Service Bancorp, Inc.
81 Main Street
Medway, Massachusetts 02053
(508) 533-4343
September 21, 2001
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 Tuesday,
October 23, 2001, at 3:00 p.m., Eastern standard time.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. During the 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
three directors and the ratification of Wolf & Company, P.C. as the Company's
independent auditors for the fiscal year ending June 30, 2002. 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 will
assure 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/ Pamela J. Montpelier
-------------------------------------
Pamela J. Montpelier
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 23, 2001
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 23, 2001 at 3:00 p.m., eastern
standard time, for the following purposes:
1. To elect three Directors to the Board of Directors;
2. To ratify the appointment of Wolf & Company, P.C. as the Company's
independent auditors for the fiscal year ending June 30, 2002; and
to consider 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
7, 2001 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 POSTAGE-PAID 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/ Pamela J. Montpelier
------------------------------
Pamela J. Montpelier
President and Chief Executive Officer
September 21, 2001
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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.
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PROXY STATEMENT
Service Bancorp, Inc.
81 Main Street
Medway, Massachusetts 02053
(508) 533-4343
ANNUAL MEETING OF STOCKHOLDERS
October 23, 2001
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 Tuesday, October 23,
2001, at 3:00 p.m., Eastern standard 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 21,
2001.
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REVOCATION OF PROXIES
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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 will be 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 three directors and the ratification of Wolf &
Company, P.C. as the Company's independent auditors for the fiscal year
ending June 30, 2002. 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 previously 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.
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VOTE REQUIRED
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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 7, 2001 (the
"Record Date") are entitled to one vote for each share then held. As of the
Record Date, the Company had 1,644,124 shares of Common Stock issued and
outstanding. The presence in person or 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 the
votes cast is required for approval of the proposal to ratify Wolf & Company,
P.C. as the Company's independent auditors for the fiscal year ending June 30,
2002. Abstentions and broker non-votes will not affect the vote on Proposal 2.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Persons and groups who beneficially own in excess of five percent(5%)
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 7, 2001, 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.
Name and Address of Beneficial Amount of Shares Owned and Percent of Shares of
Owners(1) Nature of Beneficial Common Stock
Ownership(2) Outstanding
Service Bancorp, MHC 907,694 55.2%
81 Main Street
Medway, MA 02053
Service Bancorp, MHC 1,022,715 62.2%
and all Directors, nominees
and Executive Officers as a
Group (15 persons)
-------------------------
(1) The business address of all named persons is 81 Main Street, Medway,
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.
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PROPOSAL 1-ELECTION OF DIRECTORS
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Effective at the Annual Meeting, the Company's Board of Directors
will be composed of 13 members. The Company's by-laws 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. Three Directors will be
elected at the Annual Meeting to serve for three-year periods and until their
respective successors shall have been
-2-
elected and shall qualify. The Board of Directors has nominated to serve as
Directors for three-year terms William L. Casey, John Hasenjaeger and Lawrence
E. Novick.
The table below sets forth certain information, as of September 7,
2001, 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.
Current Shares Percent
Name Position(s) Held Director Term Beneficially Of
With the Company Age Since (1) Expires Owned Class
NOMINEES
William L. Casey Chairman of the Board 53 1995 2001 2,000(2) *
John Hasenjaeger Director 58 1995 2001 3,200(3) *
Lawrence E. Novick Director 61 1992 2001 11,500(2) *
OTHER BOARD MEMBERS
Pamela J. Montpelier President, Chief Executive 38 2000 2002 7,674(4) *
Officer and Director
Richard Giusti Director 57 1991 2002 6,500(2) *
Thomas R. Howie Director 58 1988 2002 1,900(3) *
James W. Murphy Director and Secretary 66 1979 2002 6,700(3) *
Eugene G. Stone Director 66 1988 2002 35,753(5) 2.2%
Kenneth C.A. Isaacs Director 48 1997 2003 13,000(2) *
Paul V. Kenney Director 38 1992 2003 1,200(3) *
Eugene R. Liscombe Director 55 1991 2003 1,900(3) *
Robert A. Matson Director 42 1997 2003 2,075(2) *
Kelly A. Verdolino Director 41 1995 2003 11,500(2) *
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Paul T. CareySenior Vice President 41 N/A N/A 1,000(6) *
Warren W. Chase, Jr. Senior Vice President 54 N/A N/A 9,119(7) *
and Treasurer
-------------------------
* Less than 1%
(1) Reflects initial appointment to the Board of Trustees of Strata Bank or its
predecessors.
(2) Includes 800 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. Also includes 500
shares that may be acquired pursuant to options which are presently or will
become exercisable within 60 days at an exercise price of $7.50 per share.
(3) Includes 400 shares granted under the Recognition Plan, which are subject
to future vesting but as to which voting may currently be directed. Also
includes 200 shares that may be acquired pursuant to options which are
presently or will become exercisable within 60 days at an exercise price of
$7.50 per share.
(4) Includes 3,194 shares granted under the Recognition Plan, which are subject
to future vesting but as to which voting may currently be directed. Also
includes 1,918 shares that may be acquired pursuant to options which are
presently or will become exercisable within 60 days at an exercise price of
$7.50 per share.
-3-
(5) Includes 9,658 shares granted under the Recognition Plan, which are subject
to future vesting but as to which voting may currently be directed. Also
includes 16,097 shares that may be acquired pursuant to options which are
presently or will become exercisable within 60 days at an exercise price of
$7.50 per share.
(6) Includes 1,000 shares granted under the Recognition Plan, which are subject
to future vesting but as to which voting may currently be directed.
(7) Includes 2,800 shares granted under the Recognition Plan, which are subject
to future vesting but as to which voting may currently be directed. Also
includes 1,500 shares that may be acquired pursuant to options which are
presently or will become exercisable within 60 days at an exercise price of
$7.50 per share.
The business experience for the past five years for each of the Company's
directors and executive officers is as follows:
Directors of the Company
Nominees
William L. Casey has served as a director of Strata Bank (the "Bank," and
formerly Summit Bank) since 1995 and, since 1997, he 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 has served on several town and
community boards in Millis, Massachusetts.
John Hasenjaeger has served as a director of the Bank since 1995. He is
owner of a real estate firm and a retired professor at Boston College's School
of Management. Dr. Hasenjaeger has served on the board of state and national
consumers council and consumer affairs organizations. For 19 years, Dr.
Hasenjaeger was chairman of the capital budget committee in the town of Walpole,
Massachusetts.
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.
Other Directors
Pamela J. Montpelier has served as a director and President of the Bank
since June 2000. She is President and Chief Executive Officer of the Company. In
October 2000 she was also named Chief Executive Officer and Chair of the Bank.
Ms. Montpelier joined the Bank in 1992 and was previously Senior Vice President
of Retail Banking. Ms. Montpelier has over 20 years of banking experience, in
both commercial and thrift institutions. She serves on the advisory boards of
local civic, arts, and health care 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 and Finance of the Metropolitan
Machine Company. Mr. Giusti is involved in various civic activities as well.
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 President of Howie Oil Company, Inc., a heating oil
distributor in Millis, Massachusetts. He is involved in various charitable and
civic organizations.
-4-
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.
Eugene G. Stone has served as a director of the Bank since 1988. Until his
retirement in 2000, he was the President and Chief Executive Officer of the Bank
and served as Chairman of the Bank since 1997. Mr. Stone was President and Chief
Executive Officer of the Company since its organization in 1998 through 2000.
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 & Maciolek of Medway, Massachusetts. Mr. Kenney
serves as President of the Medway Business Council and Treasurer of the Western
Norfolk Bar Association.
Eugene R. Liscombe has served as a director of the Bank since 1991 and
served on its Board of Investment from 1991 to 1996. He was Chairman of the
Board of trustees of the Bank from 1994 to 1996. Mr. Liscombe is a Certified
Public Accountant and partner in the accounting firm of Murphy, Liscombe &
Edwards, PC, located in Framingham and Franklin, Massachusetts. He is actively
involved in several civic and charitable organizations.
Robert A. Matson has served as a director of the Bank since 1997. Mr.
Matson is the owner of a financial services firm in Millis, Massachusetts and is
a Chartered Financial Consultant. He is involved in leadership positions within
several industry and charitable organizations.
Kelly A. Verdolino has served as 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. She is the Manager of Customer Service for Old Colony Food,
Inc., a specialty foods broker. Ms. Verdolino was previously employed as a
Certified Public Accountant for PriceWaterhouseCoopers and has served on several
town committees in Medway, Massachusetts.
Executive Officers of the Company Who are Not Directors
Paul T. Carey has served as the Bank's Senior Vice President and Senior
Loan Officer since February 2001. He joined the Bank in July 2000 as Vice
President and Senior Loan Officer. Mr. Carey has 20 years of banking and lending
experience, and was Vice President for the Bank of Canton before joining the
Bank. He is a member of the Franklin Rotary Club.
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 Company since
its organization in 1998. Prior to joining the Bank, Mr. Chase, a certified
public accountant, worked for 17 years for Sterling Bank 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, 2001, the Board of Directors held six meetings. During the fiscal
year ended June 30, 2001, no director attended fewer than seventy-five
-5-
percent (75%) 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, Liscombe 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 during the
fiscal year ended June 30, 2001.
The Nominating Committee consists of Directors Montpelier, Casey, Giusti,
Isaacs, Novick, Matson and Verdolino. The Nominating Committee has the authority
to review nominations to the Board of Directors made by a shareholder and to
recommend to the full Board of Directors nominees for election to the Board. The
Nominating Committee met once during the fiscal year ended June 30, 2001.
The Executive Committee consists of Directors Casey, Giusti, Isaacs,
Novick, Matson, 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, 2001.
The Stock Benefit Plan Committee consists of Directors Casey, Giusti,
Isaacs, Novick, Matson and Verdolino. The Stock Benefit Plan Committee
determines stock option and stock grants to the Company's and Bank's employees.
The Stock Benefit Plan Committee met once during fiscal year ended June 30,
2001.
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 10% or
more 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.
Other than Paul T. Carey who failed to file a timely Form 3, no officer,
director or 10% Beneficial Owner of the Company failed to file ownership reports
on a timely basis for the fiscal year ended June 30, 2001.
Compensation of Directors
Non-employee Directors of the Company and non-employee Trustees of the
Mutual Holding Company are paid an annual retainer of $2,000 for their service
on both Boards. Members of committees of the Board are paid a fee of $100 per
committee meeting. Directors of the Bank receive a monthly fee of $1,000 for all
meetings attended and the clerk is paid an additional $500 per meeting.
-6-
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,
2001, 2000 and 1999 to the individuals who served as Chief Executive Officer of
the Company during any part of the last fiscal year. No other executive officers
of the Company received total annual compensation in excess of $100,000 during
any of the periods presented.
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Long-Term Compensation
Annual Compensation(1) --------------------------------- -----------------
Awards Payout
------------------------- ------------ ---------- --------- --------------- ----------- -------- --------- -----------------
Fiscal
Name and Principal Years Restricted Options/
Position Ended Bonus Other Annual Stock SARs LTIP All Other
June 30, Salary ($) ($) Compensation(1) Award(s) (#) Payouts Compensation(1)
------------------------- ------------ ---------- --------- --------------- ----------- -------- --------- -----------------
Pamela J. Montpelier 2001 $140,478 -- -- -- -- -- --
President and Chief 2000 91,173 -- -- $29,955(2) 9,590 -- --
Executive Officer 1999 76,210 -- -- -- -- -- --
------------------------- ------------ ---------- --------- --------------- ----------- -------- --------- -----------------
Eugene G. Stone 2001 $110,000 -- -- -- -- -- $15,000(4)
Former President and 2000 178,386 -- -- $90,548(2) 16,097 -- --
Chief Executive 1999 146,933 $30,000 -- -- -- -- --
Officer(3
------------------------- ------------ ---------- --------- --------------- ----------- -------- --------- -----------------
--------------------------
(1) The Bank also provided Mr. Stone 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 the 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.
(3) Mr. Stone retired as President and Chief Executive Officer to the Company
and the Bank in December, 2000.
(4) Mr. Stone was paid a consulting fee of $15,000 for consulting services
provided after his retirement as Chief Executive Officer, from January 1,
2001 through June 30, 2001.
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 and is 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
-7-
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 benefits
will not commence until the director reaches his normal retirement date. In the
event of a change of control of the Bank or the 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.
Employee Incentive Plan. In June 2001, the Bank adopted the Employee
Incentive Plan for fiscal year 2002. Pursuant to the plan's terms, the President
identifies employees to participate in the Incentive Plan at the beginning of
the fiscal year from all employees who must meet certain eligibility
requirements. The Bank President then recommends (1) the formula for calculating
the total available bonus pool which shall be based on the Bank's fiscal
performance and (2) each employee's participation level, to the Board for their
consideration and approval. The Bank President and Board have retained their
rights to modify or discontinue the plan as may be in the best interest of the
Bank.
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 (the "401(k)
Plan"). All employees who have attained age 21 and have completed one year of
service during which they worked at 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 $10,500 (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., $170,000 for plan years beginning in
2001). In 1999 and prior years, the Bank matched 50% of the participant's salary
reduction contributions 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") and the Company's 1999 Recognition and Retention Plan.
The term of the options granted under the Stock Option Plan shall be no more
than ten years from the date of grant, and the shares subject to any award 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. Stock option awards
may include an equal number of reload options ("Reload Options"), limited stock
appreciation rights ("Limited Rights") and dividend equivalent rights ("Dividend
Equivalent Rights"). A
-8-
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 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 interest-bearing 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 additional shares equal in
amount to the shares he or she has traded in. Reload Options may also be granted
to replace option shares 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 value of 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.
No stock options were granted under the Stock Option Plan to either Named
Executive Officer during 2001.
Set forth below is certain information concerning options outstanding to
the Named Executive Officers at June 30, 2001. Neither Named Executive Officer
exercised any options during 2001.
================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
================================================================================
SHARES
ACQUIRED NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
UPON VALUE OPTIONS AT YEAR-END MONEY OPTIONS AT YEAR-END(1)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE ($)
----------- ---------- ---------- ------------------------------ --------------------------------
Pamela J.
Montpelier 0 $0 1,918/7,672 $6,713/$26,852
----------- ---------- ---------- ------------------------------ --------------------------------
Eugene G.
Stone 0 $0 16,097/0 $56,340/$0
=========== ========== ========== ============================== ================================
----------------------------
(l) 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, 2001, at which date the last trade price of the Common Stock as quoted
on the Over-the-Counter Bulletin Board was $11.00.
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 interest rates 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.
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PROPOSAL 2-RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
The Board of Directors of the Company has approved the engagement of Wolf &
Company, P.C. to be the Company's independent auditors for the 2002 fiscal year,
subject to the ratification of the
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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, 2002. 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 or she so desires.
Additional Audit Information
Audit Fees. The aggregate fees billed for professional services rendered
for the audit of the Company's annual financial statements for the fiscal year
ended June 30, 2001 (which include review of the Company&'s Forms 10-QSB for the
fiscal year 2001) totaled $71,700.
All Other Fees. The aggregate fees billed for services rendered by the
principal accountant, other, than, the services provided for the audit of the
Company's annual financial statements for the fiscal year ended June 30, 2001
was $16,400.
After consideration of this information, the Audit Committee of the
Company's Board of Directors determined that the provision of the services by
the accountants and the Company's payment of the fees described above is
compatible with maintaining the accountant's independence.
In order to ratify the selection of Wolf & Company, P.C. as the independent
auditors for the 2002 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 the independent auditors for the 2002 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 at 81 Main
Street, Medway, Massachusetts 02053, no later than May 24, 2002. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Exchange Act.
The by-laws 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 stockholders 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.
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--------------------------------------------------------------------------------
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 Meeting, it 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.
--------------------------------------------------------------------------------
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 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, 2001, 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/ Pamela J. Montpelier
----------------------------
Pamela J. Montpelier
President and Chief Executive Officer
Medway, Massachusetts
September 21, 2001
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REVOCABLE PROXY
SERVICE BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 23, 2001
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 23, 2001, at 3:00 p.m. eastern
standard time. The official proxy committee is authorized to cast all votes to
which the undersigned is entitled as follows:
1. The election as Directors of all nominees listed below:
/ / FOR (except as marked to the contrary below) / / VOTE WITHHELD
William L. Casey John Hasenjaeger Lawrence E. Novick
(INSTRUCTIONS: To withhold your vote for one or more nominees, write the name
of the nominee(s) on the line(s) below.
--------------------------------------------------------------------------------
2. The ratification of Wolf & Company, P.C. as the Company's independent
auditors for the fiscal year ending June 30, 2002.
/ / FOR / / AGAINST / / ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
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 may also 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 the Annual Meeting.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
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
21, 2001, and audited financial statements.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THIS
PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS 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.
/ / Check Box if You Plan to
Attend the Annual Meeting
Dated:
-----------------------------------------
-----------------------------------------------
PRINT NAME OF STOCKHOLDER
-----------------------------------------------
SIGNATURE OF STOCKHOLDER
-----------------------------------------------
PRINT NAME OF STOCKHOLDER
-----------------------------------------------
SIGNATURE OF STOCKHOLDER
PLEASE COMPLETE AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. Note: Please sign exactly as your name appears
on this card. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian, please give
your full title.