Board members. It is intended that the proxies solicited on behalf of
the Board of Directors (other than proxies in which the vote is withheld as to
the nominee) will be voted at the Meeting for the election of the nominees
identified below. If a nominee is unable to serve, the shares represented by all
such proxies will be voted for the election of such substitute as the Board of
Directors may recommend. At this time, the Board of Directors knows of no reason
why any nominee might be unable to serve, if elected. Except as indicated
herein, there are no arrangements or understandings between any nominee and any
other person pursuant to which such nominee was selected.
<TABLE>
<CAPTION>
Shares
Position(s) Held With Director Current Beneficially Percent of
Name the Company Age Since(1) Term Expires Owned Class
------ --------------------- ----- ---------- ------------ ----------- ---------
NOMINEES
<S> <C> <C> <C> <C> <C> <C>
Eugene G. Stone President, Chief Executive 64 1988 2000 6,540 *
Officer and Director
Richard Giusti Director 55 1991 1999 5,000 *
Thomas R. Howie Director 56 1988 1999 1,200 *
James W. Murphy Director and Secretary 64 1979 1999 5,000 *
OTHER BOARD MEMBERS
Kelly A. Verdolino Director 39 1995 2000 10,000 *
Kenneth C.A. Isaacs Director 46 1997 2000 10,000 *
Paul V. Kenney Director 36 1992 2000 500 *
Eugene R. Liscombe Director 53 1991 2000 15,000 *
Robert A. Matson Director 40 1997 2000 575 *
William L. Casey Chairman of the Board 51 1995 2001 500 *
John G. Dugan Director 48 1990 2001 2,500 *
John Hasenjaeger Director 56 1995 2001 2,500 *
Robert J. Heavey Director 69 1981 2001 5,000 *
Lawrence E. Novick Director 59 1992 2001 10,000 *
EXECUTIVE OFFICER WHO IS NOT A DIRECTOR
Warren W. Chase, Jr. Vice President 52 N/A N/A 3,191 *
and Treasurer
</TABLE>
__________
* Less than 1%
(1) Reflects initial appointment to the Board of Trustees of Summit Bank
or its predecessors.
The business experience for the past five years for each of the Company's
directors and executive officers is as follows:
Directors of the Company
KELLY A. VERDOLINO has served as a director of the Bank since 1995 and a
member of the Bank's Audit Committee since 1996. Ms. Verdolino also serves as
Clerk of the Bank. Ms. Verdolino is an accountant and has served on several town
committees in Medway, Massachusetts.
WILLIAM L. CASEY has served as a director of the Bank since 1995 and, since
1997, has served as Chairman of the Board of Trustees of Service Bancorp, MHC,
the Company's parent mutual holding company (the "Mutual Holding Company"). He
is the Corporate Manager of Credit and Sales Accounting at Analog Devices, Inc.,
Norwood, Massachusetts, an integrated circuit manufacturer. Mr. Casey serves on
several town and community boards in Millis, Massachusetts.
JOHN G. DUGAN has served as a director of the Bank since 1990. Mr. Dugan
also serves on the Audit Committee of the Mutual Holding Company. He is an
attorney in the law firm of Dugan & Cannon of Medfield,
3
<PAGE>
Massachusetts, and serves as town moderator for the town of Millis. Mr.
Dugan participates in a number of civic and charitable organizations.
RICHARD GIUSTI has served as a director of the Bank since 1991. Mr. Giusti
continues to serve as a trustee of the Mutual Holding Company and a director of
the Bank. He is Manager of Administration & Finance of the Metropolitan Machine
Co., Inc., a machine company. Mr. Giusti is involved in various civic activities
as well.
JOHN HASENJAEGER has served as a director of the Bank since 1995. He is
owner of a real estate firm and also is a professor of management at Boston
College School of Management.
ROBERT J. HEAVEY has served as a director of the Bank since 1981 and served
as Chairman of the Board of Trustees of the Bank from 1991 to 1994. Mr. Heavey
is President and Treasurer of RJ Heavey Co., Inc., a plumbing company in
Walpole, Massachusetts. He also serves several civic and charitable
organizations.
THOMAS R. HOWIE has served as a director of the Bank since 1988 and served
on the Bank's Board of Investment from 1990 to 1994 and on its Audit Committee
since 1995. He is Vice President of Howie Oil Company, Inc., a heating oil
distributor in Millis, Massachusetts. He is involved in various charitable and
civic organizations.
KENNETH C.A. ISAACS has served as a director of the Bank since 1997. Mr.
Isaacs is a private trustee with extensive real estate experience.
PAUL V. KENNEY has served as a director of the Bank since 1992. He is a
member of the law firm Kenney and Maciolek of Medway, Massachusetts. He also
serves several civic organizations.
EUGENE R. LISCOMBE has served as a director of the Bank since 1991 and
served on its Board of Investment from 1991 to 1996. Mr. Liscombe also was
Chairman of the Board of Trustees of the Bank from 1994 to 1996. Mr. Liscombe is
a self-employed certified public accountant and is active in several civic and
charitable organizations.
ROBERT A. MATSON has served as a director of the Bank since 1997. Mr.
Matson is self-employed as a chartered financial consultant and chartered life
underwriter. He is involved in civic and charitable organizations.
JAMES W. MURPHY has served as a director of the Bank since 1979 and served
as Clerk of the Bank since 1992. Mr. Murphy is an insurance broker for D.L.
Murphy Insurance of Millis, Massachusetts.
LAWRENCE E. NOVICK has served as a director of the Bank since 1992, where
he also served on the Board of Investment (since 1996) and on the Audit
Committee (from 1993 to 1996). He is a self-employed tax and financial services
advisor in Holliston, Massachusetts. Mr. Novick is involved in many trade
organizations and holds positions in civic and charitable organizations.
EUGENE G. STONE has served as a director of the Bank since 1988. He has
been President and Chief Executive Officer of the Bank since 1988, Chairman of
the Bank since 1997 and President and Chief Executive Officer of the Company
since its organization in 1998. Mr. Stone serves on the boards of several civic
and charitable organizations.
Executive Officer of the Company Who is Not a Director
WARREN W. CHASE, JR. served as Vice President and Treasurer of the Bank
since 1995 and was named Senior Vice President and Treasurer of the Bank in
1999. Mr. Chase has served as Vice President and Treasurer of the Company since
its organization in 1998. Prior to joining the Bank, Mr. Chase, a certified
public accountant, worked for 17 years for Sterling Bank, Waltham, Massachusetts
as Controller and Vice President of Financial Planning. His principal areas of
responsibility for the Bank include financial reporting, financial planning and
liquidity management.
4
<PAGE>
Meetings and Committees of the Board of Directors
The business of the Company's Board of Directors is conducted through
meetings and activities of the Board and its committees. During the fiscal year
ended June 30, 1999, the Board of Directors held four meetings. During the
fiscal year ended June 30, 1999, no director attended fewer than 75 percent of
the total meetings of the Board of Directors of the Company and committees on
which such director served.
The Audit Committee consists of Directors Casey, Dugan and Liscombe. The
Audit Committee met five times during the fiscal year ended June 30, 1999.
The Nominating Committee consists of the entire Board of Directors. The
Nominating Committee met once during the fiscal year ended June 30, 1999.
The Executive Committee consists of Directors Casey, Guisti, Isaacs,
Novick, Matson, Stone and Verdolino. The Executive Committee reviews the
performance of the President and Chief Executive Officer. The Executive
Committee met once during the fiscal year ended June 30, 1999.
Ownership Reports by Officers and Directors
The Common Stock is registered pursuant to Section 12(g) of the Exchange
Act. The officers and directors of the Company and beneficial owners of greater
than 10% of the Common Stock ("10% beneficial owners") are required to file
reports on Forms 3, 4 and 5 with the SEC disclosing beneficial ownership and
changes in beneficial ownership of the Common Stock. SEC rules require
disclosure in the Company's Proxy Statement of the failure of an officer,
director or 10% beneficial owner of the Common Stock to file a Form 3, 4 or 5 on
a timely basis. No officer, director or 10% beneficial owner of the Company
failed to file ownership reports on a timely basis for the fiscal year ended
June 30, 1999.
Compensation of Directors
Directors of the Bank receive fees of $375 for each meeting attended.
Non-employee Directors of the Company and non-employee Trustees of the Mutual
Holding Company are paid an annual retainer of $1,000 for their service on each
of these Boards, for a total retainer of $2,000. Members of committees of the
Board are paid a fee of $50, except for the Clerk of the Board who receives $75.
5
<PAGE>
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 year ended June 30,
1999, 1998 and 1997 to the Chief Executive Officer of the Company. No other
executive officers of the Company received total annual compensation in excess
of $100,000 during any of the periods presented.
<TABLE>
<CAPTION>
================================================================================================================================
Long-Term Compensation
Annual Compensation (1) Awards Payout
- --------------------------------------------------------------------------------------------------------------------------------
Fiscal
years Restricted All other
Name and Principal ended Salary Bonus Other Annual Stock LTIP compensation(1)
Position June 30, ($) ($) Compensation(1) Award(s) Options/SARs Payouts
===================== ========== ========== =========== ================ ========== ============== ========== =============
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eugene G. Stone 1999 146,933 30,000 -- -- -- -- --
President and Chief 1998 128,350 27,500 -- -- -- -- --
Executive Officer 1997 115,544 300 -- -- -- -- --
===================== ========== ========= =========== ================ ========== ============== ========== =============
</TABLE>
(1) The Bank also provides certain members of senior management with the use of
an automobile, club membership dues and certain other personal benefits,
the aggregate value of which did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus reported for Mr. Stone.
Supplemental Executive Retirement Plan. In January 1992 the Bank
entered into an agreement with Eugene G. Stone, the Bank's President and Chief
Executive Officer, which established a nonqualified supplemental executive
retirement program ("SERP") for Mr. Stone. The SERP provides for an annual
benefit of $35,375 following Mr. Stone's termination of service due to
retirement on or after age 65. The annual benefit is adjusted and reduced
accordingly for payment following Mr. Stone's death, disability or termination
of service prior to normal retirement or upon early retirement. Benefits are
payable monthly to Mr. Stone or, in the case of his death, to his beneficiary,
over a period of 15 years, unless an optional form of payment available under
the Bank's pension plan is elected. Payment of benefits commence upon death,
early or normal retirement. In the event of disability, payment of benefits
commence the later of age 65 or the termination of other disability benefits. If
Mr. Stone's employment is terminated for reasons other than death, disability,
or retirement, benefit payments begin at age 65. Benefits under the SERP are
forfeited if Mr. Stone's service is terminated for cause. The Bank has
established a rabbi trust and has made contributions to the trust sufficient to
fully satisfy its benefit obligation under the SERP; however, for tax and ERISA
purposes, the SERP is considered an unfunded plan.
Deferred Compensation Plan. In November 1991 the Bank adopted a
deferred compensation plan ("DCP") for the benefit of directors who serve the
Bank in an employment capacity. The DCP provides each director with the
opportunity to defer up to 100% of his or her salary or fees into the DCP. In
the event of a director's termination of employment, amounts credited to his
account under the DCP will be paid to him in the form of lump sum or monthly,
quarterly, semi-annual or annual cash installments in the discretion of the Bank
beginning not later than 30 days following the last day of the month of
termination, or within a reasonable period of time. In the event of death,
amounts under the DCP will be paid to the director's designated beneficiaries.
Benefits under the DCP are forfeited if the director is terminated for cause.
The DCP is an unfunded plan for tax purposes and for purposes of ERISA. All
obligations arising under the DCP are payable from the general assets of the
Bank.
Employment Agreements
Employment Agreements. The Bank has entered into an employment
agreement with President and Chief Executive Officer Eugene G. Stone. The
agreement has a term of 36 months. On each anniversary date, the agreement may
be extended for an additional twelve months, so that the remaining term shall be
36 months. If the agreement is not renewed, the agreement will expire 36 months
following the anniversary date. Under the agreement, the current Base Salary for
Mr. Stone (as defined in the agreement) is $155,000. The Base Salary may be
increased but not decreased.
6
<PAGE>
In addition to the Base Salary, the agreement provides for, among other things,
participation in retirement plans and other employee and fringe benefits
applicable to executive personnel. The agreement provides for termination by the
Bank for cause at any time. In the event the Bank terminates the executive's
employment for reasons other than disability, retirement, or for cause, or in
the event of the executive's resignation from the Bank (such resignation to
occur within the period or periods set forth in the employment agreement) upon
(i) failure to re-elect the executive to his current offices, (ii) a material
change in the executive's functions, duties or responsibilities, or relocation
of his principal place of employment by more than 30 miles, (iii) liquidation or
dissolution of the Bank or the Company, (iv) a breach of the agreement by the
Bank, or (v) following a change in control of the Bank or the Company, the
executive, or in the event of death, his beneficiary, would be entitled to
severance pay in an amount equal to three times the Base Salary and the highest
bonus paid during any of the last three years. Mr. Stone would receive an
aggregate of $550,000 pursuant to his employment agreement upon a change in
control of the Bank or the Company, based upon his current level of
compensation. The Bank would also continue the executive's life, health, dental
and disability coverage for 36 months from the date of termination. In the event
the payments to the executive would include an "excess parachute payment" as
defined by the Internal Revenue Code of 1986, as amended (the "Code"), Section
280G (relating to payments made in connection with a change in control), the
payments would be reduced in order to avoid having an excess parachute payment.
Under the agreement, the executive's employment may be terminated upon
his retirement in accordance with any retirement policy established on behalf of
the executive and with his consent. Upon the executive's retirement, he will be
entitled to all benefits available to him under any retirement or other benefit
plan maintained by the Bank. In the event of the executive's disability for a
period of six months, the Bank may terminate the agreement provided that the
Bank will be obligated to pay him his Base Salary for the remaining term of the
agreement or one year, whichever is longer, reduced by any benefits paid to the
executive pursuant to any disability insurance policy or similar arrangement
maintained by the Bank. In the event of the executive's death, the Bank will pay
his Base Salary to his named beneficiaries for one year following his death, and
will also continue medical, dental, and other benefits to his family for one
year. The employment agreement provides that, following his termination of
employment, the executive will not compete with the Bank for a period of one
year.
Compensation of Officers and Directors through Benefit Plans
The Bank's current tax-qualified employee pension benefit plans consist
of a defined benefit pension plan and a profit sharing plan with a salary
deferral feature under section 401(k) of the Code, as described below.
Defined Benefit Pension Plan. The Bank maintains the Savings Banks
Employees Retirement Association Pension Plan, which is a qualified, tax-exempt
defined benefit plan ("Retirement Plan"). All employees age 21 or older who have
worked at the Bank for a period of one year 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 annually contributes an amount to
the Retirement Plan necessary to satisfy the actuarially determined minimum
funding requirements in accordance with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
At the normal retirement age of 65, the plan is designed to provide a
single life annuity. For a married participant, the normal form of benefit is a
qualified joint and survivor annuity where, upon the participant's death, the
participant's spouse is entitled to receive a benefit equal to 100% of that paid
during the participant's lifetime. The joint and survivor annuity will be
actuarially equivalent to the single life annuity. The retirement benefit
provided is an amount equal to 1.25% of a participant's average compensation for
each year of service (up to a maximum of 25 years) plus .6% of such average
compensation in excess of covered compensation (as defined in the Retirement
Plan) for each year of service (up to a maximum of 25 years). Retirement
benefits are also payable upon retirement due to early and late retirement,
disability or death. A reduced benefit is payable upon early retirement at age
62, at or after age 55 and the completion of ten years of service with the Bank,
or at age 50 and the completion of 15 years of service. Upon termination of
employment other than as specified above, a participant who was employed by the
Bank for a minimum of three years is eligible to receive his or her accrued
benefit commencing, generally, as soon as administratively possible, following
termination. Benefits under the Retirement Plan are payable in various annuity
forms as well as in
7
<PAGE>
the form of a lump sum payment. As of March 31, 1999, the most recent date for
which information is available, the market value of the Retirement Plan assets
equaled $376.1 million.
The following table indicates the annual retirement benefit that would be
payable under the Retirement Plan upon retirement at age 65 in calendar year
1999, expressed in the form of a single life annuity for the final average
salary and benefit service classifications specified below.
Final Years of service and benefit payable at retirement
average --------------------------------------------------
compensation 25 years
10 15 20 and after (2)
------------ -------- -------- -------- -------------
$ 50,000 $ 6,250 $ 9,375 $ 12,500 $ 15,625
100,000 16,742 25,113 33,484 41,854
150,000 25,992 38,988 51,984 64,979
160,000 (1) 27,842 41,763 55,684 69,604
- -------------------
(1) Under present law, a retirement benefit cannot be funded based
on compensation in excess of $160,000. Prior to 1994,
retirement benefits could be funded based on compensation of
up to $235,840. If a participant had accrued a larger
retirement benefit based on the law before 1994, the
participant would be entitled to the larger benefit.
(2) Benefits under the Retirement Plan are calculated based on a
participant's average compensation for each year of service,
up to 25 years. Benefits do not increase due to years of
service in excess of 25.
At December 31, 1998, Mr. Stone had approximately 10 years of credited
service (i.e., benefit service) under the Retirement Plan.
401(k) Plan. The Bank maintains the Savings Banks Employees Retirement
Association 401(k) Plan which is a qualified, tax-exempt profit sharing plan
with a salary deferral feature under Section 401(k) of the Code (the "401(k)
Plan"). All employees who have attained age 21 and have completed one year of
service 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 equal to the lesser of 15% of compensation or $10,000 (as indexed
annually). For these purposes, "compensation" includes wages reported on federal
income tax form W-2 and includes any amount contributed by salary reduction to a
cafeteria plan or 401(k) plan, but does not include compensation in excess of
the Code Section 401(a)(17) limits (i.e., $160,000 for plan years beginning in
1997). The Bank will match 50% of the participant's salary reduction
contributions to the 401(k) Plan (up to 6% of the participant's compensation).
All employee contributions, matching 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. A
participant may also borrow money from their account, which loan may not exceed
the lesser of $50,000 or 50% of the participant's total account balance. The
401(k) Plan permits employees to direct the investment of their own accounts
into various investment options.
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, life annuity 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 401(k) Plan.
Normal retirement age under the 401(k) Plan is age 65. Early retirement age is
59 1/2.
Transactions with Certain Related Persons
The Bank offers to directors, officers, and employees real estate mortgage
loans secured by their principal residence. All loans to the Bank's directors,
officers and employees are made on the same terms, including interest rates and
collateral as those prevailing at the time for comparable transactions, and do
not involve more than normal risk of collectibility or present other unfavorable
features.
8
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PROPOSAL II -APPROVAL OF THE SERVICE BANCORP, INC.
1999 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
General
The Board of Directors of the Company intends to adopt the 1999 Stock
Option Plan (the "Stock Option Plan"). Under the Stock Option Plan, 80,494
shares of the Company's Common Stock will be reserved for issuance pursuant to
the exercise of options to be granted thereunder. Shares reserved for issuance
under the Stock Option Plan may be obtained through open market purchases or
issued from authorized-but-unissued shares. To the extent the Company issues
shares under the Stock Option Plan from authorized-but-unissued shares, the
voting interests of current stockholders will be diluted.
The Board of Directors believes that it is appropriate for the Company to
adopt a flexible and comprehensive stock option plan which permits the granting
of a variety of long-term incentive awards to directors, officers and employees
as a means of enhancing and encouraging the recruitment and retention of those
individuals on whom the continued success of the Company most depends. Attached
as Appendix A to this Proxy Statement is the complete text of the Stock Option
Plan. The principal features of the Stock Option Plan are summarized below.
Principal Features of the Stock Option Plan
The Stock Option Plan provides for awards in the form of stock options,
reload options, limited stock appreciation rights ("Limited Rights") and
dividend equivalent rights. Each award shall be on such terms and conditions,
consistent with the Stock Option Plan, as the committee administering the Stock
Option Plan may determine.
The committee has full and exclusive power within the limitations set forth
in the Stock Option Plan to make all decisions and determinations regarding the
selection of participants and the granting of awards; establishing the terms and
conditions relating to each award; adopting rules, regulations and guidelines
for carrying out the Stock Option Plan's purposes; and interpreting and
otherwise construing the Stock Option Plan.
Stock options granted under the Stock Option Plan may be either "incentive
stock options" as defined under Section 422 of the Internal Revenue Code or
stock options not intended to qualify as such ("non-qualified stock options").
The term of an incentive stock option will not exceed ten years from the date of
grant.
Shares issued upon the exercise of a stock option may be either authorized
but unissued shares or reacquired shares held by the Company as treasury shares.
Any shares subject to an award which expires or is terminated unexercised will
again be available for issuance under the Stock Option Plan. Generally, in the
discretion of the Board, all or any non-qualified stock options granted under
the Stock Option Plan may be transferable by the Participant but only to the
persons or classes of persons determined by the Board. No other award or any
right or interest therein is assignable or transferable except under certain
limited exceptions set forth in the Stock Option Plan.
The Stock Option Plan will be administered by a committee of the Board (the
"Committee") consisting of either two or more "non-employee directors" (as
defined in the Stock Option Plan), or the entire Board. The members of the
Committee shall be appointed by the Board. Pursuant to the terms of the Stock
Option Plan, any director, officer or employee of the Company or its affiliates
is eligible to participate. The Committee will determine to whom the awards will
be granted, in what amounts, and the period over which such awards will vest and
become exercisable. In granting awards under the Stock Option Plan, the
Committee will consider, among other things, position and years of service,
value of the individual's services to the Company and the Bank and the added
responsibilities of such individuals as employees, directors and officers of a
public company. The Committee may extend or accelerate the time period for the
exercise of an option.
9
<PAGE>
Stock Options
All stock options will be exercisable in such installments as the Committee
shall determine. If an individual to whom an incentive stock option or right was
granted ceases to maintain continuous service for any reason (excluding normal
retirement, death or disability, and termination of employment by the Company or
any affiliate following a change in control or for cause), such individual may,
but only for a three month period immediately following cessation of continuous
service and in no event after the expiration date of such option or right,
exercise such option or right to the extent that such option or right was
exercisable at the date of cessation of service. If an individual to whom a
non-statutory stock option was granted ceases to maintain continuous service for
any reason (excluding normal retirement, death or disability, and termination of
employment by the Company or any affiliate following a change in control or for
cause), such individual may, but only for a one year period immediately
following cessation of continuous service and in no event after the expiration
date of such option or right, exercise such option or right to the extent that
such individual was entitled to exercise such option or right at the date of
cessation of service. If an individual to whom an incentive stock option,
non-statutory stock option or right was granted ceases to maintain continuous
service by reason of normal retirement, death or disability, or following a
change in control, then, unless the Committee provides otherwise in the
instrument evidencing the grant, all options and rights granted and not fully
exercisable shall become exercisable in full upon the happening of such event
and shall remain exercisable for a one year period.
In the event of an individual's termination of employment or service as a
result of death, disability, or normal retirement, the Committee may, upon
request by the option holder, elect to pay to the holder an amount of cash equal
to the amount by which the market value of the shares covered by the option on
the date of termination of employment or service exceeds the exercise price,
multiplied by the number of shares with respect to which such option is properly
exercised. If the continuous service of an individual to whom an option or right
was granted by the Company is terminated for cause, all rights under such option
or right shall expire immediately upon the effective date of such termination.
The exercise price for the purchase of shares subject to a stock option may
not be less than 100% of the market value of the shares on the date of grant.
The exercise price may be paid in cash, shares of Common Stock, or through a
"cashless exercise".
Limited Stock Appreciation Rights
The Committee may grant Limited Rights at the same time as the grant of any
option to any employee. A Limited Right gives the option holder the right, upon
a change in control of the Company or the Bank, to receive the excess of the
market value of the shares represented by the Limited Rights on the date
exercised over the exercise price. Limited Rights generally will be subject to
the same terms and conditions and exercisable to the same extent as stock
options, as described above. Payment upon exercise of a Limited Right will be in
cash, or in the event of a change in control in which pooling accounting
treatment is a condition to the transaction, for shares of stock of the Company,
or in the event of a merger transaction, for shares of the acquiring corporation
or its parent, as applicable.
Limited Rights may be granted at the time of, and must be related to, the
grant of a stock option. The exercise of one will reduce to that extent the
number of shares represented by the other. If a Limited Right is granted with
and related to an incentive stock option, the Limited Right must satisfy all the
restrictions and limitations to which the related incentive stock option is
subject.
Dividend Equivalent Rights
Dividend equivalent rights may also be granted at the time of the grant of
a stock option. Dividend equivalent rights entitle the option holder to receive
an amount of cash at the time that certain extraordinary dividends are declared
equal to the amount of the extraordinary dividend multiplied by the number of
options that the person holds. For these purposes, an extraordinary dividend is
defined under the Stock Option Plan as any dividend paid on shares of Common
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<PAGE>
Stock where the rate of dividend exceeds the Bank's weighted average cost of
funds on interest-bearing liabilities for the current and preceding three
quarters.
Reload Options
Reload options may also be granted at the time of the grant of a stock
option. Reload options entitle the option holder, who has delivered shares that
he or she owns as payment of the exercise price for option stock, to a new
option to acquire additional shares equal in amount to the number of shares he
or she has traded in. Reload options may also be granted to replace option
shares retained by the employer for payment of the option holder's withholding
tax. The option price at which the additional shares of stock can be purchased
by the option holder through the exercise of a reload option is equal to the
market value of the stock at the time of the new option grant. The option period
during which the reload option may be exercised expires at the same time as that
of the original option that the holder has exercised.
Effect of Adjustments
Shares as to which awards may be granted under the Stock Option Plan, and
shares then subject to awards, will be adjusted by the Committee in the event of
any merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, combination or exchange of shares or other change in the corporate
structure of the Company.
In the case of any merger, consolidation or combination of the Company with
or into another holding company or other entity, whereby either the Company is
not the continuing holding company or its outstanding shares are converted into
or exchanged for securities, cash or other property, or any combination thereof,
any individual to whom a stock option or Limited Right has been granted at least
six months prior to such event will have the right (subject to the provisions of
the Stock Option Plan and any applicable vesting period) upon exercise of the
option or Limited Right to an amount equal to the excess of fair market value on
the date of exercise of the consideration receivable in the merger,
consolidation or combination with respect to the shares covered or represented
by the stock option or Limited Right over the exercise price of the option
multiplied by the number of shares with respect to which the option or Limited
Right has been exercised.
Amendment and Termination
The Board of Directors may at any time amend, suspend or terminate the
Stock Option Plan or any portion thereof, provided however, that no such
amendment, suspension or termination shall impair the rights of any individual,
without his consent, in any award made pursuant to the Stock Option Plan. Unless
previously terminated, the Stock Option Plan shall continue in effect for a term
of ten years, after which no further awards may be granted.
Federal Income Tax Consequences
An optionee will generally not be deemed to have recognized taxable income
upon grant or exercise of any incentive stock option, provided that shares
transferred in connection with the exercise are not disposed of by the optionee
for at least one year after the date the shares are transferred in connection
with the exercise of the option and two years after the date of grant of the
option. If these holding periods are satisfied, upon disposal of the shares, the
aggregate difference between the per share option exercise price and the fair
market value of the Common Stock is recognized as income taxable at capital
gains rates. No compensation deduction may be taken by the Company for income
tax purposes as a result of the grant or exercise of incentive stock options,
assuming these holding periods are met.
In the case of the exercise of a non-statutory stock option, an optionee
will be deemed to have received ordinary income upon exercise of the option in
an amount equal to the aggregate amount by which the fair market value of the
Common Stock exceeds the exercise price of the option. In the event shares
received through the exercise of an incentive stock option are disposed of prior
to the satisfaction of the holding periods (a "disqualifying disposition"), the
exercise of the option will essentially be treated as the exercise of a
non-statutory stock option, except that the optionee will
11
<PAGE>
recognize the ordinary income in the year in which the disqualifying disposition
occurs. The amount of any ordinary income recognized by an optionee upon the
exercise of a non-statutory stock option or due to a disqualifying disposition
will be a deductible expense of the Company for federal income tax purposes,
subject to the limitations imposed by Code Section 162(m).
The exercise of Limited Rights will result in the recognition of
compensation income by employees and self- employment income by outside
directors on the date of exercise in an amount of cash and/or fair market value
on that date of the shares acquired pursuant to the exercise. Similarly, the
receipt of a cash payment pursuant to a dividend equivalent right will result in
the recognition of compensation or self-employment income by the recipient. The
Company will be allowed a deduction at the time, and in the amount of, any
compensation or self-employment income recognized by the employee or outside
director, respectively, under the circumstances described above, provided that
the Company meets its federal withholding obligations.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE 1999 STOCK OPTION PLAN.
- --------------------------------------------------------------------------------
PROPOSAL III--APPROVAL OF THE SERVICE BANCORP, INC.
1999 RECOGNITION AND RETENTION PLAN
- --------------------------------------------------------------------------------
General
The Board of Directors intends to adopt a Recognition and Retention Plan
(the "RRP") as a method of recognizing prior service and providing executive
officers and directors with a proprietary interest in the Company in a manner
designed to encourage such individuals to remain with the Company. Pursuant to
the RRP, restricted stock awards covering 40,247 shares will be reserved for
issuance under the RRP.
Attached as Appendix B to this Proxy Statement is the complete text of the
RRP. The principal features of the RRP are summarized below.
Principal Features of the RRP
The RRP provides for the award of shares of Common Stock ("RRP Shares"),
subject to the restrictions described below. Each award under the RRP will be
made on terms and conditions, consistent with the RRP, as determined by the RRP
committee.
The RRP will be administered by a committee of the Board consisting of
either (i) at least two "non-employee directors" or (ii) the entire Board (the
"RRP Committee"). The members of the RRP Committee shall be appointed by the
Board. The RRP Committee will select the recipients and terms of awards pursuant
to the RRP, and may determine to accelerate the vesting period of an award.
Pursuant to the terms of the RRP, any director, officer or employee of the
Company or its affiliates may be selected by the RRP Committee to participate in
the RRP. In determining to whom and in what amount to grant awards, the RRP
Committee considers the position and responsibilities of eligible employees, the
value of their services to the Company and the Bank and other factors it deems
relevant. As of June 30, 1999, there were 13 non-employee directors eligible to
participate in the RRP.
The RRP provides that RRP Shares used to fund awards under such plan may be
either authorized but unissued shares or issued shares reacquired by the Company
in the open market and held as treasury shares. To the extent that the Company
utilizes authorized but unissued shares to fund the RRP, the voting interests of
current stockholders will be diluted.
RRP Shares to be awarded in 1999 to directors, officers and employees will
vest in such installments as the RRP Committee shall determine. RRP Shares are
subject to forfeiture if the recipient fails to remain in continuous
12
<PAGE>
service (as defined in the RRP) as an employee, officer or director of the
Company or the Bank for the stipulated period (the "restricted period").
In the event a recipient ceases to maintain continuous service with the
Company or the Bank by reason of normal retirement, death or disability, or
following a change in control, RRP Shares still subject to restrictions will
vest and be free of these restrictions. In the event of termination for any
other reason, all nonvested shares will be forfeited and returned to the
Company. Prior to vesting of the nonvested RRP shares, a recipient will have the
right to vote the nonvested RRP Shares which have been awarded to the recipient
and will receive any dividends declared on such RRP Shares.
Effect of Adjustments
Restricted stock awarded under the RRP will be adjusted by the RRP
Committee in the event of a reorganization, recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation or other
change in corporate structure.
Federal Income Tax Consequences
Holders of restricted stock will recognize ordinary income on the date that
the shares of restricted stock are no longer subject to a substantial risk of
forfeiture, in an amount equal to the fair market value of the shares on that
date. In certain circumstances, a holder may elect to recognize ordinary income
and determine such fair market value on the date of the grant of the restricted
stock. Holders of restricted stock will also recognize ordinary income equal to
their dividend or dividend equivalent payments when such payments are received.
Generally, the amount of income recognized by individuals will be a deductible
expense for income tax purposes by the Company.
Amendment to the RRP
The Board of Directors may at any time amend, suspend or terminate the RRP
or any portion thereof, provided however, that no such amendment, suspension or
termination shall impair the rights of any award recipient, without his consent,
in any award theretofore made pursuant to the RRP.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE 1999 RECOGNITION AND RETENTION PLAN.
- --------------------------------------------------------------------------------
PROPOSAL IV--RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors of the Company has approved the engagement of Wolf &
Company, P.C. to be the Company's auditors for the 2000 fiscal year, subject to
the ratification of the engagement by the Company's stockholders. At the
Meeting, stockholders will consider and vote on the ratification of the
engagement of Wolf & Company, P.C., for the Company's fiscal year ending June
30, 2000. A representative of Wolf & Company, P.C., is expected to attend the
Meeting to respond to appropriate questions and to make a statement if he so
desires.
In order to ratify the selection of Wolf & Company, P.C. as the auditors
for the 2000 fiscal year, the proposal must receive at least a majority of the
votes cast, either in person or by proxy, in favor of such ratification. The
Board of Directors recommends a vote "FOR" the ratification of Wolf & Company,
P.C. as auditors for the 2000 fiscal year.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the proxy materials for next
year's Annual Meeting of Stockholders, any stockholder proposal to take action
at such meeting must be received at the Company's executive office, 81 Main
Street, Medway, Massachusetts 02053, no later than May 22, 2000. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Exchange Act.
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The Bylaws of the Company provide an advance notice procedure for certain
business, or nominations to the Board of Directors to be brought before an
annual meeting. In order for a stockholder to properly bring business before an
annual meeting, or to propose a nominee to the Board, the stockholder must give
written notice to the Secretary of the Company not less than ninety (90) days
before the date fixed for such meeting; provided, however, that in the event
that less than one hundred (100) days notice or prior public disclosure of the
date of the meeting is given or made, notice by the stockholder to be timely
must be received not later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made. The notice must include the stockholder's name,
record address, and number of shares owned by the stockholder, describe briefly
the proposed business, the reasons for bringing the business before the annual
meeting, and any material interest of the stockholder in the proposed business.
In the case of nominations to the Board, certain information regarding the
nominee must be provided. Nothing in this paragraph shall be deemed to require
the Company to include in its proxy statement and proxy relating to an annual
meeting any stockholder proposal which does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal is
received.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than the matters described above in the Proxy Statement.
However, if any matters should properly come before the Annual Meeting, it is
intended that holders of the proxies will act as directed by a majority of the
Board of Directors, except for matters related to the conduct of the Annual
Meeting, as to which they shall act in accordance with their best judgment.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED JUNE 30, 1999, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN OR TELEPHONIC REQUEST TO WARREN W. CHASE, JR., SENIOR
VICE PRESIDENT, 81 MAIN STREET, MEDWAY, MASSACHUSETTS 02053 OR CALL (508)
533-4343.
BY ORDER OF THE BOARD OF DIRECTORS
\s\ Eugene G. Stone
Eugene G. Stone
President and Chief Executive Officer
Medway, Massachusetts
September 16, 1999
14
<PAGE>
SERVICE BANCORP, INC.
1999 STOCK OPTION PLAN
1. Purpose
The purpose of the Service Bancorp, Inc. 1999 Stock Option Plan (the
"Plan") is to advance the interests of Service Bancorp, Inc. (the "Company") and
its stockholders by providing Key Employees and Outside Directors of the Company
and its Affiliates, including Summit Bank (the "Bank"), upon whose judgment,
initiative and efforts the successful conduct of the business of the Company and
its Affiliates largely depends, with an additional incentive to perform in a
superior manner as well as to attract people of experience and ability.
2. Definitions
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Company or the Bank, as such terms are defined in Section 424(e) or 424(f),
respectively, of the Code, or a successor to a parent corporation or subsidiary
corporation.
"Award" means an Award of Non-Statutory Stock Options, Incentive Stock
Options, Reload Options, Limited Rights, and/or Dividend Equivalent Rights
granted under the provisions of the Plan.
"Bank" means Summit Bank, or a successor corporation.
"Beneficiary" means the person or persons designated by a Participant to
receive any benefits payable under the Plan in the event of such Participant's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, his estate.
"Board" or "Board of Directors" means the board of directors of the Company
or its Affiliate, as applicable.
"Cause" means personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Company or an Affiliate.
"Change in Control" of the Bank or the Company means a change in control of
a nature that: (i) would be required to be reported in response to Item 1(a) of
the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a Change in Control of the Bank or the Company within the
meaning of the Bank Holding Company Act of 1956, as amended, and applicable
rules and regulations promulgated thereunder, as in effect at the time of the
Change in Control (collectively, the "BHCA"); or (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time as (a) any
"person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of Company's outstanding securities
except for any securities purchased by the Bank's employee stock ownership plan
or trust; or (b) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Company's stockholders was approved by the same Nominating Committee serving
under an Incumbent Board, shall be, for purposes of this clause (b), considered
as though he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction in which the Bank or
Company is not the surviving institution occurs; or (d) a proxy statement
soliciting proxies from stockholders of the Company, by someone other than the
current management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or similar transaction
with one or more corporations as a result of which the outstanding
<PAGE>
shares of the class of securities then subject to the Plan are to be exchanged
for or converted into cash or property or securities not issued by the Company;
or (e) a tender offer is made for 25% or more of the voting securities of the
Company and the shareholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror. Notwithstanding the foregoing, a "change in control"
shall not be deemed to have occurred in the event of a conversion of the
Company's mutual holding company to stock form or in connection with any
reorganization or action used to effect such a conversion.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee of the Board consisting of either (i) at
least two Non-Employee Directors of the Company, or (ii) the entire Board of the
Company.
"Common Stock" means shares of the common stock of the Company, par value
$.01 per share.
"Company" means Service Bancorp, Inc. or a successor corporation.
"Continuous Service" means employment as a Key Employee and/or service as
an Outside Director without any interruption or termination of such employment
and/or service. Continuous Service shall also mean a continuation as a member of
the Board of Directors following a cessation of employment as a Key Employee. In
the case of a Key Employee, employment shall not be considered interrupted in
the case of sick leave, military leave or any other leave of absence approved by
the Bank or in the case of transfers between payroll locations of the Bank or
between the Bank, its parent, its subsidiaries or its successor.
"Date of Grant" means the actual date on which an Award is granted by the
Committee.
"Director" means a member of the Board.
"Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him, or of a Director to serve as such. Additionally, in the case of
an employee, a medical doctor selected or approved by the Board must advise the
Committee that it is either not possible to determine when such Disability will
terminate or that it appears probable that such Disability will be permanent
during the remainder of said employee's lifetime.
"Dividend Equivalent Rights" means the right to receive an amount of cash
based upon the terms set forth in Section 10 hereof.
"Effective Date" means the date of, or a date determined by the Board of
Directors following, approval of the Plan by the Company's stockholders.
"Fair Market Value" means, when used in connection with the Common Stock on
a certain date, the reported closing price of the Common Stock as reported by
the Nasdaq stock market (as published by the Wall Street Journal, if published)
on such date, or if the Common Stock was not traded on the day prior to such
date, on the next preceding day on which the Common Stock was traded; provided,
however, that if the Common Stock is not reported on the Nasdaq stock market,
Fair Market Value shall mean the average sale price of all shares of Common
Stock sold during the 30-day period immediately preceding the date on which such
stock option was granted, and if no shares of stock have been sold within such
30-day period, the average sale price of the last three sales of Common Stock
sold during the 90-day period immediately preceding the date on which such stock
option was granted. In the event Fair Market Value cannot be determined in the
manner described above, then Fair Market Value shall be determined by the
Committee. The Committee is authorized, but is not required, to obtain an
independent appraisal to determine the Fair Market Value of the Common Stock.
A-2
<PAGE>
"Incentive Stock Option" means an Option granted by the Committee to a
Participant, which Option is designated as an Incentive Stock Option pursuant to
Section 8.
"Key Employee" means any person who is currently employed by the Company or
an Affiliate who is chosen by the Committee to participate in the Plan.
"Limited Right" means the right to receive an amount of cash based upon the
terms set forth in Section 9.
"Non-Statutory Stock Option" means an Option granted by the Committee to
(i) an Outside Director or (ii) any other Participant and such Option is either
(A) not designated by the Committee as an Incentive Stock Option, or (B) fails
to satisfy the requirements of an Incentive Stock Option as set forth in Section
422 of the Code and the regulations thereunder.
"Non-Employee Director" means, for purposes of the Plan, a Director who (a)
is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
"Normal Retirement" means for a Key Employee, retirement at the normal or
early retirement date set forth in the Bank's Employee Stock Ownership Plan, or
any successor plan. Normal Retirement for an Outside Director means a cessation
of service on the Board of Directors for any reason other than removal for
Cause, after reaching 60 years of age and maintaining at least 10 years of
Continuous Service.
"Offering" means the October 7, 1998 subscription offering of the Common
Stock of the Company.
"Outside Director" means a Director of the Company or an Affiliate who is
not an employee of the Company or an Affiliate.
"Option" means an Award granted under Section 7 or Section 8.
"Participant" means a Key Employee or Outside Director of the Company or
its Affiliates who receives or has received an award under the Plan.
"Reload Option" means an option to acquire shares of Common Stock
equivalent to the shares (i) used by a Participant to pay for an Option, or (ii)
deducted from any distribution in order to satisfy income tax required to be
withheld, based upon the terms set forth in Section 19.
"Right" means a Limited Right or a Dividend Equivalent Right.
"Termination for Cause" means the termination of employment or termination
of service on the Board caused by the individual's personal dishonesty, willful
misconduct, any breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, or the willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), or a final
cease-and-desist order, any of which results in material loss to the Company or
one of its Affiliates.
3. Plan Administration Restrictions
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the Plan and
to make whatever determinations and interpretations in connection with the Plan
it deems necessary or advisable. All determinations and interpretations made by
the Committee shall be binding and conclusive on all Participants in the Plan
and on their legal representatives and beneficiaries.
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All transactions involving a grant, award or other acquisition from the
Company shall:
(a) be approved by the Company's full Board or by the Committee;
(b) be approved, or ratified, in compliance with Section 14 of the Exchange
Act, by either: the affirmative vote of the holders of a majority of the
securities present, or represented and entitled to vote at a meeting duly held
in accordance with the laws of the state in which the Company is incorporated;
or the written consent of the holders of a majority of the securities of the
issuer entitled to vote provided that such ratification occurs no later than the
date of the next annual meeting of shareholders; or
(c) result in the acquisition of an Option or Limited Right that is held by
the Participant for a period of six months following the date of such
acquisition.
4. Types of Awards
Awards under the Plan may be granted in any one or a combination of: (a)
Incentive Stock Options; (b) Non-Statutory Stock Options; (c) Limited Rights;
(d) Dividend Equivalent Rights; and (e) Reload Options.
5. Stock Subject to the Plan
Subject to adjustment as provided in Section 17, the maximum number of
shares reserved for issuance under the Plan is 80,494 shares. To the extent that
Options or Rights granted under the Plan are exercised, the shares covered will
be unavailable for future grants under the Plan; to the extent that Options
together with any related Rights granted under the Plan terminate, expire or are
canceled without having been exercised or, in the case of Limited Rights
exercised for cash, new Awards may be made with respect to these shares.
6. Eligibility
Key Employees of the Company and its Affiliates shall be eligible to
receive Incentive Stock Options, Non-Statutory Stock Options, Limited Rights,
Reload Options and/or Dividend Equivalent Rights under the Plan. Outside
Directors shall be eligible to receive Non-Statutory Stock Options, Dividend
Equivalent Rights and Reload Options under the Plan.
7. Non-Statutory Stock Options
The Committee may, from time to time, grant Non-Statutory Stock Options to
eligible Key Employees and Outside Directors, and, upon such terms and
conditions as the Committee may determine, grant Non-Statutory Stock Options in
exchange for and upon surrender of previously granted Awards under the Plan.
Non-Statutory Stock Options granted under the Plan, including Non-Statutory
Stock Options granted in exchange for and upon surrender of previously granted
Awards, are subject to the terms and conditions set forth in this Section 7. The
maximum number of shares subject to a Non-Statutory Option that may be awarded
under the Plan to any Key Employee shall be 40,250.
(a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Company and the Participant specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of the
Plan.
(b) Price. The purchase price per share of Common Stock deliverable upon
the exercise of each Non-Statutory Stock Option shall be the Fair Market Value
of the Common Stock of the Company on the Date of Grant. Shares may be purchased
only upon full payment of the purchase price. Payment of the purchase price may
be made, in whole or in part, through the surrender of shares of the Common
Stock of the Company at the Fair Market Value of such shares determined in the
manner described in Section 2.
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(c) Vesting. Unless the Committee shall specifically state to the contrary
at the time an Award is granted, Non-Statutory Stock Options awarded to Key
Employees and Outside Directors shall vest at the rate of 20% of the initially
awarded amount per year commencing with the vesting of the first installment one
year from the Date of Grant, and succeeding installments on each anniversary of
the Date of Grant. No Options shall become vested by a Participant unless the
Participant maintains Continuous Service until the vesting date of such Option,
except as set forth herein. Notwithstanding any other provision of this Plan, in
the event of a Change in Control of the Company or the Bank, all Non-Statutory
Stock Options that have been awarded shall immediately vest.
(d) Exercise of Options. A vested Option may be exercised from time to
time, in whole or in part, by delivering a written notice of exercise to the
President or Chief Executive Officer of the Company, or his designee. Such
notice shall be irrevocable and must be accompanied by full payment of the
purchase price in cash or shares of Common Stock at the Fair Market Value of
such shares, determined on the exercise date in the manner described in Section
2 hereof. If previously acquired shares of Common Stock are tendered in payment
of all or part of the exercise price, the value of such shares shall be
determined as of the date of such exercise.
(e) Amount of Awards. Non-Statutory Stock Options may be granted to any Key
Employee or Outside Director in such amounts as determined by the Committee. In
granting Non-Statutory Stock Options, the Committee shall consider such factors
as it deems relevant, which factors may include, among others, the position and
responsibility of the Key Employee or Outside Director, the length and value of
his service to the Bank, the Company or the Affiliate, the compensation paid to
the Key Employee or Outside Director, and the Committee's evaluation of the
performance of the Bank, the Company or the Affiliate, according to measurements
that may include, among others, key financial ratios, level of classified assets
and independent audit findings.
(f) Term of Options. The term during which each Non-Statutory Stock Option
may be exercised shall be determined by the Committee, but in no event shall a
Non-Statutory Stock Option be exercisable in whole or in part more than 10 years
and one day from the Date of Grant. The Committee may, in its sole discretion,
accelerate the time during which any Non-Statutory Stock Option vests in whole
or in part to the Key Employees and/or Outside Directors.
(g) Termination of Employment or Service. Upon the termination of a Key
Employee's employment or upon termination of an Outside Director's service for
any reason other than, Normal Retirement, death, Disability, Change in Control
or Termination for Cause, the Participant's Non-Statutory Stock Options shall be
exercisable only as to those shares that were immediately purchasable on the
date of termination and only for one year following termination. In the event of
Termination for Cause, all rights under a Participant's Non-Statutory Stock
Options shall expire upon termination. In the event of the Participant's
termination of employment or service due to Normal Retirement, death or
Disability, or coincident with or following a Change in Control all
Non-Statutory Stock Options held by the Participant, whether or not vested at
such time, shall vest and become exercisable by the Participant or his legal
representative or beneficiaries for five years following the date of such
termination, death or cessation of employment or service, provided that in no
event shall the period extend beyond the expiration of the Non-Statutory Stock
Option term.
(h) Transferability. In the discretion of the Board, all or any
Non-Statutory Stock Option granted hereunder may be transferable by the
Participant once the Option has vested in the Participant, provided, however,
that the Board may limit the transferability of such Option or Options to a
designated class or classes of persons.
8. Incentive Stock Options
The Committee may, from time to time, grant Incentive Stock Options to Key
Employees. Incentive Stock Options granted pursuant to the Plan shall be subject
to the following terms and conditions:
(a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Company and the Key Employee specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of the
Plan.
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(b) Price. Subject to Section 17 of the Plan and Section 422 of the Code,
the purchase price per share of Common Stock deliverable upon the exercise of
each Incentive Stock Option shall be not less than 100% of the Fair Market Value
of the Company's Common Stock on the date the Incentive Stock Option is granted.
However, if a Key Employee owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or its Affiliates
(or under Section 424(d) of the Code is deemed to own stock representing more
than 10% of the total combined voting power of all classes of stock of the
Company or its Affiliates by reason of the ownership of such classes of stock,
directly or indirectly, by or for any brother, sister, spouse, ancestor or
lineal descendent of such Key Employee, or by or for any corporation,
partnership, estate or trust of which such Key Employee is a shareholder,
partner or Beneficiary), the purchase price per share of Common Stock
deliverable upon the exercise of each Incentive Stock Option shall not be less
than 110% of the Fair Market Value of the Company's Common Stock on the date the
Incentive Stock Option is granted. Shares may be purchased only upon payment of
the full purchase price. Payment of the purchase price may be made, in whole or
in part, through the surrender of shares of the Common Stock of the Company at
the Fair Market Value of such shares, determined on the exercise date, in the
manner described in Section 2.
(c) Vesting. Incentive Stock Options granted under the Plan shall vest in a
Participant at the rate or rates determined by the Committee. Unless the
Committee shall specifically state to the contrary at the time an Award is
granted, Incentive Stock Options awarded to Key Employees shall vest at the rate
of 20% of the initially awarded amount per year commencing with the vesting of
the first installment one year from the Date of Grant, and succeeding
installments on each anniversary of the Date of Grant. Notwithstanding any other
provisions of this plan, in the event of a Change in Control of the Company or
the Bank, all Incentive Stock Options that have been awarded shall immediately
vest.
(d) Exercise of Options. Vested Options may be exercised from time to time,
in whole or in part, by delivering a written notice of exercise to the President
or Chief Executive Officer of the Company or his designee. Such notice is
irrevocable and must be accompanied by full payment of the exercise price in
cash or shares of Common Stock at the Fair Market Value of such shares
determined on the exercise date by the manner described in Section 2.
The Options comprising each installment may be exercised in whole or in
part at any time after such installment becomes vested, provided that the amount
able to be first exercised in a given year is consistent with the terms of
Section 422 of the Code. To the extent required by Section 422 of the Code, the
aggregate Fair Market Value (determined at the time the Option is granted) of
the Common Stock for which Incentive Stock Options are exercisable for the first
time by a Participant during any calendar year (under all plans of the Company
and its Affiliates) shall not exceed $100,000.
The Committee may, in its sole discretion, accelerate the time at which any
Incentive Stock Option may be exercised in whole or in part, provided that it is
consistent with the terms of Section 422 of the Code. Notwithstanding the above,
in the event of a Change in Control of the Company, all Incentive Stock Options
that have been awarded shall become immediately exercisable, provided, however,
that if the aggregate Fair Market Value (determined at the time the Option is
granted) of Common Stock for which Options are exercisable as a result of a
Change in Control, together with the aggregate Fair Market Value (determined at
the time the Option is granted) of all other Common Stock for which Incentive
Stock Options become exercisable during such year, exceeds $100,000, then the
first $100,000 of Incentive Stock Options (determined as of the Date of Grant)
shall be exercisable as Incentive Stock Options and any excess shall be
exercisable as Non-Statutory Stock Options (but shall remain subject to the
provisions of this Section 8 to the extent permitted).
(e) Amounts of Awards. Incentive Stock Options may be granted to any
eligible Key Employee in such amounts as determined by the Committee; provided
that the amount granted is consistent with the terms of Section 422 of the Code.
Notwithstanding the above, the maximum number of shares that may be subject to
an Incentive Stock Option awarded under the Plan to any Key Employee shall be
40,250. In granting Incentive Stock Options, the Committee shall consider such
factors as it deems relevant, which factors may include, among others, the
position and responsibilities of the Key Employee, the length and value of his
or her service to the Bank, the Company, or the Affiliate, the compensation paid
to the Key Employee and the Committee's evaluation of the performance of the
Bank, the Company, or the Affiliate, according to measurements that may include,
among others, key financial ratios, levels
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of classified assets, and independent audit findings. The provisions of this
Section 8(e) shall be construed and applied in accordance with Section 422(d) of
the Code and the regulations, if any, promulgated thereunder.
(f) Terms of Options. The term during which each Incentive Stock Option may
be exercised shall be determined by the Committee, but in no event shall an
Incentive Stock Option be exercisable in whole or in part more than 10 years
from the Date of Grant. If any Key Employee, at the time an Incentive Stock
Option is granted to him, owns stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or its Affiliate
(or, under Section 424(d) of the Code, is deemed to own stock representing more
than 10% of the total combined voting power of all classes of stock, by reason
of the ownership of such classes of stock, directly or indirectly, by or for any
brother, sister, spouse, ancestor or lineal descendent of such Key Employee, or
by or for any corporation, partnership, estate or trust of which such Key
Employee is a shareholder, partner or Beneficiary), the Incentive Stock Option
granted to him shall not be exercisable after the expiration of five years from
the Date of Grant.
(g) Termination of Employment. Upon the termination of a Key Employee's
service for any reason other than Normal Retirement, death, Disability, a Change
in Control, or Termination for Cause, the Key Employee's Incentive Stock Options
shall be exercisable only as to those shares that were immediately purchasable
by such Key Employee at the date of termination and only for a period of three
months following termination. In the event of Termination for Cause all rights
under the Incentive Stock Options shall expire upon termination.
Upon termination of a Key Employee's employment due to Normal Retirement,
death, Disability, or following a Change in Control, all Incentive Stock Options
held by such Key Employee, whether or not exercisable at such time, shall be
exercisable for a period of five years following the date of his cessation of
employment, provided however, that any such Option shall not be eligible for
treatment as an Incentive Stock Option in the event such Option is exercised
more than three months following the date of his Normal Retirement or
termination of employment following a Change in Control; and provided further,
that no Option shall be eligible for treatment as an Incentive Stock Option in
the event such Option is exercised more than one year following termination of
employment due to Disability; and provided further, in order to obtain Incentive
Stock Option treatment for Options exercised by heirs or devisees of an
Optionee, the Optionee's death must have occurred while employed or within three
(3) months of termination of employment. In no event shall the exercise period
extend beyond the expiration of the Incentive Stock Option term.
(h) Transferability. No Incentive Stock Option granted under the Plan is
transferable except by will or the laws of descent and distribution and is
exercisable during his lifetime only by the Key Employee to which it is granted.
(i) Compliance with Code. The options granted under this Section 8 are
intended to qualify as Incentive Stock Options within the meaning of Section 422
of the Code, but the Company makes no warranty as to the qualification of any
Option as an Incentive Stock Option within the meaning of Section 422 of the
Code. If an Option granted hereunder fails for whatever reason to comply with
the provisions of Section 422 of the Code, and such failure is not or cannot be
cured, such Option shall be a Non-Statutory Stock Option.
9. Limited Rights
The Committee may grant a Limited Right simultaneously with the grant of
any Option to any Key Employee of the Bank, with respect to all or some of the
shares covered by such Option. Limited Rights granted under the Plan are subject
to the following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right be exercisable in
whole or in part before the expiration of six months from the date of grant of
the Limited Right. A Limited Right may be exercised only in the event of a
Change in Control of the Company.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, provided that the Fair Market Value of the underlying
shares on the day of exercise is greater than the exercise price of the related
Option.
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Upon exercise of a Limited Right, the related Option shall cease to be
exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of the
difference between the exercise price and the Fair Market Value of the Common
Stock subject to the underlying Option. The Limited Right is transferable only
when the underlying Option is transferable and under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall promptly
receive from the Company an amount of cash equal to the difference between the
Fair Market Value on the Date of Grant of the related Option and the Fair Market
Value of the underlying shares on the date the Limited Right is exercised,
multiplied by the number of shares with respect to which such Limited Right is
being exercised. In the event of a Change in Control in which pooling of
interests accounting treatment is a condition to the transaction, the Limited
Right shall be exercisable solely for shares of stock of the Company, or in the
event of a merger transaction, for shares of the acquiring corporation or its
parent, as applicable. The number of shares to be received on the exercise of
such Limited Right shall be determined by dividing the amount of cash that would
have been available under the first sentence above by the Fair Market Value at
the time of exercise of the shares underlying the Option subject to the Limited
Right.
10. Dividend Equivalent Rights
Simultaneously with the grant of any Option to a Participant, the Committee
may grant a Dividend Equivalent Right with respect to all or some of the shares
covered by such Option. Dividend Equivalent Rights granted under this Plan are
subject to the following terms and conditions:
(a) Terms of Rights. The Dividend Equivalent Right provides the Participant
with a cash benefit per share for each share underlying the unexercised portion
of the related Option equal to the amount of any extraordinary dividend (as
defined in Section 10(c)) per share of Common Stock declared by the Company. The
terms and conditions of any Dividend Equivalent Right shall be evidenced in the
Option agreement entered into with the Participant and shall be subject to the
terms and conditions of the Plan. The Dividend Equivalent Right is transferable
only when the related Option is transferable and under the same conditions.
(b) Payment. Upon the payment of an extraordinary dividend, the Participant
holding a Dividend Equivalent Right with respect to Options or portions thereof
which have vested shall promptly receive from the Company or the Bank the amount
of cash equal to the amount of the extraordinary dividend per share of Common
Stock, multiplied by the number of shares of Common Stock underlying the
unexercised portion of the related Option. With respect to Options or portions
thereof which have not vested, the amount that would have been received pursuant
to the Dividend Equivalent Right with respect to the shares underlying such
unvested Option or portion thereof shall be paid to the Participant holding such
Dividend Equivalent Right together with earnings thereon, on such date as the
Option or portion thereof becomes vested. Payments shall be decreased by the
amount of any applicable tax withholding prior to distribution to the
Participant as set forth in Section 19.
(c) Extraordinary Dividend. For purposes of this Section 10, an
extraordinary dividend is any dividend paid on shares of Common Stock where the
rate of the dividend exceeds the Bank's weighted average cost of funds on
interest-bearing liabilities for the current and preceding three quarters.
11. Reload Option
Simultaneously with the grant of any Option to a Participant, the Committee
may grant a Reload Option with respect to all or some of the shares covered by
such Option. A Reload Option may be granted to a Participant who satisfies all
or part of the exercise price of the Option with shares of Common Stock (as
described in Section 13(c) below). The Reload Option represents an additional
Option to acquire the same number of shares of Common Stock as is used by the
Participant to pay for the original Option. Reload Options may also be granted
to replace Common Stock withheld by the Company for payment of a Participant's
withholding tax under Section 19. A Reload Option is subject to all of the same
terms and conditions as the original Option except that (i) the exercise price
of the shares of Common Stock subject to the Reload Option will be determined at
the time the original Option is exercised and (ii) such Reload Option will
conform to all provisions of the Plan at the time the original Option is
exercised.
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12. Surrender of Option
In the event of a Participant's termination of employment or termination of
service as a result of death, Disability or Normal Retirement, the Participant
(or his or her personal representative(s), heir(s), or devisee(s)) may, in a
form acceptable to the Committee make application to surrender all or part of
the Options held by such Participant in exchange for a cash payment from the
Company of an amount equal to the difference between the Fair Market Value of
the Common Stock on the date of termination of employment or the date of
termination of service on the Board and the exercise price per share of the
Option. Whether the Company accepts such application or determines to make
payment, in whole or part, is within its absolute and sole discretion, it being
expressly understood that the Company is under no obligation to any Participant
whatsoever to make such payments. In the event that the Company accepts such
application and determines to make payment, such payment shall be in lieu of the
exercise of the underlying Option and such Option shall cease to be exercisable.
13. Alternate Option Payment Mechanism
The Committee has sole discretion to determine what form of payment it will
accept for the exercise of an Option. The Committee may indicate acceptable
forms in the agreement with the Participant covering such Options or may reserve
its decision to the time of exercise. No Option is to be considered exercised
until payment in full is accepted by the Committee or its agent.
(a) Cash Payment. The exercise price may be paid in cash or by certified
check. To the extent permitted by law, the Committee may permit all or a portion
of the exercise price of an Option to be paid through borrowed funds.
(b) Cashless Exercise. Subject to vesting requirements, if applicable, a
Participant may engage in a "cashless exercise" of the Option. Upon a cashless
exercise, the Participant shall give the Bank written notice of the exercise of
the Option together with an order to a registered broker-dealer or equivalent
third party, to sell part or all of the Common Stock subject to the Option and
to deliver enough of the proceeds to the Bank to pay the Option exercise price
and any applicable withholding taxes. If the Participant does not sell the
Common Stock subject to the Option through a registered broker-dealer or
equivalent third party, the Participant may give the Bank written notice of the
exercise of the Option and the third party purchaser of the Common Stock subject
to the Option shall pay the Option exercise price plus applicable withholding
taxes to the Bank.
(c) Exchange of Common Stock. The Committee may permit payment of the
Option exercise price by the tendering of previously acquired shares of Common
Stock. All shares of Common Stock tendered in payment of the exercise price of
an Option shall be valued at the Fair Market Value of the Common Stock on the
date prior to the date of exercise. No tendered shares of Common Stock which
were acquired by the Participant upon the previous exercise of an Option or as
awards under a stock award plan (such as the Company's Recognition and Retention
Plan) shall be accepted for exchange unless the Participant has held such shares
(without restrictions imposed by said plan or award) for at least six months
prior to the exchange.
14. Rights of a Stockholder
A Participant shall have no rights as a stockholder with respect to any
shares covered by a Non-Statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in the Plan or in
any Award granted confers on any person any right to continue in the employ of
the Company or its Affiliates or to continue to perform services for the Company
or its Affiliates or interferes in any way with the right of the Company or its
Affiliates to terminate his services as an officer, director or employee at any
time.
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15. Agreement with Participants
Each Award of Options, Reload Options, Limited Rights, and/or Dividend
Equivalent Rights will be evidenced by a written agreement, executed by the
Participant and the Company or its Affiliates that describes the conditions for
receiving the Awards, including the date of Award, the purchase price,
applicable periods, and any other terms and conditions as may be required by the
Board or applicable securities laws.
16. Designation of Beneficiary
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any Option, Reload Option, Limited
Rights Award or Dividend Equivalent Rights to which he would then be entitled.
Such designation will be made upon forms supplied by and delivered to the
Company and may be revoked in writing. If a Participant fails effectively to
designate a Beneficiary, then his estate will be deemed to be the Beneficiary.
17. Dilution and Other Adjustments
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, pro rata return of capital to all
shareholders, recapitalization, or any merger, consolidation, spin-off,
reorganization, combination or exchange of shares, or other similar corporate
change, or other increase or decrease in such shares, without receipt or payment
of consideration by the Company, the Committee will make such adjustments to
previously granted Awards, to prevent dilution or enlargement of the rights of
the Participant, including any or all of the following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
that may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
covered by Awards already made under the Plan; or
(c) adjustments in the purchase price of outstanding Incentive and/or
Non-Statutory Stock Options, or any Limited Rights attached to such Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. With respect to
Incentive Stock Options, no such adjustment shall be made if it would be deemed
a "modification" of the Award under Section 424 of the Code.
18. Effect of a Change in Control on Option Awards
In the event of a Change in Control, the Committee and the Board of
Directors will take one or more of the following actions to be effective as of
the date of such Change in Control:
(a) provide that such Options shall be assumed, or equivalent options shall
be substituted ("Substitute Options") by the acquiring or succeeding corporation
(or an affiliate thereof), provided that: (A) any such Substitute Options
exchanged for Incentive Stock Options shall meet the requirements of Section
424(a) of the Code, and (B) the shares of stock issuable upon the exercise of
such Substitute Options shall constitute securities registered in accordance
with the Securities Act of 1933, as amended ("1933 Act") or such securities
shall be exempt from such registration in accordance with Sections 3(a)(2) or
3(a)(5) of the 1933 Act, (collectively, "Registered Securities"), or in the
alternative, if the securities issuable upon the exercise of such Substitute
Options shall not constitute Registered Securities, then the Participant will
receive upon consummation of the Change in Control a cash payment for each
Option surrendered equal to the difference between the (1) Fair Market Value of
the consideration to be received for each share of Common Stock in the Change in
Control times the number of shares of Common Stock subject to such surrendered
Options, and (2) the aggregate exercise price of all such surrendered Options;
or
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(b) in the event of a transaction under the terms of which the holders of
Common Stock will receive upon consummation thereof a cash payment (the "Merger
Price") for each share of Common Stock exchanged in the Change in Control
transaction, make or provide for a cash payment to the Participants equal to the
difference between (1) the Merger Price times the number of shares of Common
Stock subject to such Options held by each Participant (to the extent then
exercisable at prices not in excess of the Merger Price), and (2) the aggregate
exercise price of all such surrendered Options.
19. Withholding
There may be deducted from each distribution of cash and/or Common Stock
under the Plan the minimum amount of any federal or state taxes, including
payroll taxes, that are applicable to such supplemental taxable income and that
are required by any governmental authority to be withheld. Shares of Common
Stock will be withheld where required from any distribution of Common Stock.
20. Amendment of the Plan
The Board may at any time, and from time to time, modify or amend the Plan
in any respect, or modify or amend an Award received by Key Employees and/or
Outside Directors; provided, however, that no such termination, modification or
amendment may affect the rights of a Participant, without his consent, under an
outstanding Award. Any amendment or modification of the Plan or an outstanding
Award under the Plan, including but not limited to the acceleration of vesting
of an outstanding Award for reasons other than the death, Disability, Normal
Retirement, or a Change in Control, shall be approved by the Committee or the
full Board of the Company.
21. Effective Date of Plan
The Plan shall become effective upon the date of, or a date determined by
the Board of Directors following, approval of the Plan by the Company's
stockholders.
22. Termination of the Plan
The right to grant Awards under the Plan will terminate upon the earlier of
(i) 10 years after the Effective Date, or (ii) the date on which the exercise of
Options or related rights equaling the maximum number of shares reserved under
the Plan occurs, as set forth in Section 5. The Board may suspend or terminate
the Plan at any time, provided that no such action will, without the consent of
a Participant, adversely affect his rights under a previously granted Award.
23. Applicable Law
The Plan will be administered in accordance with the laws of the
Commonwealth of Massachusetts.
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SERVICE BANCORP, INC.
1999 RECOGNITION AND RETENTION PLAN
1. Establishment of the Plan
Service Bancorp, Inc. (the "Company") hereby establishes the Service
Bancorp, Inc. 1999 Recognition and Retention Plan (the "Plan") upon the terms
and conditions hereinafter stated in the Plan.
2. Purpose of the Plan
The purpose of the Plan is to advance the interests of the Company and its
stockholders by providing Key Employees and Outside Directors of the Company and
its Affiliates, including Summit Bank (the "Bank"), upon whose judgment,
initiative and efforts the successful conduct of the business of the Company and
its Affiliates largely depends, with compensation for their contributions to the
Company and its Affiliates and an additional incentive to perform in a superior
manner, as well as to attract people of experience and ability.
3. Definitions
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Company or the Bank, as such terms are defined in Section 424(e) and (f),
respectively, of the Code, or a successor to a parent corporation or subsidiary
corporation.
"Award" means the grant by the Committee of Restricted Stock, as provided
in the Plan.
"Bank" means Summit Bank, or a successor corporation.
"Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
"Board" or "Board of Directors" means the Board of Directors of the Company
or an Affiliate, as applicable. For purposes of Section 4 of the Plan, "Board"
shall refer solely to the Board of the Company.
"Cause" means personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Company or an Affiliate.
"Change in Control" of the Bank or the Company means a change in control of
a nature that: (i) would be required to be reported in response to Item 1(a) of
the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a Change in Control of the Company within the meaning of the
Bank Holding Company Act of 1956, as amended, and applicable rules and
regulations promulgated thereunder, as in effect at the time of the Change in
Control (collectively, the "BHCA"); or (iii) without limitation such a Change in
Control shall be deemed to have occurred at such time as (a) any "person" (as
the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company's outstanding securities except for any
securities purchased by the Bank's employee stock ownership plan or trust; or
(b) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming
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a director subsequent to the date hereof whose election was approved by a vote
of at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved by the
same Nominating Committee serving under an Incumbent Board, shall be, for
purposes of this clause (b), considered as though he were a member of the
Incumbent Board; or (c) a plan of reorganization, merger, consolidation, sale of
all or substantially all the assets of the Bank or the Company or similar
transaction in which the Bank or the Company is not the surviving institution
occurs; or (d) a proxy statement soliciting proxies from stockholders of the
Company, by someone other than the current management of the Company, seeking
stockholder approval of a plan of reorganization, merger or consolidation of the
Company or similar transaction with one or more corporations as a result of
which the outstanding shares of the class of securities then subject to the Plan
are to be exchanged for or converted into cash or property or securities not
issued by the Company; or (e) a tender offer is made for 25% or more of the
voting securities of the Company and the shareholders owning beneficially or of
record 25% or more of the outstanding securities of the Company have tendered or
offered to sell their shares pursuant to such tender offer and such tendered
shares have been accepted by the tender offeror. Notwithstanding, the foregoing,
a "Change in Control" shall not be deemed to have occurred in the event of a
conversion of the Company's mutual holding company to stock form or in
connection with any reorganization or action used to effect such conversion.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee of the Board consisting of either (i) at
least two Non-Employee Directors of the Company, or (ii) the entire Board of the
Company.
"Common Stock" means shares of the common stock of the Company, par
value $.01 per share.
"Company" means Service Bancorp, Inc., the stock holding company of the
Bank, or a successor corporation.
"Continuous Service" means employment as a Key Employee and/or service as
an Outside Director without any interruption or termination of such employment
and/or service. Continuous Service shall also mean a continuation as a member of
the Board of Directors following a cessation of employment as a Key Employee. In
the case of a Key Employee, employment shall not be considered interrupted in
the case of sick leave, military leave or any other leave of absence approved by
the Bank or in the case of transfers between payroll locations of the Bank or
between the Bank, its parent, its subsidiaries or its successor.
"Director" means a member of the Board.
"Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him, or of a Director to serve as such. Additionally, in the case of
an employee, a medical doctor selected or approved by the Board must advise the
Committee that it is either not possible to determine when such Disability will
terminate or that it appears probable that such Disability will be permanent
during the remainder of such employee's lifetime.
"Effective Date" means the date of, or a date determined by the Board of
Directors following, approval of the Plan by the Company's stockholders.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Key Employee" means any person who is currently employed by the Company or
an Affiliate who is chosen by the Committee to participate in the Plan.
"Non-Employee Director" means, for purposes of the Plan, a Director who (a)
is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
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"Normal Retirement" means for a Key Employee, retirement at the normal or
early retirement date set forth in the Bank's Employee Stock Ownership Plan, or
any successor plan. Normal Retirement for an Outside Director means a cessation
of service on the Board of Directors for any reason other than removal for
Cause, after reaching 60 years of age and maintaining at least 10 years of
Continuous Service.
"Offering" means the subscription and community offering of the Common
Stock of the Company.
"Outside Director" means a Director of the Company or an Affiliate who is
not an employee of the Company or an Affiliate.
"Recipient" means a Key Employee or Outside Director of the Company or its
Affiliates who receives or has received an Award under the Plan.
"Restricted Period" means the period of time selected by the Committee for
the purpose of determining when restrictions are in effect under Section 6 with
respect to Restricted Stock awarded under the Plan.
"Restricted Stock" means shares of Common Stock that have been contingently
awarded to a Recipient by the Committee subject to the restrictions referred to
in Section 6, so long as such restrictions are in effect.
4. Administration of the Plan.
(a) Role of the Committee. The Plan shall be administered and interpreted
by the Committee, which shall have all of the powers allocated to it in the
Plan. The interpretation and construction by the Committee of any provisions of
the Plan or of any Award granted hereunder shall be final and binding. The
Committee shall act by vote or written consent of a majority of its members.
Subject to the express provisions and limitations of the Plan, the Committee may
adopt such rules and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with respect to
the Plan to the Board at appropriate times, but in no event less than one time
per calendar year.
(b) Role of the Board. The members of the Committee shall be appointed or
approved by, and will serve at the pleasure of, the Board. The Board may in its
discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in the Plan,
may take any action under or with respect to the Plan that the Committee is
authorized to take, and may reverse or override any action taken or decision
made by the Committee under or with respect to the Plan, provided, however, that
except as provided in Section 6(b), the Board may not revoke any Award except in
the event of revocation for Cause or with respect to unearned Awards in the
event the Recipient of an Award voluntarily terminates employment with the Bank
prior to Normal Retirement.
(c) Plan Administration Restrictions. All transactions involving a grant,
award or other acquisitions from the Company shall:
(i) be approved by the Company's full Board or by the Committee;
(ii) be approved, or ratified, in compliance with Section 14 of the
Exchange Act, by either: the affirmative vote of the holders of a
majority of the shares present, or represented and entitled to vote at
a meeting duly held in accordance with the laws under which the
Company is incorporated; or the written consent of the holders of a
majority of the securities of the issuer entitled to vote provided
that such ratification occurs no later than the date of the next
annual meeting of shareholders; or
(iii)result in the acquisition of common stock that is held by the
Recipient for a period of six months following the date of such
acquisition.
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(d) Limitation on Liability. No member of the Board or the Committee shall
be liable for any determination made in good faith with respect to the Plan or
any Awards granted under it. If a member of the Board or the Committee is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of anything done or not done by him in such capacity
under or with respect to the Plan, the Bank or the Company shall indemnify such
member against expense (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Bank and the Company and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
5. Eligibility; Awards
(a) Eligibility. Key Employees and Outside Directors are eligible to
receive Awards.
(b) Awards to Key Employees and Outside Directors. The Committee may
determine which of the Key Employees and Outside Directors referenced in Section
5(a) will be granted Awards and the number of shares covered by each Award;
provided, however, that in no event shall any Awards be made that will violate
the Bank's Charter and Bylaws, the Company's Articles of Organization and
Bylaws, or any applicable federal or state law or regulation. Shares of
Restricted Stock that are awarded by the Committee shall, on the date of the
Award, be registered in the name of the Recipient and transferred to the
Recipient, in accordance with the terms and conditions established under the
Plan. The aggregate number of shares that shall be issued under the Plan is
40,247.
In the event Restricted Stock is forfeited for any reason, the Committee,
from time to time, may determine which of the Key Employees and Outside
Directors will be granted additional Awards to be awarded from forfeited
Restricted Stock.
In selecting those Key Employees and Outside Directors to whom Awards will
be granted and the amount of Restricted Stock covered by such Awards, the
Committee shall consider such factors as it deems relevant, which factors may
include, among others, the position and responsibilities of the Key Employees
and Outside Directors, the length and value of their services to the Bank and
its Affiliates, the compensation paid to the Key Employees or fees paid to the
Outside Directors, and the Committee may request the written recommendation of
the Chief Executive Officer and other senior executive officers of the Bank, the
Company and its Affiliates or the recommendation of the full Board. All
allocations by the Committee shall be subject to review, and approval or
rejection, by the Board.
No Restricted Stock shall be earned unless the Recipient maintains
Continuous Service with the Bank or an Affiliate until the restrictions lapse.
(c) Manner of Award. As promptly as practicable after a determination is
made pursuant to Section 5(b) to grant an Award, the Committee shall notify the
Recipient in writing of the grant of the Award, the number of shares of
Restricted Stock covered by the Award, and the terms upon which the Restricted
Stock subject to the Award may be earned. Upon notification of an Award of
Restricted Stock, the Recipient shall execute and return to the Company a
restricted stock agreement (the "Restricted Stock Agreement") setting forth the
terms and conditions under which the Recipient shall earn the Restricted Stock,
together with a stock power or stock powers endorsed in blank. Thereafter, the
Recipient's Restricted Stock and stock power shall be deposited with an escrow
agent specified by the Company ("Escrow Agent") who shall hold such Restricted
Stock under the terms and conditions set forth in the Restricted Stock
Agreement. Each certificate in respect of shares of Restricted Stock Awarded
under the Plan shall be registered in the name of the Recipient.
(d) Treatment of Forfeited Shares. In the event shares of Restricted Stock
are forfeited by a Recipient, such shares shall be returned to the Company and
shall be held and accounted for pursuant to the terms of the Plan until such
time as the Restricted Stock is re-awarded to another Recipient, in accordance
with the terms of the Plan and the applicable state and federal laws, rules and
regulations.
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6. Terms and Conditions of Restricted Stock
The Committee shall have full and complete authority, subject to the
limitations of the Plan, to grant awards of Restricted Stock to Key Employees
and Outside Directors and, in addition to the terms and conditions contained in
Sections 6(a) through 6(h), to provide such other terms and conditions (which
need not be identical among Recipients) in respect of such Awards, and the
vesting thereof, as the Committee shall determine.
(a) General Rules. Unless the Committee shall specifically state to the
contrary at the time an Award is granted, Restricted Stock shall be earned by a
Recipient at the rate of 20% of the initially awarded amount per year commencing
with the first installment being earned on the first anniversary of the Date of
Grant and succeeding installments being earned on the following anniversaries,
provided that such Recipient maintains Continuous Service. Subject to any such
other terms and conditions as the Committee shall provide with respect to
Awards, shares of Restricted Stock may not be sold, assigned, transferred
(within the meaning of Code Section 83), pledged or otherwise encumbered by the
Recipient, except as hereinafter provided, during the Restricted Period. The
Committee shall have the authority, in its discretion, to accelerate the time at
which any or all of the restrictions shall lapse with respect to a Restricted
Stock Award, or to remove any or all of such restrictions.
(b) Continuous Service; Forfeiture. Except as provided in Section 6(c), if
a Recipient ceases to maintain Continuous Service for any reason (other than
death, Disability, Change in Control or Normal Retirement), unless the Committee
shall otherwise determine, all shares of Restricted Stock theretofore awarded to
such Recipient and which at the time of such termination of Continuous Service
are subject to the restrictions imposed by Section 6(a) shall upon such
termination of Continuous Service be forfeited. Any stock dividends or declared
but unpaid cash dividends attributable to such shares of Restricted Stock shall
also be forfeited.
(c) Exception for Termination Due to Death, Disability, Normal Retirement
or Following a Change in Control. Notwithstanding the general rule contained in
Section 6(a), Restricted Stock awarded to a Recipient whose employment with of
the Company or an Affiliate or service on the Board terminates due to death,
Disability, Normal Retirement or following a Change in Control shall be deemed
earned as of the Recipient's last day of employment with the Company or an
Affiliate, or last day of service on the Board of the Company or an Affiliate;
provided that Restricted Stock awarded to a Key Employee who at any time also
serves as a Director, shall not be deemed earned until both employment and
service as a Director have been terminated.
(d) Revocation for Cause. Notwithstanding anything hereinafter to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Award, or portion thereof, previously awarded under the Plan, to the extent
Restricted Stock has not been redelivered by the Escrow Agent to the Recipient,
whether or not yet earned, in the case of a Key Employee whose employment is
terminated by the Company or an Affiliate or an Outside Director whose service
is terminated by the Company or an Affiliate for Cause or who is discovered
after termination of employment or service on the Board to have engaged in
conduct that would have justified termination for Cause.
(e) Restricted Stock Legend. Each certificate in respect of shares of
Restricted Stock awarded under the Plan shall be registered in the name of the
Recipient and deposited by the Recipient, together with a stock power endorsed
in blank, with the Escrow Agent and shall bear the following (or a similar)
legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the Service Bancorp, Inc. Recognition and
Retention Plan. Copies of such Plan are on file in the offices of the
Secretary of Service Bancorp, Inc. 81 Main Street, Medway, Massachusetts
02053."
(f) Payment of Dividends and Return of Capital. After an Award has been
granted but before such Award has been earned, the Recipient shall receive any
cash dividends paid with respect to such shares, or shall share in any pro-rata
return of capital to all shareholders with respect to the Common Stock. Stock
dividends declared by the Company and paid on Awards that have not yet been
earned shall be subject to the same restrictions as the Restricted
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Stock and the certificate(s) or other instruments representing or evidencing
such shares shall be legended in the manner provided in Section 6(e) and shall
be delivered to the Escrow Agent for distribution to the Recipient when the
Restricted Stock upon which such dividends were paid are earned. Unless the
Recipient has made an election under Section 83(b) of the Code, cash dividends
or other amounts so paid on shares that have not yet been earned by the
Recipient shall be treated as compensation income to the Recipient when paid. If
dividends are paid with respect to shares of Restricted Stock under the Plan
that have been forfeited and returned to the Company or to a trust established
to hold issued and unawarded or forfeited shares, the Committee can determine to
award such dividends to any Recipient or Recipients under the Plan, to any other
employee or director of the Company or the Bank, or can return such dividends to
the Company.
(g) Voting of Restricted Shares. After an Award has been granted, the
Recipient as conditional owner of the Restricted Stock shall have the right to
vote such shares.
(h) Delivery of Earned Shares. At the expiration of the restrictions
imposed by Section 6(a), the Escrow Agent shall redeliver to the Recipient (or
where the relevant provision of Section 6(b) applies in the case of a deceased
Recipient, to his Beneficiary) the certificate(s) and any remaining stock power
deposited with it pursuant to Section 5(c) and the shares represented by such
certificate(s) shall be free of the restrictions referred to Section 6(a).
7. Adjustments upon Changes in Capitalization
In the event of any change in the outstanding shares subsequent to the
Effective Date by reason of any reorganization, recapitalization, stock split,
stock dividend, combination or exchange of shares, or any merger, consolidation
or any change in the corporate structure or shares of the Company, without
receipt or payment of consideration by the Company, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive. Any shares of stock or other securities received, as a result of any
of the foregoing, by a Recipient with respect to Restricted Stock shall be
subject to the same restrictions and the certificate(s) or other instruments
representing or evidencing such shares or securities shall be legended and
deposited with the Escrow Agent in the manner provided in Section 6(e).
8. Assignments and Transfers
No Award nor any right or interest of a Recipient under the Plan in any
instrument evidencing any Award under the Plan may be assigned, encumbered or
transferred (within the meaning of Code Section 83) except, in the event of the
death of a Recipient, by will or the laws of descent and distribution until such
Award is earned.
9. Key Employee Rights under the Plan
No Key Employee shall have a right to be selected as a Recipient nor,
having been so selected, to be selected again as a Recipient and no Key Employee
or other person shall have any claim or right to be granted an Award under the
Plan or under any other incentive or similar plan of the Bank or any Affiliate.
Neither the Plan nor any action taken thereunder shall be construed as giving
any Key Employee any right to be retained in the employ of the Bank or any
Affiliate.
10. Outside Director Rights under the Plan
Neither the Plan nor any action taken thereunder shall be construed as
giving any Outside Director any right to be retained in the service of the Bank
or any Affiliate.
11. Withholding Tax
Upon the termination of the Restricted Period with respect to any shares of
Restricted Stock (or at any such earlier time that an election is made by the
Recipient under Section 83(b) of the Code, or any successor provision thereto,
to include the value of such shares in taxable income), the Bank or the Company
shall have the right to require the
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Recipient or other person receiving such shares to pay the Bank or the Company
the minimum amount of any federal or state taxes, including payroll taxes, that
are applicable to such supplemental income and that the Bank or the Company is
required to withhold with respect to such shares, or, in lieu thereof, to retain
or sell without notice, a sufficient number of shares held by it to cover the
amount required to be withheld. The Bank or the Company shall have the right to
deduct from all dividends paid with respect to shares of Restricted Stock the
amount of any taxes which the Bank or the Company is required to withhold with
respect to such dividend payments.
12. Amendment or Termination
The Board of the Company may amend, suspend or terminate the Plan or any
portion thereof at any time, provided, however, that no such amendment,
suspension or termination shall impair the rights of any Recipient, without his
consent, in any Award theretofore made pursuant to the Plan. Any amendment or
modification of the Plan or an outstanding Award under the Plan, including but
not limited to the acceleration of vesting of an outstanding Award for reasons
other than death, Disability, Normal Retirement or termination following a
Change in Control, shall be approved by the Committee, or the full Board of the
Company.
13. Governing Law
The Plan shall be governed by the laws of the Commonwealth of
Massachusetts.
14. Term of Plan
The Plan shall become effective on the date of, or a date determined by the
Board of Directors following, approval of the Plan by the Company's
stockholders. It shall continue in effect until the earlier of (i) ten years
from the Effective Date unless sooner terminated under Section 12 hereof, or
(ii) the date on which all shares of Common Stock available for award hereunder,
have vested in the Recipients of such Awards.
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<PAGE>
REVOCABLE PROXY
SERVICE BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
October 26, 1999
The undersigned hereby appoints the official proxy committee consisting of
the Board of Directors with full powers of substitution to act as attorneys and
proxies for the undersigned to vote all shares of Common Stock of the Company
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
("Annual Meeting") to be held at the Courtyard by Marriott Hotel, 10 Fortune
Boulevard, Milford, Massachusetts, on October 26, 1999, at 3:00 p.m. local time.
The official proxy committee is authorized to cast all votes to which the
undersigned is entitled as follows:
VOTE
FOR WITHHELD
(except as
marked to the
contrary below)
1. The election as Directors of all nominees [_] [_]
listed below each to serve for a three-year
term:
Eugene G. Stone
Richard Giusti
Thomas R. Howie
James W. Murphy
INSTRUCTION: To withhold your vote for one or more nominees,
write the name of the nominee(s) on the line(s) below.
- ------------------------------
- ------------------------------
- ------------------------------
FOR AGAINST ABSTAIN
2. The ratification of Wolf & Company, P.C.
as the Company's independent auditor for [_] [_] [_]
the fiscal year ended June 30, 2000.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH ANNUAL MEETING, THIS PROXY WILL BE VOTED AS
DIRECTED BY A MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD
OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
<PAGE>
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Annual Meeting of the stockholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. This proxy may also be revoked by sending written
notice to the Secretary of the Company at the address set forth on the Notice of
Annual Meeting of Stockholders, or by the filing of a later proxy prior to a
vote being taken on a particular proposal at the Annual Meeting.
The undersigned acknowledges receipt from the Company prior to the execution of
this proxy of notice of the Annual Meeting, a proxy statement dated September
16, 1999, and audited financial statements.
Dated: _________________________ --- Check Box if You Plan
--- to Attend Annual Meeting
- ------------------------------- -----------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ------------------------------- -----------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title.
- --------------------------------------------------------------------------------
PLEASE COMPLETE AND DATE THIS PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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