SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.
14a-12
FALMOUTH BANCORP, INC.
----------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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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
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FALMOUTH BANCORP, INC.
20 Davis Straits, Falmouth, Massachusetts 02540
508-548-3500
December 15, 2000
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders of Falmouth Bancorp, Inc. (the "Company"), the holding company
for Falmouth Co-operative Bank (the "Bank") which will be held on January
16, 2001 at 4:30 p.m. Eastern Standard Time at the main office of the Bank,
20 Davis Straits, Falmouth, Massachusetts 02540 (the "Annual Meeting").
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business that we will transact at the Annual Meeting. In addition to
the formal items of business, management will report on the operations and
activities of the Company and the Bank and you will have an opportunity to
ask questions.
The Board of Directors of the Company has determined that an
affirmative vote on each matter to be considered at the Annual Meeting is in
the best interests of the Company and its stockholders and unanimously
recommends a vote "FOR" each of these matters.
Please complete, sign and return the enclosed proxy card promptly,
whether or not you plan to attend the Annual Meeting. Your vote is
important regardless of the number of shares you own. Voting by proxy will
not prevent you from voting in person at the Annual Meeting but will assure
that your vote is counted if you cannot attend.
On behalf of the Board of Directors and the employees of Falmouth
Bancorp, Inc. and Falmouth Co-operative Bank, we thank you for your
continued support and look forward to seeing you at the Annual Meeting.
Sincerely yours,
/s/ Santo P. Pasqualucci
Santo P. Pasqualucci
President and Chief Executive Officer
Falmouth Bancorp, Inc.
20 Davis Straits
Falmouth, Massachusetts 02540
Notice of Annual Meeting of Stockholders
Date: Tuesday, January 16, 2001
Time: 4:30 p.m., local time
Place: Falmouth Co-operative Bank
20 Davis Straits
Falmouth, Massachusetts 02540
At our 2001 Annual Meeting, we will ask you to:
* Elect three directors to serve for a three-year term expiring at
the 2004 annual meeting. The following three directors are the
Board of Director's nominees:
John J. Lynch, Jr. William E. Newton Santo P. Pasqualucci
* Ratify the appointment of Shatswell, MacLeod & Company, P.C. as
our independent public accountants for the fiscal year ending
September 30, 2001; and
* Transact any other business as may properly come before the
Annual Meeting.
You may vote at the Annual Meeting if you were a stockholder of the
Company at the close of business on December 1, 2000, the record date.
By Order of the Board of Directors,
/s/ Jeanne E. Alves
Jeanne E. Alves
Secretary
Falmouth, Massachusetts
December 15, 2000
===========================================================================
You are cordially invited to attend the Annual Meeting. It is important
that your shares be represented regardless of the number of shares you own.
The Board of Directors urges you to sign, date and mark the enclosed proxy
card promptly and return it in the enclosed envelope. Returning the proxy
card will not prevent you from voting in person if you attend the Annual
Meeting.
===========================================================================
GENERAL INFORMATION
General
We have sent you this Proxy Statement and enclosed proxy card because
the Board of Directors is soliciting your proxy to vote at the Annual
Meeting. This Proxy Statement summarizes the information you will need to
know to cast an informed vote at the Annual Meeting. You do not need to
attend the Annual Meeting to vote your shares. You may simply complete,
sign and return the enclosed proxy card and your votes will be cast for you
at the Annual Meeting. This process is described below in the section
entitled "Voting Rights."
We began mailing this Proxy Statement, the Notice of Annual Meeting
and the enclosed proxy card on or about December 15, 2000 to all
stockholders entitled to vote. If you owned the Company's common stock at
the close of business on December 1, 2000, the record date, you are entitled
to vote at the Annual Meeting. On the record date, there were 1,026,338
shares of common stock outstanding.
Quorum
A quorum of stockholders is necessary to hold a valid meeting. If the
holders of at least a majority of the total number of the outstanding shares
of common stock entitled to vote are represented in person or by proxy at
the Annual Meeting, a quorum will exist. We will include proxies marked as
abstentions and broker non-votes to determine the number of shares present
at the Annual Meeting.
Voting Rights
You are entitled to one vote at the Annual Meeting for each share of
the Company's common stock that you owned as of record at the close of
business on December 1, 2000. The number of shares you own (and may vote)
is listed at the top of the back of the proxy card.
You may vote your shares at the Annual Meeting in person or by proxy.
To vote in person, you must attend the Annual Meeting and obtain and submit
a ballot, which we will provide to you at the Annual Meeting. To vote by
proxy, you must complete, sign and return the enclosed proxy card. If you
properly complete your proxy card and send it to us in time to vote, your
"proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares FOR each of the proposals
identified in the Notice of the Annual Meeting.
If any other matter is presented, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority
of the Board of Directors determines. As of the date of this Proxy
Statement, we know of no other matters that may be presented at the Annual
Meeting, other than those listed in the Notice of the Annual Meeting.
Vote Required
Proposal 1: The three nominees for director who receive the
Elect Three Directors most votes will be elected. So, if you do not
vote for a nominee, or you indicate "withhold
authority" for any nominee on your proxy card,
your vote will not count "for" or "against" the
nominee. You may not vote your shares
cumulatively for the election of directors.
Proposal 2: The affirmative vote of a majority of the
Ratify Appointment of shares present in person or by proxy at the
Independent Public Annual Meeting and entitled to vote on this
Accountants proposal is required to ratify the appointment
of Shatswell, MacLeod & Co., P.C. as the
Company's independent public accountants. So,
if you "abstain" from voting, it has the same
effect as if you voted "against" this proposal.
Effect of Broker Non-Votes
If your broker holds shares that you own in "street name," the broker
may vote your shares on the two proposals listed above even if the broker
does not receive instructions from you. If your broker does not vote on any
of the proposals, this will constitute a "broker non-vote." Broker non-
votes will be treated as shares that are not represented on Proposals 1 and
2 and will have no effect on the outcome of the votes.
Confidential Voting Policy
The Company maintains a policy of keeping stockholder votes
confidential. We only let our Inspector of Election and certain employees
of our independent tabulating agent examine the voting materials. We will
not disclose your vote to management unless it is necessary to meet legal
requirements. We will, however, forward any written comments that you may
have to management.
Revoking Your Proxy
You may revoke your proxy at any time before it is exercised by:
* Filing with the Secretary of the Company a letter revoking the proxy;
* Submitting another signed proxy with a later date; and
* Attending the Annual Meeting and voting in person, provided you file a
written revocation with the Secretary of the Annual Meeting prior to
the voting of such proxy.
If your shares are not registered in your own name, you will need
appropriate documentation from your stockholder of record to vote personally
at the Annual Meeting. Examples of such documentation include a broker's
statement, letter or other document that will confirm your ownership of
shares of the Company.
Solicitation of Proxies
The Company will pay the costs of soliciting proxies from its
stockholders. Directors, officers or employees of the Company and the Bank
may solicit proxies by:
* mail;
* telephone; and
* other forms of communication.
We will also reimburse banks, brokers, nominees and other fiduciaries
for the expenses they incur in forwarding the proxy materials to you.
Obtaining an Annual Report on Form 10-KSB
If you would like a copy of our Annual Report on Form 10-KSB for the
year ended September 30, 2000, which will be filed with the SEC, we will
send you one (without exhibits) free of charge. Please write to:
George E. Young, III
Vice President and Chief Financial Officer
Falmouth Bancorp, Inc.
20 Davis Straits
Falmouth, Massachusetts 02540
Security Ownership of Certain Beneficial Owners
The following table contains common stock ownership information for
persons known to the Company to "beneficially own" 5% or more of the
Company's common stock as of September 30, 2000. In general, beneficial
ownership includes those shares that a person has the power to vote, sell,
or otherwise dispose. Beneficial ownership also includes that number of
shares which an individual has the right to acquire within 60 days (such as
stock options) of the date this table was prepared. Two or more persons may
be considered the beneficial owner of the same shares. We obtained the
information provided in the following table from filings with the SEC and
with the Company. In this proxy statement, "voting power" is the power to
vote or direct the voting of shares, and "investment power" includes the
power to dispose or direct the disposition of shares.
Amount of Percent of Shares
Name and Address Beneficial of Common Stock
Title of Class of Beneficial Owner Ownership Outstanding (1)
- -------------- ------------------- ---------- -----------------
Common Stock The Cape Cod Five Cents 131,800(2) 12.72%
Savings Bank
P.O. Box 10
19 West Road
Orleans, Massachusetts 02653
Common Stock Falmouth Bancorp, Inc. 84,582 8.17%
Employee Stock Ownership Plan
Trust
20 Davis Straits
Falmouth, Massachusetts 02540
Common Stock Santo P. Pasqualucci 90,757 8.76%
c/o Falmouth Bancorp, Inc.
20 Davis Straits
Falmouth, Massachusetts 02540
<FN>
- -------------------
<F1> The total number of shares of the Company's common stock outstanding
on September 30, 2000 was 1,035,838 shares.
<F2> Based on information in a Schedule 13G/A filed with the SEC on July
30, 1999, The Cape Cod Five Cents Savings Bank is deemed to be the
beneficial owner of these shares.
</FN>
Stock Ownership of Management
The following table shows the number of shares of the Company's common
stock beneficially owned by each director and executive officer, and all
directors and executive officers of the Company as a group, as of December
1, 2000. Except as otherwise indicated, each person and each group shown in
the table has sole voting and investment power with respect to the shares of
common stock listed next to their name.
Amount and Percent of
Nature of Common
Beneficial Stock
Name Title(1) Ownership(2)(3) Outstanding(14)
- ---- -------- --------------- ---------------
John W. Holland, Jr.(4) Director 6,740 0.7%
James A. Keefe(5) Director 21,909 2.1%
Wayne C. Lamson Director 2,376 0.2%
Gardner L. Lewis(6) Director 11,429 1.1%
John J. Lynch, Jr.(7) Director 29,240 2.8%
Eileen C. Miskell(8) Director 7,652 0.7%
Robert H. Moore(9) Director 7,240 0.7%
Walter A. Murphy(10) Chairman of the Board 19,008 1.8%
William E. Newton(11) Director 14,240 1.4%
Santo P. Pasqualucci(12) President, Chief Executive 90,757 8.4%
Officer and Director
All directors and executive 301,819 27.0%
officers as a group
(14 persons)(13)
<FN>
- -------------------
<F1> Titles are for both the Company and the Bank.
<F2> Includes restricted stock awards of 1,064 shares of common stock made
to each of the outside directors, with the exception of Mr. Murphy who
was awarded 2,124 shares, under the 1997 Recognition and Retention
Plan for Outside Directors, Officers and Employees of Falmouth
Bancorp, Inc. ("RRP"). Mr. Pasqualucci was also awarded 10,000 shares
of restricted stock under the RRP. Each recipient of a restricted
stock award has sole voting power, but no investment power, over the
unvested shares of common stock covered by the award.
<F3> The figures above include stock options granted with respect to 3,176
shares of common stock to each outside director, 6,884 shares to Mr.
Murphy, 1,588 shares to Mr. Lamson and 49,096 shares to Mr.
Pasqualucci under the 1997 Stock Option Plan for Outside Directors,
Officers and Employees of Falmouth Bancorp, Inc. ("Stock Option
Plan"), which may be acquired pursuant to these vested options.
<F4> Includes 500 shares held jointly with spouse and 2,000 shares held
solely by spouse.
<F5> Includes 2,669 shares held in an Individual Retirement Account
("IRA").
<F6> Includes 2,489 shares held in spouse's IRA, 4,000 shares held in Mr.
Lewis's IRA, 250 shares held individually by spouse, and 350 shares
held by his son, for which Mr. Lewis disclaims beneficial ownership.
<F7> Includes 20,000 shares held in an IRA and 5,000 shares owned by the
corporation of which Mr. Lynch serves as president.
<F8> Includes 1,000 shares held in an IRA, 1,500 shares held solely by
spouse and 2,500 shares owned by a corporation of which Ms. Miskell
serves as treasurer.
<F9> Includes 3,000 shares held in an IRA.
<F10> Includes 10,000 held in an IRA.
<F11> Includes 5,000 shares held by Mr. Newton as trustee for a Profit
Sharing Trust, 2,500 shares held in an IRA, and 2,500 shares held by
Mr. Newton for a corporation of which Mr. Newton is a principal.
<F12> Includes the total of 6,224 shares that have been allocated to Mr.
Pasqualucci under the ESOP as of September 30, 2000, as to which he
has sole voting power, but no investment power, except in limited
circumstances, 18,000 shares held in IRA's in Mr. Pasqualucci's name,
and 6,027 shares held in three trusts for the benefit of Mr.
Pasqualucci's three minor children.
<F13> Includes 10,883 shares held by the ESOP Trust that have been allocated
as of September 30, 2000 to the individual accounts of the executive
officers under the ESOP as to which such executive officers have sole
voting power, but no investment power, except in limited
circumstances. Also includes 48,008 unallocated shares held by the
ESOP Trust as to which the ESOP Trustee may be deemed to share voting
and investment power.
<F14> Based on a total of 1,026,338 shares of the Company's common stock
outstanding as of December 1, 2000.
</FN>
DISCUSSION OF PROPOSALS RECOMMENDED BY BOARD
-------------------
PROPOSAL 1
ELECTION OF DIRECTORS
-------------------
General
The Board has nominated three persons for election as directors at the
Annual Meeting. The nominees are currently serving on the Company's Board
of Directors. If you elect the nominees, they will hold office until the
Annual Meeting in 2004, or until their successors have been elected.
We know of no reason why any nominee may be unable to serve as a
director. If any nominee is unable to serve, your proxy may vote for
another nominee proposed by the Board. If for any reason these nominees
prove unable or unwilling to stand for election, the Board will nominate
alternates or reduce the size of the Board of Directors to eliminate the
vacancy. The Board has no reason to believe that its nominees would prove
unable to serve if elected.
Nominees and Continuing Directors
Position(s)
Held with
Nominees Age(1) Term Expires the Company Director Since(2)
- -------- ------ ------------ ----------- -----------------
John J. Lynch, Jr. 74 2001 Director 1970
William E. Newton 61 2001 Director 1975
Santo P. Pasqualucci 61 2001 President, Chief Executive 1993
Officer and Director
Continuing Directors
- --------------------
John W. Holland, Jr. 75 2002 Director 1966
Gardner L. Lewis 63 2002 Director 1993
Wayne C. Lamson 49 2002 Director 1999
Eileen C. Miskell 42 2002 Director 1994
James A. Keefe 74 2003 Director 1973
Robert H. Moore 67 2003 Director 1976
Retiring Director
- -----------------
Walter A. Murphy 74 2001 Chairman of the Board 1969
<FN>
- -------------------
<F1> As of November 1, 2000.
<F2> Includes service as director of the Bank prior to the formation of the
Company in 1996.
</FN>
The principal occupation and business experience of each nominee for
election as director and each Continuing Director is set forth below.
Nominees
John J. Lynch, Jr. has served as President of Paul Peters Agency,
Inc., a general insurance agency located in Falmouth, since 1957.
William E. Newton has worked as a contractor and has been a principal
of C. H. Newton Builders, Inc. in West Falmouth since 1965.
Santo P. Pasqualucci has served as President of the Bank since
December, 1992 and as President and Chief Executive Officer of the Company
since its formation in 1996. Prior to that time, he served as the President
of a savings bank for six years. He has served the banking community of
Massachusetts for over 30 years.
Continuing Directors
John W. Holland, Jr. is an attorney in the private practice of law in
West Falmouth, Massachusetts. Mr. Holland has provided legal services to
the Bank at its request from time to time.
Gardner L. Lewis is currently retired. He owned and operated The
Pancake Man, a full-service restaurant located in Falmouth, from 1964 to
1993. In 1993, the restaurant was leased to a third party.
Wayne C. Lamson, has been Treasurer/Comptroller of the Woods Hole,
Martha's Vineyard and Nantucket Steamship Authority since 1982. As
Treasurer/Comptroller, Mr. Lamson is responsible for the Authority's
accounting, treasury, finance, internal audit, insurance, payroll, credit
and collection procurement and pension plan administration functions.
Eileen C. Miskell, CPA, is Treasurer of Wood Lumber Company in
Falmouth, Massachusetts. Previously, she was an accountant at the New
England Deaconess Hospital.
James A. Keefe has been a principal of Falmouth Ford, an automobile
dealership, since October of 1966.
Robert H. Moore has worked as an agent with the Paul Peters Agency,
Inc., a general insurance agency located in Falmouth, since May of 1960.
Mr. Moore retired from the insurance agency in 2000.
Retiring Director
Walter A. Murphy served as President of the Bank from 1968 to 1992 and
continues to serve as the Chairman of the Board of Falmouth Bancorp, Inc.
===========================================================================
The Board of Directors unanimously recommends a vote "For" all of the
nominees for election as directors.
===========================================================================
-------------------
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
-------------------
The Board of Directors has appointed Shatswell, MacLeod & Co., P.C. as
our independent public accountants for the Company for the fiscal year
ending September 30, 2001, and we are asking stockholders to ratify the
appointment. Representatives of Shatswell, MacLeod & Co., P.C. are not
expected to attend the Annual Meeting.
===========================================================================
The Board of Directors unanimously recommends a vote "For" the ratification
of the appointment of Shatswell, MacLeod & Co., P.C. as independent public
accountants for the Company.
===========================================================================
INFORMATION ABOUT BOARD OF DIRECTORS AND MANAGEMENT
Board of Directors
The Company's Board of Directors currently consists of ten members.
The Company's Certificate of Incorporation provides that the Board of
Directors shall be divided into three classes, as nearly equal in number as
possible. The terms of four directors expire at the Annual Meeting. Walter
Murphy, Chairman of the Board, will be retiring from the Board of Directors
effective on the Annual Meting date. Each of our directors also serves as a
director of the Bank.
The Board of Directors oversees our business and monitors the
performance of our management. In accordance with our corporate governance
procedures, the Board of Directors does not involve itself in the day-to-day
operations of the Company. The Company's executive officers and management
oversee the day-to-day operations of the Company. Our directors fulfill
their duties and responsibilities by attending regular meetings of the Board
which are held on a monthly basis. Our directors also discuss business and
other matters with the Chairman and the President, other key executives, and
our principal external advisors (legal counsel, auditors, financial advisors
and other consultants).
The Board of Directors held 12 regular meetings during the fiscal year
ended September 30, 2000. Each incumbent director attended at least 75% of
the meetings of the Board of Directors plus committee meetings on which that
particular director served during this period.
Committees of the Board
The Board of Directors of the Company and the Bank have established
the following committees:
EXECUTIVE COMMITTEE The Committee provides advice and recommendations to
the Board in areas of employee salaries and
directors' compensation. The Executive Committee
considers strategic, planning and industry issues
and is authorized to act as appropriate between
meetings of the Board of Directors.
Directors Keefe, Lewis, Lynch, Miskell, Murphy,
Newton, and Pasqualucci serve as members of the
committee.
The Executive Committee met 14 times in the 2000
fiscal year.
AUDIT COMMITTEE The Audit Committee is responsible for review of the
annual audit with the Company's outside auditors and
to report any substantive issues found during the
audit to the Board. The Audit Committee has adopted
a written charter, which is attached to the Proxy
Statement as Appendix A.
Directors Miskell, Murphy, Lamson and Lewis serve as
members of the committee and are "independent" as
defined in Section 121(A) of the American Stock
Exchange's listing standards.
The Audit Committee met twice in the 2000 fiscal
year.
COMPENSATION The Compensation Committee is responsible for
COMMITTEE establishing guidelines for management and employee
compensation.
Directors Murphy, Keefe and Newton serve as members
of the committee.
The Compensation Committee met 3 times in the 2000
fiscal year.
SECURITY COMMITTEE The Security Committee reviews the loan collateral,
appraisal reports on real estate, and authorizes the
funding of real estate loans. In addition, the
Committee authorizes the release of periodic draws
on construction loans.
Directors Lewis, McLane, Moore, Murphy and Pasqualucci serve as
members of the committee.
The Security Committee met 51 times in the 2000 fiscal year.
The Board of Directors, acting as the nominating committee, met in
October, 2000 to select the nominees for election as directors at the Annual
Meeting. The Company's bylaws also set forth a procedure for shareholders
to nominate directors by notifying the Secretary of the Company in writing
and meeting other requirements as set forth in the bylaws.
Audit Committee Report
The following Report of the Company's Audit Committee is provided in
accordance with the rules and regulations of the SEC. Pursuant to such
rules and regulations, this report shall not be deemed "soliciting
material," filed with the SEC, subject to Regulation 14A or 14C of the SEC
or subject to the liabilities of section 18 of the Exchange Act.
FALMOUTH BANCORP, INC. AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the Company's audited
financial statements for the fiscal year ended September 30, 2000 with
management. The Audit Committee has also reviewed and discussed with
Shatswell, MacLeod & Co., P.C. ("Shatswell"), the Company's independent
auditors, the matters required to be discussed by SAS 61, as may be modified
or supplemented.
The Audit Committee has received the written disclosures and the
letter from Shatswell required by Independence Standards Board Standard No.
1 (Independence Standards Board Standard No. 1, Independence Discussions
with Audit Committees), as may be modified or supplemented, and has
discussed Shatswell's independence with respect to the Company with
Shatswell.
Based on the review and discussions referred to in this audit
committee report, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 2000 for filing with
the SEC.
Falmouth Bancorp, Inc.
Audit Committee
Eileen C. Miskell, Chairperson
Wayne C. Lamson
Gardner L. Lewis, III
Walter A. Murphy
Director Compensation
Meeting Fees. Each non-employee of the Bank receives a fee of $500
for attendance at each board meeting. The Chairman of the Board receives a
fee of $800 per Board meeting attended. The Bank also pays each non-
employee director fees ranging from $120 to $300 for each committee meeting
attended, as well as an annual retainer of $2,500 to each non-employee
director on the Executive Committee.
Total directors' meeting and committee fees for fiscal 2000 were
$81,854. We do not compensate our employees for service as directors.
Directors are also entitled to the protection of certain indemnification
provisions in our Certificate of Incorporation and Bylaws.
Recognition and Retention Plan and Stock Option Plan. In addition,
our directors are eligible to participate in the Stock Option Plan and
Recognition and Retention Plan. These stock benefit plans are discussed
under "-Benefits," "Stock Option Plan" and "Recognition and Retention Plan."
Executive Officers
The following individuals are executive officers of the Company and
hold the offices set forth below opposite their names.
Name Position Held with the Company
---- ------------------------------
Santo P. Pasqualucci President and Chief Executive Officer
George E. Young, III Vice President and Chief Financial Officer
Jeanne E. Alves Secretary
The following individuals are executive officers of the Bank and hold
the offices set forth below opposite their names.
Name Position Held with the Bank
---- ---------------------------
Santo P. Pasqualucci President and Chief Executive Officer
George E. Young, III Vice President and Treasurer
Ronald Garcia Vice President/Senior Loan Officer
Sharon L. Shoner Vice President/Auditor/Compliance Officer
Jeanne E. Alves Clerk/Assistant Treasurer
The Board of Directors annually elects the executive officers of the
Company and the Bank. The elected officers hold office until their
respective successors have been elected and qualified, or until death,
resignation or removal by the Board of Directors. The Company has entered
into Employment Agreements with certain of its executive officers which set
forth the terms of their employment. See "-Employment Agreements."
Biographical information of executive officers of the Company and the
Bank is set forth below.
Santo P. Pasqualucci, age 61, has served as President and Chief
Executive Officer of the Bank since December, 1992 and President and Chief
Executive Officer of the Company since 1996. Prior to that time, he served
as the President of a savings bank for six years. He has served the banking
community of Massachusetts for over 30 years.
George E. Young, III, age 55, joined the Bank in 1991 as Assistant
Treasurer, was promoted to Treasurer in 1992 and since 1994 has served as
the Bank's Vice President and Treasurer. Mr. Young has also served as Vice
President and Chief Financial Officer of the Company since 1996. He was
Treasurer and Auditor/Compliance Officer from 1973 to 1991 with another
financial institution. Mr. Young has over 30 years of banking experience.
Jeanne E. Alves, age 56, has served as the Secretary of the Company
and Clerk of the Bank since November 1997. Ms. Alves joined the Bank in
1984 and was promoted to Assistant Treasurer in 1992.
Ronald Garcia, age 50, has served as Vice President/Senior Loan
Officer of the Bank since April 1997. Mr. Garcia served as Vice
President/Commercial Lending of the Bank from 1994 through April 1997.
Prior thereto, he was a Vice President and Commercial Loan Officer for
Falmouth National Bank/Bank of Boston.
Sharon L. Shoner, age 50, has served with the Loan Department of the
Bank since 1977. She is currently Vice President/Audit and Compliance
Officer of the Bank, overseeing the Bank's internal audit and compliance
functions. Ms. Shoner also conducts quarterly CRA reviews and meetings.
Executive Compensation
The following table sets forth cash and noncash compensation for the
fiscal years ended September 30, 2000, 1999 and 1998 awarded to or earned by
Santo P. Pasqualucci, the Company's President and Chief Executive Officer.
Compensation Table
Summary
Long Term
Compensation
Annual Compensation(1) Awards
------------------------------------- -----------------------
Other Restricted
Annual Stock All Other
Name and Principal Compensation Awards Options Compensation
Positions Year Salary($) Bonus($) ($) ($) (#)(2) ($)(3)
- ------------------ ---- --------- -------- ------------ ---------- ------- ------------
Santo P. Pasqualucci, 2000 $150,462 - - - 20,000 $24,261
President and Chief 1999 149,444 - - - - 25,794
Executive Officer 1998 137,948 - - - - 29,663
<FN>
- -------------------
<F1> Under Annual Compensation, the column titled "Salary" includes base
salary, amounts deferred by Mr. Pasqualucci under the Company's
401(k) plan (but not matching contributions made by the Company) and
payroll deductions for health insurance under the Company's health
insurance plan.
<F2> The options granted are intended to qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code, as amended
(the "Code") to the maximum extent possible, and any options which do
not qualify will constitute non-qualified stock options. The stock
options are immediately exercisable and generally remain exercisable
until the tenth anniversary of the grant.
<F3> Includes (i) the dollar value of premiums, if any, paid by the Company
with respect to term life insurance (other than group term insurance
coverage under a plan available to substantially all salaried
employees) for the benefit of Mr. Pasqualucci and (ii) the Company's
contributions on behalf of the executive officer to the Company's
401(k) plan and (iii) 1,349, 1,308 and 1,505 shares of common stock
allocated to the executive officer under the ESOP for fiscal 2000,
1999 and 1998, respectively. The value of the shares were based on a
price of $13.625, $15.00 and $16.25, the closing price on September
30, 2000, 1999 and 1998, respectively.
</FN>
Employment Agreements. The Bank is party to employment agreements (the
"Employment Agreements") with Messrs. Santo Pasqualucci, the Bank's
President and Chief Executive Officer, and George Young, its Vice President
and Treasurer. These Employment Agreements set forth the duties and
compensation of the Senior Executives and are intended to ensure that the
Bank and the Company will have experienced and competent management
personnel.
The Employment Agreements provide for terms of four years, in the case
of Mr. Pasqualucci, and two years, in the case of Mr. Young. On each
anniversary date from the date of commencement of the Employment Agreements,
the term of employment will be extended for an additional one-year period
beyond the then effective expiration date, upon a determination by the Board
of Directors that the performance of the Executive has met the required
performance standards and that such Employment Agreement should be extended.
The Employment Agreements provide the Executives with a salary review by the
Board of Directors not less often than annually, as well as with inclusion
in any discretionary bonus plans, retirement and medical plans, customary
fringe benefits and vacation and sick leave. The Employment Agreements will
terminate upon the Executives' death or disability, and are terminable by
the Bank or the Company for "cause" as defined in the Employment
Agreements. In the event of termination for cause, no severance benefits are
available. If the Bank or the Company terminates the Executive without
cause, the Executive will be entitled to a continuation of his salary and
benefits from the date of termination through the remaining term of the
Employment Agreement. If an Employment Agreement is terminated due to the
Executive's "disability" (as defined in the Employment Agreement), the
Executive will be entitled to a continuation of his salary at three-quarters
level and benefits until the Executive becomes employed again, reaches age
65 or dies. In the event of an Executive's death during the term of the
Employment Agreement, his estate will be entitled to receive his salary
through the end of the month of his death.
The Employment Agreements contain provisions stating that in the event
of an Executive's involuntary termination of employment in connection with,
or within one year after, any "change in control" (as defined in the
Employment Agreement), Mr. Pasqualucci and Mr. Young will be paid, within 10
days of such termination, an amount equal to 2.99 times their "base amount,"
as defined in Section 280G(b)(3) of the Code. The Employment Agreements
also provide for a lump sum payment of the payments due to an Executive for
the remaining term of the Employment Agreement to be made in the event of
the Executive's voluntary termination of employment, upon the occurrence, or
within 60 days thereafter, of certain specified events which have not been
consented to in writing by an Executive, including:
* the requirement that an Executive perform his principal executive
functions more than 35 miles from the Bank's or the Company's current
primary office;
* material reduction in the Executive's authority and responsibility;
* liquidation or dissolution of the Bank or the Company; and
* a breach of the Employment Agreement by the Bank or the Company.
Pension Plan. The Bank is a participant in the pension plan sponsored by the
Co-operative Bank Employees Retirement Association ("CBERA") (the "Pension
Plan"). The following table sets forth the estimated annual benefits that
would be payable under the Pension Plan in the form of a single life annuity
upon normal retirement age. The amounts are expressed at various levels of
compensation and years of service. No reduction is provided for Social
Security benefits.
Pension Plan Table
Years of Credited Service
Average ----------------------------------------------
Earnings 10 15 20 25
-------- -- -- -- --
$ 20,000 $ 2,000 $ 3,000 $ 4,000 $ 5,000
40,000 4,535 6,802 9,070 11,337
60,000 7,535 11,302 15,070 18,837
80,000 10,535 15,802 21,070 26,337
100,000 13,535 20,302 27,070 33,837
120,000 16,535 24,802 33,070 41,337
140,000 19,535 29,302 39,070 48,837
160,000 21,535 32,302 43,070 53,837
For purposes of determining the estimated annual benefits that would
be payable under the Pension Plan to Santo P. Pasqualucci, Mr. Pasqualucci
had completed seven years, ten months of service to the Bank as of September
30, 2000 and had final average compensation of $143,133.
Stock Option Plan
The purpose of the Stock Option Plan is to promote the growth of the
Company, the Bank and other affiliates by linking the incentive compensation
of officers, key executives and directors with the profitability of the
Company. The Stock Option Plan is not subject to ERISA and is not a tax-
qualified plan. The Company has reserved an aggregate of 145,475 shares of
common stock for issuance upon the exercise of stock options granted under
the Plan.
The members of the Board's Compensation Committee who are
disinterested directors ("Option Committee") administer the Stock Option
Plan. In general, both "incentive stock options" and non-qualified stock
options to purchase common stock of the Company may be granted to eligible
officers, employees and outside directors, subject to the restrictions of
the Internal Revenue Code. The Option Committee has discretion under the
Stock Option Plan to establish certain material terms of the options granted
to officers and employees provided such grants are made in accordance with
the Plan's requirements. All options granted to outside directors are by
automatic formula grant and the Option Committee has no discretion over the
material terms of these grants. As of December 8, 2000, each outside
director of the Company had been granted a non-qualified stock option to
purchase an aggregate of 3,969 shares of common stock at an exercise price
of $13.375 per share and the Chairman of the Board has been granted a non-
qualified stock option to purchase an aggregate of 8,605 shares of common
stock, including 7,939 shares of common stock at an exercise price of
$13.375 and 666 shares of common stock at an exercise price of $19.825. On
May 19, 1999, Director Lamson, a new director, was granted 2,381 options at
an exercise price of $15.00 per share.
Stock options granted under the Plan generally vest in 20% increments
over a five year period subject to automatic full vesting upon the
optionee's death, disability or retirement or upon a change in control of
the Company. The Company believes the use of a vesting schedule will
encourage each option recipient to remain in the service of the Company (or
an affiliate) and contribute to its profitability in order to enjoy the full
economic benefit of the option. The Company pays all costs and expenses of
the Stock Option Plan. The Company has reserved the right to amend or
terminate the Plan, in whole or in part, subject to the requirements of all
applicable laws.
The following table summarizes the grants that were made to the named
executive officer in the 2000 fiscal year under the Stock Option Plan.
Option/SAR Grants in Fiscal Year 2000
Individual Grants
- -------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees Exercise or
Granted in Fiscal Base Price Expiration
Name (#)(1) Year ($/Share) Date
- ---- ------------ ------------ ----------- ----------
Santo P. Pasqualucci 20,000 100% $15.00 11/17/09
<FN>
- -------------------
<F1> All options are immediately exercisable.
</FN>
The following table provides the value for "in-the-money" options,
which represent the positive spread between the exercise price of any such
existing stock options and the year-end price of the common stock.
Aggregated Options in 2000 Fiscal Year
and 2000 Fiscal Year End Options
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired Options/SARs at Fiscal Options/SARs at Fiscal
on Value Year-end Year-end(1)
Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------- -------- ------------------------- -------------------------
Santo P. Pasqualucci, -- -- 21,822/14,546 5,456/3,637
President and Chief
Executive Officer
<FN>
- -------------------
<F1> The closing price per share of common stock on September 30, 2000 was
$13.625, and all "in-the-money" options have an exercise price of
$13.375 per share, which equals a spread of $0.25. As of September
30, 2000, 20,000 of Mr. Pasqualucci's exercisable stock options were
"out-of-the-money."
</FN>
Recognition and Retention Plan
Similar to the Stock Option Plan, the RRP functions as a long-term
incentive compensation program for eligible officers, employees and outside
directors of the Company, the Bank and other affiliates. The members of the
Board's Compensation Committee who are disinterested directors ("RRP
Committee") administer the RRP. The Company pays all costs and expenses of
administering the RRP.
As required by the terms of the RRP, the Company has established a
trust and will contribute, or cause to be contributed, to the trust, from
time to time, funds sufficient to purchase up to 58,190 shares of common
stock, the maximum number of restricted stock awards that may be granted
under the RRP. Shares of common stock subject to a restricted stock award
are held in the trust until the award vests at which time the shares of
common stock attributable to the portion of the award that have vested are
distributed to the award holder. An award recipient is entitled to exercise
voting rights and receive cash dividends with respect to the shares of
common stock subject to the award, whether or not the underlying shares have
vested.
Restricted stock awards are granted under the RRP on a discretionary
basis to eligible officers and executives selected by the RRP Committee and
are awarded to outside directors pursuant to the terms of the RRP. As of
December 8, 2000, each outside director has been granted a restricted stock
award with respect to 1,064 shares of common stock and the Chairman received
a restricted stock award with respect to 2,124 shares of common stock.
Director Lamson received 638 shares on May 19, 1999 to be distributed at the
same rate over the remaining 3 years of the 5 year vesting period. All
outstanding restricted stock awards will vest and become distributable at
the rate of 20% per year, over a five year period, commencing on February 1,
1998, subject to automatic full vesting on the date of the award holder's
death, disability or retirement or upon a change in control of the Company.
The Company may amend or terminate the RRP, in whole or in part, at
any time, subject to the requirements of all applicable laws.
Transactions with Certain Related Persons
Under applicable federal law, all loans or extensions of credit to
executive officers and directors must be made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with the general public and must not
involve more than the normal risk of repayment or present other unfavorable
features. The Bank has made loans or extended credit to executive officers
and directors and also to certain persons related to executive officers and
directors. All such loans were made by the Bank in the ordinary course of
business and were not made with more favorable terms nor did they involve
more than the normal risk of collectibility or present unfavorable features.
At September 30, 2000, the Bank had a total of $491,948 loans outstanding to
its executive officers and directors.
In addition to these provisions of federal law, Massachusetts law
requires that loans by a co-operative bank to its officers and directors be
made on non-preferential terms and receive the prior approval of a
disinterested majority of the board of directors. Further, loans by a co-
operative bank to its own officers may not exceed $20,000 for general
purposes; $75,000 for educational purposes; and $275,000 for residential
home mortgage purposes. All loans by a co-operative bank to its officers and
directors must be reported annually to the Commissioner.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that the Company's
directors, executive officers, and any person holding more than ten percent
of the Company's Common Stock file with the SEC reports of ownership
changes, and that such individuals furnish the Company with copies of the
reports.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company
believes that all of our executive officers and directors complied with all
Section 16(a) filing requirements applicable to them.
ADDITIONAL INFORMATION
Information About Stockholder Proposals
If you wish to submit proposals to be included in our 2001 proxy
statement for the 2002 Annual Meeting of Stockholders, we must receive them
by August 17, 2001, pursuant to the proxy soliciting regulations of the SEC.
SEC rules contain standards as to what stockholder proposals are required to
be in the proxy statement. Any such proposal will be subject to 17 C.F.R.
Section 240.14a-8 of the rules and regulations promulgated by the SEC.
In addition, under the Company's Bylaws, if you wish to nominate a
director or bring other business before an annual meeting:
* You must be a stockholder of record and have given timely notice in
writing to the Secretary of the Company.
* Your notice must contain specific information required in our Bylaws.
By Order of the Board of Directors,
/s/ Jeanne E. Alves
Jeanne E. Alves
Secretary
Falmouth, Massachusetts
December 15, 2000
===========================================================================
To assure that your shares are represented at the Annual Meeting, please
complete, sign, date and promptly return the accompanying proxy card in
the postage-paid envelope provided.
===========================================================================
FALMOUTH CO-OPERATIVE BANK
AUDIT POLICY
VOTED 02/15/00
FALMOUTH CO-OPERATIVE BANK
AUDIT POLICY
AUTHORITY
Primary responsibility for Falmouth Co-operative Bank's financial
reporting and internal operating controls is vested in senior operating
management as overseen by the Audit Committee and the Board of Directors.
The Audit Committee, composed of the independent directors was established to
assist the board in fulfilling its statutory and fiduciary responsibilities.
The Audit Committee shall have unrestricted access to bank personnel
and documents and will be given the resources necessary to discharge its
responsibilities.
RESPONSIBILITIES
Financial Reporting
The responsibility of the Audit Committee in the area of financial
reporting is to provide assurance that financial disclosures made by
management reasonably portray the bank's financial condition, results of
operations and plans for long term commitments. To accomplish this the
Committee will:
* Have ultimate authority and responsibility
to select, evaluate, and where appropriate,
replace the outside auditor and/or to
nominate the outside auditor to be proposed
for shareholder approval in any proxy
statement
* Insure that the external audit coverage is
timely and complete to comply within
regulatory guidelines.
Assume responsibility for ensuring its
receipt from the outside auditors, a
formal written statement delineating all
relationships between the auditor and the
company, consistent with Independence
Standards Board Standard 1, and the audit
committee's responsibility for actively
engaging in a dialogue with the auditor
with respect to any disclosed relationships
or services that may impact the objectivity
and independence of the auditor and for
taking, or recommending that the full board
take, appropriate action to oversee the
independence of the outside auditor.
* Monitor audit results
* Review auditors' performance
* Review annual financial statements
* Insure income tax returns have been prepared
and filed
* Question any material items in the tax returns
* Insure appropriate tax reserves are maintained
* Review management responses to external
auditors and examiners
Corporate Governance
The responsibility of the Audit Committee in the area of corporate
governance is to provide assurance that the corporation is in reasonable
compliance with pertinent laws and regulations, is conducting its affairs
ethically and is maintaining effective controls against conflict of interest
and fraud. To accomplish this the Committee will:
* Review bank policies relating to compliance
with laws and regulations, ethics, conflicts
of interest and the investigation of
misconduct or fraud.
* Review current or pending litigation in
which the bank is a party.
* Review serious cases of employee, management
and director conflict of interest, misconduct
and fraud.
Internal Control
It is incumbent on the Audit Committee to fulfill its oversight
responsibilities without unnecessary or inappropriate intervention with the
prerogatives of bank management. Nevertheless, to carry out its
responsibility, the Committee must:
* Meet privately with the external auditors
to discuss pertinent matters, including
quality of management and determine if any
restrictions have been placed by management
on the scope of their examination or if
there are other matters that should be
discussed with the Audit Committee.
* Determine if the scope of the audit is of
sufficient depth to detect weaknesses in
internal controls and fraud.
* Review management's procedures to monitor
compliance with the internal controls.
* Direct special investigations into
significant matters brought to its
attention within the scope of its duties.
* Review this policy annually.
* Report Audit Committee activities to the
Board on a timely basis.
ADDENDUM
AUDIT POLICY
Page 1-5/10/00
From:
Oversee and recommend the annual nomination of independent public
accountants.
Replace:
Have ultimate authority and responsibility to select, evaluate,
and where appropriate, replace the outside auditor and/or to
nominate the outside auditor to be proposed for shareholder
approval in any proxy statement.
Add:
Assume responsibility for ensuring its receipt from the outside
auditors, a formal written statement delineating all
relationships between the auditor and the company, consistent
with Independence Standards Board Standard 1, and the audit
committee's responsibility for actively engaging in a dialogue
with the auditor with respect to any disclosed relationships or
services that may impact the objectivity and independence of the
auditor and for taking, or recommending that the full board take,
appropriate action to oversee the independence of the outside
auditor.
Falmouth Bancorp, Inc. REVOCABLE PROXY
This Proxy is solicited on behalf of the Board of Directors of
Falmouth Bancorp, Inc. for the Annual Meeting of Stockholders to be held on
January 16, 2001.
The undersigned stockholder of Falmouth Bancorp, Inc. hereby appoints
Gardner L. Lewis and Walter A. Murphy, and each of them, with full powers of
substitution, to represent and to vote as proxy, as designated, all shares
of common stock of Falmouth Bancorp, Inc. held of record by the undersigned
on December 1, 2000, at the 2001 Annual Meeting of Stockholders (the "Annual
Meeting") to be held at 4:30 p.m., Eastern Standard Time, on January 16,
2001, or at any adjournment or postponement thereof, upon the matters
described in the accompanying Notice of the 2001 Annual Meeting of
Stockholders and Proxy Statement, dated December 15, 2000, and upon such
other matters as may properly come before the Annual Meeting. The
undersigned hereby revokes all prior proxies.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is given,
this Proxy will be voted FOR the election of all nominees listed in Item 1
and FOR the proposal listed in Item 2.
PLEASE MARK, SIGN AND DATE THIS PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
- ---------------------------------------------
The Board of Directors unanimously recommends Please mark your vote as
a vote "FOR" all of the nominees named in in this example.
Item 1, and a vote "FOR" the proposal in [x]
Item 2.
- --------------------------------------------- Please check box if you
plan to attend the
meeting.
[ ]
1. Election of three Directors for terms of three years each.
Nominees: John J. Lynch, Jr., William E. Newton and
Santo P. Pasqualucci.
FOR WITHHOLD FOR ALL
EXCEPT
[ ] [ ] [ ]
Instruction: TO WITHHOLD AUTHORITY to vote for any individual nominee, mark
"For All Except" and write that nominee's name in the space provided below.
- ---------------------------------------------------------------------------
2. Ratification of the appointment of Shatswell, MacLeod & Co., P.C. as
independent public accountants for the fiscal year ending September
30, 2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please be sure to sign and date this proxy
in the box below.
-------------------- --------------------
Stock holder sign Co-holder (if any)
above sign above
Date: -----------------------------------
Detach above card, sign, date and mail in
postage paid envelope provided.
The undersigned hereby acknowledges
receipt of the Notice of the 2001 Annual
Meeting of Stockholders and the Proxy
Statement, dated December 15, 2000 for the
2001 Annual Meeting.
Please sign exactly as your name appears
on this proxy. Joint owners should each
sign personally. If signing as attorney,
executor, administrator, trustee or
guardian, please include your full title.
Corporate or partnership proxies should be
signed by an authorized officer.