SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
First Essex Bancorp, Inc.
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(Name of Registrant as Specified In Its Charter)
Not Applicable
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[FIRST ESSEX BANKCORP LOGO]
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FIRST ESSEX BANCORP, INC.
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
to be held on May 1, 1997
and
PROXY STATEMENT
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IMPORTANT
Please mark, sign and date your proxy
and promptly return it in the enclosed envelope.
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[FIRST ESSEX BANKCORP LOGO]
March 31, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
First Essex Bancorp, Inc. (the "Corporation") to be held on Thursday, May 1,
1997, at 10:00 a.m., local time, at the Andover Country Club, 60 Canterbury
Street, Andover, Massachusetts.
The Annual Meeting has been called for the purpose of electing two Class I
Directors, each for a three-year term, approving the First Essex Bancorp,
Inc. 1997 Stock Incentive Plan (the "1997 Plan") and considering and voting
upon such other business as may properly come before the meeting or any
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 14, 1997
as the record date for determining stockholders entitled to notice of and to
vote at the Annual Meeting.
The Board of Directors of the Corporation recommends that you vote "FOR"
the election of the two nominees of the Board of Directors as Directors of
the Corporation and "FOR" the approval of the 1997 Plan.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
Very truly yours,
/s/ Leonard A. Wilson
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Leonard A. Wilson
President and Chief Executive Officer
CORPORATE HEADQUARTERS: 71 Main Street, Andover, MA 01810 Telephone 508 475-4313
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FIRST ESSEX BANCORP, INC.
71 Main Street
Andover, Massachusetts 01810
Telephone: (508) 475-4313
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Thursday, May 1, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of First
Essex Bancorp, Inc. (the "Corporation") will be held on Thursday, May 1,
1997, at 10:00 a.m., local time, at the Andover Country Club, 60 Canterbury
Street, Andover, Massachusetts, for the purpose of considering and acting
upon:
1. The election of two Class I Directors each for a three-year term;
2. The approval of the First Essex Bancorp, Inc. 1997 Stock Incentive
Plan; and
3. Such other business as may properly come before the meeting and any
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 14, 1997
as the record date for determination of stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournments or postponements
thereof. Only holders of common stock of record at the close of business on
that date will be entitled to notice of and to vote at the Annual Meeting and
any adjournments or postponements thereof.
In the event there are not sufficient votes with respect to the foregoing
proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies.
By Order of the Board of Directors
/s/ WILLIAM F. BURKE
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WILLIAM F. BURKE
Secretary
Andover, Massachusetts
March 31, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
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FIRST ESSEX BANCORP, INC.
71 Main Street
Andover, Massachusetts 01810
Telephone: (508) 475-4313
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Thursday, May 1, 1997
This Proxy Statement is being furnished to stockholders on or about March
31, 1997 in connection with the solicitation of proxies by the Board of
Directors of First Essex Bancorp, Inc. (the "Corporation") for use at the
Annual Meeting of Stockholders of the Corporation to be held on Thursday, May
1, 1997, at 10:00 a.m., local time, at the Andover Country Club, 60
Canterbury Street, Andover, Massachusetts, and any adjournments or
postponements thereof (the "Annual Meeting").
At the Annual Meeting, the stockholders of the Corporation will be asked
to consider and vote upon the following matters:
1. To elect two Class I Directors each for a three-year term, each such
term to continue until the 2000 annual meeting and until each such Director's
successor is duly elected and qualified;
2. To approve the First Essex Bancorp, Inc. 1997 Stock Incentive Plan (the
"1997 Plan"); and
3. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
The Notice of Annual Meeting, Proxy Statement and proxy card are first
being mailed to stockholders of the Corporation on or about March 31, 1997,
in connection with the solicitation of proxies for the Annual Meeting. The
Board of Directors has fixed the close of business on March 14, 1997, as the
record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting (the "Record Date"). Only holders of common
stock of record at the close of business on the Record Date will be entitled
to notice of and to vote at the Annual Meeting. As of the Record Date, there
were 7,480,830 shares of the Corporation's common stock, par value $0.10 per
share ("Common Stock"), outstanding and entitled to vote at the Annual
Meeting and 1,399 stockholders of record. Each holder of a share of Common
Stock outstanding as of the close of business on the Record Date will be
entitled to one vote for each share held of record for each matter properly
submitted at the Annual Meeting.
The presence, in person or by proxy, of a majority of the total number of
outstanding shares of Common Stock is necessary to constitute a quorum for
the transaction of business at the Annual Meeting. A quorum being present,
the affirmative vote of a plurality of the shares present and voting is
necessary to elect a nominee as a Director of the Corporation. The
affirmative vote of a majority of the shares present or represented by proxy
and voting with respect to the matter is required to approve the 1997 Plan.
Abstentions and broker non-votes will have no effect on the outcome of the
election of Directors. Abstaining from voting on the 1997 Plan will have the
same effect as voting against the proposal. However, broker non-votes will
not be included in the calculation of shares voting with respect to the 1997
Plan and will therefore have no effect on the outcome. Votes will be
tabulated by the Corporation's transfer agent, The First National Bank of
Boston, c/o Boston Equiserve Limited Partnership.
Stockholders of the Corporation are requested to complete, date, sign and
return the accompanying proxy card in the enclosed envelope. Common stock
represented by properly executed proxies received by the Corporation and not
revoked will be voted at the Annual Meeting in accordance with the
instructions contained therein. If instructions are not given therein,
properly executed proxies will be voted "FOR" the election of the two
nominees for Director listed in this proxy statement and "FOR" the approval
of the 1997 Plan. It is not anticipated that any matters other than the
election of Directors and the approval of the 1997 Plan will be presented at
the Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the discretion of the proxy holders.
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Any properly completed proxy may be revoked at any time before it is voted
by giving written notice of such revocation to the Secretary of the
Corporation, or by signing and duly delivering a proxy bearing a later date,
or by attending the Annual Meeting and voting in person.
ANNUAL REPORT TO STOCKHOLDERS; OTHER INFORMATION
The Annual Report of the Corporation, including financial statements for
the fiscal year ended December 31, 1996 ("fiscal 1996"), is being mailed to
stockholders of the Corporation concurrently with this Proxy Statement. The
Annual Report, however, is not a part of the proxy solicitation material.
Stockholders of record on March 14, 1997 will receive a Proxy Statement
and the Corporation's 1996 Annual Report to Stockholders, which contains
detailed financial information concerning the Corporation. The Corporation
will mail, without charge, a copy of its Annual Report on Form 10-K
(excluding exhibits) to any stockholder solicited hereby who requests it in
writing. Please submit any such written request to David W. Dailey, Chief
Financial Officer, First Essex Bancorp, Inc., 71 Main Street, Andover,
Massachusetts 01810.
GENERAL
First Essex Bancorp, Inc., a Delaware corporation, is the holding company
for First Essex Bank, FSB (the "Bank").
PROPOSAL ONE--ELECTION OF DIRECTORS
The Board of Directors of the Corporation currently consists of eight
members and is divided into three classes, two of which have three members
and one of which has two members. Directors serve for three year terms with
one class of Directors being elected by the Corporation's stockholders at
each annual meeting.
At the Annual Meeting, two Class I Directors will be elected to serve
until the 2000 annual meeting and until their successors are duly elected and
qualified. The Board of Directors has nominated Frank J. Leone, Jr. and
Robert H. Pangione to serve as Class I Directors. Unless otherwise specified
in the proxy, it is the intention of the persons named in the proxy to vote
the shares represented by each properly executed proxy for the election as
Directors of each of the nominees. Each of the nominees has agreed to stand
for election and to serve if elected as a Director. However, if any of the
persons nominated by the Board of Directors fails to stand for election or is
unable to accept election, the proxies will be voted for the election of such
other persons as the Board of Directors may recommend.
The Board of Directors of the Corporation recommends that the
Corporation's stockholders vote FOR the election of the two nominees of the
Board of Directors as Directors of the Corporation.
Information Regarding Directors and Nominees
The following table sets forth certain information as of February 28, 1997
concerning each Director of the Corporation, including the two Class I
Directors who have been nominated for re-election at the Annual Meeting,
based on information furnished by them to the Corporation.
Director
Name Age Since(1)
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CLASS I--TERM TO EXPIRE 1997
Frank J. Leone, Jr.* 57 1973
Robert H. Pangione* 61 1982
CLASS II--TERM TO EXPIRE 1998
Augustine J. Fabiani 66 1981
Walter W. Topham 58 1981
Leonard A. Wilson 57 1989
CLASS III--TERM TO EXPIRE 1999
Thomas S. Barenboim 41 1996
William L. Lane 55 1977
Robert H. Watkinson 56 1983
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* Nominee for election.
(1) The Bank converted from mutual to stock form in December 1986, and the
Corporation was simultaneously formed to be the holding company for the
Bank. All Directors of the Corporation were first elected on, and have
served as Directors since, December 17, 1986, except Messrs. Wilson and
Barenboim, who were elected to the Board effective as of February 16,
1989 and March 21, 1996, respectively. The year listed in the table is
the year in which the named individual became a Trustee of the Bank
(prior to its conversion from mutual to stock form) or a Director of the
Corporation. All Directors are also Directors of the Bank.
The principal occupation and business experience during at least the last
five years for each Director of the Corporation is set forth below.
Information regarding Mr. Wilson is set forth under the heading "Executive
Officers."
Thomas S. Barenboim is President and owner of Clark Chrysler-Plymouth Jeep
Eagle, Robert's Chrysler Plymouth, Thames Ford-Mercury, and I.T. Robert's
Autobody.
Augustine J. Fabiani is retired; he was formerly Division Personnel
Manager of Massachusetts Electric Co. in North Andover, Massachusetts.
William L. Lane is President and Chief Executive Officer of Valley
Regional Health System, Inc. and its subsidiary corporations, Holy Family
Hospital, Inc., Valley Regional Support Services, Inc., Valley Regional
Ventures, Inc., Andover Center for Physical Therapy and Holy Family Hospital
Foundation, Inc. The principal business of these corporations is to provide
acute hospital service. Mr. Lane has been the Chief Executive Officer of this
entity since 1971.
Frank J. Leone, Jr. is a partner in Leone Realty Trust, commercial real
estate. He was formerly President of F.J. Leone Furniture Co., Inc., a
furniture store that had been located in Methuen, Massachusetts.
Robert H. Pangione is President of MacDonald and Pangione Insurance
Agency, Inc. in North Andover, Massachusetts, and R.C. Briggs Insurance
Agency, Inc. in Amesbury, Massachusetts.
Walter W. Topham is a partner of Topham, Fardy & Co., Certified Public
Accountants, located in Andover, Massachusetts.
Robert H. Watkinson is Executive Director of Massachusetts Statewide
Emergency Telecommunications Board, in Reading, Massachusetts. He was
formerly a telecommunications consultant and a Managing Director of NYNEX, at
its facility in Boston.
Information Regarding the Board of Directors and its Committees
The Board of Directors of the Corporation held 18 meetings during fiscal
1996. During fiscal 1996, each of the incumbent Directors attended at least
75% of the total number of meetings of the Board and of the committees of
which he was a member.
The Corporation has four standing committees: an Executive Committee, an
Auditing Committee, a Compensation/Nominating Committee, and a Community
Reinvestment Act (CRA) Committee.
Executive Committee. The members of the Executive Committee are Messrs.
Leone, Pangione, Topham and Wilson. During fiscal 1996, the Executive
Committee of the Corporation met 19 times. The Executive Committee is vested
with authority of the Board in most matters between meetings of the Board.
Auditing Committee. The members of the Auditing Committee are Messrs.
Fabiani, Lane, Topham and Watkinson. The members of the Auditing Committee of
the Corporation also serve as members of the Auditing Committee of the Bank.
During fiscal 1996, the Auditing Committee of the Corporation met four times.
The Auditing Committee reviews the financial statements of the Corporation
and the scope of the annual audit, monitors the Corporation's internal
financial and accounting controls and recommends to the Board of Directors
the appointment of independent certified public accountants.
Compensation/Nominating Committee. The members of the
Compensation/Nominating Committee are Messrs. Barenboim, Fabiani, Pangione,
Topham and Wilson (ex officio). The members of the Compensation/
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Nominating Committee of the Corporation also constitute the Compensation/
Nominating Committee of the Bank. During fiscal 1996, the Compensation/
Nominating Committee of the Corporation met four times. The Compensation/
Nominating Committee recommends the compensation levels, positions and
titles of officers and employees of the Corporation to the Board of Directors.
The members of the Compensation/Nominating Committee also serve as the Option
Committee under the 1987 Stock Option Plan. The Compensation/Nominating
Committee recommends nominees for election as Directors of the Corporation. The
Compensation/Nominating Committee will consider nominees for Director
recommended by stockholders for the 1998 Annual Meeting. If any stockholder
desires to make such a recommendation, the name or names of the persons
recommended should be submitted in writing together with supporting information
with respect to the qualifications and experience of such persons. See
"Submission of Stockholder Proposals for 1998 Annual Meeting."
Community Reinvestment Act (CRA) Committee. The members of the CRA
Committee are Messrs. Leone and Watkinson. During fiscal 1996, the CRA
committee of the corporation met four times.
During fiscal 1996, Directors of the Corporation who are not employees of
the Corporation received $300 for each Board of Directors meeting they
attended. Members of the Executive Committee, the Auditing Committee, the
Compensation/Nominating Committee and the CRA Committee also received $300
for each committee meeting they attended. The Directors also received an
annual retainer of $7,500, two-thirds of which was payable in Common Stock,
and the other one-third payable in cash. No such fees are paid to Directors
who are also employees of the Corporation. The Directors of the Corporation
are also the Directors of the Bank. No additional fees or retainers are paid
to any Director for serving on the Bank's Board of Directors or any committee
thereof.
Beginning in 1997, Directors receive $400 for each Board of Directors
meeting they attend as well as for each committee meeting they attend as a
member of that committee. The annual retainer is payable solely in cash and
is now $10,000 per annum, payable on a quarterly basis.
PROPOSAL TWO--1997 STOCK INCENTIVE PLAN
The Board of Directors of the Corporation has adopted the 1997 Plan,
subject to approval by the stockholders. Under the Internal Revenue Code (the
"Code"), stockholder approval is necessary for stock options relating to the
shares issuable under the 1997 Plan to qualify as incentive stock options
under Section 422 of the Code. In addition, Nasdaq rules (the "Nasdaq Rules")
require stockholder approval of the 1997 Plan. Approval for purposes of the
Code and the Nasdaq Rules will require the affirmative vote of a majority of
the shares of Common Stock present or represented at the meeting and voting
on the 1997 Plan. The full text of the 1997 Plan as adopted by the Board of
Directors is printed as Appendix A, beginning on page A-1. The following is a
summary of some of its provisions.
The 1997 Plan will be administered by the Stock Incentive Plan Committee
(the "Plan Committee") of the Board of Directors consisting of all members of
the Compensation Committee who qualify as "Non-Employee Directors" within the
meaning of Section 16b-3 under the Exchange Act. The Plan Committee will
select the individuals to whom awards are granted and will determine the
terms of each award, subject to the provisions of the 1997 Plan. Awards may
be granted under the 1997 Plan to officers, directors and employees. As of
February 28, 1997, seven Directors (excluding Mr. Wilson, who is also an
employee of the Bank) and approximately 66 officers and 240 non-officer
employees were eligible to participate in the 1997 Plan.
The 1997 Plan authorizes the grant of (i) options to purchase Common Stock
intended to qualify as incentive stock options ("Incentive Options"), as
defined in Section 422 of the Code, (ii) options that do not so qualify
("Nonqualified Options"), (iii) shares of stock at no cost or at a purchase
price set by the Plan Committee, subject to restrictions and conditions
determined by the Plan Committee, (iv) unrestricted shares of stock at prices
set by the Plan Committee, (v) rights to acquire shares of Common Stock upon
attainment of performance goals specified by the Plan Committee, and (vi)
rights to receive cash payments based on or measured by appreciation in the
market price of the Common Stock ("Stock Appreciation Rights"). Up to 800,000
shares of Common Stock (subject to adjustment upon certain changes in the
capitalization of the Corporation) may be issued pursuant to awards granted
under the 1997 Plan.
No Incentive Options may extend for more than ten years from the date of
grant (five years in the case of an optionee who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Corporation or any parent or subsidiary
("greater-than-ten-percent-stockholders"). The exercise price of Incentive
Options granted under the 1997 Plan must be at least equal to the fair market
value of the Common Stock
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on the date of grant (110% of fair market value in the case of a
greater-than-ten-percent-stockholder). The aggregate fair market value
(determined at the time of grant) of shares issuable pursuant to Incentive
Options which first become exercisable by an employee or officer in any
calendar year may not exceed one hundred thousand dollars ($100,000). Options
are non-transferable except by will or by the laws of descent or distribution
and are exercisable, during the optionee's lifetime, only by the optionee.
Options generally may not be exercised (i) after termination of the
optionee's employment or directorship either voluntarily or by the
Corporation for cause, (ii) three months after termination of the optionee's
employment or directorship with the Corporation without cause or by
retirement in accordance with the Corporation's retirement policies, (iii)
180 days following the optionee's termination of employment or directorship
with the Corporation by reason of disability, or (iv) one year following the
optionee's termination of employment or directorship with the Corporation by
reason of death. In all cases, however, the Plan Committee has the discretion
to extend the exercise date. Payment of the exercise price of the shares
subject to the option may be made (i) in cash or by certified or bank check
or other instrument acceptable to the Plan Committee for an amount equal to
the option price for such shares, (ii) with the consent of the Plan
Committee, in the form of shares of Common Stock having a fair market value
equal to the option price of such shares, (iii) by the optionee delivering to
the Corporation a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Corporation cash or a
check payable and acceptable to the Corporation to pay the purchase price,
provided that the optionee and the broker comply with any procedures and
enter into any agreements prescribed by the Plan Committee as a condition of
such payment procedure, or (iv) by any other means which the Plan Committee
determines are consistent with the purpose of the 1997 Plan and with
applicable laws and regulations.
At the discretion of the Plan Committee, options granted under the 1997
Plan may include a so-called "reload" feature pursuant to which an optionee
exercising an option by the delivery of a number of shares of Common Stock
would automatically be granted an additional option (with an exercise price
equal to the fair market value of the Common Stock on the date the additional
option is granted and with the same expiration date as the original option
being exercised, and with such other terms as the Plan Committee may provide)
to purchase that number of shares of Common Stock equal to the number
delivered to exercise the original option.
In the event of a change of control, as defined in the 1997 Plan, (i) the
time for exercise of all unexercised and unexpired awards will be
automatically accelerated, effective as of the effective time of the change
of control (or such earlier date as may be specified by the Plan Committee)
and (ii) after the effective time of the change of control, all unexercised
awards will remain outstanding and will be exercisable in full for shares of
Common Stock or, if applicable, for shares of such securities, cash or
property as the holders of shares of Common Stock received in connection with
the change of control.
Federal Income Tax Information with Respect to the 1997 Plan. The grantee
of a Nonqualified Option recognizes no income for federal income tax purposes
on the grant thereof. On the exercise of a Nonqualified Option, the
difference between the fair market value of the underlying shares of Common
Stock on the exercise date and the option exercise price is treated as
compensation to the holder of the option taxable as ordinary income in the
year of exercise, and such fair market value becomes the basis for the
underlying shares which will be used in computing any capital gain or loss
upon disposition of such shares. Subject to certain limitations, the
Corporation may deduct for the year of exercise an amount equal to the amount
recognized by the option holder as ordinary income upon exercise of a
Nonqualified Option. The grantee of an Incentive Option recognizes no income
for federal income tax purposes on the grant thereof. Except as provided
below with respect to the alternative minimum tax, there is no tax upon
exercise of an Incentive Option. If no disposition of shares acquired upon
exercise of the Incentive Option is made by the option holder within two
years from the date of the grant of the Incentive Option or within one year
after exercise of the Incentive Option, any gain realized by the option
holder on the subsequent sale of such shares is treated as a long-term
capital gain for federal income tax purposes. If the shares are sold prior to
the expiration of such periods, the difference between the lesser of the
value of the shares at the date of exercise or at the date of sale and the
exercise price of the Incentive Option is treated as compensation to the
employee taxable as ordinary income and the excess gain, if any, is treated
as capital gain (which will be long-term capital gain if the shares are held
for more than one year). The excess of the fair market value of the
underlying shares over the option price at the time of exercise of an
Incentive Option will constitute an item of tax preference for purposes of
the alternative minimum tax. Taxpayers who incur the alternative minimum tax
are allowed a credit which may be carried forward indefinitely to be used as
a credit against the regular tax liability in
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a later year; however, the minimum tax credit can not reduce the regular tax
below the alternative minimum tax for that carryover year. In connection with
the sale of the shares covered by Incentive Options, the Corporation is
allowed a deduction for tax purposes only to the extent, and at the time, the
option holder receives ordinary income (for example, by reason of the sale of
shares by the holder of an Incentive Option within two years to the date of
the granting of the Incentive Option or one year after the exercise of the
Incentive Option), subject to certain limitations on the deductibility of
compensation paid to executives.
Unless authority to do so has been limited in a proxy, it is the intention
of the persons named as proxies to vote the shares represented by the proxy
FOR the approval of the 1997 Plan.
The Board of Directors recommends that you vote FOR the proposal to
approve the 1997 Stock Incentive Plan.
Executive Officers
The names and ages of all executive officers of the Corporation and the
principal occupation and business experience during at least the last five
years for each are set forth below as of February 28, 1997.
Leonard A. Wilson became President and Chief Executive Officer of the
Corporation in May 1989 and President and Chief Executive Officer of the Bank
in February 1989. Mr. Wilson was Executive Vice President of the Corporation
from February 1989 to May 1989. Mr. Wilson was previously employed, since
1966, by various commercial banking subsidiaries of Shawmut Corporation in
various management and executive positions. Mr. Wilson was Chairman of the
Board and/or President and Chief Executive Officer for various subsidiaries
of Shawmut Corporation from 1977 to 1989. Mr. Wilson is 57 years old.
David W. Dailey became Executive Vice President and Chief Financial
Officer of the Corporation and Executive Vice President and Chief Financial
Officer of the Bank in October 1991. Mr. Dailey was previously employed by
Shawmut National Corporation as its Senior Vice President and Division Head
of Financial Operations from 1989 to 1991, Senior Vice President and Division
Head of Finance from 1985 through 1988 and Senior Vice President and Division
Head of Control and Services from 1981 through 1984. In these positions, Mr.
Dailey was responsible for accounting control, financial systems and
financial operations, including tax planning, audit and treasury functions
and risk management. He was employed by Shawmut National Corporation in other
executive and managerial capacities from 1973 through 1981. Mr. Dailey is 57
years old.
John M. DiGaetano became Executive Vice President of the Corporation and
Executive Vice President for Consumer Banking of the Bank in October 1992.
Mr. DiGaetano was previously employed by Shawmut National Corporation as its
President of Shawmut Arlington Trust Company from 1989 to 1991. Previously
Mr. DiGaetano was Executive Vice President of Consumer Banking for Arlington
Trust Company from 1984 to 1989. In these positions, Mr. DiGaetano was
responsible for branch administration, consumer sales, marketing and consumer
lending. He was employed by Arlington Trust Company in other executive and
managerial capacities from 1961 through 1984. Mr. DiGaetano is 53 years old.
Wayne C. Golon became Executive Vice President of the Corporation and
Executive Vice President for Operations and Systems of the Bank in July 1995.
Mr. Golon was previously employed by Shawmut National Corporation as its
Senior Vice President and Division Head of Cash Management and Deposit
Operations from 1992 to 1995, responsible for a staff of 850 people providing
cash management and deposit account servicing to corporate, commercial, and
retail customers. Prior to 1992, Mr. Golon held a variety of management
positions in Operations within Shawmut National Corporation. Mr. Golon is 48
years old.
David L. Savoie became Executive Vice President of the Corporation and
Executive Vice President and Senior Credit Officer of the Bank in December
1991. Prior to joining the Corporation, Mr. Savoie was employed as Executive
Vice President of First NH Bank during 1991 and Executive Vice President of
Amoskeag Bank from 1990 through 1991. In these positions, he was responsible
for the administration of nonperforming assets. Mr. Savoie was employed by
Old Stone Bank as Executive Vice President with responsibility for real
estate loan origination and management from 1983 through 1990, and in various
other executive and managerial capacities from 1972 through 1983. Mr. Savoie
is 53 years old.
Brian W. Thompson became Executive Vice President of the Corporation and
Executive Vice President for Commercial Banking of the Bank in December 1996.
Prior to joining the Corporation, Mr. Thompson was President and Chief
Executive Officer of Finest Financial Corp. and its subsidiary, Pelham Bank
and Trust Company, from
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October 1995 until its acquisition by the Corporation in December 1996. Prior
to joining Finest Financial Corp., Mr. Thompson was Executive Vice President
of Peoples Bancorp and Peoples Bank of Worcester from 1991 to 1995 with
responsibility for Commercial Banking activities. He was also employed by
Shawmut National Corporation in various executive, management and lending
activities for 23 years. Mr. Thompson is 50 years old.
William F. Burke became Senior Vice President of the Corporation and the
Bank in April 1993. In addition, Mr. Burke currently holds the positions of
Secretary of the Corporation and Secretary of the Bank to which he was named
in May 1996 and August 1994, respectively. Mr. Burke was Vice President of
the Corporation and the Bank since June of 1992. Mr. Burke was previously
employed by Shawmut National Corporation as Vice President responsible for
corporate accounting policy and control and Senior Compliance Officer from
1991 to 1992, manager of financial planning and financial information systems
from 1988 to 1991, and manager of budgeting and financial reporting from 1985
to 1988. He was employed by Shawmut National Corporation in other capacities
from 1975 through 1985. Mr. Burke is 48 years old.
Thomas P. Coursey became Senior Vice President and Controller of the
Corporation and of the Bank in December 1996. Mr. Coursey had previously been
named Vice President and Controller of the Corporation and of the Bank in
August 1996. Prior to joining the Corporation, Mr. Coursey was employed by
Shawmut National Corporation from 1985 to 1995 as Vice President in a variety
of managerial capacities including Chief Financial Officer of various
subsidiary banks, Deputy Controller, Corporate Tax Director, and Manager of
Financial Operating Systems. Mr. Coursey is 49 years old.
Each officer of the Corporation holds his office for one year and until
his successor is elected and qualified or until his earlier resignation or
removal.
Executive Compensation
Summary Compensation Table
The following summary compensation table sets forth information concerning
compensation for services rendered in all capacities awarded to, earned by or
paid to the Corporation's Chief Executive Officer and the four other most
highly compensated executive officers serving on December 31, 1996 whose
compensation exceeded $100,000 during fiscal 1996 (the "Named Executive
Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation --------------
---------------------- Securities All Other
Name and Salary Bonus Underlying Compensation
Principal Position Year ($)(1) ($)(1) Options (#)(2) ($)(3)
- --------------------- ---- ---------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Leonard A. Wilson 1996 275,507 114,660 45,000 163,557
President and Chief 1995 260,483 42,900 0 79,750
Executive Officer 1994 235,471 49,350 40,000 79,261
David W. Dailey 1996 141,799 58,380 18,000 4,236
Executive Vice 1995 134,173 21,863 0 5,919
President 1994 128,078 26,250 18,000 2,250
David L. Savoie 1996 131,174 36,680 18,000 4,177
Executive Vice 1995 122,635 13,475 0 3,684
President 1994 115,606 16,170 18,000 1,999
John M. DiGaetano 1996 129,106 36,120 18,000 4,282
Executive Vice 1995 124,173 13,640 0 3,750
President 1994 111,346 16,100 18,000 1,955
Wayne C. Golon 1996 136,625 38,220 18,000 7,110
Executive Vice 1995 65,000(4) 6,856 10,000 49,955
President 1994 -- -- -- --
</TABLE>
7
<PAGE>
- -------------
(1) Perquisites and other personal benefits paid to each Named Executive
Officer in each instance aggregated less than 10% of the total annual
salary and bonus set forth in the columns entitled "Salary" and "Bonus"
for each Named Executive Officer, and accordingly, are omitted from the
table as permitted by the rules of the Securities and Exchange
Commission.
(2) During fiscal 1994, fiscal 1995 and fiscal 1996, the Corporation did not
grant any restricted stock awards or stock appreciation rights or make
any long-term incentive plan payouts to any of the executive officers.
(3) All Other Compensation represents a payment by the Corporation of
premiums for term life insurance on behalf of Mr. Wilson in fiscal 1994,
fiscal 1995, and fiscal 1996 in the amounts of $1,993, $2,257, and
$2,257, respectively, accruals to Mr. Wilson's Executive Salary
Continuation Agreement of $73,200, $73,200 and $156,800, respectively,
payments by the Corporation of relocation expenses on behalf of Mr. Golon
in fiscal 1996 and fiscal 1995 in the amount of $1,961 and $49,955,
respectively and a payment of $4,046 during fiscal 1996 to compensate Mr.
Golon for the loss of tax benefit that would have accrued to him if he
had been eligible to participate in the First Essex Bank 401(k) Plan (the
"401(k) Plan") during the first year of his employment. The amounts
reported also include Corporation matching contributions pursuant to the
401(k) Plan for fiscal 1994, fiscal 1995 and fiscal 1996 respectively,
for the benefit of the named individuals. Such contributions were made in
shares of Common Stock, valued as follows: Mr. Wilson, $4,068, $4,293 and
$4,500; Mr. Dailey, $2,250, $3,669 and $4,236; Mr. Savoie, $1,999, $3,684
and $4,177; Mr. DiGaetano, $1,955, $3,750 and $4,282; and Mr. Golon, $0,
$0 and $1,103.
(4) This salary amount represents the salary paid to Mr. Golon from the
commencement of his employment by the Corporation on July 10, 1995
through December 31, 1995.
Stock Options Granted in Fiscal 1996
The following table sets forth certain information regarding stock options
granted during fiscal 1996 to the Named Executive Officers:
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
----------------------------------------------------------- Annual Rates of
Number of % of Total Stock Price
Securities Options/SARs Exercise Appreciation For
Underlying Granted to or Option Term
Options/SARs Employees in Based Price Expiration --------------------------
Name Granted(#) Fiscal Period ($/Share) Date 5%($) 10%($)
------------------ -------------- ---------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leonard A. Wilson 45,000 13.8% 11.375 01/11/2006 $833,790 $1,327,672
David W. Dailey 18,000 5.5% 11.375 01/11/2006 333,516 531,069
John M. DiGaetano 18,000 5.5% 11.375 01/11/2006 333,516 531,069
Wayne C. Golon 18,000 5.5% 11.375 01/11/2006 333,516 531,069
David L. Savoie 18,000 5.5% 11.375 01/11/2006 333,516 531,069
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-end Option/SAR Values
The table below sets forth certain information regarding stock options held
at December 31, 1996, by the Named Executive Officers. David W. Dailey
exercised 3,000 stock options during fiscal 1996. No other Named Executive
Officer exercised any stock options during fiscal 1996. No stock appreciation
rights ("SARS") are outstanding under the 1987 Stock Option Plan.
8
<PAGE>
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal
Shares Year-End(#) Year-End($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable(1)
- -------------------- ------------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Leonard A. Wilson -- -- 76,800/78,200 444,625/283,500
David W. Dailey 3,000 24,000 20,300/32,000 124,425/128,250
David L. Savoie -- -- 28,600/32,000 189,788/128,250
John M. DiGaetano -- -- 28,600/32,000 189,788/128,250
Wayne C. Golon -- -- 3,334/24,668 15,420/62,330
</TABLE>
(1) Calculations based upon the difference between the closing price of the
Corporation's Common Stock on December 31, 1996 of $13.125 and the
exercise price of the options.
Pension Plan
The Bank provides a retirement plan for its eligible employees through SBERA,
an unincorporated association of savings banks operating within Massachusetts
and of other organizations which provide services to or for savings banks.
SBERA's sole purpose is to enable the participating employers to provide
pensions and other benefits for their employees.
The following table illustrates annual pension benefits for retirement at
age 65 under the most advantageous plan provisions in effect on February 28,
997.
<TABLE>
<CAPTION>
Annual Pension Benefits
Based on Years of Service(1)
-----------------------------------------------
Average 25 Years
Compensation 10 Years 15 Years 20 Years and after
-------------------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
$ 20,000 $ 2,500 $ 3,750 $ 5,000 $ 6,250
40,000 5,745 8,618 11,491 14,364
60,000 9,445 14,168 18,891 23,614
80,000 13,145 19,718 26,291 32,864
100,000 16,845 25,268 33,691 42,114
120,000 20,545 30,818 41,091 51,364
125,000 21,470 32,206 42,941 53,676
140,000 24,245 36,368 48,491 60,614
150,000(2) 26,095 39,143 52,191 65,239
</TABLE>
(1) The annual pension benefit is computed on the basis of a single life
annuity.
(2) The maximum compensation that may be used to calculate benefits under the
retirement plan is $150,000.
The number of estimated credited years of service at age 65 for purposes
of the retirement plan for the Named Executive Officers are: Mr. Wilson, 17;
Mr. Dailey, 13; Mr. Savoie, 17; Mr. DiGaetano, 18; and Mr. Golon, 19.
The pension benefit described above is funded entirely by contributions of
the Bank. Mr. Wilson may also receive benefits under the Executive Salary
Continuation Agreement described below.
Executive Salary Continuation Agreement
The Corporation and the Bank (which are hereinafter sometimes referred to
collectively as the "Employers") have entered into an Executive Salary
Continuation Agreement with Mr. Wilson. Under this agreement, Mr. Wilson
would be entitled to certain payments following retirement at or after age
62. Payments under the agreement will
9
<PAGE>
equal 65% of the highest annual compensation (including bonuses) received
during any of the five years preceding retirement, reduced by a portion of
social security benefits payable as well as amounts payable pursuant to other
qualified defined benefit pension plans. The agreement also provides for
certain reduced payments if Mr. Wilson's employment terminates before age 62,
and for certain benefits in the event of disability. Additionally, if Mr.
Wilson were to die prior to retirement or disability, death benefits provided
by this agreement may, in certain circumstances, be payable to his
beneficiaries. In connection with this agreement, the Employers may elect to
maintain an insurance policy on Mr. Wilson's life.
Employment Contracts, Termination of Employment and Change in Control
Arrangements
The Employers have entered into employment agreements (the "Employment
Agreements") with Messrs. Wilson, Dailey and Thompson. The Employment
Agreements provide that such officers will receive annual compensation equal
to $235,000, $125,000 and $150,000, respectively, subject to increases in
accordance with the Employers' usual practice.
Mr. Wilson's Employment Agreement is for a three-year term, which
commenced on January 1, 1994, and is subject to extension for successive
one-year periods beginning on the first anniversary of its commencement, with
the consent of Mr. Wilson and upon the approval of the Board of Directors of
each of the Employers. Mr. Dailey's and Mr. Thompson's Employment Contracts
are each for a two-year term, which commenced on January 1, 1994 and December
30, 1996, respectively, and are subject to extension for successive one-year
periods beginning on the first anniversary of their commencement, with the
consent of Mr. Dailey or Mr. Thompson, as the case may be, and upon the
approval of the Board of Directors of each of the Employers. Under each of
the Employment Agreements, the Employers may terminate the officer's
employment at any time for "cause" or "by operation of law", as defined
therein, without incurring any continuing obligations to the officer. If the
Employers terminate an officer's employment for any reason other than for
"cause" or "by operation of law", as defined in the Employment Agreement, or
if the officer terminates his employment for material breach of the contract
by the Employers, the Employers will remain obligated to continue providing
the compensation and benefits specified in the officer's Employment Agreement
for the duration of what otherwise would have been the term of the Employment
Agreement.
In addition, the Employers have entered into special termination
agreements (the "Special Termination Agreements") with Messrs. Wilson,
Dailey, Thompson, DiGaetano, Golon, Savoie and Burke. These agreements
provide generally that if there is a "Change in Control", as defined therein,
of either of the Employers and if at any time during the three-year period
(in the case of Mr. Wilson and Mr. Thompson) or two-year period (in the case
of Messrs. Dailey, DiGaetano, Golon, Savoie and Burke) following such "Change
in Control", either of the Employers were to terminate the officer's
employment for any reason other than due to the officer's death, or for
"cause" or "by operation of law", as defined therein, or the officer were to
terminate his or her employment with either of the Employers following a
significant change in the nature or scope of the officer's responsibilities,
authorities, powers, functions or duties; a reduction in such officer's
annual base salary; a significant relocation of the Employers' offices; a
failure of the Employers to pay any portion of compensation due to the
officer; the termination of or a material reduction in benefits; or for
failure of the Employers to obtain a satisfactory agreement from any
successor to assume and agree to perform the Special Termination Agreement,
the officer would be entitled to receive certain severance benefits provided
in such officer's Special Termination Agreement. Such severance benefits
equal three times the "Base Amount" as defined in the Internal Revenue Code
in the case of Messrs. Wilson and Thompson, and two times the Base Amount in
the case of Messrs. Dailey, DiGaetano, Golon, Savoie and Burke. In the case
of such a termination, each of Mr. Wilson, Mr. Dailey and Mr. Thompson could
elect to receive (in lieu of any benefits due under such officer's Special
Termination Agreement) such termination benefits as he may receive under his
Employment Contract.
Compensation/Nominating Committee Interlocks and Insider Participation
Mr. Wilson participated in the deliberations of the Compensation/Nominating
Committee concerning compensation of all executive officers other than
himself. No Compensation/Nominating Committee interlocks exist.
Compensation/Nominating Committee Report on Executive Compensation
Overview
The Corporation's executive compensation philosophy is to provide competitive
levels of compensation, integrate management's pay with the achievement of
the Corporation's performance goals, reward above average
10
<PAGE>
corporate performance, recognize individual initiative and achievement, align
management's and stockholders' interests in the enhancement of stockholder
value through stock and stock option awards, and assist the Corporation in
attracting and retaining qualified management.
Compensation of the Corporation's executive officers for 1996 is
determined through the combination of some or all of the following three
elements: (1) annual base salary, (2) annual performance incentives in the
form of cash bonuses under the Corporation's Senior Management Incentive
Compensation Plan, and (3) long-term performance incentives in the form of
stock option awards under the Corporation's 1987 Stock Option Plan.
In 1994, the Corporation retained The Wilson Group, Inc., as a
compensation consultant to evaluate the Corporation's executive compensation.
(Mr. Wilson is not affiliated with The Wilson Group, Inc.) In its analysis,
The Wilson Group compared the Corporation's compensation to that of a peer
group of ten Massachusetts banks with assets between $400 million and $1
billion (the "Peer Group"). The Wilson Group also compared the Corporation's
compensation levels to levels for banks located in New England of comparable
size and type published by banking associations and other organizations
("Published Data"). The Wilson Group's analysis is reflected in the base
salary ranges set for fiscal 1996.
While the Peer Group and the banks discussed in the Published Data are not
identical to the Keefe, Bruyette & Woods, Inc. New England Savings Bank Index
to which the Corporation's stock performance is compared in this Proxy
Statement, the Compensation/Nominating Committee believes that the
compensation information for these groups is comparable since both groups
contain banks located in New England of comparable size and type.
Each element of the Corporation's executive compensation, as well as the
compensation of the Chief Executive Officer, is discussed separately below.
Base Salary
The fiscal 1996 salaries of the executive officers were established in
December 1995, based upon salary ranges determined by the
Compensation/Nominating Committee. The Committee established the salary
ranges after reviewing the recommendations of The Wilson Group, its
compensation consultant, based upon salaries paid by banks of comparable size
and type located in New England.
The Chief Executive Officer recommends to the Compensation/Nominating
Committee the salary level to be paid to each executive officer within the
ranges so established based upon corporate and individual performance. The
numeric data used to evaluate the performance of the Corporation includes,
but is not limited to, return on assets, return on equity, asset growth and
quality, operating efficiency ratio, and capital position. Salaries are also
based upon a subjective evaluation of the individual performance of the
officer and his or her duties and responsibilities. The
Compensation/Nominating Committee determines the salary level of the Chief
Executive Officer based upon the same criteria.
Base salaries in fiscal 1996 were established within the salary ranges set
by the Compensation/Nominating Committee. Salaries were generally set within
the next-to-highest quartile of the established salary range, reflecting the
Compensation/Nominating Committee's belief that the Corporation's Named
Executive Officers perform greater duties and responsibilities than similarly
situated officers at the banks analyzed in determining the salary ranges.
These salaries also reflect the significant improvement in the Corporation's
performance and are designed to provide the executive officers with base
salaries comparable to officers in the Corporation's Peer Group and the banks
analyzed in the Published Data.
Cash Bonuses
Annual incentives are provided through the grant of cash bonuses pursuant to
the Corporation's Senior Management Incentive Compensation Plan (the
"Incentive Plan"). Incentive compensation paid pursuant to the Incentive Plan
is based on both organizational and individual performance, except in the
cases of Mr. Wilson and Mr. Dailey, whose incentive compensation under the
Incentive Plan is based solely on organizational performance. Participation
in the Incentive Plan is determined annually by the Compensation/Nominating
Committee. Not all executive officers are guaranteed participation in the
Incentive Plan in any given year.
In February 1994, the Compensation/Nominating Committee determined that it
would be appropriate to modify the Incentive Plan for bonuses awarded for and
after the years ending December 31, 1994. As revised, the Incentive
11
<PAGE>
Plan provides that bonuses, calculated as a percent of base salary, may be
awarded if the Corporation meets specified performance objectives, measured
on the basis of return on assets. Bonuses awarded to executives other than
Messrs. Wilson and Dailey may be adjusted based upon a subjective evaluation
of such officer's attainment of individual performance goals set for that
officer at the beginning of the year in which the bonus is awarded.
In fiscal 1996, the Compensation/Nominating Committee granted cash bonuses
to Messrs. Dailey, DiGaetano, Golon, Savoie and Wilson totaling $114,660,
$58,380, $36,120, $38,220 and $36,680, respectively. These awards reflect the
Corporation's achievement of specified performance objectives as provided in
the Incentive Plan. Bonuses awarded to Messrs. DiGaetano, Golon and Savoie
also reflect such officers' attainment of individual performance goals
established for 1995.
Stock Options
Long-term incentives are provided through the grant of stock options. The
1987 Stock Option Plan is administered by the Compensation/Nominating
Committee, which has the power to determine those individuals to whom options
and rights will be granted, the number of shares, the types of options and
other terms and conditions of the options and rights. The 1987 Stock Option
Plan provides for the granting of both "incentive stock options" and
"nonqualified stock options". All options granted under the 1987 Stock Option
Plan are required to have an exercise price per share equal to at least the
fair market value of a share of Common Stock on the date the option is
granted and will expire no later than ten years from the date of grant. The
1987 Stock Option Plan expires on August 4, 1997. No further options can be
granted under the 1987 Stock Option Plan after such expiration. For
information concerning the 1997 Plan, see "Proposal Two--1997 Stock Incentive
Plan" in this Proxy Statement.
In fiscal 1996, the Compensation/Nominating Committee granted stock
options to Mr. Wilson totaling 45,000 shares, and 18,000 shares each to
Messrs. Dailey, DiGaetano, Golon and Savoie. The stock options, which vest
over a three year period, were also designed to align the officers' and
stockholders' long-term objectives.
Determination of the Chief Executive Officer's Compensation
Mr. Wilson's salary, cash bonus, and stock options are determined by the
Compensation/Nominating Committee substantially in accordance with the
policies described above relating to all executives of the Corporation. In
particular, the Compensation/Nominating Committee considered, among other
things, the following performance criteria in determining Mr. Wilson's 1996
base salary: (1) financial performance of the Corporation; (2) selection and
management of staff; (3) development of regional business relationships; (4)
effective management of bank budgets and asset growth; and (5) development of
new opportunities for business expansion. The grant of a cash bonus to Mr.
Wilson in fiscal 1996 reflects the Corporation's achievement of certain
performance objectives as specified in the Incentive Plan.
In December 1995, the Compensation/Nominating Committee increased Mr.
Wilson's base salary for fiscal 1996. In making this determination, the
Compensation/Nominating Committee noted that in prior years Mr. Wilson had
refused to accept cost of living increases to his salary due him under his
employment agreement with the Corporation. This salary increase reflects a
significant improvement in the performance of the Corporation, as well as Mr.
Wilson's achievement of certain strategic goals including building an
experienced management team, improving asset quality and developing a
strategic plan for the Corporation.
THOMAS S. BARENBOIM
AUGUSTINE J. FABIANI
ROBERT H. PANGIONE
WALTER W. TOPHAM
LEONARD A. WILSON (ex officio)
12
<PAGE>
Comparative Performance by the Corporation
The chart that follows compares the Common Stock with (i) the S&P 500 and
(ii) the Keefe, Bruyette & Woods, Inc. ("KBW") New England Savings Bank
Index, and assumes an investment of $100 on December 31, 1991, in each of the
following: (1) the Common Stock of the Corporation; (2) the Stocks comprising
the S&P Index; and (3) the Stocks of the KBW New England Savings Bank Index.
FIRST ESSEX BANCORP (FESX) VS. THE FIVE YEAR TOTAL RETURN FOR THE
KBW NEW ENGLAND BANK INDEX AND S&P 500 INDEX
[TABULAR REPRESENTATION OF LINE CHART]
<TABLE>
<CAPTION>
S&P 500 KBW NEW ENGLAND BANK INDEX FIRST ESSEX BANKCORP (FESX)
<S> <C> <C> <C>
12/31/91 100 100 100
97.49 130.88 145.45
99.34 135.57 169.7
102.47 134.42 193.94
12/31/92 107.61 175.64 181.82
112.3 194.82 248.48
112.83 183.66 212.12
115.71 237.82 360
12/31/93 118.39 234.48 332.42
113.93 246.65 390.78
114.42 290.59 480.6
120.02 277.45 459.62
12/31/94 119.99 236.05 378.65
131.64 265.02 417.73
144.16 301.08 428.27
155.59 344.52 557.79
12/31/95 164.92 368.43 603.46
173.76 369.18 576.67
181.54 391.57 589.81
187.11 440.02 657.34
12/31/96 202.69 508.88 725.53
</TABLE>
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 28, 1997, the beneficial
ownership of Common Stock for (i) each person known by the Corporation to own
beneficially more than 5% of the Common Stock as of such date, (ii) each
current Director and nominee for re-election as a Director of the
Corporation, (iii) each executive officer, and (iv) all current directors and
executive officers of the Corporation as a group:
<TABLE>
<CAPTION>
Number of Shares
of Common Stock
Beneficially Percent
Name Owned(1) of Class(2)
- ---- ---------------- ------------
<S> <C> <C>
Thomas S. Barenboim 2,720 0.04%
William F. Burke (3)(4) 25,616 0.34%
Thomas P. Coursey 0 0.00%
David W. Dailey (3)(4) 38,196 0.51%
John M. DiGaetano (3)(4) 44,526 0.59%
Augustine J. Fabiani (3) 19,165 0.26%
Wayne C. Golon (3)(4) 9,438 0.13%
William L. Lane 15,872 0.21%
Frank J. Leone, Jr (3) 31,565 0.42%
Robert H. Pangione (3) 91,973 1.23%
David L. Savoie (4) 37,163 0.49%
Brian W. Thompson 103,655 1.37%
Walter W. Topham (3) 21,685 0.29%
Robert H. Watkinson 19,248 0.26%
Leonard A. Wilson (3)(4) 126,203 1.67%
All Directors and Officers as a group (15 persons) (1)(4) 587,330 7.51%
</TABLE>
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Accordingly, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares the power to vote such security
or the power to dispose of such security. The amounts set forth above as
beneficially owned include shares owned by spouses and relatives living
in the same home, as to which beneficial ownership may be disclaimed. The
amounts set forth above as beneficially owned also include shares of
Common Stock which such beneficial owner had the right to acquire within
60 days of February 28, 1997 under options previously granted pursuant to
the 1987 Stock Option Plan in the following amounts: Mr. Burke, 23,000
shares; Mr. Dailey, 24,289 shares; Mr. DiGaetano, 35,989 shares; Mr.
Fabiani, 11,000 shares; Mr. Golon, 8,184 shares; Mr. Lane, 11,000 shares;
Mr. Leone, 13,000 shares; Mr. Pangione, 8,000 shares; Mr. Savoie, 33,889
shares; Mr. Thompson, 88,050 shares; Mr. Topham, 13,000 shares; Mr.
Watkinson, 11,000 shares; Mr. Wilson, 67,821 shares; and all of the
Directors and Officers as a group, 348,222 shares. For information
regarding the stock options held by the Named Executive Officers, see
"Stock Options Granted in 1996" and "Aggregated Option/SAR Exercises in
Last Fiscal Year and FY-end Option/SAR Values." On February 28, 1997, the
closing sale price of the Corporation's Common Stock as reported by the
Nasdaq National Market was $15.9375.
(2) For purposes of computing the Percent of Class held by each person, any
shares of Common Stock which such person has the right to acquire
pursuant to the exercise of a stock option is deemed to be outstanding,
but is not deemed to be outstanding for purposes of computing the Percent
of Class held by any other person.
(3) Indicates that such person shares voting or investment power as to all or
a portion of such shares. The number of shares as to which each person
shares voting or investment power is as follows: Mr. Burke, 1,500 shares;
Mr. Dailey, 13,000 shares; Mr. DiGaetano, 2,000 shares; Mr. Fabiani, 337
shares; Mr. Golon, 1,150 shares; Mr. Leone, 18,220 shares; Mr. Pangione,
67,825 shares; Mr. Topham, 2,493 shares; and Mr. Wilson, 10,300 shares.
14
<PAGE>
(4) Includes shares allocated to the account of such persons under the 401(k)
Plan in the following amounts: Mr. Burke, 1,116 shares; Mr. Dailey, 907
shares; Mr. DiGaetano, 2,352 shares; Mr. Golon, 104 shares; Mr. Savoie,
914 shares; and Mr. Wilson, 7,882 shares; and all of the Directors and
Officers as a group, 13,275 shares.
Certain Transactions With Management and Others
As a matter of policy, the Bank makes loans to Directors, officers and
employees of the Corporation or the Bank within the limitations set by law,
provided that such loans are on the same terms and conditions as offered to
any other borrower. All loans that have been obtained by the Directors,
officers and employees of the Corporation or the Bank were made in the
ordinary course of business and on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with unaffiliated persons and did not involve more than the
normal risk of collectibility or present other unfavorable features to the
Bank. All loans to Directors or officers must be approved by the Board of
Directors.
From time to time the Bank has purchased various services and products in
the ordinary course of its business from various companies owned or operated
by, or employing, certain of its Directors. Approximately $68,000 was
expended for two automobiles that were purchased from a company owned by Mr.
Barenboim in the year ended December 31, 1996. Such transactions have been
entered into on terms no less favorable to the Bank than would have been
available from unrelated third parties.
EXPENSES OF SOLICITATION
The Corporation will pay the entire expense of soliciting proxies for the
Annual Meeting. D.F. King & Co., Inc. has been retained to assist in the
solicitation of proxies and will be compensated in the amount of $3,500 plus
out-of-pocket expenses. In addition to such solicitation and solicitation by
use of the mails, certain Directors, officers and regular employees of the
Corporation and the Bank (who will receive no compensation for their services
other than their regular compensation) may solicit proxies by telephone,
telegram or personal interview. Banks, brokerage houses, custodians, nominees
and other fiduciaries have been requested to forward proxy materials to the
beneficial owners of shares held of record by them and such custodians will
be reimbursed for their expenses.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Corporation's directors and
executive officers and any persons who own more than 10% of the Corporation's
common stock to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes of ownership of common
stock. Such persons are required by SEC regulations to furnish the
Corporation with copies of all Section 16(a) forms they file. To the
Corporation's knowledge, based solely on the information furnished to the
Corporation during fiscal 1996, all such Section 16(a) filing requirements
were complied with.
NOTICE OF 1998 ANNUAL MEETING
Notice is hereby given that the 1998 Annual Meeting of Stockholders of
First Essex Bancorp, Inc. will be held on Thursday, May 1, 1998, unless
stockholders are notified otherwise.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Pursuant to federal securities law, stockholder proposals intended to be
presented at the 1998 annual meeting must be received in writing by the
Corporation not less than 120 calendar days in advance of the anniversary
date of this Proxy Statement (i.e., by December 1, 1997) in order to be
considered for inclusion in the Corporation's Proxy Statement and form of
proxy for that meeting. The By-laws of the Corporation provide that any
proposals or Director nominations submitted by stockholders that will not be
included in the Proxy Statement for an annual meeting may still be presented
for action at such annual meeting if such proposal is filed with the
Secretary of the Corporation at least 75 days, but not more than 120 days,
before the anniversary of the preceding year's annual meeting (the
"Anniversary Date"). However, if the annual meeting is scheduled for a date
more than seven days before the Anniversary Date, stockholder proposals or
nominations must be received by the Corporation before the later of (i) 20
days after public disclosure of the date for the annual meeting or (ii) the
75th day before the annual
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meeting. Any proposals should be mailed to: Secretary, First Essex Bancorp,
Inc., 71 Main Street, Andover, Massachusetts 01810.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP served as the independent public accountants for the
Corporation for fiscal 1996 and is expected to serve as the Corporation's
independent public accountants for 1997. Representatives of Arthur Andersen
LLP will be present at the meeting and will have the opportunity to make a
statement, if they so desire, and will be available to respond to appropriate
questions.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are duly presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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APPENDIX A
FIRST ESSEX BANCORP, INC.
1997 STOCK INCENTIVE PLAN
SECTION 1. General Purpose of the Plan; Definitions
The name of the plan is the First Essex Bancorp, Inc. 1997 Stock Incentive
Plan (the "Plan"). The purpose of the Plan is to encourage and enable the
officers, directors and employees of First Essex Bancorp, Inc. (the
"Company") and its Subsidiaries upon whose judgment, initiative and efforts
the Company largely depends for the successful conduct of its business to
acquire a proprietary interest in the Company. It is anticipated that
providing such persons with a direct stake in the Company's welfare will
assure a closer identification of their interests with those of the Company
and its shareholders, thereby stimulating their efforts on the Company's
behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards", except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified
Stock Options, Conditioned Stock Awards, Unrestricted Stock Awards,
Performance Share Awards and Stock Appreciation Rights.
"Board" means the Board of Directors of the Company.
"Cause" means personal dishonesty, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease and desist order.
"Change of Control" shall have the meaning set forth in Section 15.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" shall have the meaning set forth in Section 2.
"Conditioned Stock Award" means an Award granted pursuant to Section 6.
"Disability" means disability as set forth in Section 22(e)(3) of the
Code.
"Effective Date" shall have the meaning set forth in Section 17.
"Eligible Person" shall have the meaning set forth in Section 4.
"Fair Market Value" on any given date means the closing price per share of
the Stock on the trading day immediately preceding such date as reported by
the NASDAQ Stock Market or another nationally recognized stock exchange, or,
if the Stock is not listed on such an exchange, the fair market value of the
Stock as determined by the Committee.
"Incentive Stock Option" means any Stock Option designated and qualified
as an "incentive stock option" as defined in Section 422 of the Code.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Normal Retirement" means retirement from active employment with the
Company and its Subsidiaries in accordance with the retirement policies of
the Company and its Subsidiaries then in effect.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Performance Share Award" means an Award granted pursuant to Section 8.
"Stock" means the Common Stock, $0.10 par value per share, of the Company,
subject to adjustments pursuant to Section 3.
"Stock Appreciation Right" means an Award granted pursuant to Section 9.
"Subsidiary" means a subsidiary as defined in Section 424 of the Code.
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"Unrestricted Stock Award" means Awards granted pursuant to Section 7.
SECTION 2. Administration of Plan; Committee Authority to Select Participants
and Determine Awards.
(a) Committee. The Plan shall be administered by a Stock Incentive Plan
Committee (the "Committee") consisting of all members of the Compensation
Committee of the Company who qualify as Non-Employee Directors. The Committee
shall have at least two (2) members at all times. It is the intention of the
Company that the Plan shall be administered by "Non-Employee Directors"
within the meaning of Rule 16b-3 under the Act, but the authority and
validity of any act taken or not taken by the Committee shall not be affected
if any person administering the Plan is not a "Non-Employee Director." Except
as specifically reserved to the Board under the terms of the Plan, the
Committee shall have full and final authority to operate, manage and
administer the Plan on behalf of the Company. Action by the Committee shall
require the affirmative vote of a majority of all members thereof.
(b) Powers of Committee. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power
and authority:
(i) to select the officers and other employees of the Company and its
Subsidiaries to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any, of
Incentive Stock Options, Non-Qualified Stock Options, Conditioned Stock,
Unrestricted Stock, Performance Shares and Stock Appreciation Rights, or
any combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares to be covered by any Award;
(iv) to determine and modify the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award,
which terms and conditions may differ among individual Awards and
participants, and to approve the form of written instruments evidencing
the Awards; provided, however, that no such action shall adversely affect
rights under any outstanding Award without the participant's consent;
(v) to accelerate the exercisability or vesting of all or any portion of
any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend the period
in which any outstanding Stock Option or Stock Appreciation Right may be
exercised;
(vii) to determine whether, to what extent, and under what circumstances
Stock and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the participant and whether and
to what extent the Company shall pay or credit amounts equal to interest
(at rates determined by the Committee) or dividends or deemed dividends on
such deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and practices
for administration of the Plan and for its own acts and proceedings as it
shall deem advisable; to interpret the terms and provisions of the Plan
and any Award (including related written instruments); to make all
determinations it deems advisable for the administration of the Plan; to
decide all disputes arising in connection with the Plan; and to otherwise
supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
SECTION 3. Shares Issuable under the Plan; Mergers; Substitution.
(a) Shares Issuable. The maximum number of shares of Stock with respect to
which Awards (including Stock Appreciation Rights) may be granted under the
Plan shall be eight hundred thousand (800,000). For purposes of this
limitation, the shares of Stock underlying any Awards which are forfeited,
canceled, reacquired by the Company or otherwise terminated (other than by
exercise) shall be added back to the shares of Stock with respect to which
Awards may be granted under the Plan so long as the participants to whom such
Awards had been previously granted received no benefits of ownership of the
underlying shares of Stock to which the Award related. Subject to such
overall limitation, any type or types of Award may be granted with respect to
shares, including Incentive Stock Options. Shares issued under the Plan may
be authorized but unissued shares or shares reacquired by the Company.
(b) Stock Dividends, Mergers, etc. In the event that after approval of the
Plan by the stockholders of the Company in accordance with Section 17, the
Company effects a stock dividend, stock split or similar change in
capitalization affecting the Stock, the Committee shall make appropriate
adjustments in (i) the number and kind
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of shares of stock or securities with respect to which Awards may thereafter
be granted (including without limitation the limitation set forth in Section
3(a) above), (ii) the number and kind of shares remaining subject to
outstanding Awards, and (iii) the option or purchase price in respect of such
shares. In the event of any merger, consolidation, dissolution or liquidation
of the Company, the Committee in its sole discretion may, as to any
outstanding Awards, make such substitution or adjustment in the aggregate
number of shares reserved for issuance under the Plan and in the number and
purchase price (if any) of shares subject to such Awards as it may determine
and as may be permitted by the terms of such transaction, or accelerate,
amend or terminate such Awards upon such terms and conditions as it shall
provide (which, in the case of the termination of the vested portion of any
Award, shall require payment or other consideration which the Committee deems
equitable in the circumstances), subject, however, to the provisions of
Section 15.
(c) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary
as the result of a merger or consolidation of the employing corporation with
the Company or a Subsidiary or the acquisition by the Company or a Subsidiary
of property or stock of the employing corporation (collectively, "Merger").
The Committee may direct that the substitute awards be granted on such terms
and conditions as the Committee considers appropriate in the circumstances.
Shares which may be delivered under such substitute awards may be in addition
to the maximum number of shares provided for in Section 3(a).
SECTION 4. Eligibility.
Awards may be granted only to directors, officers or other key employees of
the Company or its Subsidiaries ("Eligible Persons").
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. To the extent that any option does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified
Stock Option.
No Incentive Stock Option shall be granted under the Plan after the tenth
anniversary of the Effective Date.
(a) Grant of Stock Options. The Committee in its discretion may determine
the effective date of Stock Options, provided, however, that grants of
Incentive Stock Options shall be made only to persons who are, on the
effective date of the grant, employees of the Company or any Subsidiary.
Stock Options granted pursuant to this Section 5(a) shall be subject to the
following terms and conditions and the terms and conditions of Section 13 and
shall contain such additional terms and conditions, not inconsistent with the
terms of the Plan, as the Committee shall deem desirable.
(i) Exercise Price. The exercise price per share for the Stock covered
by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall be, in the case
of Incentive Stock Options, not less than one hundred percent (100%) of
Fair Market Value on the date of grant. If an employee owns or is deemed
to own (by reason of the attribution rules applicable under Section 424(d)
of the Code) more than ten percent (10%) of the combined voting power of
all classes of stock of the Company or any Subsidiary or parent
corporation and an Incentive Stock Option is granted to such employee, the
option price shall be not less than one hundred ten percent (110%) of Fair
Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee but no Incentive Stock Option shall be exercisable more than ten
(10) years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than ten percent (10%) of the combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation
and an Incentive Stock Option is granted to such employee, the term of
such option shall be no more than five (5) years from the date of grant.
(iii) Exercisability; Rights of a Shareholder. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the
grant date. The Committee may at any time accelerate the exercisability of
all or any portion of any Stock Option. An optionee shall have the rights
of a shareholder only as to shares acquired upon the exercise of a Stock
Option and not as to unexercised Stock Options.
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(iv) Method of Exercise. Stock Options may be exercised in whole or in
part, by delivering written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument acceptable
to the Committee;
(B) If permitted by the Committee, in its discretion, in the form of
shares of Stock that are not then subject to restrictions under any
Company plan. Such surrendered shares shall be valued at Fair Market
Value on the exercise date; or
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event the
optionee chooses to pay the purchase price as so provided, the optionee
and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Committee shall
prescribe as a condition of such payment procedure. The Company need not
act upon such exercise notice until the Company receives full payment of
the exercise price; or
(D) By any other means (including, without limitation, by delivery of
a promissory note of the optionee payable on such terms as are specified
by the Committee) which the Committee determines are consistent with the
purpose of the Plan and with applicable laws and regulations.
The delivery of certificates representing shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt
from the Optionee (or a purchaser acting in his stead in accordance with
the provisions of the Stock Option) by the Company of the full purchase
price for such shares and the fulfillment of any other requirements
contained in the Stock Option or applicable provisions of laws.
(v) Non-transferability of Options. No Stock Option shall be
transferable other than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(vi) Annual Limit on Incentive Stock Options. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
Stock with respect to which incentive stock options granted under this
Plan and any other plan of the Company or its Subsidiaries become
exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000.
(vii) Form of Settlement. Shares of Stock issued upon exercise of a
Stock Option shall be free of all restrictions under the Plan, except as
otherwise provided in this Plan.
(b) Reload Options. At the discretion of the Committee, Options granted
under Section 5(a) may include a so-called "reload" feature pursuant to which
an optionee exercising an option (the "Original Option") by the delivery of a
number of shares of Stock in accordance with Section 5(a)(iv)(B) hereof would
automatically be granted an additional Option (with an exercise price equal
to the Fair Market Value of the Stock on the date the additional Option is
granted and with the same expiration date as the original Option being
exercised, and with such other terms as the Committee may provide) to
purchase that number of shares of Stock equal to the number delivered to
exercise the Original Option; provided, however, that the grant of such
additional Option shall be subject to the availability of shares of Stock
under the Plan at the time of the exercise of the Original Option.
SECTION 6. Conditioned Stock Awards.
(a) Nature of Conditioned Stock Award. The Committee in its discretion may
grant Conditioned Stock Awards to any Eligible Person. A Conditioned Stock
Award is an Award entitling the recipient to acquire, at no cost or for a
purchase price determined by the Committee, shares of Stock subject to such
restrictions and conditions as the Committee may determine at the time of
grant ("Conditioned Stock"). Conditions may be based on continuing employment
and/or achievement of pre-established performance goals and objectives. In
addition, a Conditioned Stock Award may be granted to an employee by the
Committee in lieu of a cash bonus due to such employee pursuant to any other
plan of the Company.
(b) Acceptance of Award. A participant who is granted a Conditioned Stock
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within sixty (60) days (or such shorter date as
the Committee may specify) following the award date by making payment to the
Company, if required,
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by certified or bank check or other instrument or form of payment acceptable
to the Committee in an amount equal to the specified purchase price, if any,
of the shares covered by the Award and by executing and delivering to the
Company a written instrument that sets forth the terms and conditions of the
Conditioned Stock in such form as the Committee shall determine.
(c) Rights as a Shareholder. Upon complying with Section 6(b) above, a
participant shall have all the rights of a shareholder with respect to the
Conditioned Stock, including voting and dividend rights, subject to non-
transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained in
the written instrument evidencing the Conditioned Award. Unless the Committee
shall otherwise determine, certificates evidencing shares of Conditioned
Stock shall remain in the possession of the Company until such shares are
vested as provided in Section 6(e) below.
(d) Restrictions. Shares of Conditioned Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment by
the Company and its Subsidiaries for any reason (including death, Disability,
Normal Retirement and for Cause), the Company shall have the right, at the
discretion of the Committee, to repurchase shares of Conditioned Stock with
respect to which conditions have not lapsed at their purchase price, or to
require forfeiture of such shares to the Company if acquired at no cost, from
the participant or the participant's legal representative. The Company must
exercise such right of repurchase or forfeiture within ninety (90) days
following such termination of employment (unless otherwise specified, in the
written instrument evidencing the Conditioned Award).
(e) Vesting of Conditioned Stock. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-
transferability of the Conditioned Stock and the Company's right of
repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or
the attainment of such preestablished performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no longer
be Conditioned Stock and shall be deemed "vested." The Committee at any time
may accelerate such date or dates and otherwise waive or, subject to Section
13, amend any conditions of the Award.
(f) Waiver, Deferral and Reinvestment of Dividends. The written instrument
evidencing the Conditioned Stock Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Stock.
SECTION 7. Unrestricted Stock Awards.
(a) Grant or Sale of Unrestricted Stock. The Committee in its discretion may
grant or sell to any Eligible Person shares of Stock free of any restrictions
under the Plan ("Unrestricted Stock") at a purchase price determined by the
Committee. Shares of Unrestricted Stock may be granted or sold as described
in the preceding sentence in respect of past services or other valid
consideration.
(b) Restrictions on Transfers. The right to receive unrestricted Stock may
not be sold, assigned, transferred, pledged or otherwise encumbered, other
than by will or the laws of descent and distribution.
SECTION 8. Performance Share Awards.
(a) Nature of Performance Shares. A Performance Share Award is an award
entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under
the Plan. Performance Share Awards may be granted under the Plan to any
Eligible Person including those who qualify for awards under other
performance plans of the Company. The Committee in its discretion shall
determine whether and to whom Performance Share Awards shall be made, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Shares; provided, however, that the
Committee may rely on the performance goals and other standards applicable to
other performance-based plans of the Company in setting the standards for
Performance Share Awards under the Plan.
(b) Restrictions on Transfer. Performance Share Awards and all rights with
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
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(c) Rights as a Shareholder. A participant receiving a Performance Share
Award shall have the rights of a shareholder only as to shares actually
received by the participant under the Plan and not with respect to shares
subject to the Award but not actually received by the participant. A
participant shall be entitled to receive a stock certificate evidencing the
acquisition of shares of Stock under a Performance Share Award only upon
satisfaction of all conditions specified in the written instrument evidencing
the Performance Share Award (or in a performance plan adopted by the
Committee).
(d) Termination. Except as may otherwise be provided by the Committee at
any time prior to termination of employment, a participant's rights in all
Performance Share Awards shall automatically terminate upon the participant's
termination of employment by the Company and its Subsidiaries for any reason
(including death, Disability, Normal Retirement and for Cause).
(e) Acceleration, Waiver, Etc. At any time prior to the participant's
termination of employment, the Committee may in its sole discretion
accelerate, waive or, subject to Section 13, amend any or all of the goals,
restrictions or conditions imposed under any Performance Share Award.
SECTION 9. Stock Appreciation Rights
(a) The Committee in its discretion may grant Stock Appreciation Rights to
any Eligible Person (i) alone, (ii) simultaneously with the grant of a Stock
Option and in conjunction therewith or in the alternative thereto or (iii)
subsequent to the grant of a Non-Qualified Option and in conjunction
therewith or in the alternative thereto.
(b) The exercise price per share of a Stock Appreciation Right granted
alone shall be determined by the Committee. A Stock Appreciation Right
granted simultaneously with or subsequent to the grant of a Stock Option and
in conjunction therewith or in the alternative thereto shall have the same
exercise price as the related Stock Option, shall be transferable only upon
the same terms and conditions as the related Stock Option, and shall be
exercisable only to the same extent as the related Stock Option; provided,
however, that a Stock Appreciation Right, by its terms, shall be exercisable
only when the Fair Market Value per share of Stock exceeds the exercise price
per share thereof.
(c) Upon any exercise of a Stock Appreciation Right which has been issued
in conjunction with a stock option, the number of shares of Stock for which
any related Stock Option shall be exercisable shall be reduced by the number
of shares for which the Stock Appreciation Right shall have been exercised.
The number of shares of Stock with respect to which a Stock Appreciation
Right shall be exercisable shall be reduced upon any exercise of any related
Stock Option by the number of shares for which such Option shall have been
exercised. Any Stock Appreciation Right shall be exercisable upon such
additional terms and conditions as may from time to time be prescribed by the
Committee.
(d) A Stock Appreciation Right shall entitle the participant upon exercise
thereof to receive from the Company, upon written request to the Company at
its principal offices (the "Request"), a number of shares of Stock (with or
without restrictions as to substantial risk of forfeiture and
transferability, as determined by the Committee in its sole discretion), an
amount of cash, or any combination of Stock and cash, as specified in the
Request (but subject to the approval of the Committee in its sole discretion,
at any time up to and including the time of payment, as to the making of any
cash payment), having an aggregate Fair Market Value equal to the product of
(i) the excess of Fair Market Value, on the date of such Request, over the
exercise price per share of Stock specified in such Stock Appreciation Right
or its related Option, multiplied by (ii) the number of shares of Stock for
which such Stock Appreciation Right shall be exercised. Notwithstanding the
foregoing, the Committee may specify at the time of grant of any Stock
Appreciation Right that such Stock Appreciation Right may be exercisable
solely for cash and not for Stock.
(e) Within thirty (30) days of the receipt by the Company of a Request to
receive cash in full or partial settlement of a Stock Appreciation Right or
to exercise such Stock Appreciation Right for cash, the Committee shall, in
its sole discretion, either consent to or disapprove, in whole or in part,
such Request. A Request to receive cash in full or partial settlement of a
Stock Appreciation Right or to exercise a Stock Appreciation Right for cash
may provide that, in the event the Committee shall disapprove such Request,
such Request shall be deemed to be an exercise of such Stock Appreciation
Right for Stock.
(f) If the Committee disapproves in whole or in part any election by a
participant to receive cash in full or partial settlement of a Stock
Appreciation Right or to exercise such Stock Appreciation Right for cash,
such disapproval shall not affect such participant's right to exercise such
Stock Appreciation Right at a later date, to the
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extent that such Stock Appreciation Right shall be otherwise exercisable, or
to elect the form of payment at a later date, provided that an election to
receive cash upon such later exercise shall be subject to the approval of the
Committee. Additionally, such disapproval shall not affect such participant's
right to exercise any related Option.
(g) A Stock Appreciation Right shall be deemed exercised on the last day
of its term, if not otherwise exercised by the holder thereof, provided that
the fair market value of the Stock subject to the Stock Appreciation Right
exceeds the exercise price thereof on such date.
(h) No Stock Appreciation Right shall be transferable other than by will
or by the laws of descent and distribution and all Stock Appreciation Rights
shall be exercisable, during the holder's lifetime, only by the holder.
SECTION 10. Termination of Stock Options and Stock Appreciation Rights.
(a) Incentive Stock Options:
(i) Termination by Death. If any participant's employment by the Company
and its Subsidiaries terminates by reason of death, any Incentive Stock
Option owned by such participant may thereafter be exercised to the extent
exercisable at the date of death, by the legal representative or legatee
of the participant, for a period of one year from the date of death, or
until the expiration of the stated term of the Incentive Stock Option, if
earlier.
(ii) Termination by Reason of Disability or Normal Retirement.
(A) Any Incentive Stock Option held by a participant whose employment
by the Company and its Subsidiaries has terminated by reason of
Disability may thereafter be exercised, to the extent it was exercisable
at the time of such termination, for a period of 180 days from the date
of such termination of employment or until the expiration of the stated
term of the Option, if earlier.
(B) Any Incentive Stock Option held by a participant whose employment
by the Company and its Subsidiaries has terminated by reason of Normal
Retirement may thereafter be exercised, to the extent it was exercisable
at the time of such termination, for a period of three months from the
date of such termination of employment or until the expiration of the
stated term of the Option, if earlier.
(C) The Committee shall have sole authority and discretion to
determine whether a participant's employment has been terminated by
reason of Disability or Normal Retirement.
(D) Except as otherwise provided by the Committee at the time of
grant, the death of a participant during a period provided in this
Section 10(a)(ii) for the exercise of an Incentive Stock Option shall
extend such period for one year from the date of death, subject to
termination on the expiration of the stated term of the Option, if
earlier.
(iii) Termination Voluntarily or for Cause. If any participant's
employment by the Company and its Subsidiaries has been terminated by the
optionee voluntarily or by the Company or any of its Subsidiaries for
Cause, any Incentive Stock Option held by such participant shall
immediately terminate at the end of the last day of the optionee's
employment and shall thereafter be of no further force and effect.
(iv) Termination Without Cause. Unless otherwise determined by the
Committee, if a participant's employment by the Company and its
Subsidiaries is terminated by the Company or any of its Subsidiaries
without cause, any Incentive Stock Option held by such participant may
thereafter be exercised, to the extent it was exercisable on the date of
termination of employment, for three months from the last day of the
optionee's employment (or such longer period as the Committee shall
specify at any time, it being understood that any Incentive Options that
are not exercised by such terminated optionee within three months after
such termination shall thereafter become Nonqualified Options) or until
the expiration of the stated term of the Option, if earlier.
(b) Non-Qualified Stock Options and Stock Appreciation Rights. Any
Non-Qualified Stock Option or Stock Appreciation Right granted under the Plan
shall contain such terms and conditions with respect to its termination as
the Committee, in its discretion, may from time to time determine.
SECTION 11. Tax Withholding.
(a) Payment by Participant. Each participant shall, no later than the date as
of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant
for Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding
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payment of any Federal, state or local taxes of any kind required by law to
be withheld with respect to such income. The Company and its Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the participant.
(b) Payment in Shares. A Participant may elect, with the consent of the
Committee, to have such tax withholding obligation satisfied, in whole or in
part, by authorizing the Company to withhold from shares of Stock to be
issued pursuant to an Award a number of shares with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
withholding amount due with respect to such Award.
SECTION 12. Transfer, Leave of Absence, Etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another;
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
SECTION 13. Amendments and Termination.
The Board may at any time amend or discontinue the Plan and the Committee may
at any time amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise
or purchase price, but such price, if any, must satisfy the requirements
which would apply to the substitute or amended Award if it were then
initially granted under this Plan) for the purpose of satisfying changes in
law or for any other lawful purpose, but no such action shall adversely
affect rights under any outstanding Award without the holder's consent.
However, no such amendment, unless approved by the stockholders of the
Company, shall be effective if it would cause the Plan to fail to satisfy the
incentive stock option requirements of the Code, or cause transactions under
the Plan to fail to satisfy the requirements of Rule 16b-3 or any successor
rule under the Act as in effect on the date of such amendment.
SECTION 14. Status of Plan.
With respect to the portion of any Award which has not been exercised and any
payments in cash, Stock or other consideration not received by a participant,
a participant shall have no rights greater than those of a general creditor
of the Company unless the Committee shall otherwise expressly determine in
connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the
Company's obligations to deliver Stock or make payments with respect to
Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the provision of the foregoing sentence.
SECTION 15. Change of Control Provisions.
(a) In the event of a Change of Control while unexercised Stock Options,
Conditional Stock Awards, Performance Share Awards or Stock Appreciation
Rights remain outstanding under the Plan, then (i) the time for exercise of
all unexercised and unexpired Awards shall be automatically accelerated,
effective as of the effective time of the Change of Control (or such earlier
date as may be specified by the Committee), and (ii) after the effective time
of such Change of Control, unexercised Stock Options, Conditional Stock
Awards, Performance Share Awards or Stock Appreciation Rights shall remain
outstanding and shall be exercisable for shares of Stock (or consideration
based upon the Fair Market Value of Stock) or, if applicable, for shares of
such securities, cash or property (or consideration based upon shares of such
securities, cash or property) as the holders of shares of Stock received in
connection with such Change of Control.
(b) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Act) becomes a "beneficial owner" (as such term is defined in Rule
13d-3 promulgated under the Act) (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), directly or indirectly, of securities
of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding securities; or
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(ii) persons who, as of January 1, 1997, constituted the Company's Board
(the "Incumbent Board") cease for any reason, including without limitation
as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that
any person becoming a director of the Company subsequent to January 1,
1997 whose election was approved by, or who was nominated with the
approval of, at least a majority of the directors then comprising the
Incumbent Board shall, for purposes of this Plan, be considered a member
of the Incumbent Board; or
(iii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation or other entity, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than sixty-five percent (65%) of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
SECTION 16. General Provisions.
(a) No Distribution; Compliance with Legal Requirements. The Committee may
require each person acquiring shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities laws and other legal and stock exchange requirements
have been satisfied. The Committee may require the placing of such stop
orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.
(b) Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when
the Company or a stock transfer agent of the Company shall have delivered
such certificates in the United States mail, addressed to the participant, at
the participant's last known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, including trusts, subject to
stockholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases. The
adoption of the Plan or any Award under the Plan does not confer upon any
employee any right to continued employment with the Company or any
Subsidiary.
(d) Delegation by Committee. The Committee may delegate to the Chief
Financial Officer or other officer of the Company the authority to make
decisions relating to the exercise of Options or other Awards, including
without limitation the authority to permit the holder of an Award to deliver
Stock in payment of the exercise price and the authority to permit a holder
of an Award to satisfy a tax withholding obligation by authorizing the
Company to withhold shares from the shares of Stock to be issued pursuant to
an Award.
SECTION 17. Effective Date of Plan.
The Effective Date of the Plan shall be the date of its adoption by the Board
of Directors provided that the stockholders of the Company shall have
approved the Plan within twelve months following the adoption of the Plan by
the Board.
SECTION 18. Governing Law.
This Plan shall be governed by, and construed and enforced in accordance
with, the substantive laws of the State of Delaware without regard to its
principles of conflicts of laws.
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