<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __________)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only
/X/ Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Commonwealth Bancorp, Inc.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): (previously paid by wire
transfer)
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2), or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies: ____________________________________________________________
(2) Aggregate number of securities to which transactions
applies:_____________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was
determined): _______________________________________________________
(4) Proposed maximum aggregate value of transaction:____________________
(5) Total fee paid: ____________________________________________________
Fee paid previously with preliminary materials.
- -----------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid: ____________________________________________
(2) Form, schedule or registration statement no.:_______________________
(3) Filing party: ______________________________________________________
(4) Date filed: ________________________________________________________
<PAGE>
[COMMONWEALTH BANCORP LETTERHEAD]
November 8, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Commonwealth Bancorp, Inc. The meeting will be held at The People's Light &
Theater Company, located at 39 Conestoga Road, Malvern, Pennsylvania, on
Tuesday, December 17, 1996 at 10:00 a.m., Eastern Time. The matters to be
considered by stockholders at the Special Meeting are described in the
accompanying materials.
It is very important that your shares be voted at the Special Meeting
regardless of the number you own or whether you are able to attend the
meeting in person. We urge you to mark, sign, and date your proxy card today
and return it in the envelope provided, even if you plan to attend the
Special Meeting. This will not prevent you from voting in person, but will
ensure that your vote is counted if you are unable to attend.
Your continued support of and interest in Commonwealth Bancorp, Inc. is
sincerely appreciated.
Sincerely,
Charles H. Meacham
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
COMMONWEALTH BANCORP, INC.
70 VALLEY STREAM PARKWAY
POST OFFICE BOX 2100
VALLEY FORGE, PENNSYLVANIA 19482
(610) 251-1600
--------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 17, 1996
--------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders ("Special
Meeting") of Commonwealth Bancorp, Inc. (the "Company") will be held at The
People's Light & Theater Company, located at 39 Conestoga Road, Malvern,
Pennsylvania, on Tuesday, December 17, 1996 at 10:00 a.m., Eastern Time, for
the following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(1) To consider and approve the adoption of the 1996 Stock Option Plan;
(2) To consider and approve the adoption of the 1996 Recognition and
Retention Plan and Trust; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof. Management is not aware of
any other such business.
The Board of Directors has fixed November 1, 1996 as the voting record
date for the determination of stockholders entitled to notice of and to vote
at the Special Meeting and at any adjournment thereof. Only those
stockholders of record as of the close of business on that date will be
entitled to vote at the Special Meeting or at any such adjournment.
By Order of the Board of Directors
LEROY D. TODD, JR.
Senior Vice President and Secretary
Valley Forge, Pennsylvania
November 8, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF
YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING,
YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY
YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE>
COMMONWEALTH BANCORP, INC.
---------------
PROXY STATEMENT
---------------
SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 17, 1996
This Proxy Statement is furnished to holders of common stock, $.10 par
value per share ("Common Stock"), of Commonwealth Bancorp, Inc. (the
"Company"), a Pennsylvania corporation which acquired all the outstanding
stock of Commonwealth Bank (the "Bank") in connection with the conversion of
Commonwealth Mutual Holding Company and the reorganization of the Bank to the
stock holding company form of organization in June 1996 (the "Conversion and
Reorganization"). Proxies are being solicited on behalf of the Board of
Directors of the Company to be used at the Special Meeting of Stockholders
("Special Meeting") to be held at The People's Light & Theater Company,
located at 39 Conestoga Road, Malvern, Pennsylvania, on Tuesday, December 17,
1996 at 10:00 a.m., Eastern Time, and at any adjournment thereof for the
purposes set forth in the Notice of Special Meeting of Stockholders. This
Proxy Statement is first being mailed to stockholders on or about November 8,
1996.
The proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with
the instructions contained therein. If no contrary instructions are given,
each proxy received will be voted for the matters described below and, upon
the transaction of such other business as may properly come before the
meeting, in accordance with the best judgment of the persons appointed as
proxies. Any stockholder giving a proxy has the power to revoke it at any
time before it is exercised by (i) filing with the Secretary of the Company
written notice thereof (LeRoy D. Todd, Jr., Senior Vice President and
Secretary, Commonwealth Bancorp, Inc., 70 Valley Stream Parkway, P.O. Box
2100, Valley Forge, Pennsylvania 19482); (ii) submitting a duly-executed
proxy bearing a later date; or (iii) appearing at the Special Meeting and
giving the Secretary notice of his or her intention to vote in person.
Proxies solicited hereby may be exercised only at the Special Meeting and any
adjournment thereof and will not be used for any other meeting.
<PAGE>
2
VOTING
Only stockholders of record of the Company at the close of business on
November 1, 1996 ("Voting Record Date") are entitled to notice of and to vote
at the Special Meeting and at any adjournment thereof. On the Voting Record
Date, there were 17,953,363 shares of Common Stock issued and outstanding and
the Company had no other class of equity securities outstanding. Each share
of Common Stock is entitled to one vote at the Special Meeting on all matters
properly presented at the meeting.
The presence in person or by proxy of at least a majority of the issued
and outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Special Meeting. The affirmative vote of the
holders of a majority of the total votes eligible to be cast in person or by
proxy at the Special Meeting is required for approval of the proposals to
approve the 1996 Stock Option Plan ("Option Plan") and the 1996 Recognition
and Retention Plan and Trust ("Recognition Plan"). Under rules applicable to
broker-dealers, the proposals to approve the Option Plan and the Recognition
Plan are considered "non-discretionary" items upon which brokerage firms may
not vote in their discretion on behalf of their clients if such clients have
not furnished voting instructions and, thus, there may be "broker non-votes."
Because of the required votes, abstentions and broker non-votes will have
the same effect as a vote against the proposals to approve the Option Plan
and the Recognition Plan.
<PAGE>
3
BENEFICIAL OWNERSHIP
OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Stock as of the Voting Record Date, and certain other information with
respect to (i) the only person or entity, including any "group" as that term
is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), who or which was known to the Company to be the
beneficial owner of more than 5% of the issued and outstanding Common Stock
on the Voting Record Date, (ii) each director of the Company, (iii) certain
executive officers of the Company, and (iv) all directors and executive
officers of the Company as a group.
AMOUNT AND NATURE
NAME OF BENEFICIAL OF BENEFICIAL
OWNER OR NUMBER OF OWNERSHIP AS OF PERCENT OF
PERSONS IN GROUP NOVEMBER 1, 1996(1)(2) COMMON STOCK
- ------------------ ---------------------- ------------
Commonwealth Bancorp, Inc. 1,301,468(3) 7.2%
Employee Stock Ownership
Plan Trust
70 Valley Stream Parkway
Malvern, Pennsylvania 19355
Directors:
Charles H. Meacham 202,181(4) 1.1
George C. Beyer, Jr. 95,535(5)(6) *
Joseph E. Colen, Jr. 70,009(6)(7) *
Richard J. Conner 37,234(6)(8) *
William B. Haines, Jr. 30,532(6)(9) *
Harry P. Mirabile 81,842(6)(10) *
Nicholas Sclufer 82,617(6)(11) *
Matthew T. Welde 55,330(12) *
Executive Officers:
Robert M. Lambert 77,019(13) *
Patrick J. Ward 44,201(14) *
William J. Monnich 25,476(15) *
LeRoy D. Todd, Jr. 107,659(16) *
All directors and 909,735(17) 5.0
executive officers as a
group (13 persons)
________________
* Represents less than 1% of the outstanding Common Stock.
<PAGE>
4
(1) Based upon filings made pursuant to the Exchange Act and
formation furnished by the respective individuals. Under regulations
promulgated pursuant to the Exchange Act, shares of Common Stock are
deemed to be beneficially owned by a person if he or she directly or
indirectly has or shares (i) voting power, which includes the power to
vote or to direct the voting of the shares, or (ii) investment power,
which includes the power to dispose or to direct the disposition of the
shares. Unless otherwise indicated, the named beneficial owner has sole
voting and dispositive power with respect to the shares.
(2) Under applicable regulations, a person is deemed to have beneficial
ownership of any shares of Common Stock which may be acquired within 60
days of the Voting Record Date pursuant to the exercise of outstanding
stock options. Shares of Common Stock which are subject to stock options
are deemed to be outstanding for the purpose of computing the percentage
of outstanding Common Stock owned by such person or group but not deemed
outstanding for the purpose of computing the percentage of Common Stock
owned by any other person or group.
(3) The Commonwealth Bancorp, Inc. Employee Stock Ownership Plan Trust
("Trust") was established pursuant to the Commonwealth Bancorp, Inc.
Employee Stock Ownership Plan ("ESOP") by an agreement between the Company
and PNC Bank, National Association, which acts as trustee of the plan
("ESOP Trustee"). As of the Voting Record Date, 1,075,238 shares of Common
Stock held in the Trust were unallocated and 226,185 shares had been
allocated to the accounts of participating employees. Under the terms of
the ESOP, the ESOP Trustee must vote the allocated shares held in the ESOP
in accordance with the instructions of the participating employees.
Unallocated shares held in the ESOP will be voted by the ESOP Trustee in
the same proportion for and against proposals to stockholders as the ESOP
participants and beneficiaries actually vote shares of Common Stock
allocated to their individual accounts. Any allocated shares which either
abstain on the proposal or are not voted will be disregarded in
determining the percentage of stock voted for and against each proposal
by the participants and beneficiaries.
(4) Includes 18,642 shares held jointly with Mr. Meacham's wife, 57,566 shares
held on behalf of Mr. Meacham in the Company's Voluntary
Investment Plan ("VIP"), 34,480 shares held in the 1993 Management
Recognition Plan and Trust of the Company ("MRP"), which may be voted by
him pending vesting and distribution, 3,068 shares allocated to Mr.
Meacham pursuant to the ESOP and 62,324 shares which may be acquired
upon the exercise of stock options exercisable within 60 days of the
Voting Record Date.
(5) Includes 5,102 shares held jointly with Mr. Beyer's wife, 27,774 shares
held by Mr. Beyer's wife, 29,935 shares held in a partnership which Mr.
Beyer is the general partner, and 14,682 shares held in a personal trust
for the benefit of Mr. Beyer.
<PAGE>
5
(6) Includes 2,098 shares held in the MRP, which may be voted by the
individual pending vesting and distribution and 14,411 shares which may
be acquired upon the exercise of stock options exercisable within 60
days of the Voting Record Date.
(7) Includes 8,829 shares held jointly with Mr. Colen's wife and children
and 10,000 shares held in a trust which Mr. Cohen is trustee.
(8) Includes 2,952 shares held by Mr. Conner's wife, children and
grandchildren.
(9) Includes 12,739 shares held jointly with Mr. Haines' wife.
(10) Includes 23,155 shares held jointly with Mr. Mirabile's wife and 3,000
shares held by Mr. Mirabile's wife.
(11) Includes 10,387 shares held by Mr. Sclufer's wife and 16,618 shares held
by Mr. Sclufer's daughters.
(12) Includes 34,627 shares held jointly with Mr. Welde's wife, 6,282
shares held in the MRP, which may be voted by him pending vesting
and distribution and 14,411 shares which may be acquired upon the
exercise of stock options exercisable within 60 days of the Voting
Record Date.
(13) Includes 3,214 shares held by Mr. Lambert's wife, 23,213 shares held
on behalf of Mr. Lambert in the VIP, 13,138 shares held in the MRP,
which may be voted by him pending vesting and distribution, 2,578
shares allocated to him pursuant to the ESOP and 16,985 shares which
may be acquired upon the exercise of stock options exercisable
within 60 days of the Voting Record Date.
(14) Includes 1,465 shares held jointly with Mr. Ward's wife, 175 shares
held on behalf of Mr. Ward in the VIP, 13,138 shares held in the
MRP, which may be voted by Mr. Ward pending vesting and
distribution, 2,684 shares allocated to him pursuant to the ESOP and
16,985 shares which may be acquired upon the exercise of stock
options exercisable within 60 days of the Voting Record Date.
(15) Includes 127 shares held on behalf of Mr. Monnich in the VIP, 14,330
shares held in the MRP, which may be voted by Mr. Monnich pending
vesting and distribution, 2,072 shares allocated to him pursuant to
the ESOP and 4,878 shares which may be acquired upon the exercise of
stock options exercisable within 60 days of the Voting Record Date.
<PAGE>
6
(16) Includes 23,639 shares held jointly with Mr. Todd's wife, 897 shares
held by Mr. Todd's wife, 2,804 shares held by Mr. Todd's children, 43,781
shares held on behalf of Mr. Todd in the VIP, 13,138 shares held in the
MRP, which may be voted by Mr. Todd pending vesting and distribution, 1,866
shares held in the ESOP and 14,372 shares which may be acquired upon the
exercise of stock options exercisable within 60 days of the Voting Record
Date.
(17) Includes 124,862 shares held on behalf of executive officers in the
VIP, 88,224 shares held in the MRP, which may be voted by directors
and executive officers pending vesting and distribution, 12,273 shares
allocated to executive officers pursuant to the ESOP and 115,544
shares which may be acquired by executive officers and directors upon
the exercise of stock options exercisable within 60 days of the
Voting Record Date.
<PAGE>
7
PROPOSAL TO ADOPT THE 1996 STOCK OPTION PLAN
GENERAL
The Board of Directors has adopted the Option Plan which is designed to
attract and retain qualified personnel in key positions, provide officers and
key employees with a proprietary interest in the Company as an incentive to
contribute to the success of the Company and reward key employees for
outstanding performance and the attainment of targeted goals. The Option
Plan is also designed to retain qualified directors for the Company. The
Option Plan provides for the grant of incentive stock options intended to
comply with the requirements of Section 422 of the Code ("incentive stock
options"), non-incentive or compensatory stock options and stock appreciation
rights (collectively "Awards"). Awards will be available for grant to
directors and key employees of the Company and any subsidiaries, except that
non-employee directors will be eligible to receive only awards of
non-incentive stock options pursuant to a set formula. If stockholder
approval is obtained, options to acquire shares of Common Stock will be
awarded to officers, key employees and directors of the Company and the Bank
with an exercise price equal to the fair market value of the Common Stock on
the date of grant. THE OPTION PLAN COMPLIES WITH APPLICABLE OTS REGULATIONS
AND IS REQUIRED TO BE SUBMITTED TO THE OTS AFTER APPROVAL BY STOCKHOLDERS.
NO ASSURANCE CAN BE GIVEN AS TO WHETHER THE OTS WILL RAISE ANY OBJECTIONS TO
THE OPTION PLAN AS PRESENTED TO STOCKHOLDERS OR WHETHER THE OTS MAY REQUIRE
MODIFICATIONS TO BE MADE TO THE OPTION PLAN. A VOTE FOR APPROVAL OF THE
OPTION PLAN SHALL BE DEEMED TO BE A VOTE FOR APPROVAL OF THE OPTION PLAN AS
THE SAME MAY BE REQUIRED TO BE MODIFIED BY THE OTS, PROVIDED THAT THE CHANGE
IS NOT MATERIAL AS DETERMINED BY THE COMPANY. THE COMPANY WILL NOT MAKE ANY
MODIFICATION TO THE OPTION PLAN WHICH WOULD INCREASE THE LEVEL OF BENEFITS
FROM THAT PRESENTED. NON-OBJECTION TO THE OPTION PLAN BY THE OTS SHALL NOT
CONSTITUTE APPROVAL OR ENDORSEMENT OF THE OPTION PLAN BY THE OTS.
DESCRIPTION OF THE OPTION PLAN
The following description of the Option Plan is a summary of its terms
and is qualified in its entirety by reference to the Option Plan, a copy of
which is attached hereto as Appendix A.
ADMINISTRATION. The Option Plan will be administered and interpreted by
a committee of the Board of Directors ("Committee") that is comprised solely
of two or more non-employee directors. The members of the Committee will
consist of Messrs. Joseph E. Colen, Jr., George C. Beyer, Jr. and Harry
Mirabile.
STOCK OPTIONS. Under the Option Plan, the Board of Directors or the
Committee will determine which officers and key employees will be granted
options, whether such options will be incentive or compensatory options, the
number of shares subject to each option, the exercise price of each option,
whether such options may be exercised by delivering other shares of Common
Stock and when such options become exercisable. The per share
<PAGE>
8
exercise price of an incentive stock option shall at least equal to the fair
market value of a share of Common Stock on the date the option is granted,
and the per share exercise price of a compensatory stock option shall at
least equal the greater of par value or the fair market value of a share of
Common Stock on the date the option is granted.
All options granted to participants under the Option Plan shall become
vested and exercisable at the rate of 20% per year on each annual anniversary
of the date the options were granted, and the right to exercise shall be
cumulative. Notwithstanding the foregoing, no vesting shall occur on or
after a participant's employment or service with the Company is terminated
for any reason other than his death or disability. Unless the Committee or
Board of Directors shall specifically state otherwise at the time an option
is granted, all options granted to participants shall become vested and
exercisable in full on the date an optionee terminates his employment or
service with the Company or a subsidiary company because of his death or
disability. In addition, all stock options will become vested and
exercisable in full on the date an optionee terminates his employment or
service with the Company or a subsidiary company due to retirement or as the
result of a change in control of the Company if, as of such date of
retirement or change in control of the Company, such treatment is either
authorized or is not prohibited by applicable laws and regulations.
Each stock option or portion thereof shall be exercisable at any time on
or after it vests and is exercisable until the earlier of ten years after its
date of grant or three months after the date on which the optionee's
employment or service as a non-employee director terminates, unless extended
by the Committee or the Board of Directors to a period not to exceed three
years from such termination. However, failure to exercise incentive stock
options within three months after the date on which the optionee's employment
terminates may result in adverse tax consequences to the optionee. If an
optionee dies while serving as an employee or a non-employee director or
terminates his service as an employee or a non-employee director as a result
of disability without having fully exercised his options, the optionee's
executors, administrators, legatees or distributees of his estate shall have
the right to exercise such options during the twelve-month period following
the earlier of his death or termination due to disability, provided no option
will be exercisable more than ten years from the date it was granted. Stock
options are non-transferable except by will or the laws of descent and
distribution. Notwithstanding the foregoing, an optionee who holds
non-qualified options may transfer such options to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust for the
benefit or one or more of these individuals. Options so transferred may
thereafter be transferred only to the optionee who originally received the
grant or to an individual or trust to whom the optionee could have initially
transferred the option. Options which are so transferred shall be
exercisable by the transferee according to the same terms and conditions as
applied to the optionee.
GRANTS TO DIRECTORS. Options granted to non-employee directors under the
Option Plan will be awarded under a formula pursuant to which each
non-employee director (seven persons), defined as a member of the Board of
Directors of the Company or the Bank, including a director emeritus, who is
not an officer or employee of the Company or any
<PAGE>
9
subsidiary company, will receive a non-incentive option to purchase 29,616
shares of Common Stock upon approval of the Option Plan by stockholders.
STOCK APPRECIATION RIGHTS. Under the Option Plan, the Board of Directors
or the Committee is authorized to grant rights to optionees ("stock
appreciation rights") under which an optionee may surrender any exercisable
incentive stock option or compensatory stock option or part thereof in return
for payment by the Company to the optionee of cash or Common Stock in an
amount equal to the excess of the fair market value of the shares of Common
Stock subject to option at the time over the option price of such shares, or
a combination of cash and Common Stock. Stock appreciation rights may be
granted concurrently with the stock options to which they relate or at any
time thereafter which is prior to the exercise or expiration of such options.
NUMBER OF SHARES COVERED BY THE OPTION PLAN. A total of 987,215 shares
of Common Stock has been reserved for future issuance pursuant to the Option
Plan. In the event of a stock split, reverse stock split or stock dividend,
the number of shares of Common Stock under the Option Plan, the number of
shares to which any Award relates and the exercise price per share under any
option or stock appreciation right shall be adjusted to reflect such increase
or decrease in the total number of shares of Common Stock outstanding.
AMENDMENT AND TERMINATION OF THE OPTION PLAN. Unless sooner terminated,
the Option Plan shall continue in effect for a period of ten years from
October 22, 1996, the date that the Option Plan was adopted by the Board of
Directors. Termination of the Option Plan shall not affect any previously
granted Awards.
FEDERAL INCOME TAX CONSEQUENCES. Under current provisions of the Code,
the federal income tax treatment of incentive stock options and compensatory
stock options is different. As regards incentive stock options, an optionee
who meets certain holding period requirements will not recognize income at
the time the option is granted or at the time the option is exercised, and a
federal income tax deduction generally will not be available to the Company
any time as a result of such grant or exercise. With respect to compensatory
stock options, the difference between the fair market value on the date of
exercise and the option exercise price generally will be treated as
compensation income upon exercise, and the Company will be entitled to a
deduction in the amount of income so recognized by the optionee. Upon the
exercise of a stock appreciation right, the holder will realize income for
federal income tax purposes equal to the amount received by him, whether in
cash, shares of stock or both, and the Company will be entitled to a
deduction for federal income tax purposes in the same amount.
Section 162(m) of the Code generally limits the deduction for certain
compensation in excess of $1 million per year paid by a publicly-traded
corporation to its chief executive officer and the four other most highly
compensated executive officers ("covered executive"). Certain types of
compensation, including compensation based on performance goals, are excluded
from the $1 million deduction limitation. In order for compensation to
qualify for
<PAGE>
10
this exception: (i) it must be paid solely on account of the attainment of
one or more preestablished, objective performance goals; (ii) the performance
goal must be established by a compensation committee consisting solely of two
or more outside directors, as defined; (iii) the material terms under which
the compensation is to be paid, including performance goals, must be
disclosed to and approved by stockholders in a separate vote prior to
payment; and (iv) prior to payment, the compensation committee must certify
that the performance goals and any other material terms were in fact
satisfied (the "Certification Requirement").
Final Treasury regulations issued in December 1995 provide that
compensation attributable to a stock option or stock appreciation right is
deemed to satisfy the requirement that compensation be paid solely on account
of the attainment of one or more performance goals if: (i) the grant is made
by a compensation committee consisting solely of two or more outside
directors, as defined; (ii) the plan under which the option or stock
appreciation right is granted states the maximum number of shares with
respect to which options or stock appreciation rights may be granted during a
specified period to any employee; and (iii) under the terms of the option or
stock appreciation right, the amount of compensation the employee could
receive is based solely on an increase in the value of the stock after the
date of grant or award. The Certification Requirement is not necessary if
these other requirements are satisfied.
The Option Plan has been designed to meet the requirements of Section
162(m) of the Code and, as a result, the Company believes that compensation
attributable to stock options and stock appreciation rights granted under the
Option Plan in accordance with the foregoing requirements will be fully
deductible under Section 162(m) of the Code. If the non-excluded
compensation of a covered executive exceeded $1 million, however,
compensation attributable to other awards, such as restricted stock, may not
be fully deductible unless the grant or vesting of the award is contingent on
the attainment of a performance goal determined by a compensation committee
meeting specified requirements and disclosed to and approved by the
stockholders of the Company. The Board of Directors believes that the
likelihood of any impact on the Company from the deduction limitation
contained in Section 162(m) of the Code is remote at this time.
The above description of tax consequences under federal law is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
ACCOUNTING TREATMENT. Stock appreciation rights will, in most cases,
require a charge against the earnings of the Company each year representing
appreciation in the value of such rights over periods in which they become
exercisable. Such charge is based on the difference between the exercise
price specified in the related option and the current market price of the
Common Stock. In the event of a decline in the market price of the Common
<PAGE>
11
Stock subsequent to a charge against earnings related to the estimated costs
of stock appreciation rights, a reversal of prior charges is made in the
amount of such decline (but not to exceed aggregate prior charges).
Neither the grant nor the exercise of an incentive stock option or a
compensatory stock option under the Option Plan currently requires any charge
against earnings under GAAP. This treatment currently is being evaluated by
the Financial Accounting Standards Board, which has issued an exposure draft
which would require the recognition of expense under GAAP based upon the fair
market value of stock compensation awards when stock options and similar
awards are granted, and thus could change in the future. In certain
circumstances, shares issuable pursuant to outstanding options under the
Option Plan might be considered outstanding for purposes of calculating
earnings per share.
STOCKHOLDER APPROVAL. No Awards will be granted under the Option Plan
unless the Option Plan is approved by stockholders. Stockholder ratification
of the Option Plan will also satisfy Nasdaq Stock Market listing, federal tax
and OTS requirements.
<PAGE>
12
AWARDS TO BE GRANTED. The Board of Directors of the Company adopted the
Option Plan and the Committee established thereunder intends to grant options
to executive officers and employees of the Company. The Option Plan also
provides that non-employee directors will be granted compensatory options
pursuant to a set formula upon approval of the plan by stockholders. The
grants to officers and employees shall be effective no earlier than upon
stockholder approval of the Option Plan with a per share exercise price equal
to the fair market value of a share of Common Stock on the date of grant.
The following table sets forth certain information with respect to such
grants.
NUMBER OF SHARES
NAME OF INDIVIDUAL OR SUBJECT TO
NUMBER OF PERSONS IN GROUP TITLE STOCK OPTIONS
- --------------------------- ------------------------- -----------------
Charles H. Meacham President and Chief 177,696
Executive Officer
Patrick J. Ward Senior Vice President and 98,720
Chief Financial Officer
All executive officers as 409,688
a group (five persons)
All non-employee directors 207,312
as a group (seven persons)
All employees, not 327,970
including executive officers, as
a group (139 persons)
In addition, it is anticipated that the three Senior Vice Presidents of
the Company will each be granted stock options to purchase 44,424 shares of
Common Stock.
The terms of the options granted to all recipients shall provide that
they will be vested and exercisable 20% per year over a five-year period
commencing on the first anniversary of the date of grant.
On November 1, 1996, the closing price of a share of Common Stock as
reported by the Nasdaq Stock Market National Market was $13.00.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION OF
THE 1996 STOCK OPTION PLAN.
<PAGE>
13
PROPOSAL TO ADOPT THE 1996 MANAGEMENT
RECOGNITION PLAN AND TRUST
GENERAL
The Board of Directors of the Company has adopted the Recognition Plan,
the objective of which is to enable the Company to provide officers, key
employees and directors with a proprietary interest in the Company as an
incentive to contribute to its success. Officers and key employees of the
Company and the Bank who are selected by the Board of Directors of the
Company or members of a committee appointed by the Board will be eligible to
receive benefits under the Recognition Plan. Non-employee directors of the
Company will receive awards under the plan pursuant to a set formula. If
stockholder approval is obtained, shares will be granted to officers and key
employees directors as determined by the Committee or the Board of Directors
and non-employee directors will be granted shares pursuant to the set
formula. THE RECOGNITION PLAN COMPLIES WITH APPLICABLE OTS REGULATIONS AND
IS REQUIRED TO BE SUBMITTED TO THE OTS AFTER APPROVAL BY STOCKHOLDERS. NO
ASSURANCE CAN BE GIVEN AS TO WHETHER THE OTS WILL RAISE ANY OBJECTIONS TO THE
RECOGNITION PLAN AS PRESENTED TO STOCKHOLDERS OR WHETHER IT MAY REQUIRE
MODIFICATIONS TO BE MADE TO THE RECOGNITION PLAN. A VOTE FOR APPROVAL OF THE
RECOGNITION PLAN SHALL BE DEEMED TO BE A VOTE FOR APPROVAL OF THE RECOGNITION
PLAN AS THE SAME MAY BE REQUIRED TO BE MODIFIED BY THE OTS, PROVIDED THAT THE
CHANGE IS NOT MATERIAL AS DETERMINED BY THE COMPANY. THE COMPANY WILL NOT
MAKE ANY MODIFICATION TO THE RECOGNITION PLAN WHICH WOULD INCREASE THE LEVEL
OF BENEFITS FROM THAT PRESENTED. NON-OBJECTION TO THE RECOGNITION PLAN BY
THE OTS SHALL NOT CONSTITUTE APPROVAL OR ENDORSEMENT OF THE RECOGNITION PLAN
BY THE OTS.
DESCRIPTION OF THE RECOGNITION PLAN
The following description of the Recognition Plan, is a summary of its
terms and is qualified in its entirety by reference to the Recognition Plan,
a copy of which is attached hereto as Appendix B.
ADMINISTRATION. A committee of the Board of Directors of the Company
will administer the Recognition Plan, which shall consist of at least two
non-employee directors of the Company. The members of the Committee will be
Messrs. Joseph E. Colen, Jr., George C. Beyer, Jr. and Harry Mirabile, who
will also serve as trustees of the trust established pursuant to the
Recognition Plan ("Trust"). The trustees will have the responsibility to
invest all funds contributed by the Company to the Trust.
Upon stockholder approval of the Recognition Plan, the Company will
acquire Common Stock on behalf of the Recognition Plan, in an amount
necessary to purchase the number of shares of Common Stock equal to 4% of the
Common Stock sold in the Conversion and Reorganization, or 394,886 shares.
These shares will be acquired through open market purchases or from
authorized but unissued shares.
<PAGE>
14
GRANTS. Shares of Common Stock granted pursuant to the Recognition Plan
will be in the form of restricted stock payable over a five-year period at a
rate of 20% per year, beginning one year from the anniversary date of the
grant. A recipient will be entitled to all voting and other stockholder
rights with respect to shares which have been earned and allocated under the
Recognition Plan. However, until such shares have been earned and allocated,
they may not be sold, pledged or otherwise disposed of and are required to be
held in the Trust. In addition, any cash dividends or stock dividends
declared in respect of unvested share awards will be held by the Trust for
the benefit of the recipients and such dividends, including any interest
thereon, will be paid out proportionately by the Trust to the recipients
thereof as soon as practicable after the share awards become earned.
If a recipient terminates employment or service with the Company for
reasons other than death, disability or retirement, the recipient will
forfeit all rights to the allocated shares under restriction. All shares
subject to an award held by a recipient whose employment or service with the
Company or any subsidiary terminates due to death or disability shall be
deemed earned as of the recipient's last day of employment or service with
the Company or any subsidiary and shall be distributed as soon as practicable
thereafter; provided, however, that awards shall be distributed in accordance
with the Recognition Plan. In addition, in the event that a recipient's
employment or service with the Company or any subsidiary terminates due to
retirement all shares subject to an award held by a recipient shall be deemed
earned as of the recipient's last day of employment with or service to the
Company or any subsidiary and shall be distributed as soon as practicable
thereafter, provided that as of the date of such retirement, such treatment
is either authorized or is not prohibited by applicable laws and regulations.
All shares subject to an award held by a recipient also shall be deemed to
be earned in the event of a change in control of the Company, as defined in
the Recognition Plan, provided that as of the date of such change in control
of the Company, such treatment is either authorized or is not prohibited by
applicable laws and regulations.
Pursuant to the terms of the Recognition Plan, each of the non-employee
directors of the Company and the Bank (seven persons) will receive an award
of 14,103 shares upon approval of the Recognition Plan by stockholders.
FEDERAL INCOME TAX CONSEQUENCES. Pursuant to Section 83 of the Code,
recipients of Recognition Plan awards will recognize ordinary income in an
amount equal to the fair market value of the shares of Common Stock granted
to them at the time that the shares vest and become transferable. A
recipient of a Recognition Plan award may also elect, however, to accelerate
the recognition of income with respect to his or her grant to the time when
shares of Common Stock are first transferred to him or her, notwithstanding
the vesting schedule of such awards. The Company will be entitled to deduct
as a compensation expense for tax purposes the same amounts recognized as
income by recipients of Recognition Plan awards in the year in which such
amounts are included in income.
<PAGE>
15
ACCOUNTING TREATMENT. For accounting purposes, the Company will also
recognize a compensation expense as shares of Common Stock granted pursuant
to the Recognition Plan vest. Unlike the treatment of Recognition Plan
awards for tax purposes, however, the compensation expense recognized for
accounting purposes is limited to the fair market value of the Common Stock
at the date of grant to recipients, rather than the fair market value of the
Common Stock at the time that a Recognition Plan grant vests.
STOCKHOLDER APPROVAL. No shares will be granted under the Recognition
Plan unless the Recognition Plan is approved by stockholders.
SHARES TO BE GRANTED. The Board of Directors of the Company adopted the
Recognition Plan and the Committee established thereunder intends to grant
shares to executive officers and key employees of the Company and the Bank no
earlier than upon stockholder approval of the Recognition Plan. The
Recognition Plan provides that non-employee directors will be granted awards
pursuant to a set formula effective upon stockholder approval of the
Recognition Plan. The following table sets forth certain information with
respect to such grants.
NAME OF INDIVIDUAL OR NUMBER OF SHARES
NUMBER OF PERSONS IN GROUP TITLE AWARDED
- ---------------------------- ------------------------- -----------------
Charles H. Meacham President and Chief 59,232
Executive Officer
Patrick J. Ward Senior Vice President and 39,488
Chief Financial Officer
All executive officers as 157,952
a group (five persons)
All non-employee directors 98,720
as a group (seven persons)
All employees, not including 122,303
executive officers, as a group
83 persons)
In addition, it is anticipated that the three Senior Vice Presidents of
the Company will each be granted a Plan Share Award of 19,744 shares of
restricted stock.
The above grants of restricted stock to all recipients will vest over
five years at the rate of 20% per year commencing on the first anniversary of
the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION OF
THE 1996 RECOGNITION AND RETENTION PLAN AND TRUST.
<PAGE>
16
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information
concerning the compensation awarded to or paid by the Bank for services
rendered in all capacities during the past three years to the Chief Executive
Officer and the most highly compensated executive officers of the Bank and
its subsidiaries whose total compensation during the year ended December 31,
1995 exceeded $100,000.
<PAGE>
17
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation(4)
-------------------------------------- -------------------------
Other
Name and Annual Stock All Other
Principal Position Year Salary(1) Bonus(2) Compensation(3) Grants(5) Options(6) Compensation(7)
------------------ ---- --------- -------- --------------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles H. Meacham 1995 $307,400 $63,530 $0 $ 0 0 $18,830
Chairman, President and 1994 285,000 92,037 0 276,610 130,675 10,528
Chief Executive Officer 1993 295,000 80,086 0 0 0 1,685
Robert M. Lambert 1995 128,750 24,602 0 0 0 16,498
Senior Vice President and 1994 125,000 34,550 0 105,380 42,468 9,332
Chief Information Officer 1993 121,500 20,415 0 0 0 1,963
Patrick J. Ward 1995 146,160 27,928 0 0 0 15,570
Senior Vice President and 1994 126,000 34,827 0 105,380 42,468 7,428
Chief Financial Officer 1993 118,500 30,796 0 0 0 91
William J. Monnich 1995 116,336 22,744 0 79,210 32,704 13,320
Senior Vice President, 1994 85,684 20,030 0 9,330 9,764 5,049
Community Banking Division 1993 82,000 14,948 0 0 0 0
LeRoy T. Todd, Jr.(8) 1995 93,215 17,812 0 0 0 12,796
Senior Vice President and 1994 90,500 25,061 0 105,380 35,935 7,622
Corporate Secretary 1993 88,500 10,324 0 0 0 2,228
Russell I. Wakal(9) 1995 171,360 0 0 0 0 1,634
Senior Vice President 1994 168,000 53,054 0 131,720 55,536 10,478
of the Bank and 1993 150,000 0 0 0 0 1,635
President of ComNet
</TABLE>
<PAGE>
18
- -------------------------
(1) Includes amounts deferred by the named executive officer pursuant to the
VIP, a non-contributory defined contribution plan which is intended to
qualify under Section 401(k) of the Code and pursuant to which employees
may defer up to 10% of their compensation.
(2) Consists of bonuses paid under the Bank's Management Incentive
Compensation Plan which awards are based on a combination of the Bank's
financial performance and an individual's or group rating for the year
indicated.
(3) Does not include amounts attributable to miscellaneous benefits received
by executive officers, including the use of Bank-owned automobiles. In
the opinion of management of the Bank the costs to the Bank of providing
such benefits to any individual executive officer during the year ended
December 31, 1995 did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus reported for the individual.
(4) All amounts have been adjusted for the exchange of Common Stock for
common stock of the Bank in the Conversion and Reorganization on June
14, 1996.
(5) Represents the grant of restricted Common Stock pursuant to the MRP,
which were deemed to have had the indicated value at the date of grant,
and which had a fair market value of $622,573, $237,705, $237,105,
$199,215 and $237,105 for the grants to Messrs. Meacham, Lambert, Ward,
Monnich and Todd, respectively, at December 31, 1995. The awards vest
20% a year from the date of grant.
(6) Consists of awards granted pursuant to the 1993 Stock Incentive Plan
which options to purchase 10,000 shares are exercisable each year
commencing on the date of grant for Mr. Meacham and are exercisable at
the rate of 20% a year from the date of grant for all other executive
officers.
(7) Consists of amounts allocated during the year ended December 31, 1995 on
behalf of Messrs. Meacham, Lambert, Ward, Monnich, Todd and Wakal
pursuant to the ESOP of $17,145, $14,535, $15,570, $13,320, $10,508
and $-0-, respectively, and amounts paid in lieu of insurance benefits or
premiums previously paid to officers of the Bank of $1,685, $1,963, $-0-,
$-0-, $2,288 and $1,634, respectively.
(8) Mr. Todd is retiring at year-end.
(9) Mr. Wakal's employment with the Bank terminated in September 1995.
<PAGE>
19
DIRECTOR COMPENSATION
BOARD FEES. During the year ended December 31, 1995, each member of the
Board of Directors of the Bank received an annual fee of $8,200, plus $900
for each meeting attended. Board members also received a fee of $500 for
each committee meeting attended during 1995. In addition, each Board member
received $100 per month for health insurance cost reimbursement.
DIRECTORS' STOCK OPTION PLAN. The Company has adopted the 1993
Directors' Stock Option Plan (the "1993 Directors' Plan") which provides for
the grant of compensatory stock options to non-employee directors. Pursuant
to the 1993 Directors' Plan, each director of the Bank who was not an
employee of the Bank or any subsidiary was granted a compensatory stock
option to purchase 12,970 shares of Common Stock on January 21, 1994 and an
option to purchase 1,442 shares of Common Stock on January 21, 1995. Options
granted pursuant to the Directors' Plan have an exercise price equal to the
fair market value of a share of Common Stock on the date of grant and are
vested and exercisable six months from the date of grant. The share amounts
have been adjusted for the exchange in the Conversion and Reorganization.
RECOGNITION PLAN FOR DIRECTORS. The Company has adopted the 1993 MRP
which provides for the grant of restricted Common Stock to non-employee
directors. Pursuant to the 1993 MRP, each director of the Bank who was not an
employee of the Bank or any subsidiary was granted 3,044 shares of restricted
stock on January 21, 1994 (except that Mr. Welde was granted 9,131 shares)
and 339 shares of restricted stock on January 21, 1995 (except that Mr. Welde
was granted 1,016 shares). The restricted stock granted pursuant to the 1993
MRP vests 20% per year from the date of grant. The share amounts have been
adjusted for the exchange in the Conversion and Reorganization.
EMPLOYMENT AGREEMENTS
The Bank has entered into employment agreements with each of Messrs.
Meacham, Lambert, Todd, Ward, Monnich and Kehoe pursuant to which the Bank
agreed to employ these persons in their respective positions for a term of
three years at their current salary of $337,832, $131,711, $96,215, $156,099,
$127,000 and $145,040, respectively. Each such salary may be increased in
the discretion of the Board of Directors of the Bank and any such salary, as
it may be increased from time to time, may not be decreased during the term
of the employment agreement without the prior written consent of the affected
officer. On an annual basis, the Board of Directors of the Bank considers
renewal of each employment agreement for an additional year, and the term of
an employment agreement shall be extended for an additional one-year period
unless the Bank or the officer elects, not less than 30 days prior to the
annual anniversary date, not to extend the employment term. Each employment
agreement is terminable with or without cause by the Bank. The employment
agreements between the Bank and the officers provide that in the event of a
wrongful termination of employment (including a voluntary termination by the
officer as a
<PAGE>
20
result of the Bank's material breach of the agreement or as a result of
certain adverse actions which are taken with respect to his or her employment
following a Change in Control of the Bank, as defined) the officer would be
entitled to an amount of cash severance which is equal to the officer's base
salary as of the date of termination (two times base salary in the case of
Mr. Meacham), payable in 12 equal monthly installments (24 equal monthly
installments in the case of Mr. Meacham), and the officer would be entitled
to continued participation in certain employee benefit plans of the Bank
until the earlier of new employment with comparable benefits and 12 months
from the date of termination (24 months in the case of Mr. Meacham), provided
that in the event that there had been a Change in Control of the Bank prior
to the wrongful termination of the officer's employment, or there existed
certain specified events which could lead to a Change in Control of the Bank,
the cash severance would amount to two times the officer's average annual
compensation, including bonuses, during the preceding five years (three times
such average annual compensation in the case of Mr. Meacham) and continued
participation in certain employee benefit plans of the Bank until the earlier
of new employment with comparable benefits and 24 months from the date of
termination (36 months in the case of Mr. Meacham). Each employment
agreement provides that in the event that any of the payments to be made
thereunder or otherwise upon termination of employment are deemed to
constitute "excess parachute payments" within the meaning of Section 280G of
the Code, then such payments and benefits received thereunder shall be
reduced, in the manner determined by the officer, by the amount, if any,
which is the minimum necessary to result in no portion of the payments and
benefits being non-deductible by the Bank for federal income tax purposes.
Excess parachute payments generally are payments in excess of three times the
base amount, which is defined to mean the recipient's average annual
compensation from the employer includable in the recipient's gross income
during the most recent five taxable years ending before the date on which a
change in control of the employer occurred. Recipients of excess parachute
payments are subject to a 20% excise tax on the amount by which such payments
exceed the base amount, in addition to regular income taxes, and payments in
excess of the base amount are not deductible by the employer as compensation
expense for federal income tax purposes.
<PAGE>
21
STOCK OPTIONS
The following table sets forth certain information concerning grants of
stock options awarded to the named executive officers during the year ended
December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)
--------------------------------------------------------------------------------- ------------------------------
OPTIONS % OF TOTAL OPTIONS EXERCISE EXPIRATION
NAME GRANTED GRANTED TO EMPLOYEES(1) PRICE(2) DATE 5% 10%
------ --------- ----------------------- --------- ----------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Charles H. Meacham -- -- -- -- -- --
Robert M. Lambert -- -- -- -- -- --
Patrick J. Ward -- -- -- -- -- --
William J. Monnich 32,704 100% $6.38 2/23/05 $182,292 $383,633
LeRoy D. Todd, Jr. -- -- -- -- -- --
Russell I. Wakal -- -- -- -- -- --
</TABLE>
- ------------------
(1) Percentage of options granted to all employees during 1995.
(2) In all cases the exercise price was based on the fair market value of a
share of Common Stock on the date of grant.
(3) Assumes compounded rates of return for the remaining life of
the options and future stock prices of $10.39 and $16.54 at
compounded rates of return of 5% and 10%, respectively.
The following table sets forth certain information concerning exercises
of stock options by the named executive officers during the year ended
December 31, 1995 and options held at December 31, 1995
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT YEAR END OPTIONS AT YEAR END(1)
--------------------------- -----------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----- ------------- ---------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Charles H. Meacham -- -- 62,325 68,350 $375,000 $411,250
Robert M. Lambert -- -- 16,986 25,483 102,200 153,325
Patrick J. Ward -- -- 16,986 25,483 102,200 153,325
William J. Monnich -- -- 10,446 32,023 62,050 192,675
LeRoy D. Todd, Jr. -- -- 14,372 21,562 86,475 129,738
Russell I. Wakal -- -- -- -- -- --
</TABLE>
- ------------------
(1) Based on a per share market price of $10.83 at December 31, 1995, as
adjusted for the exchange in the Conversion and Reorganization.
<PAGE>
22
PENSION PLAN
The following table sets forth estimated annual benefits payable upon
retirement at age 65 to the named executive officers under the Bank's defined
benefit pension plan ("Pension Plan") based upon various levels of
compensation and years of service.
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
$125,000 $34,688 $46,250 $ 57,313 $ 69,375 $ 72,500
150,000 42,188 56,250 70,313 84,375 88,125
175,000 49,688 66,250 82,313 99,375 103,750
200,000 57,188 76,250 95,313 114,375 119,375
225,000 64,688 86,250 107,313 129,375 135,000
250,000 72,188 96,250 120,313 144,375 150,625
300,000 87,188 116,250 145,313 174,375 181,875
</TABLE>
The indicated amounts in the above table assume that participants elect a
straight life annuity form of benefit.
Benefits are generally payable under the Pension Plan upon retirement at
age 65 based upon an average of an employee's five highest consecutive annual
amounts of compensation, excluding bonuses, commissions, overtime pay and
other compensation, and excluding taxable fringe benefit amounts, during the
last ten years prior to retirement. Such amounts are within 10% of the total
compensation and bonus reported for the named individuals in the Summary
Compensation Table above.
The maximum annual compensation which may be taken into account under the
Internal Revenue Code (as adjusted from time to time by the Internal Revenue
Service) for calculating contributions under qualified defined benefit plans
currently is $150,000 and the maximum annual benefit permitted under such
plans currently is $118,800.
At December 31, 1995, Messrs. Meacham, Ward, Lambert, Todd and Monnich
had 21, three, nine, 47 and three years of credited service, respectively,
under the Pension Plan.
VOLUNTARY INVESTMENT PLAN
The Bank maintains a Voluntary Investment Plan ("VIP") for the benefit of
employees. The VIP is a non-contributory defined contribution plan which is
intended to qualify under Section 401(k) of the Code. Participants may
contribute to the VIP by salary reduction up to 15% (10% for highly
compensated employees) of annual compensation for the year. Such
contributions defer the employee's earnings up to a maximum of $9,240 in each
plan year. The Bank does not contribute to the VIP. Pursuant to the VIP and
the
<PAGE>
23
trust agreement entered into between the Bank and the VIP trustee, all
funds contributed are held in a trust fund, which are invested at the
direction of the employee in four separate funds; a certificate of deposit
fund, a mutual stock fund, a GNMA fund, or a Common Stock fund.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has established an Employee Stock Ownership Plan ("ESOP") for
employees age 21 or older who have at least one year of credited service with
the Bank. The ESOP is funded by the Company's contributions made in cash
(which primarily will be invested in Common Stock) or Common Stock. Benefits
may be paid either in shares of Common Stock or in cash.
In June 1996, the ESOP borrowed $9.3 million from the Company to purchase
7,897,720 shares of Common Stock in the Conversion and Reorganization and to
repay the balance of the loan from an unaffiliated lender used to purchase
shares of common stock of the Bank in the Bank's initial public offering in
January 1994. The Company makes scheduled discretionary cash contributions
to the ESOP sufficient to amortize the principal and interest on the loan,
which has a maturity of ten years. The Company may, in any plan year, make
additional discretionary contributions for the benefit of plan participants
in either cash or shares of Common Stock, which may be acquired through the
purchase of outstanding shares in the market or from individual stockholders,
upon the original issuance of additional shares by the Company or upon the
sale of treasury shares by the Company. Such purchases, if made, would be
funded through additional borrowings by the ESOP or additional contributions
from the Company. The timing, amount and manner of future contributions to
the ESOP will be affected by various factors, including prevailing regulatory
policies, the requirements of applicable laws and regulations and market
conditions.
Generally accepted accounting principles require that any borrowing by
the ESOP be reflected as a liability on the Company's statement of financial
condition. In addition, shares purchased with borrowed funds will, to the
extent of the borrowings, be excluded from stockholders' equity, representing
unearned compensation to employees for future services not yet performed.
Consequently, to the extent of the ESOP purchases of already issued shares in
the open market, the Company's consolidated liabilities will increase to the
extent of the ESOP's borrowings, and total and per share stockholders' equity
will be reduced to reflect such borrowings. To the extent of the ESOP
purchases of newly-issued shares from the Company, total stockholders' equity
would neither increase nor decrease, but per share stockholders' equity and
per share net income would decrease because of the increase in the number of
outstanding shares. In either case, as the borrowings used to fund ESOP
purchases are repaid, total stockholders' equity will correspondingly
increase.
Shares purchased by the ESOP with the proceeds of the loan are held in a
loan suspense account and released on a pro rata basis as debt service
payments are made.
<PAGE>
24
Discretionary contributions to the ESOP and shares released from the suspense
account will be allocated among participants on the basis of compensation.
Forfeitures will be reallocated among remaining participating employees and
may reduce any amount the Company might otherwise have contributed to the
ESOP. Benefits may be payable upon retirement, early retirement, disability
or separation from service. The Company's contributions to the ESOP are not
fixed, so benefits payable under the ESOP cannot be estimated.
A Committee appointed by the Board of Directors of the Company
administers the ESOP ("ESOP Committee") and an unaffiliated financial
institution has been appointed to act as trustee of the related trust. The
ESOP Committee may instruct the trustee regarding investment of funds
contributed to the ESOP. Under the ESOP, the trustee must vote all allocated
shares held in the ESOP in accordance with the instructions of the
participating employees, and allocated shares for which employees do not give
instructions will be voted in the same ratio on any matter as to those shares
for which instructions are given. Unallocated shares held in the ESOP will be
voted by the ESOP trustee after considering the recommendation of the ESOP
Committee.
The ESOP is subject to the requirements of ERISA and the regulations of
the IRS and the Department of Labor thereunder.
SUPPLEMENTAL BENEFIT PLANS
The Board of Directors of the Bank has authorized an excess benefit plan
("EBP") and a supplemental executive retirement plan ("SERP") to provide
certain additional retirement benefits to Mr. Meacham. The EBP provides that
Mr. Meacham shall receive an annual allocation of stock units representing
shares of common stock of the Bank. The number of stock units allocable to
his benefit each year shall be equal to the difference between the annual
allocation of shares that would have been made to him in the Bank's ESOP,
assuming that his compensation was $235,840, the previous limitation under
the Code prior to amendments which reduced such limitation to $150,000 as set
forth in Section 401(a)(17) of the Code, minus the number of shares actually
allocated to his ESOP account in a particular year. The SERP provides that
Mr. Meacham shall receive a supplemental retirement benefit at or after his
normal retirement date which is calculated to produce a total retirement
benefit payable by the Bank equal to 50% of his final average earnings, as
defined, with certain offsets, and a reduction in the case of early
retirement. For purposes of the SERP, Mr. Meacham's final average earnings
means the average of his highest annual compensation received during any five
of the current and preceding ten calendar years, with certain adjustments and
exclusions.
<PAGE>
25
INDEBTEDNESS OF MANAGEMENT
In accordance with applicable federal laws and regulations, the Bank used
to offer mortgage loans to its directors, officers and full-time employees
for the financing of their primary residences and certain other loans.
Except for interest rates and fees, these loans generally were made on
substantially the same terms as those prevailing at the time for comparable
transactions with non-affiliated persons. It is the belief of management
that these loans neither involve more than the normal risk of collectibility
nor present other unfavorable features.
As a result of the application of Section 22(h) of the Federal Reserve
Act to savings associations, effective August 1989, any credit extended by a
savings association, such as the Bank to its executive officers, directors
and, to the extent otherwise permitted, principal stockholder(s), or any
related interest of the foregoing, must be (i) on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions by the savings association with
non-affiliated parties and (ii) not involve more than the normal risk of
repayment or present other unfavorable features. As of December 31, 1995,
four of the directors and executive officers of the Company or the Bank had
aggregate loan balances in excess of $60,000, which amounted to $583,938 in
the aggregate, or approximately less than 1% of the Bank's retained earnings
as of such date. All such loans were made by the Bank in the ordinary course
of business and were not made with favorable terms nor did they involve more
than the normal risk of collectibility.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders
of the Company, which is scheduled to be held in April 1997, must be received
at the principal executive offices of the Company, 70 Valley Stream Parkway,
P.O. Box 2100, Valley Forge, Pennsylvania 19482, Attention: LeRoy D. Todd,
Jr., Senior Vice President and Secretary, no later than December 23, 1996.
If such proposal is in compliance with all applicable requirements, it will
be included in the proxy statement and set forth on the form of proxy issued
for such annual meeting of stockholders. It is urged that any such proposals
be sent certified mail, return receipt requested.
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26
OTHER MATTERS
Management is not aware of any business to come before the Special
Meeting other than the matters described above in this Proxy Statement.
However, if any other matters should properly come before the meeting, it is
intended that the proxies solicited hereby will be voted with respect to
those other matters in accordance with the judgment of the persons voting the
proxies.
The cost of the solicitation of proxies will be borne by the Company.
The Company has retained D.F. King & Co., Inc., a professional proxy
solicitation firm, to assist in the solicitation of proxies. Such firm will
be paid a fee of $4,500, plus reimbursement for out-of-pocket expenses. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending the proxy
materials to the beneficial owners of the Common Stock. In addition to
solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
<PAGE>
APPENDIX A
COMMONWEALTH BANCORP, INC.
1996 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Commonwealth Bancorp, Inc. (the "Corporation") hereby establishes this 1996
Stock Option Plan (the "Plan") upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of the
Corporation and its Subsidiary Companies by providing Employees and Non-Employee
Directors with a proprietary interest in the Corporation as an incentive to
contribute to the success of the Corporation and its Subsidiary Companies, and
rewarding Employees for outstanding performance and the attainment of targeted
goals. All Incentive Stock Options issued under this Plan are intended to
comply with the requirements of Section 422 of the Code, and the regulations
thereunder, and all provisions hereunder shall be read, interpreted and applied
with that purpose in mind.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option or Stock Appreciation Right granted pursuant
to the terms of this Plan.
3.02 "Bank" means Commonwealth Savings Bank, the wholly owned subsidiary of
the Corporation.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in control of the Corporation" shall mean a change in control
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or
not the Corporation in fact is required to comply with Regulation 14A
thereunder; provided that, without limitation, such a change in control shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the Corporation, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing 25% or
more of the combined voting power of the Corporation's then outstanding
securities, or (ii) during any period of
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twenty-four consecutive months during the term of an Option, individuals who
at the beginning of such period constitute the Board of the Corporation cease
for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Corporation's stockholders,
of each director who was not a director at the date of grant has been
approved in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the period.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means a committee of two or more directors appointed by
the Board pursuant to Article IV hereof each of whom shall be a Non-Employee
Director as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any
successor thereto.
3.07 "Common Stock" means shares of the common stock, $.10 par value per
share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which qualifies
an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company, or, if
no such plan applies, which would qualify such individual for disability
benefits under the long-term disability plan maintained by the Corporation,
if such individual were covered by that plan.
3.09 "Effective Date" means the day upon which the Board approves this
Plan.
3.10 "Employee" means any person who is employed by the Corporation or a
Subsidiary Company, or is an Officer of the Corporation or a Subsidiary
Company, but not including directors who are not also Officers of or
otherwise employed by the Corporation or a Subsidiary Company.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
3.12 "Fair Market Value" shall be equal to the fair market value per
share of the Corporation's Common Stock on the date an Award is granted. For
purposes hereof, the Fair Market Value of a share of Common Stock shall be
the closing sale price of a share of Common Stock on the date in question
(or, if such day is not a trading day in the U.S. markets, on the nearest
preceding trading day), as reported with respect to the principal market (or
the composite of the markets, if more than one) or national quotation system
in which such shares are then traded, or if no such closing prices are
reported, the mean between the high bid and low asked prices that day on the
principal market or national quotation system then in use, or if no such
quotations are available, the price furnished by a professional securities
dealer making a market in such shares selected by the Committee.
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3.13 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.14 "Non-Employee Director" means a member of the Board of the
Corporation or Board of Directors of the Bank, including a Director Emeritus
of the Board of the Corporation or Board of Directors of the Bank, who is not
an Officer or Employee of the Corporation or any Subsidiary Company.
3.15 "Non-Qualified Option" means any Option granted under this Plan
which is not an Incentive Stock Option.
3.16 "Offering" means the offering of Common Stock to the public pursuant
to the conversion of Commonwealth Mutual Holding Company to the stock form
and the reorganization of Commonwealth Savings Bank as a subsidiary of the
Corporation.
3.17 "Officer" means an Employee whose position in the Corporation or
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.18 "Option" means a right granted under this Plan to purchase Common
Stock.
3.19 "Optionee" means an Employee or Non-Employee Director or former
Employee or Non-Employee Director to whom an Option is granted under the Plan.
3.20 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained
by the Corporation or a Subsidiary Corporation, or, if no such plan is
applicable, which would constitute "retirement" under the Corporation's
pension benefit plan, if such individual were a participant in that plan.
3.21 "Stock Appreciation Right" means a right to surrender an Option in
consideration for a payment by the Corporation in cash and/or Common Stock,
as provided in the discretion of the Committee in accordance with Section
8.11.
3.22 "Subsidiary Companies" means those subsidiaries of the Corporation,
including the Bank, which meet the definition of "subsidiary corporations"
set forth in Section 425(f) of the Code, at the time of granting of the
Option in question.
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ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 DUTIES OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority to adopt,
amend and rescind such rules, regulations and procedures as, in its opinion,
may be advisable in the administration of the Plan, including, without
limitation, rules, regulations and procedures which (i) deal with
satisfaction of an Optionee's tax withholding obligation pursuant to Section
12.02 hereof, (ii) include arrangements to facilitate the Optionee's ability
to borrow funds for payment of the exercise or purchase price of an Award, if
applicable, from securities brokers and dealers, and (iii) include
arrangements which provide for the payment of some or all of such exercise or
purchase price by delivery of previously-owned shares of Common Stock or
other property and/or by withholding some of the shares of Common Stock which
are being acquired. The interpretation and construction by the Committee of
any provisions of the Plan, any rule, regulation or procedure adopted by it
pursuant thereto or of any Award shall be final and binding in the absence of
action by the Board.
4.02 APPOINTMENT AND OPERATION OF THE COMMITTEE. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the
Board. The Board from time to time may remove members from, or add members
to, the Committee, provided the Committee shall continue to consist of two or
more members of the Board, each of whom shall be a Non-Employee Director, as
defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor thereto.
In addition, each member of the Committee shall be an "outside director"
within the meaning of Section 162(m) of the Code and regulations thereunder
at such times as is required under such regulations. The Committee shall act
by vote or written consent of a majority of its members. Subject to the
express provisions and limitations of the Plan, the Committee may adopt such
rules, regulations and procedures as it deems appropriate for the conduct of
its affairs. It may appoint one of its members to be chairman and any
person, whether or not a member, to be its secretary or agent. The Committee
shall report its actions and decisions to the Board at appropriate times but
in no event less than one time per calendar year.
4.03 REVOCATION FOR MISCONDUCT. The Board or the Committee may by
resolution immediately revoke, rescind and terminate any Option, or portion
thereof, to the extent not yet vested, or any Stock Appreciation Right, to
the extent not yet exercised, previously granted or awarded under this Plan
to an Employee who is discharged from the employ of the Corporation or a
Subsidiary Company for cause, which, for purposes hereof, shall mean
termination because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order. Options granted to a Non-Employee Director who
is removed for cause pursuant to the Corporation's Articles of Incorporation
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and Bylaws or the Bank's Charter and Bylaws shall terminate as of the
effective date of such removal.
4.04 LIMITATION ON LIABILITY. Neither the members of the Board nor any
member of the Committee shall be liable for any action or determination made
in good faith with respect to the Plan, any rule, regulation or procedure
adopted by it pursuant thereto or any Awards granted under it. If a member
of the Board or the Committee is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of anything done
or not done by him in such capacity under or with respect to the Plan, the
Corporation shall, subject to the requirements of applicable laws and
regulations, indemnify such member against all liabilities and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably
believed to be in the best interests of the Corporation and its Subsidiary
Companies and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
4.05 COMPLIANCE WITH LAW AND REGULATIONS. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as
may be required. The Corporation shall not be required to issue or deliver
any certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any federal or state law or any rule or
regulation of any government body, which the Corporation shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option or
Stock Appreciation Right may be exercised if such exercise would be contrary
to applicable laws and regulations.
4.06 RESTRICTIONS ON TRANSFER. The Corporation may place a legend upon
any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees of the Corporation and its
Subsidiary Companies as may be designated from time to time by the Board or
the Committee. Awards may not be granted to individuals who are not
Employees or Non-Employee Directors of either the Corporation or its
Subsidiary Companies. Non-Employee Directors shall be eligible to receive
only Non-Qualified Options pursuant to Section 8.02 of the Plan.
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ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 OPTION SHARES. The aggregate number of shares of Common Stock which
may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be 987,215, which is equal to 10.0% of the shares of Common
Stock issued in the Offering. None of such shares shall be the subject of
more than one Award at any time, but if an Option as to any shares is
surrendered before exercise, or expires or terminates for any reason without
having been exercised in full, or for any other reason ceases to be
exercisable, the number of shares covered thereby shall again become
available for grant under the Plan as if no Awards had been previously
granted with respect to such shares. Notwithstanding the foregoing, if an
Option is surrendered in connection with the exercise of a Stock Appreciation
Right, the number of shares covered thereby shall not be available for grant
under the Plan. During the time this Plan remains in effect, grants to each
Employee and each Non-Employee Director shall not exceed 25% and 5% of the
shares of Common Stock available under the Plan, respectively.
6.02 SOURCE OF SHARES. The shares of Common Stock issued under the Plan
may be authorized but unissued shares, treasury shares or shares purchased by
the Corporation on the open market or from private sources for use under the
Plan.
ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
7.01 DETERMINATION OF AWARDS. The Board or the Committee shall, in its
discretion, determine from time to time which Employees will be granted
Awards under the Plan, the number of shares of Common Stock subject to each
Award, whether each Option will be an Incentive Stock Option or a
Non-Qualified Stock Option and the exercise price of an Option. In making
all such determinations there shall be taken into account the duties,
responsibilities and performance of each respective Employee, his present and
potential contributions to the growth and success of the Corporation, his
salary and such other factors deemed relevant to accomplishing the purposes
of the Plan.
7.02 MAXIMUM AWARDS TO EMPLOYEES. Notwithstanding anything contained in
this Plan to the contrary, the maximum number of shares of Common Stock to
which Awards may be granted to any Employee in any calendar year shall be
246,804.
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ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 STOCK OPTION AGREEMENT. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which
shall set forth the total number of shares of Common Stock to which it
pertains, the exercise price, whether it is a Non-Qualified Option or an
Incentive Stock Option, and such other terms, conditions, restrictions and
privileges as the Board or the Committee in each instance shall deem
appropriate, provided they are not inconsistent with the terms, conditions
and provisions of this Plan. Each Optionee shall receive a copy of his
executed Stock Option Agreement.
8.02 GRANTS TO NON-EMPLOYEE DIRECTORS. Options to purchase 29,616 shares
of Common Stock shall be granted to each Non-Employee Director as of the day
that the Plan is approved by stockholders of the Corporation, effective at
such time and with a per share exercise price equal to the Fair Market Value
of a share of Common Stock on such date. Awards made to Non-Employee
Directors in the aggregate may not exceed 296,164 shares (or 30% of the
number of shares available under this Plan) and no individual Non-Employee
Director may receive Awards in excess of 49,361 shares (or 5% of the number
of shares available under this Plan).
8.03 OPTION EXERCISE PRICE.
(a) INCENTIVE STOCK OPTIONS. The per share price at which the
subject Common Stock may be purchased upon exercise of an Incentive Stock
Option shall be no less than one hundred percent (100%) of the Fair Market
Value of a share of Common Stock at the time such Incentive Stock Option is
granted, except as provided in Section 8.10(b).
(b) NON-QUALIFIED OPTIONS. The per share price at which the subject
Common Stock may be purchased upon exercise of a Non-Qualified Option shall
be established by the Committee at the time of grant, but in no event shall
be less than the greater of (i) the par value or (ii) one hundred percent
(100%) of the Fair Market Value of a share of Common Stock at the time such
Non-Qualified Option is granted.
8.04 VESTING AND EXERCISE OF OPTIONS.
(a) GENERAL RULES. Incentive Stock Options and Non-Qualified
Options granted to Employees shall become vested and exercisable at the rate
of 20% per year on each annual anniversary of the date the Option was
granted, and the right to exercise shall be cumulative. Notwithstanding the
foregoing, no vesting shall occur on or after an Employee's employment or
service as a Non-Employee Director with the Corporation and all Subsidiary
Companies is terminated for any reason other than his death or Disability.
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In determining the number of shares of Common Stock with respect to which
Options are vested and/or exercisable, fractional shares will be rounded up
to the nearest whole number if the fraction is 0.5 or higher, and down if it
is less.
(b) ACCELERATED VESTING. Unless the Committee shall specifically
state otherwise at the time an Option is granted, all Options granted under
this Plan shall become vested and exercisable in full on the date an Optionee
terminates his employment with the Corporation or a Subsidiary Company or
service as a Non-Employee Director because of his death or Disability. All
Options hereunder shall become immediately vested and exercisable in full on
the date an Optionee terminates his employment with the Corporation or a
Subsidiary Company or service as a Non-Employee Director due to Retirement or
as the result of a Change in Control of the Corporation if, as of such date
of such Retirement or Change in Control of the Corporation, such treatment is
either authorized or is not prohibited by applicable laws and regulations.
8.05 DURATION OF OPTIONS.
(a) GENERAL RULE. Except as provided in Sections 8.05(b) and 8.10,
each Option or portion thereof granted to an Optionee shall be exercisable at
any time on or after it vests and becomes exercisable until the earlier of
(i) ten (10) years after its date of grant or (ii) three (3) months after the
date on which the Optionee ceases to be employed by the Corporation and all
Subsidiary Companies or serve as a Non-Employee Director, unless the Board or
the Committee in its discretion decides at the time of grant or thereafter to
extend such period of exercise upon termination of employment or service from
three (3) months to a period not exceeding five (5) years.
(b) EXCEPTIONS. If an Employee dies while in the employ of the
Corporation or a Subsidiary Company or terminates employment with the
Corporation or a Subsidiary Company as a result of Disability without having
fully exercised his Options, the Optionee or the executors, administrators,
legatees or distributees of his estate shall have the right, during the
twelve-month period following the earlier of his death or termination due to
Disability, to exercise such Options. If a Non-Employee Director dies while
serving as a Non-Employee Director or terminates his service to the
Corporation or a Subsidiary Company as a result of Disability without having
fully exercised his Options, the Non-Employee Director or the executors,
administrators, legatees or distributees of his estate shall have the right,
during the twelve-month period following the earlier of his death or
termination due to Disability, to exercise such Options. In no event,
however, shall any Option be exercisable more than ten (10) years from the
date it was granted. In the event of Retirement, an Employee or Non-Employee
Director shall be entitled to the same time period set forth above in this
Section 8.05(b) to exercise an Option if, as of the date of such Retirement,
such treatment is either authorized or is not prohibited by applicable laws
and regulations.
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8.06 NONASSIGNABILITY. Options shall not be transferable by an Optionee
except by will or the laws of descent or distribution, and during an
Optionee's lifetime shall be exercisable only by such Optionee or the
Optionee's guardian or legal representative. Notwithstanding the foregoing,
or any other provision of this Plan, an Optionee who holds Non-Qualified
Options may transfer such Options to his or her spouse, lineal ascendants,
lineal descendants, or to a duly established trust for the benefit of one or
more of these individuals. Options so transferred may thereafter be
transferred only to the Optionee who originally received the grant or to an
individual or trust to whom the Optionee could have initially transferred the
Option pursuant to this Section 8.06. Options which are transferred pursuant
to this Section 8.06 shall be exercisable by the transferee according to the
same terms and conditions as applied to the Optionee.
8.07 MANNER OF EXERCISE. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be
set forth in the written Stock Option Agreement provided for in Section 8.01
above.
8.08 PAYMENT FOR SHARES. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of any Option shall
be made to the Corporation upon exercise of the Option. All shares sold
under the Plan shall be fully paid and nonassessable. Payment for shares may
be made by the Optionee in cash or, at the discretion of the Board or the
Committee, by delivering shares of Common Stock (including shares acquired
pursuant to the exercise of an Option) or other property equal in Fair Market
Value to the purchase price of the shares to be acquired pursuant to the
Option, by withholding some of the shares of Common Stock which are being
purchased upon exercise of an Option, or any combination of the foregoing.
8.09 VOTING AND DIVIDEND RIGHTS. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded
on the Corporation's stockholder ledger as the holder of record of such
shares acquired pursuant to an exercise of an Option.
8.10 ADDITIONAL TERMS APPLICABLE TO INCENTIVE STOCK OPTIONS. All Options
issued under the Plan as Incentive Stock Options will be subject, in addition
to the terms detailed in Sections 8.01 to 8.09 above, to those contained in
this Section 8.10.
(a) Notwithstanding any contrary provisions contained elsewhere in
this Plan and as long as required by Section 422 of the Code, the aggregate
Fair Market Value, determined as of the time an Incentive Stock Option is
granted, of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
under this Plan, and stock options that satisfy the requirements of Section
422 of the Code under any other stock option plan or plans maintained by the
Corporation (or any parent or Subsidiary Company), shall not exceed $100,000.
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(b) LIMITATION ON TEN PERCENT STOCKHOLDERS. The price at which
shares of Common Stock may be purchased upon exercise of an Incentive Stock
Option granted to an individual who, at the time such Incentive Stock Option
is granted, owns, directly or indirectly, more than ten percent (10%) of the
total combined voting power of all classes of stock issued to stockholders of
the Corporation or any Subsidiary Company, shall be no less than one hundred
and ten percent (110%) of the Fair Market Value of a share of the Common
Stock of the Corporation at the time of grant, and such Incentive Stock
Option shall by its terms not be exercisable after the earlier of the date
determined under Section 8.04 or the expiration of five (5) years from the
date such Incentive Stock Option is granted.
(c) NOTICE OF DISPOSITION; WITHHOLDING; ESCROW. An Optionee shall
immediately notify the Corporation in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section 421 of the Code) of any shares of
Common Stock acquired through exercise of an Incentive Stock Option, within
two (2) years after the grant of such Incentive Stock Option or within one
(1) year after the acquisition of such shares, setting forth the date and
manner of disposition, the number of shares disposed of and the price at
which such shares were disposed of. The Corporation shall be entitled to
withhold from any compensation or other payments then or thereafter due to
the Optionee such amounts as may be necessary to satisfy any withholding
requirements of federal or state law or regulation and, further, to collect
from the Optionee any additional amounts which may be required for such
purpose. The Committee may, in its discretion, require shares of Common
Stock acquired by an Optionee upon exercise of an Incentive Stock Option to
be held in an escrow arrangement for the purpose of enabling compliance with
the provisions of this Section 8.10(c).
8.11 STOCK APPRECIATION RIGHTS.
(a) GENERAL TERMS AND CONDITIONS. The Board or the Committee may,
but shall not be obligated to, authorize the Corporation, on such terms and
conditions as it deems appropriate in each case, to grant rights to Optionees
to surrender an exercisable Option, or any portion thereof, in consideration
for the payment by the Corporation of an amount equal to the excess of the
Fair Market Value of the shares of Common Stock subject to the Option, or
portion thereof, surrendered over the exercise price of the Option with
respect to such shares (any such authorized surrender and payment being
hereinafter referred to as a "Stock Appreciation Right"). Such payment, at
the discretion of the Board or the Committee, may be made in shares of Common
Stock valued at the then Fair Market Value thereof, or in cash, or partly in
cash and partly in shares of Common Stock.
The terms and conditions set with respect to a Stock Appreciation Right
may include (without limitation), subject to other provisions of this Section
8.11 and the Plan: the period during which, date by which or event upon which
the Stock Appreciation Right may be exercised; the method for valuing shares
of Common Stock for purposes of this Section 8.11; a ceiling on the amount of
consideration which the Corporation may pay in connection with exercise and
cancellation of the Stock Appreciation Right; and arrangements for income tax
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withholding. The Board or the Committee shall have complete discretion to
determine whether, when and to whom Stock Appreciation Rights may be granted.
Notwithstanding the foregoing, the Corporation may not permit the exercise of
a Stock Appreciation Right issued pursuant to this Plan until the Corporation
has been subject to the reporting requirements of Section 13 of the Exchange
Act for a period of at least one year prior to the exercise of any such Stock
Appreciation Right and until a Stock Appreciation Right issued pursuant to
this Plan has been outstanding for at least six months from the date of grant.
(b) TIME LIMITATIONS. If a holder of a Stock Appreciation Right
terminates service with the Corporation as an Officer or Employee, the Stock
Appreciation Right may be exercised only within the period, if any, within
which the Option to which it relates may be exercised.
(c) EFFECTS OF EXERCISE OF STOCK APPRECIATION RIGHTS OR OPTIONS.
Upon the exercise of a Stock Appreciation Right, the number of shares of
Common Stock available under the Option to which it relates shall decrease by
a number equal to the number of shares for which the Stock Appreciation Right
was exercised. Upon the exercise of an Option, any related Stock Appreciation
Right shall terminate as to any number of shares of Common Stock subject to
the Stock Appreciation Right that exceeds the total number of shares for
which the Option remains unexercised.
(d) TIME OF GRANT. A Stock Appreciation Right granted in
connection with an Incentive Stock Option must be granted concurrently with
the Option to which it relates, while a Stock Appreciation Right granted in
connection with a Non-Qualified Option may be granted concurrently with the
Option to which it relates or at any time thereafter prior to the exercise or
expiration of such Option.
(e) NON-TRANSFERABLE. The holder of a Stock Appreciation Right may
not transfer or assign the Stock Appreciation Right otherwise than by will or
in accordance with the laws of descent and distribution, and during a
holder's lifetime a Stock Appreciation Right may be exercisable only by the
holder.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any outstanding Award relates,
the maximum number of shares that can be covered by Award to each Employee
and each Non-Employee Director and the exercise price per share of Common
Stock under any outstanding Option shall be proportionately adjusted for any
increase or decrease in the total number of outstanding shares of Common
Stock issued subsequent to the effective date of this Plan resulting from a
split, subdivision or consolidation of shares or any other capital
adjustment, the payment of a stock dividend, or other increase or decrease in
such shares effected without receipt or
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payment of consideration by the Corporation. If, upon a merger,
consolidation, reorganization, liquidation, recapitalization or the like of
the Corporation, the shares of the Corporation's Common Stock shall be
exchanged for other securities of the Corporation or of another corporation,
each recipient of an Award shall be entitled, subject to the conditions
herein stated, to purchase or acquire such number of shares of Common Stock
or amount of other securities of the Corporation or such other corporation as
were exchangeable for the number of shares of Common Stock of the Corporation
which such optionees would have been entitled to purchase or acquire except
for such action, and appropriate adjustments shall be made to the per share
exercise price of outstanding Options. Notwithstanding any provision to the
contrary, the exercise price of shares subject to outstanding Awards may be
proportionately adjusted upon the payment of a special large and nonrecurring
dividend that has the effect of a return of capital to the stockholders.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to any required stockholder approval or any stockholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits
under tax, securities or other laws or satisfying any applicable stock
exchange listing requirements. The Board may not, without the consent of the
holder of an Award, alter or impair any Award previously granted or awarded
under this Plan as specifically authorized herein.
ARTICLE XI
EMPLOYMENT AND SERVICE RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create
any right on the part of any Employee or Non-Employee Director to continue in
such capacity.
ARTICLE XII
WITHHOLDING
12.01 TAX WITHHOLDING. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the
Corporation the amount required to be withheld as a condition to delivering
the shares acquired pursuant to an Award. The Corporation also may withhold
or collect amounts with respect to a disqualifying disposition of shares of
Common Stock acquired pursuant to exercise of an Incentive Stock Option, as
provided in Section 8.10(c).
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12.02 METHODS OF TAX WITHHOLDING. The Board or the Committee is
authorized to adopt rules, regulations or procedures which provide for the
satisfaction of an Optionee's tax withholding obligation by the retention of
shares of Common Stock to which the Employee would otherwise be entitled
pursuant to an Award and/or by the Optionee's delivery of previously-owned
shares of Common Stock or other property.
ARTICLE XIII
EFFECTIVE DATE OF THE PLAN; TERM
13.01 EFFECTIVE DATE OF THE PLAN. This Plan shall become effective on
the Effective Date, and Awards may be granted hereunder no earlier than the
date that this Plan is approved by stockholders of the Corporation and prior
to the termination of the Plan, provided that this Plan is approved by
stockholders of the Corporation pursuant to Article XIV hereof.
13.02 TERM OF THE PLAN. Unless sooner terminated, this Plan shall remain
in effect for a period of ten (10) years ending on the tenth anniversary of
the Effective Date. Termination of the Plan shall not affect any Awards
previously granted and such Awards shall remain valid and in effect until
they have been fully exercised or earned, are surrendered or by their terms
expire or are forfeited.
ARTICLE XIV
STOCKHOLDER APPROVAL
The Corporation shall submit this Plan to stockholders for approval at a
meeting of stockholders of the Corporation held within twelve (12) months
following the Effective Date in order to meet the requirements of (i) Section
422 of the Code and regulations thereunder, (ii) Section 162(m) of the Code
and regulations thereunder, (iii) the National Association of Securities
Dealers, Inc. for quotation of the Common Stock on the Nasdaq Stock Market's
National Market, and (iv) regulations of the Office of Thrift Supervision.
ARTICLE XV
MISCELLANEOUS
15.01 GOVERNING LAW. To the extent not governed by federal law, this
Plan shall be construed under the laws of the Commonwealth of Pennsylvania.
15.02 PRONOUNS. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
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APPENDIX B
COMMONWEALTH BANCORP, INC.
1996 RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Commonwealth Bancorp, Inc. (the "Corporation") hereby establishes
the 1996 Recognition and Retention Plan (the "Plan") and Trust (the "Trust")
upon the terms and conditions hereinafter stated in this 1996 Recognition and
Retention Plan and Trust Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and
accretions thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain personnel of experience and
ability in key positions by providing Employees and Non-Employee Directors of
the Corporation and Commonwealth Savings Bank ("Bank") with a proprietary
interest in the Corporation as compensation for their contributions to the
Corporation, the Bank, and any other Subsidiaries and as an incentive to make
such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with an
initial capital letter, unless the context clearly indicates otherwise, shall
have the meanings set forth below. Wherever appropriate, the masculine
pronouns shall include the feminine pronouns and the singular shall include
the plural.
3.01 "Bank" means Commonwealth Savings Bank, the wholly-owned subsidiary of
the Corporation.
3.02 "Beneficiary" means the person or persons designated by a Recipient
to receive any benefits payable under the Plan in the event of such
Recipient's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time
to time by similar written notice to the Committee. In the absence of a
written designation, the Beneficiary shall be the Recipient's surviving
spouse, if any, or if none, his estate.
<PAGE>
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in control of the Corporation" shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act,
whether or not the Corporation in fact is required to comply with Regulation
14A thereunder; provided that, without limitation, such a change in control
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Corporation, is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Corporation
representing 25% or more of the combined voting power of the Corporation's
then outstanding securities, or (ii) during any period of twenty-four
consecutive months during the term of a Plan Share Award, individuals who at
the beginning of such period constitute the Board of the Corporation cease
for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Corporation's stockholders,
of each director who was not a director at the date of grant has been
approved in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the period.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means the committee appointed by the Board pursuant to
Article IV hereof.
3.07 "Common Stock" means shares of the common stock, $.10 par value per
share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which qualifies
an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or any Subsidiary or, if no
such plan applies, which would qualify such individual for disability
benefits under the long-term disability plan maintained by the Corporation,
if such individual were covered by that plan.
3.09 "Effective Date" means the day upon which the Board approves this
Plan.
3.10 "Employee" means any person who is employed by the Corporation, the
Bank, or any Subsidiary, or is an officer of the Corporation, the Bank, or
any Subsidiary, including officers or other employees who may be directors of
the Corporation.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
3.12 "Non-Employee Director" means a member of the Board of the
Corporation or the Board of Directors of the Bank, including a Director
Emeritus of the Board of the Corporation or the Board of Directors of the
Bank, who is not an Employee.
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3.13 "Plan Shares" or "Shares" means shares of Common Stock held in the
Trust which may be distributed to a Recipient pursuant to the Plan.
3.14 "Plan Share Award" or "Award" means a right granted under this Plan to
receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII.
3.15 "Recipient" means an Employee or Non-Employee Director who receives a
Plan Share Award under the Plan.
3.16 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained
by the Corporation or a Subsidiary Corporation, or, if no such plan is
applicable, which would constitute "retirement" under the Corporation's
pension benefit plan, if such individual were a participant in that plan.
3.17 "Subsidiary" means the Bank and any other subsidiaries of the
Corporation or the Bank which, with the consent of the Board, agree to
participate in this Plan.
3.18 "Trustee" means such firm, entity or persons approved by the Board to
hold legal title to the Plan for the purposes set forth herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of
the Board, each of whom shall be a Non-Employee Director, as defined in Rule
16b-3(b)(3)(i) of the Exchange Act. The Committee shall have all of the
powers allocated to it in this and other Sections of the Plan. The
interpretation and construction by the Committee of any provisions of the
Plan or of any Plan Share Award granted hereunder shall be final and binding
in the absence of action by the Board. The Committee shall act by vote or
written consent of a majority of its members. Subject to the express
provisions and limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with respect
to the Plan to the Board at appropriate times, but in no event less than one
time per calendar year.
4.02 ROLE OF THE BOARD. The members of the Committee and the Trustee
shall be appointed or approved by, and will serve at the pleasure of, the
Board. The Board may in its discretion from time to time remove members
from, or add members to, the Committee, and may remove or replace the
Trustee, provided that any directors who are selected as members of the
Committee shall be Non-Employee Directors.
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4.03 LIMITATION ON LIABILITY. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Plan Shares or Plan Share Awards granted under it. If a member
of the Board or the Committee is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of anything done
or not done by him in such capacity under or with respect to the Plan, the
Corporation shall, subject to the requirements of applicable laws and
regulations, indemnify such member against all liabilities and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably
believed to be in the best interests of the Corporation and any Subsidiaries
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
4.04 COMPLIANCE WITH LAWS AND REGULATIONS. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency or
stockholders as may be required.
ARTICLE V
CONTRIBUTIONS
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine the
amount (or the method of computing the amount) and timing of any
contributions by the Corporation and any Subsidiaries to the Trust
established under this Plan. Such amounts may be paid in cash or in shares
of Common Stock and shall be paid to the Trust at the designated time of
contribution. No contributions by Employees or Non-Employee Directors shall
be permitted.
5.02 INVESTMENT OF TRUST ASSETS; NUMBER OF PLAN SHARES. Subject to
Section 8.02 hereof, the Trustee shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan shall be 394,886 shares of Common Stock,
subject to adjustment as provided in Section 9.01 hereof, which shares shall
be purchased (from the Corporation and/or, if permitted by applicable
regulations, from stockholders thereof) by the Trust with funds contributed
by the Corporation. During the time this Plan remains in effect, Awards to
each Employee and each Non-Employee Director shall not exceed 25% and 5% of
the shares of Common Stock available under the Plan, respectively.
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<PAGE>
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 AWARDS TO NON-EMPLOYEE DIRECTORS. A Plan Share Award shall be
allocated to each Non-Employee Director as of the day on which the Plan is
approved by stockholders of the Corporation. Specifically, on such date,
each Non-Employee Director shall receive a Plan Share Award of 14,103 shares
of Common Stock. Plan Share Awards to Non-Employee Directors in the
aggregate shall not exceed 30% of the number of shares available under this
Plan and no individual Non-Employee Director may receive Plan Share Awards in
excess of 5% of the number of shares available under this Plan.
6.02 AWARDS TO EMPLOYEES. Plan Share Awards may be made to such
Employees as may be selected by the Board or the Committee. In selecting
those Employees to whom Plan Share Awards may be granted and the number of
Shares covered by such Awards, the Board or the Committee shall consider the
duties, responsibilities and performance of each respective Employee, his
present and potential contributions to the growth and success of the
Corporation, his salary and such other factors as deemed relevant to
accomplishing the purposes of the Plan. The Board or the Committee may but
shall not be required to request the written recommendation of the Chief
Executive Officer of the Corporation other than with respect to Plan Share
Awards to be granted to him.
6.03 FORM OF ALLOCATION. As promptly as practicable after an allocation
pursuant to Sections 6.01 or 6.02 that a Plan Share Award is to be issued,
the Board or the Committee shall notify the Recipient in writing of the grant
of the Award, the number of Plan Shares covered by the Award, and the terms
upon which the Plan Shares subject to the Award shall be distributed to the
Recipient. The date on which the Board or the Committee so notifies the
Recipient shall be considered the date of grant of the Plan Share Award. The
Board or the Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 ALLOCATIONS NOT REQUIRED TO ANY SPECIFIC EMPLOYEE OR NON-EMPLOYEE
DIRECTOR. Notwithstanding anything to the contrary in Sections 6.01 or 6.02
hereof, no Employee or Non-Employee Director shall have any right or
entitlement to receive a Plan Share Award hereunder, such Awards being at the
total discretion of the Board or the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Subject to the terms hereof, Plan Share Awards
shall be earned by a Recipient at the rate of twenty percent (20%) of the
aggregate number of Shares covered by the Award as of each annual anniversary
of the date of grant of the Award. If the employment of an Employee or
service as a Non-Employee Director is
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terminated prior to the fifth (5th) annual anniversary of the date of grant
of a Plan Share Award for any reason (except as specifically provided in
subsections (b) and (c) below), the Recipient shall forfeit the right to any
Shares subject to the Award which have not theretofore been earned. In the
event of a forfeiture of the right to any Shares subject to an Award, such
forfeited Shares shall become available for allocation pursuant to Sections
6.01 and 6.02 hereof as if no Award had been previously granted with respect
to such Shares. No fractional shares shall be distributed pursuant to this
Plan.
(b) EXCEPTION FOR TERMINATIONS DUE TO DEATH, DISABILITY OR
RETIREMENT. Notwithstanding the general rule contained in Section 7.01(a),
all Plan Shares subject to a Plan Share Award held by a Recipient whose
employment with the Corporation or any Subsidiary or service as a
Non-Employee Director terminates due to death or Disability shall be deemed
earned as of the Recipient's last day of employment with or service to the
Corporation or any Subsidiary and shall be distributed as soon as practicable
thereafter; provided, however, that Awards shall be distributed in accordance
with Section 7.03(a). In addition, in the event that a Recipient's employment
with the Corporation or any Subsidiary or service as a Non-Employee Director
terminates due to Retirement, all Plan Shares subject to a Plan Share Award
held by a Recipient shall be deemed earned as of the Recipient's last day of
employment with or service to the Corporation or any Subsidiary and shall be
distributed as soon as practicable thereafter; provided, however, that as of
the date of such Retirement, such treatment is either authorized or is not
prohibited by applicable laws and regulations.
(c) EXCEPTION FOR TERMINATIONS AFTER A CHANGE IN CONTROL OF THE
CORPORATION. Notwithstanding the general rule contained in Section 7.01(a),
all Plan Shares subject to a Plan Share Award held by a Recipient shall be
deemed to be earned in the event of a Change in Control of the Corporation
if, as of the date of such Change in Control of the Corporation, such
treatment is either authorized or is not prohibited by applicable laws and
regulations.
(d) REVOCATION FOR MISCONDUCT. Notwithstanding anything
hereinafter to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award, or portion thereof, previously
awarded under this Plan, to the extent Plan Shares have not been distributed
hereunder to the Recipient, whether or not yet earned, in the case of an
Employee who is discharged from the employ of the Corporation or any
Subsidiary for cause (as hereinafter defined). Termination for cause shall
mean termination because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order. Plan Share Awards granted to a Non-Employee
Director who is removed for cause pursuant to the Corporation's Articles of
Incorporation and Bylaws or the Bank's Charter and Bylaws shall terminate as
of the effective date of such removal.
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<PAGE>
7.02 DISTRIBUTION OF DIVIDENDS. Any cash dividends (including special
large and nonrecurring dividends including one that has the effect of a
return of capital to the Corporation's stockholders) or stock dividends
declared in respect of each unvested Plan Share Award will be held by the
Trust for the benefit of the Recipient on whose behalf such Plan Share Award
is then held by the Trust and such dividends, including any interest thereon,
will be paid out proportionately by the Trust to the Recipient thereof as
soon as practicable after the Plan Share Awards become earned. Any cash
dividends or stock dividends declared in respect of each vested Plan Share
held by the Trust will be paid by the Trust, as soon as practicable after the
Trust's receipt thereof, to the Recipient on whose behalf such Plan Share is
then held by the Trust.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Plan Shares shall be
distributed to the Recipient or his Beneficiary, as the case may be, as soon
as practicable after they have been earned.
(b) FORM OF DISTRIBUTIONS. All Plan Shares, together with any
Shares representing stock dividends, shall be distributed in the form of
Common Stock. One share of Common Stock shall be given for each Plan Share
earned and distributable. Payments representing cash dividends shall be made
in cash.
(c) WITHHOLDING. The Trustee may withhold from any cash payment or
Common Stock distribution made under this Plan sufficient amounts to cover
any applicable withholding and employment taxes, and if the amount of a cash
payment is insufficient, the Trustee may require the Recipient or Beneficiary
to pay to the Trustee the amount required to be withheld as a condition of
delivering the Plan Shares. The Trustee shall pay over to the Corporation or
any Subsidiary which employs or employed such Recipient any such amount
withheld from or paid by the Recipient or Beneficiary.
(d) RESTRICTIONS ON SELLING OF PLAN SHARES. Plan Share Awards may
not be sold, assigned, pledged or otherwise disposed of prior to the time
that they are earned and distributed pursuant to the terms of this Plan.
Following distribution, the Board or the Committee may require the Recipient
or his Beneficiary, as the case may be, to agree not to sell or otherwise
dispose of his distributed Plan Shares except in accordance with all then
applicable Federal and state securities laws, and the Board or the Committee
may cause a legend to be placed on the stock certificate(s) representing the
distributed Plan Shares in order to restrict the transfer of the distributed
Plan Shares for such period of time or under such circumstances as the Board
or the Committee, upon the advice of counsel, may deem appropriate.
7.04 VOTING OF PLAN SHARES. After a Plan Share Award has been made, the
Recipient shall be entitled to direct the Trustee as to the voting of the
Plan Shares which are covered by the Plan Share Award and which have not yet
been earned and distributed to him
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pursuant to Section 7.03, subject to rules and procedures adopted by the
Committee for this purpose. All shares of Common Stock held by the Trust
which have not been awarded under a Plan Share Award and shares which have
been awarded as to which Recipients have not directed the voting shall be
voted by the Trustee in the same proportion as voted by the Trustee for
shares allocated and which the Trustee receives directions for such vote by
Recipients.
ARTICLE VIII
TRUST
8.01 TRUST. The Trustee shall receive, hold, administer, invest and make
distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 MANAGEMENT OF TRUST. It is the intent of this Plan and Trust that
the Trustee shall have complete authority and discretion with respect to the
arrangement, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustee determine that the holding
of monies in cash or cash equivalents is necessary to meet the obligations of
the Trust. In performing their duties, the Trustee shall have the power to
do all things and execute such instruments as may be deemed necessary or
proper, including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets
in Common Stock without regard to any law now or hereafter in force limiting
investments for trustees or other fiduciaries. The investment authorized
herein may constitute the only investment of the Trust, and in making such
investment, the Trustee are authorized to purchase Common Stock from the
Corporation or from any other source, and such Common Stock so purchased may
be outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above, in such deposit accounts, and certificates of deposit,
obligations of the United States Government or its agencies or such other
investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any
time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in
the name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be maintained
showing that such security is an asset of the Trust).
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(e) To hold cash without interest in such amounts as may in the
opinion of the Trustee be reasonable for the proper operation of the Plan and
Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a dispute
as to the disposition thereof, whether in a segregated account or held in
common with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or
report to any court, or to secure any order of court for the exercise of any
power herein contained, or give bond.
8.03 RECORDS AND ACCOUNTS. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall
be available at all reasonable times for inspection by any legally entitled
person or entity to the extent required by applicable law, or any other
person determined by the Board or the Committee.
8.04 EXPENSES. All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Corporation or, in the
discretion of the Corporation, the Trust.
8.05 INDEMNIFICATION. Subject to the requirements of applicable laws and
regulations, the Corporation shall indemnify, defend and hold the Trustee
harmless against all claims, expenses and liabilities arising out of or
related to the exercise of the Trustee's powers and the discharge of their
duties hereunder, unless the same shall be due to their gross negligence or
willful misconduct.
ARTICLE IX
MISCELLANEOUS
9.01 ADJUSTMENTS FOR CAPITAL CHANGES. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any Plan Share Award relates shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the effective date of
the Plan resulting from any split, subdivision or consolidation of shares or
other capital adjustment, or other increase or decrease in such shares
effected without receipt or payment of consideration by the Corporation.
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9.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by resolution, at
any time amend or terminate the Plan, subject to any required stockholder
approval or any stockholder approval which the Board may deem to be advisable
for any reason, such as for the purpose of obtaining or retaining any
statutory or regulatory benefits under tax, securities or other laws or
satisfying any applicable stock exchange listing requirements. The Board may
not, without the consent of the Recipient, alter or impair his Plan Share
Award except as specifically authorized herein. Upon termination of the
Plan, the Recipient's Plan Share Awards shall be distributed to the Recipient
regardless of whether or not such Plan Share Award had otherwise been earned
under the service requirements set forth in Article VII.
9.03 NONTRANSFERABLE. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Recipient, and during the lifetime of the Recipient,
Plan Shares may only be earned by and paid to a Recipient who was notified in
writing of an Award by the Committee pursuant to Section 6.03 No Recipient
or Beneficiary shall have any right in or claim to any assets of the Plan or
Trust, nor shall the Corporation or any Subsidiary be subject to any claim
for benefits hereunder.
9.04 EMPLOYMENT OR SERVICE RIGHTS. Neither the Plan nor any grant of a
Plan Share Award or Plan Shares hereunder nor any action taken by the
Trustee, the Committee or the Board in connection with the Plan shall create
any right on the part of any Employee or Non-Employee Director to continue in
such capacity.
9.05 VOTING AND DIVIDEND RIGHTS. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan
Shares covered by a Plan Share Award, except as expressly provided in
Sections 7.02 and 7.04 above, prior to the time said Plan Shares are actually
earned and distributed to him.
9.06 GOVERNING LAW. To the extent not governed by federal law, the Plan
and Trust shall be governed by the laws of the Commonwealth of Pennsylvania.
9.07 EFFECTIVE DATE. This Plan shall be effective as of the Effective
Date, and Awards may be granted hereunder as of or after the Effective Date
and as long as the Plan remains in effect. Notwithstanding the foregoing or
anything to the contrary in this Plan, the implementation of this Plan and
any Awards granted pursuant hereto are subject to the approval of the
Corporation's stockholders.
9.08 TERM OF PLAN. This Plan shall remain in effect until the earlier of
(1) ten (10) years from the Effective Date, (2) termination by the Board, or
(3) the distribution to Recipients and Beneficiaries of all assets of the
Trust.
9.09 TAX STATUS OF TRUST. It is intended that the trust established
hereby be treated as a Grantor Trust of the Corporation under the provisions
of Section 671 ET SEQ. of the Code, as the same may be amended from time to
time.
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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and the corporate seal to be affixed
and duly attested, and the initial Trustee of the Trust established pursuant
hereto have duly and validly executed this Agreement, all on this 22nd day of
October 1996.
COMMONWEALTH BANCORP, INC.
By: /S/CHARLES H. MEACHAM
Charles H. Meacham
Chairman, President and
Chief Executive Officer
ATTEST: TRUSTEES:
/S/LEROY D. TODD, JR. /S/JOSEPH E. COLEN, JR.
LeRoy D. Todd, Jr. Joseph E. Colen, Jr.
Secretary
/S/GEORGE C. BEYER, JR.
George C. Beyer, Jr.
/S/HARRY MIRABILE
Harry Mirabile
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REVOCABLE PROXY
COMMONWEALTH BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COMMONWEALTH BANCORP, INC. FOR USE AT THE SPECIAL MEETING OF STOCKHOLDERS TO
BE HELD ON DECEMBER 17, 1996 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints Charles H. Meacham and Matthew T. Welde
as proxies, each with power to appoint his substitute, and hereby authorizes
each of them to represent and vote, as designated below, all the shares of
Common Stock of Commonwealth Bancorp, Inc. (the "Company") held of record by
the undersigned on November 1, 1996 at the Special Meeting of Stockholders to
be held at The People's Light & Theater Company, located at 39 Conestoga
Road, Malvern, Pennsylvania, on December 17, 1996, at 10:00 a.m., Eastern
Time, and any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSALS 1 AND 2 BELOW.
1. PROPOSAL to adopt the 1996 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
2. PROPOSAL to adopt the 1996 Recognition and Retention Plan and Trust.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(CONTINUED ON REVERSE SIDE)
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE SHARES OF THE
COMPANY'S COMMON STOCK WILL BE VOTED AS SPECIFIED. IF NOT OTHERWISE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS TO ADOPT THE 1996 STOCK
OPTION PLAN AND THE 1996 RECOGNITION AND RETENTION PLAN AND OTHERWISE AT THE
DISCRETION OF THE PROXIES. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO
THE TIME IT IS VOTED AT THE SPECIAL MEETING.
Dated: ____________________, 1996
__________________________
__________________________
Signatures
PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAMES(S) APPEAR(S) ON THIS PROXY.
WHEN SIGNING IN A REPRESENTATIVE CAPACITY, PLEASE GIVE TITLE. WHEN SHARES
ARE HELD JOINTLY, ONLY ONE HOLDER NEED SIGN.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
November 8, 1996
To: Participants in the Commonwealth Voluntary Investment Plan
As described in the attached materials, your proxy as a stockholder of
the Company is being solicited in connection with the proposals to be
considered at the Company's upcoming Special Meeting of Stockholders. We
hope you will take advantage of the opportunity to direct the manner in which
shares of Common Stock of the Company allocated to your account under the
Voluntary Investment Plan ("VIP") will be voted.
Enclosed with this letter is the Proxy Statement, which describes the
matters to be voted upon, a voting instruction ballot, which will permit you
to vote the shares allocated to your account, and a return envelope. After
you have reviewed the Proxy Statement, we urge you to vote your shares held
pursuant to the VIP by marking, dating, signing and returning the enclosed
voting instruction ballot to the plan administrators in the accompanying
envelope.
We urge each of you to vote, as a means of participating in the
governance of the affairs of the Company. If your voting instructions for
the VIP are not received, the shares allocated to your account pursuant to
this plan will not be voted. While I hope that you will vote in the manner
recommended by the Board of Directors, the most important thing is that you
vote in whatever manner you deem appropriate. Please take a moment to do so.
Please note that the enclosed material relates only to those shares which
have been allocated to your account under the VIP. Your will receive other
voting material for those shares owned by you individually and not under the
VIP.
Sincerely,
Charles H. Meacham
Chairman, President and Chief
Executive Officer
<PAGE>
November 8, 1996
To: Participants in the Commonwealth 1993 Management Recognition Plans
As described in the attached materials, your proxy as a stockholder of
the Company is being solicited in connection with the proposals to be
considered at the Company's upcoming Special Meeting of Stockholders. We
hope you will take advantage of the opportunity to direct the manner in which
shares of Common Stock of the Company granted to you under the 1993
Management Recognition Plan for Officers or the 1993 Management Recognition
Plan for Directors (each a "Recognition Plan" or together the "Recognition
Plans") will be voted.
Enclosed with this letter is the Proxy Statement, which describes the
matters to be voted upon, a voting instruction ballot, which will permit you
to vote the shares granted to you, and a return envelope. After you have
reviewed the Proxy Statement, we urge you to vote your shares held pursuant
to a Recognition Plan by marking, dating, signing and returning the enclosed
voting instruction ballot to the plan administrators in the accompanying
envelope.
We urge each of you to vote, as a means of participating in the
governance of the affairs of the Company. If your voting instructions for a
Recognition Plan are not received, the shares awarded to you pursuant to the
plan will be voted by the Trustees of the Recognition Plans as directed by
the Plan Administrators in their discretion. While I hope that you will vote
in the manner recommended by the Board of Directors, the most important thing
is that you vote in whatever manner you deem appropriate. Please take a
moment to do so.
Please note that the enclosed material relates only to those shares which
have been granted to you under a Recognition Plan. You will receive other
voting material for those shares owned by you individually and not under the
Recognition Plans.
Sincerely,
Charles H. Meacham
Chairman, President and Chief
Executive Officer
<PAGE>
November 8, 1996
To: Participants in the Commonwealth Bancorp, Inc. Employee Stock Ownership Plan
As described in the attached materials, your proxy as a stockholder of
the Company is being solicited in connection with the proposals to be
considered at the Company's upcoming Special Meeting of Stockholders. We
hope you will take advantage of the opportunity to direct the manner in which
shares of Common Stock of the Company allocated to your account under the
Employee Stock Ownership Plan ("ESOP") will be voted.
Enclosed with this letter is the Proxy Statement, which describes the
matters to be voted upon, a voting instruction ballot, which will permit you
to vote the shares allocated to your account, and a return envelope. After
you have reviewed the Proxy Statement, we urge you to vote your shares held
pursuant to the ESOP by marking, dating, signing and returning the enclosed
voting instruction ballot to the plan administrators in the accompanying
envelope.
We urge each of you to vote, as a means of participating in the
governance of the affairs of the Company. If your voting instructions for
the ESOP are not received, the shares allocated to your account will be voted
in the same proportion as the allocated shares under the ESOP have been
voted. While I hope that you will vote in the manner recommended by the
Board of Directors, the most important thing is that you vote in whatever
manner you deem appropriate. Please take a moment to do so.
Please note that the enclosed material relates only to those shares which
have been allocated to your account under the ESOP. Your will receive other
voting material for those shares owned by you individually and not under the
ESOP.
Sincerely,
Charles H. Meacham
Chairman, President and Chief
Executive Officer
<PAGE>
COMMONWEALTH BANCORP, INC.
SPECIAL MEETING OF STOCKHOLDERS
The undersigned hereby instructs the Trustee of the trust created pursuant
to the Voluntary Investment Plan ("VIP") of Commonwealth Savings Bank to vote
the shares of Common Stock of Commonwealth Bancorp, Inc. (the "Company") which
were allocated to my account as of November 1, 1996 under the VIP upon the
following proposals to be presented at the Special Meeting of Stockholders of
the Company to be held on December 17, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSALS 1 AND 2 BELOW.
1. PROPOSAL to adopt the 1996 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
2. PROPOSAL to adopt the 1996 Recognition and Retention Plan and Trust.
/ / FOR / / AGAINST / / ABSTAIN
3. In its discretion, the Trustee is authorized to vote upon such other
business as may properly come before the meeting.
SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF DIRECTORS. THE COMPANY'S
BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE PROPOSALS TO ADOPT THE 1996 STOCK
OPTION PLAN AND THE 1996 RECOGNITION AND RETENTION PLAN.
Dated:__________________, 1996
________________________________
Signature
If you return this card properly signed
but do not otherwise specify, shares
will be voted FOR the proposals
specified above. If you do not return
this card, shares will not be voted.
<PAGE>
COMMONWEALTH BANCORP, INC.
SPECIAL MEETING OF STOCKHOLDERS
The undersigned hereby instructs the Trustee of the trust created
pursuant to the Employee Stock Ownership Plan ("ESOP") of Commonwealth
Bancorp, Inc. (the "Company") to vote the shares of Common Stock of the
Company which were allocated to my account as of November 1, 1996 under the
ESOP upon the following proposals to be presented at the Special Meeting of
Stockholders of the Company to be held on December 17, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSALS 1 AND 2 BELOW.
1. PROPOSAL to adopt the 1996 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
2. PROPOSAL to adopt the 1996 Recognition and Retention Plan and Trust.
/ / FOR / / AGAINST / / ABSTAIN
3. In its discretion, the Trustee is authorized to vote upon such other
business as may properly come before the meeting.
SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF DIRECTORS. THE COMPANY'S
BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE PROPOSALS TO ADOPT THE 1996
STOCK OPTION PLAN AND THE 1996 RECOGNITION AND RETENTION PLAN.
Dated:___________________________ , 1996
____________________________________
Signature
If you return this card properly signed but do not
otherwise specify, shares will be voted FOR the
proposals specified above. If you do not return this
card, shares will be voted by the Trustee in the same
manner as the allocated shares under the ESOP have
voted.
<PAGE>
COMMONWEALTH BANCORP, INC.
SPECIAL MEETING OF STOCKHOLDERS
The undersigned hereby instructs the Trustees of the trust created
pursuant to the 1993 Management Recognition Plan ("Recognition Plan") of
Commonwealth Bancorp, Inc. (the "Company") to vote the shares of Common Stock
of the Company which were granted to me as of November 1, 1996 under the
Recognition Plan upon the following proposals to be presented at the Special
Meeting of Stockholders of the Company to be held on December 17, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSALS 1 AND 2 BELOW.
1. PROPOSAL to adopt the 1996 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
2. PROPOSAL to adopt the 1996 Recognition and Retention Plan and Trust.
/ / FOR / / AGAINST / / ABSTAIN
3. In its discretion, the Trustee is authorized to vote upon such other
business as may properly come before the meeting.
SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF DIRECTORS. THE COMPANY'S
BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE PROPOSALS TO ADOPT THE 1996
STOCK OPTION PLAN AND THE 1996 RECOGNITION AND RETENTION PLAN.
Dated: _____________________, 1996
__________________________________
Signature
If you return this card properly signed but
do not otherwise specify, shares will be
voted FOR the proposals specified above. If
you do not return this card, shares will be
voted by the Trustees of the Recognition Plan
as directed by the plan administrators in
their discretion.
