<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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
KENWOOD 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)(4) 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:
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(4) Date filed:
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<PAGE> 2
January 2, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Kenwood Bancorp, Inc. (the "Company"). The meeting will be held at the
Company's headquarters located at 7711 Montgomery Road, Cincinnati, Ohio, on
Thursday, January 30, 1997 at 4:00 p.m., Eastern Time. The matters to be
considered by stockholders at the Annual Meeting are described in the
accompanying materials.
The Board of Directors of the Company has determined that the matters
to be considered at the Special Meeting are in the best interests of the
Company and its shareholders. FOR THE REASONS SET FORTH IN THE PROXY
STATEMENT, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH MATTER TO
BE CONSIDERED.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares 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 the Company are sincerely
appreciated.
Sincerely,
/S/ THOMAS W. BURNS
Thomas W. Burns
Executive Vice President and
Chief Executive Officer
<PAGE> 3
KENWOOD BANCORP, INC.
7711 MONTGOMERY ROAD
CINCINNATI, OHIO 45236
(513) 791-2834
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 30, 1997
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders of
Kenwood Bancorp, Inc. (the "Company") will be held at the Company's
headquarters located at 7711 Montgomery Road, Cincinnati, Ohio, on Thursday,
January 30, 1997, at 4:00 p.m., Eastern Time, for the following purposes, all
of which are more completely set forth in the accompanying Proxy Statement:
1. To elect two (2) directors of the Company for a three-year
term and until their successors are elected and qualified;
2. To consider and approve the adoption of the Company's 1996
Stock Option Plan;
3. To consider and approve the adoption of the Company's
Management Recognition Plan and Trust;
4. To ratify the appointment of Clark, Schaefer, Hackett & Co. as
the Company's independent auditors for the year ending September 30, 1997;
5. If necessary, to adjourn the Annual Meeting to solicit
additional proxies; and
6. To transact such other business as may properly come before
the meeting or any adjournment thereof. Except with respect to procedural
matters incident to the conduct of the Annual Meeting, management is not aware
of any other matters which could come before the Annual Meeting.
The Board of Directors of the Company has fixed December 26, 1996 as
the voting record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting. 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
/S/ P. LINCOLN MITCHELL
P. Lincoln Mitchell, Secretary
January 2, 1997
Cincinnati, Ohio
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 THIS MEETING,
YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED
BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE> 4
KENWOOD BANCORP, INC.
----------------------------
PROXY STATEMENT
----------------------------
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 30, 1997
GENERAL
This Proxy Statement is being furnished to the stockholders of Kenwood
Bancorp, Inc. (the "Company"), a Delaware corporation which acquired all of the
outstanding stock of Kenwood Savings Bank (the "Savings Bank") in connection
with the conversion of Kenwood Federal Mutual Holding Company and the
reorganization of the Savings Bank to the holding company form of organization
(the "Conversion and Reorganization") which was consummated on June 28, 1996.
In the Conversion and Reorganization, each share of common stock of the Savings
Bank was exchanged for 1.9463 shares of common stock, $0.01 par value per share
(the "Common Stock"), of the Company. Proxies are being solicited on behalf of
the Board of Directors of the Company for use at the Annual Meeting of
Stockholders ("Annual Meeting") to be held at the Company's headquarters
located at 7711 Montgomery Road, Cincinnati, Ohio, on Thursday, January 30,
1997, at 4:00 p.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 January 2, 1997.
VOTING RIGHTS
Only the holders of record of the outstanding shares of the Company's
Common Stock at the close of business on December 26, 1996 ("Voting Record
Date") will be entitled to notice of and to vote at the Annual Meeting. At
such date, there were 295,133 shares of Common Stock issued and outstanding.
Holders of record of Common Stock at the close of business on December
26, 1996 will be entitled to one vote per share on all matters that may
properly come before the Annual Meeting. Stockholders of the Company are not
permitted to cumulate their votes for the election of directors.
The presence, either in person or by proxy, of at least a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. Directors shall be elected by a
plurality of the votes cast with a quorum present.
<PAGE> 5
Abstentions are considered in determining the presence of a quorum but will not
affect the plurality vote required for the election of directors. The
affirmative vote of the holders of a majority of the total votes eligible to be
cast in person or by proxy at the Annual Meeting is required for approval of
the proposals to approve the Company's 1996 Stock Option Plan ("Stock Option
Plan") and the Company's Management Recognition Plan and Trust ("Recognition
Plan"). A majority of the total votes present in person and by proxy will be
required to adjourn the Annual Meeting, if such action is required to be voted
on, and to ratify the appointment of the independent auditors. Because of the
required votes, abstentions will have the same effect as a vote against the
proposals with respect to the Stock Option Plan and the Recognition Plan.
Under rules of the New York Stock Exchange, the proposals for the election of
directors, the ratification of auditors, and for adjournment, if necessary, are
considered "discretionary" items upon which brokerage firms may vote in their
discretion on behalf of their clients if such clients have not furnished voting
instructions and for which there will not be "broker non-votes." The proposals
to approve the Stock Option Plan and the Recognition Plan, however, are
considered "non-discretionary" and for which there may be broker non-votes. A
broker non-vote will have the same effect as a vote against the proposals to
approve the Stock Option Plan and the Recognition Plan.
PROXIES
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 NOMINEES FOR DIRECTOR DESCRIBED HEREIN AND
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 who has given a
proxy may revoke it at any time prior to its exercise at the Annual Meeting by
(i) giving written notice of revocation to the Secretary of the Company, (ii)
properly submitting to the Company a duly-executed proxy bearing a later date,
or (iii) attending the Annual Meeting and voting in person. All written
notices of revocation and other communications with respect to the revocation
of proxies should be addressed as follows: Kenwood Bancorp, Inc., 7711
Montgomery Road, Cincinnati, Ohio 45236, Attention: Secretary.
BENEFICIAL OWNERSHIP
The following table sets forth information as to the Common Stock
beneficially owned, as of December 26, 1996, by (i) the only persons or
entities, including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), who or which was
known to the Company to be the beneficial owner of more than 5% of the issued
and outstanding Common Stock, (ii) the directors of the Company, and (iii) all
directors and executive officers of the Company as a group.
2
<PAGE> 6
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Name of Beneficial Owner or Ownership as of Percent of
Number of Persons in Group December 26, 1996(1) Common Stock
--------------------------- -------------------- ------------
<S> <C> <C>
Kenwood Bancorp, Inc. 12,612(2) 4.3%
Employee Stock Ownership Plan
Trust
7711 Montgomery Road
Cincinnati, Ohio 45236
Directors:
P. Lincoln Mitchell 5,670(3) 1.9%
James N. Murphy 7,882(4) 2.7%
Robert P. Isler 16,508(5) 5.6%
Donald G. Ashcraft 7,881(6) 2.7%
Richard C. Kent 10,000(7) 3.4%
All directors and executive officers
of the Company as a
group (6 persons) 60,340(8) 20.4%
</TABLE>
- -----------------------------------
(1) Pursuant to rules promulgated by the Securities and Exchange
Commission ("SEC") under the Exchange Act, a person or entity is
considered to beneficially own shares of Common Stock if the person or
entity 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 direct the disposition of the
shares. Unless otherwise indicated, a person or entity has sole
voting and sole investment power with respect to the indicated shares.
Shares which are subject to stock options and which may be exercised
within 60 days of the Voting Record Date are deemed to be outstanding
for the purpose of computing the percentage of Common Stock
beneficially owned by such person.
(2) The Kenwood Bancorp, Inc. Employee Stock Ownership Plan Trust
("Trust") was established pursuant to the Kenwood Bancorp, Inc.
Employee Stock Ownership Plan ("ESOP") by an agreement between the
Company and Messrs. Isler and Mitchell, who act as trustees of the
ESOP ("Trustees"). As of the Voting Record Date, no shares held in
the Trust had been allocated to the accounts of participating
employees. Since no shares held in the Trust were allocated as of the
Voting Record
(footnotes continued on following page)
3
<PAGE> 7
Date under the terms of the ESOP, unallocated shares held in the ESOP
will be voted by the Trustees in accordance with their fiduciary
duties as Trustees. Under the terms of the ESOP, the Trustees must
vote the allocated shares held in the ESOP in accordance with the
instructions of the participating employees. Unallocated shares held
in the ESOP are required to be voted in the same ratio on any matter
as those allocated shares for which instructions are given. 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. The
amount of Common Stock beneficially owned by directors who serve as
Trustees of the ESOP and by all directors and executive officers as a
group does not include the unallocated shares held by the Trust.
(3) Includes options to purchase 805 shares pursuant to the Company's 1992
Directors' Stock Option Plan.
(4) All of such shares are owned jointly with Mr. Murphy's wife.
(5) All shares are held by the Isler Homes, Inc. Profit Sharing Plan as to
which Mr. Isler is the sole administrator and beneficiary.
(6) Includes 7,076 shares held jointly with Mr. Ashcraft's spouse.
(7) All of such shares are owned jointly with Mr. Kent's spouse.
(8) Includes in the case of all directors and executive officers of the
Company as a group, options to purchase 3,446 shares which are held by
Mr. Burns pursuant to the Company's 1992 Stock Incentive Plan and
options to purchase 805 shares which are held by Mr. Mitchell pursuant
to the Company's 1992 Directors' Stock Option Plan. See "Executive
Compensation - Stock Options" and "Directors' Compensation."
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
DIRECTORS WHOSE TERM CONTINUES AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
The Company's Board of Directors is currently composed of five
members. The Certificate of Incorporation of the Company provides that the
Board of Directors shall be divided into three classes as nearly equal in
number as possible, and that the members of each class shall be elected for
terms of three years and when their successors are elected and qualified, with
one of the three classes of directors to be elected each year.
At the Annual Meeting, stockholders of the Company will be asked to
elect two (2) directors of the Company for a three-year term and until their
successors are elected and
4
<PAGE> 8
qualified. The two nominees for election as directors were selected by the
Nominating Committee of the Board of Directors of the Company and both nominees
currently serve as directors of the Company. There are no arrangements or
understandings between the persons named and any other person pursuant to which
such person was selected as a nominee for election as a director at the Annual
Meeting. No director or nominee for director is related to any other director
or executive officer of the Company by blood, marriage or adoption.
If a person named as a nominee should be unable or unwilling to stand
for election at the time of the Annual Meeting, the proxies will nominate and
vote for a replacement nominee recommended by the Board of Directors of the
Company. At this time, the Board of Directors knows of no reason why the
nominees may not be able to serve as a director if elected.
The Bylaws of the Company provide that stockholders of the Company may
nominate persons for director in addition to nominees selected by the Board of
Directors, provided that such nominations are in writing and delivered to the
Secretary of the Company, 7711 Montgomery Road, Cincinnati, Ohio 45236, ninety
(90) 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 of the Company; provided, however, that with respect to this first
Annual Meeting, nominations by the stockholder must have been delivered or
received no later than the close of business on the second Thursday of October
1996. Each written notice of a stockholder nomination must set forth certain
information specified in the Company's Bylaws. No nominations from
stockholders were received in connection with this Annual Meeting.
INFORMATION WITH RESPECT TO THE NOMINEES FOR DIRECTOR AND CONTINUING DIRECTORS
The following tables present information concerning the nominees for
director of the Company and each director whose term continues, including his
or her tenure as a director of the Savings Bank and his or her principal
occupation during the past five years. Each of the nominees is also a director
of the Savings Bank.
5
<PAGE> 9
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERM EXPIRING IN 2000
<TABLE>
<CAPTION>
Position with the
Company and Principal Occupation Director
Name Age During the Past Five Years Since(1)
- ------------------------ ----- ---------------------------------------------------------- ----------
<S> <C> <C> <C>
P. Lincoln Mitchell 72 Director; Secretary of the Company since June 1996; 1985
Secretary of the Savings Bank since June 1992;
self-employed as a real estate appraiser since 1961.
James N. Murphy 56 Director; sole stockholder of Kenwood Pharmacy, 1992
Cincinnati, Ohio, since May 1992 and was a 50%
stockholder of Kunkel Pharmacy, Cincinnati, Ohio, from
October 1987 to September 1991.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE NOMINEES
BE ELECTED AS DIRECTORS
DIRECTORS WITH TERMS EXPIRING IN 1998
<TABLE>
<CAPTION>
Position with the
Company and Principal Occupation Director
Name Age During the Past Five Years Since(1)
- ------------------------ ----- ---------------------------------------------------------- ----------
<S> <C> <C> <C>
Robert P. Isler 61 Director; President and Chairman of the Board of the 1986
Company since June 1996; President of the Savings Bank
since June 1992 and Chairman of the Board of the Savings
Bank since January 1993; Vice President of the Savings
Bank from January 1991 to June 1992; President of Isler
Homes, Inc., Okeana, Ohio, since 1964.
Donald G. Ashcraft 61 Director; Owner of Vintage Title Agency, Inc. since 1991
September 1995; President and co-owner of Blue Chip
Title Agency, Inc. from 1988 to August 1995.
</TABLE>
6
<PAGE> 10
DIRECTOR WITH TERM EXPIRING IN 1999
<TABLE>
<CAPTION>
Position with the
Company and Principal Occupation Director
Name Age During the Past Five Years Since(1)
- -------------------- ----- -------------------------------------------------------------- ----------
<S> <C> <C> <C>
Richard C. Kent 50 Director; Owner of Kent Insurance Agency, Inc., Cincinnati, 1993
Ohio, since 1988.
</TABLE>
- --------------------------
(1) Includes service with Kenwood Savings Bank.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following table sets forth certain information with respect to the
only person who currently serves as an executive officer of the Company and the
Savings Bank and who is not also a director of the Company and the Savings
Bank. There are no arrangements or understandings between the Company or the
Savings Bank and such person pursuant to which such person was elected an
executive officer of the Company and the Savings Bank and no such officer is
related to any director or other officer of the Company and the Savings Bank by
blood, marriage or adoption.
<TABLE>
<CAPTION>
Position with the Company and the Savings Bank and Principal
Occupation
Name Age During the Past Five Years
- -------------------- ----- ------------------------------------------------------------------------
<S> <C> <C>
Thomas W. Burns 41 Executive Vice President and Chief Executive Officer of the Company
since June 1996. Executive Vice President and Chief Executive
Officer of the Savings Bank since December 1991. Prior to December
1991, served as Controller, Cardinal State Bank, Maineville, Ohio.
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors (and the Savings Bank's officers and directors prior to the
Conversion and Reorganization) and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the SEC. 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
Company's Common Stock.
7
<PAGE> 11
Based solely on review of the copies of such forms furnished to the
Company, the Company believes that during fiscal 1996, all Section 16(a) filing
requirements applicable to its officers and directors were complied with.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company meets monthly and the Board of
Directors of the Savings Bank meets twice a month. Both companies may have
special meetings from time-to-time as needed. During the year ended September
30, 1996, following the Company's formation in June, the Board of Directors of
the Company met three times. The Board of Directors of the Savings Bank met
twenty-three times during the year ended September 30, 1996. No director
attended fewer than 75% in the aggregate of both the total number of Board
meetings during fiscal 1996 and the total number of meetings of committees on
which he served during the year.
The Company at its December 12, 1996 Board Meeting established an
Audit Committee to perform the functions previously performed by the Savings
Bank's Audit Committee. The Company's Audit Committee, like the Savings Bank's
Audit Committee during fiscal 1996, will examine and review the affairs and
reports of the Company, including its system of internal control, as well as
the reports of the independent auditors. The Audit Committee will also
monitor the Company's adherence in accounting and financial reporting to
generally accepted accounting principles. The Savings Bank Audit Committee met
one time during fiscal 1996 and consists of Messrs. Isler, Ashcraft and
Mitchell. These same individuals sit on the Company Audit Committee.
The Nominating Committee is appointed each year prior to the Annual
Meeting and nominates individuals for election as directors of the Company.
The Nominating Committee did not meet during fiscal 1996 but met prior to the
date of this Proxy Statement.
The Personnel Committee reviews existing compensation, investigates
new and different forms of compensation and makes recommendations with respect
thereto to the Board of Directors of the Savings Bank. The Personnel Committee
consists of Messrs. Ashcraft, Burns, Murphy and Isler and met two times during
fiscal 1996.
8
<PAGE> 12
PROPOSAL TO ADOPT THE 1996 STOCK OPTION PLAN
GENERAL
The Board of Directors has adopted the Stock 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 Stock Option Plan is also designed to retain
qualified directors for the Company. The Stock Option Plan provides for the
grant of incentive stock options intended to comply with the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
("incentive stock options"), non-qualified or compensatory stock options and
stock appreciation rights (collectively "Awards"). Awards will be available
for grant to directors and key employees of the Company and any subsidiaries,
except that non-employee directors will not be eligible to receive incentive
stock options. If stockholder approval is obtained, options to acquire shares
of Common Stock will be awarded to key employees of the Company and the Savings
Bank and directors of the Company with an exercise price equal to the fair
market value of the Common Stock on the date of the grant. The Stock Option
Plan complies in all material respects with Office of Thrift Supervision
("OTS") regulations and the OTS in no way endorses or approves the Stock Option
Plan.
DESCRIPTION OF THE STOCK OPTION PLAN
The following description of the Stock Option Plan is a summary of its
terms and is qualified in its entirety by reference to the Stock Option Plan, a
copy of which is attached hereto as Appendix A.
ADMINISTRATION. The Stock Option Plan is administered and interpreted
by a committee of the Board of Directors ("Committee") that is composed solely
of two or more "Non-Employee Directors."
STOCK OPTIONS. Under the Stock Option Plan, the Board of Directors or
the Committee determines which officers and key employees will be granted
options, whether such options will be incentive or compensatory options, the
number of shares subject to each option, the exercise price of each
compensatory option, whether such options may be exercised by delivering other
shares of Common Stock and when such options become exercisable. The per share
exercise price of a stock option shall be equal to the fair market value of a
share of Common Stock on the date the option is granted.
All options granted to participants under the Stock Option Plan shall
become vested and exercisable at the rate of 20% per year on each annual
anniversary of the date the options were granted, and the right to exercise
shall be cumulative. Notwithstanding the foregoing, no vesting shall occur on
or after a participant's employment with the Company is terminated for any
reason other than his death or disability. Unless the Committee shall
specifically state otherwise at the time an option is granted, all options
granted to
9
<PAGE> 13
participants shall become vested and exercisable in full on the date an
optionee terminates his employment with or service to the Company or a
subsidiary company because of his death or disability. In addition, all stock
options will become vested and exercisable in full on the date an optionee
terminates his employment or service to the Company or a subsidiary company as
the result of a change in control of the Company, as defined in the Stock
Option Plan, if, as of the date of such change in control of the Company, such
treatment is either authorized or is not prohibited by applicable laws and
regulations.
Each stock option or portion thereof shall be exercisable at any time
on or after it vests and is exercisable until the earlier of ten years after
its date of grant or three months after the date on which the optionee's
employment or service as a non-employee director terminates, unless extended by
the Committee to a period not to exceed three years from such termination.
However, failure to exercise incentive stock options within three months after
the date on which the optionee's employment terminates may result in adverse
tax consequences to the optionee. If an optionee dies while serving as an
employee or a non-employee director or terminates his service as an employee or
a non-employee director as a result of disability without having fully
exercised his options, the optionee's executors, administrators, legatees or
distributees of his estate shall have the right to exercise such options during
the twelve-month period following the earlier of his death or termination due
to disability, provided no option will be exercisable more than ten years from
the date it was granted. Stock options are non-transferable except by will or
the laws of descent and distribution. Notwithstanding the foregoing, an
optionee who holds non-qualified options may transfer such options to his or
her spouse, lineal ascendants, lineal descendants, or to a duly established
trust for the benefit 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. Options which are so transferred shall be
exercisable by the transferee according to the same terms and conditions as
applied to the optionee.
STOCK APPRECIATION RIGHTS. Under the Stock Option Plan, the Board of
Directors or the Committee is authorized to grant stock appreciation rights to
optionees under which an optionee may surrender any exercisable incentive stock
option or compensatory stock option or any portion 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, or portion thereof, at the time over the exercise price of
the option with respect to such shares, or a combination of cash and Common
Stock. A stock appreciation right may be granted concurrently with the stock
option to which it relates or at any time thereafter which is prior to the
exercise or expiration of such option.
NUMBER OF SHARES COVERED BY THE STOCK OPTION PLAN. A total of 15,765
shares of Common Stock has been reserved for issuance pursuant to the Stock
Option Plan. In the event of a stock split, reverse stock split or stock
dividend, the number of shares of Common Stock under the Stock 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
10
<PAGE> 14
to reflect such increase or decrease in the total number of shares of the
Common Stock outstanding.
AMENDMENT AND TERMINATION OF THE STOCK OPTION PLAN. Unless sooner
terminated, the Stock Option Plan shall continue in effect for a period of ten
years from the effective date, which is December 26, 1996, the date the Stock
Option Plan was adopted by the Board and became effective by its terms.
Termination of the Stock Option Plan shall not affect any previously granted
Awards.
FEDERAL INCOME TAX CONSEQUENCES. Under current provisions of the
Code, the federal income tax treatment of incentive stock options and
compensatory stock options is different. As regards incentive stock options,
an optionee who meets certain holding period requirements will not recognize
income at the time the option is granted or at the time the option is
exercised, and a federal income tax deduction generally will not be available
to the Company at 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.
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 Option Plan currently requires any
charge against earnings under generally accepted accounting principles. In
certain circumstances, shares issuable pursuant to outstanding options under
the Stock Option Plan might be considered outstanding for purposes of
calculating earnings per share.
11
<PAGE> 15
STOCKHOLDER APPROVAL. No Awards will be granted under the Stock
Option Plan unless the Stock Option Plan is approved by stockholders.
Stockholder ratification of the Stock Option Plan will satisfy certain Nasdaq
market listing and tax requirements.
AWARDS TO BE GRANTED. The Board of Directors of the Company adopted
the Stock Option Plan and approved the grant of incentive options to executive
officers and employees of the Company and the Savings Bank and non-qualified
options to non-employee directors thereof. The options shall be effective upon
stockholder approval of the Stock Option Plan with a per share exercise price
equal to the fair market value of a share of Common Stock on the date of such
approval. The following table sets forth certain information with respect to
such grants.
<TABLE>
<CAPTION>
Number of Shares
Name of Individual or Subject to
Number of Persons in Group Title Stock Options
-------------------------- ----- ------------------
<S> <C> <C>
Thomas W. Burns Executive Vice President and Chief
Executive Officer 788
All executive officers as
a group (three persons) --- 2,364
All non-employee directors
as a group (three persons) --- 2,364
All employees, not including
executive officers, as a
group (none) --- ---
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION
OF THE STOCK OPTION PLAN.
12
<PAGE> 16
PROPOSAL TO ADOPT THE MANAGEMENT
RECOGNITION PLAN AND TRUST
GENERAL
The Board of Directors of the Company has adopted the Recognition
Plan, the objective of which is to retain qualified personnel in key positions,
provide officers, key employees and directors with a proprietary interest in
the Company as an incentive to contribute to its success and reward key
employees for outstanding performance. Officers and key employees of the
Company who are selected by the Board of Directors of the Company or a
committee thereof, as well as non-employee directors of the Company, will be
eligible to receive benefits under the Recognition Plan. Although no specific
award determinations have been made at this time by the Board of Directors of
the Company, if stockholder approval is obtained, shares will be granted to
employees and to non-employee directors when and as determined by the Board and
as described below. The Recognition Plan complies in all material respects
with OTS regulations and the OTS in no way endorses or approves the Recognition
Plan.
DESCRIPTION OF THE RECOGNITION PLAN
The following description of the Recognition Plan is a summary of its
terms and is qualified in its entirety by reference to the Recognition Plan, a
copy of which is attached hereto as Appendix B.
ADMINISTRATION. The Recognition Plan is administered and interpreted
by a committee of the Board of Directors ("Committee") that is composed solely
of two or more "Non-Employee Directors."
Upon stockholder approval of the Recognition Plan, and when and as
determined by the Board of Directors of the Company, the Company will acquire
Common Stock on behalf of the Recognition Plan, in an amount necessary to
purchase 6,306 shares of Common Stock. These shares will be acquired through
open market purchases.
GRANTS. Shares of Common Stock granted pursuant to the Recognition
Plan will be in the form of restricted stock payable over a five-year period at
a rate of 20% per year, beginning one year from the anniversary date of the
grant. A recipient will be entitled to direct the trustee of the Recognition
Plan Trust as to the voting of shares which have been awarded but not earned
and allocated under the Recognition Plan. However, until such shares have been
earned and allocated, they may not be sold, pledged or otherwise disposed of
and are required to be held in the Recognition Plan Trust. Under the terms of
the Recognition Plan, all shares which have not yet been awarded are required
to be voted by the trustee in its sole discretion. In addition, any cash
dividends or stock dividends declared in respect of unvested share awards will
be held by the Recognition Plan Trust for the benefit of the recipients and
such dividends, including any interest thereon, will be paid out
13
<PAGE> 17
proportionately by the Recognition Plan Trust to the recipients thereof as soon
as practicable after the share awards become earned. Any cash dividends or
stock dividends declared in respect of each vested share held by the
Recognition Plan Trust will be paid by the Recognition Plan Trust as soon as
practicable after the Recognition Plan Trust's receipt thereof to the recipient
on whose behalf such share is then held by the Recognition Plan Trust.
If a recipient terminates employment for reasons other than death or
disability, the recipient will forfeit all rights to the allocated shares under
restriction. All shares subject to an award held by a recipient whose
employment with or service to the Company or any subsidiary terminates due to
death or disability, as defined in the Recognition Plan, shall be deemed earned
as of the recipient's last day of employment with or service to the Company or
any subsidiary and shall be distributed as soon as practicable thereafter;
provided, however, that awards shall be distributed in accordance with the
Recognition Plan. All shares subject to an award held by a recipient also
shall be deemed to be earned in the event of a change in control of the
Company, as defined in the Recognition Plan, provided that as of the date of
such change in control of the Company, such treatment is either authorized or
is not prohibited by applicable laws and regulations.
During the lifetime of the recipient, shares subject to an award may
only be earned by and paid to the recipient, provided that shares subject to an
award and rights to such shares shall be transferable by a recipient to his or
her spouse, lineal ascendants, lineal descendants, or to a duly established
trust. Shares subject to an award so transferred may not again be transferred
other than to the recipient who originally received the grant or to an
individual or trust to whom such recipient could have transferred shares
subject to an award. Shares subject to awards which are transferred shall be
subject to the same terms and conditions as would have applied to such shares
subject to awards in the hands of the recipient who originally received the
grant.
FEDERAL INCOME TAX CONSEQUENCES. Pursuant to Section 83 of the Code,
recipients of Recognition Plan awards will recognize ordinary income in an
amount equal to the fair market value of the shares of Common Stock granted to
them at the time that the shares vest and become transferable. A recipient of a
Recognition Plan award may also elect, however, to accelerate the recognition
of income with respect to his or her grant to the time when shares of Common
Stock are first transferred to him or her, notwithstanding the vesting schedule
of such awards. The Company will be entitled to deduct as a compensation
expense for tax purposes the same amounts recognized as income by recipients of
Recognition Plan awards in the year in which such amounts are included in
income.
ACCOUNTING TREATMENT. For accounting purposes, the Company will also
recognize a compensation expense as shares of Common Stock granted pursuant to
the Recognition Plan vest. Unlike the treatment of Recognition Plan awards for
tax purposes, however, the compensation expense recognized for accounting
purposes is limited to the fair market value of the Common Stock at the date of
grant to recipients, rather than the fair market value of the Common Stock at
the time that a Recognition Plan grant vests.
14
<PAGE> 18
STOCKHOLDER APPROVAL. No shares will be granted under the Recognition
Plan unless the Recognition Plan is approved by stockholders. Stockholder
ratification of the Recognition Plan will satisfy certain Nasdaq market listing
and tax requirements.
SHARES TO BE GRANTED. The Board of Directors of the Company has made
no determination at this time as to the amount or timing of any specific grant
of shares to executive officers and employees of the Company and the Savings
Bank and non-employee directors thereof. Upon stockholder approval of the
Recognition Plan, and when and if the Board of Directors of the Company or a
committee thereof approves the granting of shares, the awards shall be
effective upon the date of such grant. Awards to individual executive officers
and employees of the Company and the Savings Bank and each non-employee
director thereto shall not exceed 25% and 5% of the shares available under the
Recognition Plan, respectively, provided, however, that awards in the aggregate
to all non-employee directors shall not exceed 30% of the shares available
under the Recognition Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION
OF THE MANAGEMENT RECOGNITION PLAN AND TRUST.
ADJOURNMENT OF SPECIAL MEETING
Each proxy solicited hereby requests authority to vote for an
adjournment of the Annual Meeting, if an adjournment is deemed to be necessary.
The Company may seek an adjournment of the Annual Meeting for not more than 30
days in order to enable the Company to solicit additional votes in favor of the
proposals to adopt the Stock Option Plan and/or the Recognition Plan in the
event that either or both of such proposals have not received the requisite
vote of stockholders at the Annual Meeting and either or both of such proposals
have not received the negative votes of the holders of a majority of the
Company's Common Stock. If the Company desires to adjourn the meeting with
respect to either or both of the foregoing proposals, it will request a motion
that the meeting be adjourned for up to 30 days with respect to such proposal
or proposals (and solely with respect to such proposal or proposals, provided
that a quorum is present at the Annual Meeting), and no vote will be taken on
such proposal(s) at the originally scheduled Annual Meeting. Each proxy
solicited hereby, if properly signed and returned to the Company and not
revoked prior to its use, will be voted on any motion for adjournment in
accordance with the instructions contained therein. If no contrary
instructions are given, each proxy received will be voted in favor of any
motion to adjourn the meeting. Unless revoked prior to its use, any proxy
solicited for the Annual Meeting will continue to be valid for any adjournment
of the Annual Meeting, and will be voted in accordance with instructions
contained therein, and if no contrary instructions are given, for the
proposal(s) in question.
Any adjournment will permit the Company to solicit additional proxies
and will permit a greater expression of the stockholders' views with respect to
such proposal(s). Such an adjournment would be disadvantageous to stockholders
who are against the proposal(s), because an adjournment will give the Company
additional time to solicit favorable votes and thus increase the chances of
passing such proposal(s).
15
<PAGE> 19
If a quorum is not present at the Annual Meeting, no proposal will be
acted upon and the Board of Directors of the Company will adjourn the Annual
Meeting to a later date in order to solicit additional proxies on each of the
proposal(s) being submitted to stockholders.
An adjournment for up to 30 days will not require either the setting
of a new record date or notice of the adjourned meeting as in the case of an
original meeting. The Company has no reason to believe that an adjournment of
the Annual Meeting will be necessary at this time.
BECAUSE THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE PROPOSALS TO ADOPT THE STOCK OPTION PLAN AND RECOGNITION PLAN, AS DISCUSSED
ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
POSSIBLE ADJOURNMENT OF THE ANNUAL MEETING. THE HOLDERS OF A MAJORITY OF THE
COMPANY'S COMMON STOCK PRESENT, IN PERSON OR BY PROXY, AT THE ANNUAL MEETING
WILL BE REQUIRED TO APPROVE A MOTION TO ADJOURN THE ANNUAL MEETING.
16
<PAGE> 20
EXECUTIVE COMPENSATION
SUMMARY
The following table sets forth a summary of certain information
concerning the compensation awarded to or paid by the Company for services
rendered in all capacities during the last fiscal year to the Executive Vice
President and Chief Executive Officer of the Company. There were no executive
officers of the Company whose total compensation during the last fiscal year
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
==================================================================================================================================
ANNUAL COMPENSATION LONG TERM COMPENSATION
-----------------------------------------------------------------------------
OTHER AWARDS PAYOUTS ALL OTHER
NAME AND ANNUAL ---------------------------------------- COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION RESTRICTED SECURITIES (2)
(1) STOCK UNDERLYING LTIP
AWARDS OPTIONS PAYOUTS
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas W. Burns 1996 $63,125 $ -- -- -- -- -- $2,367
Executive Vice President
and Chief Executive 1995 $61,000 $ 1,000 -- -- -- -- $2,325
Officer
1994 $57,930 $10,000 -- -- -- -- $5,095
==================================================================================================================================
</TABLE>
- ---------------------------
(1) Does not include amounts attributable to miscellaneous benefits
received by executive officers. The costs to the Company of providing
such benefits to the named executive officer during the year ended
September 30, 1996 did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus reported for such individual.
(2) Consists of amounts allocated, accrued or paid by the Savings Bank on
behalf of Mr. Burns pursuant to the Savings Bank's 401(k) Profit
Sharing Plan.
STOCK OPTIONS
In connection with the Conversion and Reorganization, the Company
adopted the Savings Bank's 1992 Stock Incentive Plan. The 1992 Stock Incentive
Plan provides for the grant of options to purchase the Company's Common Stock
to officers and employees of the Savings Bank. The maximum number of shares of
the Company's Common Stock which may be issued under the 1992 Stock Incentive
Plan is 7,833 shares. Options for all such shares were outstanding under such
plan, none of which had been issued as of September
17
<PAGE> 21
30, 1996. There were no option grants made during fiscal 1996 pursuant to the
Company's 1992 Stock Incentive Plan.
The following table sets forth certain information concerning
exercises of stock options granted pursuant to the Company's 1992 Stock
Incentive Plan by the named executive officer during the year ended September
30, 1996 and options held at September 30, 1996.
<TABLE>
<CAPTION>
==============================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
------------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Options at In-The-Money Options at Fiscal
Fiscal-Year End(1) Year-End(2)
-----------------------------------------------------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Burns -- -- 2,584 5,249(3) $27,778 $56,427
==============================================================================================================================
</TABLE>
- ----------------------------
(1) As adjusted to take into consideration the exchange of common stock of
the Savings Bank for Company Common Stock in the Conversion and
Reorganization.
(2) Based on a per share market price of $10.75 as of September 10, 1996,
as adjusted to take into consideration the exchange of common stock of
the Savings Bank for Company Common Stock in the Conversion and
Reorganization.
(3) Such options vest over a nine-year period at the rate of 11% per year,
commencing November 13, 1992.
DIRECTORS' COMPENSATION
During the year ended September 30, 1996, following the Company's
formation in June, each member of the Board of Directors of the Company
received a monthly fee of $200. During the year ended September 30, 1996, each
member of the Board of Directors of the Savings Bank received a monthly fee of
$764, except Mr. Isler, the President and Chairman of the Board of the Savings
Bank, and Mr. Mitchell, the Secretary of the Savings Bank, who received monthly
fees of $1,201 and $986, respectively. Mr. Isler and Mr. Mitchell are not
otherwise compensated as officers of the Savings Bank. Director fees are paid
regardless of attendance or the number of meetings held. Directors otherwise
do not receive any fees for committee meetings.
Prior to the Conversion and Reorganization, the Savings Bank
maintained a 1992 Directors' Stock Option Plan which provided for the grant of
options to purchase the Savings Bank's common stock to non-employee directors
of the Savings Bank. Upon the consummation of the Conversion and
Reorganization, the Company adopted the 1992
18
<PAGE> 22
Directors' Stock Option Plan. The maximum number of shares which may be issued
pursuant to the 1992 Directors' Stock Option Plan is 414 shares.
In the original mutual holding company reorganization of the Savings
Bank in 1992, each non-employee director of the Company was granted an option
to purchase 805 shares of Common Stock at an exercise price of $10.00 per
share, as adjusted to take into consideration the exchange of common stock of
the Savings Bank for Common Stock of the Company in the Conversion and
Reorganization. All of such options have been exercised except for options
held by Mr. Mitchell. As of September 30, 1996, options for an aggregate of
805 shares were available for grant under such plan.
MANAGEMENT RECOGNITION PLAN
In connection with the Conversion and Reorganization, the Company
adopted the Savings Bank's Management Recognition Plan which provides for the
award of restricted Common Stock to directors, officers and employees of the
Savings Bank. The restricted stock awarded pursuant to the Management
Recognition Plan vests over five years, one-fifth per year from the date of
grant. As of September 30, 1996, the maximum number of shares of the Company's
Common Stock available for grant under the Management Recognition Plan was
3,059 shares, and 969 shares were subject to the Plan's vesting requirements.
PROFIT SHARING PLAN
The Savings Bank maintains a 401(k) Profit Sharing Plan ("Profit
Sharing Plan"). Employees are eligible to participate on the October 1 of any
year after completing one-half year of service with the Savings Bank and
attaining age 20-1/2. The Profit Sharing Plan permits participants, subject to
the limitations imposed by Section 401(k) of the Code, and satisfaction of the
requirements of the Employee Retirement Income Security Act of 1974, as
amended, ("ERISA"), to make voluntary tax defined contributions in an amount up
to 7.5% of their annual base compensation. The Savings Bank may also
contribute to the Profit Sharing Plan additional amounts in its discretion.
During the year ended September 30, 1996, the Savings Bank contributed $8,990
to the Profit Sharing Plan, exclusive of amounts deferred by employees.
Discretionary contributions made by the Savings Bank to the Profit
Sharing Plan are allocated to the accounts of plan participants in proportion
to each participant's compensation for the plan year. Benefits from the plan
are payable upon a participant's death, disability, retirement at age 65 or
early retirement (as defined therein), at which time the participant (or his
beneficiary) will become 100% vested in his plan benefits. Any participant who
separates from service prior to one of those events will be entitled to a
portion of his benefits. All amounts deferred by employees are 100% vested.
Vesting of matching and discretionary contributions is 20% after two years of
service with an additional 20% for each additional year of service up to 6
years when full vesting occurs. The Profit Sharing Plan also provides for
payment of benefits prior to separation from service to a participant
experiencing financial hardship, as determined under the terms of the plan.
The
19
<PAGE> 23
payment of benefits under the Profit Sharing Plan may be made in a single cash
payment, in installments or by the purchase of an annuity.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has established the ESOP for employees of the Company and
the Savings Bank. Full-time employees of the Company and the Savings Bank who
have been credited with at least 1,000 hours of service during a twelve month
period and who have attained age 21 are eligible to participate in the ESOP.
As part of the Conversion and Reorganization, the ESOP borrowed funds
to purchase 12,612 shares of Common Stock from the Company at a rate of 8.25%
per annum. The loan to the ESOP is being repaid principally from the Company's
and the Savings Bank's contributions to the ESOP over a period of 10 years, and
the collateral for the loan is the Common Stock purchased by the ESOP. The
Company may, in any plan year, make additional discretionary contributions for
the benefit of plan participants in either cash or shares of Common Stock,
which may be acquired through the purchase of outstanding shares in the open
market or from individual stockholders, upon the original issuance of
additional shares by the Company or upon the sale of treasury shares by the
Company. Such purchases, if made, would be funded through additional
borrowings by the ESOP or additional contributions from the Company. The
timing, amount and manner of future contributions to the ESOP will be affected
by various factors, including prevailing regulatory policies, the requirements
of applicable laws and regulations and market conditions.
Shares purchased by the ESOP with the proceeds of the loan are held in
a suspense account and released on a pro rata basis as debt service payments
are made. Discretionary contributions to the ESOP and shares released from the
suspense account are allocated among participants on the basis of compensation.
Forfeitures are reallocated among remaining participating employees and may
reduce any amount the Company might otherwise have contributed to the ESOP.
Participants vest in their right to receive their account balances pursuant to
the ESOP after completing five years of service with the Savings Bank
(inclusive of years of service prior to establishment of the ESOP). In the
case of a change in control of the Company, as defined, however, participants
will become fully vested in their account balances. Benefits are payable upon
retirement, early retirement or separation from service. The Company's
contributions to the ESOP are not fixed, so benefits payable under the ESOP
cannot be estimated.
The ESOP is subject to the requirements of ERISA and the regulations
of the Internal Revenue Service and the Department of Labor.
INDEBTEDNESS OF MANAGEMENT
In accordance with applicable federal laws and regulations, any credit
extended by the Savings Bank to its executive officers, directors and, to the
extent otherwise permitted, principal stockholder(s), or any related interest
of the foregoing, must (i) be on substantially
20
<PAGE> 24
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions by the savings institution with
non-affiliated parties; (ii) be pursuant to underwriting standards that are no
less stringent than those applicable to comparable transactions with
non-affiliated parties; (iii) not involve more than the normal risk of
repayment or present other unfavorable features; and (iv) not exceed, in the
aggregate, the institution's unimpaired capital and surplus, as defined.
With the exception of Mr. Murphy (who had in the aggregate $142,600 of
loans from the Savings Bank which were secured by deposit accounts, which loans
were made in the ordinary course of business, were not made with favorable
terms and did not involve more than the normal risk of collectibility), no
director or executive officer of the Savings Bank, including members of such
persons' immediate families and affiliated entities, had loans with the Savings
Bank aggregating $60,000 or more during the year ended September 30, 1996.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Clark, Schaefer,
Hackett & Co. ("Clark, Schaefer"), independent certified public accountants, to
perform the audit of the Company's financial statements for the year ending
September 30, 1997, 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 Clark, Schaefer 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. Clark, Schaefer 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.
For each of the years in the three year period ended September 30,
1994, the Savings Bank's financial statements were audited by Grant Thornton
LLP. The services of Grant Thornton LLP were discontinued in April 1995 and
Clark, Schaefer was engaged in April 1995 and remains as the Company's
independent auditors. The decision to change auditors was approved by the
Board of Directors of the Savings Bank. Accordingly, the Savings Bank's
financial statements at September 30, 1994 and for the fiscal year ended
September 30, 1994 were audited by Grant Thornton LLP and the financial
statements at September 30, 1996 and 1995 and for each of the two fiscal years
ended September 30, 1996 were audited by Clark, Schaefer.
For the fiscal year ended September 30, 1994, and up to the date of
the discontinuation of services of Grant Thornton LLP, there were no
disagreements with Grant Thornton LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which,
if not resolved to the satisfaction of Grant
21
<PAGE> 25
Thornton LLP would have caused it to make a reference to the subject matter of
the disagreement in connection with its reports.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF CLARK, SCHAEFER, HACKETT & CO. AS INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1997.
OTHER MATTERS
Management is not aware of any business to come before the Annual
Meeting other than those matters described in this Proxy Statement. However,
if any other matters should properly come before the Annual 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 solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of 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.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
solicitation materials to be used in connection with the next Annual Meeting of
Stockholders of the Company must be received at the main office of the Company
no later than August 29, 1997. 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 the next Annual
Meeting of Stockholders. It is urged that any such proposals be sent by
certified mail, return receipt requested.
No stockholder proposals were submitted in connection with this Annual
Meeting. Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the Exchange Act may be
brought before an annual meeting pursuant to Section 2.14 of the Company's
Bylaws, which provides that business at an annual meeting of stockholders must
be (a) properly brought before the meeting 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 stockholders' notice must be
delivered to, or mailed and received at, the principal executive offices of the
Company not later than 90 days prior to the anniversary date of the immediately
preceding annual meeting of
22
<PAGE> 26
stockholders of the Company. Such stockholders' notice is required to set
forth certain information specified in the Company's Bylaws.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
Stockholders of the Company as of the record date for the Annual
Meeting are being forwarded a copy of the Company's Annual Report to
Stockholders for the year ended September 30, 1996 ("Annual Report"). Included
in the Annual Report are the financial statements of the Savings Bank as of
September 30, 1995 and the Company as of September 30, 1996 and for each of the
years in the three-year period ended September 30, 1996, prepared in accordance
with generally accepted accounting principles, and the related report of the
Company's independent public accountants. The Annual Report is not a part of
this Proxy Statement.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED SEPTEMBER 30, 1996 AND A LIST OF EXHIBITS THERETO, INCLUDING THE
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, REQUIRED TO BE FILED
WITH THE SEC UNDER THE EXCHANGE ACT. SUCH WRITTEN REQUEST SHOULD BE DIRECTED
TO KENWOOD BANCORP, INC., 7711 MONTGOMERY ROAD, CINCINNATI, OHIO 45236,
ATTENTION: SECRETARY. THE ANNUAL REPORT ON FORM 10-K IS NOT A PART OF THIS
PROXY STATEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
P. Lincoln Mitchell, Secretary
January 2, 1997
Cincinnati, Ohio
23
<PAGE> 27
APPENDIX A
KENWOOD BANCORP, INC.
1996 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Kenwood Bancorp, Inc. (the "Corporation") hereby establishes this 1996
Stock Option Plan (the "Plan") upon the terms and conditions hereinafter
stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Corporation and its Subsidiary Companies by providing Employees and
Non-Employee Directors with a proprietary interest in the Corporation as an
incentive to contribute to the success of the Corporation and its Subsidiary
Companies, and rewarding those Employees for outstanding performance and the
attainment of targeted goals. All Incentive Stock Options issued under this
Plan are intended to comply with the requirements of Section 422 of the Code,
and the regulations thereunder, and all provisions hereunder shall be read,
interpreted and applied with that purpose in mind.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option or Stock Appreciation Right granted
pursuant to the terms of this Plan.
3.02 "Bank" means Kenwood Savings Bank, the wholly-owned subsidiary
of the Corporation.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall 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 and any trustee or other
fiduciary holding securities under any employee benefit plan of 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; (ii) during any period of two
consecutive years (not including any period prior to the adoption of the Plan),
individuals who at the beginning of such
<PAGE> 28
period constitute the Board of Directors, and any new director whose election
by the Board of Directors or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of the two-year
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the Board of
Directors; (iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a
merger or consolidation that would result in the voting securities of the
Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) more than 50% of the combined voting power of the
voting securities of the Corporation outstanding immediately after such merger
or consolidation; or (iv) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the Corporation's
assets. If any of the events enumerated in clauses (i) through (iv) occur, the
Board shall determine the effective date of the Change in Control resulting
therefrom for purposes of the Plan.
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.
3.07 "Common Stock" means shares of the common stock, $0.01 par
value per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an Employee 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 Employee for disability benefits
under the Federal Social Security System.
3.09 "Division" means the Ohio Department of Commerce, Division of
Financial Institutions.
3.10 "Effective Date" means the day upon which the Board approves
this Plan.
3.11 "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.
3.12 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.13 "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
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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.
3.14 "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.
3.15 "Non-Employee Director" means a member of the Board who is not
an Officer or Employee of the Corporation or any Subsidiary Company.
3.16 "Non-Qualified Option" means any Option granted under this
Plan which is not an Incentive Stock Option.
3.17 "Offering" means the offering of Common Stock to the public
pursuant to a Plan of Conversion and Agreement and Plan of Reorganization
adopted by the Corporation, the Bank and Kenwood Federal Mutual Holding
Company.
3.18 "Officer" means an Employee whose position in the Corporation
or Subsidiary Company is that of a corporate officer, as determined by the
Board.
3.19 "Option" means a right granted under this Plan to purchase
Common Stock.
3.20 "Optionee" means an Employee or Non-Employee Director to whom
an Option is granted under the Plan.
3.21 "OTS" means the Office of Thrift Supervision.
3.22 "Retirement" means a termination of employment upon or after
attainment of age sixty-five (65) or such earlier age as may be specified in
any applicable qualified pension benefit plan maintained by the Corporation or
a Subsidiary Company.
3.23 "Stock Appreciation Right" means a right to surrender an
Option in consideration for a payment by the Corporation in cash and/or Common
Stock, as provided in the discretion of the Committee in accordance with
Section 8.11.
3.24 "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 Award in question.
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ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 DUTIES OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority in its
absolute discretion (subject to compliance with applicable OTS and Division
regulations) 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 of Directors.
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. The
Committee shall act by vote or written consent of a majority of its members.
Subject to the express provisions and limitations of the Plan, the Committee
may adopt such rules, regulations and procedures as it deems appropriate for
the conduct of its affairs. It may appoint one of its members to be chairman
and any person, whether or not a member, to be its secretary or agent. The
Committee shall report its actions and decisions to the Board at appropriate
times but in no event less than one time per calendar year.
4.03 REVOCATION FOR MISCONDUCT. The Board of Directors 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 Certificate of Incorporation
shall terminate as of the effective date of such removal.
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4.04 LIMITATION ON LIABILITY. No member of the Board of Directors
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 any members
of the Board of Directors or a member of the Committee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Corporation shall, subject to the requirements of
applicable laws and regulations, indemnify such member against all liabilities
and expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Corporation and its
Subsidiary Companies and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful.
4.05 COMPLIANCE WITH LAW AND REGULATIONS. All Awards granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may
be required. The Corporation shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any Federal or state law or any rule or regulation
of any government body, which the Corporation shall, in its sole discretion,
determine to be necessary or advisable. Moreover, no Option or Stock
Appreciation Right may be exercised if such exercise would be contrary to
applicable laws and regulations.
4.06 RESTRICTIONS ON TRANSFER. The Corporation may place a legend
upon any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees of the Corporation and its
Subsidiary Companies as may be designated from time to time by the Board of
Directors 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 15,765 shares, which is equal to 10.0% of the shares of
Common Stock issued in the Offering. None of such shares shall be the subject
of more than one Award at any time, but if an Award as to any shares is
surrendered before exercise, or expires or terminates for any reason without
having been exercised in full, or for any other reason ceases to be
exercisable, the number of shares covered thereby shall again become available
for grant under the Plan as if no Awards had been previously granted with
respect to such shares. Notwithstanding the foregoing, if an Option is
surrendered in connection with the exercise of a Stock Appreciation Right, or
vice versa, the number of shares covered thereby shall not be available for
grant under the Plan. During the time this Plan remains in effect, grants to
each Employee and each Non-Employee Director shall not exceed 25% and 5% of the
shares of Common Stock available under the Plan, respectively, provided,
however, that grants in the aggregate to Non-Employee Directors shall not
exceed 30% of the shares of Common Stock available under the Plan.
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 or, if applicable, shares held in a grantor trust created by the
Corporation.
ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
The Board of Directors 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, and whether each Option will be an Incentive Stock Option or a
Non-Qualified Stock Option. In making all such determinations there shall be
taken into account the duties, responsibilities and performance of each
respective Employee, his present and potential contributions to the growth and
success of the Corporation, his salary and such other factors as the Committee
shall deem relevant to accomplishing the purposes of the Plan.
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ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 STOCK OPTION AGREEMENT. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which
shall set forth the total number of shares of Common Stock to which it
pertains, the exercise price, whether it is a Non-Qualified Option or an
Incentive Stock Option, and such other terms, conditions, restrictions and
privileges as the Board of Directors or the Committee in each instance shall
deem appropriate, provided they are not inconsistent with the terms, conditions
and provisions of this Plan. Each Optionee shall receive a copy of his
executed Stock Option Agreement.
8.02 AWARDS TO EMPLOYEES AND NON-EMPLOYEE DIRECTORS. Specific
Awards to Employees and Non-Employee Directors shall be made to such persons
and in such amounts as are determined by the Board of Directors or the
Committee. However, Awards equal to 4,729 shares (or 30% of the number of
shares available under this Plan) shall be made to Non-Employee Directors in
the aggregate and no individual Non-Employee Director may receive Awards in
excess of 788 shares (or 5% of the number of shares available under this Plan).
8.03 OPTION EXERCISE PRICE.
(a) INCENTIVE STOCK OPTIONS. The per share price at
which the subject Common Stock may be purchased upon exercise of an Incentive
Stock Option shall be no less than one hundred percent (100%) of the Fair
Market Value of a share of Common Stock at the time such Incentive Stock Option
is granted, except as provided in Section 8.10(b), and subject to any
applicable adjustment pursuant to Article IX hereof.
(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 no less than one hundred percent (100%) of the Fair Market
Value of a share of Common Stock at the time such Non-Qualified Option is
granted, and subject to any applicable adjustment pursuant to Article IX
hereof.
8.04 VESTING AND EXERCISE OF OPTIONS.
(a) GENERAL RULES. Incentive Stock Options and
Non-Qualified Options granted hereunder shall become vested and exercisable at
the rate of 20% per year on each annual anniversary of the date the Option was
granted, and the right to exercise shall be cumulative. Notwithstanding the
foregoing, no vesting shall occur on or after an Employee's employment with the
Corporation and all Subsidiary Companies is terminated for any reason other
than his death or Disability. In determining the number of shares of Common
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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 Board of Directors
or the Committee shall specifically state otherwise at the time an Option is
granted, all Options granted hereunder shall become vested and exercisable in
full on the date an Optionee terminates his employment with or service to the
Corporation or a Subsidiary Company because of his death or Disability. All
options hereunder shall become immediately vested and exercisable in full on
the date an Optionee terminates his employment or service to the Corporation
or a Subsidiary Company as the result of a Change in Control of the Corporation
if, as of the date of such Change in Control of the Corporation, such treatment
is either authorized or is not prohibited by applicable laws and regulations.
8.05 DURATION OF OPTIONS.
(a) GENERAL RULE. Except as provided in Sections 8.05(b)
and 8.10, each Option or portion thereof granted to Employees and Non-Employee
Directors shall be exercisable at any time on or after it vests and becomes
exercisable until the earlier of (i) ten (10) years after its date of grant or
(ii) three (3) months after the date on which the Optionee ceases to be
employed (or in the service of the Board of Directors in the case of
Non-Employee Directors) by the Corporation and all Subsidiary Companies, unless
the Committee in its discretion decides at the time of grant or thereafter to
extend such period of exercise upon termination of employment or service from
three (3) months to a period not exceeding three (3) years.
(b) EXCEPTIONS. If an Employee dies while in the employ
of the Corporation or a Subsidiary Company or terminates employment with the
Corporation or a Subsidiary Company as a result of Disability without having
fully exercised his Options, the Optionee or the executors, administrators,
legatees or distributee of his estate shall have the right, during the
twelve-month period following the earlier of his death or Disability, to
exercise such Options to the extent vested on the date of such death or
Disability. If a Non-Employee Director dies while serving as a Non-Employee
Director without having fully exercised his Options, the Non-Employee
Director's executors, administrators, legatees or distributee of his estate
shall have the right, during the twelve-month period following such death, to
exercise such Options. In no event, however, shall any Option be exercisable
within six (6) months after the date of grant or more than ten (10) years from
the date it was granted. In the event of Retirement, an Employee or
Non-Employee Director shall be entitled to the same time period set forth above
in this Section 8.05(b) to exercise an Option if, as of the date of such
Retirement, such treatment is either authorized or is not prohibited by
applicable laws and regulations.
8.06 NONASSIGNABILITY. Options shall not be transferable by an
Optionee except by will or the laws of descent or distribution, and during an
Optionee's lifetime shall be
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exercisable only by such Optionee or the Optionee's guardian or legal
representative. Notwithstanding the foregoing, or any other provision of this
Plan, an Optionee who holds Non-Qualified Options may transfer such Options to
his or her spouse, lineal ascendants, lineal descendants, or to a duly
established trust for the benefit of one or more of these individuals. Options
so transferred may thereafter be transferred only to the Optionee who
originally received the grant or to an individual or trust to whom the Optionee
could have initially transferred the Option pursuant to this Section 8.06.
Options which are transferred pursuant to this Section 8.06 shall be
exercisable by the transferee according to the same terms and conditions as
applied to the Optionee.
8.07 MANNER OF EXERCISE. Options may be exercised in part or in
whole and at one time or from time to time. The procedures for exercise shall
be set forth in the written Stock Option Agreement provided for in Section 8.01
above.
8.08 PAYMENT FOR SHARES. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of any Option shall
be made to the Corporation upon exercise of the Option. All shares sold under
the Plan shall be fully paid and nonassessable. Payment for shares may be made
by the Optionee in cash or, at the discretion of the Board of Directors or the
Committee, by delivering shares of Common Stock (including shares acquired
pursuant to the exercise of an Option) or other property equal in Fair Market
Value to the purchase price of the shares to be acquired pursuant to the
Option, by withholding some of the shares of Common Stock which are being
purchased upon exercise of an Option, or any combination of the foregoing.
8.09 VOTING AND DIVIDEND RIGHTS. No Optionee shall have any voting
or dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded
on the Corporation's stockholder ledger as the holder of record of such shares
acquired pursuant to an exercise of an Option.
8.10 ADDITIONAL TERMS APPLICABLE TO INCENTIVE STOCK OPTIONS. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.09 above, to those
contained in this Section 8.10.
(a) Notwithstanding any contrary provisions contained
elsewhere in this Plan and as long as required by Section 422 of the Code, the
aggregate Fair Market Value, determined as of the time an Incentive Stock
Option is granted, of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by the Optionee during any calendar
year under this Plan and stock options that satisfy the requirements of Section
422 of the Code under any other stock option plan or plans maintained by the
Corporation (or any parent or Subsidiary Company), shall not exceed $100,000.
(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
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indirectly, more than ten percent (10%) of the total combined voting power of
all classes of stock issued to stockholders of the Corporation or any
Subsidiary Company, shall be no less than one hundred and ten percent (110%) of
the Fair Market Value of a share of the Common Stock of the Corporation at the
time of grant, and such Incentive Stock Option shall by its terms not be
exercisable after the earlier of the date determined under Section 8.04 or the
expiration of five (5) years from the date such Incentive Stock Option is
granted.
(c) NOTICE OF DISPOSITION; WITHHOLDING; ESCROW. An
Optionee shall immediately notify the Corporation in writing of any sale,
transfer, assignment or other disposition (or action constituting a
disqualifying disposition within the meaning of Section 421 of the Code) of any
shares of Common Stock acquired through exercise of an Incentive Stock Option,
within two (2) years after the grant of such Incentive Stock Option or within
one (1) year after the acquisition of such shares, setting forth the date and
manner of disposition, the number of shares disposed of and the price at which
such shares were disposed of. The Corporation shall be entitled to withhold
from any compensation or other payments then or thereafter due to the Optionee
such amounts as may be necessary to satisfy any withholding requirements of
Federal or state law or regulation and, further, to collect from the Optionee
any additional amounts which may be required for such purpose. The Board of
Directors or the Committee may, in its discretion, require shares of Common
Stock acquired by an Optionee upon exercise of an Incentive Stock Option to be
held in an escrow arrangement for the purpose of enabling compliance with the
provisions of this Section 8.10(c).
8.11 STOCK APPRECIATION RIGHTS.
(a) GENERAL TERMS AND CONDITIONS. The Board of Directors
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 Committee, may be made in shares of Common Stock valued at
the then Fair Market Value thereof, or in cash, or partly in cash and partly in
shares of Common Stock.
The terms and conditions set with respect to a Stock Appreciation
Right may include (without limitation), subject to other provisions of this
Section 8.11 and the Plan, the period during which, date by which or event upon
which the Stock Appreciation Right may be exercised (which shall be on the same
terms as the Option to which it relates pursuant to Section 8.04 hereunder);
the method for valuing shares of Common Stock for purposes of this Section
8.11; a ceiling on the amount of consideration which the Corporation may pay in
connection with exercise and cancellation of the Stock Appreciation Right; and
arrangements for income tax withholding. The Board of Directors or the
Committee shall
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have complete discretion to determine whether, when and to whom Stock
Appreciation Rights may be granted. Notwithstanding the foregoing, the
Corporation may not permit the exercise of a Stock Appreciation Right issued
pursuant to this Plan until the Corporation has been subject to the reporting
requirements of Section 13 of the Exchange Act for a period of at least one
year prior to the exercise of any such Stock Appreciation Right.
(b) TIME LIMITATIONS. If a holder of a Stock
Appreciation Right terminates service with the Corporation, the Stock
Appreciation Right may be exercised only within the period, if any, within
which the Option to which it relates may be exercised. Notwithstanding the
foregoing, any election by an Optionee to exercise the Stock Appreciation
Rights provided in this Plan shall be made during the period beginning on the
third business day following the release for publication of quarterly or annual
financial information required to be prepared and disseminated by the
Corporation pursuant to the requirements of the Exchange Act and ending on the
twelfth business day following such date. The required release of information
shall be deemed to have been satisfied when the specified financial data
appears on or in a wire service, financial news service or newspaper of general
circulation or is otherwise first made publicly available.
(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 may be
granted concurrently with the Option to which it relates or at any time
thereafter prior to the exercise or expiration of such Option.
(e) NON-TRANSFERABLE. The holder of a Stock Appreciation
Right may not transfer or assign the Stock Appreciation Right otherwise than by
will or in accordance with the laws of descent and distribution, and during a
holder's lifetime a Stock Appreciation Right may be exercisable only by the
holder.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any Award relates and the
exercise price per share of Common Stock under any Award 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
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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 Awards. 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 regulations of the OTS and the Division and any required
stockholder approval or any stockholder approval which the Board may deem to be
advisable for any reason, such as for the purpose of obtaining or retaining any
statutory or regulatory benefits under tax, securities or other laws or
satisfying any applicable stock exchange listing requirements. The Board may
not, without the consent of the holder of an Award, alter or impair any Award
previously granted or awarded under this Plan as specifically authorized
herein.
ARTICLE XI
EMPLOYMENT 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 of the
Corporation or a Subsidiary Company to continue in such capacity.
ARTICLE XII
WITHHOLDING
12.01 TAX WITHHOLDING. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require
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the Optionee to pay to the Corporation the amount required to be withheld as a
condition to delivering the shares acquired pursuant to an Award. The
Corporation also may withhold or collect amounts with respect to a
disqualifying disposition of shares of Common Stock acquired pursuant to
exercise of an Incentive Stock Option, as provided in Section 8.10(c).
12.02 METHODS OF TAX WITHHOLDING. The Board of Directors 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 as of or after the
Effective Date and prior to the termination of the Plan, provided that no
Incentive Stock Option issued pursuant to this Plan shall qualify as such
unless this Plan is approved by the requisite vote of the holders of the
outstanding voting shares of the Corporation at a meeting of stockholders of
the Corporation held within twelve (12) months of the Effective Date.
Notwithstanding the foregoing or anything to the contrary in this Plan, the
implementation of this Plan and any Awards granted pursuant hereto are subject
to the non-objection of the OTS in the first year after the completion of the
Offering and approval of the Corporation's stockholders.
13.02 TERM OF 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
MISCELLANEOUS
14.01 GOVERNING LAW. To the extent not governed by Federal law,
this Plan shall be construed under the laws of the State of Delaware.
14.02 PRONOUNS. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
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APPENDIX B
KENWOOD BANCORP, INC.
MANAGEMENT RECOGNITION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Kenwood Bancorp, Inc. (the "Corporation") hereby establishes a
Management Recognition Plan (the "Plan") and Trust (the "Trust") upon the terms
and conditions hereinafter stated in this 1996 Management Recognition Plan and
Trust Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the
Trust assets existing on the date of this Agreement and all additions and
accretions thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain personnel of experience
and ability in key positions by providing Employees and Non-Employee Directors
of the Corporation and of Kenwood Savings Bank (the "Bank") with a proprietary
interest in the Corporation as compensation for their contributions to the
Corporation, the Bank, and any other Subsidiaries and as an incentive to make
such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with an
initial capital letter, unless the context clearly indicates otherwise, shall
have the meanings set forth below. Wherever appropriate, the masculine
pronouns shall include the feminine pronouns and the singular shall include the
plural.
3.01 "Bank" means Kenwood Savings Bank, the wholly-owned subsidiary
of the Corporation.
3.02 "Beneficiary" means the person or persons designated by a
Recipient to receive any benefits payable under the Plan in the event of such
Recipient's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time
to time by similar written notice to the Committee. In the
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absence of a written designation, the Beneficiary shall be the Recipient's
surviving spouse, if any, or if none, his estate.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" 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 and any trustee or other
fiduciary holding securities under any employee benefit plan of 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; (ii) during any period of two
consecutive years (not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the Board of
Directors, and any new director whose election by the Board of Directors or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors; (iii) the
stockholders of the Corporation approve a merger or consolidation of the
Corporation with any other corporation, other than a merger or consolidation
that would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the Corporation outstanding immediately after such merger or consolidation; or
(iv) the stockholders of the Corporation approve a plan of complete liquidation
of the Corporation or an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's assets. If any of
the events enumerated in clauses (i) through (iv) occur, the Board shall
determine the effective date of the Change in Control resulting therefrom for
purposes of the Plan.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means the committee appointed by the Board
pursuant to Article IV hereof.
3.07 "Common Stock" means shares of the common stock, $0.01 par
value per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an Employee for disability benefits under the applicable long-term
disability plan maintained by the Corporation or any Subsidiary or, if no such
plan applies, which would qualify such Employee for disability benefits under
the Federal Social Security System.
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3.09 "Division" means the Ohio Department of Commerce, Division of
Financial Institutions.
3.10 "Effective Date" means the day upon which the Board approves
this Plan.
3.11 "Employee" means any person who is employed by the
Corporation, the Bank, or any Subsidiary, or is an officer of the Corporation,
the Bank, or any Subsidiary, including officers or other employees who may be
directors of the Corporation.
3.12 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.13 "Non-Employee Director" means a member of the Board who is not
an Employee.
3.14 "OTS" means the Office of Thrift Supervision.
3.15 "Plan Shares" or "Shares" means shares of Common Stock held in
the Trust which may be distributed to a Recipient pursuant to the Plan.
3.16 "Plan Share Award" or "Award" means a right granted under this
Plan to receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII.
3.17 "Recipient" means an Employee or Non-Employee Director who
receives a Plan Share Award under the Plan.
3.18 "Subsidiary" means Kenwood Savings Bank and any other
subsidiaries of the Corporation or the Bank which, with the consent of the
Board, agree to participate in this Plan.
3.19 "Trustee" means such firm, entity or persons approved by the
Board of Directors to hold legal title to the Plan for the purposes set forth
herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of the
Board, each of whom shall be a Non-Employee Director. The Committee shall have
all of the powers allocated to it in this and other Sections of the Plan. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Plan Share Award granted hereunder shall be final and binding in the
absence of action by the Board of Directors. The Committee shall act by vote
or written consent of a majority of its members. Subject to the
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express provisions and limitations of the Plan and subject to compliance with
applicable OTS and Division regulations, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with respect to
the Plan to the Board at appropriate times, but in no event less than one time
per calendar year.
4.02 ROLE OF THE BOARD. The members of the Committee and the
Trustee shall be appointed or approved by, and will serve at the pleasure of,
the Board. The Board may in its discretion from time to time remove members
from, or add members to, the Committee, and may remove or replace the Trustee,
provided that any directors who are selected as members of the Committee shall
be Non-Employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or the
Committee shall be liable for any determination made in good faith with respect
to the Plan or any Plan Shares or Plan Share Awards granted under it. If a
member of the Board or the Committee is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of anything
done or not done by him in such capacity under or with respect to the Plan, the
Corporation shall, subject to the requirements of applicable laws and
regulations, indemnify such member against all liabilities and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in the best interests of the Corporation and any Subsidiaries and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
4.04 COMPLIANCE WITH LAWS AND REGULATIONS. All Awards granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency or
stockholders as may be required.
ARTICLE V
CONTRIBUTIONS
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine
the amount (or the method of computing the amount) and timing of any
contributions by the Corporation and any Subsidiaries to the Trust established
under this Plan. Such amounts may be paid in cash or in shares of Common Stock
and shall be paid to the Trust at the designated time of contribution. No
contributions by Employees or Directors shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS; NUMBER OF PLAN SHARES. Subject to
Section 8.02 hereof, the Trustee shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan shall be
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6,306 shares of Common Stock, which shares shall be purchased from the
Corporation and/or from stockholders thereof by the Trust with funds
contributed by the Corporation. During the time this Plan remains in effect,
Awards to each Employee and each Non-Employee Director shall not exceed 25% and
5% of the shares of Common Stock available under the Plan, respectively,
provided, however, that Awards in the aggregate to all Non-Employee Directors
shall not exceed 30% of the shares of Common Stock available under the Plan.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 AWARDS TO NON-EMPLOYEE DIRECTORS. Plan Share Awards to
Non-Employee Directors shall be made to such persons and in such amounts as
determined by the Board of Directors or the Committee. However, Plan Share
Awards equal to 1,891 shares (or 30% of the number of shares available under
this Plan) shall be made to Non-Employee Directors in the aggregate and no
individual Non-Employee Director may receive Plan Share Awards in excess of 315
shares (or 5% of the number of shares available under this Plan). In the event
of a forfeiture of the right to any Shares subject to an Award, such forfeited
Shares shall be reallocated on the first day of the month following such
forfeiture to the remaining Non-Employee Directors who are eligible to receive
such re-allocation by dividing the number of forfeited shares of Common Stock
by such remaining number of Non-Employee Directors at such time.
6.02 AWARDS TO EMPLOYEES. Plan Share Awards may be made to such
Employees as may be selected by the Board of Directors or the Committee,
subject to the maximum number of shares as determined under Section 5.02
hereof. In selecting those Employees to whom Plan Share Awards may be granted
and the number of Shares covered by such Awards, the Board of Directors or the
Committee shall consider the duties, responsibilities and performance of each
respective Employee, his present and potential contributions to the growth and
success of the Corporation, his salary and such other factors as the Committee
shall deem relevant to accomplishing the purposes of the Plan. The Board of
Directors or the Committee may, but shall not be required to, request the
written recommendation of the Chief Executive Officer of the Corporation other
than with respect to Plan Share Awards to be granted to him.
6.03 FORM OF ALLOCATION. As promptly as practicable after a
determination is made pursuant to Sections 6.01 or 6.02 that a Plan Share Award
is to be issued (subject to the maximum number of shares as determined under
Section 5.02 hereof), the Board of Directors or the Committee shall notify the
Recipient in writing of the grant of the Award, the number of Plan Shares
covered by the Award, and the terms upon which the Plan Shares subject to the
Award shall be distributed to the Recipient. The date on which the Committee
so notifies the Recipient shall be considered the date of grant of the Plan
Share
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Award. The Board of Directors or the Committee shall maintain records as to
all grants of Plan Share Awards under the Plan.
6.04 ALLOCATIONS NOT REQUIRED TO ANY SPECIFIC EMPLOYEE.
Notwithstanding anything to the contrary in Section 6.02 hereof, no Employee
shall have any right or entitlement to receive a Plan Share Award hereunder,
such Awards being at the total discretion of the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Subject to the terms hereof, Plan
Share Awards shall be earned by a Recipient at the rate of twenty percent (20%)
of the aggregate number of Shares covered by the Award as of each annual
anniversary of the date of grant of the Award. If the employment of an
Employee or service as a Non-Employee Director is terminated prior to the fifth
(5th) annual anniversary of the date of grant of a Plan Share Award for any
reason (except as specifically provided in subsections (b) and (c) below), the
Recipient shall forfeit the right to any Shares subject to the Award which have
not theretofore been earned. In the event of a forfeiture of the right to any
Shares subject to an Award, such forfeited Shares shall become available for
allocation pursuant to Section 6.02 hereof as if no Award had been previously
granted with respect to such Shares. No fractional shares shall be distributed
pursuant to this Plan. In determining the number of Plan Shares which are to
be earned, fractional Shares shall be rounded down to the nearest whole number,
provided that such fractional Shares shall be aggregated and distributed on the
fifth annual anniversary of the date of grant.
(b) EXCEPTION FOR TERMINATIONS DUE TO DEATH OR
DISABILITY. Notwithstanding the general rule contained in Section 7.01(a), all
Plan Shares subject to a Plan Share Award held by a Recipient whose employment
with or service to the Corporation or any Subsidiary terminates due to death or
Disability shall be deemed earned as of the Recipient's last day of employment
with the Corporation or any Subsidiary and shall be distributed as soon as
practicable thereafter; provided, however, that Awards shall be distributed in
accordance with Section 7.03(a).
(c) EXCEPTION FOR TERMINATIONS AFTER A CHANGE IN CONTROL
OF THE CORPORATION. Notwithstanding the general rule contained in Section
7.01(a), all Plan Shares subject to a Plan Share Award held by a Recipient
shall be deemed to be earned in the event of a Change in Control of the
Corporation if, as of the date of such Change in Control of the Corporation,
such treatment is either authorized or is not prohibited by applicable laws and
regulations.
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(d) REVOCATION FOR MISCONDUCT. Notwithstanding anything
hereinafter to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award, or portion thereof, previously
awarded under this Plan, to the extent Plan Shares have not been distributed
hereunder to the Recipient, whether or not yet earned, in the case of an
Employee who is discharged from the employ of the Corporation or any Subsidiary
for cause (as hereinafter defined). Termination for cause shall mean
termination because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order. Plan Share Awards granted to a Non-Employee
Director who is removed for cause pursuant to the Corporation's Certificate of
Incorporation shall terminate as of the effective date of such removal.
7.02 DISTRIBUTION OF DIVIDENDS. Any cash dividends (including
special large and non-recurring dividends including one that has the effect of
a return of capital to the Corporation's stockholders) or stock dividends
declared in respect of each unvested Plan Share Award will be held by the Trust
for the benefit of the Recipient on whose behalf such Plan Share Award is then
held by the Trust and such dividends, including any interest thereon, will be
paid out proportionately by the Trust to the Recipient thereof as soon as
practicable after the Plan Share Awards become earned. Any cash dividends or
stock dividends declared in respect of each vested Plan Share held by the Trust
will be paid by the Trust, as soon as practicable after the Trust's receipt
thereof, to the Recipient on whose behalf such Plan Share is then held by the
Trust.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Plan Shares
shall be distributed to the Recipient or his Beneficiary, as the case may be,
as soon as practicable after they have been earned.
(b) FORM OF DISTRIBUTIONS. All Plan Shares, together
with any Shares representing stock dividends, shall be distributed in the form
of Common Stock. One share of Common Stock shall be given for each Plan Share
earned and distributable. Payments representing cash dividends shall be made
in cash.
(c) WITHHOLDING. The Trustee may withhold from any cash
payment or Common Stock distribution made under this Plan sufficient amounts to
cover any applicable withholding and employment taxes, and if the amount of a
cash payment is insufficient, the Trustee may require the Recipient or
Beneficiary to pay to the Trustee the amount required to be withheld as a
condition of delivering the Plan Shares. The Trustee shall pay over to the
Corporation or any Subsidiary which employs or employed such Recipient any such
amount withheld from or paid by the Recipient or Beneficiary.
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(d) RESTRICTIONS ON SELLING OF PLAN SHARES. Plan Share
Awards may not be sold, assigned, pledged or otherwise disposed of prior to the
time that they are earned and distributed pursuant to the terms of this Plan.
Following distribution, the Board of Directors or the Committee may require the
Recipient or his Beneficiary, as the case may be, to agree not to sell or
otherwise dispose of his distributed Plan Shares except in accordance with all
then applicable federal and state securities laws, and the Committee may cause
a legend to be placed on the stock certificate(s) representing the distributed
Plan Shares in order to restrict the transfer of the distributed Plan Shares
for such period of time or under such circumstances as the Committee, upon the
advice of counsel, may deem appropriate.
7.04 VOTING OF PLAN SHARES. All Plan Shares which have not yet
been earned and allocated shall be voted by the Trustee in its sole discretion.
ARTICLE VIII
TRUST
8.01 TRUST. The Trustee shall receive, hold, administer, invest
and make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 MANAGEMENT OF TRUST. It is the intent of this Plan and Trust
that the Trustee shall have complete authority and discretion with respect to
the arrangement, control and investment of the Trust, and that the Trustee
shall invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustee determine that the holding
of monies in cash or cash equivalents is necessary to meet the obligations of
the Trust. In performing their duties, the Trustee shall have the power to do
all things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all
Trust assets in Common Stock without regard to any law now or hereafter in
force limiting investments for trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and in
making such investment, the Trustee is authorized to purchase Common Stock from
the Corporation or from any other source, and such Common Stock so purchased
may be outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in
accordance with (a) above, in such deposit accounts, and certificates of
deposit, obligations of the United States Government or its agencies or such
other investments as shall be considered the equivalent of cash.
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(c) To sell, exchange or otherwise dispose of any
property at any time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be
registered in the name of a nominee, without the addition of words indicating
that such security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may
in the opinion of the Trustee be reasonable for the proper operation of the
Plan and Trust.
(f) To employ brokers, agents, custodians, consultants
and accountants.
(g) To hire counsel to render advice with respect to
their rights, duties and obligations hereunder, and such other legal services
or representation as they may deem desirable.
(h) To hold funds and securities representing the amounts
to be distributed to a Recipient or his Beneficiary as a consequence of a
dispute as to the disposition thereof, whether in a segregated account or held
in common with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 RECORDS AND ACCOUNTS. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Board of Directors or the Committee.
8.04 EXPENSES. All costs and expenses incurred in the operation
and administration of this Plan shall be borne by the Corporation.
8.05 INDEMNIFICATION. Subject to the requirements of applicable
laws and regulations, the Corporation shall indemnify, defend and hold the
Trustee harmless against all claims, expenses and liabilities arising out of or
related to the exercise of the Trustee's powers and the discharge of its duties
hereunder, unless the same shall be due to the Trustee's gross negligence or
willful misconduct.
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ARTICLE IX
MISCELLANEOUS
9.01 ADJUSTMENTS FOR CAPITAL CHANGES. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of shares or other capital
adjustment, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Corporation.
9.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by
resolution, at any time amend or terminate the Plan and the Trust (including
amendments which may result in the merger of the Plan or the Trust with and
into other plans or trusts of the Corporation or successor thereto), subject to
regulations of the OTS and/or the Division and any required stockholder
approval or any stockholder approval which the Board may deem to be advisable
for any reason, such as for the purpose of obtaining or retaining any statutory
or regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. The Board may not, without the
consent of the Recipient, alter or impair his Plan Share Award except as
specifically authorized herein. Upon termination of the Plan, the Recipient's
Plan Share Awards shall be distributed to the Recipient in accordance with the
terms of Article VII hereof.
9.03 NONTRANSFERABLE. During the lifetime of the Recipient, Plan
Shares may only be earned by and paid to the Recipient who was notified in
writing of the Award pursuant to Section 6.03, provided that Plan Share Awards
and rights to Plan Shares shall be transferable by a Recipient to his or her
spouse, lineal ascendants, lineal descendants, or to a duly established trust.
Plan Share Awards so transferred may not again be transferred other than to the
Recipient who originally received the grant of Plan Share Awards or to an
individual or trust to whom such Recipient could have transferred Plan Share
Awards pursuant to this Section 9.03. Plan Share Awards which are transferred
pursuant to this Section 9.03 shall be subject to the same terms and conditions
as would have applied to such Plan Share Awards in the hands of the Recipient
who originally received the grant of such Plan Share Award. No Recipient or
Beneficiary shall have any right in or claim to any assets of the Plan or
Trust, nor shall the Corporation or any Subsidiary be subject to any claim for
benefits hereunder.
9.04 EMPLOYMENT OR SERVICE RIGHTS. Neither the Plan nor any grant
of a Plan Share Award or Plan Shares hereunder nor any action taken by the
Trustee, the Committee or the Board in connection with the Plan shall create
any right on the part of any Employee or Non-Employee Director to continue in
such capacity.
9.05 VOTING AND DIVIDEND RIGHTS. No Recipient shall have any
voting or dividend rights or other rights of a stockholder in respect of any
Plan Shares covered by a Plan Share
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Award, except as expressly provided in Sections 7.02 and 7.04 above, prior to
the time said Plan Shares are actually earned and distributed to him.
9.06 GOVERNING LAW. To the extent not governed by Federal law, the
Plan and Trust shall be governed by the laws of the State of Delaware.
9.07 EFFECTIVE DATE. This Plan shall be effective as of the
Effective Date, and Awards may be granted hereunder as of or after the
Effective Date and as long as the Plan remains in effect. Notwithstanding the
foregoing or anything to the contrary in this Plan, the implementation of this
Plan and any Awards granted pursuant hereto are subject to the non-objection of
the OTS and approval of the Corporation's stockholders.
9.08 TERM OF PLAN. This Plan shall remain in effect until the
earlier of (1) ten (10) years from the Effective Date, (2) termination by the
Board, or (3) the distribution to Recipients and Beneficiaries of all assets of
the Trust.
9.09 TAX STATUS OF TRUST. It is intended that the trust
established hereby be treated as a Grantor Trust of the Corporation under the
provisions of Section 671 et seq. of the Code, as the same may be amended from
time to time.
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REVOCABLE PROXY
KENWOOD BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF KENWOOD
BANCORP, INC. FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
JANUARY 30, 1997 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints the Board of Directors of Kenwood 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
December 24, 1996 at the Annual Meeting of Stockholders to be held at the
Company's headquarters located at 7711 Montgomery Road, Cincinnati, Ohio on
Thursday, January 30, 1997, at 4:00 p.m., Eastern Time, and any adjournment
thereof.
1. ELECTION OF DIRECTORS FOR THREE-YEAR TERM EXPIRING IN 2000
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked for all nominees listed
to the contrary below) below
Nominees for a three-year term expiring in 2000:
P. Lincoln Mitchell and James N. Murphy
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
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2. PROPOSAL to adopt the 1996 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL to adopt the Management Recognition Plan and Trust.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 52
4. PROPOSAL to adjourn the Annual Meeting, if necessary, to solicit
additional proxies.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. PROPOSAL TO RATIFY THE APPOINTMENT by the Board of Directors of Clark,
Schaefer, Hackett & Co. as the Company's independent auditors for the
year ending September 30, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
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 DIRECTORS' NOMINEES
TO THE BOARD OF DIRECTORS, FOR THE PROPOSALS SPECIFIED IN ITEMS 2, 3, 4 AND 5
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: , 1997
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Signature(s)
PLEASE SIGN THIS EXACTLY AS YOUR NAME(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.
