September 27, 2000
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of Service
Bancorp, Inc. (the "Company"). The Annual Meeting will be held at the Courtyard
by Marriott Hotel, 10 Fortune Boulevard, Milford, Massachusetts, on October 24,
2000, at 3:00 p.m., local time.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. Dthe Annual Meeting we will also report on the
operations of the Company. Directors and officers of the Company will be present
to respond to any questions that stockholders may have. Also enclosed for your
review is our Annual Report to Stockholders, which contains detailed information
concerning the activities and operating performance of the Company.
The business to be conducted at the Annual Meeting consists of the election of
six directors and the ratification of Wolf & Company, P.C. as the Company's
auditors for the fiscal year ending June 30, 2001. For the reasons set forth in
the Proxy Statement, the Board of Directors of the Company has determined that
the matters to be considered at the Annual Meeting are in the best interest of
the Company and its stockholders, and the Board of Directors unanimously
recommends a vote "FOR" each matter to be considered.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible, even if you currently plan to attend
the Annual Meeting. This will not prevent you from voting in person, but wassur
that your vote is counted if you are unable to attend the meeting. Your vote is
important, regardless of the number of shares that you own.
Sincerely,
/s/ Eugene G. Stone
Eugene G. Stone
President and Chief Executive Officer
Service Bancorp, Inc.
81 Main Street
Medway, Massachusetts 02053
(508) 533-4343
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On October 24, 2000
Notice is hereby given that the Annual Meeting of Service Bancorp, Inc.
(the "Company") will be held at the Courtyard by Marriott Hotel, 10 Fortune
Boulevard, Milford, Massachusetts, on October 24, 2000 at 3:00 p.m., local time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. election of six Directors to the Board of Directors;
2. the ratification of the appointment of Wolf & Company, P.C. as
auditors for the Company for the fiscal year ending June 30, 2001; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual Meeting on
the date specified above, or on the date or dates to which the Annual Meeting
may be adjourned. Stockholders of record at the close of business on September
8, 2000, are the stockholders entitled to vote at the Annual Meeting, and any
adjournments thereof.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POST ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE REVOKED AT ANY
TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING WITH THE SECRETARY
OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER
DATE. ANY STOCKHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE HIS OR HER PROXY
AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL MEETING. HOWEVER,
IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU
WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO VOTE
PERSONALLY AT THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ Eugene G. Stone
Eugene G. Stone
President and Chief Executive Officer
September 27, 2000
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
PROXY STATEMENT
Service Bancorp, Inc.
81 Main Street
Medway, Massachusetts 02053
(508) 533-4343
ANNUAL MEETING OF STOCKHOLDERS
October 24, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Service Bancorp, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting"), which will be held at the Courtyard by Marriott Hotel, 10
Fortune Boulevard, Milford, Massachusetts, on October 24, 2000, at 3:00 p.m.,
local time, and all adjournments of the Annual Meeting. The accompanying Notice
of Annual Meeting of Stockholders and this Proxy Statement are first being
mailed to stockholders on or about September 27, 2000.
- --------------------------------------------------------------------------------
REVOCATION OF PROXIES
- --------------------------------------------------------------------------------
Stockholders who execute proxies in the form solicited hereby retain the
right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Annual Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon. Where
no instructions are indicated, validly executed proxies wbe voted "FOR" the
proposals set forth in this Proxy Statement for consideration at the Annual
Meeting.
At the Annual Meeting, stockholders are being asked to consider and vote
upon the election of six directors and the ratification of Wolf & Company, P.C.
as the Company's auditors for the year ending June 30, 2001. The Board of
Directors knows of no additional matters that will be presented for
consideration at the Annual Meeting. Execution of a proxy, however, confers on
the designated proxy holders discretionary authority to vote the shares in
accordance with their best judgment on such other business, if any, that may
properly come before the Annual Meeting or any adjournments thereof.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Company, at the address shown above. The presence at the Annual
Meeting of any stockholder who had returned a proxy shall not revoke such proxy
unless the stockholder delivers his or her ballot in person at the Annual
Meeting or delivers a written revocation to the Secretary of the Company prior
to the voting of such proxy.
- --------------------------------------------------------------------------------
VOTE REQUIRED
- --------------------------------------------------------------------------------
Holders of record of the Company's common stock, par value $0.01 per share
(the "Common Stock") as of the close of business on September 8, 2000 (the
"Record Date") are entitled to one vote for each share then held. As of the
Record Date, the Company had 1,603,877 shares of Common Stock issued and
outstanding. The presence in por by proxy of a majority of the outstanding
shares of Common Stock entitled to vote is necessary to constitute a quorum at
the Annual Meeting. Abstentions and broker non-votes are counted for purposes of
determining a quorum.
Directors are elected by a plurality of votes cast, without regard to
either broker non-votes, or proxies as to which the authority to vote for the
nominees being proposed is withheld. The affirmative vote of a majority of tvote
cast is required for approval of the proposal to ratify Wolf & Company, P.C. as
the Company's auditors for the fiscal year ending June 30, 2001. Abstentions and
broker non-votes will not affect the vote on Proposal II.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- --------------------------------------------------------------------------------
Persons and groups who beneficially own in excess of five percent of the
Common Stock are required to file certain reports with the Securities and
Exchange Commission (the "SEC") regarding such ownership pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"). The following table sets
forth, as of September 8, 2000, the shares of Common Stock known by management
of the Company to be beneficially owned by executive officers, Directors, and
nominees for Director as a group and by each person who was the beneficial owner
of more than five percent of the Company's outstanding shares of Common Stock.
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owners(1) Ownership(2) Outstanding
-------------------- --------------------- ----------------------
Service Bancorp, MHC 907,694 56.6%
81 Main Street
Summit, MA 02053
Service Bancorp, MHC 1,004,907 65.4%
and all Directors, nominees and Executive Officers
as a Group (16 persons)
(1) The business address of all named persons is 81 Main Street, Summit,
Massachusetts 02053. Certain of the Company's executive officers and
directors are also executive officers and trustees of Service Bancorp, MHC.
(2) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner for purposes of this table, of
any shares of Common Stock if he has shared voting or investment power with
respect to such security, or has a right to acquire beneficial ownership at
any time within 60 days from the date as of which beneficial ownership is
being determined. As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the power to dispose
or direct the disposition of shares, and includes all shares held directly
as well as by spouses and minor children, in trust and other indirect
ownership, over which shares the named individuals effectively exercise
sole or shared voting or investment power.
- --------------------------------------------------------------------------------
PROPOSAL I--ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
Effective at the Annual Meeting, the Company's Board of Directors will be
composed of 15 members. The Company's bylaws provide that approximately
one-third of the Directors are to be elected annually. Directors of the Company
are generally elected to serve for three-year periods and until their respective
successors shall have been elected and shall qualify. Five Directors will be
elected at the Annual Meeting to serve for three-year periods aunti their
respective successors shall have been elected and shall qualify, and one
Director will be elected for a two- period and until her successor shall have
been elected and qualify. The Board of Directors has nominated to serve as
Directors for three-year terms Kelly A. Verdolino, Kenneth C.A. Isaacs, Paul V.
Kenney, Eugene R. Liscombe and Robert A. Matson, and the Board of Directors has
nominated Pamela J. Mozynski to serve as Director for a two- term.
2
The table below sets forth certain information, as of September 8, 2000,
regarding members of the Company's Board of Directors and other individuals,
including the terms of office of Board members. It is intended that the proxies
solicited on behalf of the Board of Directors (other than proxies in which the
vote is withheld as to the nominee) will be voted at the Meeting for the
election of the nominees identified below. If a nominee is unable to serve, the
shares represented by all such proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this time, the Board of
Directors knows of no reason why any nominee might be unable to serve, if
elected. Except as indicated herein, there are no arrangements or understandings
between any nominee and any other person pursuant to which such nominee was
selected.
Shares
Position(s) Held With Director Current Beneficially Percent of
Name the Company Age Since(1) Term Expires Owned Class
- ---------------------- ---------------------- ----------- ----------- ------------ ------------ -----------
NOMINEES
Kelly A. Verdolino Director 40 1995 2000 11,000(2) *
Kenneth C.A. Isaacs Director 47 1997 2000 12,500(2) *
Paul V. Kenney Director 37 1992 2000 1,000(3) *
Eugene R. Liscombe Director 54 1991 2000 1,700(3) *
Robert A. Matson Director 41 1997 2000 1,575(2) *
Pamela J. Mozynski President and Chief 37 -- -- 5,341(4) *
Operating Officer, Strata Bank
OTHER BOARD MEMBERS
William L. Casey Chairman of the Board 52 1995 2001 1,500(2) *
John G. Dugan Director 49 1990 2001 3,000(3) *
John Hasenjaeger Director 57 1995 2001 3,000(3) *
Robert J. Heavey Director 70 1981 2001 5,500(3) *
Lawrence E. Novick Director 60 1992 2001 11,000(2) *
Eugene G. Stone President, Chief Executive 65 1988 2002 19,656(5) 1.2%
Officer and Director
Richard Giusti Director 56 1991 2002 6,000(2) *
Thomas R. Howie Director 57 1988 2002 1,700(3) *
James W. Murphy Director and Secretary 65 1979 2002 5,500(3) *
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Warren W. Chase, Jr. Vice President and Treasurer N/A N/A 7,241(6) *
- --------------------------------
* Less than 1%
(1) Reflects initial appointment to the Board of Trustees of Summit Bank or its
predecessors.
(2) Includes 1,000 shares granted under the Company's 1999 Recognition and
Retention Plan (the "Recognition Plan"), which are subject to future
vesting but as to which voting may currently be directed.
(3) Includes 500 shares granted under the Recognition Plan, which are subject
to future vesting but as to which voting may currently be directed.
(4) Includes 3,994 shares granted under the Recognition Plan, which are subject
to future vesting but as to which voting may currently be directed.
(5) Includes 12,073 shares granted under the Recognition Plan, which are
subject to future vesting but as to wvotin may currently be directed.
(6) Includes 3,500 shares granted under the Recognition Plan, which are subject
to future vesting but as to which voting may currently be directed.
The business experience for the past five years for each of the Company's
directors and executive oi as follows:
Directors of the Company
William L. Casey has served as a director of Strata Bank (the "Bank," and
formerly "Summit Bank") since 1995 and, since 1997, has served as Chairman of
the Board of Trustees of Service Bancorp, MHC, the Company's parent mutual
holding company (the "Mutual Holding Company"). He is the Corporate Manager of
Credit and Sales Accounting at Analog Devices, Inc., Norwood, Massachusetts, an
integrated circuit manufacturer. Mr. Casey son several town and community boards
in Millis, Massachusetts.
John G. Dugan has served as a director of the Bank since 1990. Mr. Dugan
also serves on the Audit Committee of the Mutual Holding Company. He is an
attorney in the law firm of Dugan & Cannon of Medfield,
3
Massachusetts, and serves as town moderator for the town of Millis. Mr. Dugan
participates in a number of civic and charitable organizations.
Richard Giusti has served as a director of the Bank since 1991. Mr. Giusti
continues to serve as a trustee of the Mutual Holding Company and a director of
the Bank. He is Manager of Administration & Finance of the Metropolitan Machine
Co., Inc., a machine company. Mr. Giusti is involved in various civic activities
as well.
John Hasenjaeger has served as a director of the Bank since 1995. He is
owner of a real estate firm and also is a professor of management at Boston
College School of Management.
Robert J. Heavey has served as a director of the Bank since 1981 and served
as Chairman of the Board of Trustees of the Bank from 1991 to 1994. Mr. Heavey
is President and Treasurer of RJ Heavey Co., Inc., a plumbing company in
Walpole, Massachusetts. He also serves several civic and charitable
organizations.
Thomas R. Howie has served as a director of the Bank since 1988 and served
on the Bank's Board of Investment from 1990 to 1994 and on its Audit Committee
since 1995. He is Vice President of Howie Oil Company, Inc., a heating oil
distributor in Millis, Massachusetts. He is involved in various charitable and
civic organizations.
Kenneth C.A. Isaacs has served as a director of the Bank since 1997. Mr.
Isaacs is a private trustee with extensive real estate experience.
Paul V. Kenney has served as a director of the Bank since 1992. He is a
member of the law firm Kenney and Maciolek of Medway, Massachusetts. He also
serves several civic organizations.
Eugene R. Liscombe has served as a director of the Bank since 1991 and
served on its Board of Investment from 1991 to 1996. Mr. Liscombe also was
Chairman of the Board of Trustees of the Bank from 1994 to 1996. Mr. Liscombe is
a self-employed certified public accountant and is active in several civic and
charitable organizations.
Robert A. Matson has served as a director of the Bank since 1997. Mr.
Matson is self-employed as a chartered financial consultant and chartered life
insurance underwriter. He is involved in civic and charitable organizations.
Pamela J. Mozynski was named President and Chief Operating Officer of the
Bank in June 2000. Ms. Mozynski has been employed by the Bank since 1992, and
previously served as Senior Vice President of Retail Banking.
James W. Murphy has served as a director of the Bank since 1979 and served
as Clerk of the Bank since 1992. Mr. Murphy is a retired insurance broker.
Lawrence E. Novick has served as a director of the Bank since 1992, and
also served on the Bank's Board of Investment since 1996 and on the Audit
Committee from 1993 to 1996. He is a self-employed tax and financial services
advisor in Holliston, Massachusetts. Mr. Novick is involved in many trade
organizations and holds positions in civic and charitable organizations.
Eugene G. Stone has served as a director of the Bank since 1988. He has
been President and Chief Executive Officer of the Bank since 1988, Chairman of
the Bank since 1997 and President and Chief Executive Officer of the Company
since its organization in 1998. Mr. Stone serves on the boards of several civic
and charitable organizations.
Kelly A. Verdolino has served as a director of the Bank since 1995 and a
member of the Bank's Audit Committee since 1996. Ms. Verdolino also serves as
Clerk of the Bank. Ms. Verdolino is an accountant and has served on several town
committees in Medway, Massachusetts.
Executive Officers of the Company Who are Not Directors
Warren W. Chase, Jr. served as Vice President and Treasurer of the Bank
since 1995 and was named Senior Vice President and Treasurer of the Bank in
1999. Mr. Chase has served as Vice President and Treasurer of the
4
Company since its organization in 1998. Prior to joining the Bank, Mr. Chase, a
certified public accountant, worked for 17 years for Sterling Bank, Waltham,
Massachusetts as Controller and Vice President of Financial Planning. His
principal areas of responsibility for the Bank include financial reporting,
financial planning and liquidity management.
Meetings and Committees of the Board of Directors
The business of the Company's Board of Directors is conducted through
meetings and activities of the Board and its committees. During the fiscal year
ended June 30, 2000, the Board of Directors held six meetings. During the fiscal
year ended June 30, 2000, no director attended fewer than 75 percent of the
total meetings of the Board of Directors of the Company and committees on which
such director served.
The Audit Committee consists of Directors Casey, Dugan and Kenney, all of
whom are non-employee directors. The audit committee has discussed with the
Company's independent auditors the matters required to be discussed under SAS
61. The audit committee has received written disclosures and a letter from the
independent auditors relating to their independence and has discussed this
correspondence with the auditors. The Audit Committee met four times dthe fiscal
year ended June 30, 2000.
The Nominating Committee consists of the entire Board of Directors. The
Nominating Committee met once during the fiscal year ended June 30, 2000.
The Executive Committee consists of Directors Casey, Guisti, Isaacs,
Novick, Matson, Stone and Verdolino. The Executive Committee reviews the
performance of the President and Chief Executive Officer. The Executive
Committee met once during the fiscal year ended June 30, 2000.
Ownership Reports by Officers and Directors
The Common Stock is registered pursuant to Section 12(g) of the Exchange
Act. The officers and directors of the Company and beneficial owners of greater
than 10% of the Common Stock ("10% beneficial owners") are required to file
reports on Forms 3, 4 and 5 with the SEC disclosing beneficial ownership and
changes in beneficial ownership of the Common Stock. SEC rules require
disclosure in the Company's Proxy Statement of the failure of an officer,
director or 10% beneficial owner of the Common Stock to file a Form 3, 4 or 5 on
a timely basis. No officer, director or 10% beneficial owner of the Company
failed to file ownership reports on a timely basis for the fiscal year eJun 30,
2000.
Compensation of Directors
Directors of the Bank receive fees of $375 for each meeting attended.
Non-employee Directors of the Company and non-employee Trustees of the Mutual
Holding Company are paid an annual retainer of $1,000 for their service on each
of these Boards, for a total retainer of $2,000. Members of committees of the
Board are paid a fee of $50 per meeting, except for the Clerk of the Board who
receives $75.
5
Executive Compensation
Summary Compensation Table. The following table sets forth the cash
compensation paid by the Bank as well as certain other compensation paid or
accrued for services rendered in all capacities during the year ended June 30,
2000, 1999 and 1998 to the Chief Executive Officer of the Company. No other
executive officers of the Company received total annual compensation in excess
of $100,000 during any of the periods presented.
Long-Term Compensation
Annual Compensation (1) Awards Payout
Fiscal
Years Restricted
Name and Principal Ended Salary Bonus Other Annual Stock Options/SARs LTIP All Other
Position June 30, ($) ($) Compensation(1) Award(s) (#) Payouts Compensation(1)
==================== ========= =========== =========== ================ ============== ================ ========= ===============
Eugene G. Stone 2000 $178,386 $ -- -- $90,548(2) 16,097 -- --
President and Chief 1999 146,933 30,000 -- -- -- -- --
Executive Officer 1998 128,350 27,500 -- -- -- -- --
==================== ========= =========== =========== ================ ============== ================ ========= ===============
(1) The Bank also provides certain members of senior management with the use of
an automobile, club membership dues and certain other personal benefits,
the aggregate value of which did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus reported for Mr. Stone.
(2) Represents the market value of 12,073 shares awarded in fiscal year 2000
pursuant to the Company's 1999 Recognition and Retention Plan. These shares
vest in five equal annual installments commencing on January 1, 2001.
Supplemental Executive Retirement Plan. In January 1992, the Bank entered
into an agreement with Eugene G. Stone, the Bank's Chief Executive Officer,
which established a nonqualified supplemental executive retirement program
("SERP") for Mr. Stone. The SERP provides for an annual benefit of $35,375
following Mr. Stone's termination of service due to retirement on or after age
65. The annual benefit is adjusted and reduced accordingly for payment following
Mr. Stone's death, disability or termination of service prior to normal
retirement or upon early retirement. Benefits are payable monthly to Mr. Stone
or, in the case of his death, to his beneficiary, over a period of 15 years,
unless an optional form of payment available under the Bank's pension plan is
elected. Payment of benefits commences upon death, early or normal retirement.
In the event of disability, payment of benefits commences the later of age 65 or
the termination of other disability benefits. If Mr. Stone's employment is
terminated for reasons other than death, disability, or retirement, benefit
payments begin at age 65. Benefits under the SERP are forfeited if Mr. Stone's
service is terminated for cause. The Bank has established a rabbi trust and has
made contributions to the trust sufficient to fully satisfy its benefit
obligation under the SERP; however, for tax and ERISA purposes, the SERP is can
unfunded plan.
Deferred Compensation Plan. In November 1991, the Bank adopted a deferred
compensation plan () for the benefit of directors who serve the Bank in an
employment capacity. The DCP provides each director with the opportunity to
defer up to 100% of his or her salary or fees into the DCP. In the event of a
director's termination of employment, amounts credited to his account under the
DCP will be paid to him in the form of lump sum or monthly, quarterly,
semi-annual or annual cash installments, in the discretion of the Bank,
beginning not later than 30 days following the last day of the month of
termination, or within a reasonable period of time. In the event of death,
amounts under the DCP will be paid to the director's designated beneficiaries.
Benefits under the DCP are forfeited if tdirecto is terminated for cause. The
DCP is an unfunded plan for tax purposes and for purposes of ERISA. All
obligations arising under the DCP are payable from the general assets of the
Bank.
Employment Agreements
Employment Agreements. The Bank has entered into an employment agreement
with Chief Executive Officer Eugene G. Stone. The agreement has a term of 36
months. On each anniversary date, the agreement may be extended for an
additional twelve months, so that the remaining term shall be 36 months. If the
agreement is not renewed, the agreement will expire 36 months following the
anniversary date. Under the agreement, the current Base Salary for Mr. Stone (as
defined in the agreement) is $155,000. The Base Salary may be increased but not
decreased. In addition to
6
the Base Salary, the agreement provides for, among other things, participation
in retirement plans and other employee and fringe benefits applicable to
executive personnel. The agreement provides for termination by the Bank for cat
any time. In the event the Bank terminates the executive's employment for
reasons other than disability, retirement, or for cause, or in the event of the
executive's resignation from the Bank (such resignation to occur within the
period or periods set forth in the employment agreement) upon (i) failure to
re-elect the executive to his current offices, (ii) a material change in the
executive's functions, duties or responsibilities, or relocation of his
principal place of employment by more than 30 miles, (iii) liquidation or
dissolution of the Bank or the Company, (iv) a breach of the agreement by the
Bank, or (v) following a change in control of the Bank or the Company, the
executive, or in the event of death, his beneficiary, would be entitled to
severance pay in an amount equal to three times the Base Salary and the highest
bonus paid during any of the last three years. Mr. Stone would receive an
aggregate of $550,000 pursuant to his employment agreement upon a change in
control of the Bank or the Company, based upon his current level of
compensation. The Bank would also continue the executive's life, health, dental
and disability coverage for 36 months from the date of termination. In the event
the payments to the executive would include an "excess parachute payment" as
defined bthe Internal Revenue Code of 1986, as amended (the "Code"), Section
280G (relating to payments made in connection with a change in control), the
payments would be reduced in order to avoid having an excess parachute payment.
Under the agreement, the executive's employment may be terminated upon his
retirement in accordance with any retirement policy established on behalf of the
executive and with his consent. Upon the executive's retirement, he will be
entitled to all benefits available to him under any retirement or other benefit
plan maintained by the Bank. In the event of the executive's disability for a
period of six months, the Bank may terminate the agreement, provided tth Bank
will be obligated to pay him his Base Salary for the remaining term of the
agreement or one year, whichever is longer, reduced by any benefits paid to the
executive pursuant to any disability insurance policy or similar arrangement
maintained by the Bank. In the event of the executive's death, the Bank will pay
his Base Salary to his named beneficiaries for one year following his death, and
will also continue medical, dental, and other benefits to his family for one
year. The employment agreement provides that, following his termination of
employment, the executive will not compete with the Bank for a period of one
year.
Compensation of Officers and Directors through Benefit Plans
Directors Supplemental Retirement Plan. In February 2000, the Bank and the
Company adopted a non- qualified, unfunded deferred compensation plan for the
benefit of their non-employee directors ("Directors Retirement Plan"). The
Directors Retirement Plan provides supplemental retirement benefits to the
non-employee directors ais evidenced by individual agreements with each
non-employee director. The agreements are unfunded, but the Bank has purchased
life insurance policies on each director that are actuarially designed to offset
the annual expenses associated with the plan and provide a complete recovery of
all plan costs upon the director's death. The Bank is the sole owner of the
insurance policies. The amount of the retirement benefit will be determined
pursuant to the accrual of two accounts: (i) a pre-retirement account; and (ii)
an index retirement benefit account. The pre-retirement account is a liability
reserve account of the Bank, and is increased or decreased each year by an
amount determined by the aggregate annual; after-tax income from specified life
insurance contracts reduced by an "opportunity cost" which is calculated by
taking into account the Bank's after-tax cost of funds. The index retirement
benefit account is equal to the excess of the annual earnings of the insurance
policies over the "opportunity cost". Benefits from the pre-retirement account
are paid in 20 equal annual installments following the director's retirement.
Upon normal retirement, directors will receive an additional index retirement
benefit until their death. Should a director die prior to having received the
entire amount of their pre-retirement account, the unpaid balance will be paid
in a lump sum to their beneficiaries. While directors are entitled to receive
their benefit if they terminate service prior to their retirement date, the
payment of bwill not commence until the director reaches his normal retirement
date. In the event of a change of control of the Bank oth Company, directors
will be entitled to receive the amounts accumulated in their pre-retirement
account within 30 days of such event and will also begin receiving the annual
index benefit. The benefits under the agreement are forfeitable if a director is
terminated by the Bank for cause.
The Bank's current tax-qualified employee pension benefit plans consist of
a defined benefit pension plan and a profit sharing plan with a salary deferral
feature under Section 401(k) of the Code, as described below.
7
Defined Benefit Pension Plan. Until May 2000, the Bank maintained the
Savings Banks Employees Retirement Association Pension Plan, which was a
qualified, tax-exempt defined benefit plan ("Retirement Plan"). All employees
age 21 or older who worked at the Bank for a period of one year and were
credited with 1,000 or more hours of service with the Bank during the year were
eligible to accrue benefits under the Retirement Plan. In connection with
terminating the Retirement Plan, the Bank amended the Retirement Plan to
increase the benefits to active participants in order to allocate the Retirement
Plan's surplus assets upon termination. This amendment and termination are
subject to receipt of a favorable tax determination from the Internal Revenue
Service.
401(k) Plan. The Bank maintains the Savings Banks Employees Retirement
Association 401(k) Plan which is a qualified, tax-exempt profit sharing plan
with a salary deferral feature under Section 401(k) of the Code ("401(k Plan").
All employees who have attained age 21 and have completed one year of service
during which they wat least 1,000 hours are eligible to participate.
Under the 401(k) Plan, participants are permitted to make salary reduction
contributions equal to the lesser of 15% of compensation or $10,000 (as indexed
annually). For these purposes, "compensation" includes wages reported on federal
income tax form W-2 and includes any amount contributed by salary reduction to a
cafeteria plan or 401(k) plan, but does not include compensation in excess of
the Code Section 401(a)(17) limits (i.e., $160,000 for plan years beginning in
1997). In 1999 and prior years, the Bank matched 50% of the participant's salary
reduction contributions to the 401(k) Plan (up to 6% of the participant's
compensation). Beginning January 1, 2000, in connection with the termination of
the defined benefit pension plan, the Bank increased the matching contribution
to 100% of the participant's salary reduction contributions up to 4% of the
participant's compensation. All employee contributions, matching contributions
and earnings thereon are fully and immediately vested. A participant may
withdraw salary reduction contributions in the event the participant suffers a
financial hardship. A participant may also borrow money from his or her account,
which loan may not exceed the lesser of $50,000 or 50% of the participant's
total account balance. The 401(k) Plan permits employees to direct the
investment of their own accounts into various investment options.
Plan benefits will be paid to each participant in the form of a life
annuity (or joint and survivor annuity if married) upon retirement or death
unless an alternate form of distribution (lump sum, life annuity or equal
payments over a fixed period) is selected. If a participant terminates
employment prior to retirement, his vested benefit will be held by the 401(k)
Plan until the participant elects to receive his benefit from the 401(k) Plan.
Normal retirement age under the 401(k) Plan is 65. Early retirement age is 59
1/2.
Stock Benefit Plans. During the fiscal year ended June 30, 2000, the
Company adopted, and stockholders approved, the Company's 1999 Stock Option Plan
(the "Stock Option Plan"). Pursuant to the Stock Option Plan, options to
purchase 2,500 shares were granted to non-employee directors Casey, Giusti,
Isaacs, Matson, Novick and Verdolino, options to purchase 1,000 shares were
granted to non-employee directors Dugan, Hasenjaeger, Heavey, Howie, Kenney,
Liscombe and Murphy, and options to purchase 9,590 shares were granted to
nominee Mozynski, all at an exercise price of $7.50 per share, the fair market
value of the underlying shares on the date of the award. The term of the options
is ten years from the date of grant, and the shares subject to awards will be
adjusted in the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination or exchange of shares
or other change in the corporate structure of the Company. The awards included
an equal number of reload options ("Relo Options"), limited stock appreciation
rights ("Limited Rights") and dividend equivalent rights ("Dividend Equivalent
Rights"). A Limited Right gives the option holder the right, upon a change in
control of the Company or the Bank, to receive the excess of the market value of
the shares represented by the Limited Rights on the date exercised over the
exercise price. The Limited Rights are subject to the same terms and conditions
as the stock options. Payment upon exercise of a Limited Rights will be in cash,
or in the event of a change in control in which pooling accounting treatment is
a condition to the transaction, in shares of stock of the Company, or in the
event of a merger transaction, in shares of the acquiring corporation or its
parent, as applicable. The Dividend Equivalent Rights entitle the option holder
to receive an amount of cash at the time that certain extraordinary dividends
are declared equal to the amount of the extraordinary dividend multiplied by the
number of options that the person holds. For these purposes, an extraordinary
dividend is defined as any dividend where the rate of dividend exceeds the
Bank's weighted average cost of funds on interes liabilities for the current and
preceding three quarters. The Reload Options entitle the option holder, who has
delivered shares that he or she owns as payment of the exercise price for option
stock, to a new option to acquire ashare equal in amount to the shares he or she
has traded in. Reload Options may also be granted to replace option shares
8
retained by the employer for payment of the option holder's withholding tax. The
option price at which additional shares of stock can be purchased by the option
holder through the exercise of a Reload Option is equal to the market vo the
previously owned stock at the time it was surrendered. The option period during
which the Reload Option may be exercised expires at the same time as that of the
original option that the holder has exercised.
During the fiscal year ended June 30, 2000, the Company adopted, and
stockholders approved, the Company's 1999 Recognition and Retention Plan (the
"Recognition Plan"). Pursuant to the Recognition Plan, 1,000 shares of stock
were granted to non-employee directors Casey, Giusti, Isaacs, Matson, Novick and
Verdolino, 500 shares of stock were granted to non-employee directors Dugan,
Hasenjaeger, Heavey, Howie, Kenney, Liscombe and Murphy and 5,341 shares of
stock were granted to nominee Mozynski.
Set forth in the following table is information relating to options granted
under the Stock Option Plan tth Named Executive Officer during 2000.
OPTION GRANTS IN LAST FISCAL YEAR
=============================================================================================================================
Individual Grants
- -----------------------------------------------------------------------------------------------------------------------------
Percent of Total
Options Granted Grant Date Present
to Employees in Exercise or Expiration Value (1)
Name Options Granted FY 2000 Base Price Date
- -----------------------------------------------------------------------------------------------------------------------------
Eugene G. Stone 16,097 38.0% $7.50 10/26/09 $65,676
=============================================================================================================================
- -----------------------------------
(1) The grant date present value was derived using the Black-Scholes option
pricing model with the following assumptions: volatility of 26%; risk
free rate of return of 6.5%; no dividend yield; and a 10-year option
life.
Set forth below is certain information concerning options outstanding to
the Named Executive Officer at June 30, 2000. The Named Executive Officer did
not exercise any options during 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
=========================================================================================================================
Number of Unexercised Value of Unexercised In-
Options at The-Money Options at
Shares Acquired Value Year-End Year-End (1)
Name Upon Exercise Realized
Exercisable/Unexercisable Exercisable/Unexercisable
(#) ($)
- -------------------------------------------------------------------------------------------------------------------------
Eugene G. Stone 0 $0 0/16,097 $0/ $0
=========================== ================= ================= ========================== ==========================
- ------------------------------------
(1) Equals the difference between the aggregate exercise price of such
options and the aggregate fair market value of the shares of Common
Stock that would be received upon exercise, assuming such exercise
occurred on June 30, 2000, at which date the last trade price of the
Common Stock as quoted on the Over-the-Counter Bulletin Board was
$5.9375.
Transactions with Certain Related Persons
The Bank offers to directors, officers, and employees real estate mortgage
loans secured by their principal residence. All loans to the Bank's directors,
officers and employees are made on the same terms, including irate and
collateral as those prevailing at the time for comparable transactions, and do
not involve more than normal risk of collectibility or present other unfavorable
features.
9
- --------------------------------------------------------------------------------
PROPOSAL II--RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors of the Company has approved the engagement of Wolf &
Company, P.C. to be the Company's auditors for the 2001 fiscal year, subject to
the ratification of the engagement by the Company's stockholders. At the
Meeting, stockholders will consider and vote on the ratification of the
engagement of Wolf & Company, P.C., for the Company's fiscal year ending June
30, 2001. A representative of Wolf & Company, P.C. is expected to attend the
Meeting to respond to appropriate questions and to make a statement if he so
desires.
In order to ratify the selection of Wolf & Company, P.C. as the auditors
for the 2001 fiscal year, the proposal must receive at least a majority of the
votes cast, either in person or by proxy, in favor of such ratification. The
Board of Directors recommends a vote "FOR" the ratification of Wolf & Company,
P.C. as auditors for the 2001 fiscal year.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the proxy materials for next
year's Annual Meeting of Stockholders, any stockholder proposal to take action
at such meeting must be received at the Company's executive office, 81 Main
Street, Medway, Massachusetts 02053, no later than May 28, 2001. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Exchange Act.
The Bylaws of the Company provide an advance notice procedure for certain
business, or nominations to the Board of Directors to be brought before an
annual meeting. In order for a stockholder to properly bring business before an
annual meeting, or to propose a nominee to the Board, the stockholder must give
written notice to the Secretary of the Company not less than ninety (90) days
before the date fixed for such meeting; provided, however, that in the event
that less than one hundred (100) days notice or prior public disclosure of the
date of the meeting is given or made, notice by the stockholder to be timely
must be received not later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made. The notice must include the stockholder's name,
record address, and number of shares owned by the stockholder, describe briefly
the proposed business, the reasons for bringing the business before the annual
meeting, and any material interest of the stockholder in the proposed business.
In the case of nominations to the Board, certain information regarding the
nominee must be provided. Nothing in this paragraph shall be deemed to require
the Company to include in its proxy statement and proxy relating to an annual
meeting any stockholder proposal which does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal is
received.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than the matters described above in the Proxy Statement.
However, if any matters should properly come before the Annual Mit is intended
that holders of the proxies will act as directed by a majority of the Board of
Directors, except for matters related to the conduct of the Annual Meeting, as
to which they shall act in accordance with their best judgment.
10
- --------------------------------------------------------------------------------
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 mto the
beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED JUNE 30, 2000, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN OR TELEPHONIC REQUEST TO WARREN W. CHASE, JR., SENIOR
VICE PRESIDENT, 81 MAIN STREET, MEDWAY, MASSACHUSETTS 02053 OR CALL (508)
533-4343.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Eugene G. Stone
Eugene G. Stone
President and Chief Executive Officer
Medway, Massachusetts
September 27, 2000
11
REVOCABLE PROXY
SERVICE BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
October 24, 2000
The undersigned hereby appoints the official proxy committee consisting of
the Board of Directors with full powers of substitution to act as attorneys and
proxies for the undersigned to vote all shares of Common Stock of the Company
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
("Annual Meeting") to be held at the Courtyard by Marriott Hotel, 10 Fortune
Boulevard, Milford, Massachusetts, on October 24, 2000, at 3:00 p.m. local time.
The official proxy committee is authorized to cast all votes to which the
undersigned is entitled as follows:
VOTE
FOR WITHHELD
--- --------
(except as
marked to the
contrary below)
1. The election as Directors of all nominees |_| |_|
listed below:
Kelly A. Verdolino
Kenneth C.A. Isaacs
Paul V. Kenney
Eugene R. Liscombe
Robert A. Matson
Pamela J. Mozynski
INSTRUCTION: To withhold your vote for one or more nominees,
write the name of the nominee(s) on the line(s) below.
- ------------------------------
- ------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. The ratification of Wolf & Company, P.C. as
the Company's independent auditor for the |_| |_| |_|
fiscal year ended June 30, 2001.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH ANNUAL MEETING, THIS PROXY WILL BE VOTED AS
DIRECTED BY A MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD
OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Annual Meeting of the stockholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. This proxy mals be revoked by sending written
notice to the Secretary of the Company at the address set forth on the Notice of
Annual Meeting of Stockholders, or by the filing of a later proxy prior to a
vote being taken on a particular proposal at tAnnua Meeting.
The undersigned acknowledges receipt from the Company prior to the execution of
this proxy of notice of the Annual Meeting, a proxy statement dated September
27, 2000, and audited financial statements.
Dated: _________________________ --- Check Box if You Plan
--- to Attend Annual Meeting
- ------------------------------- -----------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ------------------------------- -----------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title.
- --------------------------------------------------------------------------------
Please complete and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.
- --------------------------------------------------------------------------------