Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c)
or Rule 14a-12
PROVIDENT FINANCIAL HOLDINGS, INC.
-----------------------------------
(Name of Registrant as Specified in Its Charter)
PROVIDENT FINANCIAL HOLDINGS, INC.
-----------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
(2) Form, schedule or registration statement no.:
N/A
(3) Filing party:
N/A
(4) Date filed:
N/A
December 12, 1996
Dear Shareholder:
You are cordially invited to attend the first Annual Meeting of
Shareholders of Provident Financial Holdings, Inc. to be held at the Mission
Inn at 3649 Mission Inn Boulevard, Riverside, California, on Thursday, January
23, 1997, at 11:00 a.m., local time. Effective June 27, 1996, the company
became the holding company for Provident Savings Bank, F.S.B.
The Notice of Annual Meeting of Shareholders and Proxy Statement
appearing on the following pages describe the formal business to be transacted
at the meeting. During the meeting, we will also report on the operations of
the Company. Directors and officers of the Company, as well as a
representative of Price Waterhouse LLP, the Company's independent auditors,
will be present to respond to appropriate questions of shareholders.
It is important that your shares are represented at this meeting,
whether or not you attend the meeting in person and regardless of the number
of shares you own. To make sure your shares are represented, we urge you to
complete and mail the enclosed proxy card. If you attend the meeting, you may
vote in person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
Craig G. Blunden
President and Chief
Executive Officer
PROVIDENT FINANCIAL HOLDINGS, INC.
3576 Central Avenue
Riverside, California 92506
(909) 686-6060
- ---------------------------------------------------------------- NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On January 23, 1997
- ----------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Provident Financial Holdings, Inc. ("Company") will be held at the Mission Inn
at 3649 Mission Inn Boulevard, Riverside, California, on Thursday, January 23,
1997, at 11:00 a.m., local time, for the following purposes:
(1) To elect three directors to serve for a term of
three years;
(2) To consider and vote upon a proposal to adopt the Provident
Financial Holdings, Inc. 1996 Stock Option Plan;
(3) To consider and vote upon a proposal to adopt the Provident
Financial Holdings, Inc. 1996 Management Recognition Plan; and
(4) To consider and act upon such other matters as may properly
come before the meeting or any adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to
come before the meeting.
Any action may be taken on the foregoing proposals at the meeting
on the date specified above or on any date or dates to which, by original or
later adjournment, the meeting may be adjourned. Shareholders of record at
the close of business on December 5, 1996 are entitled to notice of and to
vote at the meeting and any adjournments or postponements thereof.
You are requested to complete and sign the enclosed form of proxy,
which is solicited by the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend the meeting and
vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT G. SCHRADER
SECRETARY
Riverside, California
December 12, 1996
- -----------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
PROXY STATEMENT
OF
PROVIDENT FINANCIAL HOLDINGS, INC.
3576 Central Avenue
Riverside, California 92506
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
January 23, 1997
- -----------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Provident Financial
Holdings, Inc. ("Company"), the holding company for Provident Savings Bank,
F.S.B. (the "Savings Bank"), to be used at the Annual Meeting of Shareholders
of the Company. The Annual Meeting will be held at the Mission Inn at 3649
Mission Inn Boulevard, Riverside, California on Thursday, January 23, 1997, at
11:00 a.m., local time. This Proxy Statement and the enclosed proxy card are
being first mailed to shareholders on or about December 12, 1996.
- ------------------------------------------------------------------------------
VOTING AND PROXY PROCEDURE
- ------------------------------------------------------------------------------
Shareholders of record as of the close of business on December 5,
1996 are entitled to one vote for each share of common stock ("Common Stock")
of the Company then held. As of December 5, 1996, the Company had 5,125,215
shares of Common Stock issued and outstanding. The presence, in person or by
proxy, of at least a majority of the total number of outstanding shares of
Common Stock entitled to vote is necessary to constitute a quorum at the
Annual Meeting. Abstentions will be counted as shares present and entitled to
vote at the Annual Meeting for purposes of determining the existence of a
quorum. Broker non-votes will not be considered shares present and will not
be included in determining whether a quorum is present.
The Board of Directors solicits proxies so that each shareholder
has the opportunity to vote on the proposals to be considered at the Annual
Meeting. When a proxy card is returned properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. Where no instructions are indicated, proxies will be voted FOR
the nominees for directors set forth below, FOR adoption of the Provident
Financial Holdings, Inc. 1996 Stock Option Plan and FOR adoption of the
Provident Financial Holdings, Inc. 1996 Management Recognition Plan. If a
shareholder attends the Annual Meeting, he or she may vote by ballot.
Shareholders who execute proxies retain the right to revoke them at
any time. Proxies may be revoked by written notice delivered in person or
mailed to the Secretary of the Company or by filing a later proxy prior to a
vote being taken on a particular proposal at the Annual Meeting. Attendance
at the Annual Meeting will not automatically revoke a proxy, but a shareholder
in attendance may request a ballot and vote in person, thereby revoking a
prior granted proxy.
The three directors to be elected at the Annual Meeting will be
elected by a plurality of the votes cast by shareholders present in person or
by proxy and entitled to vote. Shareholders are not permitted to cumulate
their votes for the election of directors. With respect to the election of
directors, votes may be cast for or withheld from each nominee. Votes that
are withheld and broker non-votes will have no effect on the outcome of the
election because directors will be elected by a plurality of votes cast. With
respect to the other proposals to be voted upon, shareholders may vote for a
proposal, against a proposal or may abstain from voting. Adoption of the 1996
Stock Option Plan and the 1996 Management Recognition Plan will require the
affirmative vote of a majority of the outstanding shares. Thus, abstentions
and broker non-votes will have the same effect as a vote against adoption of
the Stock Option Plan and the Management Recognition Plan.
- ------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------------
Persons and groups who beneficially own in excess of 5% of the
Company's Common Stock are required to file certain reports disclosing such
ownership pursuant to the Securities Exchange Act of 1934, as amended
("Exchange Act"). Based on such reports, the following table sets forth, as
of December 5, 1996, certain information as to those persons who were
beneficial owners of more than 5% of the outstanding shares of Common Stock.
Management knows of no persons other than those set forth below who
beneficially owned more than 5% of the outstanding shares of Common Stock at
December 5, 1996. The following table also sets forth, as of December 5,
1996, information as to the shares of Common Stock beneficially owned by each
director, by the Chief Executive Officer of the Company, by the Company's
executive officers who received salaries and bonuses in excess of $100,000
during the year ended June 30, 1996 and by all executive officers and
directors of the Company as a group.
Number of Shares Percent of Shares
Name Beneficially Owned (1) Outstanding
- ---- ----------------------- ------------------
Beneficial Owners of More Than 5%
Provident
Savings Bank,
F.S.B. 410,017 8.0%
Employee Stock
Ownership Plan Trust
Directors
Bruce W. Bennett 5,331(2) *
Michael C. Billings 5,001 *
Debbi H. Guthrie 5,001(3) *
David W. Mitchell 25,001 *
Roy H. Taylor 25,001 *
Named Executive Officers
Craig G. Blunden** 30,463(4) *
Robert G. Schrader** 21,151 *
All Executive Officers 150,169 2.9%
and Directors as a
Group
(11 persons)
_______________
* Less than 1 percent of shares outstanding.
** Mr. Blunden and Mr. Schrader are also directors of the Company.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner, for purposes of this table, of any shares of
Common Stock if he or she has voting or investment power with respect to
such security. The table includes shares owned by spouses, other
immediate family members in trust, shares held in retirement accounts or
funds for the benefit of the named individuals, and other forms of
ownership, over which shares the persons named in the table may possess
voting and/or investment power.
(2) Includes 880 shares owned by Mr. Bennett's spouse.
(3) Includes 5,000 shares owned by a company controlled by Ms.
Guthrie.
(4) Includes 2,560 shares owned by Mr. Blunden's spouse.
2
- ------------------------------------------------------------------------------
PROPOSAL I -- ELECTION OF DIRECTORS
- ------------------------------------------------------------------------------
The Company's Board of Directors consists of seven members. The
Board of Directors is divided into three classes with three-year staggered
terms, with approximately one third of the directors elected each year. Three
directors will be elected at the Annual Meeting to serve for a three year
period, or until their respective successors have been elected and qualified.
The nominees for election this year are Craig G. Blunden, David W. Mitchell
and Roy H. Taylor. The nominees are current members of the Boards of
Directors of the Company and the Savings Bank.
It is intended that the proxies solicited by the Board of Directors
will be voted for the election of the above named nominees. If any nominee is
unable to serve, the shares represented by all valid proxies will be voted for
the election of such substitute as the Board of Directors may recommend or the
Board of Directors may adopt a resolution to amend the Bylaws and reduce the
size of the Board. At this time the Board of Directors knows of no reason why
any nominee might be unavailable to serve.
The Board of Directors recommends a vote "FOR" the election of
Messrs. Blunden, Mitchell and Taylor.
The following table sets forth certain information regarding the
nominees for election at the Annual Meeting, as well as information regarding
those directors continuing in office after the Annual Meeting.
Year First
Elected Term to
Name Age (1) Director (2) Expire
BOARD NOMINEES
Craig G. Blunden 48 1975 1999(3)
David W. Mitchell 68 1988 1999(3)
Roy H. Taylor 45 1990 1999(3)
DIRECTORS CONTINUING IN OFFICE
Michael C. Billings 56 1994 1997
Robert G. Schrader 57 1995 1997
Bruce W. Bennett 47 1993 1998
Debbi H. Guthrie 45 1994 1998
______________
(1) As of June 30, 1996.
(2) Includes prior service on the Board of Directors of the
Savings Bank.
(3) Assuming the individual is re-elected.
The present principal occupation and other business experience
during the last five years of each nominee for election and each director
continuing in office is set forth below:
Craig G. Blunden has been associated with the Savings Bank since
1974 and has served as President and Chief Executive Officer of the Savings
Bank since 1991 and as President and Chief Executive Officer of the Company
since its formation in 1996. Mr. Blunden also serves on the Foundation Board
of Trustees for the
3
University of California, Riverside, the Western League of Savings
Institutions Board of Directors, the Appraisal Foundation Board of Trustees
and America's Community Bankers Mortgage Finance Committee.
David W. Mitchell, who is retired, is a former Chairman and Chief
Executive Officer of Avon Products, Inc., a global direct sales cosmetics
company, with which he was associated for 36 years. Mr. Mitchell currently
serves as chairman of the Company's Audit Committee. Mr. Mitchell also serves
as a director of New York Life Insurance Co.
Roy H. Taylor is co-owner of Goldware & Taylor Insurance services,
an insurance brokerage firm, with which he has been associated since 1972.
Mr. Taylor currently serves as chairman of the Personnel/Compensation
Committee. Mr. Taylor also serves as President of the Raincross Club of
Riverside.
Michael C. Billings is the retired Chief Executive Officer of
Riverside National Bank, with which he was associated from 1967 to 1992. Mr.
Billings currently serves on the Company's Audit and Personnel/Compensation
Committees.
Robert G. Schrader has been associated with the Savings Bank since
1963 and has served as Executive Vice President of the Savings Bank since
January 1995. From 1990 through 1994, Mr. Schrader served as Senior Vice
President of the Savings Bank. Mr. Schrader has served as Corporate Secretary
of the Company since its formation in 1996.
Bruce W. Bennett is the President and owner of Community Care and
Rehabilitation Center, a skilled nursing facility, with which he has been
associated since 1973. He also serves as a director of Riverside Community
Hospital. Mr. Bennett currently serves on the Personnel/Compensation
Committee.
Debbi H. Guthrie is the President and owner of Roy O. Huffman Roof
Company, with which she has been associated since 1971. Ms. Guthrie currently
serves on the Company's Audit Committee. Ms. Guthrie also serves as the
Chairman of the Greater Riverside Chamber of Commerce and as the Co-Chair of
the Riverside YWCA Professional Women's Council.
- ------------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- ------------------------------------------------------------------------------
The Boards of Directors of the Company and the Savings Bank conduct
their business through meetings of the Boards and through their committees.
During the fiscal year ended June 30, 1996, the Board of Directors of the
Company held one meeting in connection with its initial organization and five
subsequent meetings, and the Board of Directors of the Savings Bank held 12
meetings. No director of the Company or the Savings Bank attended fewer than
75% of the total meetings of the Boards and committees on which such person
served during this period.
The Board of Directors of the Company has an Audit Committee,
consisting of Directors Mitchell (Chairman), Guthrie and Billings, which is
responsible for reviewing the adequacy of the Savings Bank's system of
internal accounting controls, approving the services provided by the Company's
outside auditor and meeting with the Company's outside auditor to discuss the
results of the annual audit and any related matters. The AuditCommittee,
including meetings of the Savings Bank's Audit Committee prior to the
completion of the Savings Bank's mutual to stock conversion, met four times
during the fiscal year ended June 30, 1996.
The Personnel/Compensation Committee, consisting of Directors
Taylor (Chairman), Bennett and Billings, is responsible for reviewing the
Savings Bank's employee benefit programs and wage and salary administration
program, making recommendations to the full Board of Directors on annual
salary increases and bonuses and addressing other personnel issues as they
arise. The Personnel/Compensation Committee met seven times during the fiscal
year ended June 30, 1996.
4
The Board of Directors of the Company acts as a nominating
committee for selecting the nominees for election as directors. The Board of
Directors met once in its capacity as nominating committee to select nominees
for election at the Annual Meeting.
- ------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
- ------------------------------------------------------------------------------
Non-employee Directors of the Savings Bank currently receive a
monthly retainer of $1,750. Non-employee Directors also receive a fee of $300
for each committee meeting attended. The committee chairman receives a fee of
$400. In addition, Directors are covered under the Savings Bank's policies
for medical, dental and vision care. Dependent coverage is available at the
Directors' own expense. Following retirement from the Board of Directors,
Directors continue to receive such coverage. No separate fees are paid for
service on the Board of Directors of the Company.
- ------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- ------------------------------------------------------------------------------
Summary Compensation Table
The following information is furnished for the Chief Executive
Officer of the Company and for the executive officers of the Company who
received salary and bonus in excess of $100,000 for the year ended June 30,
1996. No other executive officers of the Company or the Bank received salary
and bonus in excess of $100,000 during the year ended June 30, 1996.
Annual Compensation(1)
Other All
Annual Other
Name and Salary Bonus Compensation Compensation
Position Year ($) ($) ($)(2) ($)(3)
- ---------------- ---- -------- ------- ------------ ------------
Craig G. Blunden 1996 $208,999 $44,100 -- $13,162
Chief Executive 1995 204,010 -- -- 12,914
Officer and
President
Robert G. Schrader 1996 $112,641 $13,132 -- $10,105
Executive Vice 1995 105,958 -- -- 7,791
President and
Chief Operating
Officer
(1) Compensation information for the fiscal year ended
June 30, 1994 has been omitted as the Company was
not a public company nor a subsidiary thereof at such
time.
(2) Does not include perquisites which did not exceed the
lesser of $50,000 or 10% of salary and bonus.
(3) Represents employer matching and discretionary
contributions to the Savings Bank's 401(k) plan.
Employment Agreements
On March 26, 1992, the Savings Bank entered into an employment
agreement with Mr. Blunden. The agreement had an initial term of three years
and renews automatically for an additional year each year unless Mr. Blunden
has attained age 62 or the Board or Mr. Blunden have given advance notice of
their intention not to extend the term of the agreement. The agreement
further provides for a base salary which may not be reduced except as part of
a general salary reduction policy for senior executives of the Savings Bank.
Mr. Blunden's base salary is subject to annual review by the Board. Mr.
Blunden's current base salary under the agreement is $210,000. In the
5
event of a "change of control" of the Savings Bank (as defined below), Mr.
Blunden's base salary is fixed as the sum of his then current base salary and
any bonuses paid during the 12-month period preceding the change in control.
Under the agreement, Mr. Blunden is eligible to participate in all fringe
benefit programs available to employees of the Savings Bank as well as any
program made available to senior executives of the Savings Bank, including the
use of an employer-provided automobile. The agreement also provides for the
reimbursement of expenses incurred by Mr. Blunden in the course of his
employment.
In the event of Mr. Blunden's termination without cause by the
Savings Bank, the agreement provides for (i) a lump sum payment equal to the
discounted present value of the aggregate future base salary payments Mr.
Blunden would have received over the then remaining term of the agreement and
(ii) the continuation of life and medical insurance at the Savings Bank's
expense for Mr. Blunden and his dependents. If Mr. Blunden's employment
terminates by reason of his death or disability, the Savings Bank is also
obligated to continue life and medical insurance benefits for Mr. Blunden and
his dependents, as applicable.
In the event of Mr. Blunden's termination without cause following a
change in control of the Savings Bank, Mr. Blunden is entitled to an
additional payment equal to three times the sum of his base salary and bonuses
during the 12 months preceding his termination of employment reduced by the
value of any other payments made by the Savings Bank by reason of Mr.
Blunden's termination without cause. In the event that a change of control of
the Savings Bank had occurred on June 30, 1996, based solely on the cash
compensation paid to Mr. Blunden during 1996 and excluding the value of any
other employee benefits which may be payable, Mr. Blunden would have received
a payment of approximately $759,000. For purposes of the agreement, "change
in control" is defined to mean (i) a change in control of the Savings Bank as
determined under applicable regulations of the Office of Thrift Supervision
and (ii) a change in the composition of the Board following a merger,
consolidation or other business combination involving the Savings Bank such
that a majority of the directors of the resulting entity consists of persons
who were not directors immediately prior to such transaction.
Post-Retirement Compensation Agreement
Effective March 26, 1992, the Savings Bank has also entered into a
separate post-retirement compensation agreement with Mr. Blunden. The
agreement provides that, if Mr. Blunden terminates employment with the Savings
Bank after attaining age 60, the Savings Bank will provide Mr. Blunden with a
monthly benefit for life equal to 50% of his final average monthly salary.
For purpose of the agreement, "final average monthly salary" is defined as the
average of Mr. Blunden's highest paid 36 months of employment with the Savings
Bank determined by reference to the gross amount of Mr. Blunden's monthly
salary excluding bonus and incentive awards, director's fees and accelerated
payments of future salary. Assuming that Mr. Blunden's current compensation
level were equivalent to his "final average monthly salary," the normal
monthly benefit payable under the agreement would be $8,750. Under the
agreement, Mr. Blunden may elect to receive the actuarially determined lump
sum equivalent of the normal monthly benefit or a joint-and-survivor benefit.
Mr. Blunden may also elect to receive an early retirement benefit under the
agreement which is reduced proportionately to reflect the number of months
then remaining to Mr. Blunden's 60th birthday. However, in the event of Mr.
Blunden's termination of employment prior to age 60 by reason of his death or
disability, the agreement provides for payment of the normal monthly benefit
to Mr. Blunden or his beneficiary. At June 30, 1996, the accrued liability of
the Savings Bank with respect to its obligations under the agreement was
$461,000.
Severance Agreement
In connection with the Savings Bank's mutual to stock conversion,
the Company and the Savings Bank entered into a severance agreement with Mr.
Schrader. The agreement has a term of one year, which may be extended for an
additional year on the anniversary of the effective date of the agreement by
the Board of Directors. The agreement provides that in the event of an
involuntary termination of Mr. Schrader following a change in control of the
Company or the Savings Bank, he will be entitled to receive two times his then
current base salary. A severance payment also will be provided on a similar
basis in connection with a voluntary termination of employment
6
PAGE
where, subsequent to a change in control, Mr. Schrader is assigned duties
inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control. The Savings Bank or its
successor would also be obligated to continue Mr. Schrader's other employee
benefits for a one-year period following termination of employment.
The term "change in control" is defined in the agreement as having
occurred when, among other things, (a) a person other than the Company
purchases shares of the Company's common stock pursuant to a tender or
exchange offer for such shares, (b) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
securities, (c) the membership of the Board of Directors changes as the result
of a contested election, or (d) shareholders of the Company approve a merger,
consolidation, sale or disposition of all or substantially all of the
Company's assets, or a plan of partial or complete liquidation. If a change
in control of the Company or the Savings Bank occurred during the fiscal year
ending June 30, 1996, based solely on Mr. Schrader's current salary level and
excluding the value of any other employee benefits which may be payable, Mr.
Schrader would receive payment of approximately $233,000.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or
the Exchange Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Report of the Compensation
Committee and Performance Graph shall not be incorporated by reference into
any such filings.
Report of the Personnel/Compensation Committee.
Under rules established by the Securities and Exchange Commission,
the Company is required to provide certain data and information in regard to
the compensation and benefits provided to the Company's Chief Executive
Officer and other executive officers of the Savings Bank. The disclosure
requirements for the Chief Executive Officer and other executive officers
include the use of tables and a report explaining the rationale and
considerations that led to the fundamental executive compensation decisions
affecting those individuals. Insofar as no separate compensation is currently
payable by the Company, the Personnel/Compensation Committee of the Savings
Bank (the "Committee"), at the direction of the Board of Directors of the
Company, has prepared the following report for inclusion in this proxy
statement.
The Personnel/Compensation Committee of the Board of Directors is
responsible for establishing and implementing all compensation policies of the
Savings Bank and its subsidiaries. The Committee is also responsible for
evaluating the performance of the Chief Executive Officer of the Savings Bank
and approving an appropriate compensation level. The Chief Executive Officer
evaluates the performance of the Executive Vice President and certain Senior
Vice Presidents of the Savings Bank and recommends to the Committee individual
compensation levels for approval by the Committee.
The Committee believes that a compensation plan for executive
officers should take into account management skills, long-term performance
results and shareholder returns. The principals underlying compensation
policies are: (1) to attract and retain key executives who are highly
qualified and are vital to the long-term success of the Savings Bank and its
subsidiaries; (2) to provide levels of compensation competitive with those
offered throughout the banking industry; (3) to motivate executives to enhance
long-term shareholder value by helping them build their own ownership in the
Company; and (4) to integrate the compensation program with the Savings Bank's
long-term strategic planning and management process.
The Savings Bank's current compensation plan involves a combination
of salary and bonuses to reward short-term performance, and, in the future,
will include grants of stock options to encourage long-term performance. The
salary levels of executive officers are designed to be competitive within the
banking and financial services industries. The Committee annually reviews the
Western League of Savings Institutions Survey of salaries to
7
determine competitive salary levels. Individual annual performance is
reviewed to determine appropriate salary adjustments.
The Annual Incentive Plan is based on annual performance of the
Savings Bank compared to budget, profitability relative to peers, and
individual performance assessments. The Plan is designed to provide for
bonuses up to 30% of salary for the Chief Executive Officer, up to 25% of
salary for Senior Officers, up to 15% of salary for certain managers, and up
to 10% of salary for remaining department managers.
The Stock Option Plan will be designed to attract and retain
qualified personnel and nonemployee directors, to provide such officers, key
employees and nonemployee directors with a proprietary interest in the Company
as an incentive to contribute to the success of the Company and the Savings
Bank and to reward officers and key employees for outstanding performance.
Upon receipt of stockholder approval of the Stock Option Plan, stock options
may be granted to key employees of the Company and its subsidiaries, including
the Savings Bank. The Stock Option plan will be administered and interpreted
by a committee of the Board of Directors. Under the Stock Option Plan, such
committee will determine which officers and key employees will be granted
options, the number of shares subject to each option, and the exercisability
of such options. The per share exercise price of an option will equal at
least 100% of the fair market value of a share of Common Stock on the date the
option is granted.
During the fiscal year ended June 30, 1996, the base salary of
Craig G. Blunden, President and Chief Executive Officer of the Savings Bank,
was $210,000. In addition to this he received a performance bonus of $44,100.
This resulted in total compensation of $254,100, which represents a 24.6
percent increase from the previous year. The performance bonus was paid based
on his meeting the performance criteria established by the Committee in the
Annual Incentive Plan. The Committee believes the increase in compensation is
appropriate based on competitive salary surveys and the performance of the
Savings Bank.
The Committee also recommends to the Board of Directors the amount
of fees paid for service on the Board. The Committee did not recommend a
change in Board fees during the fiscal year ended June 30, 1996.
Personnel/Compensation Committee
Roy H. Taylor
Bruce W. Bennett
Michael C. Billings
Performance Graph
The Company's common stock was sold in an initial public offering
at $10.00 per share in a subscription and community offering in connection
with the conversion of the Savings Bank from the mutual to stock form. The
common stock commenced trading on the Nasdaq Stock Market on June 28, 1996,
which was the last business day of the Company's fiscal year. Accordingly, a
comparison of cumulative total return with a broad equity market index or a
peer group would not be meaningful.
- ------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- ------------------------------------------------------------------------------
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of any registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Executive
officers, directors and greater than 10% shareholders are required by
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms it has
received and written representations provided to the Company by the above
referenced persons, the Company believes that, during the fiscal year ended
June 30,
8
1996, all filing requirements applicable to its reporting officers, directors
and greater than 10% shareholders were properly and timely complied with.
- ------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
- ------------------------------------------------------------------------------
As required by federal regulations, all loans or extensions of
credit to executive officers and directors are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and do not involve more
than the normal risk of repayment or present other unfavorable features. In
addition, loans made by the Savings Bank to a director or executive officer in
an amount that, when aggregated with the amount of all other loans by the
Savings Bank to such person and his or her related interests, are in excess of
the greater of $25,000 or 5% of the Savings Bank's capital and surplus (up to
a maximum of $500,000) are subject to approval in advance by a majority of the
disinterested members of the Board of Directors.
- ------------------------------------------------------------------------------
PROPOSAL II -- RATIFICATION OF 1996 STOCK OPTION PLAN
- ------------------------------------------------------------------------------
The Company's Board of Directors adopted the 1996 Stock Option Plan
("Option Plan") on October 23, 1996, subject to approval by the Company's
stockholders. The Option Plan will be effective on the date of shareholder
approval. The following description of the Option Plan is qualified in its
entirety by reference to the complete text of the Option Plan which is
attached to this Proxy Statement as Exhibit A.
Administration of the Option Plan
The Option Plan is administered by a committee of the Board of
Directors (the "Committee"). The Committee consists of not less than two
non-employee members of the Board of Directors. In addition to determining
who will be granted options, the Committee has the authority and discretion to
determine when options will be granted and the number of options to be
granted. In making such determination, the Committee will consider those
non-employee directors, officers and employees who are expected to make
significant contributions to the long-term success of the Company and the
Savings Bank. With respect to awards to officers and employees, the Committee
also determines which options are intended to qualify for special treatment
under the Internal Revenue Code ("Incentive Stock Options") or to be issued as
options which are not intended to so qualify ("Non-Qualified Stock Options").
The Option Plan provides that all options granted to non-employee directors
are Non-Qualified Stock Options.
The Board may from time to time amend or terminate the Option Plan
in any respect. An amendment to the Option Plan may be subject to shareholder
approval if such approval is necessary to comply with any tax or regulatory
requirement. No amendment or termination may retroactively impair the rights
of any person with respect to an option.
Shares Subject to the Option Plan
The Company has reserved an aggregate of 512,500 shares of the
Company's Common Stock for issuance pursuant to the exercise of stock options
which may be granted to officers, employees and non-employee directors.
In the event of a merger, consolidation, sale of all or
substantially all of the property of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution, to the extent permitted by the Company, an
appropriate and proportionate adjustment shall be made in (i) the maximum
number of shares available, (ii) the number and kind of shares subject to
outstanding options, if any, and (iii) the price for each share.
9
Option Price
The exercise price of Non-Qualified Stock Options and Incentive
Stock Options may not be less than 100% of the fair market value of the shares
of Common Stock of the Company on the date of grant. Any Incentive Stock
Option granted to a person owning more than 10% of the Company's outstanding
Common Stock must have an exercise price of at least 110% of fair market value
on the date of grant. The maximum aggregate fair market value (determined as
of the date of grant) of the shares to which Incentive Stock Options held by
an individual become exercisable for the first time during any calendar year
may not exceed $100,000.
Terms of Options
In general, the Committee has the discretion to fix the term of
each option granted to an officer or employee under the Option Plan, except
that the maximum term of each option is 10 years, subject to earlier
termination as provided in the Option Plan (five years in the case of
Incentive Stock Options granted to an employee who owns over 10% of the total
combined voting power of all classes of the Company's stock). The Option Plan
provides that all awards under the Option Plan will become exercisable in
equal installments over a five-year period following the date of grant.
However, unvested options will become immediately exercisable in the event of
the option holder's death or disability, or upon a change in control (as
defined in the Option Plan) of the Company or the Savings Bank (to the extent
authorized or not prohibited by applicable law or regulations).
Except in limited circumstances, an option may not be transferred
other than by will or by laws of descent and distribution and, during the
lifetime of the option holder, may be exercised only by such holder. If any
option expires or terminates for any reason without having been exercised in
full, the unpurchased shares subject to such option will be available again
for purposes of the Option Plan.
Federal Income Tax Consequences of Non-Qualified Options
An option holder who is granted a Non-Qualified Stock Option under
the Option Plan will not realize any income for Federal income tax purposes on
the grant of an option. An option holder will realize ordinary income for
Federal income tax purposes on the exercise of an option, provided the shares
are not then subject to a substantial risk of forfeiture within the meaning of
Section 83 of the Code ("Risk of Forfeiture"), in an amount equal to the
excess, if any, of the fair market value of the shares of Common Stock on the
date of exercise over the exercise price thereof. If the shares are subject
to a Risk of Forfeiture on the date of exercise, the option holder will
realize ordinary income for the year in which the shares cease to be subject
to a Risk of Forfeiture in an amount equal to the excess, if any, of the fair
market value of the shares at the date they cease to be subject to a Risk of
Forfeiture over the exercise price, unless the option holder shall have made a
timely election under Section 83 of the Code to include in his income for the
year of exercise an amount equal to the excess of the fair market value of the
shares of Common Stock on the date of exercise over the exercise price. The
amount realized for tax purposes by an option holder by reason of the exercise
of a Non-Qualified Stock Option granted under the Option Plan is subject to
withholding by the Company and the Company is entitled to a deduction in an
amount equal to the income so realized by an option holder, provided all
necessary withholding requirements under the Code are met.
Provided that the option holder satisfies certain holding period
requirements provided by the Code, an employee will realize long-term capital
gain or loss, as the case may be, if the shares issued upon exercise of a
Non-Qualified Stock Option are disposed of more than one year after (i) the
shares are transferred to the employee or (ii) if the shares were subject to a
Risk of Forfeiture on the date of exercise and a valid election under Section
83 of the Code shall not have been made, the date as of which the shares cease
to be subject to a Risk of Forfeiture. The amount recognized upon such
disposition will be the difference between the option holder's basis in such
shares and the amount realized upon such disposition. Generally, an option
holder's basis in the shares will be equal to the exercise price plus the
amount of income recognized upon exercise of the option.
10
Federal Income Tax Consequences of Incentive Stock Options
An Incentive Stock Option holder who meets the eligibility
requirements of Section 422 of the Code will not realize income for Federal
income tax purposes, and the Company will not be entitled to a deduction, on
either the grant or the exercise of an Incentive Stock Option. If the
Incentive Stock Option holder does not dispose of the shares acquired within
two years after the date the Incentive Stock Option was granted to him or
within one year after the transfer of the shares to him, (i) any proceeds
realized on a sale of such shares in excess of the option price will be
treated as long-term capital gain and (ii) the Company will not be entitled to
any deduction for Federal income tax purposes with respect to such shares.
If an Incentive Stock Option holder disposes of shares during the
two-year or one-year periods referred to above (a "Disqualifying
Disposition"), the Incentive Stock Option holder will not be entitled to the
favorable tax treatment afforded to incentive stock options under the Code.
Instead, the Incentive Stock Option holder will realize ordinary income for
Federal income tax purposes in the year the Disqualifying Disposition is made,
in an amount equal to the excess, if any, of the fair market value of the
shares of Common Stock on the date of exercise over the exercise price.
An Incentive Stock Option holder generally will recognize long-term
capital gains or loss, as the case may be, if the Disqualifying Disposition is
made more than one year after the shares are transferred to the Incentive
Stock Option holder. The amount of any such gain or loss will be equal to the
difference between the amount realized on the Disqualifying Disposition and
the sum of (x) the exercise price and (y) the ordinary income realized by the
Incentive Stock Option holder as the result of the Disqualifying Disposition.
The Company will be allowed in the taxable year of a Disqualifying
Disposition a deduction in the same amount as the ordinary income recognized
by the Incentive Stock Option holder provided all necessary withholding
requirements are met.
Notwithstanding the foregoing, if the Disqualifying Disposition is
made in a transaction with respect to which a loss (if sustained) would be
recognized to the Incentive Stock Option holder, then the amount of ordinary
income required to be recognized upon the Disqualifying Disposition will not
exceed the amount by which the amount realized from the disposition exceeds
the exercise price. Generally, a loss may be recognized if the transaction is
not a "wash" sale, a gift or a sale between certain persons or entities
classified under the Code as "related persons."
Alternative Minimum Tax
For purposes of computing the alternative minimum tax with respect
to shares acquired pursuant to the exercise of Incentive Stock Options, the
difference between the fair market value of the shares on the date of exercise
over the exercise price will be an item of tax preference in the year of
exercise if the shares are not subject to a Risk of Forfeiture; if the shares
are subject to a Risk of Forfeiture, the amount of the tax preference taken
into account in the year the Risk of Forfeiture ceased will be the excess of
the fair market value of the shares at the date they cease to be subject to a
Risk of Forfeiture over the exercise price. The basis of the shares for
alternative minimum tax purposes, generally, will be an amount equal to the
exercise price, increased by the amount of the tax preference taken into
account in computing the alternative minimum taxable income.
New Plan Benefits
The following table sets forth information regarding the number of
options anticipated to be granted under the Option Plan as of the date the
Option Plan is approved by stockholders. Consistent with Office of Thrift
Supervision regulations applicable to plans implemented prior to the first
anniversary of the Savings Bank's mutual-to-stock conversion, the Option Plan
provides that (i) no officer or employee will receive an award of options
covering in excess of 25% of the number of shares reserved for issuance under
the Option Plan, (ii) no non-employee
11
director shall receive an award of options covering in excess of 5% of the
number of shares reserved for issuance under the Option Plan and (iii) and
non-employee directors serving as of the date of shareholder approval will not
receive awards of options covering in excess of 30% in the aggregate of the
number of shares reserved for issuance under the Option Plan. Each option
award specified below will be granted at 100% of the fair market value of the
Company's Common Stock on the date of grant and that each award will become
exercisable in equal installments over a five-year period.
Anticipated Stock
Name Position Option Grant
- ------------------- --------- ------------
Craig G. Blunden President and Chief 102,500
Executive Officer
Robert G. Schrader Executive Vice President 61,500
Chief Operating Officer
All current executive ---- 276,750
officers as a group
(six persons)
All non-employee ---- 102,500
directors
(five persons)
All non-executive ---- 30,750
officers and
employees as a
group (six persons)
The balance of the options that may be granted under the Option Plan
are expected to be allocated in the future to current and prospective
non-employee directors, officers and employees.
Adoption of the Option Plan
Subject to approval by the Company's stockholders, the Board of
Directors adopted the Option Plan to encourage stock ownership by employees
and non-employee directors of the Company and its subsidiaries by issuing
options to purchase shares of the Company's Common Stock enabling such
directors, officers and employees to acquire or increase their proprietary
interest in the Company and thereby encourage them to remain in the employ or
remain directors of the Company and its subsidiaries. The Board of Directors
has determined that the Option Plan is desirable, cost effective and produces
incentives which will benefit the Company and its stockholders. Moreover, the
Board of Directors believes that the terms of the Option Plan are consistent
with the terms of similar stock compensation programs implemented by other
recently converted financial institutions in the Savings Bank's peer group.
The foregoing Option Plan must be approved by a majority of the outstanding
shares of Common Stock of the Company. The Board of Directors recommends a
vote "FOR" the adoption of the 1996 Stock Option Plan attached as Exhibit A.
- ------------------------------------------------------------------------------
PROPOSAL III -- RATIFICATION OF THE MANAGEMENT
RECOGNITION PLAN
- ------------------------------------------------------------------------------
The Board of Directors of the Company adopted a Management
Recognition Plan ("MRP") on October 23, 1996 for the benefit of officers,
employees and non-employee directors of the Company and its subsidiaries.
Assuming shareholder approval, the MRP will be effective on July 1, 1997. By
postponing the effective date, the MRP will not be subject to certain
regulatory restrictions otherwise applicable to plans implemented prior to the
first anniversary of the Savings Bank's mutual-to-stock conversion. The
following description of the MRP is qualified
12
in its entirety by reference to the complete text of the MRP which is attached
to this Proxy Statement as Exhibit B.
The purpose of the MRP is to encourage and provide an additional
incentive to non-employee directors, officers and employees of the Company and
its subsidiaries to increase the value of the Company and its Common Stock by
permitting them to acquire a significant equity interest in the Company. The
MRP is also intended to assist the Company in retaining superior personnel and
to strengthen their desire to remain as directors or employees of the Company.
All awards under the MRP are made by a committee of the Board of
Directors consisting of at least two non-employee directors. The MRP provides
that (i) no officer or employee will receive an award of restricted stock
covering in excess of 25% of the number of shares reserved for issuance under
the MRP, (ii) no non-employee director shall receive an award of restricted
stock covering in excess of 5% of the number of shares reserved for issuance
under the MRP and (iii) and non-employee directors serving as of the date of
shareholder approval will not receive awards of restricted stock covering in
excess of 30% in the aggregate of the number of shares reserved for issuance
under the MRP.
MRP awards are made in the form of restricted stock that is subject
to restrictions on transfer of ownership. MRP awards will generally vest over
a five-year period in equal installments beginning on the first anniversary of
the effective date of the MRP. If the employee or non-employee director
terminates service for reasons other than death or disability, the employee or
director forfeits all rights to the allocated shares under restriction. If
the employee's or director's termination is caused by death or disability, all
restrictions expire and all shares allocated become unrestricted. MRP awards
will also become fully vested upon a change in control (as defined in the MRP)
of the Company or the Savings Bank. Compensation expense in the amount of the
fair market value of the Common Stock at the date of the grant to the officer
or director will be recognized over the period in which the shares vest. An
eligible officer or director will not be entitled to voting and other
stockholder rights with respect to the shares while restricted. Furthermore,
the shares, while restricted, may not be sold, pledged or otherwise disposed
of and dividends paid during the period of restriction will be held in escrow.
A recipient of an award who receives a grant of restricted stock
who does not elect to be taxed at the time of grant will not recognize income
upon an award of shares of Common Stock, and the Company will not be entitled
to a deduction until the termination of the restrictions. Upon such
termination, the recipient will recognize ordinary income in an amount equal
to the fair market value of the Common Stock at the time (less any amount paid
by the recipient for such shares) and the Company will be entitled to a
deduction in the same amount after satisfying federal income tax withholding
requirements. However, the recipient may elect to recognize ordinary income
in the year the restricted stock is granted in an amount equal to the fair
market value of the shares at that time, determined without regard to the
restrictions. In that even, the Company will be entitled to a deduction in
such year and in the same amount. Any gain or loss recognized by the
recipient upon subsequent disposition of the stock will be capital in nature.
The MRP may utilize authorized but unissued shares of Common Stock
from the Company in fulfillment of awards. Any such use of shares by the MRP
could dilute the holdings of the Company's stockholders. The MRP also may
purchase Common Stock in the open market through a trust established in
connection with the MRP and funded with contributions from the Company. No
more than 205,000 shares may be issued under the MRP, subject to adjustment in
the event of a stock dividend, stock split, or similar event. The Board of
Directors can terminate the MRP at any time, and if it does so, any shares not
allocated will revert to the Company.
13
New Plan Benefits
The following table sets forth information regarding the number of
restricted shares anticipated to be granted under the MRP following the
effective date of the MRP.
Anticipated Restricted
Name Position Stock Grant
Craig G. Blunden President and Chief 51,250
Executive Officer
Robert G. Schrader Executive Vice 32,800
President and Chief
Operating Officer
All current executive ---- 153,750
officers as
a group (six persons)
All non-employee ---- 38,950
directors (five
persons)
All non-executive ---- 6,150
officers and employees
as a group (three
persons)
The balance of the shares that may be issued pursuant to the MRP is
expected to be allocated in the future to current and prospective non-employee
directors, subsidiary directors, officers and employees.
The Board of Directors has determined that the MRP is desirable and
will produce incentives for management which will benefit the Company and its
stockholders. The Board of Directors believes that the MRP will be a
significant factor in aligning the interests of management with those of
stockholders and that the terms of the MRP are consistent with the terms of
similar stock compensation programs implemented by other recently converted
financial institutions in the Savings Bank's peer group. The MRP must be
approved by a majority of the outstanding shares of Common Stock of the
Company. The Board of Directors recommends a vote "FOR" the adoption of the
MRP attached as Exhibit B.
- ------------------------------------------------------------------------------
AUDITORS
- ------------------------------------------------------------------------------
The Board of Directors has appointed Price Waterhouse LLP,
independent public accountants, to serve as the Company's auditors for the
fiscal year ending June 30, 1997. A representative of Price Waterhouse LLP is
expected to be present at the Annual Meeting to respond to appropriate
questions from shareholders and will have the opportunity to make a statement
if he or she so desires.
- ------------------------------------------------------------------------------
OTHER MATTERS
- ------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before
the Annual Meeting other than those matters described above in this Proxy
Statement. However, if any other matters should properly come before the
Annual Meeting, it is intended that proxies in the accompanying form will be
voted in respect thereof in accordance with the judgment of the person or
persons voting the proxies.
14
- ------------------------------------------------------------------------------
MISCELLANEOUS
- ------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company.
The Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy
materials to the beneficial owners of the Common Stock. In addition to
solicitations by mail, directors, officers and regular employees of the
Company may solicit proxies personally or by telecopier or telephone without
additional compensation. The Company has retained Kissel Blake, Inc. to
assist in soliciting proxies of shareholders whose shares are held in street
name by brokers, banks and other institutions at a cost of $3,000 plus
expenses up to $1,500.
The Company's 1996 Annual Report to Shareholders, including
financial statements, has been mailed to all shareholders of record as of the
close of business on December 5, 1996. Any shareholder who has not received a
copy of such annual report may obtain a copy by writing to the Company. The
Annual Report is not to be treated as part of the proxy solicitation material
or having been incorporated herein by reference.
A copy of the Company's Form 10-K for the fiscal year ended June
30, 1996, as filed with the Securities and Exchange Commission, will be
furnished without charge to shareholders of record as of December 5, 1996 upon
written request to Robert G. Schrader, Corporate Secretary, Provident
Financial Holdings, Inc., 3576 Central Avenue, Riverside, California 92506.
- ------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- ------------------------------------------------------------------------------
Proposals of shareholders intended to be presented at the Company's
annual meeting to be held in October 1997 must be received by the Company no
later than May 27, 1997 to be considered for inclusion in the proxy materials
and form of proxy relating to such meeting. Any such proposals shall be
subject to the requirements of the proxy rules adopted under the Exchange Act.
The Company's Certificate of Incorporation provides that in order
for a shareholder to make nominations for the election of directors or
proposals for business to be brought before the Annual Meeting, a shareholder
must deliver notice of such nominations and/or proposals to the Secretary not
less than 30 nor more than 60 days prior to the date of the Annual Meeting;
provided that if less than 31 days' notice of the Annual Meeting is given to
shareholders, such notice must be delivered not later than the close of the
tenth day following the day on which notice of the Annual Meeting was mailed
to shareholders. As specified in the Certificate of Incorporation, the notice
with respect to nominations for election of directors must set forth certain
information regarding each nominee for election as a director, including such
person's written consent to being named in the proxy statement as a nominee
and to serving as a director, if elected, and certain information regarding
the shareholder giving such notice. The notice with respect to business
proposals to be brought before the Annual Meeting must state the shareholder's
name, address and number of shares of Common Stock held, and briefly discuss
the business to be brought before the Annual Meeting, the reasons for
conducting such business at the Annual Meeting and any interest of the
shareholder in the proposal.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT G. SCHRADER
SECRETARY
Riverside, California
December 12, 1996
15
Exhibit A
Provident Financial Holdings, Inc.
1996 Stock Option Plan
SECTION 1. Purpose. The purposes of the Provident Financial
Holdings, Inc. 1996 Stock Option Plan are to promote the interests of the
Company, its affiliates, and its stockholders by (i) attracting and retaining
exceptional executive personnel and other key employees and directors of the
Company and its affiliates; (ii) motivating such employees and Eligible
Directors by means of performance-related incentives to achieve longer-range
performance goals; and (iii) enabling such employees and Eligible Directors to
participate in the long-term growth and financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the following terms
shall have the meanings set forth below:
"Affiliate" shall mean the Bank and any other "subsidiary" of the
Company as defined in Section 424(f) of the Code.
"Award" shall mean any grant of Options or Director Options.
"Award Agreement" shall mean any written agreement, contract, or
other instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Bank" shall mean Provident Savings Bank, F.S.B., Riverside,
California.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall mean an event deemed to occur if and when
(a) an offeror other than the Company purchases shares of the common stock of
the Company or the Bank pursuant to a tender or exchange offer for such
shares, (b) any person (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) is or becomes the beneficial owner, directly or indirectly,
of securities of the Company or the Bank representing twenty-five percent
(25%) or more of the combined voting power of the Company's or the Bank's then
outstanding securities, (c) the membership of the board of directors of the
Company or the Bank changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four (24) month
period (whether commencing before or after the date of adoption of this Plan)
do not constitute a majority of the Board at the end of such period, or (d)
shareholders of the Company or the Bank approve a merger, consolidation, sale
or disposition of all or substantially all of the Company's or the Bank's
assets, or a plan of partial or complete liquidation. If any of the events
enumerated in clauses (a) - (d) occur, the Board shall determine the effective
date of the change in control resulting therefrom, for purposes of the Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean a committee of the Board consisting of at
least two nonemployee directors designated by the Board to administer the
Plan. If a separate committee is not so designated, the Board shall serve as
the Committee for all purposes under the Plan.
"Company" shall mean Provident Financial Holdings, Inc., a Delaware
corporation.
"Director Option" shall mean a Non-Qualified Stock Option granted
to an Eligible Director pursuant to Section 6(e).
"Disability" shall have the meaning set forth in Section 22(e)(3)
of the Code. For purposes of the Plan, all determinations as to whether a
Participant has become disabled shall be made by a majority of the Board upon
the basis of such evidence as it deems necessary or desirable, and shall be
final and binding on all interested persons.
"Effective Date" shall mean the date of shareholder approval of the
Plan.
"Eligible Director" shall mean, on any date, a person who is
serving as a member of the Board but shall not include a person who is an
Employee.
"Employee" shall mean an employee of the Company or any Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall be determined as follows:
(a) If the Shares are traded or quoted on the
Nasdaq Stock Market or other national
securities exchange at the time of grant of
the Award, then the Fair Market Value shall
be the average of the highest and lowest
selling price on such exchange on the date
such Award is granted or, if there were no
sales on such date, then on the next prior
business day on which there was a sale.
(b) If the Shares are not traded or quoted on
the Nasdaq Stock Market or other national
securities exchange, then the Fair Market
Value shall be a value determined by the
Committee in good faith on such basis as it
deems appropriate.
"Incentive Stock Option" shall mean a right to purchase Shares from
the Company that is granted under Section 6 of the Plan and that is intended
to meet the requirements of Section 422 of the Code or any successor provision
thereto.
"Non-Qualified Stock Option" shall mean a right to purchase Shares
from the Company that is granted under Section 6 of the Plan and that is not
intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option but shall not include a Director Option.
"Participant" shall mean any Employee or Eligible Director selected
by the Committee to receive an Award of Options or Director Options, as
appropriate.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
"Plan" shall mean the Provident Financial Holdings, Inc. 1996 Stock
Option Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted
by the SEC under the Exchange Act, or any successor rule or regulation thereto
as in effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto and shall include the staff thereof.
"Shares" shall mean common shares of the Company, or such other
securities of the Company as may be designated by the Committee from time to
time.
"Ten Percent Stockholder" shall mean any stockholder who, at the
time an Incentive Stock Option is granted to such stockholder, owns (within
the meaning of Section 424(d) of the Code) more than ten percent (10%) of the
voting power of all classes of stock of the Company.
A-1
"Termination for Cause" shall mean termination because of a
Participant's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule, or regulation (other than
traffic violations or similar offenses) or material breach of any provision of
any employment agreement between the Company and/or, the Bank and a
Participant.
SECTION 3. Administration.
(a) The Plan shall be administered by the Committee. Subject
to the terms of the Plan and applicable law, and in addition to other express
powers and authorizations conferred on the Committee by the Plan, the
Committee shall: (i) designate Participants; (ii) determine the type or types
of Awards to be granted to an eligible Employee; (iii) determine the number of
Shares to be covered by, or with respect to which payments, rights, or other
matters are to be calculated in connection with, Awards; (iv) determine the
terms and conditions of any Award; (v) determine whether, to what extent, and
under what circumstances Awards may be settled or exercised in cash, Shares,
other securities, other Awards or other property, or canceled, forfeited, or
suspended; (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property,
and other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (viii) establish, amend, suspend,
or waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (ix) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or
with respect to the Plan or any Award shall be within the sole discretion of
the Committee, may be made at any time and shall be final, conclusive, and
binding upon all Persons, including the Company, and Participant, any holder
or beneficiary of any Award, any shareholder and any Employee.
SECTION 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in
Section 4(b), the number of Shares with respect to which Options and Director
Options may be granted under the Plan shall be 512,500. If, after the
effective date of the Plan, any Shares covered by an Option or Director Option
granted under the Plan, or to which such an Option or Director Option relates,
are forfeited, or if an Option or Director Option otherwise terminates or is
canceled without the delivery of Shares, then the Shares covered by such
Option or Director Option, or to which such Option or Director Option relates,
or the number of Shares otherwise counted against the aggregate number of
Shares with respect to which Options and Director Options may be granted, to
the extent of any such settlement, forfeiture, termination or cancellation,
shall again be, or shall become, Shares with respect to which Options and
Director Options may be granted. In the event that any Option or Director
Option is exercised through the delivery of Shares, the number of Shares
available for Awards under the Plan shall be increased by the number of Shares
surrendered.
(b) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Shares or other securities of the Company, issuance of warrants or
other rights to purchase Shares or other securities of the Company, or other
similar corporate transaction or event affects the Shares such that an
adjustment is necessary in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee shall proportionately adjust any or all (as necessary) of
(i) the number of Shares or other securities of the Company (or number and
kind of other securities or property) with respect to which Awards may be
granted, (ii) the number of Shares or other securities of the Company (or
number and kind of other securities or property) subject to outstanding
Awards, and (iii) the grant or exercise price with respect to any Award;
provided, in each case, that with respect to Awards of Incentive Stock Options
no such adjustment shall be authorized to the extent that such authority would
cause the Plan to violate Section 422(b)(1) of the Code, as from time to time
amended.
A-2
(c) Sources of Shares. Any Shares delivered pursuant to an
Option or Director Option may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.
SECTION 5. Eligibility. An Employee, including any officer or
employee-director of the Company, shall be eligible to be designated a
Participant. Each Eligible Director shall be eligible to receive Director
Options in accordance with Section 6(e) hereof.
SECTION 6. Options and Director Options.
(a) Grant. Subject to the provisions of the Plan and the
recommendation of the Board, the Committee shall determine the Employees to
whom Options shall be granted, the number of Shares to be covered by each
Option, the option price therefor and the conditions and limitations
applicable to the exercise of the option. The Committee shall have the
authority to grant Incentive Stock Options, or to grant Non-Qualified Stock
Options, or to grant both types of options. In such case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and
comply with such rules as may be prescribed by Section 422 of the Code, as
from time to time amended, and any regulations implementing such statute,
including without limitation, the requirements of Code Section 422(d), which
limits the aggregate fair market value of Shares of which Incentive Stock
Options are exercisable for the first time to one hundred thousand dollars
($100,000) per calendar year. Each provision of the Plan and of each written
option agreement relating to an Option designated an Incentive Stock Option
shall be construed so that such Option qualifies as an Incentive Stock Option,
and any provision that cannot be so construed shall be disregarded.
(b) Exercise Price. The Committee shall establish the
exercise price at the time each Option or Director Option is granted, which
price shall not be less than one hundred percent (100%) of the per Share Fair
Market Value on the date of grant. Notwithstanding any provision contained
herein, in the case of an Incentive Stock Option, the exercise price at the
time such Incentive Stock Option is granted to any Employee who, at the time
of such grant, is a Ten Percent Stockholder, shall not be less than one
hundred ten percent (110%) of the per Share Fair Market Value on the date of
grant.
(c) Exercise. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award Agreement or thereafter; provided,
however, that in the case of an Incentive Stock Option, a Participant may not
exercise such Option as an Incentive Stock Option after the earlier of (i) the
date which is ten (10) years (five (5) years in the case of a Participant who
is a Ten Percent Stockholder) after the date on which such Incentive Stock
Option is granted, or (ii) the date which is three (3) months (twelve (12)
months in the case of a Participant who becomes Disabled, or who dies) after
the date on which he ceases to be an employee of the Company or an Affiliate;
provided, further, that no Award of Options under the Plan shall vest more
rapidly than ratably over a five (5) year period whereby twenty percent (20%)
of the Award shall vest on each of the first through the fifth anniversaries
of the date of grant so long as the Participant remains an Employee of the
Company or an Affiliate; provided, further, that an Award of Options shall be
one hundred percent (100%) vested upon a Participant's death or Disability.
In the event of an Employee's Termination for Cause, his Options shall be
canceled on the date he ceases to be an Employee. The Committee may impose
such conditions with respect to the exercise of Options, including without
limitation, any relating to the application of federal or state securities
laws, as it may deem necessary or advisable.
(d) Payment. No Shares shall be delivered pursuant to any
exercise of an Option or Director Option until payment in full of the option
price therefor is received by the Company. Such payment may be made in cash
or its equivalent, or, if and to the extent permitted by the Committee, by
exchanging Shares owned by the optionee (which are not the subject of any
pledge or other security interest), or by a combination of the foregoing,
provided that the combined value of all cash and cash equivalents and the Fair
Market Value of any such Shares so tendered to the Company as of the date of
such tender is at least equal to such option price. The Committee may, in its
discretion, arrange procedures for the payment of the exercise price with one
or more stock brokerage firms for the purpose of allowing a Participant to
make a "cashless exercise" of an Option or Director Option.
A-3
(e) Director Options. Subject to the provisions of the Plan
and the recommendation of the Board, the Committee shall determine the
Eligible Directors to whom Director Options shall be granted, the number of
shares to be covered by each Director Option and the condition and limitations
applicable to the exercise of each Director Option. Each Award of Director
Options shall vest ratably over a five (5) year period whereby twenty percent
(20%) of the Award shall vest on each of the first through the fifth
anniversaries of the date of grant so long as the Eligible Director continues
to serve as a member of the Board; provided, however, that the Award shall be
one hundred percent (100%) vested in the event of the Eligible Director's
death or Disability. A Director Option shall be exercisable until the earlier
to occur of the following two (2) dates (i) the tenth anniversary of the date
of grant of such Director Option or (ii) one (1) year (two (2) years in the
case of an Eligible Director who becomes Disabled, or who dies) after the date
the Eligible Director ceases to be a member of the Board, except that if the
Eligible Director ceases to be a member of the Board upon Termination for
Cause, his Director Option shall be canceled on the date he ceases to be a
member of the Board. An Eligible Director may pay the exercise price of a
Director Option in the manner described in Section 6(d).
(f) Effect of a Change in Control. In the event of a Change
in Control, all then outstanding Options and Director Options, shall (to the
extent authorized or not prohibited by applicable law or regulations) become
one hundred percent (100%) vested and exercisable as of the effective date of
the Change in Control. If, in connection with or as a consequence of a Change
in Control, the Company or the Bank is merged into or consolidated with
another corporation, or if the Company or the Bank sells or otherwise disposes
of substantially all of its assets to another corporation, then unless
provisions are made in connection with such transaction for the continuance of
the Plan and/or the assumption or substitution of then outstanding Options and
Director Options with new options covering the stock of the successor
corporation, or parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices, such Options or Director Options
shall be canceled as of the effective date of the merger, consolidation, or
sale and the Participant or Eligible Director shall be paid in cash an amount
equal to the difference between the Fair Market Value of the Shares subject to
the Options or Director Options as of the effective date of the such corporate
event and the exercise price of the Options or Director Options, as
appropriate.
(g) Limitation on Awards. Notwithstanding anything herein to
the contrary, (i) no Employee shall receive an Award covering in excess of
twenty five percent (25%), (ii) no Eligible Director shall receive an Award
covering in excess of five percent (5%) and (iii) Eligible Directors shall not
receive Awards covering in excess of thirty percent (30%) in the aggregate, of
the number of shares reserved for issuance under the Plan.
SECTION 7. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or any portion thereof at any
time; provided that no such amendment, alteration, suspension, discontinuation
or termination shall be made without shareholder approval if such approval is
necessary to comply with any tax or regulatory requirement with which the
Committee deems it necessary or appropriate to comply.
(b) Amendments to Awards. The Committee may waive any
conditions or rights under, amend any terms of, or alter, suspend,
discontinue, cancel or terminate, any Award theretofore granted, prospectively
or retroactively; provided, however, that any such waiver, amendment,
alteration, suspension, discontinuance, cancellation or termination that would
impair the rights of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without the consent
of the affected Participant, holder or beneficiary.
(c) Cancellation. Any provision of this Plan or any Award
Agreement to the contrary notwithstanding, the Committee may cause any Award
of Options granted hereunder to be canceled in consideration of the granting
to the holder of an alternative Award of Options having a Fair Market Value
equal to the Fair Market Value of such canceled Award.
SECTION 8. General Provisions.
A-4
(a) Nontransferability.
(i) Each Award, and each right under any Award,
shall be exercisable only by the Participant during his lifetime, or, if
permissible under applicable law, by the Participant's guardian or legal
representative or a transferee receiving such Award pursuant to a domestic
relations order, or Section 8(a)(ii) as determined by the Committee.
(ii) No Award may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a Participant
otherwise than by will or by the laws of descent and distribution or pursuant
to a domestic relations order, and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company; provided, however, that the designation of
a beneficiary shall not constitute an assignment, alienation, pledge,
attachment, sale, transfer or encumbrance. Notwithstanding the preceding
sentence, the Committee shall have discretionary authority to permit the
transfer of any Non-Qualified Stock Option to members of a Participant's
immediate family, including trusts for the benefit of such family members and
partnerships in which such family members are the only partners; provided,
however, that a transferred Non-Qualified Stock Option may be exercised by the
transferee on any date only to the extent that the Participant would have been
entitled to exercise the Non-Qualified Stock Option on such date had the
Non-Qualified Stock Option not been transferred. Any transferred
Non-Qualified Stock Option shall remain subject to the terms and conditions of
the Participant's Award Agreement.
(b) No Rights to Awards. No Employee, Participant or other
Person shall have any claim to be granted any Award, and there is no
obligation for uniformity of treatment of Employees, Participants, or holders
or beneficiaries of Awards. The terms and conditions of Awards need not be
the same with respect to each recipient.
(c) Share Certificates. All Shares or other securities of
the Company delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions
as the Committee may deem advisable under the Plan or the rules, regulations,
and other requirements of the SEC, any stock exchange or national securities
association upon which such Shares or other securities are then listed, and
any applicable Federal or state laws, and the Committee may cause a legend or
legends to be put on any certificates representing such Shares or other
securities to make appropriate reference to such restrictions.
(d) Delegation. Subject to the terms of the Plan and
applicable law, the Committee may delegate to one or more officers or managers
of the Company, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to
grant Awards to, or to cancel, modify or waive rights with respect to, or to
alter, discontinue, suspend, or terminate Awards held by, Employees who are
not officers or directors of the Company for purposed of Section 16 of the
Exchange Act, or any successor section thereto, or who are otherwise not
subject to such Section.
(e) Withholding. A Participant shall be required to pay to
the Company and the Company is hereby authorized to withhold from any Award,
from any payment due or transfer made under any Award or from any compensation
or other amount owing to a Participant the amount of any applicable
withholding taxes in respect of an Award, its exercise, or any payment or
transfer under an Award and to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for the payment of such
taxes, including, but not limited to, the withholding of the issuance of
Shares to be issued upon the exercise of any Option or Director Option until
the Participant reimburses the Company for any amount required to be withheld.
(f) Award Agreements. Each Award hereunder shall be
evidenced by an Award Agreement which shall be delivered to the Participant
and shall specify the terms and conditions of the Award and any rules
applicable thereto.
(g) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other compensation arrangements, which may, but need
not, provide for the grant of options, restricted stock, Shares and other
types of Awards provided for
A-5
hereunder (subject to shareholder approval if such approval is required), and
such arrangements may be either generally applicable or applicable only in
specific cases.
(h) No Right to Employment. The grant of an Award shall not
be construed as giving a Participant the right to be retained in the employ of
the Company or an Affiliate. Further, the Company may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provide in the Plan or in any Award
Agreement.
(i) No Rights as Stockholder. Subject to the provisions of
the applicable Award, no Participant or holder or beneficiary of any Award
shall have any rights as a stockholder with respect to any Shares to be
distributed under the Plan until he has become the holder of such Shares.
(j) Governing Law. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of the State of
California, without giving effect to the choice of law principles thereof.
(k) Severability. If any provisions of the Plan or any Award
is or becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to the applicable laws, or if it
cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, Person or Award and the
remainder of the Plan and any such Award shall remain in full force and
effect.
(l) Other Laws. The Committee may refuse to issue or
transfer any Shares or other consideration under an Award if, acting in its
sole discretion, it determines that the issuance or transfer of such Shares or
such other consideration might violate any applicable law or regulation or
entitle the Company to recovery under Section 16(b) of the Exchange Act, and
any payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be promptly
refunded to the relevant Participant, holder or beneficiary. Without limiting
the generality of the foregoing, no Award granted hereunder shall be construed
as an offer to sell securities of the Company, and no such offer shall be
outstanding, unless and until the Committee in its sole discretion has
determined that any such offer, if made, would be in compliance with all
applicable requirements of the U.S. federal securities laws.
(m) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Company and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments
from the Company pursuant to an Award, such rights shall be no greater than
the right of any unsecured general creditor of the Company.
(n) Rule 16b-3 Compliance. With respect to persons subject
to Section 16 of the Exchange Act, transactions under this Plan are intended
to comply with all applicable terms and conditions of Rule 16b-3 and any
successor provisions. To the extent that any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
(o) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.
(p) No Impact on Benefits. Unless specifically provided
under any other benefit plan of the Company or its Affiliates, Awards shall
not be treated as compensation for purposes of calculating an Employee's or
Eligible Director's rights under such benefit plans.
(q) Indemnification. Each person who is or shall have been a
member of the Committee or of the Board shall be indemnified and held harmless
by the Company against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit,
A-6
or proceeding to which he may be made a party or in which he may be involved
by reason of any action taken or failure to act under the Plan and against and
from any and all amounts paid by him in settlement thereof, with the Company's
approval, or paid by him in satisfaction of any judgement in any such action,
suit, or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other
rights of indemnification to which such persons may be entitled under the
Company's articles of incorporation or bylaws, by contract, as a matter of
law, or otherwise.
SECTION 9. Term of the Plan.
(a) Effective Date. The Plan shall become effective upon
approval by a majority of the Company's stockholders at an annual or special
meeting of stockholders of the Company held not less than six (6) months after
the date of consummation of the Company's mutual-to-stock conversion nor more
than twelve (12) months after the date of adoption of the Plan by the Board.
(b) Expiration Date. The Plan shall terminate on and no
Award shall be granted under the Plan after the tenth anniversary of the
Effective Date. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award granted hereunder may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue,
or terminate any such Award or to waive any conditions or rights under any
such Award shall, continue after the tenth anniversary of the Effective Date.
A-7
Exhibit B
Provident Financial Holdings, Inc.
1996 Management Recognition Plan
1. Purpose; Definitions.
The purpose of the Plan is to increase the proprietary and vested
interest of the key Employees and Eligible Directors of the Company and its
Affiliates in the growth, development and financial success of the Company and
its Affiliates by granting them awards of Restricted Shares.
Whenever the following terms are used in the Plan, they shall have
the meaning specified below unless the context clearly indicated to the
contrary.
"Affiliate" shall mean the Bank and any other "subsidiary" of the
Company as defined in Section 424(f) of the Code.
"Award" shall mean an award of Restricted Shares under the Plan.
"Bank" shall mean Provident Savings Bank, F.S.B., Riverside,
California, or any successor thereto.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall mean an event deemed to occur if and when
(a) an offeror other than the Company purchases shares of the common stock of
the Company or the Bank pursuant to a tender or exchange offer for such
shares, (b) any person (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) is or becomes the beneficial owner, directly or indirectly,
of securities of the Company or Bank representing twenty-five percent (25%) or
more of the combined voting power of the Company's or the Bank's then
outstanding securities, (c) the membership of the board of directors of the
Company or the Bank changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four (24) month
period (whether commencing before or after the date of adoption of this Plan)
do not constitute a majority of the Board at the end of such period, or (d)
shareholders of the Company or the Bank approve a merger, consolidation, sale
or disposition of all or substantially all of the Company's or the Bank's
assets or a plan of partial or complete liquidation. If any of the events
enumerated in clauses (a) - (d) occur, the Board shall determine the effective
date of the change in control resulting therefrom.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean a committee of the Board consisting of at
least two nonemployee directors designated by the Board to administer the
Plan. If a separate committee is not designated by the Board, the Board shall
serve as the Committee for all purposes under the Plan.
"Company" shall mean Provident Financial Holdings, Inc., a Delaware
corporation.
"Designated Beneficiary" shall have the meaning set forth in
Section 2.2 hereof.
"Disability" shall have the meaning set forth in Section 22(e)(3)
of the Code. For purposes of the Plan, all determinations as to whether a
Participant has become disabled shall be made by a majority of the Committee,
upon the basis of such evidence as it deems necessary or desirable, and shall
be final and binding on all interested persons.
"Effective Date" shall have the meaning set forth in Section 5.1
hereof.
B-1
"Eligible Director" shall mean a member of the Board on the
Effective Date who is not also an Employee.
"Employee" shall mean any person who is employed by the Company or
an Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Participant" shall mean an Employee or Eligible Director to whom
an award of Restricted Shares is granted pursuant to the Plan.
"Plan" shall mean this Provident Financial Holdings, Inc. 1996
Management Recognition Plan, as hereinafter amended from time to time.
"Restricted Shares" shall mean Shares which are awarded to an
Employee or Eligible Director that are subject to the transfer and
forfeitability restrictions described in Section 4.2.
"Share" shall mean a share of the Company's common stock, par value
$.01 per share.
2. Administration.
2.1 Administration
The Plan shall be administered by the Committee, which shall have
the power to interpret the Plan and to adopt such rules for the
administration, interpretation and application of the Plan and Awards
thereunder as are consistent with its terms and provisions and to interpret,
amend or revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee shall be binding upon all persons,
including the Company, shareholders, Participants and Designated
Beneficiaries. The Secretary of the Company shall be authorized to implement
the Plan in accordance with its terms, and to take such actions of a
ministerial nature as shall be necessary to effectuate the intent and purposes
thereof. No member of the Committee shall be personally liable for any
action, determination or interpretation made in good faith with respect to the
Plan or the Awards thereunder, and all members of the Committee shall be fully
protected by the Company in respect to any such action, determination or
interpretation.
2.2 Designated Beneficiaries
If a Participant dies prior to receiving any payment due under the
Plan, such payment shall be made to his Designated Beneficiary. A
Participant's Designated Beneficiary shall be the beneficiary specifically
designated by a Participant in writing to receive amounts due the Participant
in the event of the Participant's death. In the absence of an effective
designation by the Participant, Designated Beneficiary shall mean the
Participant's surviving spouse or, if none, his estate.
3. Shares Subject To The Plan.
3.1 Shares Subject to the Plan
The maximum number of Shares that may be the subject of Awards
under this Plan shall be 205,000. The Company shall reserve such number of
Shares for the purposes of the Plan out of its authorized but unissued Shares
or out of Shares held in the Company's treasury, or partly out of each. In
the event that a trust is established in connection with the Plan pursuant to
Section 5.4, the Company may authorize the trustees of the trust to purchase
Shares in the open market with funds contributed by the Company or an
Affiliate and such shares shall be included in the number of shares that may
be the subject of Awards. In the event that Restricted Shares are forfeited
for any reason, such Shares shall thereafter again be available for award
pursuant to the Plan.
B-2
3.2 Changes in the Company's Shares
In the event that the Committee shall determine that any
recapitalization, reorganization, merger, consolidation, stock split,
spin-off, combination, or exchange of Shares, or other similar corporate event
affects the Shares such that an adjustment is required in order to preserve
the benefits or potential benefits intended under this Plan, the Committee
shall, in such manner as it may deem equitable, adjust any or all of the
number and kind of Shares which thereafter may be awarded under the Plan, or
the number and kind of Shares subject to outstanding awards; provided,
however, that the number of Shares subject to any award shall always be a
whole number.
4. Restricted Shares
4.1 Eligibility; Awards Under the Plan
(a) Eligibility. Employees (including officers and employee
directors of the Bank) and Eligible Directors shall be eligible to participate
in the Plan upon designation by the Committee. To the extent that Shares are
available for grant under the Plan, then upon recommendation of the Board, the
Committee shall determine which of the Employees and Eligible Directors shall
be granted an Award and the number of Restricted Shares covered by each Award.
In selecting those Employees to whom Awards will be granted and the number of
Shares covered by such Awards, the Committee shall consider the position and
responsibilities of the eligible Employees, the length and value of their
services to the Company and its Affiliates, the compensation paid to the
Employees and any other factors the Committee may deem relevant, and the
Committee may request the written recommendation of the chief executive
officer and other senior executive officers of the Company and its Affiliates.
(b) Limitation on Awards. Notwithstanding anything herein to
the contrary, (i) no Employee shall receive Awards covering in excess of
twenty five percent (25%), (ii) no Eligible Director shall receive Awards
covering in excess of five percent (5%) and (iii) Eligible Directors shall not
receive Awards covering in excess of thirty percent (30%) in the aggregate, of
the number of shares reserved for issuance under the Plan.
(c) Fractions of Shares. Whenever under the terms of the
Plan a fractional share would be required to be issued, the fractional share
shall be rounded up to the next full share.
4.2 Terms of Awards
The Restricted Shares awarded hereunder shall be awarded only
pursuant to a written agreement, which shall be executed by the Participant
and a duly authorized officer of the Company and which shall contain the
following terms and conditions:
(a) Acceptance of Award. An award of Restricted Shares must
be accepted by the Participant within a period of sixty (60) days (or such
other period as the Committee may specify at grant) after the award date by
the execution of a Restricted Share award agreement in the form provided by
the Company.
(b) Restrictions and Conditions. The Restricted Shares
awarded to a Participant pursuant to this Section 4 shall be subject to the
following restrictions and conditions:
(i) A Participant shall not be permitted to vote,
sell, transfer, pledge, assign or otherwise encumber Restricted Shares awarded
under the Plan prior to the date on which such shares vest in accordance with
clause (iii), except in accordance with the laws of descent and distribution.
(ii) On the date an Award of Restricted Shares
vests in accordance with clause (iii), a Participant (or his beneficiary)
shall be entitled to receive any cash dividends previously paid with respect
to the Restricted Shares, together with interest accrued thereon (at a
reasonable rate established from time to time by the Committee). Prior to
such date, cash dividends shall be held by the Company for the account of the
Participant. Stock dividends, if any, issued with respect to Restricted
Shares shall be treated as additional Restricted Shares that
B-3
are subject to the same restrictions and other terms and conditions that apply
with respect to the Restricted Shares with respect to which such dividends are
paid.
(iii) Subject to the applicable provisions of the
Restricted Share award agreement and this Section, a Participant's interest in
Shares shall immediately become fully vested and nonforfeitable, and the
restrictions set forth in this Section 4.2 shall lapse (x) ratably over a five
(5) year period whereby twenty percent (20%) of the Award shall vest on each
of the first through the fifth anniversaries of the date of grant so long as
the Participant remains an Employee or Eligible Director (y) upon the
Participant's death or Disability, or (z) upon a Change in Control.
4.3 Stock Certificates
Except as otherwise provided herein, a stock certificate registered
in the name of each Participant receiving a Restricted Share award (or in the
name of a trustee for the benefit of each Participant) shall be issued in
respect of such shares. Such certificate shall bear whatever appropriate
legend referring to the terms, conditions, and restrictions applicable to such
award as the Committee shall determine. The Committee may, in its sole
discretion, require that the stock certificates evidencing Restricted Shares
be held in custody by the Company (or in trust by a trustee) until the
restrictions thereon shall have lapsed. If a trust is established in
connection with the Plan, a certificate or certificates may be solely issued
in the name of the trust; provided, however, that the trustee shall maintain a
record of Awards authorized under the Plan and the amount of cash dividends
payable to a Participant upon the vesting of any Award or installment thereof.
5. Miscellaneous.
5.1 Shareholder Approval; Effective Date; Term
The Plan shall become effective on July 1, 1997 but only if, prior
to such date, the Plan is approved by a majority of the Company's shareholders
at an annual or special meeting of shareholders of the Company. The Plan
shall continue in effect until the tenth anniversary of the Effective Date.
5.2 Amendment, Suspension or Termination of the Plan
The Plan may be wholly or partially amended or otherwise modified,
suspends or terminated at any time or from time to time by the Board;
provided, however, that no amendment or modification shall be made without
shareholder approval if such approval is necessary to comply with any tax or
regulatory requirement with which the Board deems it necessary or appropriate
to comply.
From and after the Effective Date, neither the amendment,
suspension nor termination of the Plan shall, without the consent of the
Participant, alter or impair any rights or obligations under any award
theretofore granted. No awards may be granted during any period of suspension
nor after termination or expiration of the Plan.
5.3 Regulations and Other Approvals
(a) The obligation of the Company to deliver Shares with
respect to any award granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Board.
(b) The Board may make such changes to the Plan as may be
necessary or appropriate to comply with the rules or requirements of any
governmental authority.
(c) Each award of Shares is subject to the requirement that,
if at any time the Board determines, in its sole discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any United States, state or
federal law, or the consent or approval of any
B-4
governmental regulatory body is necessary or desirable as a condition of, or
in connection with, issuance of Shares, no Shares shall be issued, in whole or
in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions as acceptable to the Board.
(d) In the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, and is not otherwise exempt from such
registration, such Shares shall be restricted against transfer to the extent
required by the Securities Act of 1933 or regulations thereunder, and the
Board may require any individual receiving Shares pursuant to the Plan, as a
condition precedent to receipt of such Shares, to represent to the Company in
writing that the Shares acquired by such individual are acquired for
investment only and not with a view to distribution. The certificate for any
Shares acquired pursuant to the Plan shall include any legend that the Board
deems appropriate to reflect any restrictions on transfer.
(e) At the time of grant of any award, the Board may provide
in the Restricted Share award agreement that any Shares received as a result
of such grant shall be subject to a right of first refusal in favor of the
Company, pursuant to which the Participant shall be required to offer to the
Company any Shares that he wishes to sell, with the price being the then fair
market value of such Shares, subject to such other terms and conditions as the
Board may specify in the award agreement.
(f) With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable terms and conditions of Rule 16b-3 and any successor provisions.
To the extent that any provision of the Plan or action by the Committee fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee.
(g) A Participant shall be required to pay to the Company or
an Affiliate the amount of any applicable withholding taxes in respect of an
Award and the Company shall be authorized to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes, including, but not limited to, the withholding of the
issuance of Shares to be issued upon the vesting of any Award, until the
Participant reimburses the Company for any amount required to be withheld.
5.4 Trust Arrangement
All benefits under the Plan represent an unsecured promise to pay
by the Company. The Plan shall be unfunded and the benefits hereunder shall
be paid only from the general assets of the Company resulting in the
Participants having no greater rights than the Company's general creditors;
provided, however, that nothing herein shall prevent or prohibit the Company
from establishing a trust or other arrangement for the purpose of providing
for the payment of the benefits payable under the Plan.
5.5 Governing Law
The Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of
California without giving effect to the choice of law principles thereof.
5.6 Titles; Construction
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Plan. The
masculine pronoun shall include the feminine and neuter and the singular shall
include the plural, when the context so indicates.
B-5
REVOCABLE PROXY
PROVIDENT FINANCIAL HOLDINGS, INC.
ANNUAL MEETING OF SHAREHOLDERS
January 23, 1997
The undersigned hereby appoints the entire Board of Directors of
Provident Financial Holdings, Inc. (the "Company") with full powers of
substitution to act as attorneys and proxies for the undersigned, to vote all
shares of Common Stock of the Company which the undersigned is entitled to
vote at the Annual Meeting of Shareholders, to be held at the Mission Inn at
3649 Mission Inn Boulevard, Riverside, California, on Thursday, January 23,
1997, at 11:00 a.m., local time, and at any and all adjournments thereof, as
follows:
VOTE
1. The election as director of the nominees FOR WITHHELD
listed below (except as marked to the [ ] [ ]
contrary below).
Craig G. Blunden
David W. Mitchell
Roy H. Taylor
INSTRUCTIONS: To withhold your vote
for any individual nominee, write the
nominee's name on the line below.
----------------------
FOR AGAINST ABSTAIN
2. The adoption of the Provident [ ] [ ] [ ]
Financial Holdings, Inc. 1996
Stock Option Plan.
3. The adoption of the Provident [ ] [ ] [ ]
Financial Holdings, Inc. 1996
Management Recognition Plan.
4. In their discretion, upon such other matters
as may properly come before the meeting.
The Board of Directors recommends a vote "FOR" the listed propositions.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED
THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE BOARD OF
DIRECTORS IN ITS BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING. THIS PROXY
ALSO CONFERS DISCRETIONARY AUTHORITY ON THE BOARD OF DIRECTORS TO VOTE WITH
RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEES ARE
UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO THE
CONDUCT OF THE 1996 ANNUAL MEETING.
B-29
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual
Meeting or at any adjournment thereof and after notification to the Secretary
of the Company at the Annual Meeting of the shareholder's decision to
terminate this proxy, then the power of said attorneys and proxies shall be
deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of the Notice of Annual Meeting of Shareholders, a
Proxy Statement dated December 12, 1996 and the 1996 Annual Report to
Shareholders.
Dated: ___________________, 199_
_________________________ _________________________
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
_________________________ _________________________
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on the enclosed card. When signing
as attorney, executor, administrator, trustee or guardian, please give your
full title. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.