SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [_]
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COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Port Financial Corp
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(Name of Registrant as Specified In Its Charter)
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Notes:
[Letterhead of Port Financial Corp.]
September 11, 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of
Port Financial Corp., the holding company for Cambridgeport Bank, which will be
held on October 18, 2000 at 2:00 p.m., Eastern Time, at Port Financial's
corporate headquarters, 1380 Soldiers Field Road, Brighton, MA 02135.
Stockholders are being asked to consider and vote upon proposals to approve
our 2000 Stock Option Plan and 2000 Recognition and Retention Plan. The Board
of Directors has carefully considered both of these proposals and believes that
approval of these plans will enhance our ability to recruit and retain quality
directors, management and employees. We believe that stock-based compensation
is essential in linking the interests of directors, officers and employees
directly to the interest of our stockholders. Accordingly, your Board of
Directors unanimously recommends you vote "FOR" both of these proposals.
The attached Notice of Special Meeting of Stockholders and Proxy Statement
further describe the business to be transacted at the special meeting.
Directors and officers of Port Financial will be present at the meeting to
respond to appropriate questions.
We encourage you to attend the meeting in person. Whether or not you plan
to attend, please read the enclosed proxy statement and then complete, sign and
date the enclosed proxy card and return it in the accompanying postpaid return
envelope as promptly as possible. Please vote as soon as possible --this will
save us additional expense in soliciting proxies and will ensure that your
shares are represented at the 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 special meeting, but will assure that your vote is counted if you
are unable to attend.
Your Board of Directors and the employees of Port Financial and
Cambridgeport Bank are committed to the success of Port Financial and the
enhancement of your investment. As Chairman of the Board and Chief Executive
Officer, I want to express my appreciation for your confidence and support.
Sincerely yours,
James B. Keegan
Chairman and Chief Executive Officer
[Letterhead of Port Financial Corp.]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on October 18, 2000
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Port
Financial Corp. will be held at Port Financial's corporate headquarters, 1380
Soldiers Field Road, Brighton, MA 02135, on October 18, 2000 at 2:00 p.m.,
Eastern Time, to consider and vote upon the following matters:
1. Approval of the Proposed Port Financial Corp. 2000 Stock Option Plan;
2. Approval of the Proposed Port Financial Corp. 2000 Recognition and
Retention Plan; and
3. Authorization of the Board of Directors, in its discretion, to direct
the vote of proxies upon such matters incident to the conduct of the
special meeting as may properly come before the special meeting, and
any adjournment or postponement thereof, including, without
limitation, a motion to adjourn the special meeting. Please note that
at this time we are not aware of any such business.
In accordance with the bylaws of Port Financial, no business shall be
transacted and no corporate action shall be taken at the special meeting other
than that stated in this Notice of Special Meeting.
The Board of Directors has fixed August 25, 2000 as the record date for the
determination of stockholders entitled to notice of and to vote at the special
meeting and any adjournment or postponement thereof. Only stockholders of record
at the close of business on that date will be entitled to notice of and to vote
at the special meeting and any adjournment or postponement thereof.
By Order of the Board of Directors,
James B. Keegan
Chairman and Chief Executive Officer
Brighton, Massachusetts
September 11, 2000
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You are cordially invited to attend the special 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 Special Meeting.
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PORT FINANCIAL CORP.
1380 Soldiers Field Road
Brighton, MA 02135
(800) 835-9094
PROXY STATEMENT FOR THE
SPECIAL MEETING OF STOCKHOLDERS
To Be Held on October 18, 2000
GENERAL INFORMATION
GENERAL
The Port Financial Corp. Board of Directors is using this proxy statement
and accompanying proxy card to solicit proxies from the holders of Port
Financial's issued and outstanding common stock, par value $.01 per share, as of
the close of business on August 25, 2000, for use at our upcoming special
meeting. The special meeting of stockholders of Port Financial will be held on
October 18, 2000 at Port Financial's corporate headquarters, 1380 Soldiers Field
Road, Brighton, MA 02135 at 2:00 p.m., Eastern Time and at any adjournment or
postponement thereof. This proxy statement, together with the enclosed proxy
card, is first being mailed to stockholders on or about September 11, 2000.
Port Financial is a Massachusetts-chartered stock holding company, which
owns all the capital stock of Cambridgeport Bank. In April 2000, Port Financial
converted from a Massachusetts-chartered mutual holding company, Cambridgeport
Mutual Holding Company, to a Massachusetts-chartered stock holding company and
changed its name to Port Financial Corp., and conducted an initial public
offering of its common stock. As used in this proxy statement, "we", "us" and
"our" refer to Port Financial and/or its subsidiaries, depending on the context.
The term "special meeting," as used in this proxy statement, includes any
adjournment or postponement of such meeting.
The purpose of the special meeting is to consider and vote upon our
proposed 2000 Stock Option Plan and proposed 2000 Recognition and Retention
Plan. As indicated in our prospectus dated February 14, 2000, we intended to
implement a stock option plan and a recognition and retention plan for our
directors, officers and employees after our conversion from the mutual to stock
form of organization, which was completed in April of 2000. Given that most of
the companies with which we compete for directors and management-level employees
are public companies that offer stock options and awards as part of their
compensation packages, the Board of Directors of Port Financial believes that
approval of these plans will enhance our ability to recruit and retain quality
directors and management.
WHO CAN VOTE
The Board of Directors has fixed the close of business on August 25, 2000
as the record date for the determination of stockholders entitled to notice of
and to vote at the special meeting. Accordingly, only holders of record of
shares of common stock at the close of business on such date will be entitled to
vote at the special meeting. On August 25, 2000, there were 7,442,818 shares of
common stock issued and outstanding. The presence, in person or by proxy, of the
holders of at least a majority of the total number of outstanding shares of
common stock entitled to vote at the special meeting is necessary to constitute
a quorum at the meeting.
HOW MANY VOTES YOU HAVE
Each holder of shares of common stock outstanding on August 25, 2000 will
be entitled to one vote for each share held of record at the special meeting.
The number of shares you own and may vote is listed at the top of the back of
the proxy card.
HOW TO VOTE
All properly executed proxies received by Port Financial will be voted in
accordance with the instructions marked on the proxy card. If you return an
executed proxy card without marking your instructions, your executed proxy will
be voted "FOR" the proposals identified in the Notice of Special Meeting. In
accordance with the bylaws of Port Financial, we will not transact any business
or take any corporate action at the special meeting other than that stated in
the Notice of Special Meeting.
If you are a stockholder whose shares are not registered in your own name,
you will need appropriate documentation from your stockholder of record to vote
personally at the special meeting.
VOTE REQUIRED
In order to implement each of Proposal 1 and Proposal 2, the holders of
two-thirds of the outstanding shares of our common stock must be voted "FOR"
each proposal. Under this voting standard, we must treat an abstention or a
failure to vote the same as a vote "AGAINST" a proposal. Shares for which no
vote is cast or which the "ABSTAIN" box has been selected on the proxy card,
including shares held by a broker who submits a proxy card but fails to cast a
vote on Proposals 1 or 2, will be treated the same as a vote "AGAINST" each
proposal.
In order to implement Proposal 3, we must obtain the affirmative vote of
the holders of a majority of the shares of our common stock represented in
person or by proxy at the special meeting and entitled to vote on the proposal.
Under this voting standard, shares as to which the "ABSTAIN" box has been
selected on the proxy card will count as shares represented and entitled to vote
and will be treated as votes "AGAINST" the proposal. Shares for which no vote is
cast, including shares held by a broker who submits a proxy card but fails to
cast a vote on this proposal, will be treated as shares that are not represented
and will have no effect on the outcome of the vote.
REVOCABILITY OF PROXIES
You may revoke your grant of proxy at any time before it is voted by:
. filing a written revocation of the proxy with our clerk;
. submitting a signed proxy card bearing a later date;
. attending and voting in person at the special meeting, but you| also
must file a written revocation with the clerk of the special meeting
prior to the voting.
We are soliciting proxies only for the special meeting. If you grant us a
proxy to vote your shares, the proxy will only be exercised at the special
meeting.
2
SOLICITATION OF PROXIES
Our officers, directors and employees may solicit proxies on our behalf by
telephone or through other forms of communication. We will also request persons,
firms and corporations holding shares in their names or in the name of their
nominees, which are beneficially owned by others, to send proxy materials to and
obtain proxies from such beneficial owners, and will reimburse such holders for
reasonable expenses incurred in connection therewith. We have also hired
Georgeson Shareholder Communications to assist in the solicitation of proxies
for a fee of $9,000 plus reimbursement of reasonable out-of-pocket expenses. We
will bear all costs of solicitation.
INTEREST OF PERSONS IN MATTERS TO BE ACTED UPON
Our directors, officers and employees may be granted stock awards under the
proposed Port Financial Corp. 2000 Stock Option Plan and Port Financial Corp.
2000 Recognition and Retention Plan, both of which are being presented for
stockholder approval. As a result, our directors, officers and employees have a
personal interest in the outcome of the vote.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of August 25, 2000, certain information
as to common stock beneficially owned by persons owning in excess of 5% of the
outstanding shares of our common stock. We know of no person, except as listed
below, who beneficially owned more than 5% of the outstanding shares of our
common stock as of August 25, 2000. Except as otherwise indicated, the
information provided in the following table was obtained from filings with the
Securities and Exchange Commission and with Port Financial pursuant to the
Securities Exchange Act of 1934, as amended. Addresses provided are those listed
in the filings as the address of the person authorized to receive notices and
communications. For purposes of the table below and the table set forth under
"Security Ownership of Management," in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, a person is deemed to be the
beneficial owner, for purposes of this table, of any shares of common stock (1)
over which he or she has or shares, directly or indirectly, voting or investment
power, or (2) of which he or she has the right to acquire beneficial ownership
at any time within 60 days after August 25, 2000. As used herein, "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 and
Nature of
Name and Address of Beneficial
Title of Class Beneficial Owner Ownership Percent
- -------------- ---------------- --------- -------
Common Stock, Port Financial Corp. Employee Stock 568,330/(1)/ 7.6%
$.01 par value Ownership Plan Trust
HSBC Bank USA
140 Broadway
New York, New York 10005
Common Stock, Wallace R. Weitz & Company, and 545,000/(2)/ 7.3%
$.01 par value Wallace R. Weitz
1125 South 103/rd/ Street, Suite 600
Omaha, Nebraska 68124-6008
Common Stock, Wellington Management Company, LLP 1,041,000/(3)/ 13.9%
$.01 par value 75 State Street
Boston, Massachusetts 02109
______________________________
/1/ The Port Financial Corp. Employee Stock Ownership Plan ("ESOP") is
administered by the compensation committee of Port Financial's Board of
Directors (the "Compensation Committee"). The ESOP's assets are held in a
trust (the "ESOP Trust"), for which HSBC Bank USA, serves as trustee (the
"ESOP Trustee"). The ESOP Trust purchased these shares with funds
borrowed from Port Financial, initially placed these shares in a suspense
account for future allocation and intends to allocate them to employees
participating in the ESOP over a period of years as its acquisition debt
is retired. The ESOP Trustee is the beneficial owner of the shares held
in the ESOP Trust. The terms of the ESOP Trust Agreement provide that,
subject to the ESOP Trustee's fiduciary responsibilities under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
the ESOP Trustee will vote, tender or exchange shares of common stock
held in the ESOP Trust in accordance with instructions received from the
participants.
/2/ As reported by Wallace R. Weitz & Company and Mr. Wallace R. Weitz, as
President and Sole Owner of Wallace R. Weitz & Company in a Schedule
13G/A dated June 20, 2000. Wallace R. Weitz & Company reported sole
voting and investment power with respect to 545,000 shares and shared
voting and investment power with respect to 545,000 shares. Mr. Weitz
reported shared voting and investment power with respect to 545,000
shares.
/3/ As reported by Wellington Management Company, LLP in a Schedule 13G dated
May 10, 2000, which reported sharing voting power with respect to 214,800
shares and shared investment power with respect to 1,041,100 shares.
4
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information about the shares of common stock
beneficially owned by each director of Port Financial, by each named executive
officer of Port Financial identified in the Summary Compensation Table included
elsewhere in this proxy statement, and all directors and executive officers of
Port Financial or Port Financial's wholly owned subsidiary, Cambridgeport Bank,
as a group as of August 25, 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 indicated.
Percent of
Amount And Nature Common Stock,
Position with of Beneficial $.01 par value
Name Port Financial Ownership/(1)/ Outstanding
- ----------------------------- ------------------------- ----------------- ----------------
James B. Keegan Chairman of the Board and 25,000 /(2)(3)/ *
Chief Executive Officer
Jane L. Lundquist Director, President and 13,295 /(2)(4)/ *
Clerk
Charles Jeffrey Senior Vice President, 11,000 /(2)(5)/ *
Treasurer and Chief
Financial Officer
Paul R. Corcoran, Jr. Director 1,000 *
Daniel C. Crane, Esq. Director 10,000 *
Samuel C. Fleming Director 5,000 *
William Goldberg, Esq. Director 10,000 *
Robert D. Happ Director 20,000 *
Joseph F. O'Connor Director 10,000 *
Rudolph R. Russo Director 10,000 *
Sandra J. Sucher Director 200 *
Lawrence Weber Director 1,500 *
Thomas H. Niles Director 15,000 *
All directors and executive
officers as a group (13 131,995 1.77%
persons)/(2)/ ======= ====
_____________________
* Less than one percent
(1) See "Security Ownership of Certain Beneficial Owners and Management" for a
definition of "beneficial ownership."
(2) Excludes 568,330 shares held under Port Financial's Employee Stock
Ownership Plan over which executives may share voting power with other ESOP
participants. As of August 25, 2000, no shares of Port Financial's common
stock have been allocated to participants pursuant to Port Financial's
Employee Stock Ownership Plan.
(3) Includes 14,700 shares held in Mr. Keegan's 401(k) Plan.
(4) Includes 400 shares held by Ms. Lundquist as custodian for her minor
children under the UTMA, and 2,395 shares held in Ms. Lundquist's 401(k)
Plan.
(5) Amount reflects shares held in Mr. Jeffrey's individual retirement account.
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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS' COMPENSATION
Retainers and Fees. Currently, each non-employee director of Port Financial
and Cambridgeport Bank receives the following fees:
. an annual retainer of $5,000 for serving on the board of directors of
Cambridgeport Bank and $5,000 for serving on the board of directors of
Port Financial Corp.; and
. fees of $500 for each board meeting or committee meeting attended.
Only one board or committee meeting fee is paid to a director for any joint
meeting of the boards of Port Financial and Cambridgeport Bank or any joint
meeting of any committees of the boards. In addition to the fees listed above,
Mr. Corcoran receives an additional annual retainer of $10,000 for his service
as Clerk of Cambridgeport Bank.
Prior to April 11, 2000, the effective date of the conversion of Port
Financial from mutual to stock form of organization, each non-employee director
of Cambridgeport Bank received an annual retainer of $10,000. Each non-employee
director also received a payment of $500 for attendance at each board meeting
and each committee meeting. Cambridgeport Bank paid fees totaling $216,000 to
its non-employee directors for the year ended December 31, 1999. Before the
effective date of the conversion, Port Financial did not compensate directors
for their services.
Directors' Emeritus Consultation Plan. Directors of Port Financial who
retire from service on the board of Port Financial within four years from the
conversion (i.e., April 11, 2004) may elect to participate in the Directors'
Emeritus Consultation Plan by agreeing to provide consulting services to Port
Financial for a period of 12 to 36 months. A retiring director who elects to
provide consulting services will receive a fee of $1,000 per month and will be
designated as a director emeritus. A director emeritus will provide the
consulting services agreed upon and may attend meetings of the board of Port
Financial, but will have no power or right to vote at such meetings.
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EXECUTIVE COMPENSATION
The following table provides information about the compensation paid during
the fiscal year ended December 31, 1999 to the Chief Executive Officer of
Cambridgeport Bank and to the other most highly compensated executive officers
of Cambridgeport Bank whose annual salary and bonus for 1999 was at least
$100,000.
Annual Compensation
Name And --------------------------------------------
Principal Position Other Annual All Other
With Port Financial Year Salary ($) Bonus ($) Compensation ($)/(A)/ Compensation/(b)/
- ------------------------------ ---- ---------- --------- --------------------- -----------------
James B. Keegan, 1999 331,602 120,000 -- 8,520
Chairman of the Board
and Chief Executive
Officer
Jane L. Lundquist, 1999 216,009 90,000 -- 6,940
Director, President and
Clerk
Charles Jeffrey, 1999 139,669 40,000 -- 2,130
Senior Vice President and
Chief Financial Officer
_______________________
(a) Cambridgeport Bank provides its executive officers with non-cash benefits
and perquisites, such as the use of employer-owned or leased automobiles.
Management of Cambridgeport Bank believes that the aggregate value of these
benefits for 1999 did not, in the case of any executive officer, exceed
$50,000 or 10% of the aggregate salary and annual bonus reported for him or
her in the Summary Compensation Table.
(b) Includes the following components: (1) employer matching contributions to
the Cambridgeport Bank 401(k) Plan: Mr. Keegan, $3,754; Ms. Lundquist,
$2,400; and Mr. Jeffrey, $882; and (2) the premium cost for life insurance
coverage provided by Cambridgeport Bank: Mr. Keegan, $4,766; Ms. Lundquist,
$2,488; and Mr. Jeffrey, $1,248.
EMPLOYMENT AGREEMENTS
Port Financial and Cambridgeport Bank jointly entered into employment
agreements with Mr. Keegan to secure his services as President and Chief
Executive Officer of Cambridgeport Bank and Chairman and Chief Executive Officer
of Port Financial, and Ms. Lundquist to secure her services as Executive Vice
President of Cambridgeport Bank and President of Port Financial. For purposes of
Port Financial's obligations, the employment agreements have rolling three-year
terms that began on November 1, 1999, which by decision of the executive or
joint decision of Port Financial and Cambridgeport Bank may be converted to a
fixed three-year term. For purposes of Cambridgeport Bank's obligations, the
employment agreements have fixed terms of three years which began on November 1,
1999 and may be renewed annually after a review of the executive's performance.
These agreements provide for minimum annual salaries of $375,000 and $220,000,
respectively, discretionary cash bonuses, and participation on generally
applicable terms and conditions in other compensation and fringe benefit plans.
They also guarantee customary corporate indemnification and errors and omissions
insurance coverage throughout the employment term and for six years after
termination.
Port Financial and Cambridgeport Bank may terminate each executive's
employment, and each executive may resign, at any time with or without cause.
However, in the event of termination during the term without cause, Port
Financial and Cambridgeport Bank will owe the executive severance benefits
generally equal to the value of the cash compensation and fringe benefits that
the executive would have received if he or she had continued working for an
additional three years. The same severance benefits
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would be payable if the executive resigns during the term following: a loss of
title, office or membership on the board of directors; material reduction in
duties, functions or responsibilities; involuntary relocation of the executive's
principal place of employment to a location over 25 miles in distance from
Cambridgeport Bank's principal office and over 25 miles from the executive's
principal residence; or other material breach of contract by Port Financial or
Cambridgeport Bank which is not cured within 30 days. For 60 days after a change
in control, each executive may resign for any reason and collect severance
benefits as if he or she had been discharged without cause. The employment
agreements also provide uninsured death and disability benefits.
If Port Financial or Cambridgeport Bank experiences a change in ownership,
a change in effective ownership or control or a change in the ownership of a
substantial portion of their assets as contemplated by section 280G of the
Internal Revenue Code, a portion of any severance payments under the employment
agreements might constitute an "excess parachute payment" under current federal
tax laws. Federal tax laws impose a 20% excise tax, payable by the executive, on
excess parachute payments. Under the employment agreements, Cambridgeport Bank
and Port Financial would reimburse the executive for the amount of this excise
tax and would make an additional gross-up payment so that, after payment of the
excise tax and all income and excise taxes imposed on the reimbursement and
gross-up payments, the executive will retain approximately the same net-after
tax amounts under the employment agreement that he or she would have retained if
there were no 20% excise tax. The effect of this provision is that Cambridgeport
Bank and Port Financial, rather than the executive, bears the financial cost of
the excise tax. Neither Port Financial nor Cambridgeport Bank could claim a
federal income tax deduction for an excess parachute payment, excise tax
reimbursement payment or gross-up payment.
CHANGE OF CONTROL AGREEMENTS
Port Financial and Cambridgeport Bank have jointly entered into two-year
change of control agreements with Mr. Jeffrey and two non-executive officers.
The term of these agreements is perpetual until Cambridgeport Bank gives notice
of non-extension, at which time the term is fixed for two years.
Generally, Cambridgeport Bank may terminate the employment of any officer
covered by these agreements, with or without cause, at any time prior to a
change of control without obligation for severance benefits. However, if Port
Financial or Cambridgeport Bank signs a merger or other business combination
agreement, or if a third party makes a tender offer or initiates a proxy
contest, it could not terminate an officer's employment without cause without
liability for severance benefits. The severance benefits would generally be
equal to the value of the cash compensation and fringe benefits that the officer
would have received if he or she had continued working for an additional two
years. Cambridgeport Bank would pay the same severance benefits if the officer
resigns after a change of control following a loss of title, office or
membership on the board of directors, material reduction in duties, functions or
responsibilities, involuntary relocation of his or her principal place of
employment to a location over 25 miles from Cambridgeport Bank's principal
office on the day before the change of control and over 25 miles from the
officer's principal residence or other material breach of contract which is not
cured within 30 days. These agreements also provide payment in the event of
death or disability following a change in control.
If Port Financial or Cambridgeport Bank experiences a change in ownership,
a change in effective ownership or control or a change in the ownership of a
substantial portion of their assets as contemplated by section 280G of the
Internal Revenue Code, a portion of any severance payments under the change of
control agreements might constitute an "excess parachute payment" under current
federal tax laws. Any excess parachute payment would be subject to a federal
excise tax payable by the officer and would be non-deductible by Cambridgeport
Bank and Port Financial for federal income tax purposes. The change of control
agreements do not provide a tax indemnity.
8
BENEFIT PLANS
Pension Plans. Cambridgeport Bank has adopted the SBERA Pension Plan for
its employees. The SBERA Pension Plan is a tax-qualified plan that covers
substantially all employees who are age 21 and completed at least one year of
service. The following table shows the estimated aggregate benefits payable
under the SBERA Pension Plan upon retirement at age 65 with various years of
service and average compensation combinations.
Years of Service
------------------------------------------------
Average
Compensation/(a)/ 15 20 25 30/(b)/ 35/(b)/
- -------------------------- -------- ------- ------- -------- --------
$ 100,000 $17,274 $23,032 $28,790 $28,790 $28,790
120,000 21,324 28,432 35,540 35,540 35,540
140,000 25,374 33,832 42,290 42,290 42,290
160,000 29,424 39,232 49,040 49,040 49,040
200,000 29,424 39,232 49,040 49,040 49,040
400,000 29,424 39,232 49,040 49,040 49,040
600,000 29,424 39,232 49,040 49,040 49,040
_______________________
(a) Average compensation is average base salary plus bonus, as reported in the
"Salary" and "Bonus" columns of the Summary Compensation Table, for the
highest three consecutive years during the participant's employment period.
Tax laws impose a limit ($160,000 for individuals retiring in 1999) on the
average compensation that may be counted in computing benefits under the
SBERA Pension Plan.
(b) The SBERA Pension Plan does not count service in excess of 25 years in the
benefit formula. The benefits shown in the preceding table are annual
benefits payable in the form of a single life annuity at age 65 and are not
subject to any deduction for social security or other offset amounts. An
additional benefit equal to 0.6% of "Average Compensation" is provided for
each year of service credited prior to April 1, 2000. Mr. Keegan, Ms.
Lundquist and Mr. Jeffrey have 17, 14 and 1 year(s) of such prior service
credit, respectively. At December 31,1999, the estimated average
compensation and years of service of the executive officers named in the
Summary Compensation Table were: Mr. Keegan: $397,889, 17 years of service;
Ms. Lundquist: $259,876, 14 years of service; and Mr. Jeffrey: $109,104,
one year of service.
Mr. Keegan and Ms. Lundquist also are entitled to retirement benefits under
the Cambridgeport Bank 1999 Nonqualified Pension Plan. Under this plan, each
executive is entitled to a monthly retirement benefit equal to the greater of
25% of his or her highest monthly salary or 75% of his or her highest monthly
salary, reduced by his or her monthly retirement benefit under the SBERA Pension
Plan and his or her monthly social security benefit. Under the plan, the
executive's highest monthly salary is equal to the executive's average annual
base salary for the three calendar years out of the five calendar years prior to
retirement in which the executive's base salary is the highest, divided by
twelve.
401(k) Plan. Cambridgeport Bank has adopted the SBERA 401(k) Plan, a tax-
qualified defined contribution plan, for substantially all employees of
Cambridgeport Bank who have attained age 21 and completed at least one year of
service. Eligible employees may contribute from 1% to 15% of annual compensation
to the plan on a pre-tax basis each year, subject to limitations of the Internal
Revenue Code. For 1999, the limit was $10,000. Cambridgeport Bank makes a
matching contribution to the plan equal to 100% of the first three percent of a
participant's annual compensation contributed to the plan on a pre-tax basis.
This plan has an individual account for each participant's contributions
and allows each participant to direct the investment of his or her account. One
permitted investment is Port Financial common stock.
9
Officers' Deferred Compensation Plan. Cambridgeport Bank also maintains the
Cambridgeport Bank Officers' Deferred Compensation Plan, a non-qualified plan,
in order to provide restorative payments to executives whose employer matching
contributions under the 401(k) Plan are limited by legal limitations applicable
to tax-qualified plans. The Officers' Deferred Compensation Plan also offers
eligible executives the opportunity to defer the receipt of a portion of their
income in a manner that defers the taxation of such income.
Employee Stock Ownership Plan. This plan is a tax-qualified plan that
covers substantially all employees who have at least one year of service and
have attained age 21. The plan has purchased 568,330 shares as of August 25,
2000.
Port Financial has committed to lend this plan enough money to purchase
595,425 shares. Although contributions to this plan will be discretionary,
Cambridgeport Bank intends to contribute enough money each year to make the
required principal and interest payments on the loan from Port Financial. The
loan is for a term of 30 years and calls for level annual payments of principal
and interest. The plan has pledged the shares it purchases as collateral for the
loan and holds them in a suspense account.
As of August 25, 2000, the plan has not released any of the pledged shares
for allocation to participant accounts. Assuming the plan repays its loan as
scheduled over a 30-year term, we expect that 1/30th of the shares will be
released annually in years 2000 through 2030. The plan will allocate the shares
released each year among the accounts of participants in proportion to their
compensation for the year. For example, if a participant's compensation for a
year represents 1% of the total compensation of all participants for the year,
the plan would allocate to that participant 1% of the shares released for the
year. Participants direct the voting of shares allocated to their accounts.
Shares in the suspense account will usually be voted in a way that mirrors the
votes which participants cast for shares in their individual accounts.
This plan may purchase additional shares in the future, and may do so using
borrowed funds, cash dividends, periodic employer contributions or other cash
flow.
ESOP Restoration Plan. Port Financial has also established the ESOP
Restoration Plan of Port Financial in order to provide restorative payments to
executives who are prevented from receiving the full benefits contemplated by
the Employee Stock Ownership Plan benefit formula. The restorative payments
consist of payments in lieu of shares that cannot be allocated to participants
under the Employee Stock Ownership Plan due to the legal limitations imposed on
tax-qualified plans and, in the case of participants who retire before the
repayment in full of the Employee Stock Ownership Plan loan, payments in lieu of
the shares that would have been allocated if employment had continued through
the full term of the loan.
Long-Term Incentive Plan. Effective as of January 1, 2000, the Long-Term
Incentive Plan was established to permit executives selected by the compensation
committee to earn cash bonuses based on the achievement of objective,
preestablished performance goals appropriate for a publicly-held company that
are set for periods longer than one year. Under the plan, the compensation
committee grants participation units to selected employees each year. Each unit
represents a dollar amount that will be paid at the end of a three-year
performance period if specified performance targets are met. The compensation
committee may establish lower unit values for performance that exceeds a minimum
threshold but is below the target and higher unit values for performance that
exceeds the target. Participation units granted in any plan year may be canceled
and substituted with awards of restricted stock or stock options granted to the
participant.
10
Payments for participation units will be made as soon as practicable
following the end of the relevant performance period. In general, a participant
whose employment terminates prior to the payment for units for a performance
period will forfeit his or her units. There is an exception, and payment will be
made in the event death, disability, retirement or a change in control occurs
after the end of a performance period but prior to the payment for units related
to the performance period.
Stock Option Plan. The Board of Directors of Port Financial has adopted the
Port Financial Corp. 2000 Stock Option Plan. This plan is subject to the
approval of the stockholders at the special meeting. See "Proposal 1 -- Stock
Option Plan."
Recognition and Retention Plan. The Board of Directors of Port Financial
has adopted the Port Financial Corp. 2000 Recognition and Retention Plan. This
plan is subject to the approval of the stockholders at the special meeting. See
"Proposal 2 -- Recognition and Retention Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1999, our compensation committee
consisted of Messrs. Corcoran, Fleming, Happ, Keegan, O'Connor and Ms. Lundquist
with Mr. Corcoran serving as Chairman. Mr. Keegan and Ms. Lundquist are
executive officers of Port Financial. During fiscal 1999, there were no
interlocks between members of the compensation committee or executive officers
of Port Financial and corporations with respect to which such persons are
affiliated.
LIMITATIONS ON FEDERAL TAX DEDUCTIONS FOR EXECUTIVE OFFICER COMPENSATION
As a private entity, Cambridgeport Bank had been subject to federal tax
rules which permit it to claim a federal income tax deduction for a reasonable
allowance for salaries or other compensation for personal services actually
rendered. Because Cambridgeport Bank is now a subsidiary of a public company,
federal tax laws may limit this deduction in future years to $1.0 million each
tax year for each executive officer named in the summary compensation table in
Port Financial's proxy statement for that year. This limit will not apply to
non-taxable compensation under various broad-based retirement and fringe benefit
plans, to compensation that is "qualified performance-based compensation" under
applicable law or to compensation that is paid in satisfaction of commitments
that arose before the conversion. Port Financial and Cambridgeport Bank expect
that the compensation committee will take this deduction limitation into account
with other relevant factors in establishing future compensation levels of their
executive officers and in setting the terms of compensation programs. Currently,
none of our executives officers receive annual compensation expected to exceed
this limit. However, there is no assurance that all compensation paid to our
executive officers will be deductible for federal income tax purposes. To the
extent that compensation paid to any executive officer is not deductible, the
net after-tax cost of providing the compensation will be higher and the net
after-tax earnings of Port Financial and Cambridgeport Bank will be reduced.
11
_________________________________________________________________
PROPOSAL 1
STOCK OPTION PLAN
_________________________________________________________________
Our Board of Directors has adopted the Port Financial Corp. 2000 Stock
Option Plan, subject to approval by the holders of two-thirds of our outstanding
shares of common stock. We have provided below a summary of our reasons for
adopting this plan and seeking the approval of our stockholders. The following
summary is qualified in its entirety by the full text of the plan document. The
plan document is included at the end of this proxy statement as Appendix A and
----------
is incorporated by reference into this proposal.
WHY WE ARE ASKING FOR STOCKHOLDER APPROVAL
We are asking our stockholders to approve the Port Financial Corp. 2000
Stock Option Plan so that we will be able to grant stock options to certain key
officers, employees and directors of Port Financial. Most of the companies with
which we compete for directors and management-level employees are public
companies that offer stock options as part of their compensation packages. By
approving this plan, our stockholders will enable us to offer a more competitive
compensation package in attracting and retaining highly qualified directors,
officers and employees. In addition, the value of the stock options that we
would grant under this plan relates directly to the market price of our common
stock. Adding stock options to our compensation package would link the financial
interests of our directors, officers and employees with the financial interests
of our stockholders.
IF WE DO NOT RECEIVE STOCKHOLDER APPROVAL
Applicable Massachusetts banking regulations did not permit us to implement
a stock option plan during the first six months after the completion of Port
Financial's stock conversion and our related public offering. These regulations
permit us to implement a stock option plan after six months and before the first
anniversary of these events only if we obtain the approval of the holders of
two-thirds of our outstanding shares of common stock. If we do not receive this
approval, it will not be possible for us to grant stock options. In this event,
we expect that our Board of Directors may consider resubmitting the plan for
stockholder approval and/or will consider substituting other forms of
compensation to assure that our compensation packages for directors, officers
and employees are competitive with those of other publicly traded financial
services companies.
PURPOSE OF THE OPTION PLAN
The purpose of the option plan is to promote the growth and profitability
of Port Financial, to provide certain key officers, employees and directors of
Port Financial and its affiliates with an incentive to achieve corporate
objectives, to attract and retain individuals of outstanding competence and to
provide such individuals with an equity interest in Port Financial.
DESCRIPTION OF THE OPTION PLAN
Administration. A committee of outside directors administers this plan. Its
members are the members of the compensation committee of our Board of Directors
who are "disinterested directors" under the federal tax and securities laws. In
general, disinterested directors are directors who (1) are not, and never were,
executive officers or employees of Port Financial or Cambridgeport Bank; and (2)
do not
12
receive material compensation from Port Financial or Cambridgeport Bank except
for service as a director. The administrative committee must have at least two
members and has broad discretionary powers.
Stock Subject to the Option Plan. Port Financial has reserved 744,282
shares of common stock of Port Financial for issuance upon the exercise of
options under the plan. Such shares may be authorized and unissued shares or
shares previously issued that Port Financial has reacquired. Any shares subject
to grants under the option plan which expire or are terminated, forfeited or
canceled without having been exercised or vested in full, shall be available for
new option grants. As of August 25, 2000, the aggregate fair market value of the
shares reserved for issuance under the plan was $12,280,653 based on the latest
closing sales price per share of common stock of $16.50 on The Nasdaq Stock
Market.
Eligibility. An administrative committee of Port Financial selects the
people who receive stock option grants. Any employee of Port Financial,
Cambridgeport Bank or any affiliate approved by the Board of Directors may be
selected to receive option grants. It is anticipated that approximately 100
employees will be selected by the committee as eligible to receive option
grants. Directors of Port Financial, Cambridgeport Bank or any affiliate
approved by the Board of Directors who are not also employees or officers may be
selected by the committee to receive option grants. It is anticipated that 10
such directors will be selected by the committee to receive option grants.
Terms and Conditions of Options. The administrative committee sets the
terms and conditions of the stock options that it grants. In setting terms and
conditions, it must observe the following restrictions:
. It may not grant options to purchase more than 186,070 shares to any one
employee. In addition, it may not grant options to purchase more than
37,214 shares of our common stock to any one non-employee director or
options to purchase more than 223,284 shares of our common stock to all
outside directors in the aggregate.
. It may not grant a stock option with a purchase price that is less than
the fair market value of a share of our common stock on the date it
grants the stock option.
. It may not grant a stock option with a term that is longer than ten
years.
. It may not grant options that become exercisable more rapidly than at
the rate of 20% per year measured from the date we receive stockholder
approval for the plan, with acceleration permitted only in case of death
or disability.
. It may not grant stock options with an effective date that is before the
date that we receive stockholder approval for the plan.
The committee may grant incentive stock options that qualify for special
federal income tax treatment or non-qualified stock options that do not qualify
for special federal income tax treatment. Incentive stock options are subject to
certain additional restrictions under the Internal Revenue Code and the plan.
Upon the exercise of an option, the exercise price of the option must be
paid in full. Payment may be made in cash, common stock of Port Financial
already owned by the option holder, shares to be acquired by the option holder
upon exercise of the option, or in such other consideration as the
administrative committee authorizes. Options may be transferred prior to
exercise only to certain family members, certain non-profit organizations, and
on the death of the option holder.
13
Mergers and Reorganizations; Adjustments for Extraordinary Dividends. The
number of shares available under the plan, the maximum limits on option grants
to individual officers and directors and to non-employee directors in the
aggregate, and the number of shares subject to outstanding options will be
adjusted to reflect any merger, consolidation or business reorganization in
which Port Financial is the surviving entity, and to reflect any stock split,
stock dividend or other event generally affecting the number of shares. If a
merger, consolidation or other business reorganization occurs and Port Financial
is not the surviving entity, outstanding options may be canceled upon 30 days'
written notice to the option holder so long as the option holder receives
payment determined by Port Financial's Board of Directors to be of a value
equivalent to the value of the canceled options.
Termination or Amendment of the Option Plan
This plan will be in effect for a ten-year period that will begin on the
date of stockholder approval and will end on the tenth anniversary of the date
of stockholder approval. The Board of Directors of Port Financial may suspend or
terminate the plan before then. It may also amend this plan at any time and in
any respect. Any amendment that would change the class of eligible employees,
increase the number of stock options that may be granted to any person or in
total, or reduce the minimum option price must first be approved by our
stockholders.
Federal Income Tax Consequences
The following discussion is intended to be a summary and is not a
comprehensive description of the federal tax laws, regulations and policies
affecting Port Financial and recipients of stock option grants under the plan.
Any descriptions of the provisions of any law, regulation or policy are
qualified in their entirety by reference to the particular law, regulation or
policy. Any change in applicable law or regulation or in the policies of various
taxing authorities may have a significant effect on this summary. The plan is
not a qualified plan under Section 401(a) of the Internal Revenue Code.
Federal Tax Consequences for Option Recipients. Incentive stock options
will not create federal income tax consequences when they are granted. If they
are exercised during employment or within three months after termination of
employment, the exercise will not create federal income tax consequences either.
When the shares acquired on exercise of an incentive stock option are sold, the
seller must pay federal income taxes on the amount by which the sales price
exceeds the purchase price. This amount will be taxed at capital gains rates if
the sale occurs at least two years after the option was granted and at least one
year after the option was exercised. Otherwise, it is taxed as ordinary income.
Incentive stock options that are exercised more than one year after
termination of employment due to death or disability or three months after
termination of employment for other reasons are treated as non-qualified stock
options. Non-qualified stock options will not create federal income tax
consequences when they are granted. When they are exercised, federal income
taxes at ordinary income tax rates must be paid on the amount by which the fair
market value of the shares acquired by exercising the option exceeds the
exercise price. When an option holder sells shares acquired by exercising non-
qualified stock option, he or she must pay federal income taxes on the amount by
which the sales price exceeds the purchase price plus the amount included in
ordinary income at option exercise. This amount will be taxed at capital gains
rates, which will vary depending upon the time that has elapsed since the
exercise of the option. A cash payment under the plan's change of control
provisions is taxed as if it were the exercise of a non-qualified stock option
followed immediately by a resale of the stock acquired by exercising the option.
14
Federal Tax Consequences for Port Financial. When a non-qualified stock
option is exercised, Port Financial may be allowed a federal income tax
deduction for the same amount that the option holder includes in his or her
ordinary income. When an incentive stock option is exercised, there is no tax
deduction unless the shares acquired are resold sooner than two years after the
option was granted or one year after the option was exercised. A cash payment
under the plan's change of control provisions is deductible as if it were the
exercise of a non-qualified stock option. The Internal Revenue Code places an
annual limit of $1.0 million each on the tax deduction which we may claim in any
fiscal year for the compensation of our Chief Executive Officer and for the
compensation of our four next most highly compensated executive officers whose
salary and bonus for the fiscal year in question equals or exceeds $100,000.
There is an exception to this limit for so-called "qualified performance-based
compensation." We have designed this plan with the intention that the stock
options that we grant will constitute qualified performance-based compensation.
As a result, we do not believe that this limit will impair our ability to claim
federal income tax deductions that are otherwise available when an option holder
exercises a non-qualified stock option.
The preceding statements summarize the general principles of current
federal income tax law applicable to options that may be granted under the plan.
State and local tax consequences may also be significant.
The Board of Directors unanimously recommends that stockholders vote "For"
approval of the Port Financial Corp. 2000 Stock Option Plan.
15
_____________________________________________
PROPOSAL 2
RECOGNITION AND RETENTION PLAN
_____________________________________________
Our Board of Directors has adopted the Port Financial Corp. 2000
Recognition and Retention Plan, subject to approval by the holders of two-thirds
of our outstanding shares of common stock. We have provided below a summary of
our reasons for adopting this plan and seeking the approval of our stockholders.
The following summary is qualified in its entirety by the full text of the plan
document. The plan document is included at the end of this proxy statement in
Appendix B and is incorporated by reference into this proposal.
- ----------
Why We Are Asking For Stockholder Approval
We are asking our stockholders to approve the Port Financial Corp. 2000
Recognition and Retention Plan so that we will be able to grant stock awards to
certain key officers, employees and directors of Port Financial. Most of the
companies with which we compete for directors and management-level employees are
public companies that offer stock awards as part of their compensation packages.
By approving this plan, our stockholders will enable us to offer a more
competitive compensation package in attracting and retaining highly qualified
directors, officers and employees. In addition, the value of the stock awards
that we would grant under this plan relates directly to the market price of our
common stock. Adding stock awards to our compensation package would link the
financial interests of our directors, officers and employees with the financial
interest of our stockholders.
If We Do Not Receive Stockholder Approval
Applicable Massachusetts banking regulations did not permit us to implement
this plan during the first six months after the completion of Port Financial's
stock conversion and related initial public offering. These regulations permit
us to implement this plan after six months and before the first anniversary of
these events only if we obtain the approval of the holders of two-thirds of our
outstanding shares of common stock. If we do not receive this approval, it will
not be possible for us to grant stock awards. In this event, we expect that our
Board of Directors may consider resubmitting the plan for stockholder approval
and/or will consider substituting other forms of compensation to assure that our
compensation packages for directors, officers and employees are competitive with
those of other publicly traded financial services companies.
Purpose of the Recognition and Retention Plan
The purpose of the plan is to promote the growth and profitability of Port
Financial, to provide certain key officers, employees and directors of Port
Financial and its affiliates with an incentive to achieve corporate objectives,
to attract and retain individuals of outstanding competence and to provide such
individuals with an equity interest in Port Financial.
16
Description of the RRP
Administration. A committee of outside directors administers this plan.
This committee consists of members of the compensation committee of our Board of
Directors who are "disinterested directors" under the federal tax and securities
laws. In general, disinterested directors are directors who (1) are not, and
never were, officers or employees of Port Financial or Cambridgeport Bank; and
(2) do not receive material compensation from Port Financial or Cambridgeport
Bank except for service as a director. The administrative committee must have at
least two members and has broad discretionary powers.
Stock Subject to the RRP. Port Financial will establish a fund and will
contribute certain amounts of money or property to be determined by the Board of
Directors of Port Financial, in its discretion. No contributions by participants
will be permitted. The funding agent will invest the assets of the fund
primarily in the shares of our common stock that will be used to make restricted
stock awards. It is currently anticipated that the fund will purchase common
stock on the open market or in private transactions. The fund will not purchase
previously authorized but unissued shares from Port Financial. The fund is not
authorized to purchase more than 297,713 shares of common stock of Port
Financial and cannot purchase more than this number. As of August 25, 2000, the
aggregate fair market value of the shares to be purchased under this plan was
$4,912,265 based on the closing sales price per share of common stock of $16.50
on The Nasdaq Stock Market on August 25, 2000.
Eligibility. An administrative committee of Port Financial selects the
people who receive restricted stock awards under the plan. Any employee of Port
Financial, Cambridgeport Bank or any affiliate approved by the Board of
Directors may be selected to receive stock awards. It is anticipated that
approximately 50 employees will be selected by the committee to receive stock
awards. Directors of Port Financial, Cambridgeport Bank or any affiliate
approved by the Board of Directors who are not also employees or officers may be
selected by the committee to receive stock awards. It is anticipated that 10
such directors will be selected by the committee to receive stock awards.
Terms and Conditions of Awards. The administrative committee may, in its
discretion, grant awards of restricted stock to eligible individuals, up to a
maximum of 297,713 shares. The administrative committee will determine at the
time of the grant the number of shares of common stock subject to an award, the
vesting schedule applicable to the award and may, in its discretion, establish
other terms and conditions applicable to the award. In setting terms and
conditions, it must observe the following restrictions:
. It may not grant restricted stock awards for more than 74,428 shares of our
common stock to any one officer or employee, more than 14,885 shares of our
common stock to any one non-employee director, or more than 89,313 shares
to all non-employee directors in the aggregate.
. It may not grant restricted stock awards that vest more rapidly than at the
rate of 20% per year measured from the date we receive stockholder approval
for the plan, with acceleration permitted only in cases of death or
disability.
. It may not grant restricted stock awards with an effective date that is
before the date that we receive stockholder approval for the plan.
As a general rule, shares of our common stock that are subject to a
restricted stock award are held in a fund for the benefit of the award recipient
until vested and, when vested, are transferred from the fund to the award
recipient. While the shares are held in the fund, the award recipient receives
dividends and exercises voting rights. In the alternative, the administrative
committee may authorize the immediate distribution of the restricted shares to
the award recipient in the form of a stock certificate bearing a legend
containing the applicable vesting restrictions.
17
Mergers and Reorganizations. The number of shares available under the plan,
the maximum limits on restricted stock awards to individual officers and
directors and to non-employee directors in the aggregate, and any outstanding
awards will be adjusted to reflect any merger, consolidation or business
reorganization in which Port Financial is the surviving entity, and to reflect
any stock split, stock dividend or other event generally affecting the number of
shares. If a merger, consolidation or other business reorganization occurs and
Port Financial is not the surviving entity, the funding agent will hold any
money, stock, securities or other property received in the fund, and adjust any
award by allocating such money, stock, securities or other property to the
individual eligible for the award.
Termination or Amendment
The Board of Directors of Port Financial has the authority to suspend or
terminate the plan in whole or in part at any time by giving written notice to
the administrative committee, but the plan may not be terminated while there are
outstanding awards that may vest in the future. Upon the termination of the
plan, the funding agent will make distributions from the fund as directed by the
administrative committee and will return any remaining assets of the fund to
Port Financial.
Federal Income Tax Consequences
The following discussion is intended to be a summary and is not a
comprehensive description of the federal tax laws, regulations and policies
affecting Port Financial and recipients of awards that may be granted under the
plan. Any descriptions of the provisions of any law, regulation or policy are
qualified in their entirety by reference to the particular law, regulation or
policy. Any change in applicable law or regulation or in the policies of various
taxing authorities may have a significant effect on this summary. The plan is
not a qualified plan under Section 401(a) of the Internal Revenue Code.
The stock awards under the plan do not result in federal income tax
consequences to either Port Financial or the award recipient. As a general rule,
once the award is vested and the shares subject to the award are distributed,
the award recipient will generally be required to include in ordinary income,
for the taxable year in which the vesting date occurs, an amount equal to the
fair market value of the shares on the vesting date. Port Financial will
generally be allowed to claim a deduction, for compensation expense, in a like
amount. If dividends are paid on unvested shares held under the plan, such
dividend amounts will also be included in the ordinary income of the recipient.
Port Financial will be allowed to claim a deduction for compensation expense for
this amount as well.
Section 162(m) of the Internal Revenue Code limits Port Financial's
deductions for compensation in excess of $1.0 million per year for the Chief
Executive Officer and the four other most highly paid executives named in its
proxy statement. Compensation amounts resulting from restricted stock awards
will be subject to this deduction limitation if this amount of the restricted
stock awards plus other compensation of the executive that is subject to the
limit exceeds $1.0 million. We expect that the administrative committee will
take these deduction limits into account in setting the size and the terms and
conditions of restricted stock awards. However, the administrative committee may
decide to grant restricted stock awards all or a portion of which will exceed
the deduction limit.
The preceding statements are intended to summarize the general principles
of current federal income tax law applicable to awards that may be granted under
the plan. State and local tax consequences may also be significant.
The Board of Directors unanimously recommends that stockholders vote "For"
approval of the Port Financial Corp. 2000 Recognition and Retention Plan.
18
________________________________________________________________________________
PROPOSAL 3
AUTHORIZATION OF THE BOARD OF DIRECTORS, IN ITS DISCRETION, TO
DIRECT THE VOTE OF THE PROXIES UPON SUCH OTHER MATTERS
INCIDENT TO THE CONDUCT OF THE SPECIAL MEETING AS MAY PROPERLY
COME BEFORE THE SPECIAL MEETING, AND ANY ADJOURNMENT OR
POSTPONEMENT THEREOF, INCLUDING, WITHOUT LIMITATION,
A MOTION TO ADJOURN THE SPECIAL MEETING
________________________________________________________________________________
General
The Board of Directors is not aware of any other business that may properly
come before the special meeting. The Board seeks the authorization of the
stockholders of Port Financial, in the event matters incident to the conduct of
the special meeting properly come before the meeting, including, but not limited
to, the consideration of whether to adjourn the special meeting once called to
order, to direct the manner in which those shares represented at the special
meeting by proxies solicited pursuant to this proxy statement shall be voted. As
to all such matters, the Board intends that it would direct the voting of such
shares in the manner determined by the Board, in its discretion, and in the
exercise of its duties and responsibilities, to be in the best interests of Port
Financial and its stockholders, taken as a whole.
Vote Required
The authorization of the Board of Directors, in its discretion, to vote
upon such other business as may properly come before the special meeting
requires the affirmative vote of the holders of a majority of the outstanding
shares of common stock represented in person or by proxy at the special meeting
and entitled to vote thereon. Accordingly, shares as to which the "ABSTAIN" box
has been selected on the proxy card will be counted as present and entitled to
vote and will have the effect of a vote against such proposal. Shares underlying
broker non-votes will not be counted as having been voted in person or by proxy
and will have no effect on the vote.
The Board of Directors unanimously recommends that stockholders vote "For"
authorization of the Board of Directors, in its discretion, to direct the vote
of the proxies upon such other matters incident to the conduct of the special
meeting as may properly come before the special meeting, and any adjournment or
postponement thereof, including, without limitation, a motion to adjourn the
special meeting.
19
ADDITIONAL INFORMATION
Stockholder Proposals for 2000 Annual Meeting
Pursuant to proxy soliciting regulations of the Securities and Exchange
Commission, any stockholder proposal intended for inclusion in the proxy
statement for Port Financial's 2000 Annual Meeting of Stockholders must be
received by Port Financial a reasonable time before we make our proxy
solicitation in connection with such meeting. Nothing in this paragraph shall be
deemed to require Port Financial to include in its proxy statement and proxy
card for such meeting any stockholder proposal which does not meet the
requirements of the Securities and Exchange Commission in effect at the time.
Any such proposal will be subject to 17 C.F.R. (S)240.14a-8 of the Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended.
To be considered for presentation at Port Financial's 2000 Annual Meeting
of Stockholders, any stockholder proposal must be received at our executive
office at least 90 days before the date of the annual meeting. All such
proposals will be subject to the Securities Exchange Act of 1934, as amended,
and Port Financial's Articles of Organization and By-laws.
By Order of the Board of Directors,
James B. Keegan
Chairman and Chief Executive Officer
Brighton, Massachusetts
September 11, 2000
To assure that your shares are represented at the special meeting, please
complete, sign, date and promptly return the accompanying proxy card in the
postage-paid envelope provided.
20
APPENDIX A
----------
Port Financial Corp.
2000 Stock Option Plan
_______________________
Adopted on August 15, 2000
TABLE OF CONTENTS
Page
Article I
Purpose
Section 1.1 General Purpose of the Plan .............................. 1
Article II
Definitions
Section 2.1 Bank...................................................... 1
Section 2.2 Board..................................................... 1
Section 2.3 Change in Control......................................... 1
Section 2.4 Code...................................................... 3
Section 2.5 Committee................................................. 3
Section 2.6 Company................................................... 3
Section 2.7 Disability................................................ 3
Section 2.8 Disinterested Board Member................................ 3
Section 2.9 Effective Date............................................ 3
Section 2.10 Eligible Director......................................... 3
Section 2.11 Eligible Employee......................................... 3
Section 2.12 Employer.................................................. 3
Section 2.13 Exchange Act.............................................. 4
Section 2.14 Exercise Price............................................ 4
Section 2.15 Fair Market Value......................................... 4
Section 2.16 Family Member............................................. 4
Section 2.17 FDIC Regulations.......................................... 4
Section 2.18 Incentive Stock Option.................................... 4
Section 2.19 Non-Profit Organization................................... 4
Section 2.20 Non-Qualified Stock Option................................ 4
Section 2.21 Option.................................................... 4
Section 2.22 Option Period ............................................ 4
Section 2.23 Person.................................................... 5
Section 2.24 Plan...................................................... 5
Section 2.25 Retirement................................................ 5
Section 2.26 Share..................................................... 5
Section 2.27 Termination for Cause..................................... 5
Article III
Available Shares
Section 3.1 Available Shares.......................................... 5
(i)
Page
----
Article IV
Administration
Section 4.1 Committee.................................................. 6
Section 4.2 Committee Action........................................... 7
Section 4.3 Committee Responsibilities................................. 7
Article V
Stock Option Grants
Section 5.1 Grant of Options........................................... 7
Section 5.2 Size of Option............................................. 8
Section 5.3 Exercise Price............................................. 8
Section 5.4 Option Period ............................................. 8
Section 5.5 Required Regulatory Provisions............................. 9
Section 5.6 Additional Restrictions on Incentive Stock Options......... 10
Article VI
Options -- In General
Section 6.1 Method of Exercise......................................... 11
Section 6.2 Limitations on Options..................................... 12
Article VII
Amendment and Termination
Section 7.1 Termination................................................ 13
Section 7.2 Amendment.................................................. 13
Section 7.3 Adjustments in the Event of a Business Reorganization...... 13
Article VIII
Miscellaneous
Section 8.1 Status as an Employee Benefit Plan......................... 14
Section 8.2 No Right to Continued Employment........................... 14
Section 8.3 Construction of Language................................... 15
Section 8.4 Governing Law.............................................. 15
Section 8.5 Headings................................................... 15
Section 8.6 Non-Alienation of Benefits................................. 15
Section 8.7 Taxes...................................................... 15
Section 8.8 Notices.................................................... 15
Section 8.9 Required Regulatory Provisions............................. 16
Section 8.10 Approval of Shareholders................................... 16
(ii)
Page
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Article IX
Additional Provisions Subject to Further Shareholder Approval
Section 9.1 Accelerated Vesting Upon Retirement or Change in Control... 16
Section 9.2 Discretion to Establish Vesting Schedules.................. 17
Section 9.3 No Effect Prior to Shareholder Approval.................... 17
(iii)
Port Financial Corp. 2000 Stock Option Plan
-------------------------------------------
Article I
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Purpose
-------
Section 1.1 General Purpose of the Plan.
---------------------------
The purpose of the Plan is to promote the growth and profitability of
Port Financial Corp., to provide eligible directors, certain key officers and
employees of Port Financial Corp. and its affiliates with an incentive to
achieve corporate objectives, to attract and retain individuals of outstanding
competence and to provide such individuals with an equity interest in Port
Financial Corp.
Article II
----------
Definitions
-----------
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
Section 2.1 Bank means Cambridgeport Bank and any successor thereto.
----
Section 2.2 Board means the board of directors of the Company.
-----
Section 2.3 Change in Control means any of the following events:
-----------------
(a) the consummation of a reorganization, merger or consolidation of
the Company with one or more other persons, other than a transaction
following which:
(i) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act")) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the outstanding equity ownership
interests in the Company; and
(ii) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51%
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of the securities entitled to vote generally in the election of
directors of the Company;
(b) the acquisition of all or substantially all of the assets of the
Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert;
(c) a complete liquidation or dissolution of the Company;
(d) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board of Directors of the Company do not
belong to any of the following groups:
(i) individuals who were members of the Board of Directors of
the Company on the Effective Date; or
(ii) individuals who first became members of the Board of
Directors of the Company after the Effective Date either:
(A) upon election to serve as a member of the Board of
Directors of the Company by affirmative vote of three-quarters of
the members of such board, or of a nominating committee thereof,
in office at the time of such first election; or
(B) upon election by the shareholders of the Company to
serve as a member of such board, but only if nominated for
election by affirmative vote of three-quarters of the members of
the Board of Directors of the Company, or of a nominating
committee thereof, in office at the time of such first
nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of Directors of the Company; or
(e) approval by the stockholders of the Company of any agreement,
plan or arrangement for the consummation of a transaction which, if
consummated, would result in the occurrence of an event described in
section 2.3(a), (b), (c) or (d); or
(f) any event which would be described in section 2.3(a), (b), (c),
(d) or (e) if the term "Bank" were substituted for the terms "Company"
therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or any subsidiary of
either of them, or by any employee benefit plan maintained
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by any of them. For purposes of this section 2.3, the term "person" shall have
the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange
Act.
Section 2.4 Code means the Internal Revenue Code of 1986 (including
----
the corresponding provisions of any succeeding law).
Section 2.5 Committee means the Committee described in section 4.1.
---------
Section 2.6 Company means Port Financial Corp., a corporation
-------
organized and existing under the laws of the Commonwealth of Massachusetts, and
any successor thereto.
Section 2.7 Disability means a condition of total incapacity,
----------
mental or physical, for further performance of duty with the Company which the
Committee shall have determined, on the basis of competent medical evidence, is
likely to be permanent.
Section 2.8 Disinterested Board Member means a member of the Board
--------------------------
who (a) is not a current employee of the Company or a subsidiary, (b) is not a
former employee of the Company who receives compensation for prior services
(other than benefits under a tax-qualified retirement plan) during the taxable
year, (c) has not been an officer of the Company, (d) does not receive
remuneration from the Company or a subsidiary, either directly or indirectly, in
any capacity other than as a director except in an amount for which disclosure
would not be required pursuant to Item 404(a) of the proxy solicitation rules of
the Securities and Exchange Commission and (e) does not possess an interest in
any other transaction, and is not engaged in a business relationship, for which
disclosure would be required pursuant to Item 404(a) or (b) of the proxy
solicitation rules of the Securities and Exchange Commission. The term
Disinterested Board Member shall be interpreted in such manner as shall be
necessary to conform to the requirements of section 162(m) of the Code and Rule
16b-3 promulgated under the Exchange Act.
Section 2.9 Effective Date means October 18, 2000.
--------------
Section 2.10 Eligible Director means a member of the board of
-----------------
directors of an Employer who is not also an employee or an officer of any
Employer.
Section 2.11 Eligible Employee means any employee whom the Committee
-----------------
may determine to be a key officer or employee of an Employer and select to
receive a grant of an Option pursuant to the Plan.
Section 2.12 Employer means the Company, the Bank and any successor
--------
thereto and, with the prior approval of the Board, and subject to such terms and
conditions as may be imposed by the Board, any other savings bank, savings and
loan association, bank, corporation, financial institution or other business
organization or institution. With respect to any Eligible Employer or Eligible
Director, the Employer shall mean the entity which employs such person or upon
whose board of directors such person serves.
Section 2.13 Exchange Act means the Securities Exchange Act of 1934,
------------
as amended.
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Section 2.14 Exercise Price means the price per Share at which
--------------
Shares subject to an Option may be purchased upon exercise of the Option,
determined in accordance with section 5.3.
Section 2.15 Fair Market Value means, with respect to a Share on a
-----------------
specified date:
(a) the final reported sales price on the date in question (or if
there is no reported sale on such date, on the last preceding date on which
any reported sale occurred) as reported in the principal consolidated
reporting system with respect to securities listed or admitted to trading
on the principal United States securities exchange on which the Shares are
listed or admitted to trading; or
(b) if the Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date on
the National Association of Securities Dealers Automated Quotations System,
or, if no such quotation is provided, on another similar system, selected
by the Committee, then in use; or
(c) if sections 2.15(a) and (b) are not applicable, the fair market
value of a Share as the Committee may determine.
Section 2.16 Family Member means the spouse, parent, child or
-------------
sibling of an Eligible Director or Eligible Employee.
Section 2.17 FDIC Regulations means the rules and regulations of the
----------------
Federal Deposit Insurance Corporation.
Section 2.18 Incentive Stock Option means a right to purchase Shares
----------------------
that is granted to Eligible Employees pursuant to section 5.1, that is
designated by the Committee to be an Incentive Stock Option and that is intended
to satisfy the requirements of section 422 of the Code.
Section 2.19 Non-Profit Organization means any organization which is
-----------------------
exempt from federal income tax under section 501(c)(3), (4), (5), (6), (7), (8)
or (10) of the Internal Revenue Code.
Section 2.20 Non-Qualified Stock Option means a right to purchase
--------------------------
Shares that is either (a) granted to an Eligible Director or (b) granted to an
Eligible Employee and either (i) is not designated by the Committee to be an
Incentive Stock Option, or (ii) does not satisfy the requirements of section 422
of the Code.
Section 2.21 Option means either an Incentive Stock Option or a Non-
------
Qualified Stock Option.
Section 2.22 Option Period means the period during which an Option
-------------
may be exercised, determined in accordance with section 5.4.
Section 2.23 Person means an individual, a corporation, a bank, a
------
savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock
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company, a trust, an estate, an unincorporated organization and any other
business organization or institution.
Section 2.24 Plan means the Port Financial Corp. 2000 Stock Option
----
Plan, as amended from time to time.
Section 2.25 Retirement means with respect to an Eligible Employee,
----------
termination of all service for all Employers as an employee at or after the
normal or early retirement date set forth in any tax-qualified retirement plan
of the Bank, whether or not the individual in question actually participates in
any such tax-qualified plan of the Bank, and in the case of an Eligible
Director, termination of all service for all Employers as a voting member of the
Employer's board of directors after the attainment of the latest age at which
the Eligible Director is eligible for election or appointment as a voting member
of the Employer's board of directors under the Employer's charter.
Section 2.26 Share means a share of Common Stock, par value $.01
-----
share, of Port Financial Corp.
Section 2.27 Termination for Cause means termination of service or
---------------------
removal from office with the Employer upon the occurrence of any of the
following: (a) the individual intentionally engages in dishonest conduct in
connection with his performance of services for the Employer resulting in his
conviction of a felony; (b) the individual is convicted of, or pleads guilty or
nolo contendere to, a felony or any crime involving moral turpitude; (c) the
individual breaches his fiduciary duties to the Employer for personal profit; or
(d) the individual willfully breaches or violates any law, rule or regulation
(other than traffic violations or similar offenses), or final cease and desist
order in connection with his performance of services for the Employer.
Article III
-----------
Available Shares
----------------
Section 3.1 Available Shares.
----------------
(a) The maximum aggregate number of Shares with respect to which
Options may be granted at any time shall be equal to the excess of:
(i) 744,282 Shares; over
(ii) the sum of:
(A) the number of Shares with respect to which previously
granted Options may then or may in the future be exercised; plus
(B) the number of Shares with respect to which previously
granted Options have been exercised;
subject to adjustment pursuant to section 7.3.
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(b) Options to purchase an aggregate maximum of 223,285 Shares
(subject to adjustment pursuant to section 7.3) may be granted to Eligible
Directors, and Options to purchase a maximum of 37,214 Shares (subject to
adjustment pursuant to section 7.3) may be granted to any one Eligible Director.
(c) Options to purchase an aggregate maximum of 223,285 Shares
(subject to adjustment pursuant to section 7.3) may be granted to Eligible
Employees, and Options to purchase a maximum of 186,071 Shares (subject to
adjustment pursuant to section 7.3) may be granted to any one Eligible Employee.
(d) For purposes of this section 3.1, an Option shall not be
considered as having been exercised to the extent that such Option terminates by
reason other than the purchase of related Shares; provided, however, that for
purposes of meeting the requirements of section 162(m) of the Code, no Eligible
Employee who is a covered employee (within the meaning of section 162(m) of the
Code) shall receive grants of Options for an aggregate number of Shares that is
in excess of the amount specified for him under this section 3.1, computed as if
any Option which is canceled or forfeited reduced the maximum number of Shares.
Article IV
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Administration
--------------
Section 4.1 Committee.
---------
The Plan shall be administered by the members of the Compensation
Committee of Port Financial Corp. who are Disinterested Board Members. If the
Committee consists of fewer than two Disinterested Board Members, then the Board
shall appoint to the Committee such additional Disinterested Board Members as
shall be necessary to provide for a Committee consisting of at least two
Disinterested Board Members.
Section 4.2 Committee Action.
----------------
The Committee shall hold such meetings, and may make such
administrative rules and regulations, as it may deem proper. A majority of the
members of the Committee shall constitute a quorum, and the action of a majority
of the members of the Committee present at a meet ing at which a quorum is
present, as well as actions taken pursuant to the unanimous written consent of
all of the members of the Committee without holding a meeting, shall be deemed
to be actions of the Committee. All actions of the Committee shall be final and
conclusive and shall be binding upon the Company and all other interested
parties. Any Person dealing with the Committee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by the Secretary of the Committee and one member of the Committee, by two
members of the Committee or by a representative of the Committee authorized to
sign the same in its behalf.
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Section 4.3 Committee Responsibilities.
--------------------------
Subject to the terms and conditions of the Plan and such limitations
as may be imposed by the Board, the Committee shall be responsible for the
overall management and administration of the Plan and shall have such authority
as shall be necessary or appropriate in order to carry out its responsibilities,
including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for participation
in the Plan, the number of Shares subject to the Options, if any, to be
granted, and the terms and conditions thereof;
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions of
the Plan that it may deem necessary or appropriate.
Article V
---------
Stock Option Grants
-------------------
Section 5.1 Grant of Options.
----------------
(a) Subject to the limitations of the Plan, the Committee may, in its
discretion, grant to an Eligible Employee or an Eligible Director an Option to
purchase Shares. An Option for Eligible Employees must be designated as either
an Incentive Stock Option or a Non-Qualified Stock Option and, if not designated
as either, shall be a Non-Qualified Stock Option. An Option for an Eligible
Director shall be a Non-Qualified Stock Option.
(b) Any Option granted under this section 5.1 shall be evidenced by a
written agreement which shall:
(i) specify the number of Shares covered by the Option determined in
accordance with section 5.2;
(ii) specify the Exercise Price, determined in accordance with section
5.3, for the Shares subject to the Option;
(iii) specify the Option Period determined in accordance with section
5.4;
(iv) set forth specifically or incorporate by reference the applicable
provisions of the Plan; and
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(v) contain such other terms and conditions not inconsistent with the
Plan as the Committee may, in its discretion, prescribe with respect to an
Option granted to an Eligible Employee or an Eligible Director.
Section 5.2 Size of Option.
--------------
Subject to section 3.1 and such limitations as the Board may from time
to time impose, the number of Shares as to which an Eligible Employee or
Eligible Director may be granted Options shall be determined by the Committee,
in its discretion.
Section 5.3 Exercise Price.
--------------
The price per Share at which an Option granted to an Eligible Employee
or Eligible Director shall be determined by the Committee, in its discretion;
provided, however, that the Exercise Price shall not be less than the Fair
Market Value of a Share on the date on which the Option is granted.
Section 5.4 Option Period.
-------------
Subject to section 5.5, the Option Period during which an Option
granted to an Eligible Employee may be exercised shall commence on the date
specified by the Committee in the Option agreement and shall expire on the date
specified in the Option agreement or, if no date is specified, on the earliest
of:
(a) in the case of an Option granted to an Eligible Employee:
(i) the close of business on the last day of the three-
month period commencing on the date of the Eligible Employee's
termination of employment with the Employer, other than on account of
death or Disability, Retirement or a Termination for Cause;
(ii) the close of business on the last day of the one-year
period commencing on the date of the Eligible Employee's termination
of employment due to death, Disability or Retirement;
(iii) the date and time when the Eligible Employee ceases to
be an employee of the Employer due to a Termination for Cause; and
(iv) the last day of the ten-year period commencing on the
date on which the Option was granted; and
(b) in the case of an Option granted to an Eligible Director:
(i) removal for cause in accordance with the Employer's
bylaws, or Termination for Cause; or
(ii) the last day of the ten-year period commencing on the
date on which the Option was granted.
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Section 5.5 Required Regulatory Provisions.
------------------------------
Notwithstanding anything contained herein to the contrary:
(a) no Option shall be granted to an Eligible Employee or Eligible
Director under the Plan prior to shareholder approval in accordance with
section 8.10;
(b) subject to section 9.2, each Option granted to an Eligible
Employee or Eligible Director shall become exercisable no more rapidly than
as follows:
(i) prior to the first anniversary of the Effective Date,
an Option shall not be exercisable;
(ii) on and after the first anniversary, but prior to the
second anniversary, of the Effective Date, an Option may be exercised
as to a maximum of twenty percent (20%) of the Shares subject to the
Option when granted;
(iii) on and after the second anniversary, but prior to the
third anniversary, of the Effective Date, an Option may be exercised
as to a maximum of forty percent (40%) of the Shares subject to the
Option when granted, including in such forty percent (40%) any
optioned Shares purchased prior to such second anniversary;
(iv) on and after the third anniversary, but prior to the
fourth anniversary, of the Effective Date, an Option may be exercised
as to a maximum of sixty percent (60%) of the Shares subject to the
Option when granted, including in such sixty percent (60%) any
optioned Shares purchased prior to such third anniversary;
(v) on and after the fourth anniversary, but prior to the
fifth anniversary, of the Effective Date, an Option may be exercised
as to a maximum of eighty percent (80%) of the Shares subject to the
Option when granted, including in such eighty percent (80%) any
optioned Shares purchased prior to such fourth anniversary; and
(vi) on and after the fifth anniversary of the Effective
Date and for the remainder of the Option Period, an Option may be
exercised as to the entire number of optioned Shares not theretofore
purchased;
provided, however, that such an Option shall become fully exercisable, and
all optioned Shares not previously purchased shall become available for
purchase, on the date of the Option holder's death or Disability while in
the service of an Employer.
(c) The Option Period of any Option granted hereunder, whether or not
previously vested, shall be suspended as of the time and date at which the
Option holder has received notice from the Board that his or her employment
is subject to
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a possible Termination for Cause, or in the case of an Eligible Director,
removal for cause in accordance with the Employer's by-laws. Such
suspension shall remain in effect until the Option holder receives official
notice from the Board that he or she has been cleared of any possible
Termination for Cause, or in the case of an Eligible Director, removal for
cause, at which time, the original Exercise Period shall be reinstated
without any adjustment for the intervening suspended period. In the event
that the Option Period under section 5.4 expires during such suspension,
the Company shall pay to the Eligible Employee, within 30 days after his
reinstatement as an employee of the Company, damages equal to the value of
the expired Options (based on the Fair Market Value of a Share as of the
expiration of the Option Period less the Exercise Price of such Options).
(d) No Option granted to an Eligible Employee or Eligible Director
hereunder, whether or not previously vested, shall be exercised after the
time and date at which the Option holder's services with the Employer are
terminated in a Termination for Cause, or, in the case of an Eligible
Director, removal for cause in accordance with the Employer's by-laws.
Section 5.6 Additional Restrictions on Incentive Stock Options.
--------------------------------------------------
An Option granted to an Eligible Employee designated by the Committee
to be an Incentive Stock Option shall be subject to the following limitations:
(a) If, for any calendar year, the sum of (i) plus (ii) exceeds
$100,000, where (i) equals the Fair Market Value (determined as of the date
of the grant) of Shares subject to an Option intended to be an Incentive
Stock Option which first be come available for purchase during such
calendar year, and (ii) equals the Fair Market Value (determined as of the
date of grant) of Shares subject to any other options intended to be
Incentive Stock Options and previously granted to the same Eligible
Employee which first become exercisable in such calendar year, then that
number of Shares optioned which causes the sum of (i) and (ii) to exceed
$100,000 shall be deemed to be Shares optioned pursuant to a Non-Qualified
Stock Option or Non-Qualified Stock Options, with the same terms as the
Option or Options intended to be an Incentive Stock Option;
(b) The Exercise Price of an Incentive Stock Option granted to an
Eligible Employee who, at the time the Option is granted, owns Shares
comprising more than 10% of the total combined voting power of all classes
of stock of the Company shall not be less than 110% of the Fair Market
Value of a Share, and if an Option designated as an Incentive Stock Option
shall be granted at an Exercise Price that does not satisfy this
requirement, the designated Exercise Price shall be observed and the Option
shall be treated as a Non-Qualified Stock Option;
(c) The Option Period of an Incentive Stock Option granted to an
Eligible Employee who, at the time the Option is granted, owns Shares
comprising more than 10% of the total combined voting power of all classes
of stock of the Company, shall expire no later than the fifth anniversary
of the date on which the Option was granted, and if an Option designated as
an Incentive Stock Option shall be granted for an
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Option Period that does not satisfy this requirement, the designated Option
Period shall be observed and the Option shall be treated as a Non-Qualified
Stock Option;
(d) An Incentive Stock Option that is exercised during its designated
Option Period but more than:
(i) three (3) months after the termination of employment with
the Company, a parent or a subsidiary (other than on account of
disability within the meaning of section 22(e)(3) of the Code or
death) of the Eligible Employee to whom it was granted; and
(ii) one (1) year after such individual's termination of
employment with the Company, a parent or a subsidiary due to
disability (within the meaning of section 22(e)(3) of the Code) or
death;
may be exercised in accordance with the terms but shall at the time of
exercise be treated as a Non-Qualified Stock Option; and
(e) Except with the prior written approval of the Committee, no
individual shall dispose of Shares acquired pursuant to the exercise of an
Incentive Stock Option until after the later of (i) the second anniversary
of the date on which the Incentive Stock Option was granted, or (ii) the
first anniversary of the date on which the Shares were acquired.
Article VI
----------
Options -- In General
---------------------
Section 6.1 Method of Exercise.
------------------
(a) Subject to the limitations of the Plan and the Option agreement,
an Option holder may, at any time during the Option Period, exercise his or her
right to purchase all or any part of the Shares to which the Option relates;
provided, however, that the minimum number of Shares which may be purchased at
any time shall be 100, or, if less, the total number of Shares relating to the
Option which remain unpurchased. An Option holder shall exercise an Option to
purchase Shares by:
(i) giving written notice to the Committee, in such form and manner
as the Committee may prescribe, of his intent to exercise the Option;
(ii) delivering to the Committee full payment, consistent with section
6.1(b), for the Shares as to which the Option is to be exercised; and
(iii) satisfying such other conditions as may be prescribed in the
Option agreement.
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(b) The Exercise Price of Shares to be purchased upon exercise of any
Option shall be paid in full in cash (by certified or bank check or such other
instrument as the Company may accept) or, if and to the extent permitted by the
Committee, by one or more of the following: (i) in the form of Shares already
owned by the Option holder having an aggregate Fair Market Value on the date the
Option is exercised equal to the aggregate Exercise Price to be paid; (ii) by
requesting the Company to cancel without payment Options outstanding to such
Person for that number of Shares whose aggregate Fair Market Value on the date
of exercise, when reduced by their aggregate Exercise Price, equals the
aggregate Exercise Price of the Options being exercised; or (iii) by a
combination thereof. Payment for any Shares to be purchased upon exercise of an
Option may also be made by delivering a properly executed exercise notice to the
Company, together with a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds to pay the purchase
price. To facilitate the foregoing, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms. The Committee shall
have no obligation to allow, and may in its sole and absolute discretion decline
to allow, the use of any exercise method described in section 6.1(b)(i), (ii) or
(iii) in any one or more case or in all cases.
(c) When the requirements of section 6.1(a) and (b) have been
satisfied, the Committee shall take such action as is necessary to cause the
issuance of a stock certificate evidencing the Option holder's ownership of such
Shares. The Person exercising the Option shall have no right to vote or to
receive dividends, nor have any other rights with respect to the Shares, prior
to the date as of which such Shares are transferred to such Person on the stock
transfer records of the Company, and no adjustments shall be made for any
dividends or other rights for which the record date is prior to the date as of
which such transfer is effected, except as may be required under section 7.3.
Section 6.2 Limitations on Options.
----------------------
(a) An Option by its terms shall not be transferable by the Option
holder other than to Family Members or Non-profit Organizations or by will or by
the laws of descent and distribution and shall be exercisable, during the
lifetime of the Option holder, only by the Option holder, a Family Member or a
Non-profit Organization. Any such transfer shall be effected by written notice
to the Company given in such form and manner as the Committee may prescribe and
shall be recognized only if such notice is received by the Company prior to the
death of the person giving it. Thereafter, the transferee shall have, with
respect to such Option, all of the rights, privileges and obligations which
would attach thereunder to the transferor if the Option were issued to such
transferor. If a privilege of the Option depends on the life, employment or
other status of the transferor, such privilege of the Option for the transferee
shall continue to depend on the life, employment or other status of the
transferor. The Committee shall have full and exclusive authority to interpret
and apply the provisions of this Plan to transferees to the extent not
specifically described herein. Notwithstanding the foregoing, an Incentive
Stock Option is not transferable by an Eligible Employee other than by will or
the laws of descent and distribution, and is exercisable, during his lifetime,
solely by him.
(b) The Company's obligation to deliver Shares with respect to an
Option shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Option holder to whom such
Shares are to be delivered, in such form as the Committee shall determine to be
necessary or advisable to comply with the provisions of applicable federal,
state or local law. It may be provided that any such representation shall
become inoperative
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upon a registration of the Shares or upon the occurrence of any other event
eliminating the necessity of such representation. The Company shall not be
required to deliver any Shares under the Plan prior to (i) the admission of such
Shares to listing on any stock exchange on which Shares may then be listed, or
(ii) the completion of such registration or other qualification under any state
or federal law, rule or regulation as the Committee shall determine to be
necessary or advisable.
Article VII
-----------
Amendment and Termination
-------------------------
Section 7.1 Termination.
-----------
The Board may suspend or terminate the Plan in whole or in part at any
time prior to the tenth anniversary of the Effective Date by giving written
notice of such suspension or ter mination to the Committee. Unless sooner
terminated, the Plan shall terminate automatically on the day preceding the
tenth anniversary of the Effective Date. In the event of any suspension or
termination of the Plan, all Options theretofore granted under the Plan that are
outstanding on the date of such suspension or termination of the Plan shall
remain outstanding and exercisable for the period and on the terms and
conditions set forth in the Option agreements evidencing such Options.
Section 7.2 Amendment.
---------
The Board may amend or revise the Plan in whole or in part at any
time; provided, however, that, to the extent required to comply with section
162(m) of the Code, no such amendment or revision shall be effective if it
amends a material term of the Plan unless approved by the holders of a majority
of the votes cast on a proposal to approve such amendment or revision.
Section 7.3 Adjustments in the Event of a Business Reorganization.
-----------------------------------------------------
(a) In the event of any merger, consolidation, or other business
reorganization in which the Company is the surviving entity, and in the event of
any stock split, stock dividend or other event generally affecting the number of
Shares held by each Person who is then a holder of record of Shares, the number
of Shares covered by each outstanding Option and the number of Shares available
to any individual or group of individuals pursuant to section 3.1 shall be
adjusted to account for such event. Such adjustment shall be effected by
multiplying such number of Shares by an amount equal to the number of Shares
that would be owned after such event by a Person who, immediately prior to such
event, was the holder of record of one Share, and the Exercise Price of the
Options shall be adjusted by dividing the Exercise Price by such number of
Shares; provided, however, that the Committee may, in its discretion, establish
another appropriate method of adjustment.
(b) In the event of any merger, consolidation, or other business
reorganization in which the Company is not the surviving entity, any Options
granted under the Plan which remain outstanding shall be converted into options
to purchase voting common equity securities of the business entity which
survives such merger, consolidation or other business reorganization having
substantially the same terms and conditions as the outstanding Options under
this Plan and reflecting
A-14
the same economic benefit (as measured by the difference between the aggregate
exercise price and the value exchanged for outstanding Shares in such merger,
consolidation or other business reorganization), all as determined by the
Committee prior to the consummation of such merger; provided, however, that the
Committee may, at any time prior to the consummation of such merger,
consolidation or other business reorganization, direct that all, but not less
than all, outstanding Options be canceled as of the effective date of such
merger, consolidation or other business reorganization in exchange for a cash
payment per optioned Share equal to the excess (if any) of the value exchanged
for an outstanding Share in such merger, consolidation or other business
reorganization over the Exercise Price of the Option being canceled.
Article VIII
------------
Miscellaneous
-------------
Section 8.1 Status as an Employee Benefit Plan.
----------------------------------
This Plan is not intended to satisfy the requirements for
qualification under section 401(a) of the Code or to satisfy the definitional
requirements for an "employee benefit plan" under section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended. It is intended to be a non-
qualified incentive compensation program that is exempt from the regulatory
requirements of the Employee Retirement Income Security Act of 1974, as amended.
The plan shall be construed and administered so as to effectuate this intent.
Section 8.2 No Right to Continued Employment.
--------------------------------
Neither the establishment of the Plan nor any provisions of the Plan
nor any action of the Board or the Committee with respect to the Plan shall be
held or construed to confer upon any Eligible Director or Eligible Employee any
right to a continuation of his or her position as a director or employee of the
Company. The Employers reserve the right to remove any Eligible Director or
dismiss any Eligible Employee or otherwise deal with any Eligible Director or
Eligible Employee to the same extent as though the Plan had not been adopted.
Section 8.3 Construction of Language.
------------------------
Whenever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular, and
words importing the masculine gender may be read as referring equally to the
feminine or the neuter. Any reference to an Article or section number shall
refer to an Article or section of this Plan unless otherwise indicated.
A-15
Section 8.4 Governing Law.
-------------
The Plan shall be construed, administered and enforced according to
the laws of the Commonwealth of Massachusetts without giving effect to the
conflict of laws principles thereof, except to the extent that such laws are
preempted by federal law. The Plan shall be construed to comply with applicable
FDIC Regulations.
Section 8.5 Headings.
--------
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and
the text of the Plan, the text shall control.
Section 8.6 Non-Alienation of Benefits.
--------------------------
The right to receive a benefit under the Plan shall not be subject in
any manner to anticipation, alienation or assignment, nor shall such right be
liable for or subject to debts, contracts, liabilities, engagements or torts.
Section 8.7 Taxes.
-----
The Company shall have the right to deduct from all amounts paid by
the Company in cash with respect to an Option under the Plan any taxes required
by law to be withheld with respect to such Option. Where any Person is entitled
to receive Shares pursuant to the exercise of an Option, the Company shall have
the right to require such Person to pay the Company the amount of any tax which
the Company is required to withhold with respect to such Shares, or, in lieu
thereof, to retain, or to sell without notice, a sufficient number of Shares to
cover the minimum amount re quired to be withheld under applicable law.
Section 8.8 Notices.
-------
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally or five (5) days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below, or at such other address as one such
party may by written notice specify to the other party:
(a) If to the Committee:
Port Financial Corp.
1380 Soldiers Field Road
Brighton, MA 02135
Attention: Corporate Secretary
-------------------
(b) If to an Option holder, to the Option holder's address as shown
in the Employer's records.
A-16
Section 8.9 Required Regulatory Provisions.
------------------------------
The grant and settlement of Options under this Plan shall be
conditioned upon and subject to compliance with section 18(k) of the Federal
Deposit Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations
promulgated thereunder.
Section 8.10 Approval of Shareholders.
------------------------
The Plan shall not be effective or implemented prior to April 12, 2001
unless approved by the holders of at least two-thirds of the total votes
eligible to be cast at any duly called annual or special meeting of the Company,
in which case the Plan shall be effective as of the later of (a) October 11,
2000 or (b) the date of such approval. If not effective prior to such one year
anniversary, the Plan shall be effective on such later date as is specified by
the Board. No Option shall be granted prior to the date on which the Plan
becomes effective.
Article IX
----------
Additional Provisions Subject to Further Shareholder Approval
-------------------------------------------------------------
Section 9.1 Accelerated Vesting Upon Retirement or Change in
------------------------------------------------
Control.
-------
Notwithstanding anything in the Plan to the contrary, but subject to
section 9.3: (a) in the event that any Eligible Employee terminates service as
an Employee of all Employers, or in the event that an Eligible Director
terminates service as a voting member of all Employers' boards of directors,
and such termination constitutes a Retirement, all Options outstanding to such
holder on the date of his Retirement shall, to the extent not already
exercisable, become exercisable upon Retirement; and (b) in the event of a
Change in Control, all Options outstanding under the Plan on the date of the
Change in Control shall, to the extent not already exercisable, become
exercisable on the date of the Change in Control.
Section 9.2 Discretion to Establish Vesting Schedules.
------------------------------------------
Notwithstanding anything in the Plan to the contrary, but subject to
section 9.3, section 5.5(b) shall apply in determining the exercisability of
Options granted to Eligible Employees only if no different vesting schedule is
established by the Committee and specified in the agreement evidencing an
outstanding Option.
Section 9.3 No Effect Prior to Shareholder Approval.
---------------------------------------
Notwithstanding anything contained in this Article IX to the contrary,
the provisions of this Article IX shall not be applied, and shall be of no force
or effect, unless and until the shareholders of the Company shall have approved
such provisions by affirmative vote of the holders of a majority of the Shares
represented in person or by proxy and entitled to vote at a meeting of
shareholders duly called and held after April 11, 2001.
APPENDIX B
----------
Port Financial Corp.
2000 Recognition and Retention Plan
______________________________
Adopted on August 15, 2000
Table of Contents Page
----
Article I
Purpose
Section 1.1 General Purpose of the Plan 1
Article II
Definitions
Section 2.1 Award...................................................... 1
Section 2.2 Award Notice............................................... 1
Section 2.3 Bank....................................................... 1
Section 2.4 Beneficiary................................................ 1
Section 2.5 Board...................................................... 1
Section 2.6 Change of Control.......................................... 1
Section 2.7 Code....................................................... 3
Section 2.8 Committee.................................................. 3
Section 2.9 Company.................................................... 3
Section 2.10 Disability................................................. 3
Section 2.11 Disinterested Board Member................................. 3
Section 2.12 Effective Date............................................. 4
Section 2.13 Eligible Director.......................................... 4
Section 2.14 Eligible Employee.......................................... 4
Section 2.15 Employer................................................... 4
Section 2.16 Exchange Act............................................... 4
Section 2.17 FDIC Regulations........................................... 4
Section 2.18 Fund....................................................... 4
Section 2.19 Funding Agent.............................................. 4
Section 2.20 Funding Agreement.......................................... 4
Section 2.21 Person..................................................... 4
Section 2.22 Plan....................................................... 4
Section 2.23 Retirement................................................. 4
Section 2.24 Share...................................................... 5
Article III
Shares Available Under Plan
Section 3.1 Shares Available Under Plan................................ 5
Page
----
Article IV
Administration
Section 4.1 Committee................................................... 5
Section 4.2 Committee Action............................................ 6
Section 4.3 Committee Responsibilities.................................. 6
Article V
The Fund
Section 5.1 Contributions............................................... 6
Section 5.2 The Fund.................................................... 7
Section 5.3 Investments................................................. 7
Article VI
Awards
Section 6.1 To Eligible Directors....................................... 7
Section 6.2 To Eligible Employees....................................... 7
Section 6.3 Awards in General........................................... 8
Section 6.4 Share Allocations........................................... 8
Section 6.5 Dividend Rights............................................. 8
Section 6.6 Voting Rights............................................... 9
Section 6.7 Tender Offers............................................... 9
Section 6.8 Limitations on Awards....................................... 10
Article VII
Vesting
Section 7.1 Vesting of Awards........................................... 11
Section 7.2 Designation of Beneficiary.................................. 11
Section 7.3 Manner of Distribution...................................... 11
Section 7.4 Taxes....................................................... 12
Page
----
Article VIII
Amendment and Termination
Section 8.1 Termination................................................. 12
Section 8.2 Amendment................................................... 13
Section 8.3 Adjustments in the Event of a Business Reorganization....... 13
Article IX
Miscellaneous
Section 9.1 Status as an Employee Benefit Plan.......................... 14
Section 9.2 No Right to Continued Employment............................ 14
Section 9.3 Construction of Language.................................... 14
Section 9.4 Governing Law............................................... 14
Section 9.5 Headings.................................................... 14
Section 9.6 Non-Alienation of Benefits.................................. 15
Section 9.7 Notices..................................................... 15
Section 9.8 Required Regulatory Provisions.............................. 15
Section 9.9 Approval of Shareholders.................................... 15
Article X
Additional Provisions Subject to Further Shareholder Approval
Section 10.1 Accelerated Vesting Upon Retirement or Change in Control.... 16
Section 10.2 Discretion to Establish Vesting Schedules................... 16
Section 10.3 No Effect Prior to Stockholder Approval..................... 16
Port Financial Corp.
--------------------
2000 Recognition and Retention Plan
-----------------------------------
Article I
---------
Purpose
-------
Section 1.1 General Purpose of the Plan.
---------------------------
The purpose of the Plan is to promote the growth and profitability of
Port Financial Corp. and its affiliated companies and to provide eligible
directors, certain key officers and employees of Port Financial Corp. and its
affiliated companies with an incentive to achieve corporate objectives, to
attract and retain directors, key officers and employees of outstanding
competence and to provide such directors, officers and employees with an equity
interest in Port Financial Corp. and its affiliated companies.
Article II
----------
Definitions
-----------
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
Section 2.1 Award means a grant of Shares to an Eligible Director
-----
or Eligible Employee pursuant to section 6.1 or 6.2.
Section 2.2 Award Notice means, with respect to a particular Award,
------------
a written instrument signed by the Company and the Awards recipient evidencing
the granting of the Award and establishing the terms and conditions thereof.
Section 2.3 Bank means Cambridgeport Bank and any successor
----
thereto.
Section 2.4 Beneficiary means the Person designated by an Eligible
-----------
Director or Eligible Employee pursuant to section 7.2 to receive distribution of
any Shares available for distribution to such Eligible Director or Eligible
Employee, in the event such Eligible Director or Eligible Employee dies prior to
receiving distribution of such Shares.
Section 2.5 Board means the Board of Directors of the Company.
-----
B-2
Section 2.6 Change of Control means any of the following events:
-----------------
(a) the consummation of a reorganization, merger or consolidation of
the Company with one or more other persons, other than a transaction
following which:
(i) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act")) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the outstanding equity ownership
interests in the Company; and
(ii) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Company;
(b) the acquisition of all or substantially all of the assets of the
Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert;
(c) a complete liquidation or dissolution of the Company;
(d) the occurrence of any event if, immediately following such event,
at least 50% of the members of the board of directors of the Company do not
belong to any of the following groups:
(i) individuals who were members of the board of directors of
the Company on the Effective Date; or
(ii) individuals who first became members of the board of
directors of the Company after the Effective Date either:
(A) upon election to serve as a member of the board of
Directors of the Company by affirmative vote of three-quarters of
the members of such board, or of a nominating committee thereof,
in office at the time of such first election; or
(B) upon election by the shareholders of the Company to
serve as a member of such board, but only if nominated for
election
B-3
by affirmative vote of three-quarters of the members of the board
of directors of the Company, or of a nominating committee
thereof, in office at the time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
board of directors of the Company;
(e) approval by the stockholders of the Company of any agreement,
plan or arrangement for the consummation of a transaction which, if
consummated, would result in the occurrence of an event described in
section 2.6(a), (b), (c) or (d); or
(f) any event which would be described in section 2.6(a), (b), (c),
(d) or (e) if the term "Bank" were substituted for the term "Company"
therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or any subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 2.6, the term "person" shall have the meaning assigned
to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
Section 2.7 Code means the Internal Revenue Code of 1986 (including
----
the corresponding provisions of any succeeding law).
Section 2.8 Committee means the Committee described in section 4.1.
---------
Section 2.9 Company means Port Financial Corp., a corporation
-------
organized and existing under the laws of the State of Massachusetts, and any
successor thereto.
Section 2.10 Disability means a condition of total incapacity,
----------
mental or physical, for further performance of duty with the Company which the
Committee shall have determined, on the basis of competent medical evidence, is
likely to be permanent.
Section 2.11 Disinterested Board Member means a member of the Board
--------------------------
who (a) is not a current employee of the Company or a subsidiary, (b) does not
receive remuneration from the Company or a subsidiary, either directly or
indirectly, in any capacity other than as a director, except in an amount for
which disclosure would not be required pursuant to Item 404(a) of the proxy
solicitation rules of the Securities and Exchange Commission and (c) does not
possess an interest in any other transaction, and is not engaged in a business
relationship, for which disclosure would be required pursuant to Item 404(a) or
(b) of the proxy solicitation rules of the Securities and Exchange Commission.
The term Disinterested Board Member shall be interpreted in such manner as shall
be necessary to conform to the requirements of Rule 16b-3 promulgated under the
Exchange Act.
Section 2.12 Effective Date means October 18, 2000.
--------------
B-4
Section 2.13 Eligible Director means a member of the board of
-----------------
directors of an Employer who is not also an employee of any Employer.
Section 2.14 Eligible Employee means any employee whom the Committee
-----------------
may determine to be a key officer or employee of the Employer and selects to
receive an Award pursuant to the Plan.
Section 2.15 Employer means the Company, the Bank and any successor
--------
thereto and, with the prior approval of the Board of Directors of the Company,
and subject to such terms and conditions as may be imposed by the Board, any
other savings bank, savings and loan association, bank, corporation, financial
institution or other business organization or institution. With respect to any
Eligible Employee or Eligible Director, the Employer shall mean the entity which
employs such person or upon whose board of directors such person serves.
Section 2.16 Exchange Act means the Securities and Exchange Act of
------------
1934, as amended.
Section 2.17 FDIC Regulations means the rules and regulations of the
----------------
Federal Deposit Insurance Corporation.
Section 2.18 Fund means the corpus (consisting of contributions paid
----
over to the Funding Agent, and investments thereof), and all earnings,
appreciations or additions thereof and thereto, held by the Funding Agent under
the Funding Agreement in accordance with the Plan, less any depreciation thereof
and any payments made therefrom pursuant to the Plan.
Section 2.19 Funding Agent means the trustee or custodian of the
-------------
Fund from time to time in office. The Funding Agent shall serve as Funding
Agent until it is removed or resigns from office and is replaced by a successor
Funding Agent or Funding Agents appointed by Port Financial Corp.
Section 2.20 Funding Agreement means the agreement between Port
-----------------
Financial Corp. and the Funding Agent therein named or its successor pursuant to
which the Fund shall be held in trust or custody.
Section 2.21 Person means an individual, a corporation, a bank, a
------
savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or institution.
Section 2.22 Plan means the Port Financial Corp. 2000 Recognition
----
and Retention Plan as amended from time to time.
Section 2.23 Retirement means with respect to an Eligible Employee,
----------
termination of all service for all Employers as an employee at or after the
normal or early retirement date set forth in any tax-qualified retirement plan
of the Bank, whether or not the individual in question actually participates in
any such tax-qualified plan of the Bank, and in the case of an Eligible
Director, termination of all service for all Employers as a voting member of the
Employer's board of directors
B-5
after the attainment of the latest age at which the Eligible Director is
eligible for election or appointment as a voting member of the Employer's board
of directors under the Employer's charter.
Section 2.24 Share means a share of common stock of Port Financial
-----
Corp., par value $.01 per share.
Article III
-----------
Shares Available Under Plan
---------------------------
Section 3.1 Shares Available Under Plan.
---------------------------
(a) The maximum number of Shares available for Awards under the Plan
shall be 297,713, subject to adjustment pursuant to section 8.3.
(b) An aggregate maximum of 89,313 Shares (subject to adjustment
pursuant to section 8.3) may be granted as Awards to Eligible Directors, and a
maximum of 14,885 Shares (subject to adjustment pursuant to section 8.3) may be
granted as Awards to any one Eligible Director.
(c) An aggregate maximum of 297,713 Shares (subject to adjustment
pursuant to section 8.3) may be granted as Awards to Eligible Employees, and a
maximum of 74,428 Shares (subject to adjustment pursuant to section 8.3) may be
granted as Awards to any one Eligible Employee.
Article IV
----------
Administration
--------------
Section 4.1 Committee.
---------
The Plan shall be administered by the members of the Compensation
Committee of Port Financial Corp. who are Disinterested Board Members. If the
Committee consists of fewer than two Disinterested Board Members, then the Board
shall appoint to the Committee such additional Disinterested Board Members as
shall be necessary to provide for a Committee consisting of at least two
Disinterested Board Members.
B-6
Section 4.2 Committee Action.
----------------
The Committee shall hold such meetings, and may make such
administrative rules and regulations, as it may deem proper. A majority of the
members of the Committee shall constitute a quorum, and the action of a majority
of the members of the Committee present at a meeting at which a quorum is
present, as well as actions taken pursuant to the unanimous written consent of
all of the members of the Committee without holding a meeting, shall be deemed
to be actions of the Committee. All actions of the Committee shall be final and
conclusive and shall be binding upon the Company and all other interested
parties. Any Person dealing with the Committee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by the Secretary of the Committee and one member of the Committee, by two
members of the Committee or by a representative of the Committee authorized to
sign the same in its behalf.
Section 4.3 Committee Responsibilities.
--------------------------
Subject to the terms and conditions of the Plan and such limitations
as may be imposed by the Board, the Committee shall be responsible for the
overall management and administration of the Plan and shall have such authority
as shall be necessary or appropriate in order to carry out its responsibilities,
including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for Awards under
the Plan, the amount of Shares, if any, to be granted pursuant to an Award,
and the terms and conditions of such Award;
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions of
the Plan that it may deem necessary or appropriate.
Article V
---------
The Fund
--------
Section 5.1 Contributions.
-------------
Port Financial Corp. shall contribute, or cause to be contributed, to
the Fund, from time to time, such amounts of money or property as shall be
determined by the Board, in its discretion. No contributions by Eligible
Directors or Eligible Employees shall be permitted.
B-7
Section 5.2 The Fund.
--------
The Fund shall be held and invested under the Funding Agreement with the
Funding Agent. The provisions of the Funding Agreement shall include provisions
conferring powers on the Funding Agent as to investment, control and
disbursement of the Trust Fund, and such other provisions not inconsistent with
the Plan as may be prescribed by or under the authority of the Board. No bond or
security shall be required of any Funding Agent at any time in office.
Section 5.3 Investments.
-----------
The Funding Agent shall invest the Trust Fund in Shares and in such other
investments as may be permitted under the Funding Agreement, including savings
accounts, time or other interest bearing deposits in or other bearing
obligations of the Company, in such proportions as shall be determined by the
Committee; provided, however, that in no event shall the Fund be used to
purchase more than 297,713 Shares (subject to adjustment pursuant to section
8.3). Notwithstanding the immediately preceding sentence, the Funding Agent may
temporarily invest the Fund in short-term obligations of, or guaranteed by, the
U.S. Government or an agency thereof, or the Funding Agent may retain the Trust
Fund uninvested or may sell assets of the Fund to provide amounts required for
purposes of the Plan.
Article VI
----------
Awards
------
Section 6.1 To Eligible Directors.
---------------------
Subject to the limitations of the Plan and such limitations as the Board
may from time to time impose, the number of Shares as to which an Eligible
Director may be granted an Award shall be determined by the Committee in its
discretion; provided, however, that in no event shall the number of Shares
allocated to an Eligible Director in an Award exceed the number of Shares then
held in the Fund and not allocated in connection with other Awards.
Section 6.2 To Eligible Employees.
---------------------
Subject to the limitations of the Plan and such limitations as the Board
may from time to time impose, the number of Shares as to which an Eligible
Employee may be granted an Award shall be determined by the Committee in its
discretion; provided, however, that in no event shall the number of Shares
allocated to an Eligible Employee in an Award exceed the number of Shares then
held in the Trust and not allocated in connection with other Awards.
B-8
Section 6.3 Awards in General.
-----------------
Any Award shall be evidenced by an Award Notice issued by the
Committee to the Eligible Director or Eligible Employee, which notice shall:
(a) specify the number of Shares covered by the Award;
(b) specify the date of grant of the Award;
(c) specify the dates on which such Shares shall become vested; and
(d) contain such other terms and conditions not inconsistent with the
Plan as the Board or Committee may, in its discretion, prescribe.
Section 6.4 Share Allocations.
-----------------
Upon the grant of an Award to an Eligible Director or Eligible
Employee, the Committee shall notify the Funding Agent of the Award and of the
number of Shares subject to the Award. Thereafter, until such time as the Shares
subject to such Award become vested or are forfeited, the books and records of
the Funding Agent shall reflect that such number of Shares have been awarded to
such Award recipient.
Section 6.5 Dividend Rights.
---------------
(a) Unless the Committee determines otherwise with respect to any
Award and specifies such determination in the relevant Award Notice, any cash
dividends or distributions declared and paid with respect to Shares subject to
the Award that are, as of the record date for such dividend, allocated to an
Eligible Director or Eligible Employee in connection with such Award shall be
promptly paid to and retained by such Eligible Director or Eligible Employee.
Any cash dividends declared and paid with respect to Shares that are not, as of
the record date for such dividend, allocated to any Eligible Director or
Eligible Employee in connection with any Award shall, at the direction of the
Committee, be held in the Trust or used to pay the administrative expenses of
the Plan, including any compensation due to the Funding Agent.
(b) Unless the Committee determines otherwise with respect to any
Award and specifies such determination in the relevant Award Notice, any
dividends or distributions declared and paid in property other than cash with
respect to Shares shall be subject to the same vesting and other restrictions as
the Shares to which the Award relates. Any such dividends declared and paid with
respect to Shares that are not, as of the record date for such dividend,
allocated to any Eligible Director or Eligible Employee in connection with any
Award shall, at the direction of the Committee, be held in the Trust or used to
pay the administrative expenses of the Plan, including any compensation due to
the Funding Agent or, in the case of a stock dividend, used for future Awards.
B-9
Section 6.6 Voting Rights.
-------------
(a) Each Eligible Director or Eligible Employee to whom an Award has
been made that is not fully vested shall have the right to exercise, or direct
the exercise of, all voting rights appurtenant to unvested Shares related to
such Award. Such a direction for any Shares as to which the Eligible Director or
Eligible Employee is not the record owner shall be given by completing and
filing, with the inspector of elections, the Funding Agent or such other person
who shall be independent of the Company as the Committee shall designate in the
direction, a written direction in the form and manner prescribed by the
Committee. If no such direction is given by an Eligible Director or Eligible
Employee, then the voting rights appurtenant to the Shares allocated to him
shall not be exercised.
(b) To the extent that the Fund contains Shares that are not
allocated in connection with an Award, all voting rights appurtenant to such
Shares shall be exercised by the Funding Agent in such manner as the Committee
shall direct to reflect the voting directions given by Eligible Directors or
Eligible Employees with respect to Shares allocated in connection with their
Awards.
(c) The Committee shall furnish, or cause to be furnished, to each
Eligible Director or Eligible Employee who is not the record holder of the
Shares relating to his or her Award all annual reports, proxy materials and
other information furnished by Port Financial Corp., or by any proxy solicitor,
to the holders of Shares.
Section 6.7 Tender Offers.
-------------
(a) Each Eligible Director or Eligible Employee to whom an Award has
been made that is not fully vested shall have the right to respond, or to direct
the response, with respect to the Shares related to such Award, to any tender
offer, exchange offer or other offer made to the holders of Shares. Such a
direction for any Shares as to which the Eligible Director or Eligible Employee
is not the record owner shall be given by completing and filing, with the
inspector of elections, the Funding Agent or such other person who shall be
independent of the Company as the Committee shall designate in the direction, a
written direction in the form and manner prescribed by the Committee. If no such
direction is given by an Eligible Director or Eligible Employee, then the Shares
shall not be tendered or exchanged.
(b) To the extent that the Fund contains Shares that are not
allocated in connection with an Award, all responses to tender, exchange and
other offers appurtenant to such Shares shall be given by the Funding Agent in
such manner as the Committee shall direct to reflect the responses given by
Eligible Directors or Eligible Employees with respect to Shares allocated in
connection with their Awards.
(c) The Committee shall furnish, or cause to be furnished, to each
Eligible Director or Eligible Employee, all information furnished by the offeror
to the holders of Shares.
B-10
Section 6.8 Limitations on Awards.
---------------------
(a) No Award shall be granted under the Plan prior to the later of
the date on which the Plan is approved by shareholders pursuant to section 9.9
or October 11, 2000;
(b) No Award granted under the Plan shall become vested more rapidly
than under the following schedule:
(i) prior to the first anniversary of the Effective Date, no part of
any Award shall be vested in the absence of the death or Disability of the
Award recipient;
(ii) on and after the first anniversary of the Effective Date and
prior to the second anniversary of the Effective Date, an Award will be
vested as to a maximum of twenty percent (20%) of the Shares subject to the
Award when granted in the absence of the death or Disability of the Award
recipient;
(iii) on and after the second anniversary of the Effective Date and
prior to the third anniversary of the Effective Date, an Award may be
vested as to a maximum of forty percent (40%) of the Shares subject to the
Award when granted in the absence of the death or Disability of the Award
recipient;
(iv) on and after the third anniversary of the Effective Date and
prior to the fourth anniversary of the Effective Date, an Award may be
vested as to a maximum of sixty percent (60%) of the Shares subject to the
Award when granted in the absence of the death or Disability of the Award
recipient;
(v) on and after the fourth anniversary of the Effective Date and
prior to the fifth anniversary of the Effective Date, an Award may be
vested as to a maximum of eighty percent (80%) of the Shares subject to the
Award when granted in the absence of the death or Disability of the Award
recipient; and
(vi) on and after the fifth anniversary of the date on which the Plan
is approved by shareholders pursuant to section 9.9, the Award may be
vested as to one hundred percent (100%) of the Shares subject to the Award
when granted; and
(vii) an Award may become fully vested on the date of the Award
holder's death or Disability without regard to the time expired from and
after the Effective Date.
(c) An Award by its terms shall not be transferable by the Eligible
Director or Eligible Employee other than by will or by the laws of descent and
distribution, and the Shares granted pursuant to such Award and held in the
Trust shall be distributable, during the lifetime of the Recipient, only to the
Recipient.
B-11
ARTICLE VII
-----------
Vesting
-------
Section 7.1 Vesting of Awards.
-----------------
Subject to the terms and conditions of the Plan, unless otherwise
determined by the Committee and specified in the Award Notice relating to an
Award, Shares subject to each Award granted to an Eligible Director or Eligible
Employee under the Plan shall become vested as follows: (i) twenty percent
(20%) of such Shares shall become vested twenty (20) calendar days after the end
of the calendar quarter that includes the first anniversary of the date of
grant; (ii) an additional twenty percent (20%) of such Shares shall become
vested twenty (20) calendar days after the end of the calendar quarter that
includes the second anniversary of the date of grant; (iii) an additional twenty
percent (20%) of such Shares shall become vested twenty (20) calendar days after
the end of the calendar quarter that includes the third anniversary of the date
of grant; (iv) an additional twenty percent (20%) of such Shares shall become
vested twenty (20) calendar days after the end of the calendar quarter that
includes the fourth anniversary of the date of grant; (v) an additional twenty
percent (20%) of such Shares shall become vested twenty (20) calendar days after
the end of the calendar quarter that includes the fifth anniversary of the date
of grant; and provided, further, an Award shall become 100% vested upon the
Award recipient's death or Disability.
Section 7.2 Designation of Beneficiary.
--------------------------
An Eligible Director or Eligible Employee who has received an Award
may designate a Beneficiary to receive any undistributed Shares that are, or
become, available for distribution on, or after, the date of his death. Such
designation (and any change or revocation of such designation) shall be made in
writing in the form and manner prescribed by the Committee. In the event that
the Beneficiary designated by an Eligible Director or Eligible Employee dies
prior to the Eligible Director or Eligible Employee, or in the event that no
Beneficiary has been designated, any undistributed Shares that are, or become,
available for distribution on, or after, the Eligible Director's or Eligible
Employee's death shall be paid to the executor or administrator of the Eligible
Director's or Eligible Employee's estate, or if no such executor or
administrator is appointed within such time as the Committee, in its sole
discretion, shall deem reasonable, to such one or more of the spouse and
descendants and blood relatives of such deceased person as the Committee may
select.
Section 7.3 Manner of Distribution.
----------------------
(a) Except as provided in section 7.3(b), as soon as practicable
following the date any Shares granted pursuant to an Award become vested
pursuant to sections 7.1, the Committee shall take such actions as are necessary
to cause the transfer of record ownership of the Shares that have become vested
from the Funding Agent to the Award holder and shall cause the Funding Agent to
distribute to the Award holder all property other than Shares then being held in
connection with the Shares being distributed.
B-12
(b) The Committee may, in its discretion, cause the transfer to an
Award recipient of record ownership of the Shares subject to such Award that
have not yet vested. Any such Shares shall be held in certificated form only,
and the certificate therefor shall bear the following or a substantially
similar legend:
The securities evidenced hereby are subject to the
terms of an Award Notice dated [date] between the
issuer and [name of Award recipient] pursuant to
the Port Financial Corp. 2000 Recognition and
Retention Plan, a copy of which is on file with the
issuer and may be inspected at the issuer's
executive offices at 689 Massachusetts Avenue,
Cambridge, Massachusetts 02139. No sale, transfer,
hypothecation or other disposition of these
securities may be made except in compliance with
the terms of such Award Notice and the terms of
the Plan.
(c) The Company's obligation to deliver Shares with respect to an
Award shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Eligible Director or
Eligible Employee or Beneficiary to whom such Shares are to be delivered, in
such form as the Committee shall determine to be necessary or advisable to
comply with the provisions of applicable federal, state or local law. It may be
provided that any such representation shall become inoperative upon a
registration of the Shares or upon the occurrence of any other event eliminating
the necessity of such representation. The Company shall not be required to
deliver any Shares under the Plan prior to (i) the admission of such Shares to
listing on any stock exchange on which Shares may then be listed, or (ii) the
completion of such registration or other qualification under any state or
federal law, rule or regulation as the Committee shall determine to be necessary
or advisable.
Section 7.4 Taxes.
-----
The Company, the Committee or the Funding Agent shall have the right
to require any person entitled to receive Shares pursuant to an Award to pay
the amount of any tax which is required to be withheld with respect to such
Shares, or, in lieu thereof, to retain, or to sell without notice, a sufficient
number of Shares to cover the amount required to be withheld.
Article VIII
------------
Amendment and Termination
-------------------------
Section 8.1 Termination.
-----------
The Board may suspend or terminate the Plan in whole or in part at any
time by giving written notice of such suspension or termination to the
Committee; provided, however, that the Plan may not be terminated while there
are outstanding Awards that may thereafter become
B-13
vested. Upon the termination of the Plan, the Funding Agent shall make
distributions from the Fund in such amounts and to such persons as the Committee
may direct and shall return the remaining assets of the Fund, if any, to Port
Financial Corp.
Section 8.2 Amendment.
---------
The Board may amend or revise the Plan in whole or in part at any
time; provided, however, that no such amendment or revision shall alter the
stockholder approval standard set forth in Article X as a condition precedent to
the effectiveness of Article X or otherwise directly or indirectly give effect
to the substance of the provisions of Article X without compliance with the
stockholder approval requirement set forth therein.
Section 8.3 Adjustments in the Event of a Business Reorganization.
-----------------------------------------------------
(a) In the event of any merger, consolidation, or other business
reorganization (including but not limited to a Change of Control) in which Port
Financial Corp. is the surviving entity, and in the event of any stock split,
stock dividend or other event generally affecting the number of Shares held by
each person who is then a holder of record of Shares, the number of Shares held
or permitted to be held in the Fund, the number of Shares covered by outstanding
Awards, and the number of Shares available as Awards in total or to particular
individuals or groups shall be adjusted to account for such event. Such
adjustment shall be effected by multiplying such number of Shares by an amount
equal to the number of Shares that would be owned after such event by a person
who, immediately prior to such event, was the holder of record of one Share,
unless the Committee, in its discretion, establishes another appropriate method
of adjustment.
(b) In the event of any merger, consolidation, or other business
reorganization (including but not limited to a Change of Control) in which Port
Financial Corp. is not the surviving entity, the Funding Agent shall hold in the
Fund any money, stock, securities or other property received by holders of
record of Shares in connection with such merger, consolidation, or other
business reorganization. Any Award with respect to which Shares had been
allocated to an Eligible Director or Eligible Employee shall be adjusted by
allocating to the Eligible Director or Eligible Employee receiving such Award
the amount of money, stock, securities or other property received by the Funding
Agent for the Shares allocated to such Eligible Director or Eligible Employee,
and such money, stock, securities or other property shall be subject to the same
terms and conditions of the Award that applied to the Shares for which it has
been exchanged.
B-14
Article IX
----------
Miscellaneous
-------------
Section 9.1 Status as an Employee Benefit Plan.
----------------------------------
This Plan is not intended to satisfy the requirements for
qualification under section 401(a) of the Code or to satisfy the definitional
requirements for an "employee benefit plan" under section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended. It is intended to be a
non-qualified incentive compensation program that is exempt from the regulatory
requirements of the Employee Retirement Income Security Act of 1974, as amended.
The Plan shall be construed and administered so as to effectuate this intent.
Section 9.2 No Right to Continued Employment.
--------------------------------
Neither the establishment of the Plan nor any provisions of the Plan
nor any action of the Board or the Committee with respect to the Plan shall be
held or construed to confer upon any Eligible Director or Eligible Employee any
right to continue in the service of any Employer. The Employers reserve the
right to dismiss any Eligible Director or Eligible Employee or otherwise deal
with any Eligible Director or Eligible Employee to the same extent as though the
Plan had not been adopted.
Section 9.3 Construction of Language.
------------------------
Whenever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular, and
words importing the masculine gender may be read as referring equally to the
feminine or the neuter. Any reference to an Article or section number shall
refer to an Article or section of this Plan unless otherwise indicated.
Section 9.4 Governing Law.
-------------
The Plan shall be construed and enforced in accordance with the laws
of the Commonwealth of Massachusetts without giving effect to the conflict of
laws principles thereof, except to the extent that such laws are preempted by
the federal laws of the United States of America. The Plan shall be construed
to comply with applicable FDIC Regulations.
Section 9.5 Headings.
--------
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and
the text of the Plan, the text shall control
B-15
Section 9.6 Non-Alienation of Benefits.
--------------------------
The right to receive a benefit under the Plan shall not be subject in
any manner to anticipation, alienation or assignment, nor shall such right be
liable for or subject to debts, contracts, liabilities, engagements or torts;
provided, however, that any recipient of an Award who makes an election pursuant
to section 83(b) of the Code to include the value of the Shares subject to such
Award in gross income for federal income purposes when granted rather than when
vested shall have the right to margin such Shares to finance the payment of
taxes. Any Shares so margined shall nevertheless remain subject to the
forfeiture provisions and other terms and conditions of the Award.
Section 9.7 Notices.
-------
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is personally delivered or 5 days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below, or at such other address as one such
party may by written notice specify to the other:
(a) If to the Committee:
Port Financial Corp.
1380 Soldiers Field Road
Brighton, MA 02135
Attention: Corporate Secretary
-------------------
(b) If to an Eligible Director or Eligible Employee, to the Eligible
Director's or Eligible Employee's address as shown in the Employer's
records.
Section 9.8 Required Regulatory Provisions.
------------------------------
The making and payment of Awards under this Plan shall be conditioned
upon and subject to compliance with section 18(k) of the Federal Deposit
Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations promulgated
thereunder.
Section 9.9 Approval of Shareholders.
------------------------
The Plan shall not be effective or implemented prior to April 12, 2001
unless approved by the holders of at least two-thirds of the total votes
eligible to be cast at any duly called annual or special meeting of the Company
in which case the Plan shall be effective as of the later of (a) October 11,
2000 or (b) the date of such approval. No Award shall be made prior to the date
on which the Plan becomes effective.
B-16
Article X
---------
Additional Provisions Subject to Further Shareholder Approval
-------------------------------------------------------------
Section 10.1 Accelerated Vesting Upon Retirement or Change in Control.
--------------------------------------------------------
Notwithstanding anything in the Plan to the contrary, but subject to
section 10.3, unless otherwise determined by the Committee and specified in the
Award Notice relating to an Award: (a) in the event that any Eligible Employee
terminates service as an Employee of all Employers, or in the event that an
Eligible Director terminates service as a voting member of all Employers' boards
of directors, and such termination constitutes a Retirement, all Awards
outstanding to such holder on the date of his Retirement shall, to the extent
not already vested, become vested upon Retirement; and (b) in the event of a
Change of Control, all Awards outstanding under the Plan on the date of the
Change of Control shall, to the extent not already vested, become vested on the
date of the Change of Control.
Section 10.2 Discretion to Establish Vesting Schedules.
-----------------------------------------
Notwithstanding anything in the Plan to the contrary, but subject to
section 10.3, section 7.1 shall apply in determining the vesting of Awards only
if no different vesting schedule is established by the Committee and specified
in the Award Notice.
Section 10.3 No Effect Prior to Stockholder Approval.
---------------------------------------
Notwithstanding anything contained in this Article X to the contrary, the
provisions of this Article X shall not be applied, and shall be of no force or
effect, unless and until the shareholders of the Company shall have approved
such provisions by affirmative vote of the holders of a majority of the Shares
represented in person or by proxy and entitled to vote at a meeting of
shareholders duly called and held on or after April 11, 2001.