UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, DC 20552
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------------
Commission File Number 000-29460
COMMUNITY SAVINGS BANKSHARES, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0870004
------------------------------- -------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
660 US Highway One
North Palm Beach, FL 33408
-------------------------------------- -------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (561) 881-2212
--------------
Indicate by check whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of April 25, 2000, there were 9,282,308 shares of the Registrant's
common stock outstanding.
<PAGE>
COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
- ----------------------------- ----
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
March 31, 2000 (Unaudited) and December 31, 1999 2
Consolidated Statements of Operations (Unaudited) for
the three months ended March 31, 2000 and 1999 3
Consolidated Statements of Changes in Shareholders'
Equity for the three months ended March 31, 2000
(Unaudited) and for the year ended December 31, 1999 4
Consolidated Statements of Cash Flows (Unaudited) for
the three months ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 14
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Default Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature Page 16
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999
March 31, December 31,
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS (In thousands)
Cash and cash equivalents:
Cash and amounts due from depository institutions $ 18,976 $ 22,057
Interest-bearing deposits 41,394 23,182
--------- ---------
Total cash and cash equivalents 60,370 45,239
Securities available for sale 144,444 144,840
Securities held to maturity 37,787 38,802
Loans receivable, net of allowance for loan losses 606,198 608,369
Accrued interest receivable 3,346 3,788
Premises and equipment, net 24,740 24,939
Real estate held for investment 1,872 1,872
Investment in and advances to real estate venture 12,943 11,633
Real estate owned, net 557 494
Federal Home Loan Bank stock - at cost 7,009 7,009
Other assets 6,513 5,989
--------- ---------
Total assets $ 905,779 $ 892,974
========= =========
LIABILITIES
Deposits:
Demand deposits $ 43,058 $ 39,429
NOW and statement savings 85,490 76,073
Savings deposits 35,847 34,466
Money market deposits 94,990 100,299
Certificates of deposit 377,019 363,676
--------- ---------
Total deposits 636,404 613,943
Mortgage-backed bond - net 14,277 14,508
Advances from Federal Home Loan Bank 128,750 140,186
Advances by borrowers for taxes and insurance 3,486 1,403
Other liabilities 7,173 7,233
--------- ---------
Total liabilities 790,090 777,273
--------- ---------
SHAREHOLDERS' EQUITY
Preferred stock ($1 par value): 10,000,000 authorized shares, no shares issued -- --
Common stock ($1 par value): 60,000,000 authorized shares; 9,289,808 and 9,319,873
shares outstanding at March 31, 2000 and December 31, 1999, respectively 10,571 10,571
Additional paid-in capital 93,816 93,744
Retained income - substantially restricted 38,695 37,869
Common stock purchased by Employee Stock Ownership Plan (4,551) (4,722)
Common stock issued to Recognition and Retention Plans (2,442) (2,586)
Accumulated other comprehensive income (3,432) (3,358)
Treasury stock, at cost: 1,281,332 and 1,251,267 shares at March 31, 2000 and
December 31, 1999, respectively (16,968) (15,817)
--------- ---------
Total shareholders' equity 115,689 115,701
--------- ---------
Total liabilities and shareholders' equity $ 905,779 $ 892,974
========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
For the three months
ended March 31,
2000 1999
------------ ------------
(Unaudited)
(Dollars in thousands
except per share data)
<S> <C> <C>
Interest income:
Loans $ 11,667 $ 10,424
Securities 3,187 2,483
Other interest and dividend income 684 1,095
------------ ------------
Total interest income 15,538 14,002
------------ ------------
Interest expense:
Deposits 6,054 5,525
Advances from Federal Home Loan Bank and other borrowings 2,343 1,621
------------ ------------
Total interest expense 8,397 7,146
------------ ------------
Net interest income 7,141 6,856
Provision for loan losses 150 322
------------ ------------
Net interest income after provision for loan losses 6,991 6,534
------------ ------------
Other income:
Servicing income and other fees 89 80
NOW account and other customer fees 812 851
Net gain (loss) on real estate owned 4 (12)
Equity in net loss of real estate venture (75) --
Miscellaneous 101 59
------------ ------------
Total other income 931 978
------------ ------------
Operating expense:
Employee compensation and benefits 3,136 2,860
Occupancy and equipment 1,471 1,534
Advertising and promotion 235 288
Federal deposit insurance premium 31 88
Miscellaneous 947 831
------------ ------------
Total operating expense 5,820 5,601
------------ ------------
Income before provision for income taxes 2,102 1,911
Provision for income taxes 495 526
------------ ------------
Net income $ 1,607 $ 1,385
============ ============
Earnings per share - basic $ 0.19 $ 0.14
============ ============
Earnings per share - diluted $ 0.18 $ 0.14
============ ============
Weighted average common shares outstanding - basic 8,627,615 9,920,292
============ ============
Weighted average common shares outstanding - diluted 8,893,535 10,177,050
============ ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED) AND
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Retained Employee Recognition Accumulated
Additional Income- Stock and Other
Common Paid-In Substantially Ownership Retention Comprehensive Treasury
Stock Capital Restricted Plan Plans Income Stock Total
---------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1998 $10,549 $93,268 $35,545 $(5,407) $ (237) $ (432) $ -- $ 133,286
Net income for the year ended
December 31, 1999 -- -- 6,534 -- -- 6,534
Other comprehensive income:
Unrealized decrease in market value
of assets available for sale
(net of income taxes) -- -- -- -- -- (2,926) -- (2,926)
---------
Comprehensive income 3,608
Stock options exercised 22 99 -- -- -- -- 88 209
Shares committed to be released -
Employee Stock Ownership Plan and
Recognition and Retention Plans -- 371 -- 685 539 -- -- 1,595
Purchase of common stock by 1999 and 1995
Recognition and Retention Plans -- 60 (95) -- (2,888) -- -- (2,923)
Cost of stock issuance -- (54) -- -- -- -- -- (54)
Purchase of treasury stock -- -- -- -- -- -- (15,905) (15,905)
Dividends declared -- -- (4,115) -- -- -- -- (4,115)
---------------------------------------------------------------------------------------
Balance - December 31, 1999 10,571 93,744 37,869 (4,722) (2,586) (3,358) (15,817) 115,701
Net income for the three months ended
March 31, 2000 -- -- 1,607 -- -- -- 1,607
Other comprehensive income:
Unrealized decrease in market value
of assets available for sale
(net of income taxes) -- -- -- -- -- (74) -- (74)
---------
Comprehensive income 1,533
Stock options exercised -- -- -- -- -- -- 675 675
Amortization of deferred compensation -
Employee
Stock Ownership Plan and Recognition
and Retention Plans -- 72 -- 171 144 -- -- 387
Stock benefit plan tax adjustment -- -- 160 -- -- -- -- 160
Purchase of treasury stock -- -- -- -- -- -- (1,826) (1,826)
Dividends declared -- -- (941) -- -- -- -- (941)
---------------------------------------------------------------------------------------
Balance - March 31, 2000 (unaudited) $10,571 $93,816 $38,695 $(4,551) $(2,442) $(3,432) $(16,968) $ 115,689
=======================================================================================
See notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY SAVINGS BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
For the three months ended
March 31,
2000 1999
--------- ---------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,607 $ 1,385
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 553 623
ESOP and Recognition and Retention Plans compensation expense 547 253
Accretion of discounts, amortization of premiums, and other deferred yield items (434) (298)
Provision for loan losses 150 322
(Increase) decrease in other assets (145) 53
Increase in other liabilities 2,084 4,293
--------- ---------
Net cash from operating activities 4,362 6,631
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in loans 9,521 (23,354)
Principal payments, calls and maturities received on securities and FHLB stock 2,342 16,149
Purchases of:
Loans and participations (7,500) (6,000)
Securities available for sale and FHLB stock (632) (23,367)
Premises and equipment, net (238) (438)
Investment in real estate venture (1,310) --
--------- ---------
Net cash from investing activities 2,183 (37,010)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 22,461 (10,388)
Repayments, calls of advances from Federal Home Loan Bank (11,436) (2,124)
Purchase of treasury stock (1,826) --
Proceeds from exercise of stock options 675 --
Payments made on mortgage-backed bond (347) (346)
Dividends paid (941) (1,155)
--------- ---------
Net cash from financing activities 8,586 (14,013)
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 15,131 (44,392)
CASH AND CASH EQUIVALENTS, beginning of period 45,239 117,015
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 60,370 $ 72,623
========= =========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited consolidated interim financial statements for Community
Savings Bankshares, Inc. ("Bankshares") and its subsidiary Community
Savings, F. A. (the "Association"), reflect all adjustments (consisting
only of normal recurring accruals) which, in the opinion of management,
are necessary to present fairly Bankshares' consolidated financial
condition and the consolidated results of operations and cash flows for
the interim periods presented herein. The results for interim periods are
not necessarily indicative of trends or results to be expected for the
full fiscal year. All weighted interest rates are presented on an
annualized basis. The unaudited consolidated interim financial statements
and notes should be read in conjunction with the audited consolidated
financial statements and the notes thereto included in Bankshares' Annual
Report to Shareholders for the year ended December 31, 1999.
RECLASSIFICATIONS - Certain items in the 1999 financial statements and the
notes thereto have been reclassified to conform with the 2000
presentation.
2. LOANS RECEIVABLE
Loans receivable consists of the following:
March 31, December 31,
2000 1999
--------- ---------
(In thousands)
Real estate loans:
Residential 1-4 family $ 443,179 $ 420,845
Residential 1-4 family construction 107,579 105,282
Multi-family 6,858 11,135
Multi-family construction 23,782 17,251
Land 21,147 50,885
Commercial 29,295 28,626
Commercial construction 9,307 9,633
--------- ---------
Total real estate loans 641,147 643,657
--------- ---------
Non-real estate loans:
Consumer 13,652 12,685
Commercial business 10,655 11,409
--------- ---------
Total non-real estate loans 24,307 24,094
--------- ---------
Total loans receivable 665,454 667,751
Undisbursed loan proceeds (56,813) (56,948)
Unearned discount and premium and
net deferred loan fees and costs 1,577 1,489
Allowance for loan losses (4,020) (3,923)
--------- ---------
Total loans receivable, net $ 606,198 $ 608,369
========= =========
6
<PAGE>
An analysis of the changes in the allowance for loan losses is as follows:
For the three months
ended March 31,
2000 1999
------- -------
(In thousands)
Balance, beginning of period $ 3,923 $ 3,160
Provision charged to income 150 322
Losses charged to allowance (53) (44)
Recoveries -- --
------- -------
Balance, end of period $ 4,020 $ 3,438
======= =======
The Association accounts for impaired loans in accordance with SFAS No.
114 "Accounting by Creditors for Impairment of a Loan" as amended by SFAS
No. 118 "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures". At March 31, 2000 and December 31, 1999,
impaired loans totaled $521,000 and $5,000, respectively.
3. REAL ESTATE OWNED
Real estate owned consists of the following:
March 31, December 31,
2000 1999
----- -----
(In thousands)
Real estate owned $ 563 $ 500
Less allowance for loss 6 6
----- -----
Total real estate owned $ 557 $ 494
===== =====
Changes in allowance for loss on real estate owned are as follows:
For the three months
ended March 31,
2000 1999
---- ----
(In thousands)
Balance, beginning of period $ 6 $ 36
Provision charged to income -- 5
Losses charged to allowance -- (9)
---- ----
Balance, end of period $ 6 $ 32
==== ====
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
In the following discussion, references to "Bankshares" relate to Community
Savings Bankshares, Inc. together with its subsidiary, Community Savings, F. A.
(the "Association").
COMMUNITY SAVINGS BANKSHARES, INC.
Bankshares is a Delaware-chartered stock holding company organized in August
1998. Bankshares' significant assets include cash and its investment in its
wholly-owned subsidiary, the Association. On December 15, 1998, Bankshares
completed its reorganization and stock offering in connection with the
conversion and reorganization of ComFed, M.H.C. ("ComFed") and its mid-tier
holding company. The holding company reorganization was accounted for at
historical cost in a manner similar to a pooling of interests. Therefore, all
financial information has been presented as if Bankshares had been in existence
for all periods presented in this report. The common stock of Bankshares trades
on The Nasdaq Stock Market under the symbol "CMSV".
COMMUNITY SAVINGS, F. A.
The Association, founded in 1955, is a federally chartered savings and loan
association headquartered in North Palm Beach, Florida. The Association's
deposits are federally insured by the Federal Deposit Insurance Corporation
("FDIC") through the Savings Association Insurance Fund ("SAIF"). The
Association has been a member of the Federal Home Loan Bank of Atlanta ("FHLB")
since 1955. The Association is regulated by the Office of Thrift Supervision
("OTS").
The Association is a community-oriented financial institution engaged primarily
in the business of attracting deposits from the general public and using such
funds, together with other borrowings, to invest in various residential and
commercial real estate loans, consumer and commercial business loans,
mortgage-backed securities ("MBS"), and investment securities. The Association's
plan is to operate as a well-capitalized, profitable and independent
institution. The Association currently exceeds all regulatory capital
requirements.
The Association's profitability is highly dependent on its net interest income.
The components that determine net interest income are the amount of
interest-earning assets and interest-bearing liabilities, non-interest-bearing
liabilities and capital, together with the yields earned or rates paid on such
interest rate-sensitive instruments. The Association manages interest rate risk
exposure by matching, in part, asset and liability maturities and rates. This is
accomplished while considering the credit risk of certain assets. The
Association maintains asset quality by utilizing comprehensive loan underwriting
standards and collection efforts as well as by primarily originating or
purchasing secured or guaranteed assets.
The Association has two wholly-owned subsidiaries. ComFed, Inc. ("ComFed"),
formed in 1971, does business as Community Insurance Agency, selling mortgage
life insurance and receiving income and incurring related expenses from the sale
of third party mutual funds and annuities. Palm River Development Co., Inc.
("Palm River"), incorporated in 1999, is engaged in a real estate development
joint venture in Indian River County.
Management believes the success of the Association as a community-oriented
financial institution depends on building long-term relationships with its
customers while meeting their current financial needs. Goals for 2000 include
aggressively pursuing new loan opportunities in its market area of Palm Beach,
Martin, St. Lucie and Indian River counties, funding the resulting increase in
the asset base primarily with deposit growth. While management will still look
for suitable locations for new branch offices, they will also evaluate the
effectiveness of our existing branch network. In addition, management will
continue to focus on improving the efficiency ratio, through cost reduction and
enhanced fee income strategies. As part of the continued implementation of this
strategy, the Board of Directors of the Association has taken steps to terminate
the Association's defined benefit plan and replace it with a 401(k) defined
contribution plan. As a result of the termination of the defined benefit plan,
the Association expects to recognize a one-time gain in the second quarter
estimated to be approximately $1.0 million. However, in connection with the
final settlement of the plan, which will not occur until receipt of a favorable
termination letter from the Internal Revenue Service, the Association expects to
incur in the fourth quarter a settlement expense currently estimated to amount
to $500,000.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Association adjusts its liquidity levels in order to meet funding needs of
deposit outflows, payment of real estate taxes on mortgage loans, repayment of
borrowings and loan commitments. The Association also adjusts liquidity as
appropriate to meet its asset and liability management objectives. A major
portion of the Association's liquidity consists of cash and cash equivalents,
which are a product of its operating, investing, and financing activities.
The Association is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which varies from time to time
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term borrowings. The required ratio currently is 4.0%. The
Association's liquidity ratio averaged 14.1% during the three months ended March
31, 2000 while liquidity ratios averaged 14.7% for the year ended December 31,
1999.
The Association's primary sources of funds are deposits, amortization and
prepayment of loans and MBS, maturities of investment securities and other
short-term investments, FHLB advances, as well as earnings and funds provided
from operations. While scheduled principal repayments on loans and MBS, and
maturities of securities are a relatively predictable source of funds, deposit
flows and loan prepayments are greatly influenced by general interest rates,
economic conditions, and competition. The Association manages the pricing of its
deposits to maintain a desired deposit balance. In addition, the Association
invests funds in excess of its immediate needs in short-term interest-earning
deposits and other assets, which provide liquidity to meet lending requirements.
Short-term interest-bearing deposits with the FHLB of Atlanta totaled $40.0
million at March 31, 2000. Other assets qualifying for liquidity outstanding at
March 31, 2000 amounted to $47.7 million. For additional information about cash
flows from operating, financing, and investing activities, see the unaudited
consolidated statements of cash flows included in the consolidated financial
statements.
Liquidity management is both a daily and long-term function of business
management. If funds are required beyond the ability to generate them
internally, borrowing agreements exist with the FHLB which provide an additional
source of funds. FHLB advances totaled $128.8 million at March 31, 2000.
At March 31, 2000, commitments to originate and purchase loans totaled $11.3
million and $21.1 million, respectively. The unfunded portion of consumer lines
of credit totaled $13.4 million and available commercial lines and letters of
credit totaled $9.6 million. Certificates of deposit scheduled to mature in less
than one year totaled $279.2 million at March 31, 2000. Based on prior
experience, management believes that a significant portion of such deposits will
remain with the Association.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
GENERAL
Net income for the quarter ended March 31, 2000 was $1.6 million, or $0.18
diluted earnings per share, a $222,000 increase from $1.4 million, or $0.14
diluted earnings per share, for the quarter ended March 31, 1999. The increase
in net income was primarily the result of a $285,000 increase in net interest
income combined with a $172,000 decrease in the provision for loan losses,
offset in part by a $219,000 increase in operating expense.
NET INTEREST INCOME
Net interest income increased to $7.1 million for the quarter ended March 31,
2000 from $6.9 million for the same period in 1999 primarily as a result of a
$39.9 million increase in average interest-earning assets to $827.6 million for
the three months ended March 31, 2000 from $787.7 million for the same period in
the prior year, reflecting the increase in the average balances of the loan and
investment portfolios. In addition, the average yield on interest-earning assets
increased by 40 basis points to 7.51% for the three months ended March 31, 2000
from 7.11% for the 1999 period due to the rising interest rate environment since
early 1999. The increase in net interest income was partially offset by an
increase in the average cost of interest-bearing liabilities to 4.35% for the
three months ended March 31, 2000 from 4.11% for the 1999 period, primarily as a
result of the increased weighted average cost of deposits to 3.88% for the
quarter ended March 31, 2000 from 3.75% for the same period in 1999. The
Association used higher costing odd-term certificates of deposit during the
first quarter of 2000 to maintain existing customers as well as to attract new
9
<PAGE>
deposits, resulting in an increased cost of deposits reflecting the change in
the composition of the deposit portfolio. The dollar balance of total
certificates of deposit, which have a higher cost to the Association, increased
by 3.7%, while the dollar balance of lower costing core deposits (consisting of
checking, NOW, statement, passbook, and money market deposit accounts) increased
by 3.6%. The Association will continue to emphasize lower costing core deposit
products to its customers to establish a complete deposit relationship. In
addition, average interest-bearing liabilities increased $76.1 million to $772.4
million for the three months ended March 31, 2000 from $696.3 million for the
same period in 1999. The increase in average interest-bearing liabilities
reflected $33.4 million and $42.7 million higher average balances for the
Association's deposit portfolio and borrowed funds, respectively, for the
quarter ended March 31, 2000 as the Association used such funds to support its
expanding lending program.
PROVISION FOR LOAN LOSSES
The Association maintains an allowance for loan losses based upon a periodic
evaluation of known and inherent risks in the loan portfolio, its past loan loss
experience, adverse situations that may affect borrowers' ability to repay
loans, the estimated value of the underlying loan collateral, the nature and
volume of its loan activities, and current as well as expected future economic
conditions. Loan loss provisions are based upon management's estimate of the
fair value of the collateral and the actual loss experience, as well as
guidelines applied by the OTS. The provision for loan losses was $150,000 for
the quarter ended March 31, 2000, as compared to $322,000 for the quarter ended
March 31, 1999 primarily due to management's assessment that the allowance for
loan losses needed to be increased to a greater extent in the 1999 period. The
allowance for loan losses as a percentage of net loans receivable was 0.66% and
0.60% at March 31, 2000 and 1999, respectively.
OTHER INCOME
Other income consists of servicing income and fee income, service charges, gains
or losses on the sales of securities available for sale and other assets. Other
income decreased $47,000 to $931,000 for the quarter ended March 31, 2000, from
$978,000 for the same period in 1999, primarily due to a $75,000 net loss in the
Palm River real estate joint venture for the three months ended March 31, 2000.
The joint venture began operations in July 1999 and is expected to begin sales
of developed lots during the third quarter of 2000. For further information on
this project, see "Investments in and Advances to Real Estate Venture" in the
Notes to Consolidated Financial Statements in Bankshares' 1999 Annual Report.
OPERATING EXPENSE
Operating expense increased $219,000 to $5.8 million for the three month period
ended March 31, 2000 from $5.6 million for the same period in 1999. Employee
compensation and benefits increased $276,000 during the quarter ended March 31,
2000 as compared to the same period in 1999. The increase primarily reflected
increased compensation resulting from merit increases implemented in connection
with the Association's annual review of its compensation structure for all
employees and officers. As a result of such review, it was determined to
increase salaries at a greater level than prior periods in order to improve the
Association's ability to compete for, and retain high quality employees.
In addition, pension costs increased by $68,000 for the 2000 period as compared
to the 1999 period due to higher actuarial accruals for 2000. In April 2000, as
part of the 2000 strategic plan, the Board of Directors of the Association took
steps to terminate the Association's defined benefit plan and replace it with a
401(k) defined contribution plan. As a result of the termination of the defined
benefit plan, Bankshares expects to recognize a one-time gain in the second
quarter of 2000 estimated to be approximately $1.0 million. However, in
connection with the final settlement of the plan, which will not occur until
receipt of a favorable termination letter from the Internal Revenue Service,
Bankshares expects to incur in the fourth quarter a settlement expense currently
estimated to amount to $500,000.
Occupancy and equipment costs decreased $63,000 for the three months ended March
31, 2000 as compared to the same period in 1999. In addition, advertising and
marketing expense decreased $53,000 during the quarter ended March 31, 2000 as
compared to the same quarter in 1999. Miscellaneous expense increased $116,000
for the quarter ended March 31, 2000. The 1999 period reflected a reversal of a
$127,000 loss reserve previously recorded which was recovered from an insurance
company as a result of the settlement of an employee defalcation claim.
10
<PAGE>
PROVISION FOR INCOME TAXES
The provision for income taxes was $495,000 for the three months ended March 31,
2000 as compared to $526,000 for the same period in 1999 reflecting primarily
the increased benefit from tax credits totaling $134,000 resulting from the
Association's investment in an affordable housing partnership during the quarter
ended March 31, 2000 as compared to $124,000 for the same period in 1999.
FINANCIAL CONDITION
MARCH 31, 2000 COMPARED TO DECEMBER 31, 1999
The following table summarizes certain information relating to Bankshares'
financial condition at the dates indicated.
<TABLE>
<CAPTION>
March 31, December 31, Increase
2000 1999 (Decrease)
-------- -------- --------
(Unaudited)
(In thousands)
<S> <C> <C> <C>
Assets:
Total assets $905,779 $892,974 $ 12,805
Cash and cash equivalents 60,370 45,239 15,131
Securities portfolio:
Securities available for sale 144,444 144,840 (396)
Securities held to maturity 37,787 38,802 (1,015)
-------- -------- --------
Total securities portfolio 182,231 183,642 (1,411)
Loans receivable, net 606,198 608,369 (2,171)
Investments in and advances to real estate venture 12,943 11,633 1,310
Real estate owned, net 557 494 63
Liabilities and Shareholders' Equity:
Total liabilities 790,090 777,273 12,817
Deposits 636,404 613,943 22,461
Federal Home Loan Bank advances 128,750 140,186 (11,436)
Advances by borrowers for taxes and insurance 3,486 1,403 2,083
Shareholders' equity 115,689 115,701 (12)
</TABLE>
Total assets increased $12.8 million to $905.8 million at March 31, 2000, as
compared to $893.0 million at December 31, 1999 primarily due to a $15.1 million
increase in cash and cash equivalents to $60.4 million at March 31, 2000 from
$45.2 million at December 31, 1999, partially offset by a $1.4 million net
decrease in the securities portfolio (which includes securities available for
sale and held to maturity) to $182.2 million at March 31, 2000 from $183.6
million at December 31, 1999, and a $2.2 million decrease in loans receivable to
$606.2 million at March 31, 2000 from $608.4 million at December 31, 1999. The
increase in cash and cash equivalents was funded in part by a $22.5 million net
increase in deposits to $636.4 million at March 31, 2000 from $613.9 million at
December 31, 1999. In addition, FHLB advances decreased $11.4 million, totaling
$128.8 million and $140.2 million at March 31, 2000 and December 31, 1999,
respectively.
The securities portfolio net decrease of $1.4 million primarily reflects
$632,000 in purchases of new securities available for sale offset by scheduled
principal reductions and amortization of premiums and discounts amounting to
$2.0 million.
As a result of continued emphasis on expanded lending activities, loan
originations totaled $46.7 million and included loans secured by residential
one- to four-family properties totaling $40.4 million, commercial real estate
properties totaling $1.5 million, consumer loans totaling $1.6 million and
commercial business loans totaling $2.7 million. The originations and purchases
of $7,5 million were offset by sales and repayments of $7.5 million and $48.0
million, respectively. Repayments included the payoff of a $21.0 million loan
secured by land.
11
<PAGE>
Real estate owned increased $63,000 to $557,000 at March 31, 2000, from $494,000
at December 31, 1999, primarily due to a residential foreclosed property offset
by the sale of a non-residential property.
Total liabilities increased $12.8 million to $790.1 million at March 31, 2000,
from $777.3 million at December 31, 1999. Total deposits increased by $22.5
million to $636.4 million at March 31, 2000 from $613.9 million at December 31,
1999. The increase in deposits reflected increases of $9.1 million and $13.4
million in core deposits (which include demand, NOW, savings, and money market
deposit accounts) and certificates of deposits, respectively. The weighted
average yield paid on deposits increased to 4.02% at March 31, 2000 as compared
to 3.95% at December 31, 1999 in the rising-interest rate environment
experienced during 2000. Federal Home Loan Bank advances decreased $11.4 million
to $128.8 million at March 31, 2000 from $140.2 million at December 31, 1999.
The decreases included the call and payoff of $10.0 million and $400,000
advances, respectively, as well as $1.0 million of normal amortization. There
were no new advances during the first quarter of 2000 due to the adequacy of
deposit inflows and loan repayments to fund loan originations.
Total equity, which totaled $115.7 million at March 31, 2000, decreased $12,000
from December 31, 1999, reflecting the purchase of treasury stock totaling $1.8
million, the declaration of dividends totaling $941,000 and a net decrease in
the market value of assets available for sale of $74,000, offset in part by net
income for the three months of $1.6 million, stock options exercised totaling
$675,000, and the amortization of deferred compensation represented by stock
benefit plans totaling $387,000. For further information, see the unaudited
consolidated statements of changes in shareholders' equity in the accompanying
consolidated financial statements.
The Association is required to report regulatory capital ratios unconsolidated
with Bankshares. The Association's actual capital amounts and ratios at March
31, 2000 are as follows:
<TABLE>
<CAPTION>
To be Considered
Well
For Capitalized
Capital for Prompt
Adequacy Corrective Action
Actual Purposes Provisions
------------------ ------------------ -------------------
Ratio Amount Ratio Amount Ratio Amount
----- ------ ----- ------ ----- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 2000:
Total Risk-Based Capital
(to Risk-weighted Assets) 17.5% $ 82,471 8.0% $ 37,787 10.0% $ 47,234
Core (Tier 1) Capital
(to Adjusted Tangible Assets) 8.8 78,589 4.0 35,549 5.0 44,436
Core (Tier 1) Capital
(to Risk-weighted Assets) 16.6 78.589 4.0 18,894 6.0 28,341
</TABLE>
As of March 31, 2000, adjusted tangible assets and risk-weighted assets were
$888.7 million and $472.3 million, respectively.
ASSET QUALITY
Loans 90 days past due are generally placed on non-accrual status. The
Association ceases to accrue interest on a loan once it is placed on non-accrual
status and interest accrued but unpaid at such time is charged against interest
income. Additionally, any loan where it appears evident prior to being past due
90 days that the collection of interest is in doubt is also placed on
non-accrual status. Real estate owned is carried at the lower of cost or fair
value, less cost to dispose. Management regularly reviews assets to determine
proper valuation. There were no restructured loans within the meaning of SFAS
No. 15 at March 31, 2000 or December 31, 1999.
12
<PAGE>
The following table sets forth information regarding the delinquent loans and
foreclosed real estate at the dates indicated:
March 31, December 31,
2000 1999
------ ------
(In thousands)
Non-performing loans:
Residential real estate:
Loans 60 to 89 days delinquent $ 98 $ 426
Loans more than 89 days delinquent 652 1,015
Commercial and multi-family real estate:
Loans 60 to 89 days delinquent 55 --
Loans more than 89 days delinquent -- 5
Consumer and commercial business:
Loans 60 to 89 days delinquent -- --
Loans more than 89 days delinquent 3 12
Land:
Loans 60 to 89 days delinquent -- --
Loans more than 89 days delinquent 7 7
REO, net of related allowance 557 494
Other repossessed assets -- --
Loans to facilitate sale of REO 233 234
------ ------
Total $1,605 $2,193
====== ======
YEAR 2000 CONSIDERATIONS
Year 2000 issues result from the inability of many computer programs or
computerized equipment to accurately calculate, store or use data for the Year
2000 or later. These potential shortcomings could result in a system failure or
miscalculations causing disruptions of operation, including among other things,
a temporary inability to process transactions, track important customer
information, provide convenient access to this information, or engage in normal
business operations. While lingering concern exists about certain dates during
the Year 2000, the most significant date, January 1, 2000, passed without
material incident. As a result of its diligent efforts, Bankshares is pleased to
report no interruptions of business or financial losses resulting from Year 2000
issues.
Please be advised that this portion of this Quarterly Report is designated as a
year 2000 Readiness Disclosure pursuant to the Year 2000 Information and
Readiness Disclosure Act (Public Law 105-271, October 19, 1998). It is intended
for informational purposes only and is not intended to be a representation or
warranty.
13
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain information in this Form 10-Q may constitute forward-looking information
that involves risks and uncertainties that could cause actual results to differ
materially from those estimated. Persons are cautioned that such forward-looking
statements are not guarantees of future performance and are subject to various
factors which could cause actual results to differ materially from those
estimated. These factors include, but are not limited to, changes in general
economic and market conditions, legislative and regulatory changes, monetary and
fiscal policies of the federal government, demand for loan and deposit products
and the development of an interest rate environment that adversely affects the
interest rate spread or other income from Bankshares' investments and
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of Bankshares' asset and liability management policies as well
as the potential impact of interest rate changes upon the market value of
Bankshares' portfolio equity, see "Management's Discussion and Analysis - Market
Risk Analysis" and -"Market Value of Portfolio Equity" in Bankshares' Annual
Report to Shareholders. There has been no material change in Bankshares' asset
and liability position or the market value of Bankshares' portfolio equity since
December 31, 1999.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are various claims and lawsuits in which Bankshares or the
Association are periodically involved incidental to its business. In
the opinion of management, no material loss is expected from any of
such pending claims or lawsuits.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Bankshares held it Annual Meeting of Shareholders on April 26, 2000. Of
the 9,292,508 shares eligible to vote, 8,065,760 shares or 86.8%, were
represented in person or by proxy at the meeting.
The shareholders acted on the following two matters at the Annual
Meeting, approving each of such matters.
1. The election of Karl D. Griffin and Harold I. Stevenson, CPA, to
serve as directors for terms of three years expiring in 2003 and
John Sheldon Clark to serve as director for a one-year term expiring
in 2001.
<TABLE>
<CAPTION>
For Number of Votes Withheld Not Voted
--- ------------------------ ---------
<S> <C> <C> <C>
Karl D. Griffin 7,140,914 924,846 1,247,587
Harold I. Stevenson, CPA 7,166,330 899,430 1,247,587
John Sheldon Clark 7,882,723 183,037 1,247,587
</TABLE>
2. The ratification of the appointment of Crowe Chizek and Company LLP
as independent auditors for fiscal year 2000.
For Against Abstain Not Voted
--- ------- ------- ---------
Number of Votes 7,939,285 86,998 39,477 1,247,587
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
10.1 Amended and Restated 1995 Stock Option Plan
10.2 Amended and Restated 1995 Recognition and Retention Plan for
Employees and Outside Directors
10.3 Amended and Restated 1999 Stock Option Plan
10.4 Amended and Restated 1999 Recognition and Retention Plan and
Trust Agreement
10.8 Amended and Restated Supplemental Retirement Income Plan
27 Financial Data Schedule.
(b) CURRENT REPORTS ON FORM 8-K.
None during the reporting period.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY SAVINGS BANKSHARES, INC.
/s/ JAMES B. PITTARD, JR.
------------------------------
Date: May 2, 2000 James B. Pittard, Jr.
President and Chief Executive Officer
Date: May 2, 2000 /s/ LARRY J. BAKER
------------------------------
Larry J. Baker
Senior Vice President and Treasurer
16
COMMUNITY SAVINGS, F. A.
AMENDED AND RESTATED
1995 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Community Savings, F. A. 1995 Stock Option Plan (the
"Plan") is to advance the interests of Community Savings, F. A. (the
"Association") and its shareholders by providing Employees of the Association
and its affiliates, including ComFed, M. H. C., the mutual holding company of
the Association (the "Company"), and the Stock Holding Company upon whose
judgment, initiative and efforts the successful conduct of the business of the
Association 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 Association, as such terms are defined in Section 424(e) or 424(f),
respectively, of the Internal Revenue Code of 1986, as amended.
"AWARD" means an Award of Nonstatutory Stock Options, Incentive Stock
Options, and/or Limited Rights granted under the provisions of the Plan.
"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 OF DIRECTORS" means the Board of Directors of the Association,
or in the event of a Conversion Transaction, the Stock Holding Company.
"CHANGE IN CONTROL" means:
(1) a reorganization, merger, merger conversion, consolidation or sale
of all or substantially all of the assets of the Association, the Company or the
Stock Holding Company, or a similar transaction in which the Association, the
Company or the Stock Holding Company is not the resulting entity;
(2) individuals who constitute the Incumbent Board of the Association,
the Company, or the Stock Holding Company cease for any reason to constitute a
majority thereof; or
(3) a change in control within the meaning of 12 C.F.R. Section 574.4,
as determined by the board of directors of the Association, the Company or the
Stock Holding Company;
(4) In the event that the Company converts to the Stock Holding Company
on a stand-alone basis, a "change in control" of the Association or the Stock
Holding Company (a) shall mean an event of a nature that 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 results in a Change in Control of
the Association or the Stock Holding Company within the meaning of the Home
Owners' Loan Act of 1933 and the Rules and Regulations promulgated by the Office
of Thrift Supervision (or its predecessor agency), as in effect on the date
hereof, (b) without limitation shall be deemed to have occurred at such time as
(i) any "person" (as the term is used in Section 13(d) and 14(d) of the Exchange
Act) other than the Stock Holding Company is or becomes a "beneficial owner" (as
defined in Rule 13-d under the Exchange Act) directly or indirectly, of
securities
<PAGE>
of the Association or the Stock Holding Company representing 25% or more of the
Association's or the Stock Holding Company's outstanding securities ordinarily
having the right to vote at the election of directors except for any securities
of the Association received by the Stock Holding Company in connection with the
Reorganization or a Conversion Transaction and any securities purchased by the
Association's employee stock ownership plan and trust shall not be counted in
determining whether such plan is the beneficial owner of more than 25% of the
Association's or the Stock Holding Company's securities, (ii) a proxy statement
soliciting proxies from shareholders of the Association or the Stock Holding
Company, by someone other than the current management of the Association or the
Stock Holding Company, seeking shareholder approval of a plan of reorganization,
merger or consolidation of the Stock Holding Company or the Association 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 or
transaction are exchanged or converted into cash or property or securities not
issued by the Association or the Stock Holding Company, or (iii) a tender offer
is made for 25% or more of the voting securities of the Association or the Stock
Holding Company and the shareholders owning beneficially or of record 25% or
more of the outstanding securities of the Association or the Stock Holding
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.
Notwithstanding the foregoing, a "Change in Control" of the Association
or the Company shall not be deemed to have occurred if the Company ceases to own
at least 51% of all outstanding shares of stock of the Association in connection
with a conversion of the Company from mutual to stock form.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Stock Benefits Committee of the Board of
Directors consisting of at least three Outside Directors of the Association, the
Stock Holding Company or the Company, and all of whom are and must be
"disinterested directors" as that term is defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
"COMMON STOCK" means the common stock of the Association, par value
$1.00 per share, or, in the event of a Conversion Transaction, the Stock Holding
Company.
"CONVERSION TRANSACTION" means the conversion of the Company from the
mutual to stock form of organization either on a stand-alone basis or in the
context of a merger conversion, as contemplated by regulations of the OTS or any
successor thereof.
"DATE OF GRANT" means the actual date on which an Award is granted by
the Committee.
"DIRECTOR" means a member of the Board of Directors.
"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. Additionally, a medical doctor selected or approved
by the Board of Directors 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.
"EMPLOYEE" means any person who is currently employed by the
Association or an Affiliate, including officers.
"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 National Association of Securities Dealers Automated Quotation
("Nasdaq") National Market (as published by the Wall Street Journal, if
published) on the day prior to such date, or if the Common Stock was not traded
on such date, on the next preceding day on which the Common Stock was traded
thereon; provided, however, that if the Common Stock is not reported on the
Nasdaq National 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
2
<PAGE>
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 Market Value
cannot be determined in the manner described above, then Fair Market Value shall
be determined by the Committee. The Committee shall be authorized 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 8.
"INCUMBENT BOARD" means, in the case of (i) the Company or the Stock
Holding Company, or (ii) the Association, the Board of Directors of the Company,
the Stock Holding Company or the Association, respectively, on the date hereof,
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 members or
shareholders was approved by the same nominating committee serving under an
Incumbent Board, shall be considered as though he were a member of the Incumbent
Board.
"LIMITED RIGHT" means the right to receive an amount of cash based upon
the terms set forth in Section 9.
"NONSTATUTORY 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.
"OFFERING" means the initial public offering of the Common Stock of the
Association.
"OPTION" means Award granted under Section 7 or Section 8.
"OUTSIDE DIRECTOR" means a Director who is not also an employee.
"PARTICIPANT" means an Outside Director or an Employee of the
Association or its Affiliates chosen by the Committee to participate in the
Plan.
"REORGANIZATION" means the reorganization of Community Savings, F. A.
as a stock savings association and the establishment of the Company as its
mutual holding company parent.
"RETIREMENT" means, with respect to an Employee, a termination of
employment which constitutes a retirement from employment with the Corporation
or a Subsidiary Company upon the earlier to occur of (a) the earlier to occur of
such individual having (i) attained age 65 or (ii) completed 30 "Years of
Service" as such phrase is defined in the Corporation's Employee Stock Ownership
Plan (the "ESOP") or (b) the later to occur of (i) such individual attaining age
55 or (ii) completing fifteen or more "Years of Service" as defined in the ESOP.
With respect to Outside Directors, retirement means retirement from service on
the Board of Directors of the Company, the Association or the Stock Holding
Company or any successor thereto (including service as a director emeritus or an
advisory director) after attaining the age of 65.
"STOCK HOLDING COMPANY" means the holding company resulting from a
stock conversion of the Company in a Conversion Transaction.
"TERMINATION FOR CAUSE" means the termination of employment caused by
the individual's personal dishonesty, willful misconduct, any breach of a
fiduciary duty involving personal profit or intentional failure to perform
stated duties, or willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist order, any of
which results in material loss to the Association, the Company, or one of its
Affiliates.
3
<PAGE>
3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, 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.
The Awards of Nonstatutory Options to Outside Directors under Section 7
of the Plan are intended to comply with Rule 16b-3 under the Securities Exchange
Act of 1934. Notwithstanding any term to the contrary appearing herein, unless
permitted by Rule 16b-3(c)(2)(ii), neither the Committee nor the Board shall
have the authority to determine the amount and price of securities to be awarded
and/or timing of awards under Section 7 of the Plan to designated directors or
categories of directors, which terms shall be set forth herein. To the extent
any provision of the Plan or action by Plan administrators fails to comply with
this subsection 3, such provision or action shall be deemed null and void to the
extent permitted by law and deemed advisable by the Board.
4. TYPES OF AWARDS
Awards under the Plan may be granted in any one or a combination of (a)
Incentive Stock Options as defined in Section 7; (b) Non-Statutory Stock Options
as defined in Section 8; and (c) Limited Rights as defined herein in Section 9.
5. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 14, the maximum number of
shares reserved for issuance under the Plan is ten percent (10%) of the shares
of Common Stock of the Association sold in connection with the Stock Offering
(or 237,986 shares). The maximum number of shares reserved for issuance to
Employees is seven and one-half percent (7.5%) of the shares of Common Stock
issued in connection with the Offering. The maximum number of shares reserved
for issuance to Outside Directors is two and one-half percent (2.5%) of the
shares of Common Stock issued in connection with the Offering.
The shares of Common Stock represented by such options may be either
authorized but unissued shares or shares previously issued and reacquired by the
Association, the Stock Holding Company or the Company. 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
cancelled 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
Officers and other employees of the Association or its Affiliates shall
be eligible to receive Incentive Stock Options, Non-Statutory Stock Options
and/or Limited Rights under the Plan. Directors who are not employees or
officers of the Association or its affiliates shall not be eligible to receive
Incentive Stock Options under the Plan. Outside Directors shall be eligible to
receive only Nonstatutory Stock Options.
7. NON-STATUTORY STOCK OPTIONS
7.1 GRANT OF NON-STATUTORY STOCK OPTIONS
(a) GRANTS TO OUTSIDE DIRECTORS. Each Outside Director who is
serving in such capacity on the date of the Association's Offering and at the
Effective Date of the Stock Option Plan, shall be granted Options to purchase
11,850 of Common Stock of the Association, subject to adjustment pursuant to
Section 14. Each person who becomes an Outside Director subsequent to the
Effective Date of the Stock Option Plan, shall be
4
<PAGE>
granted Nonstatutory Stock Options to purchase 200 shares of the Common Stock,
subject to adjustment pursuant to Section 14, to the extent shares remain
available under this Stock Option Plan. Nonstatutory Stock Options granted under
this Plan are subject to the terms and conditions set forth in this Section 7.
(b) GRANTS TO EMPLOYEES. The Committee may, from time to time,
grant Nonstatutory Stock Options to eligible Employees and, upon such terms and
conditions as the Committee may determine, grant Nonstatutory Stock Options in
exchange for and upon surrender of previously granted Awards under the Plan.
Nonstatutory Stock Options granted under this Plan are subject to the terms and
conditions set forth in this Section 7.
(c) OPTION AGREEMENT. Each Option shall be evidenced by a written
option agreement between the Association and the 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 this grant. The maximum number of shares subject to a Nonstatutory
Option that may be awarded under the Plan to any Employee shall be 40,000.
(d) PRICE. The purchase price per share of Common Stock
deliverable upon the exercise of each Non-Statutory Stock Option shall be
determined by the Committee on the date the Option is granted. Except as
provided below, such purchase price shall not be less than 100% of the Fair
Market Value of the Association's or the Stock Holding Company's Common Stock on
the date the Option is granted. The purchase price per share of Common Stock
deliverable upon the exercise of each Non-Statutory Stock Option granted in
exchange for and upon surrender of previously granted awards shall be not less
than 100% of the Fair Market Value of the Association's or the Stock Holding
Company's Common Stock on the date the Option is granted, but in no event may
the purchase price of any Non-Statutory Stock Option be less than the par value
of the Common Stock. 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 Association or the
Stock Holding Company at the Fair Market Value of such shares determined in the
manner described in Section 2.
(e) MANNER OF EXERCISE. Nonstatutory Stock Options granted under
the Stock Option Plan shall vest to a Participant at the rate, to the extent and
subject to such limitations as may be specified by the Committee. 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 and Chief Executive Officer or the
Secretary of the Association. Such notice is irrevocable and must be accompanied
by full payment of the purchase price in cash or shares of previously acquired
Common Stock of the Association or the Stock Holding Company at the Fair Market
Value of such shares determined on the exercise date by 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.
(f) 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. The Nonstatutory Options shall
be exercisable in installments, as determined by the Committee. The Committee
shall determine the date on which each installment shall become exercisable. The
shares comprising each installment may be purchased in whole or in part at any
time after such installment becomes exercisable. The Committee, in its sole
discretion, may accelerate the time at which any Non-Statutory Stock Option may
be exercised in whole or in part. Notwithstanding the above, (i) in the event of
a Change in Control of the Association, the Company or the Stock Holding
Company, all Non-Statutory Stock Options shall become immediately vested and
exercisable in full and (ii) all Non-Statutory Stock Options shall become
immediately vested and exercisable in full on the date an Employee terminates
his employment with the Company, the Association or the Stock Holding Company or
an Outside Director terminates his service as an Outside Director as a result of
his Retirement.
(g) TERMINATION OF EMPLOYMENT OR SERVICE. Upon the termination of
an Employee's employment or upon termination of an Outside Director's service
for any reason other than Disability, death, Termination for Cause, Change in
Control or Retirement, the Employee's or Outside Director's Non-Statutory Stock
5
<PAGE>
Options shall be exercisable only as to those shares that were immediately
purchasable by the Employee or Outside Directors at the date of termination and
only for a period of one year following termination. In the event of Termination
for Cause, all rights under his Non-Statutory Stock Options shall expire upon
termination. In the event of the death or Disability of any Employee or Outside
Director, all Non-Statutory Stock Options held by such Employee or Outside
Director, whether or not exercisable at such time, shall be exercisable by such
person or his legal representatives or beneficiaries for one year following the
date of his death or cessation of employment or service due to Disability,
provided that in no event shall the period extend beyond the expiration of the
Non-Statutory Stock Option term. Notwithstanding the above, all Non-Statutory
Options held by a Participant whose employment as an Employee or service as an
Outside Director terminates following a Change in Control of the Association,
the Stock Holding Company or the Company shall be exercisable for one year
following such termination of employment or service.
8. INCENTIVE STOCK OPTIONS
8.1 GRANT OF INCENTIVE STOCK OPTIONS
The Committee, from time to time, may grant Incentive Stock Options to
eligible 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 Association and the 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 this grant.
(b) PRICE. 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 Association's or the Stock Holding
Company's Common Stock on the date the Incentive Stock Option is granted.
However, if an Employee owns stock possessing more than 10% of the total
combined voting power of all classes of Common Stock of the Association or the
Stock Holding Company (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 Association or its Affiliates by reason of the ownership
of such classes of common stock directly or indirectly, by or for any brother,
sister, spouse, ancestor or lineal descendant of such Employee or by or for any
corporation, partnership, estate or trust of which such 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 Association's or the Stock
Holding 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 Association or the Stock Holding
Company. 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 exercise of the Incentive Stock Option.
(c) MANNER OF EXERCISE. Incentive Stock Options granted under the
Stock Option Plan shall vest to a Participant at the rate, to the extent and
subject to such limitations as may be specified by the Committee. 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 and Chief Executive Officer or the
Secretary of the Association, provided, however, that no Options shall be
exercisable prior to approval of the Plan by shareholders. Such notice is
irrevocable and must be accompanied by full payment of the purchase price in
cash or shares of previously acquired Common Stock of the Association. 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 of the Incentive Stock Option.
(d) AMOUNT OF OPTIONS. Incentive Stock Options may be granted to
any eligible Employee in such amounts as determined by the Committee; provided
that the amount granted is consistent with the terms of Section 422 of the
Internal Revenue Code of 1986, as amended (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 Employee shall be 40,000. In granting
Incentive Stock Options the Committee shall consider the position and
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responsibilities of the eligible Employee, the length and value of his or her
service to the Association, the compensation paid to the Employee and the
Committee's evaluation of the performance of the Association according to
measurements that 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
Participant's employer corporation and its parent and subsidiary corporations)
shall not exceed $100,000. The provisions of this Section 8.1(d) shall be
construed and applied in accordance with Section 422(d) of the Code and the
regulations, if any, promulgated thereunder.
(e) TERM 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 Employee, at the time an Incentive Stock
Option is granted to him, owns Common Stock representing more than 10% of the
total combined voting power of the Association or its Affiliates (or, under
Section 424(d) of the Code, is deemed to own Common Stock representing more than
10% of the total combined voting power of all such classes of Common Stock, by
reason of the ownership of such classes of Common Stock, directly or indirectly,
by or for any brother, sister, spouse, ancestor or lineal descendent of such
Employee, or by or for any corporation, partnership, estate or trust of which
such 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. No Incentive Stock Option granted under this Plan
is transferable except by will or the laws of descent and distribution and is
exercisable during his lifetime only by the Employee to which it is granted.
The Committee shall determine the date on which each Incentive Stock
Option shall become exercisable and may provide that an Incentive Stock Option
shall become exercisable in installments. The shares comprising each installment
may be purchased in whole or in part at any time after such installment becomes
purchasable, provided that the amount able to be first exercised in a given year
is consistent with the terms of Section 422 of the Code. To the extent required
by Section 422 of the Code, the aggregate fair market value (determined at the
time the Option is granted) of the Common Stock for which Incentive Stock
Options are exercisable for the first time by a Participant during any calendar
year (under all plans of the Association and its Affiliates) shall not exceed
$100,000. The Committee, in its sole discretion, may accelerate the time at
which any Incentive Stock Option may be exercised in whole or in part; provided
that it is consistent with the terms of Section 422 of the Code. Notwithstanding
the above, in the event of a Change in Control of the Association, the Stock
Holding Company or the Company, all Incentive Stock Options shall become
immediately vested and exercisable in full unless the fair market value of the
amount exercisable as a result of a Change in Control shall exceed $100,000
(determined as of the date of grant). In such event, the first $100,000 of
Incentive Stock Options (determined as of the date of grant) shall be
exercisable as Incentive Stock Options and any excess shall be exercisable as
Nonstatutory Stock Options. In addition, notwithstanding the foregoing, all
Incentive Stock Options shall become immediately vested and exercisable in full
on the date an Employee terminates his employment with the Company, the
Association or the Stock Holding Company as a result of his Retirement;
provided, however, if the fair market value of the additional amount of
Incentive Stock Options that will become immediately exercisable as a result of
such Retirement shall exceed $100,000 (determined as of the date of grant), that
amount of additional Incentive Stock Options that shall become exercisable that
exceeds $100,000 shall be exercisable as Non-Statutory Stock Options.
(f) TERMINATION OF EMPLOYMENT. Upon the termination of an
Employee's employment for any reason other than Disability, Change in Control,
death, Retirement, Change in Control or Termination for Cause, his Incentive
Stock Options shall be exercisable only as to those shares which were
immediately purchasable by him 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 his Incentive Stock Options shall expire upon termination.
In the event of death or Disability of any Employee, all Incentive
Stock Options held by such Employee, whether or not exercisable at such time,
shall be exercisable by such Employee or his legal representatives or
beneficiaries for one year following the date of his death or cessation of
employment due to Disability. Upon termination of an Employee's service
following a Change in Control, all Incentive Stock Options held by such Employee
shall be exercisable for a period of one year following the date of his
cessation of employment; provided,
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however, that such Option shall not be eligible for treatment as an Incentive
Stock Option in the event such Option is exercised more than three months
following the date of termination subsequent to the Change in Control. In no
event shall the exercise period extend beyond the expiration of the Incentive
Stock Option term.
(g) COMPLIANCE WITH CODE. The Options granted under this Section 8
of the Plan are intended to qualify as Incentive Stock Options within the
meaning of Section 422 of the Code, but neither the Association nor the Stock
Holding Company makes any 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 Nonstatutory Stock Option.
9. LIMITED RIGHTS
9.1 GRANT OF LIMITED RIGHTS
The Committee may grant a Limited Right simultaneously with the grant
of any Option to any Employee of the Association or an Affiliate, with respect
to all or some of the shares covered by such Option. Limited Rights granted
under this 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 Association, the Company or the Stock
Holding 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 Association 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 of 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 Association or the Stock
Holding 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.
10. 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 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
Association of an amount equal to the difference between the Fair Market Value
of the Common Stock on the date of termination of employment and the exercise
price per share of the Option on the Date of Grant. Whether the Association
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
Association is under no obligation to any Participant whatsoever to make such
payments. In the event that the Association accepts such application and
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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.
11. RIGHTS OF A SHAREHOLDER; NON-TRANSFERABILITY
An optionee shall have no rights as a shareholder 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 this Plan or in
any Award granted confers on any person any right to continue in the employ of
the Association or its Affiliates or to continue to perform services for the
Association or its Affiliates or interferes in any way with the right of the
Association or its Affiliates to terminate his services as an officer or other
employee at any time.
No Award under the Plan shall be transferable by the optionee other
than by will or the laws of descent and distribution and may only be exercised
during his lifetime by the optionee, or by a guardian or legal representative.
12. AGREEMENT WITH GRANTEES
Each Award of Options, and/or Limited Rights will be evidenced by a
written agreement, executed by the Participant and the Association or its
Affiliates that describes the conditions for receiving the Awards including the
date of Award, the purchase price if any, applicable periods, and any other
terms and conditions as may be required by the Board of Directors or applicable
securities law.
13. DESIGNATION OF BENEFICIARY
A Participant, with the consent of the Committee, may designate a
person or persons to receive, in the event of death, any Option or Limited
Rights Award to which he would then be entitled. Such designation will be made
upon forms supplied by and delivered to the Association 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.
14. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock of
the Association by reason of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or exchange of
shares, or other similar corporate change, including, but not limited to, the
conversion of the Company and the formation of the Stock Holding Company in
connection therewith as part of a Conversion Transaction or other increase or
decrease in such shares without receipt or payment of consideration by the
Association, 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 which 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;
(c) subject to Section 8.1(b) hereof, adjustments in the purchase
price of outstanding Incentive and/or Non-Statutory Stock Options, or any
Limited Rights attached to such options.
No such adjustments, however, may change materially the value of
benefits available to a Participant under a previously granted Award.
15. LIMITATIONS UPON EXERCISE OF OPTIONS
Notwithstanding any other provision of the Plan, so long as the Company
remains in the mutual form of organization and so long as any applicable statute
or regulation requires the Company to own at least a majority of
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the outstanding Common Stock of the Association, an Option granted under this
Plan may not be exercised if the exercise of such an Option would result in the
Company owning less than a majority of the Common Stock of the Association.
Nothing herein shall preclude the Association from issuing additional authorized
but unissued shares of Common Stock to the Company to allow for the exercise of
options which would otherwise have resulted in the Company owning less than a
majority of the Common Stock of the Association.
16. TREATMENT OF OPTIONS IN THE EVENT OF A CONVERSION TRANSACTION
In the event that the Company converts to stock form in a Conversion
Transaction ("Stock Holding Company"), any Options outstanding shall, at the
option of the holder, (i) be convertible into Options for Common Stock of the
Stock Holding Company, or (ii) be exercised by the holder prior to the effective
date of the Conversion Transaction and the holder shall be entitled to exchange,
in the same manner as other minority shareholders of the Association, the shares
of Common Stock of the Association received upon such exercise for shares of
Common Stock of the Stock Holding Company. If for any reason such options are
not to be converted or such shares are not exchanged, the holders of Options
under this plan shall receive cash payment for the shares of stock represented
by the Options in an amount equal to the fair market value of the underlying
Options or the initial offering price of the Common Stock of the Stock Holding
Company for which the Common Stock underlying the Option would otherwise be
exchanged, less the original exercise price of such options and, with respect to
options that have been exercised, the Stock Holding Company shall redeem such
shares for cash in the same manner as such redemption would occur for other
minority shareholders of the Association. Any exchange, conversion of Options,
or cash payment for shares shall be subject to applicable federal and state
regulations and, if necessary, subject to the approval of the appropriate
regulatory authorities.
17. 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.
18. AMENDMENT OF THE PLAN
The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect; provided, however, that if necessary to
continue to qualify the Plan under the Securities and Exchange Commission Rule
16b-3, the approval by a majority of the shares represented in person or by
proxy shall be required for any such modification or amendment that:
(a) increases the maximum number of shares for which options may
be granted under the Plan (SUBJECT, HOWEVER, to the provisions
of Section 14 hereof);
(b) reduces the exercise price at which Awards may be granted
(SUBJECT, HOWEVER, to the provisions of Sections 8.1(a) and 14
hereof):
(c) extends the period during which options may be granted or
exercised beyond the times originally prescribed (subject,
however, to the provisions of Section 8.1(a) hereof); or
(d) changes the persons eligible to participate in the Plan.
Failure to ratify or approve amendments or modifications to subsections
(a) through (d) of this Section 18 by shareholders shall be effective only as to
the specific amendment or modification requiring such ratification. Other
provisions, sections, and subsections of this Plan will remain in full force and
effect.
No such termination, modification or amendment may affect the rights of
a Participant under an outstanding Award.
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19. APPROVAL BY SHAREHOLDERS
The Plan shall be approved by shareholders of the Association within 12
months after the Plan has been adopted. No Options granted pursuant to the Plan
shall be exercisable prior to such shareholder approval.
20. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon the date adopted by the Board of
Directors, following the approval of shareholders (the "Effective Date").
21. TERMINATION OF THE PLAN
The right to grant Awards under the Plan will terminate upon the
earlier of ten (10) years after the Effective Date of the issuance of Common
Stock or 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 hereof. The Board of Directors has the right to suspend or terminate
the Plan at any time; provided that no such action will, without the consent of
a Participant, affect adversely his rights under a previously granted Award.
22. APPLICABLE LAW
The Plan will be administered in accordance with the laws of the State
of Florida.
11
COMMUNITY SAVINGS, F. A.
AMENDED AND RESTATED
1995 RECOGNITION AND RETENTION PLAN
FOR EMPLOYEES AND OUTSIDE DIRECTORS
1. ESTABLISHMENT OF THE PLAN
Community Savings, F. A. hereby establishes the Association 1995
Recognition and Retention Plan (the "Plan") upon the terms and conditions
hereinafter stated in this Recognition Plan.
2. PURPOSE OF THE PLAN
The purpose of the Plan is to retain Employees and Outside Directors of
experience and ability by providing such persons with a proprietary interest in
the Association as compensation for their contributions to the Association and
its Affiliates and as an incentive to make such contributions and to promote the
Association's growth and profitability in the future.
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 Association, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
"ASSOCIATION" means Community Savings, F. A.
"AWARD" means the grant by the Committee of Restricted Stock, as
provided in the Plan.
"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" means the Board of Directors of the Association or the Stock
Holding Company in the event of a Conversion Transaction.
"CAUSE" shall mean 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 Association or an Affiliate.
"CHANGE IN CONTROL" means:
(1) a reorganization, merger, merger conversion, consolidation or
sale of all or substantially all of the assets of the Association, the Company
or the Stock Holding Company, or a similar transaction in which the Association,
the Company or the Stock Holding Company is not the resulting entity;
(2) individuals who constitute the Incumbent Board of the
Association, the Company, or the Stock Holding Company cease for any reason to
constitute a majority thereof; or
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(3) a change in control within the meaning of 12 C.F.R. Section
574.4, as determined by the board of directors of the Association, the Stock
Holding Company or the Company;
(4) In the event that the Company converts to the Stock Holding
Company on a stand-alone basis, a "change in control" of the Association or the
Stock Holding Company (a) shall mean an event of a nature that would be required
to be reported in response to Item l (a) of the current report on Form 8-K, as
in effect on the date hereof, pursuant to Section 13 or l5(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), or results in a Change in Control of
the Association or the Stock Holding Company within the meaning of the Home
Owners' Loan Act of 1933 and the Rules and Regulations promulgated by the Office
of Thrift Supervision (or its predecessor agency), as in effect on the date
hereof, (b) without limitation shall be deemed to have occurred at such time as
(i) any "person" (as the term is used in Section 13(d) and 14(d) of the Exchange
Act) other than the Stock Holding Company is or becomes a "beneficial owner" (as
defined in Rule 13-d under the Exchange Act) directly or indirectly, of
securities of the Association or the Stock Holding Company representing 25% or
more of the Association's or the Stock Holding Company's outstanding securities
ordinarily having the right to vote at the election of directors except for any
securities of the Association received by the Stock Holding Company in
connection with the Reorganization or the Conversion Transaction and any
securities purchased by the Association's employee stock ownership plan and
trust shall not be counted in determining whether such plan is the beneficial
owner of more than 25% of the Association's or the Stock Holding Company's
securities, (ii) a proxy statement soliciting proxies from shareholders of the
Association or the Stock Holding Company, by someone other than the current
management of the Association, seeking shareholder approval of a plan of
reorganization, merger or consolidation of the Stock Holding Company or the
Association 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
or transaction are exchanged or converted into cash or property or securities
not issued by the Association or the Stock Holding Company, or (iii) a tender
offer is made for 25% or more of the voting securities of the Association or the
Stock Holding Company and the shareholders owning beneficially or of record 25%
or more of the outstanding securities of the Association or the Stock Holding
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.
Notwithstanding, the foregoing, a "Change in Control" of the
Association or the Company shall not be deemed to have occurred if the Company
ceases to own at least 51 % of all outstanding shares of stock of the
Association in connection with a conversion of the Company from mutual to stock
form.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Stock Benefits Committee of the Board which shall
consist of at least three Outside Directors of the Association, all of whom are
and must be "disinterested directors," as that term is defined under Rule 16b-3
of the Securities Exchange Act of 1934.
"COMPANY" means ComFed, M. H. C., the mutual holding company of the
Association.
"COMMON STOCK" means shares of the common stock, par value of $1.00 per
share, of the Association, or in the event of a Conversion Transaction, the
Stock Holding Company.
"CONTINUOUS SERVICE" means the absence of any interruption or
termination of service as an Employee of the Association. Service shall not be
considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Association or in the case of transfers between
payroll locations of the Association or between the Association, its parent, its
subsidiaries or its successor.
"CONVERSION TRANSACTION" means the conversion of the Company from the
mutual to stock form of organization either on a stand-alone basis or in the
context of a merger conversion, as provided by regulations of the Office of
Thrift Supervision ("OTS").
"DIRECTOR" means any director of the Association or an Affiliate.
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"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. Additionally, 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 Participant's
lifetime.
"EFFECTIVE DATE" shall be the date of execution of this Plan.
"EMPLOYEE" means any person who is employed by the Association or its
Affiliates, including officers.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"INCUMBENT BOARD" means, in the case of (i) the Company or the Stock
Holding Company, or (ii) the Association, the Board of Directors of the Company,
the Stock Holding Company or the Association, respectively, on the date hereof,
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 members or
shareholders was approved by the same nominating committee serving under an
Incumbent Board, shall be considered as though he were a member of the Incumbent
Board.
"OFFERING" means the initial public offering by the Association of up
to 49.9% of the number of shares of Common Stock that will be outstanding after
such Offering.
"OUTSIDE DIRECTOR" means any nonemployee director of the Association or
an Affiliate.
"PLAN" means the Community Savings, F. A. 1995 Recognition and
Retention Plan of the Association.
"RECIPIENT" means an Employee or Director of the Association who
receives a Restricted Stock Award under this Plan.
"REORGANIZATION" means the reorganization of Community Savings, F. A.
as a stock savings association and the establishment of the Company as its
mutual holding company parent.
"RESTRICTED PERIOD" means the period of time selected by the Committee
for the purpose of determining when restrictions are in effect under Section 6
hereof with respect to Restricted Stock awarded under the Plan.
"RESTRICTED STOCK" means shares which have been contingently awarded to
a Recipient by the Committee subject to the restrictions referred to in Section
6 hereof, so long as such restrictions are in effect.
"RETIREMENT" means, with respect to an Employee, a termination of
employment which constitutes a retirement from employment with the Corporation
or a Subsidiary Company upon the earlier to occur of (a) the earlier to occur of
such individual having (i) attained age 65 or (ii) completed 30 "Years of
Service" as such phrase is defined in the Corporation's Employee Stock Ownership
Plan (the "ESOP") or (b) the later to occur of (i) such individual attaining age
55 or (ii) completing fifteen or more "Years of Service" as defined in the ESOP.
With respect to Outside Directors, retirement means retirement from service on
the Board of Directors of the Company, the Association or the Stock Holding
Company or any successor thereto (including service as a director emeritus or
advisory director) after attaining the age of 65.
"STOCK HOLDING COMPANY" means the holding company resulting from a
stock conversion of the Company in a Conversion Transaction.
4. ADMINISTRATION OF THE PLAN.
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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 this and other Sections of the Plan. The interpretation and construction by
the Committee of any provisions of the Plan or of any Restricted Stock 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, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. The Committee
shall report its actions and decisions with respect to the Plan to the Board at
appropriate times, but in no event less than one time per calendar year.
4.02 ROLE OF THE BOARD. The members of the Committee 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 this and other Sections of the Plan, may take any action under or with
respect to the Plan which 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 6.05,
the Board may not revoke any Restricted Stock Award except in the event of
Revocation for Cause, or with respect to unearned Restricted Stock Awards in the
event a Recipient of a Restricted Stock Award voluntarily terminates employment
with the Association.
4.03 PLAN ADMINISTRATION RESTRICTIONS. This Plan is intended to
comply with Rule 16b-3 under the Securities Exchange Act of 1934.
Notwithstanding any term to the contrary appearing in this Plan, unless
permitted by Rule 16b-3(c)(2)(ii), subsequent to the establishment of the Plan,
the Committee, and the Board of Directors shall not have the authority to
determine the amount and price of securities to be awarded and/or timing of
awards to Outside Directors which terms shall be set forth in the Plan. To the
extent any provision of the Plan or action by Plan administrators fails to
comply with this Section, such provision or action shall be deemed null and void
to the extent permitted by law and deemed advisable by the Board of Directors.
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 Restricted Stock 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 Association
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
Association and its Affiliates and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful,
provided, however, that the provisions of 12 C.F.R. Section 545.121 shall apply
to any indemnification made pursuant to this Section and any such
indemnification shall be consistent therewith.
5. ELIGIBILITY; AWARDS
5.01 ELIGIBILITY. Employees and Outside Directors of the
Association and its Affiliates are eligible to receive Restricted Stock Awards.
5.02 AWARDS TO EMPLOYEES. The Committee may determine which of the
Employees referenced in Section 5.01 will be granted Restricted Stock 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 Plan, the Charter, Bylaws or Plan
of Reorganization from Mutual Savings Association to Mutual Holding Company and
Stock Issuance Plan of the Association or any applicable federal or state law or
regulation. Shares of Restricted Stock which 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 this Plan. In the event Restricted Stock is forfeited for any
reason, the Committee, from time to time, may determine which of the Employees
referenced in Section 5.01 will be granted additional Restricted Stock Awards to
be awarded from forfeited Restricted Stock. In selecting those Employees to whom
Restricted Stock Awards will be granted and the number of Restricted Stock
covered by such Awards, the Committee shall consider the position and
responsibilities
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of the eligible Employees, the length and value of their services to the
Association and its Affiliates, the compensation paid to the Employees and any
other factors the Committee may deem relevant, and the Committee may request the
written recommendation of the Chief Executive Officer and other senior executive
officers of the Association and its Affiliates. The total number of shares that
will be awarded or reserved for Employees under this Plan shall be at least
three percent (3%) of the shares issued in the Offering.
No Restricted Stock shall be earned unless the Employee maintains
Continuous Service with the Association or any Affiliate until the restrictions
lapse.
5.03 AWARDS TO OUTSIDE DIRECTORS. Each Outside Director serving on
the Board of Directors of the Association or its Affiliate on the Effective Date
shall be issued a Restricted Stock Award equal to 4,750 shares of Restricted
Stock. The total number of shares that will be awarded or reserved for Outside
Directors under this Plan shall not exceed one percent (1%) of the shares issued
in the Offering.
Any person who becomes an Outside Director of the Association
subsequent to the date of approval of this Plan by shareholders shall receive an
Award of Restricted Stock equal to 100 shares, subject to availability.
No Restricted Stock shall be earned by an Outside Director unless the
Outside Director maintains continuous service with the Association or Affiliates
until the restrictions lapse.
5.04 MANNER OF AWARD. As promptly as practicable after a
determination is made pursuant to Section 5.02 that a Restricted Stock Award has
been granted, 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 Association or the Stock Holding Company, as the case may be,
a restricted stock agreement setting forth the terms and conditions under which
the Recipient shall earn the Restricted Stock (the "Restricted Stock
Agreement"), together with a stock power endorsed in blank. Thereafter, the
Recipient's Restricted Stock and stock power shall be deposited with an escrow
agent specified by the Association (the "Escrow Agents") 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.
5.05 TREATMENT OF FORFEITED SHARES. In the event shares of
Restricted Stock are forfeited by a Recipient hereunder, such shares shall be
returned to the Association or the Stock Holding Company and shall be held and
accounted for by the Association or the Stock Holding Company pursuant to the
terms of the Plan until such time as the Committee re-awards such shares 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 and, in addition to
the terms and conditions contained in paragraphs 6.01 through 6.09 of this
Section 6, 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 an Employee
at the rate determined by the Committee. Restricted Stock Awards granted to
Outside Directors shall be earned by an Outside Director at the rate determined
by the Committee. Subject to any such other terms and conditions as the
Committee shall provide, shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered by the Recipient, except as
hereinafter provided, during the Restricted Period. 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 to shares issued to Employees, 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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6.02 CONTINUOUS SERVICE; FORFEITURE. Except as provided in Section
6.04 hereof, if a Recipient ceases to maintain Continuous Service for any reason
(other than death, Disability or Retirement as provided in Section 6.03), 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 and returned to
Trust.
6.03 EXCEPTION FOR TERMINATION DUE TO DEATH, DISABILITY OR
RETIREMENT. Notwithstanding the general rule contained in Section 6.01,
Restricted Stock awarded to a Recipient whose employment with or service to the
Association or an Affiliate terminates due to death, Disability or Retirement,
or any part thereof that has not theretofore been earned, shall be deemed earned
as of the Recipient's last day of employment with the Association or an
Affiliate.
6.04 EXCEPTION FOR A CHANGE IN CONTROL. Notwithstanding the general
rule contained in Section 6.01, all Restricted Stock subject to a Restricted
Stock Award held by a Recipient shall be deemed earned as of the effective date
of a Change in Control of the Association, the Company or the Stock Holding
Company.
6.05 REVOCATION FOR CAUSE. Notwithstanding anything hereinafter to
the contrary, the Board may by resolution immediately revoke, rescind and
terminate any Restricted Stock Award, or portion thereof, previously awarded
under this 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 an
Employee whose employment is terminated by the Association or an Affiliate for
Cause, or who is discovered after termination of employment to have engaged in
conduct that would have justified termination for Cause.
6.06 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 1995 Recognition and Retention Plan. Copies of such
Plan are on file in the offices of the Secretary of Community Savings, F. A.,
660 U.S. Highway One, North Palm Beach, Florida 33408-1808."
6.07 PAYMENT OF DIVIDENDS. After a Restricted Stock Award has been
granted but before such Award has been earned, the Recipient shall receive any
cash dividends or stock dividend paid with respect to such shares. Unless the
Recipient has made an election under Section 83(b) of the Code, any dividends so
paid on shares which have not yet been earned by the Recipient shall be treated
as compensation income to the Recipient when paid.
6.08 VOTING OF RESTRICTED SHARES. After a Restricted Stock Award
has been granted, the Recipient as owner of such shares shall have the right to
vote such shares.
6.09 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 stock power
deposited with it pursuant to Section 6.04 and the shares represented by such
certificate(s) shall be free of the restrictions referred to Section 6.01.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the outstanding shares subsequent to the
effective date of the Plan by reason of any reorganization (other than the
Reorganization), recapitalization, stock split, stock dividend, combination or
exchange of shares, merger, consolidation or any change in the corporate
structure, including, but not limited to, the
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conversion of the Company and the formation of the Stock Holding Company in
connection therewith as part of a Conversion Transaction, or shares of the
Association, the maximum aggregate number and class of shares as to which Awards
may be granted under the Plan and the number of shares subject to unvested
Awards 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 Association in the manner provided in Section
6.06 hereof.
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 except, in the event of the death of a Recipient, by will or the
laws of descent and distribution.
9. EMPLOYEE RIGHTS UNDER THE PLAN
No 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 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 Association or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any Employee any right to be retained in the employ of the Association
or any Affiliate.
10. 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 Employee under Section 83(b) of the Code, or any
successor provision thereto, to include the value of such shares in taxable
income), the Association shall have the right to require the Employee or other
person receiving such shares to pay the Association the amount of any taxes
which the Association 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 Association shall
have the right to deduct from all dividends paid with respect to shares of
Restricted Stock the amount of any taxes which the Association is required to
withhold with respect to such dividend payments.
11. TREATMENT OF RESTRICTED STOCK IN THE EVENT OF CONVERSION TRANSACTION
In the event that the Company converts to stock form in a Conversion
Transaction, any Restricted Stock shall be exchanged into shares of Common Stock
of the Stock Holding Company, provided, however, that if for any reason such
shares are not to be exchanged, the Stock Holding Company shall, simultaneously
with the closing of the Conversion Transaction, purchase Restricted Stock for
cash equal to the fair market value of such Restricted Stock or Shares. Any
exchange of shares or cash payment for shares shall be subject to applicable
federal and state regulations and, if necessary, subject to the approval of the
appropriate regulatory authorities.
12. AMENDMENT OR TERMINATION
The Board of Directors of the Association or the Stock Holding Company
may amend, suspend or terminate the Plan or any portion thereof at any time, but
(except as provided in Section 6 hereof) no amendment shall be made without
approval of the shareholders of the Association which shall (i) materially
increase the aggregate number of shares with respect to which Awards may be made
under the Plan, (ii) materially increase the aggregate number of shares which
may be subject to Awards to Recipients who are not Employees or (iii) change the
class of persons eligible to participate in the Plan; 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.
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13. GOVERNING LAW
The Plan shall be governed by the laws of the State of Florida.
14. TERM OF PLAN
The Plan shall become effective upon its adoption by the Board of
Directors of the Association, following the approval of the Plan by
shareholders. It shall continue in effect for a term of fifteen years unless
sooner terminated under Section 12 hereof.
8
COMMUNITY SAVINGS BANKSHARES, INC.
AMENDED AND RESTATED
1999 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Community Savings Bankshares, Inc. (the "Corporation") hereby
establishes this 1999 Stock Option Plan (the "Plan") upon the terms and
conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Corporation and its Subsidiary Companies by providing Employees and
Non-Employee Directors with a proprietary interest in the Corporation as an
incentive to contribute to the success of the Corporation and its Subsidiary
Companies, and rewarding Employees and Non-Employee Directors for outstanding
performance. All Incentive Stock Options issued under this Plan are intended to
comply with the requirements of Section 422 of the Code, and the regulations
thereunder, and all provisions hereunder shall be read, interpreted and applied
with that purpose in mind. Each recipient of an Award hereunder is advised to
consult with his or her personal tax advisor with respect to the tax
consequences under federal, state, local and other tax laws of the receipt
and/or exercise of an Award hereunder.
ARTICLE III
DEFINITIONS
3.01 "Association" means Community Savings, F. A., a wholly owned
subsidiary of the Corporation.
3.02 "Award" means an Option or Stock Appreciation Right granted
pursuant to the terms of this Plan.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall mean the
occurrence of any of the following: (i) the acquisition of control of the
Corporation as defined in 12 C.F.R. ss.574.4, unless a presumption of control is
successfully rebutted or unless the transaction is exempted by 12 C.F.R.
ss.574.3(c)(vii), or any successor to such sections; (ii) an event that would be
required to be reported in response to Item 1(a) of Form 8-K or Item 6(e) of
Schedule 14A of Regulation 14A pursuant to the Exchange Act, or any successor
thereto, whether or not any class of securities of the Corporation is registered
under the Exchange Act; (iii) any "person" (as such 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 Corporation representing 25% or more of the combined voting
power of the Corporation's then outstanding securities; or (iv) during any
period three consecutive years during the term of an Award, individuals who at
the beginning of such period constitute the Board of Directors of the
Corporation cease for any reason to constitute at least two-thirds thereof of
unless the election, or the nomination for election by shareholders, of each new
director was approved by a vote of at least majority of the directors then still
in office who were directors at the beginning of the period. If any of the
events enumerated in clauses (i) through (iv) occur, the Board shall determine
the effective date of the Change in Control resulting therefrom for purposes of
the Plan.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means a committee of two or more directors
appointed by the Board pursuant to Article IV hereof, each of whom shall be a
Non-Employee Director as defined in Rule 16b-3(b)(3)(i) of the
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Exchange Act or any successor thereto and within the meaning of Section 162(m)
of the Code and the regulations promulgated thereunder.
3.07 "Common Stock" means shares of common stock, par value $1.00
per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company, or, if no
such plan applies, which would qualify such individual for disability benefits
under the Federal Social Security System.
3.09 "Effective Date" means the day upon which the Board approves
this Plan.
3.10 "Employee" means any person who is employed by the
Corporation, the Association or any Subsidiary Company, or is an Officer of the
Corporation, the Association or any Subsidiary Company, but not including
directors who are not also Officers of or otherwise employed by the Corporation,
the Association or any Subsidiary Company.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.12 "Fair Market Value" shall be equal to the fair market value
per share of the Corporation's Common Stock on the date an Award is granted. For
purposes hereof, the Fair Market Value of a share of Common Stock shall be the
closing sale price of a share of Common Stock on the date in question (or, if
such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the composite
of the markets, if more than one) or national quotation system in which such
shares are then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal market or
national quotation system then in use, or if no such quotations are available,
the price furnished by a professional securities dealer making a market in such
shares selected by the Committee.
3.13 "Incentive Stock Option" means any Option granted under this
Plan which the Board intends (at the time it is granted) to be an incentive
stock option within the meaning of Section 422 of the Code or any successor
thereto.
3.14 "Non-Employee Director" means a member of the Board of
Directors of the Corporation or Board of Directors of the Association or any
successor thereto, including an advisory director or a director emeritus of the
Boards of the Corporation and/or the Association or any successor thereto, who
is not an Officer or Employee of the Corporation or any Subsidiary Company.
3.15 "Non-Qualified Option" means any Option granted under this
Plan which is not an Incentive Stock Option.
3.16 "Offering" means the subscription and community offering of
Common Stock to the public (but not the exchange offer to former shareholders of
the Association) in connection with the reorganization of the Association from
the mid-tier mutual holding company structure to the stock holding company
structure.
3.17 "Officer" means an Employee whose position in the Corporation
or a Subsidiary Company is that of a corporate officer, as determined by the
Board.
3.18 "Option" means a right granted under this Plan to purchase
Common Stock.
3.19 "Optionee" means an Employee or Non-Employee Director or
former Employee or Non-Employee Director to whom an Option is granted under the
Plan.
3.20 "Retirement" means, with respect to an Employee, a termination
of employment which constitutes a retirement from employment with the
Corporation or a Subsidiary Company upon the earlier to occur of (a) the
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earlier to occur of such individual having (i) attained age 65 or (ii) completed
30 "Years of Service" as such phrase is defined in the Corporation's Employee
Stock Ownership Plan (the "ESOP") or (b) the later to occur of (i) such
individual attaining age 55 or (ii) completing fifteen or more "Years of
Service" as defined in the ESOP. With respect to Non-Employee Directors,
retirement means retirement from service on the Board of Directors of the
Corporation or the Association or any successor thereto (including service as a
director emeritus or advisory director) after attaining the age of 65.
3.21 "Stock Appreciation Right" means a right to surrender an
Option in consideration for a payment by the Corporation in cash and/or Common
Stock, as provided in the discretion of the Board or the Committee in accordance
with Section 8.10.
3.22 "Subsidiary Companies" means those subsidiaries of the
Corporation, including the Association, which meet the definition of "subsidiary
corporations" set forth in Section 424(f) of the Code, at the time of granting
of the Option in question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority to adopt, amend
and rescind such rules, regulations and procedures as, in its opinion, may be
advisable in the administration of the Plan, including, without limitation,
rules, regulations and procedures which (i) deal with satisfaction of an
Optionee's tax withholding obligation pursuant to Section 12.01 hereof, (ii)
include arrangements to facilitate the Optionee's ability to borrow funds for
payment of the exercise or purchase price of an Award, if applicable, from
securities brokers and dealers, (iii) establish the method and arrangements by
which an optionee may defer the recognition of income upon the exercise of a
Non-Qualified Option or Stock Appreciation Right pursuant to Article XIII
hereof, and (iv) include arrangements which provide for the payment of some or
all of such exercise or purchase price by delivery of previously-owned shares of
Common Stock or other property and/or by withholding some of the shares of
Common Stock which are being acquired. The interpretation and construction by
the Committee of any provisions of the Plan, any rule, regulation or procedure
adopted by it pursuant thereto or of any Award shall be final and binding in the
absence of action by the Board.
4.02 Appointment and Operation of the Committee. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board.
The Board from time to time may remove members from, or add members to, the
Committee, provided the Committee shall continue to consist of two or more
members of the Board, each of whom shall be a Non-Employee Director, as defined
in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor thereto. In
addition, each member of the Committee shall be an "outside director" within the
meaning of Section 162(m) of the Code and regulations thereunder at such times
as is required under such regulations. The Committee shall act by vote or
written consent of a majority of its members. Subject to the express provisions
and limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. It may
appoint one of its members to be chairman and any person, whether or not a
member, to be its secretary or agent. The Committee shall report its actions and
decisions to the Board at appropriate times but in no event less than one time
per calendar year.
4.03 Revocation for Misconduct. The Board or the Committee may by
resolution immediately revoke, rescind and terminate any Option, or portion
thereof, to the extent not yet vested, or any Stock Appreciation Right, to the
extent not yet exercised, previously granted or awarded under this Plan to an
Employee who is discharged from the employ of the Corporation or a Subsidiary
Company for cause, which, for purposes hereof, shall mean termination because of
the Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order. Options granted
to a Non-Employee Director who is removed for cause pursuant to the
Corporation's Certificate of Incorporation and Bylaws or the Association's
Charter and Bylaws shall terminate as of the effective date of such removal.
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4.04 Limitation on Liability. Neither the members of the Board nor
any member of the Committee shall be liable for any action or determination made
in good faith with respect to the Plan, any rule, regulation or procedure
adopted pursuant thereto or any Awards granted hereunder. If a member of the
Board or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Corporation
shall, subject to the requirements of applicable laws and regulations, indemnify
such member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Corporation and its Subsidiary Companies and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
4.05 Compliance with Law and Regulations. All Awards granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may
be required. The Corporation shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any federal or state law or any rule or regulation
of any government body, which the Corporation shall, in its sole discretion,
determine to be necessary or advisable. Moreover, no Option or Stock
Appreciation Right may be exercised if such exercise would be contrary to
applicable laws and regulations.
4.06 Restrictions on Transfer. The Corporation may place a legend
upon any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees and Non-Employee Directors of
the Corporation and its Subsidiary Companies as may be designated from time to
time by the Board or the Committee. Awards may not be granted to individuals who
are not Employees or Non-Employee Directors of either the Corporation or its
Subsidiary Companies. Non-Employee Directors shall be eligible to receive only
Awards of Non-Qualified Options pursuant to this Plan.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 Option Shares. The aggregate number of shares of Common Stock
which may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be 547,065, which is equal to 10% of the shares of Common
Stock issued in the Offering. None of such shares shall be the subject of more
than one Award at any time (provided that Stock Appreciation Rights and the
related Options shall be deemed to be a single Award), but if an Option as to
any shares is surrendered before exercise, or expires or terminates for any
reason without having been exercised in full, or for any other reason ceases to
be exercisable, the number of shares covered thereby shall again become
available for grant under the Plan as if no Awards had been previously granted
with respect to such shares. Notwithstanding the foregoing, if an Option is
surrendered in connection with the exercise of a Stock Appreciation Right, the
number of shares covered thereby shall not be available for grant under the
Plan. During the time this Plan remains in effect, grants to each Employee and
each Non-Employee Director shall not exceed 25% and 5% of the shares of Common
Stock available under the Plan, respectively, and Awards made to Non-Employee
Directors in the aggregate may not exceed 25% of the number of shares available
under this Plan, in each case subject to adjustment as provided in Article IX.
6.02 Source of Shares. The shares of Common Stock issued under the
Plan may be authorized but unissued shares, treasury shares or shares purchased
by the Corporation on the open market or from private sources for use under the
Plan.
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ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
The Board or the Committee shall, in its discretion, determine from
time to time which Employees and Non-Employee Directors will be granted Awards
under the Plan, the number of shares of Common Stock subject to each Award,
whether each Option will be an Incentive Stock Option or a Non-Qualified Stock
Option (in the case of Employees) and the exercise price of an Option. In making
all such determinations there shall be taken into account the duties,
responsibilities and performance of each respective Employee and Non-Employee
Director, his present and potential contributions to the growth and success of
the Corporation, his salary and such other factors deemed relevant to
accomplishing the purposes of the Plan.
ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 Stock Option Agreement. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which shall
set forth the total number of shares of Common Stock to which it pertains, the
exercise price, whether it is a Non-Qualified Option or an Incentive Stock
Option, and such other terms, conditions, restrictions and privileges as the
Board or the Committee in each instance shall deem appropriate, provided they
are not inconsistent with the terms, conditions and provisions of this Plan.
Each Optionee shall receive a copy of his executed Stock Option Agreement.
8.02 Option Exercise Price.
(a) Incentive Stock Options. The per share price at which the
subject Common Stock may be purchased upon exercise of an Incentive Stock Option
shall be no less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Incentive Stock Option is granted, except
as provided in Section 8.09(b), and subject to any applicable adjustment
pursuant to Article IX hereof.
(b) Non-Qualified Options. The per share price at which the
subject Common Stock may be purchased upon exercise of a Non-Qualified Option
shall be established by the Committee at the time of grant, but in no event
shall be less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Non-Qualified Option is granted, subject
to any applicable adjustment pursuant to Article IX hereof.
8.03 Vesting and Exercise of Options.
(a) General Rules. Incentive Stock Options and Non-Qualified
Options granted hereunder shall become vested and exercisable at the rate, to
the extent and subject to such limitations as may be specified by the Board or
the Committee. Notwithstanding the foregoing, except as provided in Sections
8.03(b) and 8.03(c) hereof, no Option granted to an Employee or a Non-Employee
Director shall continue to vest on or after the date the Employee's employment
or the Non-Employee Director's service with the Corporation and all Subsidiary
Companies (or any successor companies) is terminated for any reason other than
his death, Disability or Retirement. In determining the number of shares of
Common Stock with respect to which Options are vested and/or exercisable, if
applicable, fractional shares shall be rounded down to the nearest whole number,
provided that such fractional Shares shall be aggregated and deemed vested on
the final date of vesting.
(b) Accelerated Vesting. Unless the Board or the Committee
shall specifically state otherwise at the time an Option is granted, all Options
granted under this Plan shall become vested and exercisable in full on the date
an Optionee terminates his employment with the Corporation or a Subsidiary
Company or service as a Non-Employee Director because of his death, Disability
or Retirement. In addition, all Options hereunder shall
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become immediately vested and exercisable in full as of the effective date of a
Change in Control of the Corporation.
8.04 Duration of Options.
(a) General Rule. Except as provided in Sections 8.04(b) and
8.09, each Option or portion thereof granted to an Employee shall be exercisable
at any time on or after it vests and remain exercisable until the earlier of (i)
ten (10) years after its date of grant or (ii) six (6) months after the date on
which the Employee ceases to be employed by the Corporation and all Subsidiary
Companies, unless the Board or the Committee in its discretion decides at the
time of grant or thereafter to extend such period of exercise upon termination
of employment to a period not exceeding five (5) years.
Except as provided in Section 8.04(b), each Option or portion thereof
granted to a Non-Employee Director shall be exercisable at any time on or after
it vests and remain exercisable until the earlier of (i) ten (10) years after
its date of grant or (ii) three (3) years after the date on which the
Non-Employee Director ceases to serve as a director of the Corporation and all
Subsidiary Companies, unless the Board or the Committee in its discretion
decides at the time of grant or thereafter to extend such period of exercise
upon termination of service to a period not exceeding five (5) years.
(b) Exceptions. Unless the Board or the Committee shall
specifically state otherwise at the time an Option is granted: (i) if an
Employee terminates his employment with the Corporation or a Subsidiary Company
as a result of Disability or Retirement without having fully exercised his
Options, the Employee shall have the right, during the three (3) year period
following his termination due to Disability or Retirement, to exercise such
Options, and (ii) if a Non-Employee Director terminates his service as a
director with the Corporation or a Subsidiary Company or any successor thereto
as a result of Disability or Retirement without having fully exercised his
Options, the Non-Employee Director shall have the right, during the three (3)
year period following his termination due to Disability or Retirement, to
exercise such Options.
Unless the Board or the Committee shall specifically state otherwise at
the time an Option is granted, if an Employee or Non-Employee Director
terminates his employment or service with the Corporation or a Subsidiary
Company (or any successor thereto) following a Change in Control of the
Corporation without having fully exercised his Options, the Optionee shall have
the right to exercise such Options during the remainder of the original ten (10)
year term of the Option from the date of grant.
If an Optionee dies while in the employ or service of the Corporation
or a Subsidiary Company or terminates employment or service with the Corporation
or a Subsidiary Company as a result of Disability or Retirement and dies without
having fully exercised his Options, the executors, administrators, legatees or
distributees of his estate shall have the right, during the one (1) year period
following his death, to exercise such Options.
In no event, however, shall any Option be exercisable more than ten
(10) years from the date it was granted.
8.05 Nonassignability. Options shall not be transferable by an
Optionee except by will or the laws of descent or distribution, and during an
Optionee's lifetime shall be exercisable only by such Optionee or the Optionee's
guardian or legal representative. Notwithstanding the foregoing, or any other
provision of this Plan, an Optionee who holds vested Non-Qualified Options may
transfer such Options to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Options so transferred may thereafter be transferred only to
the Optionee who originally received the grant or to an individual or trust to
whom the Optionee could have initially transferred the Option pursuant to this
Section 8.05. Options which are transferred pursuant to this Section 8.05 shall
be exercisable by the transferee according to the same terms and conditions as
applied to the Optionee.
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8.06 Manner of Exercise. Options may be exercised in part or in
whole and at one time or from time to time. The procedures for exercise shall be
set forth in the written Stock Option Agreement provided for in Section 8.01
above.
8.07 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of such Option shall
be made to the Corporation upon exercise of such Option. All shares sold under
the Plan shall be fully paid and nonassessable. Payment for shares may be made
by the Optionee (i) in cash or by check, (ii) by delivery of a properly executed
exercise notice, together with irrevocable instructions to a broker to sell the
shares and then to properly deliver to the Corporation the amount of sale
proceeds to pay the exercise price, all in accordance with applicable laws and
regulations, (iii) at the discretion of the Board or the Committee, by
delivering shares of Common Stock (including shares acquired pursuant to the
exercise of an Option) equal in Fair Market Value to the purchase price of the
shares to be acquired pursuant to the Option, (iv) at the discretion of the
Board or the Committee, by withholding some of the shares of Common Stock which
are being purchased upon exercise of an Option, or (v) any combination of the
foregoing. With respect to subclause (iii) hereof, the shares of Common Stock
delivered to pay the purchase price must have either been (x) purchased in open
market transactions or (y) issued by the Corporation pursuant to a plan thereof,
in each case more than six months prior to the exercise date of the Option.
8.08 Voting and Dividend Rights. No Optionee shall have any voting
or dividend rights or other rights of a shareholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded on
the Corporation's shareholder ledger as the holder of record of such shares
acquired pursuant to an exercise of an Option.
8.09 Additional Terms Applicable to Incentive Stock Options. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.08 above, to those
contained in this Section 8.09.
(a) Notwithstanding any contrary provisions contained
elsewhere in this Plan and as long as required by Section 422 of the Code, the
aggregate Fair Market Value, determined as of the time an Incentive Stock Option
is granted, of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
under this Plan, and stock options that satisfy the requirements of Section 422
of the Code under any other stock option plan or plans maintained by the
Corporation (or any parent or Subsidiary Company), shall not exceed $100,000.
(b) Limitation on Ten Percent Shareholders. The price at which
shares of Common Stock may be purchased upon exercise of an Incentive Stock
Option granted to an individual who, at the time such Incentive Stock Option is
granted, owns, directly or indirectly, more than ten percent (10%) of the total
combined voting power of all classes of stock issued to shareholders of the
Corporation or any Subsidiary Company, shall be no less than one hundred and ten
percent (110%) of the Fair Market Value of a share of the Common Stock of the
Corporation at the time of grant, and such Incentive Stock Option shall by its
terms not be exercisable after the earlier of the date determined under Section
8.03 or the expiration of five (5) years from the date such Incentive Stock
Option is granted.
(c) Notice of Disposition; Withholding; Escrow. An Optionee
shall immediately notify the Corporation in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section 421 of the Code) of any shares of
Common Stock acquired through exercise of an Incentive Stock Option, within two
(2) years after the grant of such Incentive Stock Option or within one (1) year
after the acquisition of such shares, setting forth the date and manner of
disposition, the number of shares disposed of and the price at which such shares
were disposed of. The Corporation shall be entitled to withhold from any
compensation or other payments then or thereafter due to the Optionee such
amounts as may be necessary to satisfy any withholding requirements of federal
or state law or regulation and, further, to collect from the Optionee any
additional amounts which may be required for such purpose. The Committee or the
Board may, in its discretion, require shares of Common Stock acquired by an
Optionee upon exercise of an Incentive Stock Option
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to be held in an escrow arrangement for the purpose of enabling compliance with
the provisions of this Section 8.09(c).
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8.10 Stock Appreciation Rights.
(a) General Terms and Conditions. The Board or the Committee
may, but shall not be obligated to, authorize the Corporation, on such terms and
conditions as it deems appropriate in each case, to grant rights to Optionees to
surrender an exercisable Option, or any portion thereof, in consideration for
the payment by the Corporation of an amount equal to the excess of the Fair
Market Value of the shares of Common Stock subject to the Option, or portion
thereof, surrendered over the exercise price of the Option with respect to such
shares (each such right being hereinafter referred to as a "Stock Appreciation
Right"). Such payment, at the discretion of the Board or the Committee, may be
made in shares of Common Stock valued at the then Fair Market Value thereof, or
in cash, or partly in cash and partly in shares of Common Stock.
The terms and conditions with respect to a Stock Appreciation Right may
include (without limitation), subject to other provisions of this Section 8.10
and the Plan: the period during which, date by which or event upon which the
Stock Appreciation Right may be exercised; the method for valuing shares of
Common Stock for purposes of this Section 8.10; a ceiling on the amount of
consideration which the Corporation may pay in connection with exercise and
cancellation of the Stock Appreciation Right; and arrangements for income tax
withholding. The Board or the Committee shall have complete discretion to
determine whether, when and to whom Stock Appreciation Rights may be granted.
(b) Time Limitations. If a holder of a Stock Appreciation
Right terminates service with the Corporation as an Officer or Employee, the
Stock Appreciation Right may be exercised only within the period, if any, within
which the Option to which it relates may be exercised.
(c) Effects of Exercise of Stock Appreciation Rights or
Options. Upon the exercise of a Stock Appreciation Right, the number of shares
of Common Stock available under the Option to which it relates shall decrease by
a number equal to the number of shares for which the Stock Appreciation Right
was exercised. Upon the exercise of an Option, any related Stock Appreciation
Right shall terminate as to any number of shares of Common Stock subject to the
Stock Appreciation Right that exceeds the total number of shares for which the
Option remains unexercised.
(d) Time of Grant. A Stock Appreciation Right granted in
connection with an Incentive Stock Option must be granted concurrently with the
Option to which it relates, while a Stock Appreciation Right granted in
connection with a Non-Qualified Option may be granted concurrently with the
Option to which it relates or at any time thereafter prior to the exercise or
expiration of such Option.
(e) Non-Transferable. The holder of a Stock Appreciation Right
may not transfer or assign the Stock Appreciation Right otherwise than by will
or in accordance with the laws of descent and distribution, and during a
holder's lifetime a Stock Appreciation Right may be exercisable only by the
holder.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any outstanding Award relates,
the maximum number of shares that can be covered by Awards to each Employee,
each Non-Employee Director and all Non-Employee Directors as a group, and the
exercise price per share of Common Stock under any outstanding Option shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the effective date of
this Plan resulting from a split, subdivision or consolidation of shares or any
other capital adjustment, the payment of a stock dividend, or other increase or
decrease in such shares effected without receipt or payment of consideration by
the Corporation. If, upon a merger, consolidation, reorganization, liquidation,
recapitalization or the like of the Corporation, the shares of the Corporation's
Common Stock shall be exchanged for other securities of the Corporation or of
another corporation, each recipient of an Award shall be entitled, subject to
the conditions herein stated, to purchase or acquire such number of shares of
Common Stock or amount of other securities of the
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Corporation or such other corporation as were exchangeable for the number of
shares of Common Stock of the Corporation which such optionees would have been
entitled to purchase or acquire except for such action, and appropriate
adjustments shall be made to the per share exercise price of outstanding
Options. Notwithstanding any provision to the contrary herein and to the extent
permitted by applicable laws and regulations and interpretations thereof, the
exercise price of shares subject to outstanding Awards shall be proportionately
adjusted upon the payment by the Corporation of a special cash dividend or
return of capital in an amount per share which exceeds 10% of the Fair Market
Value of a share of Common Stock as of the date of declaration, provided that
the adjustment to the per share exercise price shall satisfy the criteria set
forth in Emerging Issues Task Force 90-9 (or any successor thereto) so that the
adjustments do not result in compensation expense, and provided further that if
such adjustment with respect to Incentive Stock Options would be treated as a
modification of the outstanding incentive stock options with the effect that,
for purposes of Sections 422 and 425(h) of the Code, and the rules and
regulations promulgated thereunder, new Incentive Stock Options would be deemed
to be granted hereunder, then no adjustment to the per share exercise price of
outstanding Incentive Stock Options shall be made.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to any required shareholder approval or any shareholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the holder of an
Award, alter or impair any Award previously granted or awarded under this Plan
except as specifically authorized herein.
ARTICLE XI
EMPLOYMENT AND SERVICE RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create any
right on the part of any Employee or Non-Employee Director to continue in such
capacity.
ARTICLE XII
WITHHOLDING
12.01 Tax Withholding. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the Corporation
the amount required to be withheld as a condition to delivering the shares
acquired pursuant to an Award. The Corporation also may withhold or collect
amounts with respect to a disqualifying disposition of shares of Common Stock
acquired pursuant to exercise of an Incentive Stock Option, as provided in
Section 8.09(c).
12.02 Methods of Tax Withholding. The Board or the Committee is
authorized to adopt rules, regulations or procedures which provide for the
satisfaction of an Optionee's tax withholding obligation by the retention of
shares of Common Stock to which the Employee would otherwise be entitled
pursuant to an Award and/or by the Optionee's delivery of previously owned
shares of Common Stock or other property.
ARTICLE XIII
DEFERRED PAYMENTS
13.01 Deferral of Options and Stock Appreciation Rights.
Notwithstanding any other provision of this Plan, any Optionee may elect, with
the concurrence of the Committee and consistent with any rules and regulations
established by the Committee, to defer the recognition of ordinary income
resulting from the exercise of any Non-Qualified Option not transferred under
the provisions of Section 8.05 hereof and of any Stock Appreciation Rights.
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13.02 Timing of Election. The election to defer the recognition of
ordinary income resulting from the exercise of any eligible Non-Qualified Option
or Stock Appreciation Right must be made at least six (6) months prior to the
date such Option or Stock Appreciation Right is exercised or at such other time
as the Committee may specify. Deferrals of eligible Non-Qualified Options or
Stock Appreciation Rights shall only be allowed for exercises of Options and
Stock Appreciation Rights that occur while the Participant is in active service
with the Corporation or one of its Subsidiary Companies. Any election to defer
the ordinary income resulting from the exercise of an eligible Non-Qualified
Option or Stock Appreciation Right shall be irrevocable as long as the Optionee
remains an Employee or a Non-Employee Director of the Corporation or one of its
Subsidiary Companies.
13.03 Stock Option Deferral. The deferral of the ordinary income
resulting from the exercise of Non-Qualified Options may be elected by an
Optionee subject to the rules and regulations established by the Committee. The
income resulting from such an exercise shall be credited to a deferred stock
option account established for the Optionee (which may be part of an existing
deferred compensation trust account). The income shall be credited to the
deferred stock option account as a number of deferred shares or share units
equivalent in value to such income. Deferred share units shall be valued at the
Fair Market Value on the date of exercise. Subsequent to exercise, the deferred
shares or share units shall be valued at the Fair Market Value of Common Stock.
Deferred share units shall accrue dividends at the rate paid upon the Common
Stock credited in the form of additional deferred share units. Deferred shares
or share units shall be distributed in shares of Common Stock or cash, at the
discretion of the Committee, upon the Optionee's termination of employment or
service as a director or at such other date(s), as may be approved by the
Committee, over a period of no more than ten (10) years.
13.04 Stock Appreciation Right Deferral. The deferral of the
ordinary income resulting from the exercise of Stock Appreciation Rights may be
made by an Optionee subject to the rules and regulations established by the
Committee. Upon exercise, the Committee will credit the Optionee's deferred
stock option account with a number of deferred shares or share units equivalent
in value to the difference between the Fair Market Value of a share of Common
Stock on the exercise date and the Exercise Price of the Stock Appreciation
Right multiplied by the number of shares exercised. Deferred shares or share
units shall be valued at the Fair Market Value on the date of exercise.
Subsequent to exercise, the deferred shares or share units shall be valued at
the Fair Market Value of Common Stock. Deferred shares or share units shall
accrue dividends at the rate paid upon the Common Stock credited in the form of
additional deferred shares or share units. Deferred shares or share units shall
be distributed in shares of Common Stock or cash, at the discretion of the
Committee, upon the Participant's termination of employment or service as a
director or at such other date(s), as may be approved by the Committee, over a
period of no more than ten (10) years.
13.05 Accelerated Distributions. The Committee may, at its sole
discretion, allow for the early payment of an Optionee's deferred stock option
account in the event of an "unforeseeable emergency" or in the event of the
death or Disability of the Optionee. An "unforeseeable emergency" means an
unanticipated emergency caused by an event beyond the control of the Optionee
that would result in severe financial hardship if the distribution were not
permitted. Such distributions shall be limited to the amount necessary to
sufficiently address the financial hardship. Any distributions under this
provision shall be consistent with the Code and the regulations promulgated
thereunder. Additionally, the Committee may use its discretion to cause stock
option deferral accounts to be distributed when continuing the program is no
longer in the best interest of the Corporation or one of its Subsidiary
Companies.
13.06 Assignability. No rights to deferred stock option accounts may
be assigned or subject to any encumbrance, pledge or charge of any nature except
that an Optionee may designate a beneficiary pursuant to any rules established
by the Committee.
13.07 Unfunded Status. No Optionee or other person shall have any
interest in any fund or in any specific asset of the Corporation or one of its
Subsidiary Companies by reason of any amount credited pursuant to the provisions
hereof. Any amounts payable pursuant to the provisions hereof shall be paid from
the general assets of the Corporation or one of its Subsidiary Companies and no
Optionee or other person shall have any rights to such assets beyond the rights
afforded general creditors of the Corporation or one of its Subsidiary
Companies. However, the Corporation or one of its Subsidiary Companies shall
have the right to establish a reserve, trust or make any
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investment for the purpose of satisfying the obligations created under this
Article XIII of the Plan; provided, however, that no Optionee or other person
shall have any interest in such reserve, trust or investment.
ARTICLE XIV
EFFECTIVE DATE OF THE PLAN; TERM
14.01 Effective Date of the Plan. This Plan shall become effective
on the Effective Date, and Awards may be granted hereunder no earlier than the
date that this Plan is approved by shareholders of the Corporation and no later
than the termination of the Plan, provided that this Plan is approved by
shareholders of the Corporation pursuant to Article XV hereof.
14.02 Term of the Plan. Unless sooner terminated, this Plan shall
remain in effect for a period of ten (10) years ending on the tenth anniversary
of the Effective Date. Termination of the Plan shall not affect any Awards
previously granted and such Awards shall remain valid and in effect until they
have been fully exercised or earned, are surrendered or by their terms expire or
are forfeited.
ARTICLE XV
SHAREHOLDER APPROVAL
The Corporation shall submit this Plan to shareholders for approval at
a meeting of shareholders of the Corporation held within twelve (12) months
following the Effective Date in order to meet the requirements of (i) Section
422 of the Code and regulations thereunder, (ii) Section 162(m) of the Code and
regulations thereunder, (iii) the Nasdaq Stock Market for continued quotation of
the Common Stock on the Nasdaq Stock Market, and (iv) the regulations of the
Office of Thrift Supervision.
ARTICLE XVI
MISCELLANEOUS
16.01 Governing Law. To the extent not governed by federal law, this
Plan shall be construed under the laws of the State of Delaware.
16.02 Pronouns. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
12
COMMUNITY SAVINGS BANKSHARES, INC.
1999 RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Community Savings Bankshares, Inc. (the "Corporation") hereby
establishes the 1999 Recognition and Retention Plan (the "Plan") and Trust (the
"Trust") upon the terms and conditions hereinafter stated in this 1999
Recognition and Retention Plan and Trust Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the
Trust assets existing on the date of this Agreement and all additions and
accretions thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of the Plan is to retain personnel of experience and
ability in key positions by providing Employees and Non-Employee Directors with
a proprietary interest in the Corporation and its Subsidiary Companies as
compensation for their contributions to the Corporation and its Subsidiary
Companies and as an incentive to make such contributions in the future. Each
Recipient of a Plan Share Award hereunder is advised to consult with his or her
personal tax advisor with respect to the tax consequences under federal, state,
local and other tax laws of the receipt of a Plan Share Award hereunder.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with an
initial capital letter, unless the context clearly indicates otherwise, shall
have the meanings set forth below. Wherever appropriate, the masculine pronouns
shall include the feminine pronouns and the singular shall include the plural.
3.01 "Association" means Community Savings, F. A., a wholly owned
subsidiary of the Corporation.
3.02 "Beneficiary" means the person or persons designated by a
Recipient to receive any benefits payable under the Plan in the event of such
Recipient's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall mean the
occurrence of any of the following: (i) the acquisition of control of the
Corporation as defined in 12 C.F.R. ss.574.4, unless a presumption of control is
successfully rebutted or unless the transaction is exempted by 12 C.F.R.
ss.574.3(c)(vii), or any successor to such sections; (ii) an event that would be
required to be reported in response to Item 1(a) of Form 8-K or Item 6(e) of
Schedule 14A of Regulation 14A pursuant to the Exchange Act or any successor
thereto, whether or not any class of securities of the Corporation is registered
under the Exchange Act; (iii) any "person" (as such 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 Corporation representing 25% or more of the combined voting
power of the Corporation's then outstanding securities; or (iv) during any
period of three consecutive years during the term of a Plan Share Award,
individuals who at the beginning of such period constitute the Board of
Directors of the Corporation cease for any reason to constitute at least
two-thirds thereof unless the election, or the nomination for election by
shareholders, of each new director was approved by a vote of at least majority
of the
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directors then still in office who were directors at the beginning of the
period. If any of the events enumerated in clauses (i) through (iv) occur, the
Board shall determine the effective date of the Change in Control resulting
therefrom for purposes of the Plan.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means the committee appointed by the Board
pursuant to Article IV hereof.
3.07 "Common Stock" means shares of common stock, par value $1.00
per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company or, if no
such plan applies, which would qualify such individual for disability benefits
under the Federal Social Security System.
3.09 "Effective Date" means the day upon which the Board approves
this Plan.
3.10 "Employee" means any person who is employed by the
Corporation, the Association, or any Subsidiary Company, or is an Officer of the
Corporation, the Association, or any Subsidiary Company, but not including
directors who are not also Officers of or otherwise employed by the Corporation,
the Association or a Subsidiary Company.
3.11 "Employer Group" means the Corporation and any Subsidiary
which, with the consent of the Board, agrees to participate in the Plan.
3.12 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.13 "Non-Employee Director" means a member of the Board of the
Corporation or the Board of Directors of the Association or any successor
thereto, including an advisory director or a director emeritus of the Boards of
the Corporation and/or the Association (or any successor company), who is not an
Officer or Employee of the Corporation, the Association or any Subsidiary
Company.
3.14 "Offering" means the subscription and community offering of
Common Stock to the public (but not the exchange offer to former shareholders of
the Association) in connection with the reorganization of the Association from
the mid-tier mutual holding company structure to the stock holding company
structure.
3.15 "Officer" means an Employee whose position in the Corporation
or a Subsidiary Company is that of a corporate officer, as determined by the
Board.
3.16 "Performance Share Award" means a Plan Share Award granted to
a Recipient pursuant to Section 7.05 of the Plan.
3.17 "Performance Goal" means an objective for the Corporation or
any Subsidiary Company or any unit thereof or any Employee with respect to any
of the foregoing that may be established by the Committee for a Performance
Share Award to become vested, earned or exercisable. The establishment of
Performance Goals are intended to make the applicable Performance Share Awards
"performance-based" compensation within the meaning of Section 162(m) of the
Code, and the Performance Goals shall be based on one or more of the following
criteria:
(i) net income, as adjusted for non-recurring items;
(ii) cash earnings;
(iii) earnings per share;
(iv) cash earnings per share;
(v) return on average equity;
(vi) return on average assets;
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(vii) asset quality;
(viii) stock price;
(ix) total shareholder return;
(x) capital;
(xi) net interest income;
(xii) market share;
(xiii) cost control or efficiency ratio; and
(xiv) asset growth.
3.18 "Plan Shares" or "Shares" means shares of Common Stock held in
the Trust which may be distributed to a Recipient pursuant to the Plan.
3.19 "Plan Share Award" or "Award" means a right granted under this
Plan to receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII, and includes Performance Share Awards.
3.20 "Recipient" means an Employee or Non-Employee Director who
receives a Plan Share Award or Performance Share Award under the Plan.
3.21 "Retirement" means, with respect to an Employee, a termination
of employment which constitutes a retirement from employment with the
Corporation or a Subsidiary Company upon the earlier to occur of (a) the earlier
to occur of such individual having (i) attained age 65 or (ii) completed 30
"Years of Service" as such phrase is defined in the Corporation's Employee Stock
Ownership Plan (the "ESOP") or (b) the later to occur of (i) such individual
attaining age 55 or (ii) completing fifteen or more "Years of Service" as
defined in the ESOP. With respect to Non-Employee Directors, retirement means
retirement from service on the Board of Directors of the Corporation or the
Association or any successor thereto (including service as a director emeritus
or advisory director) after attaining the age of 65.
3.22 "Subsidiary Companies" means those subsidiaries of the
Corporation, including the Association, which meet the definition of "subsidiary
corporation" set forth in Section 424(f) of the Code, at the time of the
granting of the Plan Share Award in question.
3.23 "Trustee" means such firm, entity or persons approved by the
Board to hold legal title to the Plan and the Plan assets for the purposes set
forth herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of the
Board, each of whom shall be a Non-Employee Director, as defined in Rule
16b-3(b)(3)(i) of the Exchange Act. In addition, each member of the Committee
shall be an "outside director" within the meaning of Section 162(m) of the Code
and the regulations thereunder at such times as is required under such
regulations. The Committee shall have all of the powers allocated to it in this
and other sections of the Plan. The interpretation and construction by the
Committee of any provisions of the Plan or of any Plan Share Award granted
hereunder shall be final and binding in the absence of action by the Board. The
Committee shall act by vote or written consent of a majority of its members.
Subject to the express provisions and limitations of the Plan, the Committee may
adopt such rules, regulations and procedures as it deems appropriate for the
conduct of its affairs. The Committee shall report its actions and decisions
with respect to the Plan to the Board at appropriate times, but in no event less
than once per calendar year.
4.02 Role of the Board. The members of the Committee and the
Trustee shall be appointed or approved by, and will serve at the pleasure of,
the Board. The Board may in its discretion from time to time remove members
from, or add members to, the Committee, and may remove or replace the Trustee,
provided that any
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directors who are selected as members of the Committee shall be Non-Employee
Directors as defined in Rule 16b-3(b)(3)(i) of the Exchange Act.
4.03 Limitation on Liability. No member of the Board or the
Committee shall be liable for any determination made in good faith with respect
to the Plan or any Plan Shares or Plan Share Awards granted under it. If a
member of the Board or the Committee is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of anything
done or not done by him in such capacity under or with respect to the Plan, the
Corporation shall, subject to the requirements of applicable laws and
regulations, indemnify such member against all liabilities and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in the best interests of the Corporation and any Subsidiaries and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
4.04 Compliance with Laws and Regulations. All Awards granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency or
stockholders as may be required.
4.05 Restrictions on Transfer. The Corporation may place a legend
upon any certificate representing shares issued pursuant to a Plan Share Award
noting that such shares may be restricted by applicable laws and regulations.
ARTICLE V
CONTRIBUTIONS
5.01 Amount and Timing of Contributions. The Board shall determine
the amount (or the method of computing the amount) and timing of any
contributions by the Corporation and any Subsidiaries to the Trust established
under this Plan. Such amounts may be paid in cash or in shares of Common Stock
and shall be paid to the Trust at the designated time of contribution. No
contributions by Employees or Non-Employee Directors shall be permitted.
5.02 Investment of Trust Assets; Number of Plan Shares. Subject to
Section 8.02 hereof, the Trustee shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan shall be 218,826 shares of Common Stock,
subject to adjustment as provided in Section 10.01 hereof, which shares shall be
purchased (from the Corporation and/or, if permitted by applicable regulations,
from shareholders thereof) by the Trust with funds contributed by the
Corporation. During the time this Plan remains in effect, Awards to each
Employee and each Non-Employee Director shall not exceed 25% and 5% of the
shares of Common Stock available under the Plan, respectively, and Plan Share
Awards to Non-Employee Directors in the aggregate shall not exceed 25% of the
number of shares available under this Plan, in each case subject to adjustment
as provided in Section 10.01 hereof.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Awards. Plan Share Awards and Performance Share Awards may be
made to such Employees and Non-Employee Directors as may be selected by the
Board or the Committee. In selecting those Employees and Non-Employee Directors
to whom Plan Share Awards and/or Performance Share Awards may be granted and the
number of Shares covered by such Awards, the Board or the Committee shall
consider the duties, responsibilities and performance of each respective
Employee and Non-Employee Director, his present and potential contributions to
the growth and success of the Corporation, his salary and such other factors as
deemed relevant to accomplishing the purposes of the Plan. The Board or the
Committee may but shall not be required to request the written recommendation of
the Chief Executive Officer of the Corporation other than with respect to Plan
Share Awards and/or Performance Share Awards to be granted to him.
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6.02 Form of Allocation. As promptly as practicable after an
allocation pursuant to Section 6.01 that a Plan Share Award or a Performance
Share Award is to be issued, the Board or the Committee shall notify the
Recipient in writing of the grant of the Award, the number of Plan Shares
covered by the Award, and the terms upon which the Plan Shares subject to the
Award shall be distributed to the Recipient. The date on which the Board or the
Committee makes such determination with respect to an Award shall be considered
the date of grant of the Plan Share Award or the Performance Share Award. The
Board or the Committee shall maintain records as to all grants of Plan Share
Awards or Performance Share Awards under the Plan.
6.03 Allocations Not Required to any Specific Employee or
Non-Employee Director. No Employee or Non-Employee Director shall have any right
or entitlement to receive a Plan Share Award hereunder, as the granting of
Awards is subject to the total discretion of the Board or the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Subject to the terms hereof, Plan Share
Awards granted shall be earned by a Recipient at the rate determined by the
Board or the Committee pursuant to the provisions of Article VI hereof. If the
employment of an Employee or service as a Non-Employee Director is terminated
prior to the date such Plan Share Awards are fully vested for any reason (except
as specifically provided in subsections (b), (c) and (d) below), the Recipient
shall forfeit the right to any Shares subject to the Award which have not
theretofore been earned. In the event of a forfeiture of the right to any Shares
subject to an Award, such forfeited Shares shall become available for allocation
pursuant to Section 6.01 hereof as if no Award had been previously granted with
respect to such Shares. No fractional shares shall be distributed pursuant to
this Plan. In determining the number of Shares which are earned as of any
vesting date, if applicable, fractional shares shall be rounded down to the
nearest whole number, provided that such fractional Shares shall be aggregated
and distributed on the final date of vesting of the grant.
(b) Exception for Terminations Due to Death, Disability or
Retirement. Notwithstanding the general rule contained in Section 7.01(a), all
Plan Shares subject to a Plan Share Award held by a Recipient whose employment
with the Corporation or any Subsidiary or service as a Non-Employee Director
terminates due to death, Disability or Retirement shall be deemed earned as of
the Recipient's last day of employment with or service to the Corporation or any
Subsidiary Company (provided, however, no such accelerated vesting shall occur
in the event of Disability if a Recipient remains employed by at least one
member of the Employer Group) and shall be distributed as soon as practicable
thereafter.
(c) Exception for a Change in Control of the Corporation.
Notwithstanding the general rule contained in Section 7.01(a), all Plan Shares
subject to a Plan Share Award held by a Recipient shall be deemed to be earned
as of the effective date of a Change in Control of the Corporation.
(d) Revocation for Misconduct. Notwithstanding anything in
this Plan to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award or Performance Share Award or portion
thereof, previously awarded under this Plan, to the extent Plan Shares have not
been distributed hereunder to the Recipient, whether or not yet earned, in the
case of an Employee who is discharged from the employ of the Corporation or any
Subsidiary Company for cause (as hereinafter defined). Termination for cause
shall mean termination because of the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order. Plan Share Awards granted to a Non-Employee
Director who is removed for cause pursuant to the Corporation's Certificate of
Incorporation and Bylaws or the Association's Charter and Bylaws shall terminate
as of the effective date of such removal.
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7.02 Distribution of Dividends. Any cash dividends, stock dividends
or returns of capital declared in respect of each Plan Share (excluding
Performance Share Awards) (whether declared before or after the applicable Award
was granted) held by the Trust will be paid by the Trust, as soon as practicable
after the Trust's receipt thereof, to the Recipient on whose behalf such Plan
Share is then held by the Trust. Any cash dividends, stock dividends or returns
of capital declared in respect of each unvested Performance Share Award will be
held by the Trust for the benefit of the Recipient on whose behalf such
Performance Share Award is then held by the Trust (whether declared before or
after the applicable Performance Share Award was granted), and such dividends or
returns of capital, including any interest thereon, will be paid out
proportionately by the Trust to the Recipient thereof as soon as practicable
after the Performance Share Awards become earned.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Subject to the
provisions of Sections 7.03(b) and 7.05 hereof, Plan Shares shall be distributed
to the Recipient or his Beneficiary, as the case may be, as soon as practicable
after they have been earned.
(b) Timing: Exception for 10% Shareholders. Notwithstanding
Section 7.03(a) above, no Plan Shares may be distributed prior to the date which
is five years from the date of consummation of the Association's reorganization
from the mid-tier mutual holding company structure to the stock holding company
structure to the extent the Recipient or Beneficiary, as the case may be, would
after receipt of such Shares own in excess of 10% of the issued and outstanding
shares of Common Stock, unless specifically approved by two-thirds of the Board.
Any Plan Shares remaining undistributed solely by reason of the operation of
this Section 7.03(b) shall be distributed to the Recipient or his Beneficiary on
the date which is five years from the date of consummation of the Association's
reorganization from the mid-tier mutual holding company structure to the stock
holding company structure to stock form.
(c) Form of Distributions. All Plan Shares, together with any
Shares representing stock dividends, shall be distributed in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned and
distributable. Payments representing cash dividends or returns of capital shall
be made in cash.
(d) Withholding. The Trustee may withhold from any cash
payment or Common Stock distribution made under this Plan sufficient amounts to
cover any applicable withholding and employment taxes, and if the amount of a
cash payment is insufficient, the Trustee may require the Recipient or
Beneficiary to pay to the Trustee the amount required to be withheld as a
condition of delivering the Plan Shares. The Trustee shall pay over to the
Corporation or any Subsidiary Company which employs or employed such Recipient
any such amount withheld from or paid by the Recipient or Beneficiary.
(e) Restrictions on Selling of Plan Shares. Plan Share Awards
may not be sold, assigned, pledged or otherwise disposed of prior to the time
that they are earned and distributed pursuant to the terms of this Plan. Upon
distribution, the Board or the Committee may require the Recipient or his
Beneficiary, as the case may be, to agree not to sell or otherwise dispose of
his distributed Plan Shares except in accordance with all then applicable
federal and state securities laws, and the Board or the Committee may cause a
legend to be placed on the stock certificate(s) representing the distributed
Plan Shares in order to restrict the transfer of the distributed Plan Shares for
such period of time or under such circumstances as the Board or the Committee,
upon the advice of counsel, may deem appropriate.
7.04 Voting of Plan Shares. After a Plan Share Award (other than a
Performance Share Award) has been made, the Recipient shall be entitled to
direct the Trustee as to the voting of the Plan Shares which are covered by the
Plan Share Award and which have not yet been earned and distributed to him
pursuant to Section 7.03, subject to rules and procedures adopted by the
Committee for this purpose. All shares of Common Stock held by the Trust which
have not been awarded under a Plan Share Award, shares subject to Performance
Share Awards which have not yet vested and shares which have been awarded as to
which Recipients have not directed the voting shall be voted by the Trustee in
its discretion.
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7.05 Performance Share Awards
(a) Designation of Performance Share Awards. The Committee may
determine to make any Plan Share Award a Performance Share Award by making such
Plan Share Award contingent upon the achievement of a Performance Goal or any
combination of Performance Goals. Each Performance Share Award shall be
evidenced by a written agreement ("Award Agreement"), which shall set forth the
Performance Goals applicable to the Performance Share Award, the maximum amounts
payable and such other terms and conditions as are applicable to the Performance
Share Award. Each Performance Share Award shall be granted and administered to
comply with the requirements of Section 162(m) of the Code.
(b) Timing of Grants. Any Performance Share Award shall be
made not later than 90 days after the start of the period for which the
Performance Share Award relates and shall be made prior to the completion of 25%
of such period. All determinations regarding the achievement of any Performance
Goals will be made by the Committee. The Committee may not increase during a
year the amount of a Performance Share Award that would otherwise be payable
upon achievement of the Performance Goals but may reduce or eliminate the
payments as provided for in the Award Agreement.
(c) Restrictions on Grants. Nothing contained in this Plan
will be deemed in any way to limit or restrict the Committee from making any
Award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
(d) Rights of Recipients. Notwithstanding anything to the
contrary herein, a Participant who receives a Performance Share Award payable in
Common Stock shall have no rights as a stockholder until the Common Stock is
issued pursuant to the terms of the Award Agreement.
(e) Transferability. A Participant's interest in a Performance
Share Award may not be sold, assigned, transferred, pledged, or otherwise
encumbered.
(f) Distribution. No Performance Share Award or portion
thereof that is subject to the attainment or satisfaction of a condition of a
Performance Goal shall be distributed or considered to be earned or vested until
the Committee certifies in writing that the conditions or Performance Goal to
which the distribution, earning or vesting of such Award is subject have been
achieved.
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust
that the Trustee shall have complete authority and discretion with respect to
the arrangement, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustee determines that the holding
of monies in cash or cash equivalents is necessary to meet the obligations of
the Trust. In performing its duties, the Trustee shall have the power to do all
things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust
assets in Common Stock without regard to any law now or hereafter in force
limiting investments for trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and in making
such investment, the Trustee is
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authorized to purchase Common Stock from the Corporation or from any other
source, and such Common Stock so purchased may be outstanding, newly issued or
treasury shares.
(b) To invest any Trust assets not otherwise invested in
accordance with (a) above, in such deposit accounts, certificates of deposit,
obligations of the United States Government or its agencies or such other
investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at
any time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be
registered in the name of a nominee, without the addition of words indicating
that such security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may in
the opinion of the Trustee be reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to its
rights, duties and obligations hereunder, and such other legal services or
representation as it may deem desirable.
(h) To hold funds and securities representing the amounts to
be distributed to a Recipient or his Beneficiary as a consequence of a dispute
as to the disposition thereof, whether in a segregated account or held in common
with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Board or the Committee.
8.04 Expenses. All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Corporation or, in the
discretion of the Corporation, the Trust.
8.05 Indemnification. Subject to the requirements of applicable
laws and regulations, the Corporation shall indemnify, defend and hold the
Trustee harmless against all claims, expenses and liabilities arising out of or
related to the exercise of the Trustee's powers and the discharge of its duties
hereunder, unless the same shall be due to the Trustee's gross negligence or
willful misconduct.
ARTICLE IX
DEFERRED PAYMENTS
9.01 Deferral of Plan Shares. Notwithstanding any other provision
of this Plan, any Recipient may elect, with the concurrence of the Committee and
consistent with any rules and regulations established by the Committee, to defer
the receipt of Plan Shares subject to Awards granted hereunder.
9.02 Timing of Election. The election to defer the receipt of any
Plan Shares must be made no later than the last day of the calendar year
preceding the calendar year in which the Recipient would otherwise have an
unrestricted right to receive such Plan Shares. Deferrals of eligible Plan
Shares shall only be allowed for those Plan Shares scheduled to vest while the
Recipient is in active service with the Corporation or one of its Subsidiary
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Companies. Any election to defer the receipt of eligible Plan Shares shall be
irrevocable as long as the Recipient remains an Employee or a Non-Employee
Director of the Corporation or one of its Subsidiary Companies.
9.03 Plan Share Award Deferral. The deferral of Plan Shares may be
elected by a Recipient subject to the rules and regulations established by the
Committee. Upon the vesting of such Plan Shares, the Committee shall credit to a
deferred stock award account established for the Recipient (which may be part of
an existing deferred compensation trust account) a number of deferred shares or
share units equivalent in value to the number of deferred Plan Shares multiplied
by the Fair Market Value of the Common Stock. Deferred shares or share units
shall be valued at the Fair Market Value on the date the deferred Plan Shares
vest. Subsequent to the lapsing of all restrictions, the deferred shares or
share units shall be valued at the Fair Market Value of the Common Stock.
Deferred shares or share units shall accrue dividends at the rate paid upon the
Common Stock credited in the form of additional deferred share units. Deferred
share units shall be distributed in shares of Common Stock or cash, at the
discretion of the Committee, upon the Recipient's termination of employment or
service as a director or at such other date(s), as may be approved by the
Committee, over a period of no more than ten (10) years.
9.04 Accelerated Distributions. The Committee may, at its sole
discretion, allow for the early payment of an Recipient's deferred stock award
account in the event of an "unforeseeable emergency" or in the event of the
death or Disability of the Recipient. An "unforeseeable emergency" means an
unanticipated emergency caused by an event beyond the control of the Recipient
that would result in severe financial hardship if the distribution were not
permitted. Such distributions shall be limited to the amount necessary to
sufficiently address the financial hardship. Any distributions under this
provision shall be consistent with the Code and the regulations promulgated
thereunder. Additionally, the Committee may use its discretion to cause stock
award accounts to be distributed when continuing the program is no longer in the
best interest of the Corporation or one of its Subsidiary Companies.
9.05 Assignability. No rights to deferred stock award accounts may
be assigned or subject to any encumbrance, pledge or charge of any nature except
that a Recipient may designate a beneficiary pursuant to any rules established
by the Committee.
9.06 Unfunded Status. No Recipient or other person shall have any
interest in any fund or in any specific asset of the Corporation or one of its
Subsidiary Companies by reason of any amount credited pursuant to the provisions
hereof. Any amounts payable pursuant to the provisions hereof shall be paid from
the general assets of the Corporation or one of its Subsidiary Companies and no
Recipient or other person shall have any rights to such assets beyond the rights
afforded general creditors of the Corporation or one of its Subsidiary
Companies. However, the Corporation or one of its Subsidiary Companies shall
have the right to establish a reserve, trust or make any investment for the
purpose of satisfying the obligations created under this Article IX of the Plan;
provided, however, that no Recipient or other person shall have any interest in
such reserve, trust or investment.
ARTICLE X
MISCELLANEOUS
10.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards, the number
of Shares to which any unvested Plan Share Award relates and the maximum number
of Plan Shares which may be granted to any Employee, to any Non-Employee
Director or to all Non-Employee Directors as a group shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of shares or other capital
adjustment, the payment of a stock dividend or other increase or decrease in
such shares effected without receipt or payment of consideration by the
Corporation. If, upon a merger, consolidation, reorganization, liquidation,
recapitalization or the like of the Corporation or of another corporation, each
recipient of a Plan Share Award shall be entitled, subject to the conditions
herein stated, to receive such number of shares of Common Stock or amount of
other securities of the Corporation or such other corporation as were
exchangeable for the number of shares of Common Stock of the Corporation which
such Recipients would have been entitled to receive except for such action.
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10.02 Amendment and Termination of the Plan. The Board may, by
resolution, at any time amend or terminate the Plan and the Trust, subject to
any required shareholder approval or any shareholder approval which the Board
may deem to be advisable for any reason, such as for the purpose of obtaining or
retaining any statutory or regulatory benefits under tax, securities or other
laws or satisfying any applicable stock exchange listing requirements. The Board
may not, without the consent of the Recipient, alter or impair any Plan Share
Award previously granted under this Plan except as specifically authorized
herein. Notwithstanding any other provision of this Plan, this Plan may not be
terminated until such time as all Plan Shares held by the Trust have been
awarded to Plan Recipients and shall be deemed to be earned prior to the time of
termination.
10.03 Nontransferable. Plan Share Awards and Performance Share
Awards and rights to Plan Shares shall not be transferable by a Recipient, and
during the lifetime of the Recipient, Plan Shares may only be earned by and paid
to the Recipient who was notified in writing of the Award pursuant to Section
6.02. No Recipient or Beneficiary shall have any right in or claim to any assets
of the Plan or Trust, nor shall the Corporation or any Subsidiary be subject to
any claim for benefits hereunder.
10.04 Employment or Service Rights. Neither the Plan nor any grant
of a Plan Share Award, Performance Share Award or Plan Shares hereunder nor any
action taken by the Trustee, the Committee or the Board in connection with the
Plan shall create any right on the part of any Employee or Non-Employee Director
to continue in such capacity.
10.05 Voting and Dividend Rights. No Recipient shall have any voting
or dividend rights or other rights of a shareholder in respect of any Plan
Shares covered by a Plan Share Award or Performance Share Award, except as
expressly provided in Sections 7.02, 7.04 and 7.05 above, prior to the time said
Plan Shares are actually earned and distributed to him.
10.06 Governing Law. To the extent not governed by federal law, the
Plan and Trust shall be governed by the laws of the State of Delaware.
10.07 Effective Date. This Plan shall be effective as of the
Effective Date, and Awards may be granted hereunder no earlier than the date
this Plan is approved by the shareholders of the Corporation and no later than
the termination of the Plan. Notwithstanding the foregoing or anything to the
contrary in this Plan, the implementation of this Plan is subject to the
approval of the Corporation's shareholders.
10.08 Term of Plan. This Plan shall remain in effect until the
earlier of (1) ten (10) years from the Effective Date, (2) termination by the
Board, or (3) the distribution to Recipients and Beneficiaries of all the assets
of the Trust.
10.09 Tax Status of the Trust. It is intended that the trust
established hereby be treated as a Grantor Trust of the Corporation under the
provisions of Section 671 et seq. of the Code, as the same may be amended from
time to time.
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IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Agreement to be executed by its duly authorized officers and its
corporate seal to be affixed and duly attested, and the Trustees of the Trust
established pursuant hereto have duly and validly executed this Agreement, all
on this 30th day of September 1999.
COMMUNITY SAVINGS BANKSHARES, INC.
By: /s/ James B. Pittard. Jr.
---------------------------------
James B. Pittard, Jr.,
President and Chief Executive Officer
ATTEST: TRUSTEES:
/s/ Deborah M. Rousseau /s/ Frederick A. Teed
- ---------------------------- --------------------------------
Deborah M. Rousseau Frederick A. Teed
Secretary
/s/ Forest C. Beaty, Jr.
--------------------------------
Forest C. Beaty, Jr.
/s/ Robert F. Cromwell
--------------------------------
Robert F. Cromwell
/s/ Karl D. Griffin
--------------------------------
Karl D. Griffin
/s/ Harold I. Stevenson
--------------------------------
Harold I. Stevenson
11
COMMUNITY SAVINGS, F. A.
AMENDED AND RESTATED
SUPPLEMENTAL RETIREMENT INCOME PLAN
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 -- DEFINITIONS
1.1 Beneficiary............................................. 1
1.2 Change in Control of the Company........................ 1
1.3 Company................................................. 2
1.4 Compensation............................................ 2
1.5 Early Retirement Date................................... 3
1.6 Employer................................................ 3
1.7 Normal Retirement Date.................................. 3
1.8 Participant............................................. 3
1.9 Plan ................................................. 3
1.10 Committee............................................... 3
ARTICLE II -- ELIGIBILITY AND PARTICIPATION
2.1 Conditions of Eligibility............................... 3
2.2 Commencement of Participation........................... 3
2.3 Additional Compensation................................. 4
ARTICLE III -- RETIREMENT BENEFITS
3.1 Early Retirement Benefit................................ 4
3.2 Normal Retirement Benefit .............................. 4
3.3 Late Retirement Benefit ................................ 5
3.4 Change in Control Benefit............................... 5
3.5 Determination of Normal Retirement Benefit ............. 5
3.6 Payment of Retirement Benefits ......................... 6
ARTICLE IV -- DEATH BENEFITS
4.1 Participant's Death Benefits............................ 6
4.2 Death of Beneficiary ................................... 7
ARTICLE V -- PLAN ADMINISTRATION
5.1 Committee .............................................. 7
5.2 Claim ................................................. 8
5.3 Denial of Claim ........................................ 8
5.4 Review of Claim......................................... 8
5.5 Final Decision.......................................... 8
<PAGE>
ARTICLE VI -- PARTICIPANT'S RIGHTS
6.1 Participant's Rights.................................... 9
6.2 Spendthrift Provision................................... 9
6.3 Plan Not An Employment Agreement........................ 9
6.4 Protective Provisions................................... 9
ARTICLE VII -- MISCELLANEOUS
7.1 Termination of Plan..................................... 10
7.2 Inurement............................................... 10
7.3 Amendments and Modifications............................ 11
7.4 Governing Law........................................... 11
<PAGE>
COMMUNITY SAVINGS, F. A.
AMENDED AND RESTATED
SUPPLEMENTAL RETIREMENT INCOME PLAN
THIS SUPPLEMENTAL RETIREMENT INCOME PLAN was originally entered into at
North Palm Beach, Florida, on the 12th day of December 1991, for the benefit of
certain employees of Community Savings, F. A., a federally chartered savings and
loan association (hereinafter sometimes referred to as "Employer"). The Plan was
subsequently amended and restated as of the 27th day of January 2000 and the
30th day of March 2000.
ARTICLE I - DEFINITIONS
The following words and phrases as set forth in this Supplemental
Retirement Income Plan shall have the meaning and application set forth below:
1.1 BENEFICIARY. A person or entity designated in accordance with
Article IV of this Plan to receive benefits upon the death of a Participant.
1.2 CHANGE IN CONTROL OF THE COMPANY. The occurrence of any of the
following: (i) the acquisition of control of the Company as defined in 12 C.F.R.
ss.574.4, unless a presumption of control is successfully rebutted or unless the
transaction is exempted by 12 C.F.R. ss.574.3(c)(vii), or any successor to such
sections; (ii) an event that would be required to be reported in response to
Item 1(a) of Form 8-K or Item 6(e) of Schedule 14A of Regulation 14A pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor thereto, whether or not any class of securities of the Company is
registered under the Exchange Act; (iii) any "person" (as such 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 then
<PAGE>
outstanding securities; or (iv) during any period of three (3) consecutive years
after March 30, 2000, individuals who at the beginning of such period constitute
the Board of Directors of the Company cease for any reason to constitute at
least two-thirds (2/3) thereof unless the election, or the nomination for
election by shareholders of the Company, of each new director was approved by a
vote of at least a majority of the directors then still in office who were
directors at the beginning of the period. If any of the events enumerated in
clauses (i) through (iv) occur, the Board of Directors of Employer shall
determine the effective date of the Change in Control of the Company resulting
therefrom for purposes of the Plan.
1.3 COMPANY. Community Savings Bankshares, Inc., the parent holding
company for the Employer.
1.4 COMPENSATION. The highest level of compensation paid to a
Participant by the Employer and/or the Company or any subsidiary thereof during
the calendar year in which the Participant's retirement (Early, Normal or Late)
or the Change in Control of the Company occurs (determined on an annualized
basis) or either of the two calendar years immediately preceding the calendar
year in which the Participant's retirement or the Change in Control of the
Company occurs. Such compensation shall be amounts which were paid and either
(i) included in the Participant's gross income for tax purposes, including but
not limited to base salary, bonuses and amounts taxable to the Participant under
any qualified or non-qualified employee benefit plans of the Employer or the
Company, or (ii) deferred at the election of the Participant; provided however,
that for purposes of the calculation of Compensation, income related to
restricted stock plans and stock option plans of the Employer and/or the Company
shall not be included.
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<PAGE>
1.5 EARLY RETIREMENT DATE. The date on which a Participant has
completed his tenth (10th) year of service for the Employer and has reached
fifty (50) years of age.
1.6 EMPLOYER. For purposes of this Plan, Employer is Community
Savings, F. A., a federally chartered savings and loan association.
1.7 NORMAL RETIREMENT DATE. The date on which a Participant reaches
sixty-five (65) years of age.
1.8 PARTICIPANT. An employee of the Employer who is eligible to
participate in this Plan according to standards adopted by the Board of
Directors of the Employer.
1.9 PLAN. This Supplemental Retirement Income Plan as adopted by the
Employer and as may be hereafter amended.
1.10 COMMITTEE. The SERP Administration Committee as appointed by the
Board of Directors of the Employer from time to time.
ARTICLE II - ELIGIBILITY AND PARTICIPATION
2.1 CONDITIONS OF ELIGIBILITY. Eligibility to become a Participant
in this Plan will be determined by the Board of Directors of the Employer. Such
determination shall be conclusive and binding upon all persons.
2.2 COMMENCEMENT OF PARTICIPATION. The Employer or the Committee
shall notify each employee of his eligibility to participate in this Plan.
Eligible employees shall become Participants in this Plan as of the effective
date hereof or upon becoming eligible to participate in this Plan, as the case
may be. Each employee who becomes a Participant in this Plan shall complete such
forms as are reasonably required by the Committee for Plan participation.
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<PAGE>
2.3 ADDITIONAL COMPENSATION. Participant shall receive the benefits
provided for herein in addition to any compensation paid to or benefits provided
to Participant. Except as otherwise provided herein, nothing in this Plan shall
be construed as limiting, varying or reducing any provision or benefit to
Participant, Participant's estate or Beneficiaries pursuant to any employment
agreement, any retirement plan, including any qualified pension or profit
sharing plan, any health, disability or life insurance policies or any other
agreement between Employer and Participant.
ARTICLE III - RETIREMENT BENEFITS
3.1 EARLY RETIREMENT BENEFIT. (a) If a Participant retires from
full-time employment with Employer after the Early Retirement Date, Employer
will pay to Participant an Early Retirement Benefit as calculated in accordance
with Paragraph 3.1(b), payable pursuant to the provisions of Paragraph 3.6.
(b) The amount of the Early Retirement Benefit shall be equal to a
Participant's Normal Retirement Benefit as calculated pursuant to Paragraph 3.5,
multiplied by the Participant's Early Retirement Multiplier as set forth in the
table on Exhibit B attached hereto. Such Early Retirement Multiplier shall be
the factor under the Participant's name which is opposite the Participant's
Attained Age. However, for purposes of completing such benefit calculation,
Normal Retirement Date shall mean the date of the Participant's early retirement
instead of age sixty- five (65). The Participant's Attained Age shall be equal
to the Participant's age (in whole years) as of the Participant's retirement
date.
3.2 NORMAL RETIREMENT BENEFIT. If a Participant retires from
full-time employment with Employer after the Normal
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<PAGE>
Retirement Date, Employer will pay to Participant a Normal Retirement Benefit,
determined pursuant to Paragraph 3.5, payable pursuant to the provisions of
Paragraph 3.6.
3.3 LATE RETIREMENT BENEFIT. If a Participant remains employed by
Employer after the Normal Retirement Date, such Participant shall receive the
Normal Retirement Benefit upon actual retirement, actuarially adjusted to
reflect such Participant's later retirement.
3.4 CHANGE IN CONTROL BENEFIT. Upon Participant's cessation from
full-time employment with Employer after the occurrence of a Change in Control
of the Company and prior to attaining Normal Retirement Date, Employer will pay
to Participant an annual amount equal to the Normal Retirement Benefit, as
determined pursuant to Paragraph 3.5. However, for purposes of completing such
benefit calculation, Normal Retirement Date shall mean the date of Participant's
cessation of employment instead of age sixty-five (65). At the election of the
Participant, payments of benefits under this paragraph shall be made in either
(i) quarterly payments pursuant to Paragraph 3.6 or (ii) in a single lump sum
payment within five (5) days of Participant's cessation of employment. In the
event that the Participant elects the lump sum payment option, such single lump
sum payment shall equal the present value of the stream of quarterly installment
payments specified in Paragraph 3.6 discounted to present value at a discount
rate equal to the applicable federal rate, as defined in Section 7872(f)(2) of
the Internal Revenue Code of 1986, as amended, or any successor thereto, as in
effect as of the date of the Participant's cessation of employment.
3.5 DETERMINATION OF NORMAL RETIREMENT BENEFIT. A Participant's
annual Normal Retirement Benefit shall be an amount, determined as of such
Participant's Normal Retirement Date, equal to the difference between (i)
seventy-five (75%) percent of the Participant's Compensation; and (ii) the sum
of (A) such Participant's Annual Normal Retirement Benefit as specified on
Exhibit
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<PAGE>
A attached hereto, and (B) the annual Primary Insurance Amount to which such
Participant is entitled under the federal Social Security system, determined by
the actuary then serving this Plan, as of the date of such Participant's
retirement from the Employer, without regard to cost of living adjustments
occurring after such date and without regard to whether or not such Participant
receives such Primary Insurance Amount from the federal Social Security system.
3.6 PAYMENT OF RETIREMENT BENEFITS. Early, Normal, Late Retirement
or Change in Control Benefits (collectively referred to as "Retirement
Benefits") payable to a Participant upon such Participant's retirement or
cessation, as the case may be, from full-time employment with Employer, pursuant
to the provisions of Paragraphs 3.1, 3.2, 3.3 or 3.4 hereof, shall be payable in
the form of a quarterly benefit for fifteen (15) consecutive years beginning
with the first day of the second calendar quarter following such retirement or
cessation.
ARTICLE IV - DEATH BENEFITS
4.1 PARTICIPANT'S DEATH BENEFIT. If a Participant dies while
receiving quarterly installment benefits under the Plan or would have qualified
to receive a Retirement Benefit had such Participant retired or ceased
employment with the Employer the day immediately preceding his/her death,
Employer shall pay to the Beneficiary or Beneficiaries designated in writing by
Participant on Schedule A (or to Participant's Estate if Participant fails to so
designate a Beneficiary or Beneficiaries) the Retirement Benefit installments
that the Participant would have otherwise been entitled to receive, if any. Such
benefits shall be paid to the Beneficiary or Beneficiaries in the same manner as
they would have been paid to the Participant. For purposes of the Plan, a
Participant who dies while actively employed by the Employer and has satisfied
the requirements to receive a Retirement Benefit pursuant to Article III but for
his/her actual retirement or cessation of
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<PAGE>
employment, as the case may be, shall be deemed to have retired and ceased
employment with the Employer as of the day immediately preceding his/her date of
death and become entitled to a Retirement Benefit as determined pursuant to
Article III of the Plan. Such Retirement Benefit payments shall be deemed to
have commenced as of the Participants date of death.
4.2 DEATH OF BENEFICIARY. In the event of death of a Beneficiary who
is entitled to receive a Retirement Benefit in installments pursuant to
Paragraph 4.1, such benefit to which such Beneficiary was entitled at the time
of such Beneficiary's death shall continue to be payable to the beneficiary or
beneficiaries, designated in writing by such Beneficiary, on a form to be
submitted by such Beneficiary to the Committee (or to the Beneficiary's estate
if the Beneficiary fails to so designate a beneficiary or beneficiaries).
ARTICLE V -- PLAN ADMINISTRATION
5.1 COMMITTEE. This Plan and all matters related hereto, shall be
administered by the Committee which shall be the "named fiduciary". The
Committee will interpret the provisions of this Plan and shall determine all
questions arising in the administration, eligibility, interpretation and
application of this Plan. Any such determination by the Committee shall be
conclusive and binding on all persons and shall be consistently and uniformly
applied to all persons similarly situated. The Committee shall engage the
services of such independent actuaries and administrative personnel, who shall
certify, from time to time, to the Committee, that the funding policy
established by Employer, and the investments acquired pursuant thereto, are
sufficient, from time to time, to provide for such projected Retirement and
Death Benefit under the Plan.
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<PAGE>
5.2 CLAIM. Any person claiming a benefit, requesting an
interpretation or ruling under this Plan, or requesting information under the
Plan shall present the request, in writing, to the Committee which shall respond
in writing as soon as practicable.
5.3 DENIAL OF CLAIM. If the claim or request is denied, the written
notice of denial shall state:
(a) The reason for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
5.4 REVIEW OF CLAIM. Any person whose claim or request is denied or
who has not received a response within 90 days may (within 60 days after such
denial or 90-day period, whichever is earlier) request review by notice given in
writing to the Committee. Such request for review must state the specific
reasons, including any Plan provisions, upon which such request for review is
based. The claim or request shall be reviewed by the Committee which may, but
shall not be required to, grant the claimant a hearing. On review, the claimant
may have representation, examine pertinent documents, and submit issues and
comments in writing.
5.5 FINAL DECISION. The decision on review shall normally be made
within 60 days. If an extension of time is required for a hearing or other
special circumstances, the claimant shall be notified and the time limit shall
be 120 days. The decision shall be in writing and shall state the reason and the
relevant Plan provisions. All decisions on review shall be final and binding on
all parties concerned.
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<PAGE>
ARTICLE VI -- PARTICIPANT'S RIGHTS
6.1 PARTICIPANT'S RIGHTS. The rights of a Participant or a
Participant's Beneficiaries to benefits under this Plan shall be solely those of
an unsecured creditor of Employer. Any insurance policy or other asset acquired
or held by, or on behalf of, Employer or funds allocated by Employer in
connection with the liabilities assumed by Employer pursuant to this Plan shall
not be deemed to be held under any trust for the benefit of a Participant or a
Participant's Beneficiaries or to be security for the performance of Employer's
obligations pursuant hereto, but shall be and remain a general asset of
Employer.
6.2 SPENDTHRIFT PROVISION. Neither a Participant nor any other
person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are, expressly declared to be
non-assignable and non-transferrable. No part of the amounts payable shall,
prior to actual payment, be subject to seizure or sequestration for the payment
of any debts, judgments, alimony or separate maintenance owed by a Participant
or any other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
6.3 PLAN NOT AN EMPLOYMENT AGREEMENT. This Plan shall not be deemed
to constitute an employment agreement between the parties hereto nor shall any
provision, hereof, restrict the right of Employer to discharge a Participant as
an employee of Employer or restrict a Participant's right to terminate his
employment.
6.4 PROTECTIVE PROVISIONS. Participant will cooperate with Employer
by furnishing any and all information requested by Employer in order to
facilitate the payment of benefits
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<PAGE>
hereunder, taking such physical examinations as Employer may deem necessary and
taking such other action as may be requested by Employer. If a Participant makes
any material misstatement of information or nondisclosure of medical history,
then a Participant shall not be considered as having been a Participant in the
Plan.
ARTICLE VII - MISCELLANEOUS
7.1 TERMINATION OF PLAN. Employer, upon written notice to the
Participant(s), shall have the right, at any time, to terminate this Plan. Such
termination shall become effective when authorized by the Board of Directors of
Employer and written notice is given to Participant. Upon termination of this
Plan, those Participants then receiving Retirement Benefits pursuant to the
provisions of Article III and those Beneficiaries receiving Death Benefits
pursuant to the provisions of Article IV shall continue to receive such Benefits
in accordance with this Plan. If, as of the date of termination of this Plan, a
Participant shall have satisfied the requirements to receive a Retirement
Benefit pursuant to Article III but for his actual retirement or cessation of
employment, the Participant shall, for purposes of this Plan only, be deemed to
have retired and ceased employment on the day immediately preceding the
effective date of such termination. A Participant deemed to have retired and
ceased employment shall receive Retirement Benefits pursuant to the provisions
of Article III hereof as if such Participant had retired and ceased employment
on the day immediately preceding the termination of the Plan and had commenced
the receipt of such Retirement Benefits as of the termination of the Plan.
7.2 INUREMENT. This Plan shall be binding upon and shall inure to
the benefit of Employer and each Participant hereunder and their respective
heirs, executors, administrators, successors and assigns.
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<PAGE>
7.3 AMENDMENTS AND MODIFICATIONS. The Board of Directors of Employer
may, at any time or from time to time, amend or modify this Plan in any respect
and without consent of any Participant or Beneficiary; PROVIDED, HOWEVER, that
any such amendment or modification shall not impair the right of any Participant
or any Beneficiary to receive the benefits or to continue to receive the
benefits provided by Articles III and IV hereof as in effect prior to such
amendment or modification unless such Participant or such Beneficiary has
consented to such amendment or modification if at the time of such amendment or
modification, such Participant or Beneficiary shall have satisfied the
requirements to receive a Retirement Benefit or Death Benefit but for such
Participant's actual retirement, cessation of employment or death; and FURTHER
PROVIDED that this Agreement shall not be amended, modified or terminated in any
respect in contemplation of a Change in Control of the Company. For purposes of
this Paragraph 7.3, an amendment, modification or termination in contemplation
of a Change in Control of the Company shall be deemed to have occurred if a
Change in Control of the Company occurs within twelve (12) months of any
amendment or modification to this Plan, or termination of this Plan. In such
event, any such amendment, modification or termination shall be null and void.
The Board of Directors of Employer may, at any time in its sole and absolute
discretion, accelerate the payment of benefits under the Plan to a Participant
or Beneficiary.
7.4 GOVERNING LAW. This Plan is made pursuant to, and shall be
governed by, the laws of the State of Florida, in all respects, including
matters of construction, validity and performance.
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<PAGE>
IN WITNESS WHEREOF, the Employer has adopted this Amended and Restated
Supplemental Retirement Income Plan the day and year first above written.
COMMUNITY SAVINGS, F. A.
By: /s/ FREDERICK A. TEED
--------------------------------
Frederick A. Teed
Chairman of the Board of Directors
By: /s/ JAMES B. PITTARD, JR.
--------------------------------
James B. Pittard, Jr.
President and Chief Executive Officer
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<PAGE>
EXHIBIT A
ANNUAL NORMAL RETIREMENT BENEFIT
Annual Normal Retirement
Participant Benefit*
-------------------- ------------------------
Larry J. Baker $59,916.24
Cecil F. Howard, Jr. $63,539.28
James B. Pittard, Jr. $87,235.92
* The amounts reflected are preliminary numbers which are subject to change
based upon the final termination of the Retirement Plan for Employees for
Community Savings, F. A. and its Affiliates.
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT B
EARLY RETIREMENT MULTIPLIER
----------------------------------------------------------------------
EARLY RETIREMENT MULTIPLIER
- ------------------------------------------------------------------------------------------
ATTAINED AGE CECIL F. HOWARD, JR. LARRY J. BAKER JAMES B. PITTARD, JR.
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
50 .00 .32 .48
- ------------------------------------------------------------------------------------------
51 .07 .36 .52
- ------------------------------------------------------------------------------------------
52 .13 .41 .55
- ------------------------------------------------------------------------------------------
53 .20 .45 .59
- ------------------------------------------------------------------------------------------
54 .27 .50 .62
- ------------------------------------------------------------------------------------------
55 .33 .55 .66
- ------------------------------------------------------------------------------------------
56 .40 .59 .69
- ------------------------------------------------------------------------------------------
57 .47 .64 .72
- ------------------------------------------------------------------------------------------
58 .53 .68 .76
- ------------------------------------------------------------------------------------------
59 .60 .73 .79
- ------------------------------------------------------------------------------------------
60 .67 .77 .83
- ------------------------------------------------------------------------------------------
61 .73 .82 .86
- ------------------------------------------------------------------------------------------
62 .80 .86 .90
- ------------------------------------------------------------------------------------------
63 .87 .91 .93
- ------------------------------------------------------------------------------------------
64 .93 .95 .97
- ------------------------------------------------------------------------------------------
65 1.00 1.00 1.00
- ------------------------------------------------------------------------------------------
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
</LEGEND>
<CIK> 0001068725
<NAME> COMMUNITY SAVINGS BANKSHARES, INC.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 18,976
<INT-BEARING-DEPOSITS> 41,394
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 144,444
<INVESTMENTS-CARRYING> 37,787
<INVESTMENTS-MARKET> 40,075
<LOANS> 610,218
<ALLOWANCE> 4,020
<TOTAL-ASSETS> 905,779
<DEPOSITS> 636,404
<SHORT-TERM> 26,387
<LIABILITIES-OTHER> 10,659
<LONG-TERM> 116,640
0
0
<COMMON> 10,571
<OTHER-SE> 105,118
<TOTAL-LIABILITIES-AND-EQUITY> 905,779
<INTEREST-LOAN> 11,667
<INTEREST-INVEST> 3,187
<INTEREST-OTHER> 684
<INTEREST-TOTAL> 15,538
<INTEREST-DEPOSIT> 6,054
<INTEREST-EXPENSE> 8,397
<INTEREST-INCOME-NET> 7,141
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,820
<INCOME-PRETAX> 2,102
<INCOME-PRE-EXTRAORDINARY> 1,607
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,607
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.18
<YIELD-ACTUAL> 3.41
<LOANS-NON> 662
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 815
<ALLOWANCE-OPEN> 3,923
<CHARGE-OFFS> (53)
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 4,020
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</TABLE>
