<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------
(2) Aggregate number of securities to which transaction 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> 2
[COMMONWEALTH BANCORP LETTERHEAD]
March 20, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Commonwealth Bancorp, Inc. The meeting will be held at the Plymouth Country
Club, located at Plymouth and Belvoir Roads, Norristown, Pennsylvania on
Tuesday, April 21, 1998 at 9:00 a.m., Eastern Time. The matters to be
considered by stockholders at the Annual Meeting are described in the
accompanying materials.
It is very important that your shares be voted at the Annual 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 Annual
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
and Chief Executive Officer
<PAGE> 3
COMMONWEALTH BANCORP, INC.
COMMONWEALTH BANK PLAZA
2 WEST LAFAYETTE STREET
NORRISTOWN, PENNSYLVANIA 19401
(610) 251-1600
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 21, 1998
-----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Commonwealth Bancorp, Inc. (the "Company") will be held at the
Plymouth Country Club, located at Plymouth and Belvoir Roads, Norristown,
Pennsylvania on Tuesday, April 21, 1998 at 9:00 a. m., Eastern Time, for the
following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(1) To elect three (3) directors for a three-year term and until
their successors are elected and qualified;
(2) To amend the Company's 1996 Stock Option Plan and the Company's
1996 Recognition and Retention Plan and Trust to revise the provisions relating
to the vesting of options and awards as a result of changes in regulatory
requirements;
(3) To amend the Company's stock benefit plans to revise the
provisions relating to adjustments for capital changes;
(4) To ratify the appointment by the Board of Directors of Arthur
Andersen LLP as the Company's independent auditors for the year ending December
31, 1998; and
(5) 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 March 6, 1998 as the voting record
date for the determination of stockholders entitled to notice of and to vote at
the Annual 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
Annual Meeting or at any such adjournment.
By Order of the Board of Directors
Patrick J. Ward
President, Chief Operating
Officer and Secretary
Norristown, Pennsylvania
March 20, 1998
- --------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL 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> 4
COMMONWEALTH BANCORP, INC.
-------------------------
PROXY STATEMENT
-------------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 1998
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 Annual Meeting of Stockholders
("Annual Meeting") to be held at the Plymouth Country Club, located at Plymouth
and Belvoir Roads, Norristown, Pennsylvania on Tuesday, April 21, 1998 at 9:00
a.m., Eastern Time, and at any adjournment thereof for the purposes set forth
in the Notice of Annual Meeting of Stockholders. This Proxy Statement is first
being mailed to stockholders on or about March 20, 1998.
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 (Patrick J. Ward, President, Chief Operating Officer and Secretary,
Commonwealth Bancorp, Inc., 2 West Lafayette Street, Norristown, Pennsylvania
19401); (ii) submitting a duly-executed proxy bearing a later date; or (iii)
appearing at the Annual Meeting and giving the Secretary notice of his or her
intention to vote in person. Proxies solicited hereby may be exercised only at
the Annual Meeting and any adjournment thereof and will not be used for any
other meeting.
<PAGE> 5
2
VOTING
Only stockholders of record of the Company at the close of business on
March 6, 1998 ("Voting Record Date") are entitled to notice of and to vote at
the Annual Meeting and at any adjournment thereof. On the Voting Record Date,
there were 16,262,778 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 Annual Meeting on all matters
properly presented at the Annual 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 Annual Meeting. Directors will be elected by a
plurality of the votes cast at the Annual Meeting. The affirmative vote of a
majority of the total votes cast at the Annual Meeting is required for approval
of the proposals to amend the stock benefit plans and to ratify the appointment
of the Company's independent auditors.
Abstentions will be counted for purposes of determining the presence of
a quorum at the Annual Meeting. Because of the required votes, abstentions
will have no effect on the voting for the election of directors or the
proposals to amend the stock benefit plans and to ratify the appointment of the
Company's independent auditors. Under rules applicable to broker-dealers, all
of the proposals for consideration at the Annual Meeting are considered
"discretionary" items upon which brokerage firms may vote in their discretion
on behalf of their client if such clients have not furnished voting
instructions. Thus, there are no proposals to be considered at the Annual
Meeting which are considered "non-discretionary" and for which there will be
"broker non-votes."
<PAGE> 6
3
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR, DIRECTORS
WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
The Articles of Incorporation of the Company provide that the Board of
Directors of the Company shall be divided into three classes which are as equal
in number as possible, and that the members of each class are to be elected for
a term of three years and until their successors are elected and qualified. One
class of directors is to be elected annually and stockholders are not permitted
to cumulate their votes for the election of directors.
No nominee for director is related to any other director or executive
officer of the Company by blood, marriage or adoption, and all nominees
currently serve as directors of the Company.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees for director listed
below. If any person named as nominee should be unable or unwilling to stand
for election at the time of the Annual Meeting, the proxies will nominate and
vote for any replacement nominee or nominees recommended by the Board of
Directors. At this time, the Board of Directors knows of no reason why any of
the nominees listed below may not be able to serve as a director if elected.
<PAGE> 7
4
The following tables present information concerning the nominees for
director and each director whose term continues, including his tenure as a
director of the Company.
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERM EXPIRING IN 2001
<TABLE>
<CAPTION>
Position with the Company and
Principal Occupation Director
Name Age During the Past Five Years Since(1)
---- --- -------------------------- --------
<S> <C> <C> <C>
George C. Beyer, Jr. 59 Director; President and 1990
Chief Executive Officer
of Valley Forge Financial
Group, Inc.
William B. Haines, Jr. 72 Director; Retired, previously President of 1980
McFarland and Haines Insurance Agency
Nicholas Sclufer 78 Director; Senior Partner 1970
of Penton Company
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES
FOR DIRECTOR.
<PAGE> 8
5
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
DIRECTORS WITH TERMS EXPIRING IN 1999
<TABLE>
<CAPTION>
Position with the Company and
Principal Occupation During the Director
Name Age Past Five Years Since(1)
---- --- ------------------------------- --------
<S> <C> <C> <C>
Joseph E. Colen, Jr. 59 Director; Chairman of Machined Metals 1983
Co., Inc., President of Jennings
International Co. and Oak-Corson Realty
Co.
Matthew T. Welde 71 Director; Retired, previously Chairman, 1977
President and Chief Executive Officer of
the Bank
Michael T. Kennedy 43 Director; Chairman, President and Chief 1997
Executive Officer of Radnor Holdings
Corporation
</TABLE>
DIRECTORS WITH TERMS EXPIRING IN 2000
<TABLE>
<CAPTION>
Position with the Company and
Principal Occupation During the Director
Name Age Past Five Years Since (1)
---- --- ------------------------------- ---------
<S> <C> <C> <C>
Charles H. Meacham 52 Chairman, President and Chief Executive 1988
Officer of the Company and the Bank
Harry P. Mirabile 63 Director; Retired, previously Secretary 1990
and Treasurer of Mirabile Beverage
Company
Joanne Harmelin 53 Director; President and Chief Executive 1998
Officer of Harmelin and Associates, Inc.
</TABLE>
- ----------------
(1) Includes service as a director of the Bank.
<PAGE> 9
6
STOCKHOLDER NOMINATIONS
Article III, Section 3.12 of the Company's Bylaws governs nominations
for election to the Board and requires all such nominations, other than those
made by the Board, to be made at a meeting of stockholders called for the
election of directors, and only by a stockholder who has complied with the
notice provisions in that section. Stockholder nominations must be made
pursuant to timely notice in writing to the Secretary of the Company. To be
timely, a stockholder's notice must be delivered to, or mailed and received at,
the principal executive offices of the Company not later than (i) with respect
to an election to be held at an annual meeting of stockholders, 90 days prior
to the anniversary date of the mailing of proxy materials by the Company for
the immediately preceding annual meeting, and (ii) with respect to an election
to be held at a special meeting of stockholders for the election of directors,
the close of business on the tenth day following the date on which notice of
such meeting is first given to stockholders.
Each written notice of a stockholder nomination shall set forth: (a)
the name and address of the stockholder who intends to make the nomination and
of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (e) the consent of each nominee
to serve as a director of the Company if so elected. The presiding officer of
the meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedures. The Company did not receive any
nominations from stockholders for the Annual Meeting.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Regular meetings of the Board of Directors of the Company and the Bank
are typically held on a monthly basis and special meetings of the Board of
Directors are held from time-to-time as needed. There were 11 meetings of the
Board of Directors of the Company held during 1997. No director attended fewer
than 75% of the total number of meetings of the Board of Directors held during
1997 and the total number of meetings held by all committees of the Board on
which the director served during such year, except that Mr. Welde attended only
11 of 15 meetings of the Board and committees he served on during the year.
The Board of Directors of the Company has established various
committees, including Executive and Audit Committees.
The Audit Committee reviews the records and affairs of the Company to
determine its financial condition, reviews with management and the independent
auditors the systems
<PAGE> 10
7
of internal control, and monitors the Company's adherence in accounting and
financial reporting to generally accepted accounting principles. Currently,
Messrs. Kennedy, Welde, Haines and Sclufer serve as members of this committee.
The Audit Committee met four times during 1997.
The Executive Committee is authorized to act with the same authority as
the Board of Directors between meetings of the Board, except that mortgage loan
approvals in excess of certain limits must be approved by the Board of
Directors. Currently, Messrs. Meacham, Kennedy and Colen serve as members of
this committee. The Executive Committee did not meet during 1997.
To date, the Company has not established a nominating committee, the
functions of which are performed by the entire Board of Directors.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following table sets forth certain information with respect to the
executive officers of the Company and the Bank who are not directors.
<TABLE>
<CAPTION>
Name Age Positions(s)
------------------- --- -------------------------------------------------
<S> <C> <C>
Patrick J. Ward 42 President, Chief Operating Officer and
Secretary
William J. Monnich 48 Senior Vice President - Community
Banking
Peter A. Kehoe 45 Senior Vice President and President
of ComNet Mortgage Services
Charles M. Johnston 42 Senior Vice President and Chief Financial Officer
David K. Griest 46 Senior Vice President - Information Services
Brian C. Zwaan 39 Senior Vice President - Commercial Lending
</TABLE>
Set forth below is a brief description of the background of each
executive officer of the Company and the Bank who is not a director for at
least the last five years.
PATRICK J. WARD. Mr. Ward has served as President and Chief Operating
Officer since December 1996 and as Senior Vice President and Chief Financial
Officer of the Bank from July 1992 until December 1996. Prior to joining the
Bank in July 1992, he served as Controller and Vice President for the Wholesale
Banking Group and prior thereto the Retail Banking Group of Mellon Bank,
Pittsburgh, Pennsylvania. In addition, Mr. Ward has served as Secretary of the
Company and the Bank since February 1997.
<PAGE> 11
8
WILLIAM J. MONNICH. Mr. Monnich has served as Senior Vice President -
Community Banking since January 1995 and as Vice President - Community Banking
of the Bank from September 1992 until January 1995. Prior to joining the Bank
in September 1992, he served as a Vice President with CoreStates Bank. There,
he held a variety of management positions in the international and retail
banking groups.
PETER A. KEHOE. Mr. Kehoe has served as President and Chief Executive
Officer of ComNet Mortgage Services since February 1996. From 1990 until 1995,
Mr. Kehoe served as Senior Vice President, National Production, for Comerica
Mortgage, a wholly owned subsidiary of Comerica, Inc., in Detroit, Michigan.
Previously, he served as Senior Vice President, Production, for Traveler's
Mortgage Services, Inc., located in Cherry Hill, New Jersey, and as Senior Vice
President, Secondary Marketing, for Metmor Financial, located in Los Angeles,
California.
CHARLES M. JOHNSTON. Charles M. Johnston has served as Senior Vice
President and Chief Financial Officer since December 1996. From 1994 until
1996, Mr. Johnston served as the Chief Financial Officer of TFC Enterprises
Inc. in Norfolk, Virginia. From 1984 until 1994, he held various management
positions with the Mellon Bank Corporation, including Treasury Division Manager
and Director of Investor Relations.
DAVID K. GRIEST. David K. Griest has served as Senior Vice President -
Information Systems since December 1996. Previously he served as Vice
President of the Computer Systems and Services Department of the Bank. Prior
to joining the Bank in 1989, he was the Vice President of Corporate Information
Systems and Services with Meritor Financial Group.
BRIAN C. ZWAAN. Brian C. Zwaan has served as Senior Vice President -
Commercial Lending since February 1998. From 1996 until 1998, Mr. Zwaan served
as the Chief Financial Officer of Nobel Education Dynamics, Inc. in Media,
Pennsylvania. From 1990 until 1996, he held various management positions with
Summit Bank of Pennsylvania, including Senior Vice President - Commercial
Banking.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended ("1934
Act"), requires the Company's executive officers and directors, and persons who
own more than 10% of the Common Stock to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and the Nasdaq Stock
Market. Officers, directors and greater than 10% stockholders are required by
regulation to furnish the Company with copies of all Section 16(a) forms they
file. The Company knows of no person who owns 10% or more of the Common Stock.
Based solely on review of the copies of such forms furnished to the Company,
the Company believes that during the year ended December 31, 1997, all Section
16(a) filing requirements applicable to its executive officers and directors
were complied with, except that Messrs. Meacham, Ward and Monnich filed one,
one and two late reports, respectively, with respect to transactions to sell
Common Stock during the year.
<PAGE> 12
9
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.
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial of Beneficial
Owner or Number of Ownership as of Percent of
Persons in Group March 6, 1998(1)(2) Common Stock
-------------------- ------------------- ------------
<S> <C> <C>
Commonwealth Bancorp, Inc. 1,284,258(3) 7.9%
Employee Stock Ownership
Plan Trust
2 West Lafayette Street
Norristown, Pennsylvania 19401
Directors:
Charles H. Meacham 341,925(4) 2.1
George C. Beyer, Jr. 117,593(5) *
Joseph E. Colen, Jr. 96,757(6)(7) *
William B. Haines, Jr. 50,579(6)(8) *
Joanne Harmelin 0 *
Michael T. Kennedy 2,500 *
Harry P. Mirabile 120,574(6)(9) *
Nicholas Sclufer 102,662(6)(10) *
Matthew T. Welde 75,378(11) *
Executive Officers:
Patrick J. Ward 120,356(12) *
William J. Monnich 69,021(13) *
Peter A. Kehoe 29,909(14) *
Charles M. Johnston 29,929(15) *
All directors and 1,227,511(16) 7.4
executive officers as a
group (15 persons)
- -----------------
</TABLE>
* Represents less than 1% of the outstanding Common Stock.
<PAGE> 13
10
(1) Based upon filings made pursuant to the Exchange Act and information
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 ("Trustee"). As of the Voting Record Date, 865,709 shares of Common
Stock held in the Trust were unallocated and 418,549 shares had been
allocated to the accounts of participating employees. Under the terms of
the ESOP, the Trustee will generally vote the allocated shares held in
the ESOP in accordance with the instructions of the participating
employees and will generally vote unallocated shares held in the ESOP 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, subject in each case to the
fiduciary duties of the Trustee and applicable law. 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 44,742 shares held by Mr. Meacham's wife, 58,750 shares held on
behalf of Mr. Meacham in the Company's Voluntary Investment Plan ("VIP"),
70,373 shares held in a Management Recognition Plan and Trust of the
Company ("Recognition Plan"), which may be voted by Mr. Meacham pending
vesting and distribution, 5,632 shares allocated to Mr. Meacham pursuant
to the ESOP and 144,409 shares which may be acquired upon the exercise of
stock options exercisable within 60 days of the Voting Record Date.
(5) Includes 5,382 shares held jointly with Mr. Beyer's wife, 28,574 shares
held by Mr. Beyer's wife, 30,573 shares held in a partnership in which
Mr. Beyer is the general partner, 14,987 shares held in a personal trust
for the benefit of Mr. Beyer, 12,703
<PAGE> 14
11
shares held in a Recognition Plan, which may be voted by Mr. Beyer
pending vesting and distribution and 16,335 shares which may be acquired
upon the exercise of stock options exercisable within 60 days of the
Voting Record Date.
(6) Includes 12,703 shares held in a Recognition Plan, which may be voted by
the individual pending vesting and distribution and 20,335 shares which
may be acquired upon the exercise of stock options exercisable within 60
days of the Voting Record Date.
(7) Includes 8,828 shares held jointly with Mr. Colen's wife and children and
17,200 shares held in a trust in which Mr. Colen is a co-trustee.
(8) Includes 12,739 shares held jointly with Mr. Haines' wife.
(9) Includes 36,243 shares held jointly with Mr. Mirabile's wife and 3,831
shares held by Mr. Mirabile's wife.
(10) Includes 10,387 shares held by Mr. Sclufer's wife and 16,618 shares held
by Mr. Sclufer's children.
(11) Includes 34,627 shares held jointly with Mr. Welde's wife, 15,499 shares
held in a Recognition Plan which may be voted by Mr. Welde pending
vesting and distribution and 20,335 shares which may be acquired upon the
exercise of stock options exercisable within 60 days of the Voting Record
Date.
(12) Includes 1,464 shares held jointly with Mr. Ward's wife, 259 shares held
on behalf of Mr. Ward in the VIP, 40,350 shares held in a Recognition
Plan, which may be voted by Mr. Ward pending vesting and distribution,
5,248 shares allocated to him pursuant to the ESOP and 53,716 shares
which may be acquired upon the exercise of stock options exercisable
within 60 days of the Voting Record Date.
(13) Includes 264 shares held on behalf of Mr. Monnich in the VIP, 26,447
shares held in a Recognition Plan, which may be voted by Mr. Monnich
pending vesting and distribution, 4,166 shares allocated to him pursuant
to the ESOP and 30,747 shares which may be acquired upon the exercise of
stock options exercisable within 60 days of the Voting Record Date.
(14) Includes 100 shares held in custody for Mr. Kehoe's children, 126 shares
held on behalf of Mr. Kehoe in the VIP, 15,796 shares held in a
Recognition Plan, which may be voted by Mr. Kehoe pending vesting and
distribution, 1,054 shares allocated to him pursuant to the ESOP and
8,885 shares which may be acquired upon the exercise of stock options
exercisable within 60 days of the Voting Record Date.
<PAGE> 15
12
(15) Includes 3,948 shares held jointly with Mr. Johnston's wife, 15,796
shares held in a Recognition Plan, which may be voted by Mr. Johnston
pending vesting and distribution and 8,885 shares which may be acquired
upon the exercise of stock options exercisable within 60 days of the
Voting Record Date.
(16) Includes 66,236 shares held on behalf of executive officers in the VIP,
264,363 shares held in a Recognition Plan, which may be voted by
directors and executive officers pending vesting and distribution, 19,617
shares allocated to executive officers pursuant to the ESOP and 381,345
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.
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, 1997
exceeded $100,000.
<PAGE> 16
13
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------
Other
Name and Annual
Principal Position Year Salary(1) Bonus(2) Compensation(3)
------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Charles H. Meacham 1997 $337,818 $44,744 $ 0
Chairman and Chief 1996 322,609 60,272 0
Executive Officer 1995 298,701 63,530 0
Patrick J. Ward 1997 195,417 26,488 0
President and Chief 1996 151,130 28,234 0
Operating Officer 1995 136,080 31,940 0
Peter A. Kehoe(8) 1997 147,838 28,365 16,406
Senior Vice President and 1996 115,058 26,492 0
President of ComNet
Charles M. Johnston(9) 1997 121,346 17,861 37,212
Senior Vice President and 1996 0 0 0
Chief Financial Officer
William J. Monnich 1997 129,403 13,340 0
Senior Vice President- 1996 123,013 22,256 0
Community Banking 1995 116,336 22,435 0
<CAPTION>
Long Term Compensation(4)
-------------------------------
Name and All Other
Principal Position Stock Grants(5) Options(6) Compensation(7)
------------------ ------------ ------- ---------------
<S> <C> <C> <C>
Charles H. Meacham $ 0 5,000 $41,122
Chairman and Chief 851,474 177,699 67,296
Executive Officer 0 0 18,847
Patrick J. Ward 0 0 27,327
President and Chief 567,654 98,722 19,860
Operating Officer 0 0 15,570
Peter A. Kehoe(8) 0 0 26,514
Senior Vice President and 283,820 44,425 0
President of ComNet
Charles M. Johnston(9) 0 0 0
Senior Vice President and 296,160 44,425 0
Chief Financial Officer
William J. Monnich 0 0 23,256
Senior Vice President- 283,820 44,425 16,287
Community Banking 106,931 32,704 13,311
</TABLE>
<PAGE> 17
14
- -----------------------------------
(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, 1997 did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus
reported for the individual. For Messrs. Kehoe and Johnston, consists
of reimbursement for taxes relating to relocation and moving expenses
paid in 1997.
(4) All amounts have been adjusted for the exchange of Common Stock for
common stock of the Bank in the Conversion and Reorganization.
(5) Represents the grant of restricted Common Stock pursuant to a
Recognition Plan, which were deemed to have had the indicated value at
the date of grant, and which had a fair market value at December 31,
1997 of $327,063 for the grant in 1995 to Mr. Monnich and a fair
market value of $1,177,256, $784,844, $392,412, $392,412 and $392,412
for the grants in 1996 to Messrs. Meacham, Ward, Kehoe, Monnich and
Johnston, respectively. The awards vest 20% per year from the date of
grant. Dividends paid on the restricted Common Stock are held in a
Recognition Plan Trust and paid to the recipient when the restricted
stock vests.
(6) Consists of awards of options which are exercisable at the rate of 20%
per year from the date of grant, with the exception of the 5,000
shares granted in 1997 to Mr. Meacham, which vested on January 1,
1998.
(7) Consists of amounts allocated during the year ended December 31, 1997
on behalf of Messrs. Meacham, Ward, Kehoe and Monnich pursuant to the
ESOP of $22,662, $22,662, $20,939, and $18,328, respectively, matching
contributions by the Bank under the VIP of $514, $250, $565 and $494
to the accounts of Messrs. Meacham, Ward, Kehoe and Monnich,
respectively, contributions by the Bank under the target benefit
pension plan of $4,415, $5,010 and $4,434 to the accounts of Messrs.
Ward, Kehoe and Monnich, respectively, and amounts paid in lieu of
insurance benefits or premiums previously paid to officers of the Bank
of $1,750 to Mr. Meacham, and $16,196 allocated on behalf of Mr.
Meacham pursuant to the Company's Excess Benefit Plan.
(8) Mr. Kehoe's employment commenced in February 1996.
(9) Mr. Johnston's employment commenced on December 30, 1996.
<PAGE> 18
15
DIRECTOR COMPENSATION
BOARD FEES. During the year ended December 31, 1997, each member of
the Board of Directors of the Bank received an annual fee of $10,000, plus $900
for each meeting attended. Board members also received a fee of $500 for each
committee meeting attended during 1997. The Chairmen of the Compensation and
Audit Committees also received an annual retainer of $1,000. In addition, each
Board member received $100 per month for health insurance cost reimbursement.
DIRECTORS' STOCK OPTION PLANS. 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 1993 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 exercise prices relating to the options
granted on January 21, 1994 and January 21, 1995 are $4.81 and $6.49,
respectively. The exercise prices and share amounts have been adjusted for
exchange in the Conversion and Reorganization. The Company has also adopted
the 1996 Stock Option Plan, pursuant to which each non-employee director at
that time was granted on December 17, 1996 an option to purchase 29,616 shares
of Common Stock at an exercise price of $14.375, which vests at the rate of 20%
per year from the date of grant. Also, pursuant to the 1996 Stock Option Plan,
Michael T. Kennedy, a non-employee director, was granted an option to purchase
25,000 shares of Common Stock at an exercise price of $21.375 in December 1997,
which vests at the rate of 20% per year from the date of grant.
RECOGNITION PLAN FOR DIRECTORS. The Company has adopted the 1993
Recognition Plan for Directors ("1993 Directors Recognition Plan") which
provides for the grant of restricted Common Stock to non-employee directors.
Pursuant to the 1993 Directors Recognition Plan, each director of the Bank who
was not an employee of the Bank or any subsidiary was granted 3,043 shares of
restricted stock on January 21, 1994 (except that Mr. Welde was granted 9,130
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 Directors Recognition Plan vests 20% per year from the date of grant. The
share amounts have been adjusted for the exchange in the Conversion and
Reorganization. The Company has also adopted the 1996 Recognition Plan,
pursuant to which each non-employee director was granted on December 17, 1996,
14,130 shares of restricted Common Stock, which vest at the rate of 20% per
year from the date of grant.
<PAGE> 19
16
EMPLOYMENT AGREEMENTS
The Bank has entered into employment agreements with each of Messrs.
Meacham, Ward, Kehoe, Monnich, Johnston, Griest and Zwaan pursuant to which the
Bank agreed to employ these persons in their respective positions for a term of
three years with a current base salary of $337,833, $205,000, $154,440,
$133,750, $130,900, $115,700 and $130,000, respectively. Each such salary may
be increased in the discretion of the Board of Directors of the Bank but 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 whether to renew each employment agreement for
an additional year. 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 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 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 three times the officer's base salary as of the date of termination,
and the officer would be entitled to continued participation in certain
employee benefit plans of the Bank for a specified time. The employment
agreements with the Bank provide that in the event that any of the payments to
be made thereunder or otherwise upon termination of employment are deemed to
constitute "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. 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 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.
The Company has also entered into employment agreement with Messrs.
Meacham, Ward and Johnston to serve on terms substantially similar to the
agreement entered into between the executives and the Bank, except as provided
below. The executive's compensation, benefits and expenses are paid by the
Company and the Bank in the same proportion as the time and services actually
expended by the executives on behalf of each company. The agreements with the
Company provide that severance payments to Messrs. Meacham and Ward upon a
change of control shall be equal to three times that portion of their base
salary paid by the Company plus the amounts not able to be paid by the Bank
because of Section 280G of the Code. The amounts payable to Messrs. Meacham
and Ward by the Company in the event of a change in control may constitute
"parachute payments" under Section 280G of the Code, and the amounts payable by
the Company are not subject
<PAGE> 20
17
to reduction as are the amounts payable by the Bank. In addition, Messrs.
Meacham's and Ward's agreements with the Company provide that the Company shall
reimburse them for any resulting excise taxes payable by them, plus such
additional amount as may be necessary to compensate them for their payment of
state and federal income, excise and other employment-related taxes on the
additional payments. Mr. Johnston's employment agreement with the Company
provides that his severance payments and benefits shall be reduced to the
extent necessary so that they do not constitute "parachute payments" under
Section 280G of the Code.
Although the above described employment agreements could increase the
cost of any acquisition of control of the Company, management of the Company
does not believe that the terms thereof would have a significant anti-takeover
effect.
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, 1997, five of the directors and
executive officers of the Company or the Bank had aggregate loan balances in
excess of $60,000, which amounted to $1.6 million in the aggregate. 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.
<PAGE> 21
18
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, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
================================================================================================================
Potential Realizable
Value
at Assumed Annual
Rates
of Stock Price
Individual Grants Appreciation
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 5,000 9.9% $16.25 7/1/07 $51,098 $129,492
- ----------------------------------------------------------------------------------------------------------------
Patrick J. Ward -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Peter A. Kehoe -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
William J. Monnich -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Charles M. Johnston -- -- -- -- -- --
================================================================================================================
</TABLE>
(1) Percentage of options granted to all employees during 1997.
(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 $26.47 and $42.15 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, 1997 and options held at December 31, 1997
<TABLE>
<CAPTION>
=================================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------------------------
Number of Value of
Shares Unexercised Unexercised
Acquired on Value Options at Year End Options at
Name Exercise Realized Year End(1)
-----------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles H. Meacham -- -- 118,635 194,738 $1,447,306 $1,516,768
- ---------------------------------------------------------------------------------------------------------------------------------
Patrick J. Ward -- -- 45,223 95,967 492,433 690,318
- ---------------------------------------------------------------------------------------------------------------------------------
Peter A. Kehoe -- -- 8,885 35,540 48,868 195,470
- ---------------------------------------------------------------------------------------------------------------------------------
William J. Monnich -- -- 22,255 59,071 232,471 519,354
- ---------------------------------------------------------------------------------------------------------------------------------
Charles M. Johnston -- -- 8,885 35,540 43,314 173,258
=================================================================================================================================
</TABLE>
(1) Based on a per share market price of $19.875 at December 31, 1997.
<PAGE> 22
19
PENSION PLAN
The Bank previously maintained a defined benefit pension plan
("Pension Plan") which provided benefits payable upon retirement to employees
based upon various levels of compensation and years of service.
The Bank terminated the Pension Plan in June 1997 and, in connection
therewith, distributed a lump sum amount to participants for rollover to other
retirement or benefit plans. During the year ended December 31, 1997, Messrs.
Meacham, Ward, Kehoe, Monnich and Johnston received a lump sum distribution
from the Pension Plan of $294,501, $14,107, $0, $17,174 and $0, respectively.
TARGET BENEFIT PLAN
The Bank maintains a target benefit pension plan ("Target Plan") for
the benefit of its employees. The Target Plan is a money purchase plan,
established effective January 1, 1997 in connection with the termination of the
Pension Plan. Contributions are made by the Bank to the plan based upon the
assumed amount necessary to fund a target benefit, which is expressed by means
of a formula based upon average compensation and years of service of the
participant. The Bank's contribution is based upon the target benefit and
other factors based on the age of the participant. Amounts contributed by the
Bank to the Target Plan for the account of the named executive officers for
1997 are included in the summary compensation table above.
VOLUNTARY INVESTMENT PLAN
The Bank maintains a Voluntary Investment Plan ("VIP") for the benefit
of employees. The VIP is a 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 $10,000 in each plan year. Pursuant to the VIP and
the 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 various alternative investment funds, including a Company
Common Stock fund. A participant's contributions to the VIP, up to a maximum
of 3% of salary, are matched 25% by the Bank. Amounts contributed by the Bank
to the VIP for the account of the named executive officers for 1997 are
included in the summary compensation table above.
SUPPLEMENTAL BENEFIT PLANS
The Board of Directors of the Bank has adopted 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
<PAGE> 23
20
allocation of stock units representing shares of common stock. 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
ESOP, assuming that his compensation was $235,840, the previous limitation
under the Code prior to amendments which reduced such limitation, which is
currently $160,000 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.
COMPENSATION COMMITTEE
Executive compensation philosophy, policies, and programs are the
responsibility of the Compensation and Benefits Committee of the Board of
Directors. During 1997, the members of the committee were Messrs. Colen,
Mirabile and Beyer. No member of the committee is a current or former officer
or employee of the Bank or any of its subsidiaries. The report of the
committee with respect to compensation for the Chief Executive Officer and all
other executive officers is set forth below.
REPORT OF THE COMPENSATION COMMITTEE
The members recognize that Commonwealth must attract, retain and
motivate the best people to achieve its business objectives. To do so, it must
compensate its executives fairly and competitively in the markets in which it
competes. The competitive market for executives is primarily banks of a
similar asset size located in Pennsylvania and southern New Jersey; and
secondarily, public banks of a similar asset size located in the northeastern
quadrant of the United States.
The current compensation program permits recognition of individual
contribution, business unit results, and overall corporate results. Currently,
executive compensation comprises base salary, short-term incentives, and stock
grants from the initial public offering.
BASE SALARY. The Compensation and Benefits Committee establishes base
salaries for executives of Commonwealth by conducting an annual review
utilizing salary survey data provided by an external compensation consultant.
It is the intention of the Committee to pay base salaries at, or
slightly below, the average salary paid by competitive banks.
<PAGE> 24
21
INCENTIVE PLAN. The incentive portion of the executives' total
compensation program is tied to the achievement of specific individual and
group corporate results. Because it is the committee's intention to link a
significant portion of executive pay to changes in shareholder value, the
annual incentive bonus will include annual financial measures that are highly
correlated to market indicators, such as Net Income, Earnings per Share, Cash
Flow, and/or Return on Equity. Also, the Committee's intention is to offset
conservative base salaries with significant upside potential via annual
incentives (and stock plans) to provide for above average total remuneration in
years when Commonwealth has outstanding performance.
In addition, the Committee recognizes the importance of high level of
customer satisfaction as an indicator of sustained performance and therefore
the payout of the executives' incentives is tied to the achievement of customer
satisfaction indicators.
TAX DEDUCTIBILITY. At this point, and for the foreseeable future,
Commonwealth does not anticipate problems with tax deductibility of executive
compensation. If, in the future, this becomes a concern, the Compensation and
Benefits Committee will revisit the issue.
Joseph E. Colen, Jr.
Harry P. Mirabile
George C. Beyer, Jr.
<PAGE> 25
22
PERFORMANCE GRAPH
The following graph compares the yearly cumulative total return
relating to the Common Stock since the Bank's initial public offering of the
Common Stock in January 1994 with (i) the yearly cumulative total return on the
stocks included in the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") Stock Market Index (for United States
companies), and (ii) the yearly cumulative return on the stocks included in the
NASDAQ Financial Stock Index. All of these cumulative returns are computed
assuming the reinvestment of dividends at the frequency with which dividends
were paid during the applicable years.
Nasdaq Stock Mkt.
<TABLE>
<CAPTION>
DATE BASE YEAR DIVIDE BY BASE VALUE *100
<S> <C> <C> <C> <C>
Oct-97 527.744 250.093 2.110 211.019
Nov-97 530.354 250.093 2.121 212.063
Dec-97 522.072 250.093 2.088 208.751
</TABLE>
Nasdaq Financial Stock
<TABLE>
<CAPTION>
DATE BASE YEAR DIVIDE BY BASE VALUE *100
<S> <C> <C> <C> <C>
Oct-97 648.413 248.584 2.608 260.843
Nov-97 662.907 248.584 2.667 288.673
Dec-97 713.943 248.584 2.872 287.204
</TABLE>
CMSB Stock
<TABLE>
<CAPTION>
SHARES VALUE OF
SHARES DIVIDEND$ BOUGHT SHARES SHARES BASE VALUE
PRICE BOP PER SHARE DIV. $ W/DIV EOP EOP 100
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oct-97 18.250 109.266 $0.000 $0.00 0.000 109.266 1,994.10 414.273
Nov-97 20.375 109.266 $0.000 $0.00 0.000 109.266 2,226.29 462.510
Dec-97 19.875 109.266 $0.010 $7.65 0.385 109.651 2,179.31 452.749
</TABLE>
Graph represents $100 invested in the Bank's initial public offering
of Common Stock issued on January 21, 1994 at $4.81 per share. The Common
Stock commenced trading on the Nasdaq Stock Market, National Market on January
24, 1994 at $7.52 per share. Stock prices have been adjusted to reflect the
June 1996 conversion of 2.0775 shares of Company Common Stock for each share of
common stock of the Bank.
<PAGE> 26
23
PROPOSAL TO AMEND THE 1996 STOCK OPTION PLAN AND THE
1996 RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
TO CHANGE THE VESTING RATE FOR NEW AWARDS AND TO
ACCELERATE VESTING UPON CERTAIN CIRCUMSTANCES
GENERAL
The Board of Directors of the Company adopted the 1996 Stock Option
Plan ("1996 Option Plan") and the 1996 Recognition and Retention Plan and Trust
Agreement ("1996 Recognition Plan")(together, the "1996 Plans"), both of which
were approved by stockholders of the Company at a special meeting of
stockholders held on December 17, 1996. The Company completed its Conversion
and Reorganization in June 1996. Under then applicable regulations of the
Office of Thrift Supervision (the "OTS"), stock benefit plans such as the 1996
Plans established or implemented within one year following the completion of a
mutual to stock conversion were required to contain certain restrictions and
limitations. Specifically, the OTS regulations provided, among other
provisions, that awards granted pursuant to such plans begin vesting no earlier
than one year from the date the plans are approved by stockholders, shall not
vest at a rate in excess of 20% per year and shall not provide for accelerated
vesting except in the case of disability or death unless then authorized by
regulation or not otherwise prohibited by law or regulations. The 1996 Plans
provided that in the event of termination of service following a change in
control of the Company or retirement (as defined) vesting of awards would
accelerate if, as of such date, such treatment is either authorized or is not
prohibited by applicable law and regulations. Recently, the OTS has authorized
the elimination of these provisions more than one year after a conversion,
provided that stockholder approval of such amendments to the plans is obtained.
The Board of Directors of the Company has adopted amendments to the
1996 Plans, subject to approval by the stockholders, in order to remove the
restrictions described above and to provide that new awards shall vest at the
rate determined by the Board or the administering committee and that both
existing and new awards shall accelerate and vest upon termination of service
to the Company by the employee or director upon a change in control of the
Company or upon retirement, as defined in the 1996 Plans. These amendments are
consistent with the Company's intentions when it originally adopted these plans
and are consistent with the 1993 stock benefit plans of the Company as
described below. OTS policy requires that these amendments be presented to
stockholders more than one year after a mutual to stock conversion. The
amendments do not increase the number of shares reserved for issuance under the
plans or change the vesting schedule or terms of outstanding awards under the
plans other than to accelerate the vesting upon termination after a change in
control or retirement. In the event that these amendments to the 1996 Plans
are not approved by stockholders, the vesting of existing awards will not
accelerate in the event of a change in control or retirement (unless authorized
at such time or not prohibited by applicable laws or regulations), but the
other provisions of the 1996 Plans will remain in effect as originally adopted.
The Company is currently not in discussions with
<PAGE> 27
24
respect to any transaction that would result in a change in control of the
Company, and there are no proposals, arrangements or understandings known to
the Company that would result in a change in control.
PURPOSE OF THE 1996 PLANS. The 1996 Plans are 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.
The plans are also designed to retain qualified directors for the Company. The
1996 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. Awards are available for grant to directors and key employees of the
Company and any subsidiaries, except that non-employee directors are eligible
to receive only awards of non-incentive stock options pursuant to a set
formula. Officers and key employees of the Company and its subsidiaries who
are selected by the Board of Directors of the Company or members of a committee
appointed by the Board are eligible to receive plan share awards under the 1996
Recognition Plan. Non-employee directors of the Company receive plan share
awards under the 1996 Recognition Plan pursuant to a set formula.
The following are descriptions of the 1996 Plans as proposed to be
amended. Copies of the amended 1996 Plans are available upon written request
to the Secretary of the Company.
DESCRIPTION OF THE 1996 OPTION PLAN
ADMINISTRATION. The 1996 Option Plan is 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 currently
consist of Messrs. Joseph E. Colen, Jr., George C. Beyer, Jr. and Harry
Mirabile and Ms. Joanne Harmelin.
STOCK OPTIONS. Under the 1996 Option Plan, the Board of Directors or
the Committee determines 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 exercise price
of an incentive stock option shall at least equal 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 1996 Option Plan shall
become vested and exercisable at the rate as determined by the Board or the
Committee, as opposed to the current mandatory vesting schedule of not more
than 20% per year. Unless the Committee
<PAGE> 28
25
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, if the proposed amounts are approved by stockholders,
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 as opposed to the current provisions which provide acceleration only if
specifically authorized or not prohibited by law or regulations.
For purposes of the 1996 Stock Option Plan a "change in control of the
Company" means 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 Company 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 Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities, or (ii) during any period of twenty-four consecutive
months during the term of an option, individuals who at the beginning of such
period constitute the Board of the Company cease for any reason to constitute
at least a majority thereof, unless the election, or the nomination for
election by the Company'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.
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 five 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 the optionee losing incentive stock option treatment.
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
<PAGE> 29
26
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 1996 Option Plan have been awarded under a formula pursuant to which each
non-employee director (six 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 subsidiary company, received a
non-incentive option to purchase 29,616 shares of Common Stock upon approval of
the 1996 Option Plan by stockholders in December 1996. Also, pursuant to the
1996 Stock Option Plan, Michael T. Kennedy, a non-employee director, was
granted an option to purchase 25,000 shares of Common Stock at an exercise
price of $21.375 in December 1997, which vests at the rate of 20% per year from
the date of grant.
STOCK APPRECIATION RIGHTS. Under the 1996 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 the 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 1996 OPTION PLAN. A total of 987,215
shares of Common Stock has been reserved for future issuance pursuant to the
1996 Option Plan. In the event of a stock split, reverse stock split or stock
dividend, the number of shares of Common Stock under the 1996 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 1996 OPTION PLAN. Unless sooner
terminated, the 1996 Option Plan shall continue in effect for a period of ten
years from October 22, 1996, the date that the 1996 Option Plan was originally
adopted by the Board of Directors. Termination of the 1996 Option Plan shall
not affect any previously granted awards.
AWARDS GRANTED. Upon stockholder approval of the 1996 Option Plan in
December 1996, options were granted to employees and directors of the Company.
Currently, options to purchase 915,142 shares of Common Stock have been granted
and are outstanding under the 1996 Option Plan. The proposed amendments to the
1996 Option Plan will not affect the number of options previously granted nor
change the vesting schedule of outstanding options under the plan, but will
provide that outstanding options as well as newly granted awards will
accelerate in certain circumstances as described above. In addition, there are
<PAGE> 30
27
currently 69,861 shares of Common Stock available for future grants under the
1996 Option Plan, and the proposed amendments would permit any future grants to
vest more quickly than 20% per year.
DESCRIPTION OF THE 1996 RECOGNITION PLAN
ADMINISTRATION. A committee of the Board of Directors of the Company
administers the 1996 Recognition Plan, which shall consist of at least two
non-employee directors of the Company. The members of the Committee are
currently Messrs. Joseph E. Colen, Jr., George C. Beyer, Jr. and Harry Mirabile
and Ms. Joanne Harmelin who also serve as trustees of the trust established
pursuant to the 1996 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 1996 Recognition Plan in December
1996, the Company acquired Common Stock on behalf of the 1996 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.
GRANTS. Shares of Common Stock granted pursuant to the 1996
Recognition Plan are generally in the form of restricted stock payable over a
set time period as determined by the Board or the committee, as opposed to the
current mandatory vesting schedule of no more than 20% per year. A recipient
is entitled to all voting and other stockholder rights with respect to shares
which have been allocated under the 1996 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, retirement or a change in control of the
Company, 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. 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 the proposed amendments are approved by stockholders.
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
1996
<PAGE> 31
28
Recognition Plan (the definition of change in control of the Company is the
same as for the 1996 Option Plan described above), provided that the proposed
amendments are approved by stockholders.
Pursuant to the terms of the 1996 Recognition Plan, each of the
non-employee directors of the Company and the Bank (six persons) received an
award of 14,103 shares upon approval of the 1996 Recognition Plan by
stockholders in December 1996, which vests 20% per year over five years from
the date of grant.
SHARES GRANTED. Upon stockholder approval of the 1996 Recognition
Plan in December 1996, awards were granted to employees and directors of the
Company. Currently, plan share awards for 290,329 shares have been granted
under the 1996 Recognition Plan which have not yet vested. The proposed
amendments to the 1996 Recognition Plan will not affect the number of shares
previously granted nor change the vesting schedule of outstanding shares under
the plans but will provide that outstanding shares as well as newly granted
shares will accelerate in certain circumstances as described above. In
addition, there are currently 33,093 shares of Common Stock available for
future grants under the 1996 Recognition Plan, and the proposed amendments
would permit any future grants to vest more quickly than 20% per year.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION
OF THE AMENDMENTS TO THE 1996 STOCK OPTION PLAN AND THE 1996 RECOGNITION AND
RETENTION PLAN AND TRUST TO PROVIDE THAT ANY FUTURE AWARDS GRANTED THEREUNDER
MAY VEST AT THE RATE DETERMINED BY THE BOARD OF DIRECTORS OR THE COMMITTEE AND
THAT BOTH EXISTING AND FUTURE AWARDS WILL ACCELERATE UNDER CERTAIN
CIRCUMSTANCES.
PROPOSAL TO AMEND THE COMPANY'S STOCK BENEFIT PLANS TO REVISE THE
PROVISIONS RELATING TO ADJUSTMENTS FOR CAPITAL CHANGES
GENERAL
The Board of Directors of the Bank adopted the 1993 Stock Incentive
Plan ("1993 Incentive Plan"), the 1993 Directors' Stock Option Plan (the "1993
Directors Plan"), the 1993 Management Recognition Plan for Officers (the "1993
Officers Recognition Plan") and the 1993 Management Recognition Plan for
Directors (the "1993 Directors Recognition Plan") (together, the "1993 Plans"),
each of which was approved by the stockholders of the Bank at a special meeting
of stockholders held on April 29, 1994. The 1993 Plans were adopted as stock
benefit plans of the Company in connection with the Conversion and
Reorganization in June 1996. The Board of Directors of the Company adopted the
1996 Option Plan and the 1996 Recognition Plan, which were approved by the
stockholders of the Company at a special meeting of stockholders held on
December 17, 1996 (the 1993 Plans and the 1996 Plans are referred to together
as the "Plans").
<PAGE> 32
29
The Board of Directors of the Company has adopted amendments to each
of the Plans, subject to approval by the stockholders, in order to clarify the
provisions related to adjustments for capital changes. The proposed changes
specifically provide that holders of awards under the Plans will not be
adversely affected by a pro rata distribution of warrants, including litigation
tracking warrants described below, or other securities to all holders of the
Common Stock of the Company for no consideration. In the event that these
amendments to the Plans are not approved by stockholders, the amendments will
not take effect, but the other provisions of the Plans will remain in effect.
In August 1995, the Bank commenced litigation against the United
States in the U.S. Court of Federal Claims (the "Claims Court") seeking to
recover the value of its supervisory goodwill. The suit alleges that the
treatment of such goodwill mandated by the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA") constitutes a breach of
contract between the Bank and the United States and an unlawful taking of
property by the United States without just compensation or due process in
violation of the U.S. Constitution. The suit emanates from the Bank's
acquisition of First Family Federal Savings and Loan Association of Lansdale,
Pennsylvania ("First Family") in 1982 pursuant to which the government agreed
to the use of the purchase method of accounting under generally accepted
accounting principles and the recording of approximately $61 million of
goodwill as an asset resulting from the voluntary supervisory merger (there was
no financial assistance from the Federal Savings and Loan Insurance
Corporation). The Bank's goodwill balance related to the First Family
acquisition at the time of the enactment of FIRREA was $48.4 million. Since
the enactment of FIRREA, numerous suits have been filed on behalf of thrift
institutions and their holding companies alleging similar theories for breach
of contract. In the past several years, the Claims Court, the United States
Court of Appeals for the Federal Circuit, and the United States Supreme Court
have handed down decisions relating to the liability portion of the breach of
contract claims brought by three other thrift institutions. On July 1, 1996,
the United States Supreme Court ruled in the consolidated cases (United States
v. Winstar Corporation) and determined that when Congress adopted the
accounting changes to supervisory goodwill specified in FIRREA, the government
became responsible for any breaches to its original agreements with the
institutions regarding the accounting rules. The Supreme Court's decision in
the Winstar case was based upon the specific facts of each of the three
consolidated cases and, accordingly, the Claims Court may determine that the
Bank's claims involve sufficiently different facts and/or legal issues as to
render the Winstar case inapplicable to the litigation and thereby result in a
different conclusion from that of the Winstar case. Moreover, the damages
portion of the claims presented by the Winstar plaintiff thrift institutions
remains to be litigated and could take several years to resolve. There can be
no assurance that the Bank will prevail in its action and that if it does
prevail that the Claims Court will find that the Bank is entitled to any
substantial amount of damages.
Some other companies with similar goodwill lawsuits against the
government have distributed a warrant to their stockholders which entitles the
holder to all or a portion of
<PAGE> 33
30
the proceeds of such litigation if successful. Although no decision has been
made by the Company in this regard, in the event the Company distributes a
litigation warrant to its stockholders with respect to the proceeds of its
goodwill suit against the United States government, the Company desires that
holders of awards under the Plans shall also receive the benefits of such
distribution. While the Company has explored the possibility of issuing
litigation warrants, the Bank's suit against the government is still in its
early stages and management believes that it is premature to make such a
decision. The Company has no current plans or intentions to issue litigation
warrants. However, the Company believes it is appropriate to position the
Company for future issuance of such warrants if determined by the Board and in
this regard has amended the stock benefit plans to ensure that participants
receive the benefits of any issuance of such warrants.
Accordingly, the provisions in the Plans related to adjustments for
capital changes have been amended to provide that in the event the Company
distributes warrants or other securities or assets on a pro rata basis to all
holders of Common Stock without receipt or payment of consideration by the
Company, then the Company shall (a) make appropriate arrangements so that the
holders of awards outstanding immediately prior to the date of the distribution
receive upon receipt or exercise of such awards the benefits of the
distribution as if the holders had received such awards or exercised such
options immediately prior to the record date used for the distribution, and (b)
depending upon the terms of the distribution, adjust the number of shares
subject to an award and the exercise price per share of any options outstanding
immediately prior to the date of the distribution so that the economic value of
the award at the time of the distribution is neither increased nor decreased by
the distribution.
While the current anti-dilution provisions in the Plans protect
holders of stock options and stock awards in the event of a stock split,
subdivision, reclassification or other changes to the Common Stock, and it is
arguable that the present anti-dilution language would cover the receipt of any
distribution of litigation warrants, the Company believes that the amended
provision provides greater clarity and certainty in order to provide holders of
awards under the Plans the benefit of any future distributions on the Common
Stock by the Company.
PURPOSE OF THE PLANS. The Board of Directors adopted the 1993 Plans
in connection with the Bank's initial public stock offering and reorganization
to the mutual holding company form of ownership. The 1996 Plans were adopted
subsequent to the Conversion and Reorganization. The Plans are 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 Plans are
also designed to retain qualified directors for the Company.
<PAGE> 34
31
The following are descriptions of the 1993 Plans as proposed to be
amended. Descriptions of the 1996 Plans are set forth above. Copies of the
amended 1993 Plans are available upon written request to the Secretary of the
Company.
DESCRIPTION OF THE 1993 OPTION PLAN
ADMINISTRATION. The 1993 Option Plan is administered and interpreted
by a Committee of two or more members of the Board of Directors, none of whom
shall be an officer or employee of the Company, and each of whom shall be a
"disinterested person" within the meaning of applicable regulations under the
federal securities laws. The current members of the Committee consists of
Messrs. Colen, Beyer, and Mirabile and Ms. Harmelin.
STOCK OPTIONS. Under the 1993 Option Plan, the Committee determines
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 compensatory option, whether such options
may be exercised by delivering other shares of Common Stock and when such
options become exercisable. The per share exercise price of an incentive stock
option shall at least equal 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 85%
of fair market value of a share of Common Stock on the date the option is
granted.
Stock options become vested and exercisable in the manner specified by
the Committee, provided that all outstanding stock options (as well as stock
appreciation rights) will become immediately vested and exercisable if there is
a "change in control" of the Company, as defined in the 1993 Option Plan. 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 terminates,
unless extended by the Committee to a period not to exceed five years from such
termination. Stock options are non-transferable except by will or the laws of
descent and distribution.
The purchase price for shares of Common Stock purchased pursuant to
the exercise of an option must be paid in full upon exercise of the option.
Payment may be made in cash or, at the discretion of the Committee, by
delivering shares of Common Stock equal in fair market value to the purchase
price of the shares, or a combination of cash and Common Stock.
STOCK APPRECIATION RIGHTS. Under the 1993 Option Plan, the Committee
may grant rights to optionees 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
<PAGE> 35
32
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 1993 OPTION PLAN. A total of 653,366
shares of Common Stock has been reserved for issuance pursuant to the 1993
Option Plan. In the event of a stock split, reverse stock split or stock
dividend, the number of shares of Common Stock under the 1993 Option Plan, the
number of shares to which any award right 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 1993 OPTION PLAN. Unless sooner
terminated, the 1993 Option Plan shall continue in effect for a period of ten
years from January 21, 1994, the date of the Bank's initial public offering and
reorganization to the mutual holding company form of ownership and the date the
1993 Option Plan became effective by its terms. Termination of the 1993 Option
Plan shall not affect any previously granted awards.
AWARDS GRANTED. Currently, options to purchase 475,273 shares of
Common Stock have been granted and are outstanding under the 1993 Option Plan
and 7,860 shares are available for future grant. The proposed amendments to
the 1993 Option Plan will not affect the number of options previously granted
or available for future grant but will provide that outstanding options as well
as newly granted awards will receive the benefit of any distribution as
described above.
DESCRIPTION OF THE 1993 DIRECTORS PLAN
ADMINISTRATION AND ELIGIBILITY. The 1993 Directors Plan is
administered and interpreted by the entire Board of Directors of the Company.
GRANTS. Under the 1993 Directors Plan, each non-employee director of
the Bank (eight persons) at the time of the consummation of the reorganization
of the Bank to the mutual holding company form of ownership in January 1994 was
granted compensatory options to purchase 12,970 shares of Common Stock at the
actual purchase price of the Common Stock in the reorganization and a
subsequent grant of compensatory options to purchase 1,442 shares of Common
Stock on the one-year anniversary of the date of the reorganization with an
exercise price equal to the fair market value of a share of Common Stock on
such date. Options granted pursuant to the 1993 Directors Plan were vested and
exercisable six months after the date of grant. Options or any portion thereof
are exercisable at any time on or after they vest until the earlier of ten
years after the date of grant or three years after the date on which an
optionee ceases to be a non-employee director.
<PAGE> 36
33
The purchase price for shares of Common Stock purchased pursuant to
the exercise of an option must be paid in full upon exercise of the option.
Payment may be made in cash or by delivering shares of Common Stock equal in
fair market value to the purchase price of the shares, or a combination of cash
and Common Stock.
Options granted pursuant to the 1993 Directors Plan are not
transferable except by will or the laws of descent and distribution and during
an optionee's lifetime may be exercised only by the optionee or his or her
guardian or legal representative. If a non-employee director dies while
serving as a non-employee director or within three years following the
termination of the optionee's service as a non-employee director as a result of
disability, retirement or resignation without having fully exercised his or her
options, then such person or the executors, administrators, legatees or
distributees of his or her estate shall have the right, during the twelve-month
period following such death, disability or retirement, to exercise his or her
options, provided that no option is exercisable within six months after the
date of grant or more than ten years from the date it was granted. Options
granted to a non-employee director who is removed for cause shall terminate as
of the effective date of such removal.
NUMBER OF SHARES COVERED BY THE 1993 DIRECTORS PLAN. A total of
115,300 shares of Common Stock have been reserved for issuance pursuant to the
1993 Directors Plan. In the event of a stock split, reverse stock split or
stock dividend, the number of shares of Common Stock under the 1993 Directors
Plan, the number of shares to which any option relates and the exercise price
per share under the option shall be adjusted to reflect such increase or
decrease in the total number of shares of Common Stock outstanding.
AMENDMENT AND TERMINATION OF THE 1993 DIRECTORS PLAN. Unless sooner
terminated, the 1993 Directors Plan shall continue in effect for a period of
ten years from January 21, 1994, the date on which the Bank completed its
initial public offering of Common Stock and reorganized to the mutual holding
company form of ownership and the 1993 Directors Plan became effective by its
terms. Termination of the 1993 Directors Plan shall not affect any previously
granted options.
AWARDS GRANTED. Currently, options to purchase 96,880 shares of
Common Stock have been granted under the 1993 Directors Plan and remain
outstanding and there were no shares available for future grants under the 1993
Directors Plan. The proposed amendments to the 1993 Directors Plan will not
affect the number of options previously granted or available for future grant,
but will provide that outstanding options will receive the benefit of any
distribution as described above.
DESCRIPTION OF THE 1993 RECOGNITION PLANS
ADMINISTRATION. The 1993 Directors Recognition Plan is administered
by the entire Board of Directors of the Company and the 1993 Officers
Recognition Plan is administered by the Committee. The current members of the
Committee are Messrs. Colen, Beyer and
<PAGE> 37
34
Mirabile and Ms. Harmelin, who also serve as trustees of the trusts established
pursuant to the 1993 Recognition Plans. The trustees have the responsibility
to invest all funds contributed by the Bank to the trusts created for the 1993
Recognition Plans. The Trusts purchased shares of common stock issued in the
Bank's initial public stock offering.
GRANTS. Officers and key employees of the Company who are selected by
the Committee are eligible to receive benefits under the 1993 Officers
Recognition Plan. Shares of Common Stock granted pursuant to the 1993
Recognition Plans generally are in the form of restricted stock payable over a
five-year period at a rate of 20% per year unless otherwise specified by the
Committee. A recipient will be entitled to all voting and other stockholder
rights, except that the shares, while restricted, may not be sold, pledged or
otherwise disposed of and are required to be held in the Trusts. If a
recipient terminates employment for reasons other than death, disability or
retirement, the recipient will forfeit all rights to the allocated shares under
restriction. If the recipient's termination is caused by death, disability or
retirement, all restrictions will expire and all allocated shares will become
unrestricted. All restrictions also will expire and all allocated shares will
become unrestricted in the event of a change in control of the Company, as
defined in the 1993 Recognition Plans. The Board of Directors of the Company
can terminate the 1993 Recognition Plans at any time, and if it does so, any
shares not allocated will revert to the Company.
Under the terms of the 1993 Directors Recognition Plan, each of the
non-employee directors of the Bank received 3,043 shares (except that Mr. Welde
was awarded 9,130 shares) at the time of the Bank's stock issuance and
reorganization to the mutual holding company form of ownership in January 1994,
and 339 shares were awarded to each non-employee director (except that Mr.
Welde was awarded 1,016 shares) one year thereafter.
AWARDS GRANTED. Currently, 73,437 shares of Common Stock have been
granted under the 1993 Recognition Plans, which have not yet been earned or
vested and there are 8,453 shares available for future grants under the 1993
Recognition Plans. The proposed amendments to the 1993 Recognition Plans will
not effect the number of shares previously granted or available for future
grant, but will provide that outstanding shares not yet vested will receive the
benefit of any distribution as described above.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION
OF THE AMENDMENTS TO THE STOCK BENEFIT PLANS TO REVISE THE PROVISIONS RELATING
TO ADJUSTMENTS FOR CAPITAL CHANGES.
<PAGE> 38
35
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Arthur Andersen
LLP independent certified public accountants, to perform the audit of the
Company's financial statements for the year ending December 31, 1998, and
further directed that the selection of auditors be submitted for ratification
by the stockholders at the Annual Meeting.
The Company has been advised by Arthur Andersen LLP that neither that
firm nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
certified public accountants and clients. Arthur Andersen LLP will have one or
more representatives at the Annual Meeting who will have an opportunity to make
a statement, if they so desire, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS FOR 1998.
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 1999, must be received at
the principal executive offices of the Company, 2 West Lafayette Street,
Norristown, Pennsylvania 19401, Attention: Patrick J. Ward, President, Chief
Operating Officer and Secretary, no later than November 20, 1998. 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.
ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the year
ended December 31, 1997 accompanies this Proxy Statement. Such annual report
is not part of the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE 1934
ACT. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO CHARLES M. JOHNSTON, CHIEF
FINANCIAL OFFICER, COMMONWEALTH BANCORP, INC., 2 WEST LAFAYETTE STREET,
NORRISTOWN, PENNSYLVANIA. THE FORM 10-K IS NOT PART OF THE PROXY SOLICITATION
MATERIALS.
<PAGE> 39
36
OTHER MATTERS
Management is not aware of any business to come before the Annual
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 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> 40
REVOCABLE PROXY
COMMONWEALTH BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COMMONWEALTH BANCORP, INC. FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON APRIL 21, 1998 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints the Board of Directors of Commonwealth
Bancorp, Inc. (the "Company") as proxies, each with power to appoint his
substitute, and hereby authorizes them to represent and vote, as designated
below, all the shares of Common Stock of the Company held of record by the
undersigned on March 6, 1998 at the Annual Meeting of Stockholders to be held
at the Plymouth Country Club, located at Plymouth and Belvoir Roads,
Norristown, Pennsylvania, on April 21, 1998, at 9:00 a.m., Eastern Time, and
any adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below
Nominees for three-year term expiring in 2001:
George C. Beyer, Jr., William B. Haines, Jr. and Nicholas Sclufer.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL to amend the Company's 1996 Stock Option Plan and the
Company's 1996 Recognition and Retention Plan to revise the provisions relating
to the vesting of options and awards as a result of changes in regulatory
requirements.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 41
3. PROPOSAL to amend the Company's stock benefit plans to revise the
provisions relating to adjustments for capital changes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL to ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for the year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. 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> 42
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 ELECTION OF THE BOARD OF DIRECTOR'S NOMINEES
FOR DIRECTOR, FOR EACH OF THE PROPOSALS TO AMEND THE COMPANY'S STOCK BENEFIT
PLANS, FOR THE PROPOSAL TO RATIFY THE AUDITORS 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 ANNUAL MEETING.
<TABLE>
<S> <C>
Dated: , 1998
-------------------------
------------------------------------------------------
------------------------------------------------------
Signatures
</TABLE>
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> 43
COMMONWEALTH BANCORP, INC.
ANNUAL 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 March 6, 1998 under the VIP upon the
following proposals to be presented at the Annual Meeting of Stockholders of the
Company on April 21, 1998.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below
Nominees for three-year term expiring in 2001:
George C. Beyer, Jr., William B. Haines, Jr. and Nicholas Sclufer.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL to amend the Company's 1996 Stock Option Plan and the
Company's 1996 Recognition and Retention Plan to revise the provisions relating
to the vesting of options and awards as a result of changes in regulatory
requirements.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL to amend the Company's stock benefit plans to revise the
provisions relating to adjustments for capital changes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL to ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for the year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 44
5. 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 ELECTION OF THE
BOARD'S NOMINEES FOR DIRECTOR AND FOR THE OTHER PROPOSALS.
Dated: , 1998
--------------------
-----------------------------
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> 45
COMMONWEALTH BANCORP, INC.
ANNUAL 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 March 6, 1998 under the ESOP upon the
following proposals to be presented at the Annual Meeting of Stockholders of
the Company on April 21, 1998.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below
Nominees for three-year term expiring in 2001:
George C. Beyer, Jr., William B. Haines, Jr. and Nicholas Sclufer.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL to amend the Company's 1996 Stock Option Plan and the
Company's 1996 Recognition and Retention Plan to revise the provisions relating
to the vesting of options and awards as a result of changes in regulatory
requirements.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL to amend the Company's stock benefit plans to revise the
provisions relating to adjustments for capital changes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL to ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for the year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 46
5. 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 ELECTION OF THE
BOARD'S NOMINEES FOR DIRECTOR AND FOR THE OTHER PROPOSALS.
Dated: , 1998
--------------------
-----------------------------------
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> 47
COMMONWEALTH BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby instructs the Trustees of the trust created
pursuant to a 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
March 6, 1998 under a Recognition Plan upon the following proposals to be
presented at the Annual Meeting of Stockholders of the Company on April 21,
1998.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below
Nominees for three-year term expiring in 2001:
George C. Beyer, Jr., William B. Haines, Jr. and Nicholas Sclufer.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL to amend the Company's 1996 Stock Option Plan and the
Company's 1996 Recognition and Retention Plan to revise the provisions relating
to the vesting of options and awards as a result of changes in regulatory
requirements.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL to amend the Company's stock benefit plans to revise the
provisions relating to adjustments for capital changes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL to ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for the year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 48
5. 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 ELECTION OF THE
BOARD'S NOMINEES FOR DIRECTOR AND FOR THE OTHER PROPOSALS.
Dated: , 1998
--------------------
---------------------------------
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 Plans as directed by the
plan administrators in their
discretion.
<PAGE> 49
March 20, 1998
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 Annual 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 and Chief
Executive Officer
<PAGE> 50
March 20, 1998
To: Participants in the Commonwealth 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 Annual 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 Management Recognition
Plan for Officers, the Management Recognition Plan for Directors or the 1996
Recognition and Retention Plan (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 and Chief
Executive Officer
<PAGE> 51
March 20, 1998
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 Annual 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 and Chief
Executive Officer
