[LIBERTY BANCORP, INC. LOGO]
December 29, 1998
Dear Stockholder:
We cordially invite you to attend a Special Meeting of Stockholders of Liberty
Bancorp, Inc. (the "Company"). The Special Meeting will be held at the main
office of the Company, 1410 St. Georges Avenue, Avenel, New Jersey, at 10:00
a.m. (New Jersey time) on February 3, 1999.
The business to be conducted at the Special Meeting includes the ratification
and approval of the Liberty Bancorp, Inc. 1999 Stock Option Plan and the
ratification and approval of the Liberty Bancorp, Inc. 1999 Recognition and
Retention Plan.
The Board of Directors of the Company has determined that the matters to be
considered at the Special Meeting are in the best interest of the Company and
its stockholders. The Board of Directors unanimously recommends a vote "FOR"
each matter to be considered.
On behalf of the Board of Directors, I urge you to sign, date and return the
enclosed proxy card as soon as possible even if you plan to attend the Special
Meeting. This will not prevent you from voting in person, but will assure that
your vote is counted if you are unable to attend the Special Meeting.
Sincerely,
/s/ John R. Bowen
John R. Bowen
Chairman, President and Chief Executive Officer
<PAGE>
LIBERTY BANCORP, INC.
1410 St Georges Avenue
Avenel, New Jersey 07001
(732) 499-7200
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
To Be Held On February 3, 1999
Notice is hereby given that a Special Meeting of Stockholders of Liberty
Bancorp, Inc. (the "Company") will be held at the main office of the Company,
1410 St. Georges Avenue, Avenel, New Jersey, on February 3, 1999 at 10:00 a.m.,
New Jersey time.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The ratification and approval of the Liberty Bancorp, Inc. 1999
Stock Option Plan;
2. The ratification and approval of the Liberty Bancorp, Inc. 1999
Recognition and Retention Plan; and
such other matters as may properly come before the Meeting, or any adjournments
thereof. The Board of Directors is not aware of any other business to come
before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on the
date specified above, or on any date or dates to which the Meeting may be
adjourned. Stockholders of record at the close of business on December 18, 1998,
are the stockholders entitled to vote at the Meeting, and any adjournments
thereof.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING MAY REVOKE HIS OR
HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE MEETING.
HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN
NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO VOTE
PERSONALLY AT THE MEETING.
By Order of the Board of Directors
/s/ Leslie C. Whelan
Leslie C. Whelan
Corporate Secretary
Avenel, New Jersey
December 29, 1998
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
LIBERTY BANCORP, INC.
1410 St. Georges Avenue
Avenel, New Jersey 07001
(732) 499-7200
SPECIAL MEETING OF STOCKHOLDERS
February 3, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Liberty Bancorp, Inc. (the
"Company") to be used at the Special Meeting of Stockholders of Liberty Bancorp,
Inc. (the "Meeting"), which will be held at the main office of the Company, 1410
St. Georges Avenue, Avenel, New Jersey, on February 3, 1999, at 10:00 a.m., New
Jersey Time, and all adjournments of the Meeting. The accompanying Notice of
Special Meeting of Stockholders and this Proxy Statement are first being mailed
to stockholders on or about December 29, 1998.
REVOCATION OF PROXIES
Stockholders who execute proxies in the form solicited hereby retain the
right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon.
Please sign and return your Proxy to the Company in order for your vote to be
counted. Proxies which are signed, but contain no instructions for voting, will
be voted "FOR" the proposals set forth in this Proxy Statement for consideration
at the Meeting.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Company, Leslie C. Whelan, at the address of the Company shown
above, or by delivering a duly executed proxy bearing a later date. The presence
at the Meeting of any stockholder who has given a proxy shall not revoke such
proxy unless the stockholder delivers his or her ballot in person at the Meeting
or delivers a written revocation to the Secretary of the Company prior to the
voting of such proxy.
VOTING SECURITIES AND METHOD OF COUNTING VOTES
Holders of record of the Company's common stock, par value $1.00 per share
(the "Common Stock") as of the close of business on December 18, 1998 (the
"Record Date"), are entitled to one vote for each share then held. As of the
Record Date, there were 3,901,375 shares of Common Stock issued and outstanding,
2,067,729 of which were held by Liberty Bancorp, MHC (the "Mutual Holding
Company"). A majority of the outstanding shares of Common Stock entitled to vote
must be present in person or by proxy to constitute a quorum at the Meeting.
The affirmative vote of holders of a majority of the total votes eligible
to be cast at the meeting and a majority of total votes eligible to be cast by
stockholders other than the Mutual Holding Company ("Minority Stockholders"), is
required for approval of the proposals to be voted upon. Broker non-votes, as
well as shares as to which the "Abstain" box has been selected on the proxy card
will be counted as shares present and entitled to vote and will have the effect
of a vote against the matters.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Persons and groups who beneficially own in excess of 5% of Common Stock are
required to file certain reports with the Securities and Exchange Commission
(the "SEC") regarding such ownership pursuant to the Securities Exchange Act of
1934 (the "Exchange Act"). The following table sets forth, as of December 18,
1998, the shares of Common Stock beneficially owned by the Company's directors,
Named Executive Officers (as defined in "--Executive Compensation"), and
directors and executive officers as a group, and by each person who was the
beneficial owner of more than 5% of the Outstanding Shares of Common Stock.
<TABLE>
Amount of Shares
Owned and Nature Percent of Shares
of Beneficial of Common Stock
Address of Beneficial Owners (1) Ownership (2) Outstanding
- -------------------------------- --------------------- -------------------
<S> <C> <C>
John R. Bowen, Chairman, President and 20,200 *
Chief Executive Officer
Michael J. Widmer, Executive Vice President, 3,600 *
Chief Financial Officer and Director
Neil R. Bryson, DDS, Director 10,000 *
Anthony V. Caruso, Director and Legal Counsel 1,000 *
John W. Fox, Director 5,000 *
Donald F. Marsh, Director 10,000 *
John C. Marsh, Director 2,000 *
Paul J. McGovern, Director 11,000 *
Nelson L. Taylor, Jr., Director 10,000 *
Liberty Bancorp, MHC 2,067,729 53.0%
1410 St. Georges Avenue
Avenel, New Jersey 07001
Liberty Bancorp, MHC and 2,140,529 54.9%
all Directors and Executive Officers
as a Group (13 persons)
Jeffrey S. Halis 249,000 6.4%
500 Park Avenue, 5th Floor
New York, New York 10022
- ------------------------------------
</TABLE>
* Less than 1%.
(1) The address of all named persons except Mr. Halis is 1410 St. Georges
Avenue, Avenel, New Jersey 07001.
(2) Based upon the filings made pursuant to the Exchange Act and information
furnished by the respective individuals. In accordance with Rule 13d-3
under the Exchange Act, a person is deemed to be the beneficial owner for
purposes of this table, of any shares of Common Stock if he has sole or
shared voting or investment power with respect to such shares, or has a
right to acquire beneficial ownership at any time within 60 days from the
date as to which beneficial ownership is being determined. As used herein,
"voting power" is the power to vote or direct the voting of shares and
"investment power" is the power to dispose or direct the disposition of
shares. Includes all shares held directly as well as shares owned by
spouses and minor children, in trust and other indirect ownership, over
which shares the named individuals effectively exercise sole or shared
voting or investment power.
2
<PAGE>
Executive Compensation
The following table sets forth for the year ended December 31, 1997 certain
information as to the total remuneration paid by the Company to the Chief
Executive Officer and all other executive officers whose salary and bonuses
exceeded $100,000 in 1997 ("Named Executive Officers").
<TABLE>
Long-Term Compensation
---------------------------------
Annual Compensation Awards
----------------------------- ----------------------------------
Year Other Restricted Shares All
Name and Ended Annual Com Stock Underlying LTIP Other
Principal Position (1) Dec. 31, Salary(2) Bonus(3) pensation Awards Options Payouts Compensation
- ---------------------- -------- --------- --------- -------------------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John R. Bowen.......... 1997 $186,200 $16,320 -- -- -- -- $ --
President and Chief
Executive Officer
Michael J. Widmer...... 1997 $97,000 $ 8,262 -- -- -- -- $ --
Executive Vice President
And Chief Financial Officer
- ------------------------------------
(1) In accordance with the rules on executive officer and director compensation
disclosure adopted by the SEC, Summary Compensation information is excluded
for the fiscal years ended December 31, 1996 and 1995, as the Company was
not a public company during such periods.
(2) Salary amount for Mr. Bowen includes directors fees of $16,200 for the year
ended December 31, 1997.
(3) The Bank also provides certain members of senior management with the use of
an automobile, and all employees of the Bank with medical, dental and life
insurance. These benefits did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus reported for each officer.
</TABLE>
Directors Compensation
During the year ended December 31, 1997, directors of Liberty Bank, the
Company's wholly-owned subsidiary (the "Bank") received a retainer fee of
$12,000, plus a fee of $300 per board meeting or committee meeting attended. The
Bank provides all employees with medical, dental and life insurance, and also
offers medical and dental insurance to its directors. During the year ended
December 31, 1997, the Bank provided insurance benefits to directors Donald F.
Marsh, Taylor, Jr., Bryson, and Caruso of $3,600, $7,200, $11,700, and $11,000
respectively. Employee directors Bowen and Widmer received benefits of $11,700
and $7,500, respectively, pursuant to these plans. The Bank also provides that a
director's beneficiary will receive a $10,000 cash payment should a director die
while in office.
Benefit Plans
Employment Agreements. The Bank has entered into employment agreements with
Messrs. Bowen and Widmer and Ms. Capece, each of which provides for a term of 36
months. On each anniversary date, which under the agreements is defined as the
date of the organizational meeting following the Company's annual meeting, the
agreement may be extended for an additional twelve months, so that the remaining
term shall be approximately three years. If the agreement is not renewed, the
agreement will expire 36 months following the anniversary date. The agreement
provides for, among other things, base salary (which may be increased, but not
decreased), participation in stock benefit plans and other employee and fringe
benefits applicable to executive personnel. The agreement provides for
termination by the Bank for cause at any time. In the event the Bank terminates
the executive's employment for reasons other than for disability, retirement or
for cause, or in the event of the executive's resignation from the Bank upon (i)
failure to re-elect the executive to his or her current offices, (ii) a material
change in the executive's functions, duties or responsibilities, (iii)
liquidation or dissolution of the Bank or Company, (iv) a breach of the
agreement by the Bank or, (v) a change in control of the Bank or Company, the
executive, or in the event of death, the executive's beneficiary would be
entitled to severance pay in an amount equal to three times the annual rate of
Base Salary (which includes any salary deferred at the election of Mr. Bowen,
Mr. Widmer or Ms. Capece) at the time of termination, plus the highest annual
cash bonus paid to him or her during the prior three years. The Bank
3
<PAGE>
would also continue the executive's life, health, dental and disability coverage
for 36 months from the date of termination. In the event the payments to the
executive would include an "excess parachute payment" as defined by Code Section
280G (relating to payments made in connection with a change in control), the
payments would be reduced in order to avoid having an excess parachute payment.
The executive's employment may be terminated upon his/her retirement at age
65, or such later age as consented to by the Bank or in accordance with any
retirement policy established by the Bank. Upon the executive's retirement,
he/she will be entitled to all benefits available to him/her under any
retirement or other benefit plan maintained by the Bank. In the event of the
executive's disability for a period of six months, the Bank may terminate the
agreement provided that the Bank will be obligated to pay the executive his/her
Base Salary for the remaining term of the agreement or one year, whichever is
longer, reduced by any benefits paid to the executive pursuant to any disability
insurance policy or similar arrangement maintained by the Bank. In the event of
the executive's death, the Bank will pay his/her Base Salary to his/her named
beneficiaries for one year following his/her death, and will also continue
medical, dental, and other benefits to his/her family (as applicable) for one
year.
The employment agreement provides that, following termination of
employment, the executive will not compete with the Bank for a period of one
year within 25 miles of any existing branch of the Bank or within 25 miles of
any office for which the Bank and/or the Company has filed for regulatory
approval to establish an office.
Defined Benefit Pension Plan. The Bank maintains The Retirement Plan for
Employees of Liberty Bank in RSI Retirement Trust, which is a qualified,
tax-exempt defined benefit plan ("Retirement Plan"). All employees age 20 1/2 or
older who have worked at the Bank for a period of one year and have been
credited with 1,000 or more hours of service with the Bank during the year are
eligible to participant in the Retirement Plan provided, however, that leased
employees, employees paid on a contract basis and employees in a unit covered by
a collective bargaining agreement are not eligible to participate. The Bank
annually contributes an amount to the Retirement Plan necessary to satisfy the
actuarially determined minimum funding requirements in accordance with the
Employee Retirement Income Security Act ("ERISA").
The regular form of all retirement benefits (normal, early or disability)
is guaranteed for the life of the retiree, but not less than 120 monthly
installments. For a married participant, the normal form of benefit is a joint
and 50% survivor annuity where, upon the participant's death, the participant's
spouse is entitled to receive a benefit equal to 50% of that paid during the
participant's lifetime. Alternatively, a participant may elect (with proper
spousal consent, if necessary) an optional form of benefit. These optional forms
include various annuity forms as well as a lump sum payment. All forms in which
a participant's benefit may be paid will be actuarially equivalent to a ten year
period certain and life benefit. For an unmarried participant, benefits payable
upon death are made in a lump sum.
The normal retirement benefit payable at the later of age 65 or the fifth
anniversary of participation in the plan, is an amount equal to the greater of
(i) 30.5% of a participant's average annual earnings, plus 19.5% of the amount
in excess of $10,000, multiplied by a fraction, not to exceed one, the numerator
of which is the number of years of the Participant's credited service at normal
retirement date and the denominator of which is 30 and (ii) 2% of a
participant's average annual earnings multiplied by the participant's years of
credited service (up to a maximum of 10 years). Retirement benefits are also
payable upon retirement due to early and late retirement or death. A reduced
benefit is payable upon early retirement at age 55 and, for employees who first
become participants on or after January 1, 1998, ten years of credited service,
or after the sum of the participant's attained age and vested service equals 75.
Upon termination of employment other than as specified above, a participant who
is employed on or after January 1, 1998 and has five years of vested service
after age 18 is eligible to receive his or her accrued benefit commencing,
generally, on such participant's normal retirement date. (Employees employed
prior to January 1, 1998 are eligible to receive a vested retirement benefit
that vests after age 18 over a five year period at a rate of 20% per year,
beginning in the second year of service, until a participant is 100% vested
after five years). For the plan year ended December 31, 1997, the Bank made a
contribution to the Retirement Plan of $102,039.
4
<PAGE>
The following table indicates the annual retirement benefit that would be
payable under the Retirement Plan upon retirement at age 65 in calendar year
1997, expressed in the form of a single life annuity for the average salary and
benefit service classifications specified below.
<TABLE>
High Five-Year
Average Years of Service and Benefit Payable at Retirement
-----------------------------------------------------------------------------
Compensation 15 20 25 30 35 40
-------------------- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 11,525 $ 15,367 $19,208 $ 23,050 $ 23,050 $ 23,050
75,000 17,775 23,700 29,625 35,550 35,550 35,550
100,000 24,025 32,033 40,042 48,050 48,050 48,050
125,000 30,275 40,367 50,458 60,550 60,550 60,550
160,000 39,025 52,033 65,042 78,050 78,050 78,050
</TABLE>
The maximum annual compensation which may be taken into account under the
Internal Revenue Code, as amended (the "Code") for calculating contributions
under qualified defined benefit plans such as the Retirement Plan is currently
$160,000. As of December 31, 1997, Messrs. Bowen and Widmer had 33 years and two
years, respectively, of credited service (i.e., benefit service), under the
plan.
Transactions With Certain Related Persons
The Bank offers to directors, officers, and employees real estate mortgage
loans secured by their principal residence. All loans to the Bank's directors,
officers and employees are made on substantially the same terms, including
interest rates and collateral as those prevailing at the time for comparable
transactions, and do not involve more than minimal risk of collectibility.
Director Anthony V. Caruso has served as the Bank's legal counsel since
1963. During the year ended December 31, 1997 the Bank paid $61,100 in legal
fees to Mr. Caruso.
PROPOSAL I -- RATIFICATION AND APPROVAL OF THE
1999 STOCK OPTION PLAN
General
The Liberty Bancorp, Inc. 1999 Stock Option Plan (the "Stock Option Plan")
has been adopted by the Board of Directors of the Company, subject to
ratification by stockholders at the Special Meeting. Pursuant to the Stock
Option Plan, 183,364 shares of Common Stock (or 10% of the shares outstanding
that are not held by Liberty Bancorp, MHC) are reserved for issuance by the
Company under the Stock Option Plan. The Board of Directors believes that it is
appropriate for the Company to adopt a flexible and comprehensive stock option
plan that permits the granting of a variety of long-term incentive awards to
directors and officers as a means of enhancing and encouraging the recruitment
and retention of those individuals on whom the continued success of the Company
most depends. The Stock Option Plan complies with OTS regulations, although the
OTS in no way endorses or approves the plan.
Effective upon stockholder approval and Board ratification of the Stock
Option Plan, the awards to outside directors set forth in the plan will become
effective and it is expected that the Board of Directors of the Company will
grant to Named Executive Officers, directors, executive officers as a group,
non-employee directors as a group and certain employees of the Bank options
(with limited rights in the case of options granted to employees) to purchase
the following number of shares of common stock. In addition, 10,364 options will
be reserved for future issuance to
5
<PAGE>
employees and directors as an incentive to perform in a superior manner as well
as to attract people of experience and ability.
<TABLE>
Number of Shares
Name and to be Received upon
Principal Position Exercise of Options (1)
------------------ -----------------------
<S> <C>
John R. Bowen, Chairman, President and Chief Financial Officer 39,000
Michael J. Widmer, Executive Vice President, Chief Financial 33,000
Officer and Director
Neil R. Bryson, DDS, Director 7,857
Anthony V. Caruso, Director and Legal Counsel 7,857
John W. Fox, Director 7,857
Donald F. Marsh, Director 7,857
John C. Marsh, Director 7,857
Paul J. McGovern, Director 7,857
Nelson L. Taylor, Jr., Director 7,857
All executive officers as a group (6 persons) 108,000
All nonemployee directors as a group (7 persons) (2) 55,000
All employees, not including executive officers, as a group (2 persons) 10,000
</TABLE>
- ------------------
(1) The value of the stock options is not determinable because the exercise
price will be equal to the fair market value of the Company's Common Stock
at the effective time of the award.
(2) All options granted to nonemployee directors will be nonstatutory stock
options.
Attached as Appendix A to this Proxy Statement is the complete text of the
form of Stock Option Plan. The principal features of the Stock Option Plan are
summarized below.
Principal Features of the Stock Option Plan
The Stock Option Plan provides for awards in the form of stock options,
reload options, limited stock appreciation rights ("Limited Rights") and
dividend equivalent rights. Each award shall be on such terms and conditions,
consistent with the Stock Option Plan and applicable OTS Regulations, as the
committee administering the Stock Option Plan may determine.
The term of stock options generally will not exceed ten years from the date
of grant. Stock options granted under the Stock Option Plan may be either
"Incentive Stock Options" as defined under Section 422 of the Code or stock
options not intended to qualify as such ("non-qualified stock options").
Shares issued upon the exercise of a stock option may be either authorized
but unissued shares or reacquired shares held by the Company in its treasury.
Any shares subject to an award that expires or is terminated unexercised will
again be available for issuance under the Stock Option Plan. Generally, in the
discretion of the Board, all or any non-qualified stock options granted under
the Stock Option Plan may be transferable by the participant but only to the
persons or classes of persons determined by the Board. No other award or any
right or interest therein is assignable or transferable except under certain
limited exceptions set forth in the Stock Option Plan.
The Stock Option Plan is administered by a committee of the Board (the
"Committee") consisting of either two or more "non-employee directors" (as
defined in the Stock Option Plan), or the entire Board. The members of the
Committee shall be appointed by the Board. Pursuant to the terms of the Stock
Option Plan, any director, officer
6
<PAGE>
or employee of the Company or its affiliates is eligible to participate. Subject
to OTS regulation and policy, the Stock Option Committee will determine to whom
the awards will be granted, in what amounts, and the period over which such
awards will vest. In granting awards under the Stock Option Plan, the Committee
considers, among other things, position and years of service, value of the
individual's services to the Company and the Bank and the added responsibilities
of such individuals as employees, directors and officers of a public company.
The exercise price will be at least 100% of the fair market value of the
underlying Common Stock at the time of the grant. The last sale price of the
Common Stock on December 18, 1998 was $8.125 per share. The exercise price may
be paid in cash or Common Stock.
Stock Options. Incentive stock options can only be granted to employees of
the Bank, the Company or an "Affiliate" (i.e., a parent or subsidiary
corporation of the Bank or the Company). Nonemployee directors will be granted
nonstatutory stock options. No option granted to an employee in connection with
the Stock Option Plan will be exercisable as an Incentive Stock Option subject
to incentive tax treatment if exercised more than three months after the date on
which the optionee terminates employment with the Bank and/or the Company,
except as set forth below. If an optionee terminates employment with the Bank,
the Company or an Affiliate, any Incentive Stock Options exercised more than
three months following the date the optionee terminates employment shall be
treated as a nonstatutory stock option as described above; provided, however,
that in the event of death or disability, incentive stock options may be
exercised and receive incentive tax treatment for up to at least one year
following termination of employment, subject to the requirements of the Code.
In the event of death or disability of an optionee, the Company, if
requested by the optionee or beneficiary, may elect, in exchange for the option,
to pay the optionee or beneficiary, the amount by which the fair market value of
the Common Stock exceeds the exercise price of the option on the date of the
optionee's termination of service for death or disability.
Limited Stock Appreciation Rights. The Committee may grant Limited Rights
to employees simultaneously with the grant of any option. A Limited Right gives
the option holder the right, upon a change in control of the Company or the
Bank, to receive the excess of the market value of the shares represented by the
Limited Rights on the date exercised over the exercise price. Limited Rights
generally will be subject to the same terms and conditions and exercisable to
the same extent as stock options, as described above. Payment upon exercise of a
Limited Rights will be in cash, or in the event of a change in control in which
pooling accounting treatment is a condition to the transaction, for shares of
stock of the Company, or in the event of a merger transaction, for shares of the
acquiring corporation or its parent, as applicable.
Limited Rights may be granted at the time of, and must be related to, the
grant of a stock option. The exercise of one will reduce to that extent the
number of shares represented by the other. If a Limited Rights is granted with
and related to an Incentive Stock Option the Limited Rights must satisfy all the
restrictions and limitations to which the related Incentive Stock Option is
subject.
Dividend Equivalent Rights. Dividend equivalent rights may also be granted
at the time of the grant of a stock option. Dividend equivalent rights entitle
the option holder to receive an amount of cash at the time that certain
extraordinary dividends are declared equal to the amount of the extraordinary
dividend multiplied by the number of options that the person holds. For these
purposes, an extraordinary dividend is defined under the Stock Option Plan as
any dividend paid on shares of Common Stock where the rate of dividend exceeds
the Bank's weighted average cost of funds on interest-bearing liabilities for
the current and preceding three quarters.
Reload Options. Reload options may also be granted at the time of the grant
of a stock option. Reload options entitle the option holder, who has delivered
shares that he or she owns as payment of the exercise price for option stock, to
a new option to acquire additional shares equal in amount to the shares he or
she has traded in. Reload options may also be granted to replace option shares
retained by the employer for payment of the option holder's withholding tax. The
option price at which additional shares of stock can be purchased by the option
holder through
7
<PAGE>
the exercise of a reload option is equal to the market value of the previously
owned stock at the time it was surrendered to the employer. The option period
during which the reload option may be exercised expires at the same time as that
of the original option that the holder has exercised.
Effect of Adjustments. Shares as to which awards may be granted under the
Stock Option Plan, and shares then subject to awards, will be adjusted by the
Stock Option Committee in the event of any merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination or
exchange of shares or other change in the corporate structure of the Company.
In the case of any merger, consolidation or combination of the Company with
or into another holding company or other entity, whereby either the Company is
not the continuing holding company or its outstanding shares are converted into
or exchanged for securities, cash or other property, or any combination thereof,
any individual to whom a stock option or Limited Rights has been granted at
least six months prior to such event will have the right (subject to the
provisions of the Stock Option Plan and any applicable vesting period) upon
exercise of the option or Limited Rights to an amount equal to the excess of
fair market value on the date of exercise of the consideration receivable in the
merger, consolidation or combination with respect to the shares covered or
represented by the stock option or Limited Rights over the exercise price of the
option multiplied by the number of shares with respect to which the option or
Limited Rights has been exercised.
Amendment and Termination. The Board may at any time, subject to OTS
regulations and policy, amend, suspend or terminate the Stock Option Plan or any
portion thereof, provided, however, that no such amendment, suspension or
termination shall impair the rights of any individual, without his consent, in
any Award made pursuant to the Plan. Unless previously terminated, the Stock
Option Plan shall continue in effect for a term of ten years, after which no
further awards may be granted under the Stock Option Plan.
The Company will not implement the Stock Option Plan unless such plan has
been approved by a majority vote of shares present and voting at the Meeting.
Stockholder approval will also enable the recipients of options to qualify for
certain exemptive treatment from the short-swing profit recapture provisions of
Section 16(b) of the Exchange Act.
Federal Income Tax Consequences. Under present federal income tax laws,
awards under the Stock Option Plan will have the following consequences:
(1) The grant of an Award, by itself, will neither result in the recognition
of taxable income to the Individual nor entitle the Company to a deduction
at the time of such grant.
(2) The exercise of a stock option which is an "Incentive Stock Option" within
the meaning of Section 422 of the Code will generally not, by itself,
result in the recognition of taxable income to the Individual nor entitle
the Company to a deduction at the time of such exercise. However, the
difference between the exercise price and the fair market value of the
option shares on the date of exercise is an item of tax preference which
may, in certain situations, trigger the alternative minimum tax. The
alternative minimum tax is incurred only when it exceeds the regular
income tax. The alternative minimum tax will be payable at the rate of 26%
to the first $175,000 of "ordinary income" in excess of $33,750 (single
person) or $45,000 (married person filing jointly). This tax applies at a
flat rate of 28% of so much of the taxable ordinary income in excess of
$175,000. The alternative minimum tax will be payable at a maximum rate of
20% on net capital gain. If a taxpayer has alternative minimum taxable
income in excess of $150,000 (married persons filing jointly) or $112,500
(single person), the $45,000 or $33,750 exemptions are reduced by an
amount equal to 25% of the amount by which the alternative minimum taxable
income of the taxpayer exceeds $150,000 or $112,500, respectively. The
Individual will recognize long term capital gain or loss upon the resale
of the shares received upon such exercise, provided the Individual holds
the shares for more than eighteen months from the date of exercise.
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<PAGE>
(3) The sale of an Incentive Stock Option share prior to the applicable
holding period, i.e., the longer of two years from the date of grant of
the Incentive Stock Option or one year from the date of exercise, will
cause any gain to be taxed at ordinary income tax rates, with respect to
the spread between the exercise price and the fair market value of the
share on the date of exercise and at short term capital gains rates with
respect to any post exercise appreciation in the value of the share.
(4) The sale of an Incentive Stock Option share after one year from the date
of exercise, will generally result in long term capital gain or loss.
(5) The exercise of a stock option which is not an Incentive Stock Option,
i.e., a non-qualified stock option, will result in the recognition of
ordinary income on the date of exercise in an amount equal to the
difference between the exercise price and the fair market value on the
date of exercise of the shares acquired pursuant to the stock option.
(6) The exercise of a Limited Rights will result in the recognition of
ordinary income by the individual on the date of exercise in an amount of
cash, and/or the fair market value on that date of the shares, acquired
pursuant to the exercise.
(7) Reload options are of the same type (nonstatutory or incentive stock
option) as the option that the option holder exercised. Therefore, the tax
consequences of the reload option are determined under the applicable tax
rules for non-qualified or incentive stock options.
(8) The receipt of a cash payment pursuant to a dividend equivalent right will
result in the recognition of compensation or self-employment income by the
recipient.
(9) The Company will be allowed a deduction at the time, and in the amount of,
any ordinary income recognized by the Individual under the various
circumstances described above, provided that the Company meets its federal
withholding tax obligations.
THE AFFIRMATIVE VOTE OF A MAJORITY OF SHARES HELD BY MINORITY STOCKHOLDERS
IS REQUIRED FOR APPROVAL OF THE STOCK OPTION PLAN. THE AFFIRMATIVE VOTE OF A
MAJORITY OF ELIGIBLE VOTES IS REQUIRED FOR RECIPIENTS OF OPTIONS TO QUALIFY FOR
CERTAIN EXEMPTIVE TREATMENT FROM THE SHORT-SWING PROFIT RECAPTURE PROVISIONS OF
SECTION 16(B) OF THE EXCHANGE ACT.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
WILL BE VOTED FOR THE RATIFICATION AND APPROVAL OF THE STOCK OPTION PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION AND APPROVAL
OF THE STOCK OPTION PLAN.
PROPOSAL II--RATIFICATION AND APPROVAL OF THE
1999 RECOGNITION AND RETENTION PLAN
General
Subject to stockholder approval at the Special Meeting, the Company has
established the Liberty Bancorp, Inc. 1999 Recognition and Retention Plan (the
"Recognition Plan") as a method of providing certain employees and nonemployee
directors of the Bank, the Company, and their Affiliates with a proprietary
interest in the Company in a manner designed to encourage such persons to remain
with the Bank, the Company, and their Affiliates and to provide further
incentives to achieve corporate objectives. The following discussion is
qualified in its entirety by
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reference to the Recognition Plan, the form of which is attached hereto as
Appendix B. The Recognition Plan complies with OTS regulations, although the OTS
in no way endorses or approves the plan.
The Company intends to contribute shares, or sufficient funds for the
Recognition Plan to acquire 73,345 authorized but unissued shares of Common
Stock of the Company, which will be available to be awarded to employees and
nonemployee directors. Alternatively, such shares may be purchased in the open
market.
Shares of Common Stock restricted by the terms of the Recognition Plan will
be awarded in the following amounts to Named Executive Officers, executive
officers as a group, nonemployee directors, and employees as a group.
<TABLE>
Name and
Principal Position Dollar Value (1) Number of Shares
------------------ ---------------- ----------------
<S> <C> <C>
John R. Bowen, Chairman,
President and Chief Executive $ 138,125 17,000
Officer
Michael J. Widmer, Executive 114,977 14,151
Vice President, Chief Financial
Officer and Director
Neil R. Bryson, DDS, Director 25,529 3,142
Anthony V. Caruso, Director 25,529 3,142
and Legal Counsel
John W. Fox, Director 25,529 3,142
Donald F. Marsh, Director 25,529 3,142
John C. Marsh, Director 25,529 3,142
Paul J. McGovern, Director 25,529 3,142
Nelson L. Taylor, Jr., Director 25,529 3,142
All executive officers as a 384,727 47,351
group (6 persons)
All nonemployee directors 178,701 21,994
as a group (7 persons)
All employees, not including 32,500 4,000
executive officers, as a
group (2 persons)
</TABLE>
- ------------------
(1) Based on the closing price on December 18, 1998 of $8.125 per share.
Principal Features of the Recognition Plan
The Recognition Plan provides for the award of shares of Common Stock
("Recognition Plan Shares") subject to the restrictions described below. Each
award under the Recognition Plan will be made on terms and conditions,
consistent with the Recognition Plan.
The Recognition Plan is administered by a committee of the Board, which
shall be appointed by the Board and shall consist of either (i) at least two
"non-employee directors" (as defined in the Recognition Plan) or (ii) the entire
Board (the "Committee"). The Committee will select the recipients and terms of
awards pursuant to the
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<PAGE>
Recognition Plan. Pursuant to the terms of the Recognition Plan, any director,
officer or employee of the Company or its affiliates may be selected by the
Recognition Plan Committee to participate in the Recognition Plan. In
determining to whom and in what amount to grant awards, the Recognition Plan
Committee considers the position and responsibilities of eligible employees, the
value of their services to the Company and the Bank and other factors it deems
relevant. As of December 18, 1998, there were seven non-employee directors
eligible to participate in the Recognition Plan.
In the event a recipient ceases to maintain continuous service with the
Company or the Bank by reason of death or disability, Recognition Plan Shares
still subject to restrictions will vest and be free of these restrictions. In
the event of termination for any other reason, all nonvested shares will be
forfeited and returned to the Company. Prior to vesting of the nonvested
Recognition Plan shares, a recipient will have the right to vote the nonvested
Recognition Plan Shares which have been awarded to the recipient and will
receive any dividends declared on such Recognition Plan Shares. Recognition Plan
Shares are subject to forfeiture if the recipient fails to remain in the
continuous service (as defined in the Recognition Plan) as an employee, officer,
or director of the Company or the Bank for a stipulated period (the "restricted
period").
Effect of Adjustments. Restricted stock awarded under the Recognition Plan
will be adjusted by the Committee in the event of a reorganization,
recapitalization, stock split, stock dividend, combination or exchange of
shares, merger, consolidation or other change in corporate structure.
Federal Income Tax Consequences. Holders of restricted stock will recognize
ordinary income on the date that the shares of restricted stock are no longer
subject to a substantial risk of forfeiture, in an amount equal to the fair
market value of the shares on that date. In certain circumstances, a holder may
elect to recognize ordinary income and determine such fair market value on the
date of the grant of the restricted stock. Holders of restricted stock will also
recognize ordinary income equal to their dividend or dividend equivalent
payments when such payments are received. Generally, the amount of income
recognized by individuals will be a deductible expense for tax purposes by the
Bank.
Amendment to the Recognition Plan. The Board of Directors of the Company
may at any time, subject to OTS regulations and policy, amend, suspend or
terminate the Recognition Plan or any portion thereof, provided, however, that
no such amendment, suspension or termination shall impair the rights of any
award recipient, without his consent, in any award therefore made pursuant to
the Recognition Plan.
THE AFFIRMATIVE VOTE OF A MAJORITY OF SHARES HELD BY MINORITY STOCKHOLDERS
IS REQUIRED TO APPROVE THE RECOGNITION PLAN. THE AFFIRMATIVE VOTE OF A MAJORITY
OF ELIGIBLE VOTES WILL ENABLE RECIPIENTS OF RECOGNITION PLAN AWARDS TO QUALIFY
FOR CERTAIN EXEMPTIVE TREATMENT FROM THE SHORT-SWING PROFIT PROVISIONS OF
SECTION 16(B) OF THE EXCHANGE ACT.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
WILL BE VOTED FOR THE RATIFICATION AND APPROVAL OF THE RECOGNITION PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION AND APPROVAL
OF THE RECOGNITION PLAN.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive office, 1410
St. Georges Avenue, Avenel, New Jersey 07001, no later than January 8, 1999. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
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OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in the Proxy Statement. However,
if any matters should properly come before the Meeting, it is intended that
holders of the proxies will act in accordance with their best judgment.
MISCELLANEOUS
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 Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph, telephone or other means without additional
compensation. The Company has retained Corporate Investor Communications, Inc.,
a proxy solicitation firm, to assist the Company in the solicitation of proxies
for the Special Meeting, for a fee of $3,000 plus out-of-pocket expenses.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Leslie C. Whelan
Leslie C. Whelan
Corporate Secretary
Avenel, New Jersey
December 29, 1998
12
<PAGE>
LIBERTY BANCORP, INC
1999 STOCK OPTION PLAN
1. Purpose
The purpose of the Liberty Bancorp, Inc. 1999 Stock Option Plan (the
"Plan") is to advance the interests of the Company and its stockholders by
providing Key Employees and Outside Directors of Liberty Bancorp, Inc. (the
"Company") and its Affiliates, including Liberty Bank (the "Bank") upon whose
judgment, initiative and efforts the successful conduct of the business of the
Company and its Affiliates largely depends, with an additional incentive to
perform in a superior manner as well as to attract people of experience and
ability.
2. Definitions
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Company or the Bank, as such terms are defined in Section 424(e) or 424(f),
respectively, of the Code, or a successor to a parent corporation or subsidiary
corporation.
"Award" means an Award of Non-Statutory Stock Options, Incentive Stock
Options, Limited Rights, Reload Options and/or Dividend Equivalent Rights
granted under the provisions of the Plan.
"Bank" means Liberty Bank, or a successor corporation.
"Beneficiary" means the person or persons designated by a Participant to
receive any benefits payable under the Plan in the event of such Participant's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, his estate.
"Board" or "Board of Directors" means the board of directors of the Company
or its Affiliate, as applicable.
"Cause" means personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Company or an Affiliate.
"Change in Control" of the Bank or the Company means a change in control of
a nature that: (i) would be required to be reported in response to Item 1(a) of
the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a Change in Control of the Bank or the Company within the
meaning of the Home Owners Loan Act, as amended ("HOLA"), and applicable rules
and regulations promulgated thereunder, as in effect at the time of the Change
in Control; or (iii) without limitation such a Change in Control shall be deemed
to have occurred at such time as (a) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of Company's outstanding securities except for any
securities purchased by the Bank's employee stock ownership plan or trust; or
(b) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this
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clause (b), considered as though he were a member of the Incumbent Board; or (c)
a plan of reorganization, merger, consolidation, sale of all or substantially
all the assets of the Bank or the Company or similar transaction in which the
Bank or Company is not the surviving institution occurs; or (d) a proxy
statement soliciting proxies from stockholders of the Company, by someone other
than the current management of the Company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Company or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to the Plan are to be exchanged
for or converted into cash or property or securities not issued by the Company;
or (e) a tender offer is made for 25% or more of the voting securities of the
Company and the shareholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee of the Board consisting of either (i) at
least two Non-Employee Directors of the Company, or (ii) the entire Board of the
Company.
"Common Stock" means shares of the common stock of the Company, par value
$1.00 per share.
"Company" means Liberty Bancorp, Inc. or a successor corporation.
"Continuous Service" means employment as a Key Employee and/or service as
an Outside Director without any interruption or termination of such employment
and/or service. Continuous Service shall also mean a continuation as a member of
the Board of Directors following a cessation of employment as a Key Employee. In
the case of a Key Employee, employment shall not be considered interrupted in
the case of sick leave, military leave or any other leave of absence approved by
the Bank or in the case of transfers between payroll locations of the Bank or
between the Bank, its parent, its subsidiaries or its successor.
"Date of Grant" means the actual date on which an Award is granted by the
Committee.
"Director" means a member of the Board.
"Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him, or of a Director to serve as such. Additionally, in the case of
an employee, a medical doctor selected or approved by the Board must advise the
Committee that it is either not possible to determine when such Disability will
terminate or that it appears probable that such Disability will be permanent
during the remainder of said employee's lifetime.
"Dividend Equivalent Rights" means the right to receive an amount of cash
based upon the terms set forth in Section 10 hereof.
"Effective Date" means the date of, or a date determined by the Board of
Directors following, approval of the Plan by the Company's stockholders.
"Fair Market Value" means, when used in connection with the Common Stock on
a certain date, the reported closing price of the Common Stock as reported by
the Nasdaq stock market (as published by the Wall Street Journal, if published)
on such date, or if the Common Stock was not traded on the day prior to such
date, on the next preceding day on which the Common Stock was traded; provided,
however, that if the Common Stock is not reported on the Nasdaq stock market,
Fair Market Value shall mean the average sale price of all shares of Common
Stock sold during the 30-day period immediately preceding the date on which such
stock option was granted, and if no shares of stock have been sold within such
30-day period, the average sale price of the last three sales of Common Stock
sold during the 90-day period immediately preceding the date on which such stock
option was granted. In the event Fair
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<PAGE>
Market Value cannot be determined in the manner described above, then Fair
Market Value shall be determined by the Committee. The Committee is authorized,
but is not required, to obtain an independent appraisal to determine the Fair
Market Value of the Common Stock.
"Incentive Stock Option" means an Option granted by the Committee to a
Participant, which Option is designated as an Incentive Stock Option pursuant to
Section 9.
"Key Employee" means any person who is currently employed by the Company or
an Affiliate who is chosen by the Committee to participate in the Plan.
"Limited Right" means the right to receive an amount of cash based upon the
terms set forth in Section 10.
"Non-Statutory Stock Option" means an Option granted by the Committee to
(i) an Outside Director or (ii) to any other Participant and such Option is
either (A) not designated by the Committee as an Incentive Stock Option, or (B)
fails to satisfy the requirements of an Incentive Stock Option as set forth in
Section 422 of the Code and the regulations thereunder.
"Non-Employee Director" means, for purposes of the Plan, a Director who (a)
is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
"Normal Retirement" means for a Key Employee, retirement at the normal or
early retirement date set forth in the Bank's Employee Stock Ownership Plan, or
any successor plan. Normal Retirement for an Outside Director means a cessation
of service on the Board of Directors for any reason other than removal for
Cause, after reaching 60 years of age and maintaining at least 10 years of
Continuous Service.
"Outside Director" means a Director of the Company or an Affiliate who is
not an employee of the Company or an Affiliate.
"Option" means an Award granted under Section 8 or Section 9.
"OTS" means the Office of Thrift Supervision.
"Participant" means a Key Employee or Outside Director of the Company or
its Affiliates who receives or has received an award under the Plan.
"Reload Option" means as option to acquire shares of Common Stock
equivalent to the shares (i) used by the Participant to pay for an Option, or
(ii) deducted from any distribution in order to satisfy income tax required to
be withheld, based upon the terms set forth in Section 20.
"Right" means a Limited Right or a Dividend Equivalent Right.
"Termination for Cause" means the termination of employment or termination
of service on the Board caused by the individual's personal dishonesty, willful
misconduct, any breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, or the willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), or a final
cease-and-desist order, any of which results in material loss to the Company or
one of its Affiliates.
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3. Plan Administration Restrictions
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan and OTS regulations and
policy, to establish such rules and regulations as it deems necessary for the
proper administration of the Plan and to make whatever determinations and
interpretations in connection with the Plan it deems necessary or advisable. All
determinations and interpretations made by the Committee shall be binding and
conclusive on all Participants in the Plan and on their legal representatives
and beneficiaries.
All transactions involving a grant, award or other acquisition from the
Company shall:
(a) be approved by the Company's full Board or by the Committee;
(b) be approved, or ratified, in compliance with Section 14 of the Exchange
Act, by either: the affirmative vote of the holders of a majority of the
securities present, or represented and entitled to vote at a meeting duly held
in accordance with the laws of the state in which the Company is incorporated;
or the written consent of the holders of a majority of the securities of the
issuer entitled to vote provided that such ratification occurs no later than the
date of the next annual meeting of shareholders; or
(c) result in the acquisition of an Option or Limited Right that is held by
the Participant for a period of six months following the date of such
acquisition.
4. Types of Awards
Awards under the Plan may be granted in any one or a combination of: (a)
Incentive Stock Options; (b) Non-Statutory Stock Options; (c) Limited Rights;
(d) Dividend Equivalent Rights and (e) Reload Rights.
5. Stock Subject to the Plan
Subject to adjustment as provided in Section 18, the maximum number of
shares reserved for issuance under the Plan is 183,364 shares. To the extent
that Options or Rights granted under the Plan are exercised, the shares covered
will be unavailable for future grants under the Plan; to the extent that Options
together with any related Rights granted under the Plan terminate, expire or are
canceled without having been exercised or, in the case of Limited Rights
exercised for cash, new Awards may be made with respect to these shares.
6. Eligibility
Key Employees of the Company and its Affiliates shall be eligible to
receive Incentive Stock Options, Non-Statutory Stock Options, Limited Rights,
Reload Options and/or Dividend Equivalent Rights under the Plan. Outside
Directors shall be eligible to receive Non-Statutory Stock Options, Dividend
Equivalent Rights and Reload Options under the Plan.
7. General Terms and Conditions of Options and Rights.
The Committee shall have full and complete authority and discretion,
subject to OTS regulations and policy and except as expressly limited by the
Plan, to grant Options and/or Rights and to provide the terms and conditions
(which need not be identical among Participants) thereof. In particular, the
Committee shall prescribe the following terms and conditions: (i) the Exercise
Price of any Option or Right, which shall not be less than the Fair Market Value
per share at the date of grant of such Option or Right, (ii) the number of
shares of Common Stock subject to, and the expiration date of, any Option or
Right, which expiration date shall not exceed ten years from the Date of Grant,
(iii) the manner, time and rate (cumulative or otherwise) of exercise of such
Option or Right, and (iv) the
A-4
<PAGE>
restrictions, if any, to be placed upon such Option or Right or upon shares of
Common Stock which may be issued upon exercise of such Option or Right.
Notwithstanding the foregoing and subject to compliance with applicable OTS
regulations and policy, no individual shall be granted Awards with respect to
more than 25% of the total shares subject to the Plan; no Outside Director shall
be granted Awards with respect to more than 5% of the total shares of Common
Stock subject to the Plan; all Outside Directors in the aggregate may not be
granted Awards with respect to more than 30% of the total shares of Common Stock
subject to the Plan; no Awards shall begin vesting earlier than one year from
the date the Plan is approved by stockholders of the Company and no Awards shall
vest at a rate in excess of 20% per year beginning from the Date of Grant. In
the event OTS regulations are amended (the "Amended Regulations") to permit, or
OTS policy would permit, shorter vesting periods, any Award made pursuant to
this Plan which Award is subject to the requirements of such Amended Regulations
or OTS policy, may vest, at the sole discretion of the Committee, in accordance
with such Amended Regulations or OTS policy.
8. Non-Statutory Stock Options
8.1 Grant of Non-Statutory Stock Options
(a) Grants to Outside Directors and Key Employees. The Committee may, from
time to time, grant Non-Statutory Stock Options to eligible Key Employees and
Outside Directors, and, upon such terms and conditions as the Committee may
determine, grant Non-Statutory Stock Options in exchange for and upon surrender
of previously granted Awards under the Plan. Non-Statutory Stock Options granted
under the Plan, including Non-Statutory Stock Options granted in exchange for
and upon surrender of previously granted Awards, are subject to the terms and
conditions set forth in this Section 8. The maximum number of shares subject to
a Non-Statutory Option that may be awarded under the Plan to any Key Employee
shall be 91,682, subject to OTS regulations and policy, as set forth in Section
7, above, to the extent applicable.
(b) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Company and the Participant specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of the
Plan.
(c) Price. The purchase price per share of Common Stock deliverable upon
the exercise of each Non-Statutory Stock Option shall be the Fair Market Value
of the Common Stock of the Company on the date the Option is granted. Shares may
be purchased only upon full payment of the purchase price. Payment of the
purchase price may be made, in whole or in part, through the surrender of shares
of the Common Stock of the Company at the Fair Market Value of such shares
determined in the manner described in Section 2.
(d) Manner of Exercise and Vesting. Non-Statutory Stock Options awarded to
Key Employees and Outside Directors shall vest at the rate of 20% of the
initially awarded amount per year commencing with the vesting of the first
installment one year from the Date of Grant, and succeeding installments on each
anniversary of the Date of Grant. A vested Option may be exercised from time to
time, in whole or in part, by delivering a written notice of exercise to the
President or Chief Executive Officer of the Company, or his designee. Such
notice shall be irrevocable and must be accompanied by full payment of the
purchase price in cash or shares of Common Stock at the Fair Market Value of
such shares, determined on the exercise date in the manner described in Section
2 hereof. If previously acquired shares of Common Stock are tendered in payment
of all or part of the exercise price, the value of such shares shall be
determined as of the date of such exercise.
(e) Terms of Options. The term during which each Non-Statutory Stock Option
may be exercised shall be determined by the Committee, but in no event shall a
Non-Statutory Stock Option be exercisable in whole or in part more than 10 years
and one day from the Date of Grant. No Options shall be earned by a Participant
unless the Participant maintains Continuous Service until the vesting date of
such Option, except as set forth herein. The shares
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comprising each installment may be purchased in whole or in part at any time
after such installment becomes purchasable.
(f) Termination of Employment or Service. Upon the termination of a Key
Employee's employment or upon termination of an Outside Director's service for
any reason other than death or Disability or Termination for Cause, the
Participant's Non-Statutory Stock Options shall be exercisable only as to those
shares that were immediately purchasable on the date of termination and only for
one year following termination. In the event of Termination for Cause, all
rights under a Participant's Non-Statutory Stock Options shall expire upon
termination. In the event of the Participant's termination of service or
employment due to death or Disability, all Non-Statutory Stock Options held by
the Participant, whether or not exercisable at such time, shall be exercisable
by the Participant or his legal representative or beneficiaries for five years
following the date of the Participant's cessation of employment or service due
to death or Disability, provided that in no event shall the period extend beyond
the expiration of the Non-Statutory Stock Option term.
(g) Transferability. In the discretion of the Board, all or any
Non-Statutory Stock Option granted hereunder may be transferable by the
Participant once the Option has vested in the Participant, provided, however,
that the Board may limit the transferability of such Option or Options to a
designated class or classes of persons.
9. Incentive Stock Options
9.1 Grant of Incentive Stock Options
The Committee may, from time to time, grant Incentive Stock Options to Key
Employees. Incentive Stock Options granted pursuant to the Plan shall be subject
to the following terms and conditions:
(a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Company and the Key Employee specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of the
Plan.
(b) Price. Subject to Section 422 of the Code, the purchase price per share
of Common Stock deliverable upon the exercise of each Incentive Stock Option
shall be not less than 100% of the Fair Market Value of the Company's Common
Stock on the date the Incentive Stock Option is granted. However, if a Key
Employee owns stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or its Affiliates (or under Section
424(d) of the Code is deemed to own stock representing more than 10% of the
total combined voting power of all classes of stock of the Company or its
Affiliates by reason of the ownership of such classes of stock, directly or
indirectly, by or for any brother, sister, spouse, ancestor or lineal descendent
of such Key Employee, or by or for any corporation, partnership, estate or trust
of which such Key Employee is a shareholder, partner or Beneficiary), the
purchase price per share of Common Stock deliverable upon the exercise of each
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Company's Common Stock on the date the Incentive Stock Option is granted.
Shares may be purchased only upon payment of the full purchase price. Payment of
the purchase price may be made, in whole or in part, through the surrender of
shares of the Common Stock of the Company at the Fair Market Value of such
shares, determined on the exercise date, in the manner described in Section 2.
(c) Manner of Exercise. Incentive Stock Options awarded to Key Employees
shall vest at the rate of 20% of the initially awarded amount per year
commencing with the vesting of the first installment one year from the Date of
Grant, and succeeding installments on each anniversary of the Date of Grant. The
vested Options may be exercised from time to time, in whole or in part, by
delivering a written notice of exercise to the President or Chief Executive
Officer of the Company or his designee. Such notice is irrevocable and must be
accompanied by full payment of the purchase price in cash or shares of Common
Stock at the Fair Market Value of such shares determined on the exercise date by
the manner described in Section 2.
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(d) Amounts of Options. Incentive Stock Options may be granted to any
eligible Key Employee in such amounts as determined by the Committee; provided
that the amount granted is consistent with OTS regulations and policy and with
the terms of Section 422 of the Code. Notwithstanding the above, the maximum
number of shares that may be subject to an Incentive Stock Option awarded under
the Plan to any Key Employee shall be 91,682, subject to OTS regulations and
policy, as set forth in Section 7, above. In granting Incentive Stock Options,
the Committee shall consider such factors as it deems relevant, which factors
may include, among others, the position and responsibilities of the Key
Employee, the length and value of his or her service to the Bank, the Company,
or the Affiliate, the compensation paid to the Key Employee and the Committee's
evaluation of the performance of the Bank, the Company, or the Affiliate,
according to measurements that may include, among others, key financial ratios,
levels of classified assets, and independent audit findings. In the case of an
Option intended to qualify as an Incentive Stock Option, the aggregate Fair
Market Value (determined as of the time the Option is granted) of the Common
Stock with respect to which Incentive Stock Options granted are exercisable for
the first time by the Participant during any calendar year (under all plans of
the Company and its Affiliates) shall not exceed $100,000. The provisions of
this Section 9.1(d) shall be construed and applied in accordance with Section
422(d) of the Code and the regulations, if any, promulgated thereunder.
(e) Terms of Options. The term during which each Incentive Stock Option may
be exercised shall be determined by the Committee, but in no event shall an
Incentive Stock Option be exercisable in whole or in part more than 10 years
from the Date of Grant. If any Key Employee, at the time an Incentive Stock
Option is granted to him, owns stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or its Affiliate
(or, under Section 424(d) of the Code, is deemed to own stock representing more
than 10% of the total combined voting power of all classes of stock, by reason
of the ownership of such classes of stock, directly or indirectly, by or for any
brother, sister, spouse, ancestor or lineal descendent of such Key Employee, or
by or for any corporation, partnership, estate or trust of which such Key
Employee is a shareholder, partner or Beneficiary), the Incentive Stock Option
granted to him shall not be exercisable after the expiration of five years from
the Date of Grant.
(f) Termination of Employment. Upon the termination of a Key Employee's
service for any reason other than Disability, death or Termination for Cause,
the Key Employee's Incentive Stock Options shall be exercisable only as to those
shares that were immediately purchasable by such Key Employee at the date of
termination and only for a period of three months following termination. In the
event of Termination for Cause all rights under the Incentive Stock Options
shall expire upon termination.
Upon termination of a Key Employee's employment due to death or Disability,
all Incentive Stock Options held by such Key Employee, whether or not
exercisable at such time, shall be exercisable for a period of five years
following the date of his cessation of employment, provided however, that no
Option shall be eligible for treatment as an Incentive Stock Option in the event
such Option is exercised more than one year following termination of employment
due to Disability and provided further, in order to obtain Incentive Stock
Option treatment for Options exercised by heirs or devisees of an Optionee, the
Optionee's death must have occurred while employed or within three (3) months of
termination of employment. In no event shall the exercise period extend beyond
the expiration of the Incentive Stock Option term.
(g) Transferability. No Incentive Stock Option granted under the Plan is
transferable except by will or the laws of descent and distribution and is
exercisable during his lifetime only by the Key Employee to which it is granted.
(h) Compliance with Code. The options granted under this Section 9 are
intended to qualify as Incentive Stock Options within the meaning of Section 422
of the Code, but the Company makes no warranty as to the qualification of any
Option as an Incentive Stock Option within the meaning of Section 422 of the
Code. If an Option granted hereunder fails for whatever reason to comply with
the provisions of Section 422 of the Code, and such failure is not or cannot be
cured, such Option shall be a Non-Statutory Stock Option.
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10. Limited Rights
10.1 Grant of Limited Rights
The Committee may grant a Limited Right simultaneously with the grant of
any Option to any Key Employee, with respect to all or some of the shares
covered by such Option. Limited Rights granted under the Plan are subject to the
following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right be exercisable in
whole or in part before the expiration of six months from the date of grant of
the Limited Right. A Limited Right may be exercised only in the event of a
Change in Control of the Company.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, provided that the Fair Market Value of the underlying
shares on the day of exercise is greater than the exercise price of the related
Option.
Upon exercise of a Limited Right, the related Option shall cease to be
exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of the
difference between the exercise price and the Fair Market Value of the Common
Stock subject to the underlying Option. The Limited Right is transferable only
when the underlying Option is transferable and under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall promptly
receive from the Company an amount of cash equal to the difference between the
Fair Market Value on the Date of Grant of the related Option and the Fair Market
Value of the underlying shares on the date the Limited Right is exercised,
multiplied by the number of shares with respect to which such Limited Right is
being exercised. In the event of a Change in Control in which pooling accounting
treatment is a condition to the transaction, the Limited Right shall be
exercisable solely for shares of stock of the Company, or in the event of a
merger transaction, for shares of the acquiring corporation or its parent, as
applicable. The number of shares to be received on the exercise of such Limited
Right shall be determined by dividing the amount of cash that would have been
available under the first sentence above by the Fair Market Value at the time of
exercise of the shares underlying the Option subject to the Limited Right.
11. Dividend Equivalent Rights
Simultaneously with the grant of any Option to a Participant, the Committee may
grant a Dividend Equivalent Right with respect to all or some of the shares
covered by such Option. Dividend Equivalent Rights granted under this Plan are
subject to the following terms and conditions:
(a) Terms of Rights. The Dividend Equivalent Right provides the Participant
with a cash benefit per share for each share underlying the unexercised portion
of the related Option equal to the amount of any extraordinary dividend (as
defined in Section 11(c)) per share of Common Stock declared by the Company. The
terms and conditions of any Dividend Equivalent Right shall be evidenced in the
Option agreement entered into with the Participant and shall be subject to the
terms and conditions of the Plan. The Dividend Equivalent Right is transferable
only when the related Option is transferable and under the same conditions.
(b) Payment. Upon the payment of an extraordinary dividend, the Participant
holding a Dividend Equivalent Right with respect to Options or portions thereof
which have vested shall promptly receive from the Company or the Bank the amount
of cash equal to the amount of the extraordinary dividend per share of Common
Stock, multiplied by the number of shares of Common Stock underlying the
unexercised portion of the related Option. With respect to Options or portions
thereof which have not vested, the amount that would have been received pursuant
to the Dividend Equivalent Right with respect to the shares underlying such
unvested Option or portion thereof shall be paid
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to the Participant holding such Dividend Equivalent Right together with earnings
thereon, on such date as the Option or portion thereof becomes vested. Payments
shall be decreased by the amount of any applicable tax withholding prior to
distribution to the Participant as set forth in Section 20.
(c) Extraordinary Dividend. For purposes of this Section 11, an
extraordinary dividend is any dividend paid on shares of Common Stock where the
rate of the dividend exceeds the Company's weighted average cost of funds on
interest-bearing liabilities for the current and preceding three quarters.
12. Reload Option
Simultaneously with the grant of any Option to a Participant, the Committee
may grant a Reload Option with respect to all or some of the shares covered by
such Option. A Reload Option may be granted to a Participant who satisfies all
or part of the exercise price of the Option with shares of Common Stock (as
described in Section 14(c) below). The Reload Option represents an additional
Option to acquire the same number of shares of Common Stock as is used by the
Participant to pay for the original Option. Reload Options may also be granted
to replace Common Stock withheld by the Company for payment of a Participant's
withholding tax under Section 20. A Reload Option is subject to all of the same
terms and conditions as the original Option except that (i) the exercise price
of the shares of Common Stock subject to the Reload Option will be determined at
the time the original Option is exercised and (ii) such Reload Option will
conform to all provisions of the Plan at the time the original Option is
exercised.
13. Surrender of Option
In the event of a Participant's termination of employment or termination of
service as a result of death or Disability, the Participant (or his or her
personal representative(s), heir(s), or devisee(s)) may, in a form acceptable to
the Committee make application to surrender all or part of the Options held by
such Participant in exchange for a cash payment from the Company of an amount
equal to the difference between the Fair Market Value of the Common Stock on the
date of termination of employment or the date of termination of service on the
Board and the exercise price per share of the Option. Whether the Company
accepts such application or determines to make payment, in whole or part, is
within its absolute and sole discretion, it being expressly understood that the
Company is under no obligation to any Participant whatsoever to make such
payments. In the event that the Company accepts such application and determines
to make payment, such payment shall be in lieu of the exercise of the underlying
Option and such Option shall cease to be exercisable.
14. Alternate Option Payment Mechanism
The Committee has sole discretion to determine what form of payment it will
accept for the exercise of an Option. The Committee may indicate acceptable
forms in the agreement with the Participant covering such Options or may reserve
its decision to the time of exercise. No Option is to be considered exercised
until payment in full is accepted by the Committee or its agent.
(a) Cash Payment. The exercise price may be paid in cash or by certified
check. To the extent permitted by law, the Committee may permit all or a portion
of the exercise price of an Option to be paid through borrowed funds.
(b) Cashless Exercise. Subject to vesting requirements, if applicable, a
Participant may engage in a "cashless exercise" of the Option. Upon a cashless
exercise, the Participant shall give the Company written notice of the exercise
of the Option together with an order to a registered broker-dealer or equivalent
third party, to sell part or all of the Common Stock subject to the Option and
to deliver enough of the proceeds to the Company to pay the Option exercise
price and any applicable withholding taxes. If the Participant does not sell the
Common Stock subject to the Option through a registered broker-dealer or
equivalent third party, the Optionee can give the Company written
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notice of the exercise of the Option and the third party purchaser of the Common
Stock subject to the Option shall pay the Option exercise price plus applicable
withholding taxes to the Company.
(c) Exchange of Common Stock. The Committee may permit payment of the
Option exercise price by the tendering of previously acquired shares of Common
Stock. All shares of Common Stock tendered in payment of the exercise price of
an Option shall be valued at the Fair Market Value of the Common Stock on the
date prior to the date of exercise. No tendered shares of Common Stock which
were acquired by the Participant upon the previous exercise of an Option or as
awards under a stock award plan (such as the Company's Recognition and Retention
Plan) shall be accepted for exchange unless the Participant has held such shares
(without restrictions imposed by said plan or award) for at least six months
prior to the exchange.
15. Rights of a Stockholder
A Participant shall have no rights as a stockholder with respect to any
shares covered by a Non-Statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in the Plan or in
any Award granted confers on any person any right to continue in the employ of
the Company or its Affiliates or to continue to perform services for the Company
or its Affiliates or interferes in any way with the right of the Company or its
Affiliates to terminate his services as an officer, director or employee at any
time.
16. Agreement with Participants
Each Award of Options, Reload Options, Limited Rights and/or Dividend
Equivalent Rights will be evidenced by a written agreement, executed by the
Participant and the Company or its Affiliates that describes the conditions for
receiving the Awards including the date of Award, the purchase price, applicable
periods, and any other terms and conditions as may be required by the Board or
applicable securities law.
17. Designation of Beneficiary
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any stock option, Reload Options,
Limited Rights Award or Dividend Equivalent Rights Award to which he would then
be entitled. Such designation will be made upon forms supplied by and delivered
to the Company and may be revoked in writing. If a Participant fails effectively
to designate a Beneficiary, then his estate will be deemed to be the
Beneficiary.
18. Dilution and Other Adjustments
In the event of any change in the outstanding shares of Common Stock of the
Company by reason of any stock dividend or split, pro rata return of capital to
all shareholders, recapitalization, merger, consolidation, spin-off,
reorganization, combination or exchange of shares, or other similar corporate
change, or other increase or decrease in such shares without receipt or payment
of consideration by the Company, the Committee will make such adjustments to
previously granted Awards, to prevent dilution or enlargement of the rights of
the Participant, including any or all of the following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
that may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
covered by Awards already made under the Plan; or
(c) adjustments in the purchase price of outstanding Incentive and/or
Non-Statutory Stock Options, or any Limited Rights attached to such
Options.
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No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. With respect to
Incentive Stock Options, no such adjustment shall be made if it would be deemed
a "modification" of the Award under Section 424 of the Code.
19. Effect of a Change in Control on Option Awards
In the event of a Change in Control, the Committee and the Board of
Directors will take one or more of the following actions to be effective as of
the date of such Change in Control:
(a) provide that such Options shall be assumed, or equivalent options shall
be substituted, ("Substitute Options") by the acquiring or succeeding
corporation (or an affiliate thereof), provided that: (A) any such Substitute
Options exchanged for Incentive Stock Options shall meet the requirements of
Section 424(a) of the Code, and (B) the shares of stock issuable upon the
exercise of such Substitute Options shall constitute securities registered in
accordance with the Securities Act of 1933, as amended ("1933 Act") or such
securities shall be exempt from such registration in accordance with Sections
3(a)(2) or 3(a)(5) of the 1933 Act, (collectively, "Registered Securities"), or
in the alternative, if the securities issuable upon the exercise of such
Substitute Options shall not constitute Registered Securities, then the
Participant will receive upon consummation of the Change in Control a cash
payment for each Option surrendered equal to the difference between the (1) Fair
Market Value of the consideration to be received for each share of Common Stock
in the Change in Control times the number of shares of Common Stock subject to
such surrendered Options, and (2) the aggregate exercise price of all such
surrendered Options, or
(b) in the event of a transaction under the terms of which the holders of
Common Stock will receive upon consummation thereof a cash payment (the "Merger
Price") for each share of Common Stock exchanged in the Change in Control
transaction, make or to provide for a cash payment to the Participants equal to
the difference between (A) the Merger Price times the number of shares of Common
Stock subject to such Options held by each Optionee (to the extent then
exercisable at prices not in excess of the Merger Price) and (B) the aggregate
exercise price of all such surrendered Options in exchange for such surrendered
Options.
20. Withholding
There may be deducted from each distribution of cash and/or Common Stock
under the Plan the amount of tax required by any governmental authority to be
withheld. Shares of Common Stock will be withheld where required from any
distribution of Common Stock.
21. Amendment of the Plan
The Board may at any time, and from time to time, modify or amend the Plan
in any respect, or modify or amend an Award received by Key Employees and/or
Outside Directors subject to OTS regulations; provided, however, that no such
termination, modification or amendment may affect the rights of a Participant,
without his consent, under an outstanding Award. Any amendment or modification
of the Plan or an outstanding Award under the Plan shall be approved by the
Committee or the full Board of the Company.
22. Effective Date of Plan
The Plan shall become effective upon the date of, or a date determined by
the Board of Directors following, approval of the Plan by the Company's
stockholders.
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23. Termination of the Plan
The right to grant Awards under the Plan will terminate upon the earlier of
(i) 10 years after the Effective Date, or (ii) the date on which the exercise of
Options or related rights equaling the maximum number of shares reserved under
the Plan occurs, as set forth in Section 5. The Board may suspend or terminate
the Plan at any time, provided that no such action will, without the consent of
a Participant, adversely affect his rights under a previously granted Award.
24. Applicable Law
The Plan will be administered in accordance with the laws of the State of
New Jersey.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
as of the ____ day of ________________, 199___.
Date Approved by Stockholders: __________________
Effective Date: _________________________
ATTEST: LIBERTY BANCORP, INC.
- --------------------------- -------------------------------------
Leslie C. Whelan, Secretary John R. Bowen
President and Chief Executive Officer
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LIBERTY BANCORP, INC.
1999 RECOGNITION AND RETENTION PLAN
1. Establishment of the Plan
Liberty Bancorp, Inc. hereby establishes the Company 1999 Recognition and
Retention Plan (the "Plan") upon the terms and conditions hereinafter stated in
the Plan.
2. Purpose of the Plan
The purpose of the Plan is to advance the interests of the Company and its
stockholders by providing Key Employees and Outside Directors of the Company and
its Affiliates, including Liberty Bank (the "Bank") upon whose judgment,
initiative and efforts the successful conduct of the business of the Company and
its Affiliates largely depends, with compensation for their contributions to the
Company and its Affiliates and an additional incentive to perform in a superior
manner, as well as to attract people of experience and ability.
3. Definitions
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Company or the Bank, as such terms are defined in Section 424(e) and (f),
respectively, of the Code, or a successor to a parent corporation or subsidiary
corporation.
"Award" means the grant by the Committee of Restricted Stock, as provided
in the Plan.
"Bank" means Liberty Bank, or a successor corporation.
"Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
"Board" or "Board of Directors" means the Board of Directors of the Company
or an Affiliate, as applicable. For purposes of Section 4 of the Plan, "Board"
shall refer solely to the Board of the Company.
"Cause" means personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Company or an Affiliate.
"Change in Control" of the Company means a change in control of a nature
that: (i) would be required to be reported in response to Item 1(a) of the
current report on Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); or (ii)
results in a Change in Control of the Company within the meaning of the Home
Owners Loan Act, as amended ("HOLA"), and applicable rules and regulations
promulgated thereunder, as in effect at the time of the Change in Control; or
(iii) without
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limitation such a Change in Control shall be deemed to have occurred at such
time as (a) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d- 3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
outstanding securities except for any securities purchased by the Bank's
employee stock ownership plan or trust; or (b) individuals who constitute the
Board on the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved by the
same Nominating Committee serving under an Incumbent Board, shall be, for
purposes of this clause (b), considered as though he were a member of the
Incumbent Board; or (c) a plan of reorganization, merger, consolidation, sale of
all or substantially all the assets of the Company or similar transaction in
which the Company is not the surviving institution occurs; or (d) a proxy
statement soliciting proxies from stockholders of the Company, by someone other
than the current management of the Company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Company or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to the Plan are to be exchanged
for or converted into cash or property or securities not issued by the Company;
or (e) a tender offer is made for 25% or more of the voting securities of the
Company and the shareholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee of the Board consisting of either (i) at
least two Non-Employee Directors of the Company, or (ii) the entire Board of the
Company.
"Common Stock" means shares of the common stock of the Company, par value
$1.00 per share.
"Company" means Liberty Bancorp, Inc., the stock holding company of the
Bank, or a successor corporation.
"Continuous Service" means employment as a Key Employee and/or service as
an Outside Director without any interruption or termination of such employment
and/or service. Continuous Service shall also mean a continuation as a member of
the Board of Directors following a cessation of employment as a Key Employee. In
the case of a Key Employee, employment shall not be considered interrupted in
the case of sick leave, military leave or any other leave of absence approved by
the Bank or in the case of transfers between payroll locations of the Bank or
between the Bank, its parent, its subsidiaries or its successor.
"Director" means a member of the Board.
"Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him, or of a Director to serve as such. Additionally, in the case of
an employee, a medical doctor selected or approved by the Board must advise the
Committee that it is either not possible to determine when such Disability will
terminate or that it appears probable that such Disability will be permanent
during the remainder of such employee's lifetime.
"Effective Date" means the date of, or a date determined by the Board of
Directors following, approval of the Plan by the Company's stockholders.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"Key Employee" means any person who is currently employed by the Company or
an Affiliate who is chosen by the Committee to participate in the Plan.
"Non-Employee Director" means, for purposes of the Plan, a Director who (a)
is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
"Normal Retirement" means for a Key Employee, retirement at the normal or
early retirement date set forth in the Bank's Employee Stock Ownership Plan, or
any successor plan. Normal Retirement for an Outside Director means a cessation
of service on the Board of Directors for any reason other than removal for
Cause, after reaching 60 years of age and maintaining at least 10 years of
Continuous Service.
"OTS" means the Office of Thrift Supervision.
"Outside Director" means a Director of the Company or an Affiliate who is
not an employee of the Company or an Affiliate.
"Recipient" means a Key Employee or Outside Director of the Company or its
Affiliates who receives or has received an Award under the Plan.
"Restricted Period" means the period of time selected by the Committee for
the purpose of determining when restrictions are in effect under Section 6 with
respect to Restricted Stock awarded under the Plan.
"Restricted Stock" means shares of Common Stock that have been contingently
awarded to a Recipient by the Committee subject to the restrictions referred to
in Section 6, so long as such restrictions are in effect.
4. Administration of the Plan.
4.01 Role of the Committee. The Plan shall be administered and interpreted
by the Committee, which shall have all of the powers allocated to it in the
Plan, subject to OTS regulations and policy. The interpretation and construction
by the Committee of any provisions of the Plan or of any Award granted hereunder
shall be final and binding. 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 and subject to OTS regulations and policy, the Committee may adopt
such rules 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 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. The Board shall have all of the powers allocated to it in the Plan,
may take any action under or with respect to the Plan that the Committee is
authorized to take, and may reverse or override any action taken or decision
made by the Committee under or with respect to the Plan, provided, however, that
except as provided in Section 6.02, the Board may not revoke any Award except in
the event of revocation for Cause or with respect to unearned Awards in the
event the Recipient of an Award voluntarily terminates employment with the Bank
prior to Normal Retirement.
4.03 Plan Administration Restrictions. All transactions involving a grant,
award or other acquisitions from the Company shall:
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(a) be approved by the Company's full Board or by the Committee;
(b) be approved, or ratified, in compliance with Section 14 of the Exchange
Act, by either: the affirmative vote of the holders of a majority of the shares
present, or represented and entitled to vote at a meeting duly held in
accordance with the laws under which the Company is incorporated; or the written
consent of the holders of a majority of the securities of the issuer entitled to
vote provided that such ratification occurs no later than the date of the next
annual meeting of shareholders; or
(c) result in the acquisition of Common Stock that is held by the Recipient
for a period of six months following the date of such acquisition.
4.04 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 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 Bank or the Company shall indemnify such
member against expense (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 Bank and the Company and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
5. Eligibility; Awards
5.01 Eligibility. Key Employees and Outside Directors are eligible to
receive Awards.
5.02 Awards to Key Employees and Outside Directors. The Committee may
determine which of the Key Employees and Outside Directors referenced in Section
5.01 will be granted Awards and the number of shares covered by each Award;
provided, however, that in no event shall any Awards be made that will violate
the Bank's Charter and Bylaws, the Company's Charter and Bylaws, or any
applicable federal or state law or regulation. Shares of Restricted Stock that
are awarded by the Committee shall, on the date of the Award, be registered in
the name of the Recipient and transferred to the Recipient, in accordance with
the terms and conditions established under the Plan. The aggregate number of
shares that shall be issued under the Plan is 73,345.
Notwithstanding the foregoing and subject to compliance with applicable OTS
regulations and policy, no Outside Director shall be granted Awards with respect
to more than 5% of the total shares subject to the Plan, all Outside Directors
of the Company, in the aggregate, may not be granted Awards with respect to more
than 30% of the total shares subject to the Plan and no individual shall be
granted Awards with respect to more than 25% of the total shares subject to the
Plan. No Awards shall begin vesting earlier than one year from the date the Plan
is ratified by stockholders of the Company and no Awards shall vest at a rate in
excess of 20% per year beginning one year from the Date of Grant. In the event
OTS regulations are amended (the "Amended Regulations") to permit shorter
vesting periods or to permit accelerated vesting in the event of Normal
Retirement or a Change in Control of the Company, or in the event OTS policy
would permit shorter vesting periods or accelerated vesting irrespective of the
adoption of Amended Regulations, any Awards made pursuant to this Plan may vest,
at the sole discretion of the Committee, in accordance with such Amended
Regulations or OTS policy. Subject to compliance with OTS regulations and
policy, the Committee shall have the authority, in its discretion, to accelerate
the time at which any or all of the restrictions shall lapse with respect
thereto, or to remove any or all of such restrictions, whenever it may determine
that such action is appropriate by reason of changes in applicable tax or other
laws or other changes in circumstances occurring after the commencement of such
Restricted Period.
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In the event Restricted Stock is forfeited for any reason, the Committee,
from time to time, may determine which of the Key Employees and Outside
Directors will be granted additional Awards to be awarded from forfeited
Restricted Stock.
In selecting those Key Employees and Outside Directors to whom Awards will
be granted and the amount of Restricted Stock covered by such Awards, the
Committee shall consider such factors as it deems relevant, which factors may
include, among others, the position and responsibilities of the Key Employees
and Outside Directors, the length and value of their services to the Bank and
its Affiliates, the compensation paid to the Key Employees or fees paid to the
Outside Directors, and the Committee may request the written recommendation of
the Chief Executive Officer and other senior executive officers of the Bank, the
Company and its Affiliates or the recommendation of the full Board. All
allocations by the Committee shall be subject to review, and approval or
rejection, by the Board.
No Restricted Stock shall be earned unless the Recipient maintains
Continuous Service with the Bank or an Affiliate until the restrictions lapse.
5.03 Manner of Award. As promptly as practicable after a determination is
made pursuant to Section 5.02 to grant an Award, the Committee shall notify the
Recipient in writing of the grant of the Award, the number of shares of
Restricted Stock covered by the Award, and the terms upon which the Restricted
Stock subject to the Award may be earned. Upon notification of an Award of
Restricted Stock, the Recipient shall execute and return to the Company a
restricted stock agreement (the "Restricted Stock Agreement") setting forth the
terms and conditions under which the Recipient shall earn the Restricted Stock,
together with a stock power or stock powers endorsed in blank. Thereafter, the
Recipient's Restricted Stock and stock power shall be deposited with an escrow
agent specified by the Company who shall hold such Restricted Stock under the
terms and conditions set forth in the Restricted Stock Agreement. Each
certificate in respect of shares of Restricted Stock Awarded under the Plan
shall be registered in the name of the Recipient.
5.04 Treatment of Forfeited Shares. In the event shares of Restricted Stock
are forfeited by a Recipient, such shares shall be returned to the Company and
shall be held and accounted for pursuant to the terms of the Plan until such
time as the Restricted Stock is re-awarded to another Recipient, in accordance
with the terms of the Plan and the applicable state and federal laws, rules and
regulations.
6. Terms and Conditions of Restricted Stock
The Committee shall have full and complete authority, subject to the
limitations of the Plan, to grant awards of Restricted Stock to Key Employees
and Outside Directors and, in addition to the terms and conditions contained in
Sections 6.01 through 6.08, to provide such other terms and conditions (which
need not be identical among Recipients) in respect of such Awards, and the
vesting thereof, as the Committee shall determine.
6.01 General Rules. Restricted Stock shall be earned by a Recipient at the
rate of 20% of the initially awarded amount per year commencing with the first
installment being earned on the first anniversary of the Date of Grant and
succeeding installments being earned on the following anniversaries, provided
that such Recipient maintains Continuous Service; provided, however, that no
shares shall be earned for any year in which the Bank is not meeting all of its
fully phased-in capital requirements. Subject to any such other terms and
conditions as the Committee shall provide with respect to Awards, shares of
Restricted Stock may not be sold, assigned, transferred (within the meaning of
Code Section 83), pledged or otherwise encumbered by the Recipient, except as
hereinafter provided, during the Restricted Period.
6.02 Continuous Service; Forfeiture. If a Recipient ceases to maintain
Continuous Service for any reason (other than death or Disability), unless the
Committee shall otherwise determine, all shares of Restricted Stock theretofore
awarded to such Recipient and which at the time of such termination of
Continuous Service are subject to the restrictions imposed by Section 6.01 shall
upon such termination of Continuous Service be forfeited. Any stock
B-5
<PAGE>
dividends or declared but unpaid cash dividends attributable to such shares of
Restricted Stock shall also be forfeited. Notwithstanding the foregoing,
Restricted Stock awarded to a Recipient whose employment with or service on the
Board of the Bank or an Affiliate terminates due to death or Disability shall be
deemed earned as of the Recipient's last day of employment with the Company or
an Affiliate, or last day of service on the Board of the Company or an
Affiliate; provided that Restricted Stock awarded to a Key Employee who at any
time also serves as a Director, shall not be deemed earned until both employment
and service as a Director have been terminated.
6.03 Revocation for Cause. Notwithstanding anything hereinafter to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Award, or portion thereof, previously awarded under the Plan, to the extent
Restricted Stock has not been redelivered by the Escrow Agent to the Recipient,
whether or not yet earned, in the case of a Key Employee whose employment is
terminated by the Company or an Affiliate or an Outside Director whose service
is terminated by the Company or an Affiliate for Cause or who is discovered
after termination of employment or service on the Board to have engaged in
conduct that would have justified termination for Cause.
6.04 Restricted Stock Legend. Each certificate in respect of shares of
Restricted Stock awarded under the Plan shall be registered in the name of the
Recipient and deposited by the Recipient, together with a stock power endorsed
in blank, with the Escrow Agent and shall bear the following (or a similar)
legend:
"The transferability of this certificate and the
shares of stock represented hereby are subject to the terms
and conditions (including forfeiture) contained in the Liberty
Bancorp, Inc. Recognition and Retention Plan. Copies of such
Plan are on file in the offices of the Secretary of Liberty
Bancorp, Inc., 1410 St.
George Avenue, Avenel, New Jersey 07001."
6.05 Payment of Dividends and Return of Capital. After an Award has been
granted but before such Award has been earned, the Recipient shall receive any
cash dividends paid with respect to such shares, or shall share in any pro-rata
return of capital to all shareholders with respect to the Common Stock. Stock
dividends declared by the Company and paid on Awards that have not yet been
earned shall be subject to the same restrictions as the Restricted Stock and the
certificate(s) or other instruments representing or evidencing such shares shall
be legended in the manner provided in Section 6.04 and shall be delivered to the
Escrow Agent for distribution to the Recipient when the Restricted Stock upon
which such dividends were paid are earned. Unless the Recipient has made an
election under Section 83(b) of the Code, cash dividends or other amounts so
paid on shares that have not yet been earned by the Recipient shall be treated
as compensation income to the Recipient when paid. If dividends are paid with
respect to shares of Restricted Stock under the Plan that have been issued but
not awarded, or that have been forfeited and returned to the Company or to a
trust established to hold issued and unawarded or forfeited shares, the
Committee can determine to award such dividends to any Recipient or Recipients
under the Plan, to any other employee or director of the Company or the Bank, or
can return such dividends to the Company.
6.06 Voting of Restricted Shares. After an Award has been granted, the
Recipient as conditional owner of the Restricted Stock shall have the right to
vote such shares.
6.07 Delivery of Earned Shares. At the expiration of the restrictions
imposed by Section 6.01, the Escrow Agent shall redeliver to the Recipient (or
where the relevant provision of Section 6.02 applies in the case of a deceased
Recipient, to his Beneficiary) the certificate(s) and any remaining stock power
deposited with it pursuant to Section 5.03 and the shares represented by such
certificate(s) shall be free of the restrictions referred to Section 6.01.
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<PAGE>
7. Adjustments upon Changes in Capitalization
In the event of any change in the outstanding shares subsequent to the
Effective Date by reason of any reorganization, recapitalization, stock split,
stock dividend, combination or exchange of shares, merger, consolidation or any
change in the corporate structure or shares of the Company, the maximum
aggregate number and class of shares as to which Awards may be granted under the
Plan shall be appropriately adjusted by the Committee, whose determination shall
be conclusive. Any shares of stock or other securities received, as a result of
any of the foregoing, by a Recipient with respect to Restricted Stock shall be
subject to the same restrictions and the certificate(s) or other instruments
representing or evidencing such shares or securities shall be legended and
deposited with the Escrow Agent in the manner provided in Section 6.04.
8. Assignments and Transfers
No Award nor any right or interest of a Recipient under the Plan in any
instrument evidencing any Award under the Plan may be assigned, encumbered or
transferred (within the meaning of Code Section 83) except, in the event of the
death of a Recipient, by will or the laws of descent and distribution until such
Award is earned.
9. Key Employee Rights under the Plan
No Key Employee shall have a right to be selected as a Recipient nor,
having been so selected, to be selected again as a Recipient and no Key Employee
or other person shall have any claim or right to be granted an Award under the
Plan or under any other incentive or similar plan of the Bank or any Affiliate.
Neither the Plan nor any action taken thereunder shall be construed as giving
any Key Employee any right to be retained in the employ of the Bank or any
Affiliate.
10. Outside Director Rights under the Plan
Neither the Plan nor any action taken thereunder shall be construed as
giving any Outside Director any right to be retained in the service of the Bank
or any Affiliate.
11. Withholding Tax
Upon the termination of the Restricted Period with respect to any shares of
Restricted Stock (or at any such earlier time, if any, that an election is made
by the Recipient under Section 83(b) of the Code, or any successor provision
thereto, to include the value of such shares in taxable income), the Bank or the
Company shall have the right to require the Recipient or other person receiving
such shares to pay the Bank or the Company the amount of any taxes that the Bank
or the Company is required to withhold with respect to such shares, or, in lieu
thereof, to retain or sell without notice, a sufficient number of shares held by
it to cover the amount required to be withheld. The Bank or the Company shall
have the right to deduct from all dividends paid with respect to shares of
Restricted Stock the amount of any taxes which the Bank or the Company is
required to withhold with respect to such dividend payments.
12. Amendment or Termination
The Board of the Company may amend, suspend or terminate the Plan or any
portion thereof at any time, subject to OTS regulations and policy, provided,
however, that no such amendment, suspension or termination shall impair the
rights of any Recipient, without his consent, in any Award theretofore made
pursuant to the Plan. Any amendment or modification of the Plan or an
outstanding Award under the Plan shall be approved by the Committee, or the full
Board of the Company.
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<PAGE>
13. Governing Law
The Plan shall be governed by the laws of the State of New Jersey.
14. Term of Plan
The Plan shall become effective on the date of, or a date determined by the
Board of Directors following, approval of the Plan by the Company's
stockholders. It shall continue in effect until the earlier of (i) ten years
from the Effective Date unless sooner terminated under Section 12 hereof, or
(ii) the date on which all shares of Common Stock available for award hereunder,
have vested in the Recipients of such Awards.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
as of the ____ day of ________________, 199___.
Date Approved by Shareholders: _______________________
Effective Date: _______________________
ATTEST: LIBERTY BANCORP, INC.
- ---------------------------------- -----------------------------
Leslie C. Whelan, Secretary John R. Bowen, President
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<PAGE>
LIBERTY BANCORP, INC.
SPECIAL MEETING OF STOCKHOLDERS
February 3, 1999
The undersigned hereby appoints the proxy committee of the Board of
Directors, with full powers of substitution to act as attorney and proxy for the
undersigned, and to vote all shares of Common Stock of Liberty Bancorp, Inc.
which the undersigned is entitled to vote, at the Special Meeting of
Stockholders, to be held at the main office of the Company, 1410 St. Georges
Avenue, Avenel, New Jersey, on February 3, 1999 at 10:00 a.m. New Jersey time,
and at any and all adjournments thereof, as indicated on the reverse side.
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE.
This proxy is revocable and will be voted as directed, but if no
instructions are specified, this proxy will be voted FOR each of the proposals
listed. If any other business is presented at the meeting, this proxy will be
voted by those named in this proxy in their best judgment.
This proxy is solicited by the Board of Directors.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSALS.
FOR AGAINST ABSTAIN
1. Theratification and approval of the Liberty --- ------- -------
Bancorp, Inc. 1999 Stock Option Plan. |_| |_| |_|
FOR AGAINST ABSTAIN
2. The ratification and approval of the Liberty --- ------- -------
Bancorp, Inc. 1999 Recognition and Retention |_| |_| |_|
Plan.
and such other matters as may properly come before the Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Meeting.
Should the undersigned be present and elect to vote at the Meeting or at any
adjournment thereof and after notification to the Secretary of the Company at
the Meeting of the stockholder's decision to terminate this proxy, then the
power of said attorneys and proxies shall be deemed terminated and of no further
force and effect. This proxy may also be revoked by sending written notice to
the Secretary of the Company at the address set forth on the Notice of Special
Meeting of Stockholders, or by the filing of a later proxy prior to a vote being
taken on a particular proposal at the Meeting.
The undersigned acknowledges receipt from Liberty Bancorp, Inc. prior to the
execution of this proxy of notice of the Meeting, a proxy statement dated
December 18, 1998 and audited financial statements.
Dated: _________________________ |__| Check Box if You Plan
to Attend Annual Meeting
- ------------------------------- -----------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ------------------------------- -----------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing
as attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
<PAGE>
