SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SLADE'S FERRY CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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April 12, 2004
Dear Stockholder,
You are cordially invited to attend the Annual Meeting of the
Stockholders of Slade's Ferry Bancorp to be held on Monday, May 10, 2004 at
10:00 a.m. at The Cultural Center, 205 South Main Street, Fall River,
Massachusetts, 02720.
The attached Notice of Annual Meeting and proxy statement describe
the formal business that we will transact at the annual meeting. In
addition to the formal items of business, management will report on the
operations and activities of Slade's Ferry Bancorp, and you will have an
opportunity to ask questions.
The Board of Directors of Slade's Ferry Bancorp has determined that
an affirmative vote on each matter to be considered at the annual meeting
is in the best interests of Slade's Ferry Bancorp and its shareholders and
unanimously recommends a vote "FOR" each of these matters.
Please complete, sign and return the enclosed proxy card promptly,
whether or not you plan to attend the annual meeting. Your vote is
important regardless of the number of shares you own. Voting by proxy will
not prevent you from voting in person at the annual meeting but will assure
that your vote is counted if you cannot attend.
On behalf of the Board of Directors and the employees of Slade's
Ferry Bancorp, we thank you for your continued support and look forward to
seeing you at the annual meeting.
Sincerely,
/s/ Kenneth R. Rezendes, Sr.
Kenneth R. Rezendes, Sr.
Chairman of the Board
SLADE'S FERRY BANCORP, 100 Slade's Ferry Avenue, Somerset, Massachusetts
02726 TEL (508)675-2121 *** FAX (508)675-1751 *** www.sladesferry.com
SLADE'S FERRY BANCORP
100 Slade's Ferry Avenue
Somerset, Massachusetts 02726
(508)675-2121
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Date: Monday, May 10, 2004
Time: 10:00 a.m., Eastern Time
Place: The Cultural Center
205 South Main Street
Fall River, Massachusetts 02720
At our 2004 annual meeting, we will ask you to:
1. Approve amendment of the Articles of Organization and Bylaws of
Slade's Ferry Bancorp to permit the Board of Directors to amend
the Bylaws without shareholder approval under certain
circumstances.
2. Elect six Class Three Directors, each to hold office until the
2007 Annual Meeting of the Stockholders or special meeting of
stockholders in lieu thereof, and until his or her successor is
elected and qualified, and elect one Class One Director to hold
office until the 2005 Annual Meeting of the Stockholders or
special meeting of stockholders in lieu thereof, and until his
or her successor is elected and qualified.
3. Approve the Slade's Ferry Bancorp 2004 Equity Incentive Plan.
4. Elect a Clerk/Secretary of the Corporation to hold office until
the next Annual Meeting of stockholders or special meeting of
stockholders in lieu thereof, and until his or her successor is
elected and qualified.
5. Any other business as may properly be brought before the
meeting or any adjournment thereof.
You may vote at the annual meeting if you were a shareholder of
Slade's Ferry Bancorp at the close of business on March 19, 2004, the
record date. Stockholders who are unable to be present personally may
attend the meeting by proxy. Such stockholders are requested to date, sign,
and return the enclosed proxy, which may be revoked at any time before it
is voted.
By Order of the Board of Directors,
/s/ Peter G. Collias
Peter G. Collias, Clerk/Secretary
Somerset, Massachusetts
April 12, 2004
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You are cordially invited to attend the annual meeting. It is important
that your shares be represented regardless of the number of shares you own.
The Board of Directors urges you to sign, date and mark the enclosed proxy
card promptly and return it in the enclosed envelope. Returning the proxy
card will not prevent you from voting in person if you attend the annual
meeting.
===========================================================================
SLADE'S FERRY BANCORP
100 Slade's Ferry Avenue
Somerset, Massachusetts 02726
(508)675-2121
PROXY STATEMENT
FOR THE
2004 ANNUAL MEETING OF STOCKHOLDERS
May 10, 2004
GENERAL INFORMATION
GENERAL
Slade's Ferry Bancorp is a Massachusetts corporation that is
registered as a bank holding company and owns all of the capital stock of
Slade's Ferry Bank. As used in this proxy statement, "the Corporation,"
"we," "us" and "our" refer to Slade's Ferry Bancorp and/or its
subsidiaries, depending on the context, and "the Bank" refers to Slade's
Ferry Bank. The term "annual meeting," as used in this proxy statement,
includes any adjournment or postponement of such meeting.
We have sent you this proxy statement and enclosed proxy card because
the Board of Directors is soliciting your proxy to vote at the annual
meeting. This proxy statement summarizes the information you will need to
know to cast an informed vote at the annual meeting. You do not need to
attend the annual meeting to vote your shares. You may simply complete,
sign and return the enclosed proxy card and your votes will be cast for you
at the annual meeting. This process is described below in the section
entitled "Voting Rights."
We began mailing this proxy statement, the Notice of Annual Meeting
and the enclosed proxy card on or about April 12, 2004 to all shareholders
entitled to vote. If you owned common stock of Slade's Ferry Bancorp at the
close of business on March 19, 2004, the record date, you are entitled to
vote at the annual meeting. On the record date, there were 4,024,216 shares
of common stock outstanding.
QUORUM
A quorum of shareholders is necessary to hold a valid meeting. If the
holders of at least a majority of the total number of the outstanding
shares of common stock entitled to vote are represented in person or by
proxy at the annual meeting, a quorum will exist. We will include proxies
marked as abstentions and broker non-votes to determine the number of
shares present at the annual meeting.
VOTING RIGHTS
You are entitled to one vote at the annual meeting for each share of
the common stock of Slade's Ferry Bancorp that you owned as of the close of
business on March 19, 2004, the record date. The number of shares you own
(and may vote) is listed at the top of the back of the proxy card.
You may vote your shares at the annual meeting in person or by proxy.
To vote in person, you must attend the annual meeting and obtain and submit
a ballot, which we will provide to you at the annual meeting. To vote by
proxy, you must complete, sign and return the enclosed proxy card. If you
properly complete your proxy card and send it to us in time to vote, your
"proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. If you sign the proxy card but do not
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make specific choices, your proxy will vote your shares "FOR" each of the
proposals identified in the Notice of Annual Meeting.
If any other matter is presented, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority
of the Board of Directors determines. As of the date of this proxy
statement, we know of no other matters that may be presented at the annual
meeting, other than those listed in the Notice of Annual Meeting.
VOTE REQUIRED
Proposal 1: Amendment of Approval of Proposal 1 requires the affirmative
the Articles of Organization vote of two-thirds of the outstanding shares
and Bylaws. entitled to vote. Abstentions will be counted
solely for the purpose of determining whether a
quorum is present.
Proposal 2: Election of The nominees for director who receive the most
Class Three Directors and votes will be elected. So, if you do not vote
Class One Director for a nominee, or you indicate "withhold
authority" for any nominee on your proxy card,
your vote will not count "for" or "against"
the nominee.
Proposal 3: Approval of Approval of Proposal 3 requires the affirmative
the 2004 Equity Incentive vote of a majority of the votes cast at the
Plan annual meeting. Abstentions will be counted
solely for the purpose of determining whether a
quorum is present.
Proposal 4: Election of Approval of Proposal 4 requires the affirmative
Clerk/Secretary vote of a majority of the votes cast at the
annual meeting. Abstentions will be counted
solely for the purpose of determining whether a
quorum is present.
EFFECT OF BROKER NON-VOTES
If your broker holds shares that you own in "street name," the broker
may vote your shares on the proposals listed above even if the broker does
not receive instructions from you. If your broker does not vote on a
proposal, this will constitute a "broker non-vote." Here is the effect of a
"broker non-vote:
* Proposal 1: Amendment of the Articles of Organization and
Bylaws. A broker non-vote will have the same effect as voting
against the proposal.
* Proposal 2: Election of Class Three Directors and Class One
Director. A broker non-vote would have no effect on the outcome
of this proposal because a plurality of votes cast is required
to elect a director.
* Proposal 3: Approval of the 2004 Equity Incentive Plan. A
broker non-vote will be counted solely for the purpose of
determining whether a quorum is present.
* Proposal 4: Election of Clerk/Secretary. A broker non-vote will
be counted solely for the purpose of determining whether a
quorum is present.
REVOKING YOUR PROXY
You may revoke your grant of proxy at any time before it is voted by:
* filing a written revocation of the proxy with the
Clerk/Secretary;
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* submitting a signed proxy card bearing a later date; or
* attending and voting in person at the annual meeting, but you
also must file a written revocation with the Clerk/Secretary of
the annual meeting prior to the voting.
If your shares are not registered in your own name, you will need
appropriate documentation from your shareholder of record to vote
personally at the annual meeting. Examples of such documentation include a
broker's statement, letter or other document that will confirm your
ownership of shares of Slade's Ferry Bancorp.
SOLICITATION OF PROXIES
The expenses of this solicitation, including the costs of preparing
and mailing this Proxy Statement and accompanying material, will be borne
by Slade's Ferry Bancorp. Regular employees of Slade's Ferry Bancorp or
Slade's Ferry Bank may solicit proxies in person, by mail, or by telephone,
but no employee of the bank will receive any compensation for solicitation
activities in addition to his or her regular compensation. In addition, the
Corporation has engaged Georgeson Shareholder as its proxy solicitor to
solicit proxies on the Corporation's behalf for a fee of $7,000 plus
reasonable out-of-pocket expenses. Expenses may also include the charges
and expenses of brokerage houses, nominees, custodians, and fiduciaries for
forwarding proxies and proxy materials to beneficial owners of shares.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Our directors, officers and employees will be granted stock options
and certain types of stock awards including restricted stock awards under
the Slade's Ferry Bancorp 2004 Equity Incentive Plan presented for
shareholder approval in Proposal 3. As a result, our directors, officers
and employees have a personal interest in the outcome of the vote on those
proposals.
OBTAINING AN ANNUAL REPORT ON FORM 10-K
If you would like an additional copy of our Annual Report on Form 10-
K and audited financials for the fiscal year ended December 31, 2003, filed
with the Securities and Exchange Commission ("SEC"), we will send you one
(without exhibits) free of charge. Please write to Peter G. Collias,
Clerk/Secretary, Slade's Ferry Bancorp, 100 Slade's Ferry Avenue, Somerset,
Massachusetts, 02726.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information about the shares of common
stock of the Corporation beneficially owned by each director and nominee
for director of the Corporation, by each named executive officer of the
Corporation identified in the Summary Compensation Table included elsewhere
in this proxy statement and by all executive officers and directors as a
group as of March 19, 2004. We know of no person who beneficially owned
more than 5% of the outstanding shares of our common stock as of as of
March 19, 2004 based upon filings with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended. For
purposes of the table below, in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, a person is deemed to be the
beneficial owner, for purposes of any shares of common stock: (1) over
which he or she has or shares, directly or indirectly, voting or investment
power; or (2) of which he or she has the right to acquire beneficial
ownership at any time within 60 days after March 19, 2004. As used in this
proxy statement, "voting power" is the power to vote or direct the voting
of shares, and "investment power" includes the power to dispose or direct
the disposition of shares.
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Amount and Nature of
Name of Beneficial Owner Beneficial Ownership Percent of Class
------------------------ -------------------- ----------------
Thomas B. Almy, Director 71,450(1) 1.77
Peter G. Collias, Director 24,334(2) .60
Anthony F. Cordeiro, Director 25,509(3) .63
Paul C. Downey, Director 2,000 .05
Melvyn A. Holland, Director 10,969(4) .27
Mary Lynn D. Lenz, Director, 5,131(5) .13
President and Chief Executive
Officer of the Bank and
Corporation
William Q. MacLean, Jr., Director 30,820(6) .76
Francis A. Macomber, Director 118,420(7) 2.94
Deborah A. McLaughlin 1,211(8) .00
Chief Financial Officer and
Chief Operations Officer of
the Bank and the Corporation
Majed Mouded, MD, Director 69,753(9) 1.73
Shaun O'Hearn, Sr., Director 20,175(10) .50
Lawrence J. Oliveira, DDS,
Director 39,650(11) .98
Peter Paskowski, Director 31,152(12) .77
Kenneth R. Rezendes, Sr., 161,116(13) 4.00
Director, Chairman of the Board
of the Corporation
William J. Sullivan, Director 50,534(14) 1.25
Charles Veloza, Director 136,010(15) 3.37
David F. Westgate, Director, 12,685(16) .31
Vice Chairman of the Corporation
Manuel J. Tavares, Senior Vice 6,045(17) .15
President and Senior Lending
Officer of the Bank
All Executive Officers and
Directors as a Group (18 persons) 816,964 19.73
___________________
Includes 55,020 shares held jointly with Mr. Almy's wife and 8,000
options.
Includes 8,471 shares held jointly with Mr. Collias' wife and 8,000
options.
Includes 1,860 shares held by spouse.
Includes 10,100 options.
Includes 4,000 options.
Includes 18,353 shares held in revocable trust and 8,000 options.
Includes 4,412 shares held by a pension trust of LeComte's Dairy,
98,393 shares held in revocable trust, and 5,492 shares held as
custodian for other family members, and 1,550 held by spouse as
custodian for other family members, and 8,000 options.
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Includes 1,125 options.
Includes 6,000 options, 58,696 shares held jointly with Dr. Mouded's
wife, and 5,655 shares held by wife jointly with child.
Includes 364 shares held jointly with Mr. O'Hearn's wife, 9,327
shares beneficially owned as trustee for business profit sharing plan
and 10,100 options.
Includes 29,320 shares beneficially owned as trustee for business
profit sharing plan and 10,100 options.
Includes 16,537 shares held jointly with Mr. Paskowski's wife and
8,000 options.
Includes 81,076 shares held in IRA and 8,000 options.
Includes 19,856 shares held jointly with Mr. Sullivan's wife, 615
shares held jointly with children, and 10,100 options.
Includes 10,100 options.
Includes 8,000 options.
Includes 1,430 shares held jointly with spouse and children, 84 as
custodian for family members and 1,335 options.
DISCUSSION OF PROPOSALS RECOMMENDED BY BOARD
___________________
PROPOSAL ONE
AMENDMENT OF ARTICLES OF ORGANIZATION
AND BYLAWS TO PERMIT BOARD OF DIRECTORS
TO AMEND BYLAWS WITHOUT SHAREHOLDER
APPROVAL UNDER CERTAIN CIRCUMSTANCES
___________________
The Bylaws of the Corporation currently provide that any amendment to
the Bylaws requires an affirmative vote of the holders of a majority of the
outstanding shares of the Corporation. The Board of Directors believes
that it is in the best interests of the Corporation for the Articles of
Organization and the Bylaws to authorize the Board of Directors to amend,
alter, repeal or add new Corporation Bylaws.
If the stockholders approve this proposal, the Corporation's Bylaws
may be amended, altered or repealed and new Bylaws may be adopted by a
majority vote of the Board of Directors without any additional involvement
by stockholders.
Section 17 of Chapter 156B of the General Laws of Massachusetts
permits, to the extent otherwise permitted by law, the company's Articles
of Organization or the company's Bylaws, the board of directors to make,
amend or repeal the company's Bylaws, provided that the company's Articles
of Organization provide the directors with such powers. The Corporation's
Articles of Organization do not currently provide the directors with such
power. Currently, the power to adopt, amend or repeal the Corporation's
Bylaws requires the affirmative vote of two-thirds of the outstanding stock
entitled to vote.
The Board of Directors has proposed the amendments set forth below
because the Board believes that such amendments, if adopted, will provide
the Board of Directors significantly more flexibility in making necessary
or desired changes in a timely and efficient manner. Although the Board of
Directors will have the power to make changes to the Bylaws without
stockholder involvement, the stockholders, too, will have the ability to
make changes. In other words, the right to alter, amend or repeal and add
new Bylaws will not be solely within the power of the Board of Directors.
Although the stockholders will have the ability to make changes to the
Corporation's Bylaws, the ability of the Board of Directors to do
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so without the approval of stockholders would increase the power of the Board
and raises the possibility that not all shareholders will agree with the
changes made by the Board. Furthermore, some changes made by the Board may
be deemed undesirable or disadvantageous by stockholders. The Board of
Directors believes that the added flexibility and efficiency out weigh this
risk, because the Board must currently seek stockholder approval for
amendments, and delays and costs associated with the process of holding a
special meeting of stockholders may deny the Corporation the flexibility
the Board of Directors believes is important to facilitate the effective
and timely use of the Corporation's resources in responding to changed
circumstances or requirements with which the Corporation may be presented.
For example, in the past, the Corporation has required the vote of the
stockholders to amend the Bylaws to: authorize the Board of Directors to
establish committees, to authorize the Board of Directors to fix the
compensation of officers of the Corporation and to change the date of the
Corporation's Annual Meeting of Stockholders.
Recently, the FDIC has requested that the Board of Directors of the
Corporation have the ability to meet and take action to address needs of
the Corporation that arise unexpectedly by meeting via teleconference, if
necessary. As the Corporation's Articles of Organization and Bylaws are
currently written, the Board may not do so without calling a special
meeting of stockholders to amend the Bylaws. Approval of Proposal 1 would
grant the Board the authority to provide for meetings via teleconference,
as well as to amend the Bylaws, if necessary, to reflect changes in
applicable law or in the Corporation's business practices, or to update the
Bylaws, such as by adding a provision to explicitly provide for stockholder
nomination of director nominees.
Pursuant to Section 70 of Chapter 156B of the General Laws of
Massachusetts, the vote of two-thirds of each class of stock outstanding
and entitled to vote may authorize amendment of the Articles of
Organization. The proposed amendment, if adopted, would not limit the
current rights of stockholders to alter, amend, repeal or add Bylaws, but
would grant additional power to the Board.
If Proposal 1 is approved, the Board of Directors intends to amend
the Bylaws to permit Directors to attend meetings via teleconference, if
necessary. At the 2004 Annual Meeting, stockholders of the Corporation are
being asked to approve (1) the addition of sub-article E to Article VI of
the Corporation's Articles of Organization, to read in its entirety as
follows:
ARTICLE VI
Amendments of Bylaws
--------------------
E. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the Corporation is expressly
authorized to make, alter, amend, rescind or repeal from time to time
any of the Bylaws of the Corporation in accordance with the terms
thereof; provided, however, that any By-Law made by the Board may be
altered, amended, rescinded or repealed in accordance with the terms
thereof by the holders of shares of Capital Stock entitled to vote
thereon at any annual meeting or special meeting called for that
purpose. Notwithstanding the foregoing, any provision of the Bylaws
that contains a supermajority voting requirement shall only be
altered, amended, rescinded or repealed by a vote of the Board of
Directors or the holders of shares of Capital Stock entitled to vote
thereon that is not less than the supermajority specified in such
provision.
and (2) amendment of Article VIII of the Bylaws to read in its
entirety as follows:
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ARTICLE VIII
Amendment of Bylaws
-------------------
These Bylaws, except as provided by applicable law or the
Articles of Organization, or as otherwise set forth in these Bylaws,
may be amended or repealed at any regular meeting of the entire Board
by the vote of a majority of the Board; provided, however, that (a) a
notice specifying the change or amendment shall have been given at a
previous regular meeting and entered in the minutes of the Board; (b)
a written statement describing the change or amendment shall be made
in the notice mailed to the directors of the meeting at which the
change or amendment shall be acted upon; and (c) any By-law made by
the Board may be altered, amended, rescinded, or repealed by the
holders of shares of capital stock entitled to vote thereon at any
annual meeting or at any special meeting called for that purpose in
accordance with the percentage requirements set forth in the
Certificate of Incorporation and/or these Bylaws. Notwithstanding the
foregoing, any provision of these Bylaws that contains a
supermajority voting requirement shall only be altered, amended,
rescinded, or repealed by a vote of the Board or holders of capital
stock entitled to vote thereon that is not less than the
supermajority specified in such provision.
===========================================================================
The Board of Directors unanimously recommends a vote "FOR" amendment of the
Articles of Organization and Bylaws.
===========================================================================
___________________
PROPOSAL TWO
ELECTION OF CLASS THREE DIRECTORS AND
CLASS ONE DIRECTOR
___________________
The Bylaws of the Corporation provide that the Board of Directors
must consist of at least seven but not more than twenty-five members. All
of the Directors must own a certain minimum value of the Corporation's
stock. The Corporation's Directors are divided into three approximately
equal classes which serve staggered three-year terms such that only one
class (approximately one-third of the Directors) is elected each year. At
the 2004 Annual Meeting, a Class One Director is also up for election to
keep the staggered classes at approximately the same size.
At the 2004 Annual Meeting, stockholders of the Corporation are being
asked to elect six Class Three Directors of the Corporation to serve until
the 2007 Annual Meeting of Stockholders or until their successors are
elected or qualified and one Class One Director to serve until the 2005
Annual Meeting of Stockholders or until his or her successor is elected or
qualified.
The names of the nominees for Class Three Directors and the Class One
Director and the term for which each will hold office are set forth below.
All of the nominees are currently Directors of the Corporation and each has
consented to serve if elected. If any nominee shall become unavailable for
any reason, the shares represented by the enclosed Proxy will be voted in
favor of such other person as the Board of Directors of the Corporation may
at the time recommend. We know of no reason why any nominee may be unable
to serve as a director. The Board will nominate alternates or reduce the
size of the Board of Directors to eliminate the vacancy. The Board has no
reason to believe that its nominees would prove unable to serve if elected.
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Directors and Executive Officers
Nominees
Position(s) Held Director of
Term With Corporation Corporation and
Nominees Age (1) Expires Class and Bank Bank Since
-------- ------- ------- ----- ---------------- ---------------
Anthony F. Cordeiro 42 2005 One Director 2003
Paul C. Downey 40 2007 Three Director 2003
Mary Lynn D. Lenz 49 2007 Three Director, President and 2002
Chief Executive Officer
of the Bank and of the
Corporation
William Q. MacLean, Jr. 69 2007 Three Director 1997
Francis A. Macomber 74 2007 Three Director 1980
Majed Mouded, MD 62 2007 Three Director 1993
David F. Westgate 63 2007 Three Vice Chairman of the Bank 1997
and the Corporation
___________________
At December 31, 2003.
===========================================================================
The Board of Directors unanimously recommends a vote "FOR" all of the
nominees for election as directors.
===========================================================================
Continuing Directors
Position(s) Held Director of
Term With Corporation Corporation and
Nominees Age (1) Expires Class and Bank Bank Since
-------- ------- ------- ----- ---------------- ---------------
Lawrence J. Oliveira, DDS 59 2005 One Director 1997
Peter Paskowski 80 2005 One Director 1971
Kenneth R. Rezendes, Sr. 70 2005 One Chairman of the Board 1978
of the Bank and of
the Corporation
Charles Veloza 79 2005 One Director 1979
Thomas B. Almy 69 2006 Two Director 1964
Peter G. Collias 72 2006 Two Director 1973
Melvyn A. Holland 66 2006 Two Director 1997
Shaun O'Hearn, Sr. 58 2006 Two Director 1997
William J. Sullivan 64 2006 Two Director 1985
___________________
At December 31, 2003.
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Biographical Information
The principal occupation and business experience of each nominee for
election as director and each continuing director are set forth below.
Unless otherwise indicated, each of the following persons has held the
position described for the last five years.
Nominees
Anthony F. Cordeiro: President and Managing Partner of Anthony F.
Cordeiro Insurance Agency, LLC, 171 Pleasant Street, Fall River,
Massachusetts since 1988, and Vice President of The Roasted Bean Coffee
House, 4 Hartwell Street, Fall River, Massachusetts since 1996.
Paul C. Downey: President of Sakonnet Properties, Inc., a real estate
development firm in New Bedford, Massachusetts.
Mary Lynn D. Lenz: President and Chief Executive Officer of the Bank
since September 9, 2002. President and Chief Executive Officer of the
Corporation since November 12, 2002. Executive Vice President, Director of
Retail Banking at Citizens Bank of Massachusetts from 1998 to 2002. Vice
President of National Small Business Regional Sales at Key Bank of Buffalo,
New York from 1996 to 1998. Employed by Key Bank of Buffalo from 1989 to
1998.
William Q. MacLean, Jr.: Account Executive of Sylvia & Company
Insurance Agency, 500 Faunce Corner Road, Dartmouth, Massachusetts.
President/Founder of MacLean Consulting, Inc., a general business
consulting company in Boston, Massachusetts.
Francis A. Macomber: President, Treasurer and a Director of LeComte's
Dairy of Somerset, Massachusetts.
Majed Mouded, MD: Physician and endocrinologist, on active staff at
St. Anne's Hospital in Fall River, Massachusetts.
David F. Westgate: President of Quequechan Management Corp., a
management consulting firm in Fall River, Massachusetts; Vice Chairman of
the Bank and the Corporation since October 14, 2003.
Continuing Directors
Thomas B. Almy: Architect with I. T. Almy Associates of Somerset,
Massachusetts, retired.
Peter G. Collias: Principal Attorney of the Law Offices of Peter G.
Collias in Fall River, Massachusetts
Melvyn A. Holland, CPA: Partner and Treasurer of Rosenfield Raymon
Restivo PC, Certified Public Accountants of New Bedford, Massachusetts
until his retirement on January 1, 2004.
Shaun O'Hearn, Sr.: President of Bolger & O'Hearn, Inc., a color and
chemicals company in Fall River, Massachusetts.
Lawrence J. Oliveira, DDS: Orthodontist from New Bedford and
Mattapoisett, Massachusetts.
Peter Paskowski: President of the Bank from January 1, 1988 until his
retirement on June 30, 1988 and Executive Vice President of the Bank from
1984 to 1987.
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Kenneth R. Rezendes, Sr.: Chairman of the Board of the Corporation
since October 14, 2003. Vice Chairman of the Corporation since November 12,
2002. Chairman of the Board of K. R. Rezendes, Inc., a heavy construction
firm, since 1967. President of K. R. Rezendes, Inc. from 1965 to 1997.
President of K. R. Management Corp. President and Chief Executive Officer
of the Corporation from March 12, 1996 to November 12, 2002.
William J. Sullivan: President and Director of Sullivan Funeral
Homes, Inc. of Fall River and Somerset, Massachusetts.
Charles Veloza: Past President and Director of Charlie's Oil Co., a
heating and fuel oil distribution business of Fall River, Massachusetts.
Executive Officers Who Are Not Directors
Deborah A. McLaughlin: Chief Financial Officer and Chief Operations
Officer of the Bank and the Corporation since June 2003.
Manuel J. Tavares: Senior Vice President and Senior Lending Officer
of the Bank since 1989. Employed by Bank since 1987.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND MANAGEMENT
Meetings of the Board of Directors
A regular meeting of the Board of Directors of the Bank is held each
month. Corporation directors meetings are held quarterly and special
directors meetings are held when necessary. During 2003, the Board of
Directors of the Bank, which is comprised of the same members as the Board
of Directors of the Corporation, held twelve regular monthly meetings, one
special meeting and there were four regular quarterly meetings of the Board
of Directors of the Corporation. In addition to membership on the Board,
members may also serve on one or more standing committees or subcommittees.
All of the Directors attended at least 80% of the total meetings of
the Board of Directors and their assigned committees except for Mr.
Sullivan who attended 74%.
Committees of the Board of Directors
The standing committees of the Bank include the Executive Committee,
Personnel Committee, Audit Committee and Corporate Governance/Nominating
Committee.
Executive Committee The Executive Committee met twenty-five
times, and generally acts on most matters
between meetings of the regular board. Its
members are Kenneth R. Rezendes, Chairman,
Mary Lynn D. Lenz, William Q. MacLean Jr.,
Peter Paskowski, William J. Sullivan, and
David F. Westgate, and one rotating member.
In the event of extended absences occurring
on the Executive Committee, other directors
serve as temporary replacements.
Personnel Committee The Personnel Committee reviews the
compensation and benefits of the executives
and officers of the Corporation and the Bank
and sets salaries and bonuses subject to the
approval of the Board of Directors. The
Personnel Committee held 6 meetings during
the past year. Its
11
members are Paul C. Downey, Chairman, William
Q. MacLean Jr., Kenneth R. Rezendes, Sr.,
William J. Sullivan and David F. Westgate.
All of the members of the Personnel Committee
qualify as "independent" under the definition
in Rule 4200(a)(15) of the National
Association of Securities Dealers. Ms. Lenz,
who is not "independent" because she is an
officer of the Corporation, also served on
the Personnel Committee during 2003, but was
excluded from any discussions or decisions
regarding Ms. Lenz's compensation. She is not
a member of the 2004 Personnel Committee.
Audit Committee The Audit Committee oversees and monitors the
Corporation's financial reporting process and
internal control system, reviews the Audit
Plan, reviews and evaluates the audit
performed by the outside auditors, reviews
the audit function practices and findings of
the internal audit department and reports any
substantive issues found during the audit to
the Board. The Board of Directors has adopted
a written charter for the Audit Committee,
which is attached as Appendix A to this Proxy
Statement. The Audit Committee is directly
responsible for the appointment, compensation
and oversight of the work of our independent
auditors. The Audit Committee also reviews
and approves all transactions with affiliated
parties. The Audit Committee held four
meetings during the past year. Its members
are Melvyn A. Holland, Chairman, Paul C.
Downey, William Q. MacLean, Jr., Shaun
O'Hearn, Sr.; and Lawrence J. Oliveira, DDS.
All of the members of the Audit Committee
qualify as "independent" under the definition
in Rule 4200(a)(15) of the National
Association of Securities Dealers. The Board
of Directors of the Corporation has
determined that Director Holland qualifies as
a "financial expert" as the term is defined
by SEC regulations.
Corporate Governance/
Nominating Committee The Corporate Governance/Nominating Committee
held eight meetings during the past year,
provides advice and guidance to the Board of
Directors regarding the number,
qualifications and performance of the
Company's Directors and recommends
individuals to the Board for election as
Directors. The Committee also monitors the
adequacy of the Board's Structure,
communications, and procedures and ensures
that each Director is informed and diligent
regarding the fulfillment of his/her duties.
It is solely the responsibility of the
Committee to recruit individuals to serve as
Directors whose qualifications meet the
organization's needs, and to recommend these
individuals to the Board for election as
Directors. The Committee's members are
Lawrence J. Oliveira, Chairman, Kenneth R.
Rezendes Sr., and David F. Westgate. All of
the members of the Committee qualify as
"independent" under the definition in Rule
4200(a)(15) of the National Association of
Securities Dealers.
The Board of Directors of the Corporation has
adopted a written charter for the Corporate
Governance/Nominating Committee, which is
attached as Appendix B to this Proxy
Statement.
12
It is the policy of the Corporate/Governance
Committee that stockholders may recommend
nominees for election to the Board, in a
manner consistent with the Corporation's
Bylaws.
It is the policy of the Committee to select
individuals as director nominees who shall
have the highest personal and professional
integrity, who shall have demonstrated
exceptional ability and judgment and who
shall be most effective, in conjunction with
the other nominees to the Board, in
collectively serving the long-term interests
of the shareholders. Stockholder nominees are
analyzed by the Committee in the same manner
as nominees that are identified by the
Committee. The Corporation does not pay a fee
to any third party to identify or evaluate
nominees.
Anthony F. Cordeiro, Paul C. Downey, Mary
Lynn D. Lenz, William Q. MacLean, Jr.,
Francis A. Macomber, Majed Mouded, MD and
David F. Westgate were each nominated by the
non-management, independent directors that
comprise the Corporate Governance/Nominating
Committee. As of November 11, 2003, the
Nominating and Corporate Governance Committee
had not received any shareholder
recommendations for nominees in connection
with the 2004 Annual Meeting.
Shareholder Communications
Shareholders may contact Slade's Ferry Bancorp's Board of Directors
by contacting Peter G. Collias, Clerk/Secretary, Slade's Ferry Bancorp, 100
Slade's Ferry Avenue, Somerset, Massachusetts, 02726. All comments will be
forwarded directly to the Board of Directors.
It is the policy of the Corporation that all directors and nominees
should attend the Annual Meeting. At the 2003 Annual Meeting, all members
of the Board of Directors serving at the time of the meeting were in
attendance.
AUDIT COMMITTEE CHARTER AND REPORT
Audit Committee Charter
The Audit Committee was established in accordance with section
3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, and
operates pursuant to a Charter approved by the Board of Directors, a copy
of which is attached as Appendix A to this proxy statement. The Charter
sets out the responsibilities, authority, and duties of the Audit
Committee. The Charter specifies, among other things, the structure,
membership requirements, and the relationship of the Audit Committee to the
independent auditors and internal auditor.
Audit Committee Report
The following Audit Committee Report is provided in accordance with
the rules and regulations of the Securities and Exchange Commission (the
"SEC"). Pursuant to such rules and regulations, this report shall not be
deemed "soliciting materials," filed with the SEC, subject to Regulation
14A or 14C of the SEC or subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended.
13
During the 2003 fiscal year, the Audit Committee of the Corporation,
which is comprised of the same Directors and serves the same function as
the Audit Committee of the Bank, met four times to discuss matters
consistent with its duties. The Audit Committee's membership was comprised
of Directors Holland, Downey, MacLean, O'Hearn and Oliveira, with Melvyn A.
Holland serving as Chairperson.
Each member of Slade's Ferry Bancorp's Audit Committee is independent
as defined under the Nasdaq listing standards. We believe that Director
Holland qualifies as an Audit Committee Financial Expert, as that term is
defined by SEC regulations, and our Board of Directors has designated
Director Holland as such. Slade's Ferry Bancorp's Audit Committee operates
under a written charter approved by the Board, a copy of which is attached
as Appendix A to this proxy statement.
The Audit Committee assists the Board by overseeing the audit
coverage and monitoring the accounting, financial reporting, data
processing, regulatory and internal control environments. The primary
duties and responsibilities of the Audit Committee are to: (1) serve as an
independent and objective party to monitor Slade's Ferry Bancorp's
financial reporting process and internal control systems; (2) select and
monitor the independent auditor; (3) pre-approve all audit and permissible
non-audit services performed by external auditors; (4) review and appraise
the audit efforts of Slade's Ferry Bancorp's independent auditors and
internal audit department; (5) review Slade's Ferry Bancorp's quarterly
financial performance, as well as its compliance with laws and regulations;
(6) oversee management's establishment and enforcement of financial
policies; (7) provide an open avenue of communication among the independent
auditors, financial and senior management, the internal audit department,
and the Board; and (8) establish procedures for the receipt, retention and
treatment of complaints or concerns, including confidential employee
submissions, about accounting, internal accounting controls or auditing
matters.
The Audit Committee has reviewed and discussed the audited financial
statements of Slade's Ferry Bancorp for the fiscal year ended December 31,
2003 with management and Shatswell, MacLeod & Company, P.C., Slade's Ferry
Bancorp's independent auditors. The Audit Committee has discussed the
matters required by Statement on Auditing Standards No. 61 (Communication
with Audit Committee) with Shatswell, MacLeod & Company, P.C.
The Audit Committee has also received the written disclosures and the
letter from Shatswell, MacLeod & Company, P.C. required by Independence
Standards Board Standard No. 1 (entitled "Independence Discussions with
Audit Committees"), has discussed the independence of Shatswell, MacLeod &
Company, P.C. and considered whether the provision of non-audit services by
Shatswell, MacLeod & Company, P.C. is compatible with maintaining the
auditor's independence.
Based on the review and discussions noted above, the Audit Committee
recommended to the Board that Slade's Ferry Bancorp's audited financial
statements be included in Slade's Ferry Bancorp's Annual Report on Form 10-
K for the fiscal year ended December 31, 2003.
14
The Audit Committee has appointed, and the Board has also
recommended, the selection of Shatswell, MacLeod & Company, P.C. to be the
Company's independent auditors for year end 2004.
Audit Committee:
Melvyn A. Holland, Chairman
Paul C. Downey
William Q. MacLean, Jr.
Shaun O'Hearn, Sr.
Lawrence J. Oliveira DDS
Cecelia Machado, Internal Bank Auditor
Appointment of Independent Accountants
The Audit Committee of the Board of Directors of the Corporation has
appointed Shatswell, MacLeod and Company, P.C. to continue as their
independent certified public accountants for 2004. Shatswell, MacLeod and
Company, P.C. is expected to have a representative available at the Annual
Meeting, who will have the opportunity to make a statement if desired and
will be available to respond to appropriate questions.
Audit Fees and Pre-approval Policies
During the fiscal year ended December 31, 2003, Slade's Ferry Bancorp
retained and paid Shatswell, MacLeod & Company, P.C. to provide audit and
other services. The following table displays the aggregate fees for
professional audit services for the audit of the financial statements for
the years ended December 31, 2003 and 2002 and fees billed for other
services during those periods by our independent auditors.
2003 2002
---- ----
Audit fees (1) 79,975 68,500
Audit related-fees (2) 12,000 8,750
Tax fees (3) 11,600 9,600
All other fees (4) - 17,117
------- -------
Total 103,575 103,967
======= =======
___________________
Audit fees consisted of audit work performed in the preparation of
financial statements as well as work generally only the independent
auditors can reasonably be expected to provide, such as statutory
audits.
Audit related fees consisted of audits of the Corporation's Pension
Plan and 401(k) Plan.
Tax fees consisted of assistance with matters related to tax
compliance and consulting.
All other fees in 2002 consisted of the following: $7,700 for
services related to the Corporation's quarterly report on Form 10-Q
for the period ended June 30, 2002; $6,542 for a third party review
of the Corporation's information technology; and $2,875 for services
related to resolution of impairment issues.
It is the current policy of the Corporation that all audit and non-
audit services provided by the Corporation's independent auditors be pre-
approved by the Corporation's Audit Committee.
Of the services set forth in the table above, all were pre-approved
by the Audit Committee, with the exception of the following non-audit
services provided in 2002 which were not pre-approved and
15
would not be eligible for waiver of pre-approval pursuant to Rule 2.01-
(c)(7)(i)(c) of SEC Regulation S-X: $6,542 for a third party review of the
Corporation's information technology and $2,875 for services related to
resolution of impairment issues.
DIRECTOR COMPENSATION
Meeting Fees
Directors are paid $400 for each Bank Board of Directors meeting
attended and $400 for each Corporation meeting attended. In addition,
Executive Committee members are paid $350 for each Executive Committee
meeting attended, and the Executive Committee Clerk is paid an annual fee
of $2,000. The Chairman of the Board of the Bank and the Corporation is
paid $3,500 for each position, and the Vice Chairman of the Corporation is
paid $1,000 for holding such position. The Corporate Secretary of the Bank
is paid an annual fee of $2,000, with an additional fee of $750 for serving
as Corporate Clerk/Secretary for the Corporation. Members of all other
committees receive $300 per meeting attended, a $250 annual fee for serving
on such committees and an annual retainer of $1,500 for serving on the
Board. The chairman of each committee receives $500 annually for chairing
such committees.
Stock Option Grants
Each non-employee director receives an automatic grant each year of
an option for 2,000 shares of the Company's common stock under the
Automatic Grant Program of the Company's 1996 Stock Option Plan (the
"Plan"). Options granted under the Automatic Grant Program are subject to
the terms and conditions of the Plan and are exercisable immediately at a
price per share equal to the market price on the date of grant.
Life Insurance
Through the purchase of $1.6 million of directors paid-up life
insurance policies in 1999, each insurable member of the Board of Directors
is provided a death benefit of $100,000 providing the member has served 10
years or more on the board, and $50,000 to members that have less than 10
years of service. The policy also provides a retirement benefit to members
of the Board for each year following the director's retirement.
In addition, the Company, through its participation in the Employee
Group Term Life Insurance program, provides a death benefit of $50,000 life
insurance to each non-employee director up to age 65, then decreasing each
year thereafter to a base of $10,000 at age 75.
EXECUTIVE OFFICER COMPENSATION
Personnel Committee Report on Executive Compensation
During 2003, the Personnel Committee, which functions as the
Corporation's compensation committee, was composed of Directors Paul C.
Downey, Mary Lynn D. Lenz, William Q. MacLean, Jr., Kenneth R. Rezendes,
Sr., William J. Sullivan, and David F. Westgate with Director Rezendes
serving as the Chairperson of the Committee. Prior to his passing, Donald
T. Corrigan also served on the Committee. None of the members of the
Personnel Committee, except Ms. Lenz, were officers or employees of the
Corporation or its subsidiaries during 2003 or in prior years.
The following Report of Slade's Ferry Bancorp's Personnel Committee
is provided in accordance with the rules and regulations of the SEC.
Pursuant to such rules and regulations, this Report shall not
16
be deemed "soliciting material," filed with the SEC subject to Regulation
14A or 14C of the SEC or subject to the liabilities of Section 18 of the
Exchange Act of 1934, as amended.
The Personnel Committee provides advice and recommendations to the
Board of Directors in the areas of employee salaries and benefit programs.
The committee reviews the compensation and benefits programs for all
executive officers on an annual basis. Compensation of the President and
Chief Executive Officer and other executive officers of the Bank for the
fiscal year ended 2003 was paid by the Bank and determined by the Board of
Directors. Ms. Lenz did not participate in the committee's decisions
regarding her own compensation review and recommendation in 2003 or in
prior years.
The Bank's compensation program for executive officers consists of:
base salary, annual bonuses and long-term incentive awards. These elements
are intended to provide an overall compensation package that is
commensurate with the Bank's financial resources, that is appropriate to
assure that retention of experienced management personnel, and that aligns
their financial interests with those of the Corporation's shareholders.
A structured compensation system is in place at the Bank. Each
position has been scored using a point factor analysis system. Jobs with
similar point totals, indicating similar levels of responsibility and
authority, have been grouped together. Salary ranges have been assigned to
these job groupings. Officers' evaluations are based upon performance to
established standards, the standards having been written into each job
description. This measurement to standards then dictates the level of merit
increase proposed for each officer within guidelines set forth annually.
The Personnel Committee strives to provide a compensation program
that assures both the motivation and retention of the executive officers,
proper alignment with the financial interests of the Corporation's
stockholders, and competitiveness with the external marketplace. To this
end, the Personnel Committee reviewed the compensation practices of a peer
group of companies with similar size and business mix to that of the Bank
in order to develop recommendations for the Bank's executive officers.
In order to ensure competitive compensation levels, the adequacy of
the salary ranges and each officer's current compensation level is tested
annually through the use of competitive market data. The Bank currently
uses a Banking Compensation Report, produced by an independent consulting
company. In 2003, there were 153 participants in the entire survey. The
Bank's current peer group are those institutions with assets of $300
Million to $599.9 Million. The Bank's data is included in this survey,
along with forty-one other institutions.
Each officer position is reviewed annually and compared against
competitive market data. This information is analyzed by the Personnel
Committee whereby each officer's performance and merit increase
recommendations are presented.
The Personnel Committee, excluding Ms. Lenz, reviews the performance
of the President/Chief Executive Officer of the Bank. This review is
qualitative in nature and takes into consideration such factors as overall
performance of the Bank, improvement in shareholder value, preservation and
constant enhancement of the corporate image, including the Bank's
leadership and involvement in the community, efficient use of financial and
human resources, and the overall financial performance of the Bank.
Base Salaries
As noted above, salary levels recommended by the Personnel Committee
are intended to be competitive with salary levels of the companies in the
Bank's peer groups, commensurate with the
17
executive officers' respective duties and responsibilities, and reflect the
financial performance of the Bank. The President's salary is tested against
the market data noted above.
Bonuses
Bonuses are predicated on the achievement of the current year's
budgeted earnings as established independently by the Personnel Committee.
The bonus is applied if the target earnings level is obtained and adjusted
incrementally if the earnings fall below target. The target excludes
extraordinary income and expense items and gains or losses recognized on
the sale of securities.
Stock Options
The Personnel Committee also awards stock options to officers as
provided for by the Stock Option Plan under the discretionary grant program
of the Corporation's stock option plan. In making any determinations as to
persons to whom options are granted and the number of stock options
granted, the Personnel Committee takes into account the duties of the
respective individual, their contribution to the success of the Corporation
during the year, and such other factors as the Personnel Committee deems
relevant.
Chief Executive Officer's Compensation
The Bank's Chief Executive Officer's compensation in 2003 reflected
the overall performance of Ms. Lenz during 2003, and is supported by the
expansion of the Bank's customer base, and the overall quality and growth
of the Corporation's assets. Based on the foregoing criteria, for the
fiscal year ended December 31, 2003, Ms. Lenz's base salary was $250,000
and she was awarded a bonus of $100,000 payable in 2004.
Slade's Ferry Bancorp
Personnel Committee
Kenneth R. Rezendes, Sr., Chairperson
Paul C. Downey
Mary Lynn D. Lenz
William Q. MacLean, Jr.
William J. Sullivan
David F. Westgate
Compensation Committee Interlocks and Insider Participation
During 2003, the Personnel Committee of the Company's Board of
Directors, which functions as the Corporation's compensation committee,
included: Kenneth R. Rezendes, Sr., Chair, Paul C. Downey, Mary Lynn D.
Lenz, William Q. MacLean Jr., William J. Sullivan, and David F. Westgate,
and Donald T. Corrigan until his decease in September 2003. Mr. Corrigan
was Chairman of the Board of the Corporation and the Bank until his decease
in September of 2003. Mr. Rezendes is currently the Chairman of the Board
of the Corporation and the Bank, and is the former Vice Chairman of the
Corporation and the former President and Chief Executive Officer of the
Corporation. Mr. Westgate is Vice Chairman of the Board of the Corporation
and Vice Chairman of the Board of the Bank. Ms. Lenz is currently the
President and Chief Executive Officer of the Company and the Bank.
18
PERFORMANCE GRAPH
The following graph compares the performance of the Company for the periods
indicated with the performance of the NASDAQ Stock Market and the
performance of a group of banks in the $250 Million to $500 Million index
assuming reinvestment of dividends.
Slade's Ferry Bancorp.
Period Ending
---------------------------------------------------------------
Index 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
----- -------- -------- -------- -------- -------- --------
Slade's Ferry Bancorp 100.00 79.90 73.11 124.00 113.31 194.90
NASDAQ - Total US 100.00 185.95 113.19 89.65 61.67 92.90
SNL $250M-$500M Bank Index 100.00 93.03 89.58 127.27 164.11 237.11
___________________
*Source: CRSP, Center for Research in Security Prices, Graduate School of
Business, The University of Chicago 2002. Used with permission.
All rights reserved. crsp.com.
19
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and certain other
compensation paid by the Corporation for services rendered in all
capacities during the fiscal years ended December 31, 2003, 2002, and 2001
to the Corporation's and the Bank's Chief Executive Officer and to the
other most highly compensated executive officers whose annual salary and
bonus for fiscal 2003 was at least $100,000. We refer to these individuals
as "named executive officers" in this proxy statement.
Annual Compensation Long Term Compensation
--------------------------------------- ----------------------------
Other Annual Restricted Securities All Other
Name and Principal Compensation Stock Underlying Compensation
Position Year Salary ($) Bonus ($) ($)(12) Awards ($) Options/Shares ($)
------------------ ---- ---------- --------- ------------ ---------- -------------- ------------
Mary Lynn D. Lenz 2003 237,135 100,000 9,399(3) - 4,000 6,694(4)
President/CEO - Bank 2002(1) 59,231 15,000 27,287(5) - - 6,785(6)
& Corporation
Manual J. Tavares 2003 121,509 36,000 - - 1,335 7,281(7)
Senior Vice President 2002 119,940 6,000 - - - 6,529(8)
Senior Lending Officer 2001 119,940 8,500 - - 1,500 6,175(9)
- Bank
Deborah A. McLaughlin 2003(2) 56,616 15,000 40,100(10) - 1,125 112(11)
Chief Financial Officer
and Chief Operation
Officer - Bank &
Corporation
___________________
Mary Lynn D. Lenz became President and Chief Executive Officer in
2002.
Deborah A. McLaughlin became Chief Financial Officer and Chief
Operations Officer in 2003.
Includes benefit for personal use of bank owned automobile of $1,185
for 2003, and payment of $8,214 of legal fees.
Includes $4,845 accrual in 2003 in connection with the Supplemental
Executive Retirement Plan (SERP) entered into with Ms. Lenz in 2002,
which provides for the payment to Ms. Lenz upon her retirement of
$3,000 per month for 120 months; executive life insurance premiums of
$1,396 for 2003; and long-term disability insurance premiums of $440.
Includes $26,100 for consulting services provided from 8/02 to
9/02; $335 for personal use of bank owned automobile and; $852 tax-
effected value of Slade's Ferry Preferred Capital Corporation
preferred stock
Includes $6,785 for legal services regarding employment issues.
Includes $6,634 accrual in 2003 in connection with the Supplemental
Executive Retirement Plan (SERP) entered into with Mr. Tavares in
1996, which provides for the payment to Mr. Tavares upon his
retirement of $1,500 per month for 120 months; executive life
insurance premiums of $425 for 2003; and long-term disability
insurance premiums of $222.
Includes $6,142 accrual in 2002 in connection with the SERP and
executive life insurance premiums of $387 for 2002.
Includes $5,687 accrual in 2001 in connection with the SERP and
executive life insurance premiums of $488 for 2001.
Includes $39,600 for consulting services provided from 3/03 to 6/03;
$500 of benefit for opting out of the Corporation's health insurance
coverage.
Includes long-term disability insurance premiums of $112.
Does not include perquisites and other personal benefits, the
aggregate of which is less than the lesser of $50,000 or 10% of such
person's combined salary and bonus for the applicable year.
20
STOCK OPTIONS GRANTED IN 2003
The following table illustrates certain information for the Executive
Officers named regarding stock option grants made in 2003 under the
Company's 1996 Stock Option Plan (the "Plan").
Individual Grants
Potential Realizable Value
At Assumed Annual Rate of
Number of % of Total Exercise Stock Price Appreciation for
Securities Options Granted Price Per Option Term
Underlying Options to Employees in Share Expiration ----------------------------
Name Granted 2003 ($/sh)(1) Date 5% 10%
---- ------------------ --------------- --------- ---------- -- ---
Mary Lynn D. Lenz 4,000(1) 20.2% 14.59 4/14/08 $16,124 $35,629
Manual J. Tavares 1,335(2) 6.8% 18.55 9/30/08 $ 6,824 $15,119
Deborah A. McLaughlin 1,125(2) 5.7% 18.55 9/30/08 $ 5,766 $12,741
___________________
Granted in April of 2003.
Granted in October of 2003.
The following table presents certain information for the named
executive officers relating to the exercise of stock options and stock
appreciation rights ("SARs") during 2003 and, in addition, information
relating to the value of unexercised stock options.
Aggregated Option/SAR Exercises in the Last Fiscal Year
And Fiscal Year-end Option/SAR Values
Number of Securities
# Securities Underlying Unexercised Value of Unexericsed In-The-
Underlying Options at 12/31/03 Money Options at 12/31/03 (1)
Options/SARs Value -------------------------------- --------------------------------
Exercised Realized ($) Exercisable # Unexercisable # Exercisable $ Unexercisable $
------------ ------------ ------------- --------------- ------------- ---------------
Mary Lynn D. Lenz - - 4,000 0 $31,640 0
Manuel J. Tavares 4,575 34,867 1,335 0 $ 5,273 0
Deborah A. McLaughlin - - 1,125 0 $ 4,444 0
___________________
The value of unexercised In-The-Money Options is expressed as the
market value of the common stock at December 31, 2003 at the closing
price of $22.50 per share over the exercise price of each option.
21
BENEFIT PLANS
Prior to 1998, the Company maintained a Defined Benefit Pension Plan
which provided retirement benefits to each established officer and
employee. An employee must have been age 21 and have served with the
Company one (1) full year of service to have been eligible. The annual
benefits formula for normal retirement age of 65 provided for 1.5% of total
salary plus 0.5% of compensation in excess of integration level per year of
service.
The following table illustrates the estimated retirement benefit
payable to eligible officers and employees upon retirement at age 65 in
various salary groups with various years of services.
PENSION PLAN TABLE
Defined Benefits Pension Plan
Years of Service
----------------------------------------------------
Remuneration 15 Yrs 20 Yrs 25 Yrs 30 Yrs 35 Yrs
------------ ------ ------ ------ ------ ------
$100,000 $29,325 $39,100 $48,875 $58,650 $ 68,425
$125,000 $36,825 $49,100 $61,375 $73,650 $ 85,925
$150,000 $44,325 $59,100 $73,875 $88,650 $103,425
$175,000 $47,325 $63,100 $78,875 $94,650 $110,425
$200,000 $47,325 $63,100 $78,875 $94,650 $110,425
$225,000 $47,325 $63,100 $78,875 $94,650 $110,425
$250,000 $47,325 $63,100 $78,875 $94,650 $110,425
The benefits shown in the Pension Plan Table are based on a formula
of 1.5% of compensation per year plus .5% of compensation in excess of
$9,000 per year. The maximum years of service considered for benefit
purposes is 35. Annual compensation for benefits is capped at $160,000, per
Internal Revenue Code Section 401(a)(17). Benefits shown are payable as a
life annuity at age 65 and will not be subject to reductions because of
social security benefits. The life annuity is the Normal Form as defined by
the Plan document. Employees who had worked over 1000 hours in the twelve-
month period beginning on their date of hire and had attained age twenty-
one were eligible to participate in the Plan as of the next January 1 or
July 1, the Plan entry dates. The Plan covered all employees who met the
eligibility provisions, except employees covered by a collective bargaining
agreement and non-resident aliens. In addition, benefit accruals and Plan
participation were frozen by amendment effective December 31, 1997. The
years of credited service as of January 1, 1998 for the executive officers
named on the Summary Compensation Table who are eligible for retirement
benefits are as follows: Manuel J. Tavares - 11 years.
As of December 31, 1997, the Company elected to curtail the Employees
Defined Benefit Pension Plan. This decision was based on the costs
associated with the Defined Benefit Plan, and the complexities of the
marketability of the Plan to its employees. The Company in turn has
established a profit sharing type retirement plan effective January 1,
1998, which provides the employee with full investment direction of the
funds allocated to his or her account. The contribution by the Company to
the new Profit Sharing Plan is an amount to be fixed each year by the Board
of Directors. The amount allocated to each employee is based on a formula
that provides five (5) units for each $1,000 of compensation, and one (1)
unit for each full year of service with the Company. The grand total of
units of all eligible employees then becomes the denominator for the
allocation of the contribution to each employee's account. At December 31,
2003, the Defined Benefit Plan was underfunded. Although it is
22
dependent upon market conditions, it is currently estimated that the Plan's
assets will earn sufficient income in the next five to seven years to
become fully funded. Upon reaching a fully funded status, each
participant's lump sum value of the December 31, 1997 accrued benefit will
be distributed from the Defined Benefit Plan. The participant will be given
the option of rolling over their Defined Benefit Plan benefit into the new
Profit Sharing Plan.
401(k) Plan
The Company also provides a 401(k) Plan which is available to
eligible employees who attain age 21 and complete three months of service.
The Company contributes a discretionary amount as determined by the Board
of Directors to the 401(k) Plan.
1996 Stock Option Plan
The Corporation has a Stock Option Plan in effect which was approved
by the stockholders on March 11, 1996 at the 1996 Annual Meeting of
Stockholders. The purpose of the Stock Option Plan is to encourage the
retention of key employees and directors by facilitating their purchase of
a stock interest in the Corporation and to promote the success of the
business. The Stock Option Plan is not subject to ERISA and is not a tax-
qualified plan. The Corporation has reserved an aggregate of 250,000 shares
of common stock for issuance upon the exercise of stock options granted
under the Stock Option Plan. The Stock Option Plan also permits the grant
of stock option appreciation rights.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN CONTROL ARRANGEMENTS
Supplemental Executive Retirement Plans. In 1996, the Bank entered
into a Supplemental Executive Retirement Agreement (SERP) with Mr. Tavares,
which provides a payment to Mr. Tavares of $1,500 per month for 120 months
upon his retirement. The Corporation entered into a SERP with Ms. Lenz in
2003, substantially similar to the agreement with Mr. Tavares which
provides a payment to Ms. Lenz of $3,000 per month for 120 months upon her
retirement and further provides for the provision of life time medical
insurance for Ms. Lenz and her spouse. The SERPs also contain certain non-
competition restrictions applicable to the executives.
Change Of Control Agreement. The Corporation has entered into a
change of control agreement with Ms. Lenz that is triggered upon a "change
of control" of the Corporation or the Bank (as defined in the agreement).
If Ms. Lenz's employment is terminated by the Corporation or the Bank
without "cause" (as defined in the agreement) or Ms. Lenz terminates her
employment for "good reason" (as defined in the agreement) within 13 months
of the occurrence of the change of control, then Ms. Lenz will be entitled
to severance payments equal to 2.99 times her five-year average annual W-2
compensation paid by the Corporation or the Bank plus continued health
insurance and benefit plan accruals for three years. Severance benefits
under these circumstances would also include full vesting in certain other
benefit plans and the transfer of a company automobile to Ms. Lenz.
If Ms. Lenz should terminate employment for any reason twelve months
after a change of control but prior to the thirteenth month following the
change of control, then Ms. Lenz shall be paid one times her annual base
salary plus an amount equal to the last bonus paid to Ms. Lenz.
If the Corporation or the Bank experiences a change in ownership, a
change in effective ownership or control or a change in the ownership of a
substantial portion of their assets as contemplated by section 280G of the
Internal Revenue Code, a portion of any severance payments under the change
of control agreement might constitute an "excess parachute payment" under
current federal tax laws. Federal
23
tax laws impose a 20% excise tax, payable by Ms. Lenz, on excess parachute
payments. Under the change of control agreement, the Corporation would
reimburse Ms. Lenz for the amount of this excise tax and would make an
additional gross-up payment so that, after payment of the excise tax and
all income and excise taxes imposed on the reimbursement and gross-up
payments, Ms. Lenz will retain approximately the same net-after tax amounts
under the change of control agreement that she would have retained if there
were no 20% excise tax. The effect of this provision is that the
Corporation, rather than Ms. Lenz, bears the financial cost of the excise
tax. Neither the Corporation nor the Bank could claim a federal income tax
deduction for an excess parachute payment, excise tax reimbursement payment
or gross-up payment.
Confidentiality and Non-Solicitation Agreement. The Corporation and
Ms. Lenz have also entered into an agreement which provides that Ms. Lenz
shall preserve the confidential information of the Corporation, the Bank
and their affiliates following her termination of employment. This
agreement also imposes certain business and customer solicitation
provisions for a period of two years following the termination of
employment of Ms. Lenz.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's directors and executive officers, and persons
who own more than 10% of the Corporation's common stock, to report to the
Securities and Exchange Commission their initial ownership of the
Corporation's common stock and any subsequent changes in that ownership.
Specific due dates for these reports have been established by the
Securities and Exchange Commission and the Corporation is required to
disclose in this proxy statement any late filings or failures to file.
Based solely on its review of the copies of such reports furnished to
the Corporation and written representations that no other reports were
required during the fiscal year ended December 31, 2003, all Section 16(a)
filing requirements applicable to the Corporation's executive officers and
directors during fiscal 2003 were met, with the exception of Director
O'Hearn, who failed to file a Form 4 to reflect the purchase of 1,226
shares of the Corporation's common stock on January 6, 2003, and Director
Macomber, who filed a Form 4 on March 22, 2004 as trustee of the pension
trust of LeComte's Dairy to report the sale of 1,500 shares of the
Corporation's common stock on January 16, 2004. The shares purchased By
Director O'Hearn were reflected in Director O'Hearn's Form 5 filed for the
year ended December 31, 2003, and an amended Form 4 was filed on February
4, 2004.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the Corporation's and Bank's directors, executive
officers, and members of their families are at present, as in the past,
customers of the Bank and have transactions with the Bank in the ordinary
course of business. During 2003, none of these relationships or
transactions involved an amount of over $60,000 or in excess of 5% of the
Corporation's or other entity's consolidated gross revenues.
In addition, certain of the directors are at present, as in the past,
also directors, officers, or stockholders of corporations, trustees of
trusts, or members of partnerships which are customers of the Bank, and
which have loans from the Bank in the ordinary course of business. Such
loans were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other persons and did not involve more than normal risk of
collectibility or present other unfavorable features. All future loans to
officers and directors and their affiliates will be made on the same terms
and conditions as made to unaffiliated third parties.
24
___________________
PROPOSAL THREE
ADOPTION OF THE SLADE'S FERRY BANCORP
2004 EQUITY INCENTIVE PLAN
___________________
General Plan Information
The Board of Directors of the Corporation has adopted the Slade's
Ferry Bancorp 2004 Equity Incentive Plan, subject to approval by the
holders of a majority of our outstanding shares of common stock. Provided
below is a summary of our reasons for adopting this plan and seeking the
approval of our shareholders. The following summary is qualified in its
entirety by the full text of the plan document. The plan document is
included at the end of this proxy statement as Appendix C and is
incorporated by reference into this proposal.
Why We Are Asking for Shareholder Approval
We are asking for shareholders to approve the Slade's Ferry Bancorp
2004 Equity Incentive Plan so that we will be able to grant stock options
and other equity-based compensation to our directors and officers. Most of
the companies with which we compete for directors and management-level
employees are public companies that offer stock options and restricted
stock awards as part of their director and officer compensation packages.
By approving this plan, our shareholders will enable us to offer a more
competitive compensation package in attracting and retaining highly
qualified directors and officers. In addition, the value of the stock
options and other stock awards that we would grant under this plan relates
directly to the market price of our common stock. Adding stock options and
restricted stock to our compensation packages would link the financial
interest of our directors and officers with the financial interest of our
shareholders.
Applicable regulations do not permit us to implement an equity
compensation plan without shareholder approval. If we do not receive this
approval, it will not be possible for us to grant equity -based awards or
stock options under this plan. In this event, we expect that the Board will
consider substituting other forms of compensation to assure that our
compensation packages for officers and directors are competitive with those
of other publicly traded financial services companies in our market area.
Purpose of the Equity Incentive Plan
The purpose of the option plan is to promote growth and profitability
of the Corporation and its shareholders, to provide certain officers,
directors and employees of the Corporation and its affiliates with an
incentive to achieve corporate objectives, to attract and retain
individuals of outstanding competence and to provide such individuals with
an equity interest in the Corporation.
Description of the Plan
Administration. The plan will be administered by those members of the
Personnel Committee of the Board who are "disinterested directors" under
the federal tax and securities laws. In general, disinterested directors
are directors who (1) are not, and never were, executive officers or
employees of the Corporation or the Bank; and (2) do not receive material
compensation from the Corporation or the Bank except for service as a
director. There must be at least two disinterested directors on the
Personnel
25
Committee and this committee has broad discretionary powers. The Board of
Directors may also administer this plan in lieu of the Personnel Committee.
Stock Subject to the 2004 Equity Incentive Plan. The Corporation has
reserved 300,000 shares of common stock for issuance upon the exercise of
options under the plan with no more than 100,000 of these shares being able
to be issued pursuant to restricted stock awards or deferred stock awards.
Such shares may be authorized and unissued shares or shares previously
issued that the Corporation has reacquired. Any shares subject to grants
under the equity plan which expire or are terminated, forfeited or canceled
without having been exercised or vested in full, shall be available for new
grants. As of March 19, 2004, the aggregate fair market value of the shares
reserved for issuance under the plan was $6,660,000 based on the latest
closing sales price per share of common stock of $22.20 on NASDAQ on March
19, 2004.
Eligibility. The committee may select people who receive stock option
and other equity grants. Any employee of the Corporation, the Bank or any
affiliate approved by the Board of Directors may be selected to receive
grants under the plan. In addition, each non-employee director will be
automatically granted an option with respect to 2,000 shares under this
plan on the day following this Annual Meeting of the Corporation and each
Annual Meeting thereafter.
Terms and Conditions of Options. The committee sets the terms and
conditions of the stock options that it grants. In setting terms and
conditions, it must observe the following restrictions:
* It may not grant options to purchase more than 75,000 shares to
any one individual in any calendar year.
* It may not grant a stock option with a purchase price that is
less than the fair market value of a share of the Corporation's
common stock on the date it grants the stock option.
* It may not grant a stock option with a term that is longer than
ten years.
* It may not grant options with an effective date that is before
the date that we receive shareholder approval for the plan.
The committee may grant incentive stock options that qualify for
special federal income tax treatment or non-qualified stock options that do
not qualify for special federal income tax treatment. Incentive stock
options are subject to certain additional restrictions under the Internal
Revenue Code and the plan.
Upon the exercise of an option, the exercise price of the option must
be paid in full. Payment may be made in cash, common stock of the
Corporation already owned by the option holder, shares to be acquired by
the option holder upon exercise of the option or in such other
consideration as the committee authorizes. Options may be transferred prior
to exercise only to certain family members, certain non-profit
organizations and on the death of the option holder.
Terms and Conditions of Other Awards. The committee may, in its
discretion, grant awards of restricted stock and deferred stock awards to
eligible individuals, up to a maximum of 100,000 shares. The committee will
determine at the time of the grant the number of shares of common stock
subject to an award, the vesting schedule applicable to the award and may,
in its discretion, establish other terms and conditions applicable to the
award. In setting terms and conditions, it must not grant stock awards with
an effective date that is before the date that we receive shareholder
approval for the plan.
26
Shares of our common stock that are subject to a restricted stock
award may held in trust for the benefit of the award recipient until vested
and, when vested, are transferred from the fund to the award recipient.
While the shares are held in the fund, the award recipient receives
dividends and exercises voting rights. The committee may also authorize the
immediate distribution of the restricted shares to the award recipient in
the form of a stock certificate bearing a legend containing the applicable
vesting restrictions.
Mergers and Reorganizations; Adjustments for Stock Dividends. The
number of shares available under the plan, the maximum limits on option
grants to individual officers and directors and to non-employee directors
in the aggregate and the number of shares subject to outstanding options
and awards will be adjusted to reflect any merger, consolidation or
business reorganization in which the Corporation is the surviving entity,
and to reflect any stock split, stock dividend or other event generally
affecting the number of shares. If a merger, consolidation or other
business reorganization occurs and the Corporation is not the surviving
entity, outstanding options may be canceled so long as the option holder
receives payment determined by the Board of Directors to be of a value
equivalent to the value of the canceled options or awards.
Termination or Amendment of the Equity Incentive Plan
This plan will be in effect for a ten-year period that will begin on
the date of shareholder approval and will end on the tenth anniversary of
the date of shareholder approval. The Board of Directors may suspend or
terminate the plan before then. It may also amend this plan at any time and
in any respect. Any amendment that would change the class of eligible
employees, increase the number of stock options or awards that may be
granted to any person or in total or reduce the minimum option price must
first be approved by our shareholders.
Federal Income Tax Consequences
The following discussion is intended to be a summary and is not a
comprehensive description of the federal tax laws, regulations and policies
affecting the Corporation and recipients of stock option grants and other
awards under the plan. Any descriptions of the provisions of any law,
regulation or policy are qualified in their entirety by reference to the
particular law, regulation or policy. Any change in applicable law or
regulation or in the policies of various taxing authorities may have a
significant effect on this summary. The plan is not a qualified plan under
Section 401(a) of the Internal Revenue Code.
Federal Tax Consequences for Option Recipients. Incentive stock
options will not create federal income tax consequences when they are
granted. If they are exercised during employment or within three months
after termination of employment, the exercise will not result in income
that may increase taxable income, but will create an item of adjustment
that may affect liability for alternative minimum tax. When the shares
acquired on exercise of an incentive stock option are sold, the seller must
pay federal income taxes on the amount by which the sales price exceeds the
purchase price. This amount will be taxed at capital gains rates if the
sale occurs at least two years after the option was granted and at least
one year after the option was exercised. Otherwise, it is taxed as ordinary
income.
Incentive stock options that are exercised more than one year after
termination of employment due to death or disability or three months after
termination of employment for other reasons are treated as non-qualified
stock options. Non-qualified stock options will not create federal income
tax consequences when they are granted. When they are exercised, federal
income taxes at ordinary income tax rates must be paid on the amount by
which the fair market value of the shares acquired by exercising the option
exceeds the exercise price. When an option holder sells shares acquired by
exercising non-qualified stock options, he or she must pay federal income
taxes on the amount by which the sales price exceeds the
27
purchase price plus the amount included in ordinary income at option
exercise. This amount will be taxed at capital gains rates, which will vary
depending upon the time that has elapsed since the exercise of the option.
A cash payment under the plan's change of control provisions is taxed as if
it were the exercise of a non-qualified stock option followed immediately
by a resale of the stock acquired by exercising the option.
Federal Tax Consequences of Options for the Corporation. When a non-
qualified stock option is exercised, the Corporation may be allowed a
federal income tax deduction for the same amount that the option holder
includes in his or her ordinary income. When an incentive stock option is
exercised, there is no tax deduction unless the shares acquired are resold
sooner than two years after the option was granted or one year after the
option was exercised. A cash payment under the plan's change of control
provisions is deductible as if it were the exercise of a non-qualified
stock option. The Internal Revenue Code places an annual limit of $1.0
million each on the tax deduction which we may claim in any fiscal year for
the compensation of our Chief Executive Officer and for the compensation of
our four next most highly compensated executive officers whose salary and
bonus for the fiscal year in question equals or exceeds $100,000. There is
an exception to this limit for so-called "qualified performance-based
compensation." We have designed this plan with the intention that the stock
options that we grant will constitute qualified performance-based
compensation. As a result, we do not believe that this limit will impair
our ability to claim federal income tax deductions that are otherwise
available when an option holder exercises a non-qualified stock option. No
executive of the Corporation or the Bank currently receives compensation
that would be rendered nondeductible by this limitation.
Tax Consequences of Restricted Stock and Other Stock Awards. The
stock awards under the plan do not result in federal income tax
consequences to either the Corporation or the award recipient. As a general
rule, once the award is vested and the shares subject to the award are
distributed, the award recipient will generally be required to include in
ordinary income, for the taxable year in which the vesting date occurs, an
amount equal to the fair market value of the shares on the vesting date.
The Corporation will generally be allowed to claim a deduction, for
compensation expense, in a like amount. If dividends are paid on unvested
shares held under the plan, such dividend amounts will also be included in
the ordinary income of the recipient. The Corporation will be allowed to
claim a deduction for compensation expense for this amount as well.
As noted above, Section 162(m) of the Internal Revenue Code limits
the Corporation's deductions for compensation in excess of $1.0 million per
year for our Chief Executive Officer and the four other most highly paid
executives named in its proxy statement. Compensation amounts resulting
from restricted stock awards will be subject to this deduction limitation
if this amount of the restricted stock awards plus other compensation of
the executive that is subject to the limit exceeds $1.0 million. No
executive of the Corporation currently receives compensation subject to
this limitation. We expect that the committee will take these deduction
limits into account in setting the size and the terms and conditions of
restricted stock awards. However, the committee may decide to grant
restricted stock awards all or a portion of which will exceed the deduction
limit.
The preceding statements are intended to summarize the general
principles of current federal income tax law applicable to stock options
and other stock awards that may be granted under the plan. State and local
tax consequences may also be significant.
Stock option and restricted stock awards under the plan are
discretionary (other than the automatic grants to each non-employee
director) and the committee has not yet determined whom awards will be made
to and the terms and conditions of such awards. As a result, no information
is provided concerning the benefits to be delivered under the plan to any
individual or group of individuals other than
28
the non-employee directors as a group who will receive an aggregate award
of 30,000 options per year. The value of such options will be based on the
stock price appreciation following the date of grant.
The following table sets forth the aggregate information of our
equity compensation plans in effect as of December 31, 2003.
Equity Compensation Plan Information
Number of securities
Number of securities remaining available for
to be issued Weighted-average future issuance under
upon exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
Plan category warrants and rights warrants and rights reflected in column (a))
------------- -------------------- ----------------------- -------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders 161,190 $12.90 49,619
Equity compensation plans not
approved by security holders - - -
------- ------ ------
Total 161,190 $12.90 49,619
======= ====== ======
===========================================================================
The Board of Directors of the Corporation unanimously recommends that the
stockholders vote "FOR" approval of the 2004 Equity Incentive Plan.
===========================================================================
___________________
PROPOSAL FOUR
ELECTION OF CLERK/SECRETARY
___________________
The Clerk of the Corporation is to be elected by the stockholders at
an annual meeting or special meeting duly called for that purpose. At the
Meeting, the stockholders of the Corporation are being asked to elect
Attorney Peter G. Collias, the nominee proposed by the Board of Directors,
as Clerk/Secretary of the Corporation to serve until the 2005 Annual
Meeting of Stockholders, or special meeting in lieu thereof, and until his
successor is elected and qualified.
Mr. Collias is the principal in the law office of Peter G. Collias
and has been Clerk/Secretary of the Corporation since its inception and of
Slade's Ferry Bank since 1973.
===========================================================================
The Board of Directors of the Corporation unanimously recommends that the
stockholders vote "FOR" the election of Attorney Peter G. Collias as
Clerk/Secretary of the Corporation.
===========================================================================
29
ADDITIONAL INFORMATION
Information About Shareholder Proposals
If you wish to submit proposals to be included in our proxy statement
for the 2005 Annual Meeting of Stockholders of Slade's Ferry Bancorp, we
must receive them on or before December 19, 2004, pursuant to the proxy
soliciting regulations of the SEC. Nothing in this paragraph shall be
deemed to require Bridge Street Financial to include in its proxy statement
and proxy card for such meeting any shareholder proposal which does not
meet the requirements of the SEC in effect at the time. Any such proposal
will be subject to 17 C.F.R. Section 240.14a-8 of the Rules and Regulations
promulgated by the SEC under the Exchange Act. If a stockholder wishes to
submit a proposal to the 2005 Annual Meeting without including such
proposal in the proxy statement for that meeting, that proposal will be
considered untimely, and the proxies solicited by your Board of Directors
will confer discretionary authority to vote on the proposal as the proxy
holders see fit, if the company is not notified of such proposal by
February 27, 2005.
Corporation Mailings to Same Household
Pursuant to a notice sent by the Company to its eligible
shareholders, the Company sent only one copy of this Proxy Statement,
Annual Report and Report on Form 10-K for the year ended December 31, 2003
to those households in which multiple shareholders shared the same address,
unless the Company received instructions from a shareholder requesting that
they receive separate copies of these materials. If you are a shareholder
who shares the same address as other shareholders of the Company and would
like to receive a separate copy of this Proxy Statement, Annual Report or
Report on Form 10-K for the year ended December 31, 2003, or of future
proxy statements, information statements, and annual reports, please
contact Shareholder Services at (800) 643-7537 (MA and RI only) or (508)
675-2121, or by writing to Slade's Ferry Bancorp, Shareholder Services, 100
Slade's Ferry Avenue, Somerset, MA 02726. If you are a shareholder that
shares an address with other shareholders to which multiple copies of
annual reports and proxy statements are delivered and you would like to
only request a single copy in the future, you may also contact Shareholder
Services that request.
By Order of the Board of Directors,
/s/ Peter G. Collias
Peter G. Collias
Clerk/Secretary
Dated: April 12, 2004
30
Appendix A
----------
SLADE'S FERRY BANCORP /
SLADE'S FERRY TRUST COMPANY
Audit Committee Charter
I. Audit Committee
The Audit Committee of the Board of Directors shall be composed of at a
minimum three Directors who are independent of Management and are free of
any relationship that, in the opinion of the Board of Directors, would
interfere with their exercise of independent judgment as a Committee
member. Each Audit Committee member must be able to read and understand
fundamental financial statements. At least one Committee member must be a
"financial expert", i.e., have past employment experience in finance or
accounting, requisite professional certification in accounting, or other
comparable experience or background. Audit Committee members may enhance
their familiarity with finance and accounting by participating in
educational programs conducted by the Company or outside programs. Audit
Committee members and the Committee Chairman shall be appointed by the
Chairman of the Board on the recommendation of the Nominating and Board
Development Committee. If an Audit Committee Chair is not designated or
present, the members of the Committee may designate a Chair by majority
vote of the Committee membership.
Independence
A director will not be considered "Independent" if, among other things, the
director is an affiliated person of the Company or any of its subsidiaries
or has:
* Been employed by the Company or its affiliates in the past
three years.
* Accepted any compensation, including consulting and advisory
fees, from the Company or its affiliates during the previous
fiscal year (except for board services, retirement plan
benefits, or non-discretionary compensation).
* An immediate family member who is, or has been in the past
three years, employed by the Company or its affiliates as an
executive officer.
* Been a partner, controlling shareholder or an executive officer
of any for profit business to which the Company made or from
which it received, payments (other than those which arise
solely from investments in the Company's securities) that
exceed five percent of the Company's consolidated gross
revenues for that year, or $200,000, whichever is more, in any
of the past three years.
* Been employed as an executive of another entity where any of
the Company's executives serve on that entity's compensation
committee.
A-1
Authority to Engage Advisors
The Audit Committee shall have the authority and funding to engage
independent counsel and other advisers, as it deems necessary to carry out
its duties.
II. Statement of Policy
It is the Committee's responsibility to provide oversight of the Company's
accounting and financial reporting processes, including oversight of the
Company's Independent Auditors and Internal Audit function. In so doing, it
is the responsibility of the Audit Committee to maintain free and open
means of communications between the Board of Directors, the Independent
Auditors, the Internal Auditors, and the financial management of the
Company.
III. Meetings
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee will normally meet
in a separate executive session with the Internal Auditors. At least
annually, the Committee will meet with the Independent Auditors to discuss
any matters that the Committee believes should discussed privately. The
Internal Auditor shall serve as the clerk of the Committee and keep minutes
of the proceedings of each Committee meeting. A majority of the Committee
shall constitute a quorum for the conduct of business. At the discretion of
the Chairman, a member may attend a meeting by telephone conference in
which he can hear each person in attendance and all such persons can hear
the person attending by telephone conference.
IV. Responsibilities
1. Appoint and oversee the Company's Independent Auditors. The
Audit Committee is also solely responsible, and shall have the
necessary funding, for compensation of the Independent
Auditors.
2. Review and pre-approve all audit and non-audit services to be
performed by the Company's Independent Auditors, including but
not limited to requests for any management consulting
engagement to be performed by the Company's Independent
Auditors. The Audit Committee may delegate to one or more Audit
Committee members the responsibility to approve such services,
provided timely reports are made to the full Audit Committee.
In addition, the Audit Committee my establish pre-approval
categories of services, as provided by applicable rules and
regulations.
3. Evaluate the Independent Auditors on an at least an annual
basis. Such evaluation shall include a report from the
independent auditor which includes:
* The auditor's internal quality-control procedures.
* Any material issues raised by the most recent internal
quality-control review or peer review of the firm, or by
any inquiry or investigation by governmental or
professional authorities, within the last five years,
respecting independent audits carried out by the firm,
and any steps taken by the firm to address such issues.
A-2
* A formal written statement delineating all relationships
between the independent auditor and the Company as
contemplated by Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees.
4. Review and update this Charter annually and ascertain that it
is reported in the Company's proxy statement at least once
every three years.
5. Periodically report to the Board of Directors on significant
results of the following activities.
a) Appointment of the Independent Auditors to audit the
financial statements of the Company and subsidiaries and
determination of the compensation for such services.
b) Approval of all audit and non-audit services to be
provided by the Independent Auditors
c) Resolution of any disagreements that may arise between
the Independent Auditors and management.
d) Evaluation of the performance of the Independent
Auditors and, where appropriate, recommendation that the
Board replace the Independent Auditors.
6. Review the Independent Auditor's engagement letter setting
forth the scope and approach of the proposed audit, the
estimated fees for performing the annual audit, FDICIA
controls audit, and quarterly reviews of Form 10-Q. The
Committee will also meet with the Independent Auditors to
review findings, including comments or recommendations.
7. Review the effectiveness of the Internal Audit function of the
Company including the independence and authority of its
reporting obligations, the proposed audit plan for the current
internal audit cycle, and the coordination of such plans with
the Independent Auditors.
8. Review with the Independent Auditors and Internal Auditors the
integrity of the Company's financial reporting processes and
compliance with section 12 USC 1831 p-1 (Federal Deposit
Insurance Act).
9. Inquire as to the Independent Auditors' judgments about the
quality and appropriateness of the Company's accounting
principles as applied in its financial statements.
10. Consider and approve, if appropriate, major changes to the
Company's auditing and accounting principles and practices as
suggested by the Independent Auditors, Management or the
Internal Auditors.
11. Review and approve the required reports to be included in the
Company's annual report to shareholders and proxy statement.
12. Review, at the Committee's discretion, quarterly financial
statements and review with management and the Independent
Auditors any significant matters that arise out of the
Company's quarterly financial statements review, based upon the
auditors' limited review procedures. Discuss any significant
changes to the Company's accounting principles and any items
required to be communicated by the Independent Auditors in
accordance with SAS 61 as amended by SAS 90.
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13. Review and discuss with the Independent Auditors annually all
relationships the Independent Auditors have with the Company
which might adversely affect their objectivity and independence
and review a written statement from the Auditors as to their
independence. The Committee shall take, or recommend that the
full Board take, appropriate action to oversee the independence
of the Independent Auditors.
14. Review the scope and general extent of the independent
auditor's annual audit. The Committee's review should include a
report from the Independent Auditor addressing the following:
* Audit staffing and supervision, and scope of audit;
* Critical accounting policies and practices, alternative
accounting treatments, the reasons for selecting such
policies, and their impact on the fairness of the
Company's financial statements;
* Significant estimates made by management in the
preparation of financial reports;
* The nature and content of communications between auditors
and management;
* Off-balance sheet transactions, joint ventures,
contingent liabilities, or derivative transactions, and
their impact on the fairness of financial statements;
* Auditor proposed adjustments - both those recorded by
management and those not recorded by management;
* Difficulties encountered with management during the
audit;
* Disagreements with management regarding accounting
reporting issues;
* Material legal matters that may impact the financial
statements; and
* The independent auditor's opinion on the overall fairness
of the financial statements.
15. Discuss the results of the audit with the Independent Auditors
prior to releasing the year-end earnings and annual report to
regulatory agencies. Discuss those matters which are required
to be communicated to audit committees in accordance with SAS
61 as amended by SAS 90.
16. It is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements
are complete and accurate and are in accordance with generally
accepted accounting principles. This is the responsibility of
Management and the Independent Auditors.
Other Duties
1. Inquire of the Company's chief executive officer and chief
financial officer as to the existence of any significant
deficiencies or material weaknesses in the design or operation
of internal control over financial reporting which are
reasonably likely to adversely affect the Company's ability to
record, process, summarize and report financial information, and
as to the existence of any fraud, whether or not material, that
involves management or other employees who have a significant
role in the Company's internal control over financial reporting.
2. Appoint and supervise the Internal Audit Director.
A-4
3. Review internal and external reports concerning the Loan
Review, Compliance, and Information Technology functions of the
Company.
4. In consultation with the Board of Directors, review and follow-
up on regulatory examination findings and recommendations.
5. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities. The Committee is
empowered to retain Independent Counsel and other professional
advisors to assist in the conduct of any investigation or as
may be necessary in the fulfillment of its responsibilities.
6. Establish procedures for receipt, retention and treatment of
complaints regarding internal accounting controls, and auditing
matters.
7. Establish procedures for confidential, anonymous employee
submissions of concerns regarding questionable accounting or
auditing matters.
8. Review Internal Audit's adherence to its audit plan and make
adjustments as necessary.
9. Review on an annual basis the Company's insurance policies
including, blanket bond, directors' and officers', property and
casualty.
10. Review and approve all related party transactions. For such
purpose, "related party transaction" shall mean any transaction
required to be disclosed pursuant to SEC Regulation S-K, Item
404.
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APPENDIX B
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SLADE'S FERRY BANCORP
NOMINATING & CORPORATE GOVERNANCE COMMITTEE CHARTER
Purpose
The purpose of the Nominating & Corporate Governance Committee (the
"Committee") shall be to assist the board of directors (the "Board") of
Slade's Ferry Bancorp (the "Company") in identifying qualified individuals
to become Board members and officers of the Company, in determining the
composition of the Board and its committees, in developing and implementing
a process to assess Board effectiveness and in developing and implementing
the Company's corporate governance guidelines.
Membership and Appointment
The Committee shall consist of no fewer than three members, each of whom
shall meet the criteria for independence established by the rules and
regulations of the NASDAQ and who the Board has affirmatively determined
does not have a material relationship which, in the opinion of the Board,
would interfere with the exercise of independent judgment in carrying out
the responsibilities of a director. Members of the Committee shall be
appointed annually by the Board and shall serve at the pleasure of the
Board. Notwithstanding the foregoing, no director shall serve on the
Committee in any capacity in any year during which such director's term as
a director is scheduled to expire.
Meetings and Procedures
The Committee shall have a chairperson who must, and a secretary who may
but need not be, a member of the Committee. The Board shall designate the
chairperson of the Committee and the Committee shall designate the
secretary for the Committee. If the Board does not designate a chairperson,
or if the chairperson shall not be present at a meeting, the Committee
shall select its own chairperson.
The Committee shall establish its own rules of procedure, which shall be
consistent with the Bylaws of the Company and this Charter. The Committee
shall meet at least two times annually in conjunction with regularly
scheduled meetings of the Board at regularly scheduled times and places
determined by the Committee's chairperson, and may meet more frequently, or
take action by unanimous written consent, as circumstances require. A
meeting may be called by the chairperson of the Committee or by majority of
the members of the Committee. Notice of any meeting shall be given by the
person or persons calling the meeting given to each other member of the
Committee at least 48 hours prior to the meeting. Notice may be given in
the same fashion as permitted for notice of Board meetings pursuant to the
Company's Bylaws and applicable law. A meeting shall be deemed properly
called if each member of the Committee shall have received notice given as
aforesaid or, prior to the conclusion of the meeting, shall have signed a
written waiver of notice.
A quorum shall consist of at least a majority of the voting members of the
Committee. The vote of a majority of the voting members present at any
meeting at which a quorum exists, including the chairperson of the
committee who shall be eligible to vote, shall constitute the action of the
Committee.
The Committee may request that any directors, officers or employees of the
Company, or other persons whose advice and counsel are sought by the
Committee, attend any meeting of the Committee to provide such pertinent
information as the Committee requests.
Following each of its meetings, the Committee shall report its actions and
recommendations to the Board. The secretary of the Committee shall keep
written minutes of its meetings, which minutes shall be subject
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to approval by the members of the Committee and, once approved, shall be
maintained with the books and records of the Company.
The Committee shall have the authority to delegate any of its
responsibilities to subcommittees, as the committee may deem appropriate in
its sole discretion.
Nominations by Shareholders
Shareholders may recommend nominees for election to the Board, in a manner
consistent with the Company's Bylaws.
Committee Authority and Responsibilities
The Committee shall have the following authority and responsibilities:
1. The Committee shall develop criteria, to be approved by the full
Board, for the selection of new directors and, when appropriate,
conduct the search for individuals qualified to become members of the
Board.
2. The Committee shall develop criteria for the evaluation of incumbent
Board members.
3. The Committee shall evaluate the performance of current Board members
proposed for reelection, and recommend to the Board whether such
members should stand for reelection.
4. The Committee shall annually assess the performance of the Board as a
whole, discuss such assessment with the full Board and, as
appropriate, recommend changes, including, but not limited to,
changes in Board size and composition and in Board policies and
procedures.
5. The Committee shall develop and recommend to the Board for its
approval an annual self-evaluation process of the Board and its
committees. The Committee shall oversee the annual self-evaluation of
the Board and report its findings to the Board.
6. The Committee shall select, and recommend to the Board for its
approval, nominees for election as directors by the shareholders of
the Company, taking into account the criteria approved by the Board.
7. The Committee shall consider and evaluate any shareholder nominees
for election as director in compliance with the Company's Bylaws and
in accordance with the criteria approved by the Board.
8. The Committee shall review the Board's committee structure and
annually recommend to the Board, for its approval, directors to serve
as members of each committee. The Committee shall recommend to the
Board additional committee members to fill vacancies as needed,
taking into account the criteria approved by the Board. The Committee
shall recommend to the Board individual directors to be designated as
chairpersons of the Board committees. Notwithstanding the foregoing,
the members of the Committee shall be appointed by the full Board,
without recommendation by the Committee. The Board shall also,
without recommendation by the Committee, be responsible for filling
vacancies in, and appointing chairpersons of, the Committee.
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9. Together with the Compensation Committee, the Committee shall develop
criteria for the identification and recruitment of executive officers
of the Company.
10. Together with the Compensation Committee, the Committee shall develop
criteria for the evaluation of the executive officers of the Company.
11. The Committee shall annually recommend to the Board for its approval
the slate of officers for the Company.
12. The Committee shall develop and recommend to the Board for its
approval a set of corporate governance guidelines. The Committee
shall review the guidelines on an annual basis, or more frequently if
appropriate, and recommend changes as necessary.
13. The Committee shall establish procedures for the Committee to
exercise oversight of the evaluation of the Board and management.
14. The Committee may retain or terminate, in its sole discretion, any
search firm to be used to identify director and executive officer
candidates and to approve the search firm's fees and other retention
terms. The Committee shall also have authority to retain outside
counsel and any other advisors as the Committee may deem appropriate
in its sole discretion.
15. The Committee shall review and assess the adequacy of this charter at
least annually and, as appropriate, adopt and recommend changes to
the Board for its approval.
16. The Committee shall periodically review and assess the Company's
Articles of Organization and Bylaws and, as appropriate, recommend
changes to the Board for its approval.
17. The Committee shall consider any other corporate governance issues
that may arise from time to time, and to develop appropriate
recommendations for the Board.
B-3
APPENDIX C
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SLADE'S FERRY BANCORP
2004 EQUITY INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Slade's Ferry Bancorp 2004 Equity
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees and Non Employee Directors of Slade's Ferry
Bancorp (the "Company") and its Subsidiaries upon whose judgment,
initiative and efforts the Company largely depends for the successful
conduct of its business to acquire a proprietary interest in the Company.
It is anticipated that providing such persons with a direct stake in the
Company's welfare will assure a closer identification of their interests
with those of the Company, thereby stimulating their efforts on the
Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
"Administrator" is defined in Section 2(a).
"Award" or "Awards," except where referring to a particular category
of grant under the Plan, shall include Incentive Stock Options, Non-
Qualified Stock Options, Deferred Stock Awards, Restricted Stock Awards,
and Unrestricted Stock Awards.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in
Section 2.
"Covered Employee" means an employee who is a "Covered Employee"
within the meaning of Section 162(m) of the Code.
"Deferred Stock Award" means Awards granted pursuant to Section 7.
"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 15.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Fair Market Value" of the Stock on any given date means the fair
market value of the Stock determined in good faith by the Administrator;
provided, however, that if the Stock is admitted to quotation on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), NASDAQ National System or a national securities exchange, the
determination shall be made by reference to market quotations. If there are
no market quotations for such date, the determination shall be made by
reference to the last date preceding such date for which there are market
quotations.
"Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the
Code.
"Non-Employee Director" means a member of the Board who is not also
an employee of the Company or any Subsidiary.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
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"Option" or "Stock Option" means any option to purchase shares of
Stock granted pursuant to Section 5.
"Performance Cycle" means one or more periods of time, which may be
of varying and overlapping durations, as the Administrator may select, over
which the attainment of one or more performance criteria will be measured
for the purpose of determining a grantee's right to and the payment of a
Restricted Stock Award or Deferred Stock Award.
"Restricted Stock Award" means Awards granted pursuant to Section 6.
"Stock" means the Common Stock, par value $.01 per share, of the
Company, subject to adjustments pursuant to Section 3.
"Subsidiary" means any corporation or other entity (other than the
Company) in which the Company has a controlling interest, either directly
or indirectly.
"Unrestricted Stock Award" means any Award granted pursuant to
Section 8.
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT
GRANTEES AND DETERMINE AWARDS
(a) Committee. The Plan shall be administered by either the Board
or a committee of not less than two Non-Employee Directors (in either case,
the "Administrator").
(b) Powers of Administrator. The Administrator shall have the power
and authority to grant Awards consistent with the terms of the Plan,
including the power and authority:
(i) to select the individuals to whom Awards may from time to
time be granted;
(ii) to determine the time or times of grant, and the extent,
if any, of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock Awards, Deferred Stock Awards, and Unrestricted
Stock Awards, or any combination of the foregoing, granted to any one
or more grantees;
(iii) to determine the number of shares of Stock to be covered
by any Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms
of the Plan, of any Award, which terms and conditions may differ
among individual Awards and grantees, and to approve the form of
written instruments evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting
of all or any portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend
at any time the period in which Stock Options may be exercised;
(vii) to determine at any time whether, to what extent, and
under what circumstances distribution or the receipt of Stock and
other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the grantee and whether
and to what extent the Company shall pay or credit amounts
constituting interest (at rates determined by the Administrator) or
dividends or deemed dividends on such deferrals; and
(viii) at any time to adopt, alter and repeal such rules,
guidelines and practices for administration of the Plan and for its
own acts and proceedings as it shall deem advisable; to interpret the
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terms and provisions of the Plan and any Award (including related
written instruments); to make all determinations it deems advisable
for the administration of the Plan; to decide all disputes arising
in connection with the Plan; and to otherwise supervise the
administration of the Plan.
All decisions and interpretations of the Administrator shall be binding on
all persons, including the Company and Plan grantees.
(c) Delegation of Authority to Grant Awards. The Administrator, in
its discretion, may delegate to the Chief Executive Officer of the Company
all or part of the Administrator's authority and duties with respect to the
granting of Awards at Fair Market Value, to individuals who are not subject
to the reporting and other provisions of Section 16 of the Exchange Act or
"covered employees" within the meaning of Section 162(m) of the Code. Any
such delegation by the Administrator shall include a limitation as to the
amount of Awards that may be granted during the period of the delegation
and shall contain guidelines as to the determination of the exercise price
of any Stock Option, the conversion ratio or price of other Awards and the
vesting criteria. The Administrator may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior
actions of the Administrator's delegate or delegates that were consistent
with the terms of the Plan.
(d) Indemnification. Neither the Board nor the Committee, nor any
member of either or any delegatee thereof, shall be liable for any act,
omission, interpretation, construction or determination made in good faith
in connection with the Plan, and the members of the Board and the Committee
(and any delegatee thereof) shall be entitled in all cases to
indemnification and reimbursement by the Company in respect of any claim,
loss, damage or expense (including, without limitation, reasonable
attorneys' fees) arising or resulting therefrom to the fullest extent
permitted by law and/or under any directors' and officers' liability
insurance coverage which may be in effect from time to time.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Stock Issuable. The maximum number of shares of Stock reserved
and available for issuance under the Plan shall be 300,000 shares, subject
to adjustment as provided in Section 3(b); provided that not more than
100,000 shares shall be issued in the form of Unrestricted Stock Awards,
Restricted Stock Awards or Deferred Stock Awards. For purposes of this
limitation, the shares of Stock underlying any Awards which are forfeited,
canceled, held back upon exercise of an Option or settlement of an Award to
cover the exercise price or tax withholding, reacquired by the Company
prior to vesting, satisfied without the issuance of Stock or otherwise
terminated (other than by exercise) shall be added back to the shares of
Stock available for issuance under the Plan. Subject to such overall
limitations, shares of Stock may be issued up to such maximum number
pursuant to any type or types of Award; provided, however, that Stock
Options with respect to no more than 75,000 shares of Stock may be granted
to any one individual grantee during any one calendar year period. The
shares available for issuance under the Plan may be authorized but unissued
shares of Stock or shares of Stock reacquired by the Company and held in
its treasury.
(b) Changes in Stock. Subject to Section 3(c) hereof, if, as a
result of any reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar change in the
Company's capital stock, the outstanding shares of Stock are increased or
decreased or are exchanged for a different number or kind of shares or
other securities of the Company, or additional shares or new or different
shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Stock or other securities, or,
if, as a result of any merger or consolidation, sale of all or
substantially all of the assets of the Company, the outstanding shares of
Stock are converted into or exchanged for a different number or kind of
securities of the Company or any successor entity (or a parent or
subsidiary thereof), the Administrator shall make an appropriate or
proportionate adjustment in (i) the maximum number of shares reserved for
issuance under the Plan, including the maximum number of
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shares that may be issued in the form of Unrestricted Stock Awards,
Restricted Stock Awards or Deferred Stock Awards, (ii) the number of Stock
Options that can be granted to any one individual grantee and the maximum
number of shares that may be granted under a Performance-based Award,
(iii) the number and kind of shares or other securities subject to any then
outstanding Awards under the Plan, (iv) the repurchase price per share
subject to each outstanding Restricted Stock Award, and (v) the price for
each share subject to any then outstanding Stock Options under the Plan,
without changing the aggregate exercise price (i.e., the exercise price
multiplied by the number of Stock Options) as to which such Stock Options
remain exercisable. The adjustment by the Administrator shall be final,
binding and conclusive. No fractional shares of Stock shall be issued under
the Plan resulting from any such adjustment, but the Administrator in its
discretion may make a cash payment in lieu of fractional shares.
The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding
Awards to take into consideration material changes in accounting practices
or principles, extraordinary dividends, acquisitions or dispositions of
stock or property or any other event if it is determined by the
Administrator that such adjustment is appropriate to avoid distortion in
the operation of the Plan, provided that no such adjustment shall be made
in the case of an Incentive Stock Option, without the consent of the
grantee, if it would constitute a modification, extension or renewal of the
Option within the meaning of Section 424(h) of the Code.
(c) Mergers and Other Transactions. In the case of and subject to
the consummation of (i) the dissolution or liquidation of the Company, (ii)
the sale of all or substantially all of the assets of the Company on a
consolidated basis to an unrelated person or entity, (iii) a merger,
reorganization or consolidation in which the outstanding shares of Stock
are converted into or exchanged for a different kind of securities of the
successor entity and the holders of the Company's outstanding voting power
immediately prior to such transaction do not own a majority of the
outstanding voting power of the successor entity immediately upon
completion of such transaction, or (iv) the sale of all of the Stock of the
Company to an unrelated person or entity (in each case, a "Sale Event"),
all Options that are not exercisable immediately prior to the effective
time of the Sale Event shall become fully exercisable as of the effective
time of the Sale Event and all other Awards shall become fully vested and
nonforfeitable as of the effective time of the Sale Event, except as the
Administrator may otherwise specify with respect to particular Awards. Upon
the effective time of the Sale Event, the Plan and all outstanding Awards
granted hereunder shall terminate, unless provision is made in connection
with the Sale Event in the sole discretion of the parties thereto for the
assumption or continuation of Awards theretofore granted by the successor
entity, or the substitution of such Awards with new Awards of the successor
entity or parent thereof, with appropriate adjustment as to the number and
kind of shares and, if appropriate, the per share exercise prices, as such
parties shall agree (after taking into account any acceleration hereunder).
In the event of such termination, each grantee shall be permitted, within a
specified period of time prior to the consummation of the Sale Event as
determined by the Administrator, to exercise all outstanding Options held
by such grantee, including those that will become exercisable upon the
consummation of the Sale Event; provided, however, that the exercise of
Options not exercisable prior to the Sale Event shall be subject to the
consummation of the Sale Event.
Notwithstanding anything to the contrary in this Section 3(c), in the
event of a Sale Event pursuant to which holders of the Stock of the Company
will receive upon consummation thereof a cash payment for each share
surrendered in the Sale Event, the Company shall have the right, but not
the obligation, to make or provide for a cash payment to the grantees
holding Options, in exchange for the cancellation thereof, in an amount
equal to the difference between (A) the value as determined by the
Administrator of the consideration payable per share of Stock pursuant to
the Sale Event (the "Sale Price") times the number of shares of Stock
subject to outstanding Options (to the extent then exercisable at prices
not in excess of the Sale Price) and (B) the aggregate exercise price of
all such outstanding Options.
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(d) Substitute Awards. The Administrator may grant Awards under the
Plan in substitution for stock and stock based awards held by employees,
directors or other key persons of another corporation in connection with
the merger or consolidation of the employing corporation with the Company
or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Administrator may
direct that the substitute awards be granted on such terms and conditions
as the Administrator considers appropriate in the circumstances. Any
substitute Awards granted under the Plan shall not count against the share
limitation set forth in Section 3(a).
SECTION 4. ELIGIBILITY
Grantees under the Plan will be such full or part-time officers and
other employees and Non-Employee Directors of the Company and its
Subsidiaries as are selected from time to time by the Administrator in its
sole discretion.
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. Incentive Stock Options may be
granted only to employees of the Company or any Subsidiary that is a
"subsidiary corporation" within the meaning of Section 424(f) of the Code.
To the extent that any Option does not qualify as an Incentive Stock
Option, it shall be deemed a Non-Qualified Stock Option.
(a) Stock Options Granted to Employees. The Administrator in its
discretion may grant Stock Options to eligible employees of the Company or
any Subsidiary. Stock Options granted pursuant to this Section 5(a) shall
be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the
Plan, as the Administrator shall deem desirable.
(i) Exercise Price. The exercise price per share for the
Stock covered by a Stock Option granted pursuant to this Section 5(a)
shall be determined by the Administrator at the time of grant but
shall not be less than 100 percent of the Fair Market Value on the
date of grant. If an employee owns or is deemed to own (by reason of
the attribution rules of Section 424(d) of the Code) more than 10
percent of the combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation and an Incentive
Stock Option is granted to such employee, the option price of such
Incentive Stock Option shall be not less than 110 percent of the Fair
Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed
by the Administrator, but no Stock Option shall be exercisable more
than 10 years after the date the Stock Option is granted. If an
employee owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than 10 percent of the combined
voting power of all classes of stock of the Company or any parent or
subsidiary corporation and an Incentive Stock Option is granted to
such employee, the term of such Stock Option shall be no more than
five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options
shall become exercisable at such time or times, whether or not in
installments, as shall be determined by the Administrator at or after
the grant date. The Administrator may at any time accelerate the
exercisability of all or any portion of any Stock Option. An optionee
shall have the rights of a stockholder only as to shares acquired
upon the exercise of a Stock Option and not as to unexercised Stock
Options.
(iv) Method of Exercise. Stock Options may be exercised in
whole or in part, by giving written notice of exercise to the
Company, specifying the number of shares to be purchased.
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Payment of the purchase price may be made by one or more of the
following methods to the extent provided in the Option Award
agreement:
(A) In cash, by certified or bank check or other
instrument acceptable to the Administrator;
(B) Through the delivery (or attestation to the
ownership) of shares of Stock that have been purchased by the
optionee on the open market or that have been beneficially
owned by the optionee for at least six months and are not then
subject to restrictions under any Company plan. Such
surrendered shares shall be valued at Fair Market Value on the
exercise date; or
(C) By the optionee delivering to the Company a
properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company
cash or a check payable and acceptable to the Company for the
purchase price; provided that in the event the optionee chooses
to pay the purchase price as so provided, the optionee and the
broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the
Administrator shall prescribe as a condition of such payment
procedure.
Payment instruments will be received subject to collection. The
delivery of certificates representing the shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt
from the optionee (or a purchaser acting in his stead in accordance with
the provisions of the Stock Option) by the Company of the full purchase
price for such shares and the fulfillment of any other requirements
contained in the Option Award agreement or applicable provisions of laws.
In the event an optionee chooses to pay the purchase price by previously-
owned shares of Stock through the attestation method, the number of shares
of Stock transferred to the optionee upon the exercise of the Stock Option
shall be net of the number of shares attested to.
(v) Annual Limit on Incentive Stock Options. To the extent
required for "incentive stock option" treatment under Section 422 of
the Code, the aggregate Fair Market Value (determined as of the time
of grant) of the shares of Stock with respect to which Incentive
Stock Options granted under this Plan and any other plan of the
Company or its parent and subsidiary corporations become exercisable
for the first time by an optionee during any calendar year shall not
exceed $100,000. To the extent that any Stock Option exceeds this
limit, it shall constitute a Non-Qualified Stock Option.
(b) Stock Options Granted to Non Employee Directors.
(i) Automatic Grant of Options.
(A) Each Non Employee Director who is serving as
Director of the Company on the day after each annual meeting of
shareholders or any special meeting in lieu thereof, beginning
with the 2004 annual meeting, shall automatically be granted on
such day a Non-Qualified Stock Option to acquire 2,000 shares
of Stock.
(B) The exercise price per share for the Stock covered
by a Stock Option granted under this Section 5(b) shall be
equal to the Fair Market Value of the Stock on the date the
Stock Option is granted.
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(C) Non-Qualified Stock Options granted pursuant to
this Section 5(b) shall be subject to the following terms and
conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the
Administrator shall deem desirable.
(ii) Exercise Price. The exercise price per share for the
Stock covered by a Stock Option granted pursuant to this Section 5(b)
shall be determined by the Administrator at the time of grant but
shall not be less than 100 percent of the Fair Market Value on the
date of grant.
(iii) Option Term. The term of each Stock Option shall be fixed
by the Administrator, but no Stock Option shall be exercisable more
than 10 years after the date the Stock Option is granted.
(iv) Exercisability; Rights of a Stockholder. Stock Options
shall become exercisable at such time or times, whether or not in
installments, as shall be determined by the Administrator at or after
the grant date. The Administrator may at any time accelerate the
exercisability of all or any portion of any Stock Option. An optionee
shall have the rights of a stockholder only as to shares acquired
upon the exercise of a Stock Option and not as to unexercised Stock
Options.
(v) Method of Exercise. Stock Options may be exercised in
whole or in part, by giving written notice of exercise to the
Company, specifying the number of shares to be purchased. Payment of
the purchase price may be made by one or more of the following
methods to the extent provided in the Option Award agreement:
(A) In cash, by certified or bank check or other
instrument acceptable to the Administrator;
(B) Through the delivery (or attestation to the
ownership) of shares of Stock that have been purchased by the
optionee on the open market or that have been beneficially
owned by the optionee for at least six months and are not then
subject to restrictions under any Company plan. Such
surrendered shares shall be valued at Fair Market Value on the
exercise date; or
(C) By the optionee delivering to the Company a
properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company
cash or a check payable and acceptable to the Company for the
purchase price; provided that in the event the optionee chooses
to pay the purchase price as so provided, the optionee and the
broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the
Administrator shall prescribe as a condition of such payment
procedure.
Payment instruments will be received subject to collection. The
delivery of certificates representing the shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt
from the optionee (or a purchaser acting in his stead in accordance with
the provisions of the Stock Option) by the Company of the full purchase
price for such shares and the fulfillment of any other requirements
contained in the Option Award agreement or applicable provisions of laws.
In the event an optionee chooses to pay the purchase price by previously-
owned shares of Stock through the attestation method, the number of shares
of Stock transferred to the optionee upon the exercise of the Stock Option
shall be net of the number of shares attested to.
(c) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution and all Stock Options shall be exercisable, during
the optionee's lifetime, only by the optionee, or by the optionee's legal
representative
C-7
or guardian in the event of the optionee's incapacity. Notwithstanding the
foregoing, the Administrator, in its sole discretion, may provide in the
Award agreement regarding a given Option that the optionee may transfer his
Non Qualified Stock Options to members of his immediate family, to trusts
for the benefit of such family members, or to partnerships in which such
family members are the only partners, provided that the transferee agrees
in writing with the Company to be bound by all of the terms and conditions
of this Plan and the applicable Option.
SECTION 6. RESTRICTED STOCK AWARDS
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is
an Award entitling the recipient to acquire, at such purchase price as
determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time
of grant ("Restricted Stock"). Conditions may be based on continuing
employment (or other service relationship) and/or achievement of pre-
established performance goals and objectives. The grant of a Restricted
Stock Award is contingent on the grantee executing the Restricted Stock
Award agreement. The terms and conditions of each such agreement shall be
determined by the Administrator, and such terms and conditions may differ
among individual Awards and grantees.
(b) Rights as a Stockholder. Upon execution of a written instrument
setting forth the Restricted Stock Award and payment of any applicable
purchase price, a grantee shall have the rights of a stockholder with
respect to the voting of the Restricted Stock, subject to such conditions
contained in the written instrument evidencing the Restricted Stock Award.
Unless the Administrator shall otherwise determine, certificates evidencing
the Restricted Stock shall remain in the possession of the Company until
such Restricted Stock is vested as provided in Section 6(d) below, and the
grantee shall be required, as a condition of the grant, to deliver to the
Company a stock power endorsed in blank.
(c) Restrictions. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Restricted Stock Award agreement. If
a grantee's employment (or other service relationship) with the Company and
its Subsidiaries terminates for any reason, the Company shall have the
right to repurchase Restricted Stock that has not vested at the time of
termination at its original purchase price, from the grantee or the
grantee's legal representative. If no purchase price was paid by the
grantee, then such unvested Restricted Stock shall be deemed forfeited.
(d) Vesting of Restricted Stock. The Administrator at the time of
grant shall specify the date or dates and/or the attainment of pre-
established performance goals, objectives and other conditions on which the
non-transferability of the Restricted Stock and the Company's right of
repurchase or forfeiture shall lapse. Notwithstanding the foregoing, in the
event that any such Restricted Stock shall have a performance based goal,
the restriction period with respect to such shares shall not be less than
one year and in the event that any such Restricted Stock shall have a time
based restriction, the restriction period with respect to such shares shall
not be less than three years. Subsequent to such date or dates and/or the
attainment of such pre-established performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no
longer be Restricted Stock and shall be deemed "vested." Except as may
otherwise be provided by the Administrator either in the Award agreement
or, subject to Section 12 below, in writing after the Award agreement is
issued, a grantee's rights in any shares of Restricted Stock that have not
vested shall automatically terminate upon the grantee's termination of
employment (or other service relationship) with the Company and its
Subsidiaries and such shares shall be subject to the Company's right of
repurchase as provided in Section 6(c) above.
C-8
SECTION 7. DEFERRED STOCK AWARDS
(a) Nature of Deferred Stock Awards. A Deferred Stock Award is an
Award of restricted stock units to a grantee, subject to restrictions and
conditions as the Administrator may determine at the time of grant.
Conditions may be based on continuing employment (or other service
relationship) and/or achievement of pre-established performance goals and
objectives. The grant of a Deferred Stock Award is contingent on the
grantee executing the Deferred Stock Award agreement. The terms and
conditions of each such agreement shall be determined by the Administrator,
and such terms and conditions may differ among individual Awards and
grantees. Notwithstanding the foregoing, in the event that the vesting of
any such Deferred Stock Award is subject to attainment of a performance
based goal, the vesting period with respect to such award shall not be less
than one year and in the event that the vesting of any such Deferred Stock
Award shall be time-based, the vesting period with respect to such award
shall not be less than three years. At the end of the deferral period, the
Deferred Stock Award, to the extent vested, shall be paid to the grantee in
the form of shares of Stock.
(b) Election to Receive Deferred Stock Awards in Lieu of
Compensation. The Administrator may, in its sole discretion, permit a
grantee to elect to receive a portion of the cash compensation or
Restricted Stock Award otherwise due to such grantee in the form of a
Deferred Stock Award. Any such election shall be made in writing and shall
be delivered to the Company no later than the date specified by the
Administrator and in accordance with rules and procedures established by
the Administrator. The Administrator shall have the sole right to determine
whether and under what circumstances to permit such elections and to impose
such limitations and other terms and conditions thereon as the
Administrator deems appropriate.
(c) Rights as a Stockholder. During the deferral period, a grantee
shall have no rights as a stockholder.
(d) Restrictions. A Deferred Stock Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during the
deferral period.
(e) Termination. Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 12
below, in writing after the Award agreement is issued, a grantee's right in
all Deferred Stock Awards that have not vested shall automatically
terminate upon the grantee's termination of employment (or cessation of
service relationship) with the Company and its Subsidiaries for any reason.
SECTION 8. UNRESTRICTED STOCK AWARDS
Grant or Sale of Unrestricted Stock. The Administrator may, in its
sole discretion, grant (or sell at par value or such higher purchase price
determined by the Administrator) an Unrestricted Stock Award to any grantee
pursuant to which such grantee may receive shares of Stock free of any
restrictions ("Unrestricted Stock") under the Plan. Unrestricted Stock
Awards may be granted in respect of past services or other valid
consideration, or in lieu of cash compensation due to such grantee.
SECTION 9. PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award or Deferred Stock Award granted to a Covered
Employee is intended to qualify as "Performance-based Compensation" under
Section 162(m) of the Code and the regulations promulgated thereunder (a
"Performance-based Award"), such Award shall comply with the provisions set
forth below:
C-9
(a) Performance Criteria. The performance criteria used in
performance goals governing Performance-based Awards granted to Covered
Employees may include any or all of the following: (i) the Company's return
on equity, assets, capital or investment: (ii) pre-tax or after-tax profit
levels of the Company or any Subsidiary; (iii) total shareholder return;
(iv) changes in the market price of the Stock; or (v) earnings per share.
(b) Grant of Performance-based Awards. With respect to each
Performance-based Award granted to a Covered Employee, the Committee shall
select, within the first 90 days of a Performance Cycle (or, if shorter,
within the maximum period allowed under Section 162(m) of the Code) the
performance criteria for such grant, and the achievement targets with
respect to each performance criterion (including a threshold level of
performance below which no amount will become payable with respect to such
Award). Each Performance-based Award will specify the amount payable, or
the formula for determining the amount payable, upon achievement of the
various applicable performance targets. The performance criteria
established by the Committee may be (but need not be) different for each
Performance Cycle and different goals may be applicable to Performance-
based Awards to different Covered Employees.
(c) Payment of Performance-based Awards. Following the completion
of a Performance Cycle, the Committee shall meet to review and certify in
writing whether, and to what extent, the performance criteria for the
Performance Cycle have been achieved and, if so, to also calculate and
certify in writing the amount of the Performance-based Awards earned for
the Performance Cycle. The Committee shall then determine the actual size
of each Covered Employee's Performance-based Award, and, in doing so, may
reduce or eliminate the amount of the Performance-based Award for a Covered
Employee if, in its sole judgment, such reduction or elimination is
appropriate.
(d) Maximum Award Payable. The maximum Performance-based Award
payable to any one Covered Employee under the Plan for a Performance Cycle
is 75,000 Shares (subject to adjustment as provided in Section 3(b)
hereof).
SECTION 10. TAX WITHHOLDING
(a) Payment by Grantee. Each grantee shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the grantee for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state,
or local taxes of any kind required by law to be withheld with respect to
such income. The Company and its Subsidiaries shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
of any kind otherwise due to the grantee. The Company's obligation to
deliver stock certificates to any grantee is subject to and conditioned on
tax obligations being satisfied by the grantee.
(b) Payment in Stock. Subject to approval by the Administrator, a
grantee may elect to have the minimum required tax withholding obligation
satisfied, in whole or in part, by (i) authorizing the Company to withhold
from shares of Stock to be issued pursuant to any Award a number of shares
with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the withholding amount due, or (ii)
transferring to the Company shares of Stock owned by the grantee with an
aggregate Fair Market Value (as of the date the withholding is effected)
that would satisfy the withholding amount due.
C-10
SECTION 11. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary
or from the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness,
or for any other purpose approved by the Company, if the employee's right
to re-employment is guaranteed either by a statute or by contract or under
the policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.
SECTION 12. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for
the purpose of satisfying changes in law or for any other lawful purpose,
but no such action shall adversely affect rights under any outstanding
Award without the holder's consent. Except as provided in Section 3(b) or
3(c), in no event may the Administrator exercise its discretion to reduce
the exercise price of outstanding Stock Options or effect repricing through
cancellation and re-grants. Any material Plan amendments (other than
amendments that curtail the scope of the Plan), including any Plan
amendments that (i) increase the number of shares reserved for issuance
under the Plan, (ii) expand the type of Awards available, materially expand
the eligibility to participate or materially extend the term of the Plan,
or (iii) materially change the method of determining Fair Market Value,
shall be subject to approval by the Company stockholders entitled to vote
at a meeting of stockholders. In addition, to the extent determined by the
Administrator to be required by the Code to ensure that Incentive Stock
Options granted under the Plan are qualified under Section 422 of the Code
or to ensure that compensation earned under Awards qualifies as
performance-based compensation under Section 162(m) of the Code, Plan
amendments shall be subject to approval by the Company stockholders
entitled to vote at a meeting of stockholders. Nothing in this Section 12
shall limit the Administrator's authority to take any action permitted
pursuant to Section 3(c).
SECTION 13. STATUS OF PLAN
With respect to the portion of any Award that has not been exercised
and any payments in cash, Stock or other consideration not received by a
grantee, a grantee shall have no rights greater than those of a general
creditor of the Company unless the Administrator shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion,
the Administrator may authorize the creation of trusts or other
arrangements to meet the Company's obligations to deliver Stock or make
payments with respect to Awards hereunder, provided that the existence of
such trusts or other arrangements is consistent with the foregoing
sentence.
SECTION 14. GENERAL PROVISIONS
(a) No Distribution; Compliance with Legal Requirements. The
Administrator may require each person acquiring Stock pursuant to an Award
to represent to and agree with the Company in writing that such person is
acquiring the shares without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing
of such stop-orders and restrictive legends on certificates for Stock and
Awards as it deems appropriate.
C-11
(b) Delivery of Stock Certificates. Stock certificates to grantees
under this Plan shall be deemed delivered for all purposes when the Company
or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the grantee, at the
grantee's last known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, including trusts, and such
arrangements may be either generally applicable or applicable only in
specific cases. The adoption of this Plan and the grant of Awards do not
confer upon any employee any right to continued employment with the Company
or any Subsidiary.
(d) Trading Policy Restrictions. Option exercises and other Awards
under the Plan shall be subject to such Company's insider trading policy
and procedures, as in effect from time to time.
(e) Designation of Beneficiary. Each grantee to whom an Award has
been made under the Plan may designate a beneficiary or beneficiaries to
exercise any Award or receive any payment under any Award payable on or
after the grantee's death. Any such designation shall be on a form provided
for that purpose by the Administrator and shall not be effective until
received by the Administrator. If no beneficiary has been designated by a
deceased grantee, or if the designated beneficiaries have predeceased the
grantee, the beneficiary shall be the grantee's estate.
SECTION 15. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon approval by the holders of a
majority of the votes cast at a meeting of stockholders at which a quorum
is present. Subject to such approval by the stockholders and to the
requirement that no Stock may be issued hereunder prior to such approval,
Stock Options and other Awards may be granted hereunder on and after
adoption of this Plan by the Board. No grants of Stock Options and other
Awards may be made hereunder after May 10, 2014.
SECTION 16. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be
governed by, and construed in accordance with, the laws of the Commonwealth
of Massachusetts, applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: March 8, 2004
DATE APPROVED BY STOCKHOLDERS: _______________, 2004
C-12
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOKABLE PROXY
SLADE'S FERRY BANCORP. Proxy Solicited on Behalf of the
Board of Directors
Annual Stockholders Meeting
May 10, 2004
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The undersigned hereby appoint Thomas B. Almy, Lawrence J. Oliveira, and
Charles Veloza, or any one of them as my/our true and lawful attorney, with
full power of substitution, for me/us and in my/our name to vote, as
designated below, all the shares of common stock of Slade's Ferry Bancorp.
held of record by the undersigned on March 19, 2004, at the Annual Meeting
of the stockholders of said Company to be held at The Cultural Center, 205
South Main Street, Fall River, Massachusetts on Monday, May 10, 2004 at
10:00 a.m. or at any adjournment thereof, with all powers I/we should
possess if personally present, hereby revoking all previous proxies.
The Board of Directors of Slade's Ferry Bancorp. recommends that you vote
"For" each of the proposals set forth below.
For Against Abstain
[ ] [ ] [ ] (1) To approve the amendment of the Articles of
Organization and By-Laws of Slade's Ferry
Bancorp. to permit the Board of Directors to
amend the by-laws without shareholder
approval under certain circumstances.
For All
For Against Except
[ ] [ ] [ ] (2) To elect Paul C. Downey, Mary Lynn D. Lenz,
William Q. MacLean, Jr., Francis A. Macomber,
Majed Mouded, MD, and David F. Westgate as
Class Three Directors for a term of three
years and to elect Anthony F. Cordeiro as
Class One director to hold office for one
year.
Instruction: to withhold authority to vote
for any individual nominee, mark "For All
Except" and write that nominee's name in the
space provided below.
For Against Abstain
[ ] [ ] [ ] (3) To approve the Slade's Ferry Bancorp. 2004
Equity Incentive Plan.
For Against Abstain
[ ] [ ] [ ] (4) To elect Peter G. Collias as Clerk/Secretary
for a term of one year.
(5) In their discretion, the proxies are authorized to consider and act
upon such other business matters or proposals as may properly come
before the meeting.
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The shares represented by the proxy will be voted as directed by the
undersigned. It is the intention of proxies to vote "FOR" the proposals
set forth under Items 1, 2, 3 and 4 if no contrary instruction is
indicated.
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Please check box if you plan to attend the meeting [ ]
Please be sure to sign and date this Proxy in the box below.
Date
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Stockholder sign above Co-holder (if any) sign above
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Detach above card, sign, date and mail in postage paid envelope provided.
SLADE'S FERRY BANCORP.
SOMERSET, MASSACHUSETTS
In signing, please write name(s) exactly as appearing in the imprint on
this proxy. If signing as Executor, or in any other representative
capacity, or as an officer of a corporation, please indicate your full
title as such.
Please date, sign and return this proxy
in the enclosed envelope promptly.
If your address has changed, please correct
the address in the space provided below and
return this portion with the Proxy in the
envelope provided.
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