UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
PROVIDENT BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
SEC 1913 (3-99)
<PAGE>
January 14, 2000
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of
Provident Bancorp, Inc. (the "Company"). The Annual Meeting will be held at the
Holiday Inn of Suffern, 3 Executive Boulevard, Suffern, New York on February 22,
2000, at 10:00 a.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
five directors, the approval of the Provident Bank 2000 Stock Option Plan and
the Provident Bank 2000 Recognition and Retention Plan, and the ratification of
KPMG LLP as the Company's auditors for the fiscal year ending September 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/George Strayton
George Strayton
President and Chief Executive Officer
<PAGE>
Provident Bancorp, Inc.
400 Rella Boulevard
Montebello, New York 10901
(914) 369-8040
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On February 22, 2000
Notice is hereby given that the Annual Meeting of Stockholders of
Provident Bancorp, Inc. (the "Company") will be held at the Holiday Inn of
Suffern, 3 Executive Boulevard, Suffern, New York, on February 22, 2000 at 10:00
a.m., local time.
A Proxy Card and Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. the election of five Directors to the Board of Directors;
2. the approval of the Provident Bank 2000 Stock Option Plan;
3. the approval of the Provident Bank 2000 Recognition and
Retention Plan;
4. the ratification of the appointment of KPMG LLP as auditors
for the Company for the fiscal year ending September 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 date or dates to which the Annual
Meeting may be adjourned. Stockholders of record at the close of business on
December 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/Carol Benoist
Carol Benoist
Secretary
Montebello, New York
January 14, 2000
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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
Provident Bancorp, Inc.
400 Rella Boulevard
Montebello, New York 10901
(914) 369-8040
ANNUAL MEETING OF STOCKHOLDERS
February 22, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Provident Bancorp, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders of the Company (the
"Meeting"), which will be held at the Holiday Inn of Suffern, 3 Executive
Boulevard, Suffern, New York, on February 22, 2000, at 10:00 a.m., local time,
and all adjournments of the Meeting. The accompanying Notice of Annual Meeting
of Stockholders and this Proxy Statement are first being mailed to stockholders
on or about January 18, 2000.
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REVOCATION OF PROXIES
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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 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 Meeting.
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
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 Meeting or
delivers a written revocation to the Secretary of the Company prior to the
voting of such proxy.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Holders of record of the Company's common stock, par value $0.10 per
share (the "Common Stock"), as of the close of business on December 31, 1999
(the "Record Date") are entitled to one vote for each share then held. As of the
Record Date, the Company had 8,225,000 shares of Common Stock issued and
outstanding, of which 4,416,000 were held by Provident Bancorp, MHC (the "
Mutual Holding Company"), the Company's parent mutual holding company. 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 Meeting.
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. The affirmative vote of holders of a majority of the
total votes present at the Meeting in person or by proxy is required for
approval of the Provident Bank 2000 Stock Option Plan, the Provident Bank 2000
Recognition and Retention Plan and the ratification of KPMG LLP as the Company's
auditors. Shares as to which the "Abstain" box has been selected on the proxy
card will count as shares represented and entitled to vote and will be treated
as votes "Against" the proposal. Shares as to which no vote is cast, including
shares held by a broker who submits a proxy card but fails to cast a vote on the
proposal will be treated as shares that are represented and will have no effect
on the outcome of the vote.
<PAGE>
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. The following table
sets forth, as of November 30, 1999, the shares of Common Stock 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(3)
-------------------- ------------ --------------
<S> <C> <C>
Provident Bancorp, MHC
400 Rella Boulevard
Montebello, New York 10901 4,416,000 53.4%
Provident Bancorp, MHC
and all Directors, nominees for Director
and Executive Officers
as a Group (17 persons)(4) 4,740,113 57.3
BL Advisers, Inc.
Barry Lewis
Barbara Lewis
177 S. Mountain Road
New City, New York 10956(5) 414,630 5.0
</TABLE>
(1) Certain of the Company's executive officers and directors are also
executive officers and directors of the Mutual Holding Company.
(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.
(3) As of November 30, 1999, the Company had 8,272,500 shares of Common
Stock issued and outstanding.
(4) Includes shares owned by a retiring Director whose service will
terminate as of the date of the Meeting.
(5) As disclosed in a joint Schedule 13G filed with the SEC on November 19,
1999.
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PROPOSAL I--ELECTION OF DIRECTORS
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The Company's Board of Directors is currently composed of nine members,
but the Board of Directors of the Company recently amended the Company's Bylaws
to provide for 11 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 a three-year period and until their
respective successors shall have been elected and shall qualify. Four Directors
will be elected at the Meeting to serve for a three-year period and until their
respective successors shall have been elected and shall qualify, and one
director will be elected at the Meeting to serve for a two-year period and until
his successor shall have been elected and shall qualify. The Board of Directors
has nominated to serve as Directors for three-year terms Judith Hershaft, Thomas
F. Jauntig, Jr., Donald T. McNelis and Richard A. Nozell, and the Board of
Directors has nominated Burt Steinberg to serve as Director for a two-year term.
2
<PAGE>
The table below sets forth certain information, as of November 30,
1999, regarding current members of the Company's Board of Directors, nominees
for Director and Executive Officers who are not Directors, including the terms
of office of current 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 any 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 of the nominees might be unable to serve,
if elected. Except as indicated herein, there are no arrangements or
understandings between any of the nominees and any other person pursuant to
which such nominees were 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>
Judith Hershaft None 59 -- -- -- *
Thomas F. Jauntig, Jr. None 55 -- -- 500 *
Donald T. McNelis Director 66 1987 2000 20,795 *
Richard A. Nozell Director 56 1990 2000 8,446 *
Burt Steinberg None 54 -- -- 3,000 *
<CAPTION>
OTHER BOARD MEMBERS
<S> <C> <C> <C> <C> <C> <C>
William F. Helmer Chairman of the Board 65 1974 2001 50,121 *
George Strayton President, Chief Executive 56 1991 2002 45,968 *
Officer and Director
Dennis L. Coyle Vice Chairman 63 1984 2002 65,520 *
William R. Sichol, Jr. Director 59 1990 2001 21,789 *
Wilbur C. Ward Director 73 1990 2002 8,020 *
F. Gary Zeh Director 61 1979 2001 40,520 *
<CAPTION>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<S> <C> <C> <C> <C> <C> <C>
Daniel G. Rothstein Executive Vice President, 52 N/A N/A 20,689 *
Chief Credit Officer
and Regulatory Counsel
Robert J. Sansky Executive Vice President 52 N/A N/A 14,750 *
and Director of Human Resources
Katherine A. Dering Senior Vice President and 51 N/A N/A 8,740 *
Chief Financial Officer
Stephen G. Dormer Senior Vice President and 48 N/A N/A 3,341 *
Director of Business Activity
John F. Fitzpatrick Senior Vice President and 47 N/A N/A 1,421 *
Director of Support Services
</TABLE>
* Less than 1%
(1) Reflects initial appointment to the Board of Directors of Provident
Bank or its predecessors.
3
<PAGE>
The business experience for the past five years for each of the
Company's Directors, nominees for Director, and Executive Officers is as
follows:
Judith Hershaft is the Chief Executive Officer of Innovative Plastics
Corp., a manufacturer of custom plastic products. She is also the Chairman of
Greenway Plastics and Innovative Plastics.
Thomas F. Jauntig, Jr., is a partner in Korn, Rosenbaum, Phillips &
Jauntig LLP, CPAs.
Dr. Donald T. McNelis served as President of St. Thomas Aquinas College
in Sparkill, New York from 1974 until his retirement in 1995.
Richard A. Nozell is the owner of Richard Nozell Building Construction,
and serves as a general building contractor.
Burt Steinberg is the President and Chief Operating Officer of The
Dress Barn, Inc., a woman's specialty store retailer.
William F. Helmer has served as the Chairman of the Board of Directors
of Provident Bank (the "Bank") since 1994 and Chairman of the Board of the
Company since its formation in 1999, and is the President of Helmer-Cronin
Construction, Inc., a construction company.
George Strayton has been employed by the Bank since 1982, was named
President and Chief Executive Officer of the Bank in 1986, and has served as
President and Chief Executive Officer of the Company since its formation in
1999.
Dennis L. Coyle has served as Vice Chairman of the Board of Directors
of the Bank since 1994 and Vice Chairman of the Board of the Company since its
formation in 1999. Mr. Coyle is the owner of the Coyle Insurance Agency, the
owner and President of Denlo Realty Corp. and the owner of Dennis L. Coyle
Rental Properties.
William R. Sichol, Jr. is a principal of Sichol & Hicks, P.C., a
private law firm.
Wilbur C. Ward is currently retired. Prior to his retirement, Mr. Ward
was the President of Ward Bulldozers.
F. Gary Zeh is the President of Haverstraw Transit Inc., a bus
contracting company, and President and owner of Quality Bus Sales and Service.
Daniel G. Rothstein has been employed by the Bank since 1983, and was
named Executive Vice President of the Bank in 1989. Mr. Rothstein has served as
the Bank's Chief Credit Officer and Regulatory Counsel since 1996.
Robert J. Sansky has been employed by the Bank since 1985, and was
named Executive Vice President in 1989. Mr. Sansky has served as the Bank's
Director of Human Resources since 1995.
Katherine A. Dering has served as the Bank's Chief Financial Officer
since 1994. Ms. Dering previously served as the Chief Financial Officer of a
community bank located in Connecticut.
Stephen G. Dormer has served as Senior Vice President and Director of
Business Development of the Bank since 1996, and was previously Senior Vice
President and Manager of the Bank's Commercial Loan Department from 1994 until
1996. Prior to joining the Bank in 1994, Mr. Dormer was Senior Vice President of
a commercial bank located in New Jersey.
John F. Fitzpatrick has been employed by the Bank since 1986, and was
named Senior Vice President and Director of Support Services in 1997.
4
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
The Common Stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934. The Executive Officers and Directors of the
Company and beneficial owners of greater than 10% of the outstanding shares of
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 Proxy
Statement and Annual Report on Form 10-K of the failure of an officer, director
or 10% beneficial owner of the Common Stock to file a Form 3, 4 or 5 as
required. Based on the Company's review of ownership reports, no Executive
Officer, Director or 10% beneficial owner of the Company failed to file
ownership reports as required for the year ended September 30, 1999.
Meetings and Committees of the Board of Directors
The business of the Company is conducted at regular and special
meetings of the full Board and its standing committees. The standing committees
consist of the Executive and Audit Committees. The full Board of Directors acts
as Nominating Committee for the Company. During the fiscal year ended September
30, 1999, the Board of Directors met at four regular meetings and no special
meetings. No member of the Board or any committee thereof attended less than 75%
of said meetings.
The Executive Committee consists of Chairman Helmer, President, Chief
Executive Officer and Director Strayton, and Directors Coyle, McNelis and
Sichol. The Executive Committee meets as necessary when the Board is not in
session to exercise general control and supervision in all matters pertaining to
the interests of the Company, subject at all times to the direction of the Board
of Directors. The Executive Committee met once during the fiscal year ended
September 30, 1999.
The Audit Committee consists of retiring Director Murray L. Korn (who
serves as Chairman) and Directors Ward and Nozell. The Audit Committee reviews
and approves audit reports prepared by the internal auditors and independent
auditors, reviews and recommends the independent auditors to be engaged by the
Company, and reviews and approves internal audit policies and programs. The
Audit Committee met four times during the fiscal year ended September 30, 1999.
5
<PAGE>
Stock Performance Graph
Set forth below is a stock performance graph comparing the yearly total
return on the Company's Common Stock commencing with the closing price on
January 8, 1999, the first day the Common Stock was publicly traded, with (a)
the cumulative total return on stocks included in the Nasdaq Composite Index,
and (b) the cumulative total return on stocks included in the SNL Mid-Atlantic
Thrift Index.
There can be no assurance that the Company's stock performance will
continue in the future with the same or similar trend depicted in the graph. The
Company will not make or endorse any predictions as to future stock performance.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Period Ending
-------------------------------------------------------------
1/7/99 3/31/99 6/30/99 9/30/99
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Provident Bancorp, Inc. 100.00 89.58 91.93 107.87
Nasdaq Composite Index 100.00 104.62 114.47 117.10
SNL Mid-Atlantic Thrift Index 100.00 92.38 91.40 81.91
</TABLE>
6
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Company does not independently compensate its executive officers,
directors, or employees. The Human Resources Committee of the Bank retains the
principal responsibility for the compensation of the officers, Directors and
employees of the Bank, including the benefits they receive. The Human Resources
Committee consists of Directors Zeh (who serves as Chairman), Helmer, McNelis,
Nozell and Strayton. Mr. Strayton is also the President and Chief Executive
Officer of the Company and the Bank. Mr. Strayton offers input and advice as to
executive compensation affecting members of the senior management team other
than himself. Compensation decisions and recommendations made as to Mr. Strayton
are made without the participation of Mr. Strayton, who recuses himself from any
such discussions.
During the fiscal year ending September 30, 1999, the Company had no
"interlocking" relationships in which (1) any Executive Officer is a member of
the Board of Directors of another entity, one of whose executive officers is a
member of the Company Board of Directors, or (2) any Executive Officer is a
member of the compensation committee of another entity, one of whose executive
officers is a member of the Company's Board of Directors.
Report of the Compensation Committee
Under rules established by the SEC, the Company is required to provide
certain data and information in regard to the compensation and benefits provided
to the Company's Chief Executive Officer and other executive officers of the
Company. The disclosure requirements for the Chief Executive Officer and other
executive officers include the use of tables and a report explaining the
rationale and considerations that led to fundamental executive compensation
decisions affecting those individuals. In fulfillment of this requirement, the
Human Resources Committee of the Bank, at the direction of the Board of
Directors, has prepared the following report for inclusion in this proxy
statement.
The executive compensation program of the Bank is designed to attract
and retain experienced, motivated and productive officers who will help the Bank
reach its strategic and financial objectives. The compensation program is made
up of base salary, short and long-term incentive compensation, and benefits. The
following is a discussion of each component of the compensation program.:
o Base Salary. Salaries paid to executives are designed to be competitive
with other financial institutions of similar size and locations.
Salaries are paid for performance and the successful completion of job
description responsibilities and accompanying standards.
o Incentive Compensation. Short and long-term incentives are paid for
operating plan completion, return to the bank from the operating plans
and bank profitability. The Bank will continue to provide short-term
cash incentive opportunities and intends to offer long-term incentives
in the form of stock options.
o Benefits. The Bank sponsors a variety of benefit plans, including the
Provident Bank Employee Stock Ownership Plan (the "ESOP"), a 401(k)
plan, the Provident Bank Defined Benefit Pension Plan, and for certain
senior executives, a supplemental executive retirement plan. Both the
ESOP and the 401(k) plan promote equity ownership in the Company and
the Bank by investment in Common Stock.
The Human Resources Committee of the Board of Directors is responsible
for the performance review of the Chief Executive Officer, who in turn reviews
each member of senior management. Compensation strategy is tied to performance,
productivity, operating results and market competitiveness. Incentive
compensation for officers is based upon completion of operating plans, their
degree of difficulty, returns to the Bank, and Bank profitability. The Human
Resources Committee annually reviews officer salaries, and other aspects of
executive compensation. The committee reviews compensation levels for
competitiveness and reasonableness as compared to industry peers and competitors
from information gathered by external consultants. During 1999, the Bank engaged
the Bassett Group to review Bank-wide salary scales and to provide recommended
revisions.
7
<PAGE>
The Bassett Group utilized the following information to assist in
making its recommendations:
1999 America's Community Bankers' Compensation Survey
1999 SNL Executive Compensation Review
1998 Report of Segal & Co. on Bank Compensation
The Bank expects to continue to utilize comparative salary data and
consultants to ensure a viable, competitive salary program.
Compensation for the Chief Executive Officer is comprised of base
salary, incentives and benefits. The Chief Executive Officer's base salary is
determined by individual performance, competitive salaries, successful
accomplishment of strategic goals and Bank profitability. Specifically, both a
short-term incentive plan and a long term incentive plan provide goals for
targeted returns on the Bank's equity for specified periods. Based on the Bank's
actual historical return on equity, the Chief Executive Officer's short-term
incentive compensation for 1999 was equal to approximately 45% of his base
salary, while his long-term incentive compensation was equal to approximately
25% of his base salary.
This report has been provided by the Human Resources Committee:
F. Gary Zeh Richard A. Nozell
William F. Helmer George Strayton
Donald T. McNelis
8
<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth for the
years ended September 30, 1999 and 1998, certain information as to the total
remuneration paid by the Company to the Chief Executive Officer of the Company,
and the other four most highly compensated Executive Officers of the Company at
September 30, 1999 who received total annual compensation in excess of $100,000
(together, "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation (1) Long-Term Compensation
------------------------------ --------------------------------------------------------
Awards Payouts
----------------------- -------------------------------
Other
Year Annual Restricted All Other
Name and Ended Compensation Stock Options/ LTIP Compensation
Principal Position 9/30 (1) Salary Bonus (2) Awards SARS Payouts (3)
- ------------------------- --------- --------- --------- --------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George Strayton, President, 1999 $ 291,231 $ 123,300 -- -- -- $68,500 $17,933
Chief Executive Officer 1998 258,954 117,900 -- -- -- 13,100 33,349
and Director
Daniel G. Rothstein, 1999 $ 164,592 $ 59,963 -- -- -- $39,975 $12,981
Executive Vice President, 1998 158,250 57,525 -- -- -- 7,670 17,247
Chief Credit Officer
and Regulatory Counsel
Robert J. Sansky 1999 $ 149,316 $ 54,263 -- -- -- $36,175 $12,767
Executive Vice President and 1998 142,974 51,713 -- -- -- 6,895 16,613
Director of Human Resources
Stephen G. Dormer 1999 $ 133,385 $ 48,375 -- -- -- $32,250 $ 5,754
Senior Vice President and 1998 127,908 42,865 -- -- -- 6,235 9,003
Director of Business Activity
Katherine A. Dering 1999 $ 132,193 $ 47,813 -- -- -- $31,875 $ 5,606
Senior Vice President and 1998 126,107 44,813 -- -- -- 5,975 9,195
Chief Financial Officer
</TABLE>
(1) In accordance with the rules on executive officer and director compensation
disclosure adopted by the SEC, Summary Compensation information is excluded
for the fiscal year ended September 30, 1997, as the Bank was not a public
company during this period.
(2) The Bank provides certain members of senior management with 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 each
officer. The value of such personal benefits is not included in this table.
(3) Includes employer contributions to a 401(k) Plan on behalf of Named
Executive Officers, as well as the payment of premiums for life insurance
policies.
Employment Agreements. In January 1996, the Bank entered into an
employment agreement with George Strayton, the President and Chief Executive
Officer of the Bank, which agreement was amended in 1998. On each day during the
term of the agreement, the term of the agreement automatically renews so that
the agreement shall continually be for a three-year term unless notice of
non-renewal is provided at least 60 days prior to the anniversary date of the
agreement. In the event that notice of non-renewal is given, the agreement will
expire at the end of its then three-year term. Under the agreement, Mr. Strayton
will be paid $300,000 (the current annual rate of salary). For each calendar
year beginning after a change in control (as defined in the agreement) of the
Bank or Company, Mr. Strayton's annual salary will be increased by a formula set
forth in the agreement. In addition to his annual salary, Mr. Strayton is
entitled to participate in all tax-qualified plans and other incentive programs
of the Bank, and the Bank's group life, health, dental and disability plans.
In the event the Bank terminates Mr. Strayton's employment for any
reason other than for cause (as defined in the agreement), in the event of his
voluntary resignation within one year following a demotion in title or duties or
a change in control of the Bank or the Company, or in the event of termination
of his employment due to total and permanent disability, then Mr. Strayton will
be entitled to certain benefits payable by the Bank. These benefits include his
earned but unpaid salary, continuation of his life, health and disability
insurance benefits for the remaining unexpired
9
<PAGE>
employment period under the agreement, and continued health coverage for Mr.
Strayton and his spouse for their remaining lifetimes. Mr. Strayton will also be
entitled to certain lump sum payments, such as the present value of any salary
and director's fees that he would have earned for the remaining unexpired
employment period under the agreement. Within 60 days of termination of his
employment, Mr. Strayton will also be entitled to payments relating to the
Bank's defined benefit pension plan, 401(k) Plan, ESOP and Supplemental
Executive Retirement Plan. Mr. Strayton will also be entitled to immediate
vesting of any unearned options or shares of restricted stock awarded to him
under any stock benefit plan maintained by the Company, and the payments that
would have been made to him under all incentive compensation plans and programs
adopted by the Bank, including the Management Incentive Program. In the event
that the Bank gives Mr. Strayton a notice of non-renewal, or if the Bank does
not extend the employment period at least 60 days prior to any renewal date set
forth under the agreement, Mr. Strayton may resign from the Bank at any time and
will receive a lump sum cash benefit within 30 days equal to the amounts set
forth above. Also, in such event the Bank will provide the life and health
insurance benefits set forth above. In the event that Mr. Strayton becomes
subject to an excise tax on payments made under the agreement in connection with
a change in control, Mr. Strayton will be reimbursed an amount determined
pursuant to a formula set forth in the agreement for payment of such excise
taxes by the Bank, so long as during the six-month period prior to such change
in control the Bank was in compliance with all applicable minimum regulatory
capital requirements. For a period of one year following the date of his
termination with the Bank for reasons other than for cause, the agreement
provides that Mr. Strayton shall not compete with the Bank.
In connection with its conversion to a stock bank, the Bank entered
into employment agreements with five other officers, including Messrs.
Rothstein, Sansky, Dormer, and Ms. Dering. The employment agreements are for
terms of up to two years and renew on a daily basis so that the remaining term
under the agreements is for up to two years unless notice of non-renewal is
given. Each Executive Officer covered by an employment agreement receives an
annual rate of salary, as specified in the employment agreement, and will be
entitled to participate in all tax-qualified plans and other incentive programs
of the Bank, and any group life, health, disability plans maintained by the Bank
from time to time. The employment agreements for the five other officers are
substantially similar to the agreement with Mr. Strayton except that the health
coverage for the remaining officers does not continue for their lifetimes.
Supplemental Executive Retirement Plan. The Bank maintains a
non-qualified supplemental executive retirement plan ("SERP") to compensate
executives whose benefits under the Bank's tax-qualified benefit plans are
limited by the Internal Revenue Code of 1986, as amended (the "Code," and, such
limitations, the "Applicable Limitations"). The SERP provides executives with
retirement benefits generally equal to the difference between (i) the annual
benefit the executive would have received under the Bank's Retirement Plan if
such benefits were computed without giving effect to the limitations on benefits
imposed by the Code, and (ii) the amounts actually payable to the executive
under the terms of the Retirement Plan. In addition, the executive is entitled
to a 401(k) benefit under the SERP equal to the product of (i) Bank
contributions that could not be credited to his or her account in the 401(k)
Plan due to the Applicable Limitations plus an earnings factor, and (ii) his or
her vested percentage in the 401(k) Plan. The SERP was amended in connection
with the adoption of the ESOP so that an executive who does not receive the
maximum contribution under the ESOP due to one of the Applicable Limitations
will be entitled to an ESOP benefit under the SERP, credited in units of the
Company's Common Stock, equal to the difference between the fair market value of
the number of shares of Common Stock of the Company that would have been
allocated to the account of the executive under the ESOP had the limitations
under the Code not been applicable, and the fair market value of the number of
shares of Common Stock actually allocated to the account of the executive. The
SERP is considered an unfunded plan for tax and ERISA purposes. All obligations
arising under the SERP are payable from the general assets of the Bank, however,
the Bank has set up a trust, to ensure that sufficient assets will be available
to pay the benefits under the SERP. The trust is entitled to purchase Common
Stock to fund the ESOP benefit under the SERP.
As of October 1, 1998, Mr. Strayton had accrued an annual benefit of
$25,284 under the Retirement Plan portion of the SERP, which would be payable
upon his reaching age 65. Benefits available to all Named Executive Officers
under the 401(k) portion of the SERP are included in "--Summary Compensation
Table," above.
Defined Benefit Pension Plan. The Bank maintains the Provident Bank
Defined Benefit Pension Plan (the "Retirement Plan") which is a qualified,
tax-exempt defined benefit plan. 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
10
<PAGE>
the year are eligible to accrue benefits under the Retirement Plan. The Bank
contributes each year, if necessary, an amount to the Retirement Plan at least
equal to the actuarially determined minimum funding requirements in accordance
with ERISA. For the plan year ended September 30, 1999, a contribution of
approximately $572,000 was made to the Retirement Plan. At September 30, 1999,
the total market value of the Retirement Plan trust fund assets was
approximately $6.5 million.
In the event of retirement at normal retirement age (i.e., the later of
age 65 or the 5th anniversary of participation in the Retirement Plan), the plan
provides a single life annuity. For a married participant, the normal form of
benefit is an actuarially reduced joint and survivor annuity where, upon the
participant's death, the participant's spouse is entitled to receive a benefit
equal to 50% of that paid during the participant's lifetime. Alternatively, a
participant may elect (with proper spousal consent, if necessary) a joint and
100% survivor annuity, a joint and 75% survivor annuity, a different form of
annuity, or installments payable over a period of not more than the life of the
participant (and spouse, if applicable). Payment may be made in a lump sum in
cash, provided the participant has completed 20 years of service and attained
age 55 or has attained normal retirement age. All forms in which a participant's
benefit may be paid will be actuarially equivalent to the single life annuity.
The monthly retirement benefit provided is an amount equal to the greater of a
participant's frozen accrued benefit (as provided for in the Retirement Plan) or
1.6% of a participant's average monthly compensation, multiplied by the
participant's years of service (up to a maximum of 35 years) plus 0.5% of the
participant's average monthly compensation in excess of one-twelfth of the
participant's Covered Compensation (as defined in the Retirement Plan)
multiplied by the participant's months of service (up to a maximum of 35 years),
computed to the nearest dollar. Retirement benefits are also payable upon
retirement due to early and late retirement or death and disability. A reduced
benefit is payable upon early retirement at or after age 55 and the completion
of 10 years of vested service with the Bank. No reduction in benefit will occur
as a result of special early retirement on or after age 62 and the completion of
20 years of vested service, if payment is made at the time of retirement. Upon
termination of employment other than as specified above, a participant who has
five years of vested service is eligible to receive his or her accrued benefit
commencing on such participant's retirement date, death or disability.
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 average monthly
salary and benefit service classifications specified below.
<TABLE>
<CAPTION>
Average Years of Service and Annual Benefit Payable at Retirement
Monthly ---------------------------------------------------------------
Compensation 15 20 25 30 35
------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$4,167 $ 13,416 $ 17,892 $ 22,356 $ 26,832 $ 31,306
6,250 21,288 28,392 35,484 42,576 49,678
8,333 29,160 38,880 48,612 58,332 68,050
10,417 37,044 49,392 61,740 74,088 86,431
$13,333 and above(1) 48,060 64,080 80,112 96,132 112,150
</TABLE>
- --------------------
(1) Reflects the maximum benefit payable under the Retirement Plan due to tax
law limits.
As of September 30, 1999, Messrs. Strayton, Rothstein, Sansky, and
Dormer, and Ms. Dering had 17, 17, 14, 5 and 5 years, respectively, of credited
service (i.e., benefit service) under the Retirement Plan.
Compensation of Directors
Fees. Directors of the Bank receive an annual retainer fee of $12,000,
plus a fee of $700 per Board meeting attended, and $400 per committee meeting
attended. The Chairman of each committee receives an additional $2,000 per year.
Directors who are also employees of the Bank are not eligible to receive any
fees for their service as a Director.
Deferred Compensation Agreements. The Bank has entered into
nonqualified deferred compensation agreements ("DCA") for the benefit of all of
the Bank's Directors. The DCAs comprise a non-qualified deferred compensation
plan into which a non-employee director can defer up to 100% of his board fees
earned during the calendar year. The DCA permits each Director to determine
whether to invest all or a portion of his account in Common Stock,
11
<PAGE>
in accordance with the tax law limitations. When a Director reaches the
mandatory retirement age, the Director's account will be paid to him in
generally equal quarterly installments beginning on the first day of the first
calendar quarter after the Director becomes entitled to such payments and
continuing for five years. A Director may elect to receive distributions from
the plan prior to the Director's mandatory retirement age, and such
distributions may be paid over a longer period of time. In the event of the
Director's death, the balance of the Director's account will be paid to the
Director's designated beneficiary in the first calendar quarter after death. A
Director may also request a distribution from his account in the event the
Director suffers a hardship, such as a sudden or unexpected illness or accident,
affecting the Director, his beneficiary, or family member. Whether to grant a
hardship distribution is within the sole discretion of the Board.
The amount of a Director's account invested in common stock will be
credited with any earnings and appreciation on such investment, and any other
amounts will earn interest at a rate equal to the 10-year Federal Home Loan Bank
Advance Rate, or at another rate established by the committee that administers
the DCAs. The DCA is an unfunded plan for tax purposes and for purposes of
ERISA. All obligations arising under the DCAs are payable from the general
assets of the Bank, however, the Bank has established a trust to ensure that
sufficient assets will be available to pay the benefits under the DCAs.
Transactions With Certain Related Persons
No Directors, Executive Officers or immediate family members of such
individuals were engaged in transactions with the Company or any subsidiary
involving more than $60,000 (other than through a loan) during the fiscal year
ending September 30, 1999. In addition, during the fiscal year ending September
30, 1999, no Directors, Executive Officers or immediate family members of such
individuals were involved in loans from the Company or the Bank involving more
than $60,000 which had not been made in the ordinary course of business and on
substantially the same terms and conditions, including interest rate and
collateral, as those of comparable transactions prevailing at the time with
other persons, and do not include more than the normal risk of collectibility or
present other unfavorable features.
- --------------------------------------------------------------------------------
PROPOSAL II--APPROVAL OF THE PROVIDENT BANK
2000 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
General
The Board of Directors intends to adopt the Provident Bank 2000 Stock
Option Plan (the "Stock Option Plan"). Under the Stock Option Plan, 386,400
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 the Company's authorized-but-unissued shares. To the extent shares
under the Stock Option Plan are issued 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 that 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 and the Bank
most depends. Attached as Appendix A to this Proxy Statement is the complete
text of the Stock Option Plan.
12
<PAGE>
Effective upon stockholder approval and Board ratification of the Stock
Option Plan, the awards to outside directors set forth in the plan will become
effective and it is expected that the Board of Directors of the Company will
grant to Named Executive Officers, Directors, executive officers as a group,
non-employee directors as a group and certain employees of the Bank options
(with limited rights in the case of options granted to employees) to purchase
the following number of shares of common stock. In addition, 12,520 options will
be reserved for future issuance to employees and directors as an incentive to
perform in a superior manner as well as to attract people of experience and
ability.
<TABLE>
<CAPTION>
Number of Shares
Name and to be Received upon
Principal Position Exercise of Options (1)
- ------------------ -----------------------
<S> <C>
William F. Helmer, 11,000
Chairman of the Board
George Strayton, President, 90,000
Chief Executive Officer and
Director
Dennis L. Coyle, Vice Chairman 11,000
Donald T. McNelis, Director 11,000
Richard A. Nozell, Director 11,000
William R. Sichol, Jr., Director 11,000
Wilbur C. Ward, Director 11,000
F. Gary Zeh, Director 11,000
Judith Hershaft, nominee for Director 11,000
Thomas F. Jauntig, Jr., 11,000
nominee for Director
Burt Steinberg, nominee for Director 11,000
Daniel G. Rothstein, 20,200
Executive Vice President,
Chief Credit Officer and
Regulatory Counsel
Robert J. Sansky, 18,200
Executive Vice President and
Director of Human Resources
Katherine A. Dering, 16,200
Senior Vice President and
Chief Financial Officer
Stephen G. Dormer, 16,200
Senior Vice President and
Director of Business Activity
All executive officers as a group (6 persons) 177,000
All nonemployee directors as a group, including nominees (10 persons) (2) 110,000
All employees, not including executive officers, as a group (39 persons) 93,480
</TABLE>
- ------------------
(1) The value of the stock options is not determinable because the exercise
price will be equal to the fair market value of the Company's Common Stock
at the effective time of the award.
(2) All options granted to nonemployee directors will be nonstatutory stock
options.
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 Stock Option Plan will be administered by a committee (the
"Committee") consisting of either two or more "non-employee directors" of the
Company (as defined in the Stock Option Plan), or the entire Board of the
Company. The members of the Committee shall be appointed by the Board of the
Bank. 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
13
<PAGE>
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.
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 shares purchased in the open market. 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.
Stock Options
All stock options will be exercisable in 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 an
incentive stock option or right was granted ceases to maintain continuous
service due to normal retirement (as defined in the Stock Option Plan), such
individual may to the extent such option or right was exercisable at the date of
cessation of service, continue to exercise such option or right for up to three
years but in no event after the expiration date of such option or right. If an
individual to whom a non-statutory stock option was granted ceases to maintain
continuous service for any reason (excluding death or disability, and
termination of employment by the Company or any affiliate following a change in
control or for cause), such individual may for a three 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 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 occurrence of such event and shall remain
exercisable for a three year period, provided, however, that in the case of an
incentive stock option, the option will become a non-statutory stock option if
not exercised within three months of termination of employment.
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.
14
<PAGE>
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, in shares of stock of the Company,
or in the event of a merger transaction, in 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 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.
15
<PAGE>
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 will 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 will 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
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 Bank 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 UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE PROVIDENT BANK 2000 STOCK OPTION PLAN.
- --------------------------------------------------------------------------------
PROPOSAL III--APPROVAL OF THE PROVIDENT BANK
2000 RECOGNITION AND RETENTION PLAN
- --------------------------------------------------------------------------------
General
The Board of Directors intends to adopt the Provident Bank 2000
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 and the Bank in a manner designed to encourage the
continued performance and service of such individuals with the Company and the
Bank. Up to 193,200 shares of Common Stock may be awarded under the RRP.
Attached as Appendix B to this Proxy Statement is the complete text of the RRP.
16
<PAGE>
Shares of Common Stock restricted by the terms of the Recognition Plan
will be awarded in the following amounts to Named Executive Officers, Directors,
Executive Officers as a group, and nonemployee Directors.
<TABLE>
<CAPTION>
Name and
Principal Position Dollar Value (1) Number of Shares
- ------------------ ---------------- ----------------
<S> <C> <C>
William F. Helmer,
Chairman of the Board $ 112,732 7,245
George Strayton, President, 751,548 48,300
Chief Executive Officer and
Director
Dennis L. Coyle, Vice Chairman 112,732 7,245
Donald T. McNelis, Director 112,732 7,245
Richard A. Nozell, Director 112,732 7,245
William R. Sichol, Jr., Director 112,732 7,245
Wilbur C. Ward, Director 112,732 7,245
F. Gary Zeh, Director 112,732 7,245
Daniel G. Rothstein, 330,681 21,252
Executive Vice President,
Chief Credit Officer and
Regulatory Counsel
Robert J. Sansky, 300,619 19,320
Executive Vice President and
Director of Human Resources
Katherine A. Dering, 240,485 15,456
Senior Vice President and
Chief Financial Officer
Stephen G. Dormer, 240,485 15,456
Senior Vice President and
Director of Business Activity
All executive officers as a 2,104,334 135,240
group (6 persons)
All nonemployee directors 901,858 57,960
as a group (8 persons)(2)
</TABLE>
- ------------------
(1) Based on the closing price on December 31, 1999 of $15.56 per share.
(2) Includes shares to be received by a retiring Director whose service will
terminate as of the date of the Meeting.
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, described below.
The RRP will be administered by a committee of the Board consisting of
either two or more "non-employee directors" of the Company or the entire Board
of the Company (the "RRP Committee"). The members of the RRP Committee shall be
appointed by the Board of the Bank. The RRP Committee will select the recipients
and terms of awards pursuant to the RRP, and may determine to accelerate the
vesting 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 September 30, 1999, there were 8
non-employee directors eligible to participate in the RRP.
RRP Shares used to fund awards may be either authorized but unissued
shares, treasury shares or shares acquired in the open market. To the extent
that the Company utilizes authorized but unissued shares to fund the RRP, the
voting interests of current stockholders will be diluted.
17
<PAGE>
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 service
(as defined in the RRP) as an employee, officer or director of the Company or
the Bank for the stipulated period.
In the event a recipient ceases to maintain continuous service with the
Company or the Bank by reason of death or disability, following a change in
control, or in the case of an employee recipient of an RRP award, normal
retirement (as defined in the RRP) 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 RRP.
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 RRP Shares will recognize ordinary income on the date that
the RRP Shares 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 RRP Shares. Holders of
RRP Shares 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 UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE PROVIDENT BANK 2000 RECOGNITION AND RETENTION PLAN.
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PROPOSAL IV--RATIFICATION OF APPOINTMENT OF AUDITORS
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The Board of Directors of the Company has approved the engagement of
KPMG LLP 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
KPMG LLP for the Company's fiscal year ending September 30, 2000. A
representative of KPMG LLP 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 KPMG LLP 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 KPMG LLP as auditors for
the 2000 fiscal year.
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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, 400 Rella
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Boulevard, Montebello, New York 10901, no later than September 18, 2000. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
Under the Company's Bylaws, certain procedures are provided which a
stockholder must follow to nominate persons for election as directors or to
introduce an item of business at a meeting of stockholders. These procedures
provide, generally, that stockholders desiring to make nominations for
directors, or to bring a proper subject of business before the meeting, must do
so by a written notice timely received (generally not later than 5 days in
advance of such meeting, subject to certain exceptions) by the Secretary of the
Company.
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OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in the Proxy Statement. However,
if any matters should properly come before the 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 Meeting, as to which
they shall act in accordance with their best judgment.
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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-K FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1999, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF
THE RECORD DATE UPON WRITTEN OR TELEPHONIC REQUEST TO ROBERTA LENETT, VICE
PRESIDENT, SHAREHOLDER RELATIONS, 400 RELLA BOULEVARD, MONTEBELLO, NEW YORK OR
CALL (914) 369-8040.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Carol Benoist
Carol Benoist
Secretary
Montebello, New York
January 14, 2000
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APPENDIX A
PROVIDENT BANK
2000 STOCK OPTION PLAN
I. Establishment of Plan
Provident Bank (the "Bank") hereby establishes the Provident Bank 2000
Stock Option Plan (the "Plan") upon the terms and conditions hereinafter stated
in the Plan.
2. Purpose
The purpose of the Provident Bank 2000 Stock Option Plan (the "Plan")
is to advance the interests of the Bank, Provident Bancorp, Inc. (the "Company")
and the Company's stockholders by providing Key Employees and Outside Directors
of the Bank and its Affiliates, including the Company, 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.
3. Definitions
"Affiliate" means any "parent corporation" or "subsidiary corporation"
of 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 Provident 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
Bank or its Affiliate, as applicable.
"Cause" means an 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.
"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 Home Owners' Loan Act of 1933, as amended, and
applicable rules and regulations promulgated thereunder, as in effect at the
time of the Change in Control (collectively, the "HOLA"); 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
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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 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 of the Company 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 $.10 per share.
"Company" means Provident 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 11 hereof.
"Effective Date" means the date of, or a date determined by the Board
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
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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.
"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 9.
"Key Employee" means any person who is currently employed by the Bank
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 10.
"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 or
following attainment of age 62.
"Offering" means the January 7, 1999 subscription offering of the
Common Stock of the Company.
"Outside Director" means a Director of the Bank or an Affiliate who is
not an employee of the Company or an Affiliate.
"Option" means an Award granted under Section 8 or Section 9.
"Participant" means a Key Employee or Outside Director of the Bank 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 20.
"Right" means a Limited Right or a Dividend Equivalent Right.
4. 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 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.
5. 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.
6. Stock Subject to the Plan
Subject to adjustment as provided in Section 18, the maximum number of
shares reserved for issuance under the Plan is 386,400 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.
7. Eligibility
Key Employees of the Bank 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.
8. 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 8. The
maximum number of shares subject to a Non-Statutory Option that may be awarded
under the Plan to any Key Employee shall be 193,200.
(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 on the Date of Grant, unless another
purchase price is set by the Committee. 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 at the
Fair Market Value of such shares determined in the manner described in Section
3.
(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
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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 in shares of Common Stock. If shares of Common Stock
are tendered in payment of all or part of the exercise price, the Fair Market
Value of such shares shall be determined as of the date of such exercise in the
manner described in Section 3.
(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 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 three (3) years 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 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
three (3) 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 set forth in the written
option agreement.
(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.
9. 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 Bank 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.
(b) Price. Subject to Section 18 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 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
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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 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 3.
(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 Bank or his designee. Such notice is
irrevocable and must be accompanied by full payment of the purchase price in
cash or in shares of Common Stock, the Fair Market Value of which shares shall
be determined on the exercise date in the manner described in Section 3.
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, 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 9 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 193,200. 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 of
classified assets, and independent audit findings. The provisions of this
Section 9(e) shall be construed and applied in accordance with Section 422(d) of
the Code and the regulations, if any, promulgated thereunder.
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(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 employment 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. Upon the termination of a
Key Employee's employment due to Normal Retirement, the Key Employee's Incentive
Stock Options shall be exercisable only as to those shares that were immediately
purchasable by such employee at the date of Normal Retirement for a period of up
to three (3) years following Normal Retirement, provided, however, that any such
Option shall not be eligible for treatment as an Incentive Stock Option Plan if
exercised more than three (3) months following Normal Retirement. 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 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 three (3) 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.
Notwithstanding anything herein to the contrary, in no event shall the
period within which an Option may be exercised extend beyond the expiration of
the Option term set forth in the written option agreement.
(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 9
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.
10. 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:
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(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.
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.
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 Bank 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.
11. 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 11(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 20.
(c) Extraordinary Dividend. For purposes of this Section 11, 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.
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12. 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 Bank for payment of a
Participant's withholding tax under Section 20. 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.
13. 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 Bank 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 Bank 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 Bank 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.
14. 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 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.
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15. 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 Bank or its Affiliates or to continue to perform services for the Bank or
its Affiliates or interferes in any way with the right of the Bank or its
Affiliates to terminate his services as an officer, director or employee at any
time.
16. 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.
17. 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.
18. 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.
19. 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
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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
(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.
20. 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.
21. 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.
22. 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.
23. 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.
24. Applicable Law
The Plan will be administered in accordance with the laws of the State
of New York.
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IN WITNESS WHEREOF, the Bank has caused the Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
as of the ________ day of _________________, 2000.
Date Approved by Stockholders: ___________________
Effective Date: ___________________
ATTEST: PROVIDENT BANK
- ------------------------------- ----------------------------------
Secretary President
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APPENDIX B
PROVIDENT BANK
2000 RECOGNITION AND RETENTION PLAN
1. Establishment of the Plan; Creation of Separate Trust
(a) Provident Bank (the "Bank") hereby establishes the Provident
Bank 2000 Recognition and Retention Plan (the "Plan") upon the terms and
conditions hereinafter stated in the Plan.
(b) A separate trust or trusts has been established to purchase
shares of the Common Stock that will be awarded hereunder (the "Trust"). If a
Recipient hereunder fails to satisfy the conditions of the Plan and forfeits all
or any portion of the Common Stock awarded to him or her, such forfeited shares
will be returned to said Trust.
2. Purpose of the Plan
The purpose of the Plan is to advance the interests of the Bank and
Provident Bancorp, Inc. (the "Company") and the Company's stockholders by
providing Key Employees and Outside Directors of the Bank and its Affiliates,
including the Company, upon whose judgment, initiative and efforts the
successful conduct of the business of the Bank and its Affiliates largely
depends, with compensation for their contributions to the Bank 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 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 Provident 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
Bank or an 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 Company within
the meaning of the Home Owners' Loan Act of 1933, as amended, and applicable
rules and regulations promulgated thereunder, as in effect at the time of the
Change in Control (collectively, the "HOLA");
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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 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 of the Company 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 $.10 per share.
"Company" means Provident 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 and continuation as a Director Emeritus following cessation of service
as a Director. 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, and includes persons who were
members of the Board on the date the Plan is initially approved by the Board.
"Director Emeritus" means a former member of the Board who is
designated as a Director Emeritus by 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
following, approval of the Plan by the Company's stockholders.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Key Employee" means any person who is currently employed by the Bank
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.
"Normal Retirement" means for a Key Employee, retirement at or
following attainment of age 62. The term "Normal Retirement" shall not apply to
an Outside Director.
"Offering" means the January 7, 1999 subscription offering of the
Common Stock of the Company.
"Outside Director" means a Director of the Bank or an Affiliate who is
not an employee of the Company or an Affiliate. For purposes of this Plan
"Outside Director" shall also mean a Director Emeritus who continues
participation in the Plan after retirement from the Board.
"Recipient" means a Key Employee or Outside Director of the Bank 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 of the
Bank. The Bank Board may in its discretion from time to time remove members
from, or add members to, the Committee. The Board of the Company 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;
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(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.
(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 Charter 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 193,200.
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,
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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.
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, in the case of a Key Employee,
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, Following
a Change in Control and in the Case of a Key Employee, Normal Retirement.
Notwithstanding the general rule contained in Section 6(a), Restricted Stock
awarded to a Recipient whose employment with the Bank or an Affiliate or service
on the Board terminates due to death, Disability, following a Change in Control,
and in the case of a Key Employee, Normal Retirement shall be deemed earned as
of the Recipient's last day of employment with the Bank 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 Bank or an Affiliate or an Outside Director
whose service is terminated by the Bank 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:
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"The transferability of this certificate and the
shares of stock represented hereby are subject to the terms
and conditions (including forfeiture) contained in the
Provident Bank 2000 Recognition and Retention Plan. Copies of
such Plan are on file in the offices of the Secretary of
Provident Bank 400 Rella Boulevard, Montebello, New York
10901."
(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 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(c) 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.
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<PAGE>
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 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 Bank 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 State of New York.
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.
IN WITNESS WHEREOF, the Bank has caused the Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
as of the ___________ day of __________________, 2000.
Date Approved by Shareholders: _______________
Effective Date: _______________
ATTEST: PROVIDENT BANK
- ------------------------------- ----------------------------------
Secretary President
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REVOCABLE PROXY
Provident Bancorp, Inc.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
Annual Meeting of Stockholders
February 22, 2000
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 Holiday Inn of Suffern, 3 Executive
Boulevard, Suffern, New York, on February 22, 2000, at 10:00 a.m. local time.
The official proxy committee is authorized to cast all votes to which the
undersigned is entitled as follows:
1. The election as Directors of Donald T. McNelis, Richard A. Nozell, Thomas
F. Jauntig, Jr. and Judith Hershaft each to serve for a three-year term,
and Burt Steinberg to serve for a two-year term. (except as marked to the
contrary below):
[ ] For [ ] Withhold [ ] For All Except
INSTRUCTION: To withhold your vote for one or more nominees, mark "For All
Except" and write that nominee(s) name on the line below.
- --------------------------------------------------------------------------------
2. The ratification and approval of the Provident Bank 2000 Stock Option Plan.
[ ] For [ ] Against [ ] Abstain
3. The ratification and approval of the Provident Bank 2000 Recognition and
Retention Plan.
[ ] For [ ] Against [ ] Abstain
4. The ratification of KPMG LLP as the Company's independent auditors for the
fiscal year ended September 30, 2000.
[ ] For [ ] Against [ ] Abstain
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE ANNUAL MEETING. [ ]
The Board of Directors recommends a vote "FOR" each of the listed
proposals.
This proxy 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.
Please be sure to sign and date
this Proxy in the box below.
______________________________________
Date
______________________________________
Stockholder sign above
______________________________________
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage-prepaid envelope provided.
Provident Bancorp, Inc.
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 dated
proxy prior to a vote being taken on a particular proposal at the Annual
Meeting.
The above signed acknowledges receipt from the Company prior to the execution
of this proxy of a notice of the Annual Meeting, a proxy statement dated January
14, 2000, and audited financial statements.
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.
