<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
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:
----------------------------------------------------
</TABLE>
<PAGE> 2
[COMMONWEALTH BANCORP LETTERHEAD]
March 17, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Commonwealth Bancorp, Inc. The meeting will be held at the Best Western Hotel,
located at 815 North Pottstown Pike, Exton, Pennsylvania on Tuesday, April 18,
2000 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) 313-1600
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 18, 2000
----------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Commonwealth Bancorp, Inc. (the "Company") will be held at the Best
Western Hotel, located at 815 North Pottstown Pike, Exton, Pennsylvania, on
Tuesday, April 18, 2000 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 adopt the Commonwealth Bancorp, Inc. 2000 Incentive Stock
Option Plan;
(3) 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, 2000; and
(4) 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 3, 2000 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 17, 2000
- ---------------------------------------------------------------------------
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 18, 2000
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 and the holding company for Commonwealth Bank (the
"Bank"). 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 Best Western Hotel, located at 815 North Pottstown Pike, Exton,
Pennsylvania on Tuesday, April 18, 2000 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 17, 2000.
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.
VOTING
Only stockholders of record of the Company at the close of business on
March 3, 2000 ("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 approximately 11,639,560 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 adopt the Company's 2000 Incentive Stock Option Plan (the
"Incentive Option Plan") 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
adopt the Incentive Option Plan 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> 5
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.
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 2003
<TABLE>
<CAPTION>
Position with the Company and
Principal Occupation During Director
Name Age the Past Five Years Since (1)
---- --- --------------------- ---------
<S> <C> <C> <C>
Charles H. Meacham 53 Chairman and Chief Executive Officer of 1988
the Company and the Bank
Harry P. Mirabile 65 Director; Retired, previously Secretary and 1990
Treasurer of Mirabile Beverage Company
Joanne Harmelin 55 Director; President and Chief Executive 1998
Officer of Harmelin and Associates, Inc.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES FOR
DIRECTOR.
2
<PAGE> 6
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
DIRECTORS WITH TERMS EXPIRING IN 2001
<TABLE>
<CAPTION>
Position with the Company and
Principal Occupation During Director
Name Age the Past Five Years Since(1)
---- --- --------------------- --------
<S> <C> <C> <C>
George C. Beyer, Jr. 61 Director; President and Chief 1990
Executive Officer of Valley Forge
Financial Group, Inc.
Martin E. Kenney, Jr. 52 Director; Chairman and Chief 1999
Executive Officer of WRC Media,
Inc.
</TABLE>
DIRECTORS WITH TERMS EXPIRING IN 2002
<TABLE>
<CAPTION>
Position with the Company and
Principal Occupation Director
Name Age During the Past Five Years Since(1)
---- --- -------------------------- ---------
<S> <C> <C> <C>
Joseph E. Colen, Jr. 60 Director; Chairman of Machined 1983
Metals Co., Inc., President of
Jennings International Co. and
President of Oak-Corson Realty Co.
Michael T. Kennedy 45 Director; Chairman, President and 1997
Chief Executive Officer of Radnor
Holdings Corporation
</TABLE>
- ---------------
(1) Includes service as a director of the Bank.
3
<PAGE> 7
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 1999. No director attended fewer
than 75% of the total number of meetings of the Board of Directors and the total
number of meetings of committees of the Board on which the director served
during 1999.
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 of internal control, and monitors the Company's adherence
in accounting and financial reporting to generally accepted accounting
principles. Currently, Messrs. Kennedy and Kenney serve as members of this
committee. The Audit Committee met four times during 1999.
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 met three times during 1999.
The entire Board of Directors acts as a nominating committee for the
nomination of persons to serve as directors.
4
<PAGE> 8
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 44 President, Chief Operating Officer and
Secretary
David K. Griest 48 Senior Vice President - Information Services
Charles M. Johnston 44 Senior Vice President and Chief Financial Officer
Peter A. Kehoe 46 Senior Vice President and President
of ComNet Mortgage Services
William J. Monnich 49 Senior Vice President - Community Banking
Brian C. Zwaan 41 Senior Vice President and Senior Lending Officer
</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 from July 1992 until December 1996. Prior to joining the Bank in July
1992, he served as Vice President and Controller for the Wholesale Banking Group
and, prior to that, the Retail Banking Group of Mellon Bank Corporation. In
addition, Mr. Ward has served as Secretary of the Company and the Bank since
February 1997.
DAVID K. GRIEST. David K. Griest has served as Senior Vice President -
Information Systems since December 1996 and as Vice President - Computer Systems
and Services from February 1989 until December 1996. Prior to joining the Bank
in February 1989, he served as Vice President of Corporate Information Systems
and Services with Meritor Financial Group.
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 Chief Financial Officer of TFC Enterprises Inc. From 1984
until 1994, he held various management positions with Mellon Bank Corporation,
including Treasury Division Manager and Director of Investor Relations.
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, Inc. Prior to that, he served as Senior Vice President, Production,
for Traveler's Mortgage Services, Inc., and as Senior Vice President, Secondary
Marketing, for Metmor Financial.
WILLIAM J. MONNICH. Mr. Monnich has served as Senior Vice President -
Community Banking since January 1995 and as Vice President - Community Banking
from September 1992 until January 1995. Prior to joining the Bank in September
1992, he served as a Vice President with CoreStates Bank, where he held a
variety of management positions in the international and retail banking groups.
5
<PAGE> 9
BRIAN C. ZWAAN. Brian C. Zwaan has served as Senior Vice President and
Senior Lending Officer since February 1998. From 1996 until 1998, Mr. Zwaan
served as Chief Financial Officer of Nobel Education Dynamics, Inc. 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
("Exchange 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, 1999,
all Section 16(a) filing requirements applicable to its executive officers and
directors were met, except that Mr. Kenney did not file his initial report with
respect to his holdings of Commonwealth Bancorp, Inc. securities upon election
to the Board and Ms. Harmelin filed one late report with respect to transactions
in Commonwealth Bancorp, Inc. securities during the year.
6
<PAGE> 10
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 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 3, 2000(1)(2) Common Stock
------------------ ------------------- ------------
<S> <C> <C>
Commonwealth Bancorp, Inc. 1,195,718(3) 10.3%
Employee Stock Ownership
Plan Trust
2 West Lafayette Street
Norristown, Pennsylvania 19401
Directors:
Charles H. Meacham 451,492(4) 3.8
George C. Beyer, Jr. 131,588(5) 1.1
Joseph E. Colen, Jr. 110,158(6) *
Joanne Harmelin 17,576(7) *
Michael T. Kennedy 12,500(8) *
Harry P. Mirabile 134,205(9) 1.2
Martin E. Kenney 780 *
Executive Officers:
Patrick J. Ward 159,473(10) 1.4
Peter A. Kehoe 47,657(11) *
Charles M. Johnston 43,182(12) *
William J. Monnich 100,121(13) *
All directors and 1,319,281(14) 10.8%
executive officers as a
group (13 persons)
</TABLE>
- -----------------
* Represents less than 1% of the outstanding Common Stock.
(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.
7
<PAGE> 11
(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, 655,841 shares of Common
Stock held in the Trust were unallocated and 539,877 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, 61,110 shares held on
behalf of Mr. Meacham in the Company's Voluntary Investment Plan ("VIP"),
23,695 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, 7,603 shares allocated to Mr. Meacham pursuant
to the ESOP, 4,118 shares allocated to Mr. Meacham pursuant to an excess
benefit plan, and 254,894 shares which may be acquired upon the exercise
of stock options exercisable within 60 days of the Voting Record Date.
(5) Includes 5,479 shares held jointly with Mr. Beyer's wife, 28,850 shares
held by Mr. Beyer's wife, 30,845 shares held in a partnership in which
Mr. Beyer is the general partner, 5,643 shares held in a Recognition
Plan, which may be voted by Mr. Beyer pending vesting and distribution
and 17,769 shares which may be acquired upon the exercise of stock
options exercisable within 60 days of the Voting Record Date.
(6) 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. Also
includes 5,643 shares held in a Recognition Plan, which may be voted by
Mr. Colen pending vesting and distribution and 32,181 shares which may be
acquired upon the exercise of stock options exercisable within 60 days of
the Voting Record Date.
(7) Includes 1,000 shares held by Ms. Harmelin's husband, 3,000 shares held
in a pension plan in which Ms. Harmelin is a trustee and beneficiary, and
10,000 shares which may be acquired upon the exercise of stock options
exercisable within 60 days of the voting record date.
(8) Includes 10,000 shares which may be acquired by Mr. Kennedy upon the
exercise of stock options exercisable within 60 days of the voting record
date.
(9) Includes 23,155 shares held jointly with Mr. Mirabile's wife, 3,831
shares held by Mr. Mirabile's wife, 5,643 shares held in a Recognition
Plan, which may be voted by Mr. Mirabile pending vesting and
distribution, and 17,769 shares which may be acquired upon the exercise
of stock options exercisable within 60 days of the Voting Record Date.
(10) Includes 1,464 shares held jointly with Mr. Ward's wife, 436 shares held
on behalf of Mr. Ward in the VIP, 15,795 shares held in a Recognition
Plan, which may be voted by Mr. Ward pending vesting and distribution,
6,844 shares allocated to him pursuant to the ESOP and 101,700 shares
which may be acquired upon the exercise of stock options exercisable
within 60 days of the Voting Record Date.
8
<PAGE> 12
(11) Includes 100 shares held in custody for Mr. Kehoe's children, 739 shares
held on behalf of Mr. Kehoe in the VIP, 7,900 shares held in a
Recognition Plan, which may be voted by Mr. Kehoe pending vesting and
distribution, 2,520 shares allocated to him pursuant to the ESOP and
26,655 shares which may be acquired upon the exercise of stock options
exercisable within 60 days of the Voting Record Date.
(12) Includes 7,500 shares held jointly with Mr. Johnston's wife, 108 shares
held on behalf of Mr. Johnston in the VIP, 7,900 shares held in a
Recognition Plan, which may be voted by Mr. Johnston pending vesting and
distribution, 1,019 shares allocated to him pursuant to the ESOP and
26,655 shares which may be acquired upon the exercise of stock options
exercisable within 60 days of the Voting Record Date.
(13) Includes 3,096 shares held on behalf or Mr. Monnich in the VIP, 7,900
shares held in a Recognition Plan, which may be voted by Mr. Monnich
pending vesting and distribution, 4,408 shares allocated to him pursuant
to the ESOP, and 63,556 shares which may be acquired upon the exercise of
stock options exercisable within 60 days of the Voting Record Date.
(14) Includes 73,314 shares held on behalf of executive officers in the VIP,
101,219 shares held in a Recognition Plan, which may be voted by
directors and executive officers pending vesting and distribution, 31,200
shares allocated to executive officers pursuant to the ESOP and 613,599
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.
9
<PAGE> 13
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information
concerning the compensation awarded to or paid by the Company and the Bank for
services rendered in all capacities during the past three years to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company and its subsidiaries whose total compensation during the year ended
December 31, 1999 exceeded $100,000.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation(4)
---------------------------------------------- -----------------------
Other
Name and Annual Stock All Other
Principal Position Year Salary(1) Bonus(2) Compensation(3) Grants Options(4) Compensation(5)
------------------ ---- ------ ----- ------------ ------ ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles H. Meacham 1999 $337,818 $162,641 $0 $0 7,000 $35,487
Chairman and Chief 1998 350,811 0 0 0 5,600 38,172
Executive Officer 1997 337,818 44,744 0 0 5,000 43,021
Patrick J. Ward 1999 219,435 98,374 0 0 0 36,644
President and Chief 1998 212,692 0 0 0 0 26,554
Operating Officer 1997 195,417 26,488 0 0 0 29,226
Peter A. Kehoe 1999 160,380 60,523 0 0 0 27,940
Senior Vice President and 1998 160,206 40,170 0 0 0 26,676
President of ComNet 1997 147,838 28,365 0 0 0 28,269
Charles M. Johnston 1999 136,249 55,557 0 0 0 23,405
Senior Vice President and 1998 135,751 0 0 0 0 22,589
Chief Financial Officer 1997 121,346 17,861 37,212 0 0 0
William J. Monnich 1999 135,679 55,269 0 0 0 25,534
Senior Vice President- 1998 138,830 0 0 0 0 24,596
Community Banking 1997 129,403 13,340 0 0 0 24,793
</TABLE>
- ----------------
(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 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, the costs to the Bank of providing such
benefits to any individual executive officer during the year ended
December 31, 1999 did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus reported for the individual. For Mr.
Johnston, consists of reimbursement for taxes relating to relocation and
moving expenses paid in 1997.
(4) Consists of options granted to Mr. Meacham in 1997, 1998 and 1999 which
vested on January 1, 1998, July 1, 1998 and July 19, 1999, respectively.
(5) Consists of estimated amounts allocated for the year ended December 31,
1999 on behalf of Messrs. Meacham, Ward, Kehoe, Johnston, and Monnich
pursuant to the ESOP of $21,723, $21,562, $19,790, $16,947, and $18,539,
respectively. Includes matching and estimated profit sharing
contributions by the Bank relating to 1999 under the VIP to the accounts
of Messrs. Meacham, Ward, Kehoe, Johnston and Monnich of $3,353,
10
<PAGE> 14
$2,027, $2,681, $2,239 and $2,300, respectively. Reflects contributions
by the Bank relating to 1999 under the target benefit pension plan of
$4,330, $5,469, $4,218 and $4,696 to the accounts of Messrs. Ward, Kehoe,
Johnston, and Monnich, respectively. Reflects $1,685 paid in lieu of
certain insurance benefits in 1999 to Mr. Meacham. Also reflects $8,727
allocated in 1999 on behalf of each of Messrs. Meacham and Ward pursuant
to the Company's Excess Benefit Plan.
DIRECTOR COMPENSATION
BOARD FEES. During the year ended December 31, 1999, each member of the
Board of Directors of the Bank received an annual fee of $12,200 (which includes
$100 per month for health insurance cost reimbursement), plus $900 for each
meeting attended. Board members also received a fee of $500 for each committee
meeting attended during 1999. The Chairman of the Compensation Committee also
received an annual retainer of $1,000. Mr. Kennedy waives all fees in connection
with his service as a member of the Board and as Chairman of the Audit
Committee. Commencing in 1999, annual directors' fees were paid in shares of
Common Stock in lieu of cash.
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,
Joanne Harmelin, a non-employee director, was granted an option to purchase
25,000 shares of Common Stock at an exercise price of $20.50 in March 1998, and
Martin Kenney, a non-employee director, was granted an option to purchase 25,000
shares of Common Stock at an exercise price of $18.125 in September 1999, which
grants vest 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 and 339 shares of restricted stock on
January 21, 1995. 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.
EMPLOYMENT AGREEMENTS
The Bank has entered into employment agreements with each of Messrs.
Meacham, Ward, Kehoe, Johnston, Monnich, Zwaan and Griest 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 $389,185, $236,000, $165,618,
$143,263, $143,494, $145,000 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),
Messrs.
11
<PAGE> 15
Meacham and Ward would be entitled to an amount of cash severance which is equal
to two times the officer's base salary as of the date of termination (one times
base salary for the other officers), and Messrs. Meacham and Ward would be
entitled to continued participation in certain employee benefit plans of the
Bank for a period of 24 months (12 months for the other officers), in each case
assuming no Change in Control of the Company (as defined) had occurred or was
contemplated by a written agreement still in effect. If the officer's employment
was wrongly terminated (including a termination by the officer as a result of
certain adverse actions taken with respect to his employment following a Change
in Control) after a Change in Control had occurred or was contemplated by a
written agreement still in effect, then Messrs. Meacham and Ward would be
entitled to a lump sum cash severance amount equal to three times the officer's
highest annual base salary and bonus paid during the prior three years (two
times for the other officers), and Messrs. Meacham and Ward would be entitled to
continued participation in certain employee benefit plans for a period of 36
months (24 months for the officers). The employment agreements with the Bank
provide that in the event 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 minimum amount 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 (a) in the
absence of a Change in Control shall be two times the officer's current base
salary paid by the Company plus fringe benefits for 24 months, and (b) upon a
Change in Control shall be equal to three times that portion of their highest
base salary and bonus paid by the Company during the prior three years, plus
fringe benefits for 36 months and 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 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 (i) two times
that portion of his highest base salary and bonus paid by the Company during the
prior three years plus fringe benefits for 24 months in the event of a Change in
Control (or one times his current base salary from the Company plus fringe
benefits for 12 months in the absence of a Change in Control), and (ii) 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.
12
<PAGE> 16
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, 1999, seven of the directors and
executive officers of the Company or the Bank had aggregate loan balances in
excess of $60,000, which amounted to $4.2 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.
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, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
==================================================================================================================================
Potential Realizable Value
at Assumed Annual Rates
Individual Grants of Stock Price Appreciation
for Option Term(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Options % of Total Options Granted Exercise Expiration
Name Granted to Employees(1) Price(2) Date 5% 10%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles H. Meacham 7,000 9.1% $16.25 1/19/09 $71,537 $181,288
- ---------------------------------------------------------------------------------------------------------------------------------
Patrick J. Ward -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Peter A. Kehoe -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Charles M. Johnston -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
William J. Monnich -- -- -- -- -- --
==================================================================================================================================
</TABLE>
(1) Percentage of options granted to all employees during 1999.
(2) 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 over the ten-year life of the options.
With respect to Mr. Meacham's options, this would represent future stock
prices of $26.47 and $42.15 at compounded rates of return of 5% and 10%,
respectively.
13
<PAGE> 17
The following table sets forth certain information concerning exercises
of stock options by the named executive officers during the year ended December
31, 1999 and options held at December 31, 1999
<TABLE>
<CAPTION>
==================================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Value of
Shares Unexercised Unexercised
Acquired Options at Year End Options at
on Value Year End(1)
Name Exercise Realized ---------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles H. Meacham -- -- 254,891 71,082 $1,788,302 $159,935
- ----------------------------------------------------------------------------------------------------------------------------------
Patrick J. Ward -- -- 101,700 39,490 635,031 88,853
- ----------------------------------------------------------------------------------------------------------------------------------
Peter A. Kehoe -- -- 26,655 17,770 59,974 39,983
- ----------------------------------------------------------------------------------------------------------------------------------
Charles M. Johnston -- -- 26,655 17,770 43,314 28,876
- ----------------------------------------------------------------------------------------------------------------------------------
William J. Monnich -- -- 57,346 23,980 383,850 103,666
==================================================================================================================================
</TABLE>
(1) Based on a per share market price of $16.625 at December 31, 1999.
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 Bank's
defined benefit 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 1999 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. The VIP also contains a profit sharing
component which provides for discretionary contributions by the Bank to eligible
employees. Participant's accounts are credited on a pro rata basis according to
salary levels. Profit sharing contributions vest after five years. Amounts
contributed by the Bank to the VIP for the account of the named executive
officers for 1999 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 Messrs. Meacham and Ward. The EBP provides
that Messrs. Meacham and Ward shall receive an annual allocation of stock units
representing shares of common stock. The number of stock units allocable to the
executive's 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 Messrs. Meacham and Ward shall receive a supplemental retirement
benefit at or after the executive's normal retirement date which is calculated
to produce a deferred retirement benefit payable by the Bank based on final
average earnings, as defined, with certain offsets, and a reduction in the case
of early retirement.
14
<PAGE> 18
COMPENSATION COMMITTEE
Executive compensation philosophy, policies, and programs are the
responsibility of the Compensation and Benefits Committee of the Board of
Directors. During 1999, the members of the committee were Messrs. Colen,
Mirabile, and Beyer and Ms. Harmelin. 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 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.
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.
Joanne Harmelin
15
<PAGE> 19
PERFORMANCE GRAPH
The following graph compares the yearly cumulative total return relating
to the Common Stock for the five-year period from December 31, 1994 to December
31, 1999 with (i) the yearly cumulative total return on the stocks included in
the Nasdaq Stock Market Index (for United States companies), and (ii) the yearly
cumulative return on the stocks included in the Nasdaq Stock Market 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.
COMMONWEALTH BANCORP, INC.
STOCK PERFORMANCE GRAPH
[LINE GRAPH]
<TABLE>
<CAPTION>
=================================================================
cmsb stock
nasdaq at 06/14/96
nasdaq financial conversion price
stock mkt stocks (facto. -2.07747)
=================================================================
<S> <C> <C> <C>
DEC-94 100.000 100.000 100.000
MAR-95 108.951 109.978 109.148
JUN-95 124.623 119.124 129.507
SEP-95 139.634 135.782 191.150
DEC-95 141.335 145.685 187.083
MAR-96 147.952 151.548 190.282
JUN-96 160.006 155.114 185.627
SEP-96 165.705 168.116 191.043
DEC-96 173.892 187.027 264.562
MAR-97 164.463 195.221 268.001
JUN-97 194.590 227.174 291.390
SEP-97 227.521 265.025 321.553
DEC-97 213.073 286.108 356.298
MAR-98 249.365 303.286 383.511
JUN-98 256.215 295.406 414.191
SEP-98 231.371 244.364 279.071
DEC-98 300.248 277.729 283.935
MAR-99 335.857 273.246 278.736
JUN-99 367.468 306.150 330.856
SEP-99 375.848 265.421 326.743
DEC-99 542.430 274.634 309.873
</TABLE>
Graph represents $100 invested in the Bank's common stock on December 31,
1994 at $5.95 per share. Stock prices have been adjusted to reflect the June
1996 conversion of 2.0775 shares of Common Stock for each share of common stock
of the Bank.
16
<PAGE> 20
PROPOSAL TO ADOPT THE 2000 INCENTIVE STOCK OPTION PLAN
GENERAL
The Board of Directors has adopted the 2000 Incentive Option Plan which
is designed to attract and retain qualified personnel in key positions, provide
officers and key employees with a proprietary interest in the Company as an
incentive to contribute to the success of the Company and reward key employees
for outstanding performance. The Incentive Option Plan is also designed to
attract and retain qualified directors for the Company. The Incentive Option
Plan provides for the annual 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 based
upon performance goals (collectively "Awards"). Awards will be available for
grant to officers, key employees and directors of the Company and any
subsidiaries, except that non-employee directors will be eligible to receive
only awards of non-incentive stock options under the plan.
DESCRIPTION OF THE INCENTIVE OPTION PLAN
The following description of the Incentive Option Plan is a summary of
its terms and is qualified in its entirety by reference to the Incentive Option
Plan, a copy of which is attached hereto as Appendix A.
Administration. The Incentive Option Plan will be administered and
interpreted by a committee of the Board of Directors ("Committee") that is
comprised solely of two or more non-employee directors. The members of the
Committee will initially consist of Messrs. Joseph E. Colen, Jr., George C.
Beyer, Jr. and Harry P. Mirabile and Ms. Joanne Harmelin.
Stock Options. Under the Incentive Option Plan, the Committee shall meet
not less than annually and, in its discretion, grant awards based on performance
("Performance Awards") to such employees and non-employee directors, in such
amounts and on such terms as it determines giving due consideration to the
achievement of a previously established performance goals. Performance goals are
an objective for the Company or any subsidiary or any unit thereof established
by the Committee for a Performance Award to be granted. Performance goals are
based on one or more of the following criteria: (i) net income, as adjusted for
non-recurring items; (ii) cash earnings; (iii) earnings per share; (iv) cash
earnings per share; (v) return on average equity; (vi) return on average assets;
(vii) assets; (viii) stock price; (ix) total stockholder return; (x) capital;
(xi) net interest income; (xii) market share; (xiii) cost control or efficiency
ratio; and (xiv) asset growth. No participant shall have any right to a
Performance Award until such grants are actually made by the Committee. In
addition to Performance Awards, the Board of Directors or the Committee may also
make discretionary grants of Awards under the Incentive Option Plan at any time.
The Board of Directors or the Committee will determine which officers,
key employees and non-employee directors will be granted options, whether such
options will be incentive or compensatory options (in the case of options
granted to employees), 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 to the fair
market value of a share of Common Stock on the date the option is granted, and
the per share exercise price of a compensatory stock option shall at least equal
the greater of par value or the fair market value of a share of Common Stock on
the date the option is granted.
All options granted to participants under the Incentive Option Plan shall
become vested and exercisable at the rate, and subject to such limitations, as
specified by the Board of Directors or the Committee at the time of grant.
Notwithstanding the foregoing, no vesting shall occur on or after a
participant's employment or service with the Company is terminated for any
reason other than his death, disability or retirement. Unless the Committee or
Board of Directors shall specifically state otherwise at the time an option is
granted, all options granted to participants shall become vested and exercisable
in full on the date an optionee terminates his employment or service with the
Company or a subsidiary
17
<PAGE> 21
company because of his death, disability or retirement. In addition, all stock
options will become vested and exercisable in full upon a change in control of
the Company, as defined in the Incentive 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 six months after the date on which the employee's employment
(two years after termination of service in the case of non-employee directors),
unless extended by the Committee or the Board of Directors to a period not to
exceed five years from such termination. Unless stated otherwise at the time an
option is granted (i) if an employee terminates his employment with the Company
as a result of disability or retirement without having fully exercised his
options, the optionee shall have two years following his termination due to
disability or retirement to exercise such options, and (ii) if an optionee
terminate his employment or service with the Company following a change in
control of the Company without having fully exercised his options, the optionee
shall have the right to exercise such options during the remainder of the
original ten year term of the option. However, failure to exercise incentive
stock options within three months after the date on which the optionee's
employment terminates may result in adverse tax consequences to the optionee. If
an optionee dies while serving as an employee or a non-employee director or
terminates employment or service as a result of disability or retirement and
dies 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 one year period following his death, provided
no option will be exercisable more than ten years from the date it was granted.
Stock options are non-transferable except by will or the laws of descent
and distribution. Notwithstanding the foregoing, an optionee who holds
non-qualified options may transfer such options to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust for the benefit
or one or more of these individuals. Options so transferred may thereafter be
transferred only to the optionee who originally received the grant or to an
individual or trust to whom the optionee could have initially transferred the
option. Options which are so transferred shall be exercisable by the transferee
according to the same terms and conditions as applied to the optionee.
Payment for shares purchased upon the exercise of options may be made
either in cash, by certified or cashier's check or, if permitted by the
Committee or the Board, by delivering shares of Common Stock (including shares
acquired pursuant to the exercise of an option) with a fair market value equal
to the total option price, by withholding some of the shares of Common Stock
which are being purchased upon exercise of an option, or any combination of the
foregoing. To the extent an optionee already owns shares of Common Stock prior
to the exercise of his or her option, such shares could be used (if permitted by
Committee or the Board) as payment for the exercise price of the option. If the
fair market value of a share of Common Stock at the time of exercise is greater
than the exercise price per share, this feature would enable the optionee to
acquire a number of shares of Common Stock upon exercise of the option which is
greater than the number of shares delivered as payment for the exercise price.
In addition, an optionee can exercise his or her option in whole or in part and
then deliver the shares acquired upon such exercise (if permitted by the
Committee or the Board) as payment for the exercise price of all or part of his
options. Again, if the fair market value of a share of Common Stock at the time
of exercise is greater than the exercise price per share, this feature would
enable the optionee to either (1) reduce the amount of cash required to receive
a fixed number of shares upon exercise of the option or (2) receive a greater
number of shares upon exercise of the option for the same amount of cash that
would have otherwise been used. Because options may be exercised in part from
time to time, the ability to deliver Common Stock as payment of the exercise
price could enable the optionee to turn a relatively small number of shares into
a large number of shares.
Stock Appreciation Rights. Under the Incentive Option Plan, the Board of
Directors or the Committee is authorized to grant rights to optionees ("stock
appreciation rights") under which an optionee may surrender any exercisable
incentive stock option or compensatory stock option or part thereof in return
for payment by the Company to the optionee of cash or Common Stock in an amount
equal to the excess of the fair market value of the shares of Common Stock
subject to option at the time over the option price of such shares, or a
combination of cash and Common Stock. Stock appreciation rights may be granted
concurrently with the stock options to which they relate or at any time
thereafter which is prior to the exercise or expiration of such options.
18
<PAGE> 22
Number of Shares Covered by the Incentive Option Plan. A total of 575,000
shares of Common Stock, which is equal to approximately 4.95% of the issued and
outstanding Common Stock, has been reserved for future issuance pursuant to the
Incentive Option Plan. In the event of a stock split, reverse stock split,
subdivision, stock dividend or any other capital adjustment, the number of
shares of Common Stock under the Incentive 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 or such capital
adjustment.
Amendment and Termination of the Option Plan. The Board of Directors may
at any time terminate or amend the Incentive Option Plan with respect to any
shares of Common Stock as to which Awards have not been granted, subject to any
required stockholder approval or any stockholder approval which the Board may
deem to be advisable. The Board of Directors may not, without the consent of the
holder of an Award, alter or impair any Award previously granted or awarded
under the Incentive Option Plan except as specifically authorized by the plan.
Unless sooner terminated, the Incentive Option Plan shall continue in
effect for a period of ten years from March 6, 2000, the date that the Incentive
Option Plan was adopted by the Board of Directors. Termination of the Incentive
Option Plan shall not affect any previously granted Awards.
Awards to be Granted. The Company has made no determination as of the
date hereof as to the timing or recipients of grants of Awards under the
Incentive Option Plan.
Federal Income Tax Consequences. Under current provisions of the Code,
the federal income tax treatment of incentive stock options and compensatory
stock options is different. As regards incentive stock options, an optionee who
meets certain holding period requirements will not recognize income at the time
the option is granted or at the time the option is exercised, and a federal
income tax deduction generally will not be available to the Company any time as
a result of such grant or exercise. With respect to compensatory stock options,
the difference between the fair market value on the date of exercise and the
option exercise price generally will be treated as compensation income upon
exercise, and the Company will be entitled to a deduction in the amount of
income so recognized by the optionee. Upon the exercise of a stock appreciation
right, the holder will realize income for federal income tax purposes equal to
the amount received by him, whether in cash, shares of stock or both, and the
Company will be entitled to a deduction for federal income tax purposes in the
same amount.
Section 162(m) of the Code generally limits the deduction for certain
compensation in excess of $1 million per year paid by a publicly-traded
corporation to its chief executive officer and the four other most highly
compensated executive officers ("covered executive"). Certain types of
compensation, including compensation based on performance goals, are excluded
from the $1 million deduction limitation. In order for compensation to qualify
for this exception: (i) it must be paid solely on account of the attainment of
one or more preestablished, objective performance goals; (ii) the performance
goal must be established by a compensation committee consisting solely of two or
more outside directors, as defined; (iii) the material terms under which the
compensation is to be paid, including performance goals, must be disclosed to
and approved by stockholders in a separate vote prior to payment; and (iv) prior
to payment, the compensation committee must certify that the performance goals
and any other material terms were in fact satisfied (the "Certification
Requirement").
Treasury regulations provide that compensation attributable to a stock
option or stock appreciation right is deemed to satisfy the requirement that
compensation be paid solely on account of the attainment of one or more
performance goals if: (i) the grant is made by a compensation committee
consisting solely of two or more outside directors, as defined; (ii) the plan
under which the option or stock appreciation right is granted states the maximum
number of shares with respect to which options or stock appreciation rights may
be granted during a specified period to any employee; and (iii) under the terms
of the option or stock appreciation right, the amount of compensation the
employee could receive is based solely on an increase in the value of the stock
after the date of grant or award. The Certification Requirement is not necessary
if these other requirements are satisfied.
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The Incentive Option Plan has been designed to meet the requirements of
Section 162(m) of the Code and, as a result, the Company believes that
compensation attributable to stock options and stock appreciation rights granted
under the Incentive Option Plan in accordance with the foregoing requirements
will be fully deductible under Section 162(m) of the Code. If the non-excluded
compensation of a covered executive exceeded $1 million, however, compensation
attributable to other awards, such as restricted stock, may not be fully
deductible unless the grant or vesting of the award is contingent on the
attainment of a performance goal determined by a compensation committee meeting
specified requirements and disclosed to and approved by the stockholders of the
Company. The Board of Directors believes that the likelihood of any impact on
the Company from the deduction limitation contained in Section 162(m) of the
Code is remote at this time.
The above description of tax consequences under federal law is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
Accounting Treatment. Stock appreciation rights will, in most cases,
require a charge against the earnings of the Company each year representing
appreciation in the value of such rights over periods in which they become
exercisable. Such charge is based on the difference between the exercise price
specified in the related option and the current market price of the Common
Stock. In the event of a decline in the market price of the Common Stock
subsequent to a charge against earnings related to the estimated costs of stock
appreciation rights, a reversal of prior charges is made in the amount of such
decline (but not to exceed aggregate prior charges).
Neither the grant nor the exercise of an incentive stock option or a
non-qualified stock option under the Stock Incentive Option Plan currently
requires any charge against earnings under generally accepted accounting
principles. In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," which is effective for transactions entered into
after December 15, 1995. This Statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. This Statement
defines a fair value method of accounting for an employee stock option or
similar equity instrument and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation cost for those plans using
the intrinsic value method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Under the fair value method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
Under the intrinsic value method, compensation cost is the excess, if any, of
the quoted market price of the stock at grant date or other measurement date
over the amount an employee must pay to acquire the stock. The Company
anticipates that it will use the intrinsic value method, in which event pro
forma disclosure will be included in the footnotes to the Company's financial
statements to show what net income and earnings per share would have been if the
fair value method had been utilized. If the Company elects to utilize the fair
value method, its net income and earnings per share may be adversely affected.
Stockholder Approval. No Awards will be granted under the Incentive
Option Plan unless the Incentive Option Plan is approved by stockholders.
Stockholder ratification of the Incentive Option Plan will satisfy listing
requirements of the Nasdaq Stock Market and federal tax requirements.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION OF
THE 2000 INCENTIVE STOCK OPTION PLAN.
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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, 2000, 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 2000.
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 2001, 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 17, 2000. If such
proposal is in compliance with all of the requirements of Rule 14a-8 of the
Exchange Act, 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.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 of the Exchange Act may be
brought before an annual meeting pursuant to the Company's Bylaws, which
provides that business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, or
(b) otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof 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
ninety days prior to the anniversary date of the mailing of proxy materials by
the Company in connection with the immediately preceding annual meeting of
stockholders. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting, (b)
the name and address, as they appear on the Company's books, of the stockholder
proposing such business, (c) the class and number of shares of the Company which
are beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. To be timely with respect to the next annual
meeting of stockholders of the Company, a stockholders notice must be received
by the Company no later than December 18, 2000.
ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1999 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
EXCHANGE 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.
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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.
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APPENDIX A
COMMONWEALTH BANCORP, INC.
2000 INCENTIVE STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Commonwealth Bancorp, Inc. (the "Corporation") hereby establishes this
2000 Incentive Stock Option Plan (the "Plan") upon the terms and conditions
hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Corporation and its Subsidiary Companies by providing Employees and
Non-Employee Directors with a proprietary interest in the Corporation as an
incentive to contribute to the success of the Corporation and its Subsidiary
Companies, and rewarding Employees for outstanding performance and the
attainment of targeted goals. All Incentive Stock Options issued under this Plan
are intended to comply with the requirements of Section 422 of the Code, and the
regulations thereunder, and all provisions hereunder shall be read, interpreted
and applied with that purpose in mind.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option or Stock Appreciation Right granted
pursuant to the terms of this Plan, including Performance Awards.
3.02 "Bank" means Commonwealth Bank, the wholly owned subsidiary of the
Corporation.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act,
whether or not the Corporation in fact is required to comply with Regulation 14A
thereunder; provided that, without limitation, such a change in control shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the Corporation, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing 25% or
more of the combined voting power of the Corporation's then outstanding
securities, or (ii) during any period of twenty-four consecutive months during
the term of an Option, individuals who at the beginning of such period
constitute the Board of the Corporation cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination for election by
the Corporation's stockholders, of each director who was not a director at the
date of grant has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the period.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means a committee of two or more directors appointed
by the Board pursuant to Article IV hereof each of whom shall be a Non-Employee
Director as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor
thereto and within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.
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3.07 "Common Stock" means shares of the common stock, $.10 par value
per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company, or, if no
such plan applies, which would qualify such individual for disability benefits
under the long-term disability plan maintained by the Corporation, if such
individual were covered by that plan.
3.09 "Effective Date" means the day upon which the Board approves this
Plan.
3.10 "Employee" means any person who is employed by the Corporation or
a Subsidiary Company, or is an Officer of the Corporation or a Subsidiary
Company, but not including directors who are not also Officers of or otherwise
employed by the Corporation or a Subsidiary Company.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.12 "Fair Market Value" shall be equal to the fair market value per
share of the Corporation's Common Stock on the date an Award is granted. For
purposes hereof, the Fair Market Value of a share of Common Stock shall be the
closing sale price of a share of Common Stock on the date in question (or, if
such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the composite
of the markets, if more than one) or national quotation system in which such
shares are then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal market or
national quotation system then in use, or if no such quotations are available,
the price furnished by a professional securities dealer making a market in such
shares selected by the Committee.
3.13 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.14 "Non-Employee Director" means a member of the Board of the
Corporation or Board of Directors of the Bank who is not an Officer or Employee
of the Corporation or any Subsidiary Company.
3.15 "Non-Qualified Option" means any Option granted under this Plan
which is not an Incentive Stock Option.
3.16 "Officer" means an Employee whose position in the Corporation or
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.17 "Option" means a right granted under this Plan to purchase Common
Stock.
3.18 "Optionee" means an Employee or Non-Employee Director or former
Employee or Non-Employee Director to whom an Option is granted under the Plan.
3.19 "Performance Award" means an Award based upon the achievement of
previously established Performance Goals and granted pursuant to Section 7.01 of
the Plan.
3.20 "Performance Goal" means an objective for the Corporation or any
Subsidiary Company or any unit thereof that was established by the Committee for
a Performance Award to be granted. The Performance Goals shall be based on one
or more of the following criteria:
(i) net income, as adjusted for non-recurring items;
(ii) cash earnings;
(iii) earnings per share;
(iv) cash earnings per share;
(v) return on average equity;
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(vi) return on average assets;
(vii) assets;
(viii) stock price;
(ix) total stockholder return;
(x) capital;
(xi) net interest income;
(xii) market share;
(xiii) cost control or efficiency ratio; and
(xiv) asset growth.
3.21 "Retirement" means a termination of employment which
constitutes a "retirement" under any applicable qualified pension benefit plan
maintained by the Corporation or a Subsidiary Corporation, or, if no such plan
is applicable, which would constitute "retirement" under the Corporation's
pension benefit plan, if such individual were a participant in that plan.
3.22 "Stock Appreciation Right" means a right to surrender an Option in
consideration for a payment by the Corporation in cash and/or Common Stock, as
provided in the discretion of the Committee in accordance with Section 8.10.
3.23 "Subsidiary Companies" means those subsidiaries of the
Corporation, including the Bank, which meet the definition of "subsidiary
corporations" set forth in Section 425(f) of the Code, at the time of granting
of the Option in question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 DUTIES OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority to adopt, amend
and rescind such rules, regulations and procedures as, in its opinion, may be
advisable in the administration of the Plan, including, without limitation,
rules, regulations and procedures which (i) deal with satisfaction of an
Optionee's tax withholding obligation pursuant to Section 12.02 hereof, (ii)
include arrangements to facilitate the Optionee's ability to borrow funds for
payment of the exercise or purchase price of an Award, if applicable, from
securities brokers and dealers, and (iii) include arrangements which provide for
the payment of some or all of such exercise or purchase price by delivery of
previously-owned shares of Common Stock or other property and/or by withholding
some of the shares of Common Stock which are being acquired. The interpretation
and construction by the Committee of any provisions of the Plan, any rule,
regulation or procedure adopted by it pursuant thereto or of any Award shall be
final and binding in the absence of action by the Board.
4.02 APPOINTMENT AND OPERATION OF THE COMMITTEE. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board.
The Board from time to time may remove members from, or add members to, the
Committee, provided the Committee shall continue to consist of two or more
members of the Board, each of whom shall be a Non-Employee Director, as defined
in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor thereto. In
addition, each member of the Committee shall be an "outside director" within the
meaning of Section 162(m) of the Code and regulations thereunder at such times
as is required under such regulations. The Committee shall act by vote or
written consent of a majority of its members. Subject to the express provisions
and limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. It may
appoint one of its members to be chairman and any person, whether or not a
member, to be its secretary or agent. The Committee shall report its actions and
decisions to the Board at appropriate times but in no event less than one time
per calendar year.
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4.03 REVOCATION FOR MISCONDUCT. The Board or the Committee may by
resolution immediately revoke, rescind and terminate any Option, or portion
thereof, to the extent not yet vested, or any Stock Appreciation Right, to the
extent not yet exercised, previously granted or awarded under this Plan to an
Employee who is discharged from the employ of the Corporation or a Subsidiary
Company for cause, which, for purposes hereof, shall mean termination because of
the Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order. Options granted
to a Non-Employee Director who is removed for cause pursuant to the
Corporation's Articles of Incorporation and Bylaws or the Bank's Charter and
Bylaws shall terminate as of the effective date of such removal.
4.04 LIMITATION ON LIABILITY. Neither the members of the Board nor any
member of the Committee shall be liable for any action or determination made in
good faith with respect to the Plan, any rule, regulation or procedure adopted
by it pursuant thereto or any Awards granted under it. If a member of the Board
or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Corporation
shall, subject to the requirements of applicable laws and regulations, indemnify
such member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Corporation and its Subsidiary Companies and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
4.05 COMPLIANCE WITH LAW AND REGULATIONS. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
The Corporation shall not be required to issue or deliver any certificates for
shares of Common Stock prior to the completion of any registration or
qualification of or obtaining of consents or approvals with respect to such
shares under any federal or state law or any rule or regulation of any
government body, which the Corporation shall, in its sole discretion, determine
to be necessary or advisable. Moreover, no Option or Stock Appreciation Right
may be exercised if such exercise would be contrary to applicable laws and
regulations.
4.06 RESTRICTIONS ON TRANSFER. The Corporation may place a legend upon
any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees and Non-Employee Directors of the
Corporation and its Subsidiary Companies as may be designated from time to time
by the Board or the Committee. Awards may not be granted to individuals who are
not Employees or Non-Employee Directors of either the Corporation or its
Subsidiary Companies. Non-Employee Directors shall be eligible to receive only
Non-Qualified Options.
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ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 OPTION SHARES. The aggregate number of shares of Common Stock
which may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be 575,000. None of such shares shall be the subject of more
than one Award at any time, but if an Option as to any shares is surrendered
before exercise, or expires or terminates for any reason without having been
exercised in full, or for any other reason ceases to be exercisable, the number
of shares covered thereby shall again become available for grant under the Plan
as if no Awards had been previously granted with respect to such shares.
6.02 SOURCE OF SHARES. The shares of Common Stock issued under the Plan
may be authorized but unissued shares, treasury shares or shares purchased by
the Corporation on the open market or from private sources for use under the
Plan.
ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
7.01 PERFORMANCE AWARDS. The Committee shall meet not less than
annually and, in its discretion, grant Performance Awards to such Employees and
Non-Employee Directors, in such amounts and on such terms as it determines
giving due consideration to the achievement of a previously established
Performance Goal or any combination of Performance Goals. No participant shall
have any right to a Performance Award until such grants are actually made by the
Committee.
7.02 DETERMINATION OF AWARDS. In addition to Performance Awards, the
Board or the Committee shall, in its discretion, determine from time to time
which Employees and Non-Employee Directors will be granted Awards under the
Plan, the number of shares of Common Stock subject to each Award, whether each
Option will be an Incentive Stock Option or a Non-Qualified Stock Option and the
exercise price of an Option. In making all such determinations there shall be
taken into account the duties, responsibilities and performance of each
Optionee, his present and potential contributions to the growth and success of
the Corporation, his salary and such other factors deemed relevant to
accomplishing the purposes of the Plan.
7.03 MAXIMUM AWARDS TO ANY PERSON. Notwithstanding anything contained
in this Plan to the contrary, the maximum number of shares of Common Stock to
which Awards may be granted to any individual in any calendar year shall be
40,000.
ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 STOCK OPTION AGREEMENT. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which shall
set forth the total number of shares of Common Stock to which it pertains, the
exercise price, whether it is a Non-Qualified Option or an Incentive Stock
Option, and such other terms, conditions, restrictions and privileges as the
Board or the Committee in each instance shall deem appropriate, provided they
are not inconsistent with the terms, conditions and provisions of this Plan.
Each Optionee shall receive a copy of his executed Stock Option Agreement.
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8.02 OPTION EXERCISE PRICE.
(a) INCENTIVE STOCK OPTIONS. The per share price at which the
subject Common Stock may be purchased upon exercise of an Incentive Stock Option
shall be no less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Incentive Stock Option is granted, except
as provided in Section 8.09(b).
(b) NON-QUALIFIED OPTIONS. The per share price at which the
subject Common Stock may be purchased upon exercise of a Non-Qualified Option
shall be established by the Committee at the time of grant, but in no event
shall be less than the greater of (i) the par value or (ii) one hundred percent
(100%) of the Fair Market Value of a share of Common Stock at the time such
Non-Qualified Option is granted.
8.03 VESTING AND EXERCISE OF OPTIONS.
(a) GENERAL RULES. Incentive Stock Options and Non-Qualified
Options shall become vested and exercisable at the rate, to the extent and
subject to such limitations as may be specified by the Board or the Committee.
Notwithstanding the foregoing, no vesting shall occur on or after an Employee's
employment or service as a Non-Employee Director with the Corporation and all
Subsidiary Companies is terminated for any reason other than his death,
Disability, Retirement or a Change in Control of the Corporation. In determining
the number of shares of Common Stock with respect to which Options are vested
and/or exercisable, fractional shares will be rounded up to the nearest whole
number if the fraction is 0.5 or higher, and down if it is less.
(b) ACCELERATED VESTING. Unless the Committee or Board shall
specifically state otherwise at the time an Option is granted, all Options
granted under this Plan shall become vested and exercisable in full on the date
an Optionee terminates his employment with the Corporation or a Subsidiary
Company or service as a Non-Employee Director because of his death, Disability
or Retirement. In addition, all outstanding Options shall become immediately
vested and exercisable in full as of the effective date of a Change in Control
of the Corporation.
8.04 DURATION OF OPTIONS.
(a) GENERAL RULE. Except as provided in Sections 8.04(b) and
8.09, each Option or portion thereof granted to an Employee shall be exercisable
at any time on or after it vests and remain exercisable until the earlier of (i)
ten (10) years after its date of grant or (ii) six (6) months after the date on
which the Employee ceases to be employed by the Corporation and all Subsidiary
Companies, or any successor thereto, unless the Board or the Committee in its
discretion decides at the time of grant or thereafter to extend such period of
exercise upon termination of employment to a period not exceeding five (5)
years.
Except as provided in Section 8.04(b), each Option or portion thereof
granted to a Non-Employee Director shall be exercisable at any time on or after
it vests and remain exercisable until the earlier of (i) ten (10) years after
its date of grant or (ii) two (2) years after the date on which the Non-Employee
Director ceases to serve as a director of the Corporation and all Subsidiary
Companies, or any successor thereto, unless the Board or the Committee in its
discretion decides at the time of grant or thereafter to extend such period of
exercise upon termination of service to a period not exceeding five (5) years.
(b) EXCEPTIONS. Unless the Board or the Committee shall
specifically state otherwise at the time an Option is granted, if an Employee
terminates his employment with the Corporation or a Subsidiary Company as a
result of Disability or Retirement without having fully exercised his Options,
the Employee shall have the right, during the two (2) year period following his
termination due to Disability or Retirement, to exercise such Options.
Unless the Board or the Committee shall specifically state otherwise at
the time an Option is granted, if an Employee or Non-Employee Director
terminates his employment or service with the Corporation or a Subsidiary
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<PAGE> 32
Company following a Change in Control of the Corporation without having fully
exercised his Options, the Optionee shall have the right to exercise such
Options during the remainder of the original ten (10) year term of the Option
from the date of grant.
If an Optionee dies while in the employ or service of the Corporation or
a Subsidiary Company or terminates employment or service with the Corporation or
a Subsidiary Company as a result of Disability or Retirement and dies without
having fully exercised his Options, the executors, administrators, legatees or
distributees of his estate shall have the right, during the one (1) year period
following his death, to exercise such Options.
In no event, however, shall any Option be exercisable more than ten (10)
years from the date it was granted.
8.05 NONASSIGNABILITY. Options shall not be transferable by an Optionee
except by will or the laws of descent or distribution, and during an Optionee's
lifetime shall be exercisable only by such Optionee or the Optionee's guardian
or legal representative. Notwithstanding the foregoing, or any other provision
of this Plan, an Optionee who holds Non-Qualified Options may transfer such
Options to his or her spouse, lineal ascendants, lineal descendants, or to a
duly established trust for the benefit of one or more of these individuals.
Options so transferred may thereafter be transferred only to the Optionee who
originally received the grant or to an individual or trust to whom the Optionee
could have initially transferred the Option pursuant to this Section 8.05.
Options which are transferred pursuant to this Section 8.05 shall be exercisable
by the transferee according to the same terms and conditions as applied to the
Optionee.
8.06 MANNER OF EXERCISE. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be set
forth in the written Stock Option Agreement provided for in Section 8.01 above.
8.07 PAYMENT FOR SHARES. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of any Option shall be
made to the Corporation upon exercise of the Option. All shares sold under the
Plan shall be fully paid and nonassessable. Payment for shares may be made by
the Optionee in cash or, at the discretion of the Board or the Committee, by
delivering shares of Common Stock (including shares acquired pursuant to the
exercise of an Option) or other property equal in Fair Market Value to the
purchase price of the shares to be acquired pursuant to the Option, by
withholding some of the shares of Common Stock which are being purchased upon
exercise of an Option, or any combination of the foregoing.
8.08 VOTING AND DIVIDEND RIGHTS. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded on
the Corporation's stockholder ledger as the holder of record of such shares
acquired pursuant to an exercise of an Option.
8.09 ADDITIONAL TERMS APPLICABLE TO INCENTIVE STOCK OPTIONS. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.08 above, to those
contained in this Section 8.09.
(a) Notwithstanding any contrary provisions contained elsewhere
in this Plan and as long as required by Section 422 of the Code, the aggregate
Fair Market Value, determined as of the time an Incentive Stock Option is
granted, of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year under
this Plan, and stock options that satisfy the requirements of Section 422 of the
Code under any other stock option plan or plans maintained by the Corporation
(or any parent or Subsidiary Company), shall not exceed $100,000.
(b) LIMITATION ON TEN PERCENT STOCKHOLDERS. The price at which
shares of Common Stock may be purchased upon exercise of an Incentive Stock
Option granted to an individual who, at the time such Incentive Stock Option is
granted, owns, directly or indirectly, more than ten percent (10%) of the total
combined voting power of all
A-7
<PAGE> 33
classes of stock issued to stockholders of the Corporation or any Subsidiary
Company, shall be no less than one hundred and ten percent (110%) of the Fair
Market Value of a share of the Common Stock of the Corporation at the time of
grant, and such Incentive Stock Option shall by its terms not be exercisable
after the earlier of the date determined under Section 8.04 or the expiration of
five (5) years from the date such Incentive Stock Option is granted.
(c) NOTICE OF DISPOSITION; WITHHOLDING; ESCROW. An Optionee
shall immediately notify the Corporation in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section 421 of the Code) of any shares of
Common Stock acquired through exercise of an Incentive Stock Option, within two
(2) years after the grant of such Incentive Stock Option or within one (1) year
after the acquisition of such shares, setting forth the date and manner of
disposition, the number of shares disposed of and the price at which such shares
were disposed of. The Corporation shall be entitled to withhold from any
compensation or other payments then or thereafter due to the Optionee such
amounts as may be necessary to satisfy any withholding requirements of federal
or state law or regulation and, further, to collect from the Optionee any
additional amounts which may be required for such purpose. The Committee may, in
its discretion, require shares of Common Stock acquired by an Optionee upon
exercise of an Incentive Stock Option to be held in an escrow arrangement for
the purpose of enabling compliance with the provisions of this Section 8.09(c).
8.10 STOCK APPRECIATION RIGHTS.
(a) GENERAL TERMS AND CONDITIONS. The Board or the Committee
may, but shall not be obligated to, authorize the Corporation, on such terms and
conditions as it deems appropriate in each case, to grant rights to Optionees to
surrender an exercisable Option, or any portion thereof, in consideration for
the payment by the Corporation of an amount equal to the excess of the Fair
Market Value of the shares of Common Stock subject to the Option, or portion
thereof, surrendered over the exercise price of the Option with respect to such
shares (any such authorized surrender and payment being hereinafter referred to
as a "Stock Appreciation Right"). Such payment, at the discretion of the Board
or the Committee, may be made in shares of Common Stock valued at the then Fair
Market Value thereof, or in cash, or partly in cash and partly in shares of
Common Stock.
The terms and conditions set with respect to a Stock Appreciation Right
may include (without limitation), subject to other provisions of this Section
8.10 and the Plan: the period during which, date by which or event upon which
the Stock Appreciation Right may be exercised; the method for valuing shares of
Common Stock for purposes of this Section 8.10; a ceiling on the amount of
consideration which the Corporation may pay in connection with exercise and
cancellation of the Stock Appreciation Right; and arrangements for income tax
withholding. The Board or the Committee shall have complete discretion to
determine whether, when and to whom Stock Appreciation Rights may be granted.
(b) TIME LIMITATIONS. If a holder of a Stock Appreciation Right
terminates service with the Corporation as an Officer or Employee, the Stock
Appreciation Right may be exercised only within the period, if any, within which
the Option to which it relates may be exercised.
(c) EFFECTS OF EXERCISE OF STOCK APPRECIATION RIGHTS OR
OPTIONS. Upon the exercise of a Stock Appreciation Right, the number of shares
of Common Stock available under the Option to which it relates shall decrease by
a number equal to the number of shares for which the Stock Appreciation Right
was exercised. Upon the exercise of an Option, any related Stock Appreciation
Right shall terminate as to any number of shares of Common Stock subject to the
Stock Appreciation Right that exceeds the total number of shares for which the
Option remains unexercised.
(d) TIME OF GRANT. A Stock Appreciation Right granted in
connection with an Incentive Stock Option must be granted concurrently with the
Option to which it relates, while a Stock Appreciation Right granted in
connection with a Non-Qualified Option may be granted concurrently with the
Option to which it relates or at any time thereafter prior to the exercise or
expiration of such Option.
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<PAGE> 34
(e) NON-TRANSFERABLE. The holder of a Stock Appreciation Right
may not transfer or assign the Stock Appreciation Right otherwise than by will
or in accordance with the laws of descent and distribution, and during a
holder's lifetime a Stock Appreciation Right may be exercisable only by the
holder.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any outstanding Award relates,
the maximum number of shares that can be covered by Awards to each Employee,
each Non-Employee Director and all Non-Employee Directors as a group, and the
exercise price per share of Common Stock under any outstanding Option shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the effective date of
this Plan resulting from a split, subdivision or consolidation of shares or any
other capital adjustment, the payment of a stock dividend, or other increase or
decrease in such shares effected without receipt or payment of consideration by
the Corporation. If, upon a merger, consolidation, reorganization, liquidation,
recapitalization or the like of the Corporation, the shares of the Corporation's
Common Stock shall be exchanged for other securities of the Corporation or of
another corporation, each recipient of an Award shall be entitled, subject to
the conditions herein stated, to purchase or acquire such number of shares of
Common Stock or amount of other securities of the Corporation or such other
corporation as were exchangeable for the number of shares of Common Stock of the
Corporation which such optionees would have been entitled to purchase or acquire
except for such action, and appropriate adjustments shall be made to the per
share exercise price of outstanding Options. In addition, in the event the
Corporation distributes warrants or other securities or assets on a pro rata
basis to all holders of Common Stock of the Corporation without receipt or
payment of consideration by the Corporation (the "Distribution"), then the
Corporation shall (a) make appropriate arrangements so that the holders of
Options outstanding immediately prior to the date of the Distribution receive
upon exercise of such Options the benefits of the Distribution as if the holders
had 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 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, in which event the aggregate number of shares of Common Stock
available for issuance under this Plan and the maximum number of shares that can
be covered by Awards to each Employee, each Non-Employee Director and all
Non-Employee Directors as a group shall also be proportionately adjusted.
Notwithstanding any provision to the contrary, the exercise price of shares
subject to outstanding Awards may be proportionately adjusted upon the payment
of a special large and nonrecurring dividend that has the effect of a return of
capital to the stockholders.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to any required stockholder approval or any stockholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the holder of an
Award, alter or impair any Award previously granted or awarded under this Plan
except as specifically authorized herein.
ARTICLE XI
EMPLOYMENT AND SERVICE RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create any
right on the part of any Employee or Non-Employee Director to continue in such
capacity.
A-9
<PAGE> 35
ARTICLE XII
WITHHOLDING
12.01 TAX WITHHOLDING. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the Corporation
the amount required to be withheld as a condition to delivering the shares
acquired pursuant to an Award. The Corporation also may withhold or collect
amounts with respect to a disqualifying disposition of shares of Common Stock
acquired pursuant to exercise of an Incentive Stock Option, as provided in
Section 8.09(c).
12.02 METHODS OF TAX WITHHOLDING. The Board or the Committee is
authorized to adopt rules, regulations or procedures which provide for the
satisfaction of an Optionee's tax withholding obligation by the retention of
shares of Common Stock to which the Employee would otherwise be entitled
pursuant to an Award and/or by the Optionee's delivery of previously-owned
shares of Common Stock or other property.
ARTICLE XIII
EFFECTIVE DATE OF THE PLAN; TERM
13.01 EFFECTIVE DATE OF THE PLAN. This Plan shall become effective on
the Effective Date, and Awards may be granted hereunder no earlier than the date
that this Plan is approved by stockholders of the Corporation and prior to the
termination of the Plan, provided that this Plan is approved by stockholders of
the Corporation pursuant to Article XIV hereof.
13.02 TERM OF THE PLAN. Unless sooner terminated, this Plan shall remain
in effect for a period of ten (10) years ending on the tenth anniversary of the
Effective Date. Termination of the Plan shall not affect any Awards previously
granted and such Awards shall remain valid and in effect until they have been
fully exercised or earned, are surrendered or by their terms expire or are
forfeited.
ARTICLE XIV
STOCKHOLDER APPROVAL
The Corporation shall submit this Plan to stockholders for approval at a
meeting of stockholders of the Corporation held within twelve (12) months
following the Effective Date in order to meet the requirements of (i) Section
422 of the Code and regulations thereunder, (ii) Section 162(m) of the Code and
regulations thereunder, and (iii) the National Association of Securities
Dealers, Inc. for quotation of the Common Stock on the Nasdaq Stock Market's
National Market.
ARTICLE XV
MISCELLANEOUS
15.01 GOVERNING LAW. To the extent not governed by federal law, this
Plan shall be construed under the laws of the Commonwealth of Pennsylvania.
15.02 PRONOUNS. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
A-10
<PAGE> 36
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
18, 2000 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 3, 2000 at the Annual Meeting of Stockholders to be held at
the Best Western Hotel, located at 815 North Pottstown Pike, Exton,
Pennsylvania, on April 18, 2000, 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 a three-year term expiring in 2003:
Charles H. Meacham, Harry P. Mirabile and Joanne Harmelin.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL to adopt the 2000 Incentive Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL to ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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> 37
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 THE PROPOSAL TO ADOPT THE 2000 INCENTIVE STOCK OPTION PLAN,
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.
Dated: , 2000
-------------------------
-------------------------
-------------------------
Signatures
PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAMES(S) APPEAR(S) ON THIS PROXY. WHEN
SIGNING IN A REPRESENTATIVE CAPACITY, PLEASE GIVE TITLE. WHEN SHARES ARE HELD
JOINTLY, ONLY ONE HOLDER NEED SIGN.
- -----------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- -----------------------------------------------------------------------------
<PAGE> 38
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 3, 2000 under the VIP upon the
following proposals to be presented at the Annual Meeting of Stockholders of the
Company on April 18, 2000.
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 a three-year term expiring in 2003:
Charles H. Meacham, Harry P. Mirabile and Joanne Harmelin.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL to adopt the 2000 Incentive Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL to ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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: , 2000
--------------------
--------------------------------------
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, your shares
will not be voted.
<PAGE> 39
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 3, 2000 under the ESOP upon the
following proposals to be presented at the Annual Meeting of Stockholders of the
Company on April 18, 2000.
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 a three-year term expiring in 2003:
Charles H. Meacham, Harry P. Mirabile and Joanne Harmelin.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL to adopt the 2000 Incentive Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL to ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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: , 2000
--------------------
----------------------------------------------
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> 40
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 3, 2000 under a Recognition Plan upon the following proposals to be
presented at the Annual Meeting of Stockholders of the Company on April 18,
2000.
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 a three-year term expiring in 2003:
Charles H. Meacham, Harry P. Mirabile and Joanne Harmelin.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL to adopt the 2000 Incentive Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL to ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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: , 2000
--------------------
------------------------------------------
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> 41
March 17, 2000
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> 42
March 17, 2000
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> 43
March 17, 2000
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
