PROXY STATEMENT
This proxy statementProxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Columbia Financial, Inc. (which we refer to in this proxy statement as “Columbia Financial,” “we,” “us,” “our,” or the “Company”) to be used at the annual meeting of shareholders of the Company. The Company is the holding company for Columbia Bank (the “Bank”).Special Meeting and at any postponements or adjustments thereof.
INFORMATION ABOUT THE SPECIAL MEETING
Time and Location
The annual meetingSpecial Meeting will be a “virtual meeting” which will be held at the Sheraton Mahwah Hotel located at 1 International Boulevard, Route 17 North, Mahwah, New Jersey 07495 on Thursday, June 6, 2019Monday, April 4, 2022 at 10:00 a.m., local time. A notice of internet availability of proxy materials regarding thisThis proxy statement is being first mailed to shareholders on or about April 22, 2019.February 23, 2022.
Who Can Vote at the Special Meeting
You are entitled to vote your shares of Columbia Financial common stock at the annual meetingSpecial Meeting if the records of the Company show that you held your shares as of the close of business on April 12, 2019.February 11, 2022 (the “Record Date”). If your shares are held in a stock brokerage account or by a bank or other nominees, you are considered the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by your broker, bank or other nominee. As the beneficial owner, you have the right to direct your broker on how to vote your shares. Your broker, bank or other nominee has enclosed a voting instruction form for you to use in directing it on how to vote your shares.
As ofOn the close of business on April 12, 2019, 115,889,175Record Date, there were 106,811,453 shares of Columbia Financial common stock were outstanding and entitled to vote.vote at the Special Meeting, including 69,930,210 shares held by Columbia Bank MHC, the Company’s parent mutual holding company. Each share of common stock has one vote.
The Company’s certificate of incorporation provides that record holders of the Company’s common stock who beneficially own, either directly or indirectly, in excess of 10% of the Company’s outstanding shares are not entitled to any vote with respect to those shares held in excess of the 10% limit. This provision does not apply to shares held by Columbia Bank MHC, the Company’s parent mutual holding company, which owned 62,580,15569,930,210 shares, or 54.0%,65.5 %, of the Company’s outstanding common stock as of April 12, 2019.the Record Date.
With respect to the Special Meeting, the shares held by Columbia Bank MHC will be counted for purposes of determining a quorum and such shares are expected to be voted in favor of Proposal 1, Proposal 2 and Proposal 3. However, in order for the proposals to be ratified, a majority of votes cast by the minority shareholders who are eligible to participate in the ratification vote must also vote in favor of ratification of the proposals. The shareholders who are eligible to participate in the ratification vote on Proposal 1, Proposal 2 and Proposal 3 (the “Eligible Shareholders”) are all shareholders of the Company on the Record Date, other than (i) Columbia Bank MHC, (ii) the Defendants, as defined herein, (iii) family members of the Defendants residing in the same household as a Defendant, and (iv) entities controlled by one or more Defendants.
Advance Voting MethodsMaterials
Even if you plan to attend the annual meeting in person,virtual Special Meeting, please vote in advance of the meeting using any one of the following advance voting methods (see page 3 for additional details).methods.
You can vote in advance in one of three ways:
•
Visit the website listed on your proxy card/voting instruction formcard or notice of internet availability of proxy materials to voteVIA THE INTERNET;
•
Call the telephone number on your proxy card/voting instruction formcard or notice of internet availability of proxy materials to vote BY TELEPHONE; or
•
If you received a paper proxy card, or voting instruction form, complete, sign, date and return the proxy card or voting instruction form in the enclosed envelope BY MAIL.
Attending and Voting at the Annual Meeting
If you are a shareholder as of the close of business on April 12, 2019, you may attend the annual meeting. However, if you hold your shares in street name, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or letter from a bank, broker or other nominee are all examples of proof of ownership. If you want to vote your shares of Columbia Financial common stock held in street name in person at the meeting, you will need a written proxy in your name from the broker, bank or other nominee who holds your shares.
INFORMATION ABOUT THE MEETINGAttending the Special Meeting
As permitted by Delaware law, our Special Meeting will be held solely as a virtual meeting live via the internet, and not at any physical location. You will be able to attend the Special Meeting via live audio webcast by visiting the Company’s virtual meeting website at www.virtualshareholdermeeting.com/CLBK2022SM on Monday, April 4, 2022, at 10:00 a.m. Eastern time. Upon visiting the meeting website, you will be prompted to enter your 16-digit Control Number provided to you on your proxy card. Your unique Control Number allows us to identify you as a shareholder and will enable you to securely log on, vote and submit questions during the Special Meeting on the meeting website. Further instructions on how to attend and participate via the internet, including how to demonstrate proof of stock ownership, are available at www.proxyvote.com. Vote Required
The annual meetingSpecial Meeting will be held only if there is a quorum. A majority of the outstanding shares of Columbia Financial common stock entitled to vote, represented in person or by proxy, constitutes a quorum. If you return valid proxy instructions or attend the meeting in person,Special Meeting via live webcast, your shares will be counted for purposes of determining whether there is a quorum, even if you abstain from voting.
Our management anticipates that Columbia Bank MHC, our majority shareholder, will vote allattend the meeting for the purpose of its sharesestablishing a quorum and will vote in favor of all three proposals to be presented at the annual meeting.proposals. In addition, the Columbia Bank Foundation, in accordance with its governing documents, will vote at the Special Meeting, but as required by its governance documents, it must vote all the shares of Columbia Financial Inc. in the same proportion as shares are voted by all other shareholders.
•
Further, as discussed herein, ratification will also require the affirmative vote of a majority of the shares voted by Eligible Shareholders, who are all shareholders of the Company on the Record Date other than (i) Columbia Bank MHC, (ii) the Defendants, as defined herein, and (iii) family members of the Defendants residing in the same household as a Defendant, and (iv) entities controlled by one or more Defendants. The aggregate number of shares held by Eligible Shareholders as of the Record Date is 35,815,826.
Proposal 1 — — In voting on the election of directors, you may vote in favor ofapproval to ratify the nominees or withhold votes as2019 Equity Awards to the nominees. There is no cumulative voting for the election of directors. Directors are elected by a plurality of the votes cast at the annual meeting. “Plurality” means that the nominees receiving the largest number of votes cast will be elected up to the maximum number ofnon-employee directors, to be elected at the annual meeting. The maximum number of directors to be elected at the annual meeting is two.
•
Proposal 2 — In voting on the proposal to approve the Columbia Financial, Inc. 2019 Equity Incentive Plan, you may vote in favor of the proposal, vote against the proposal or abstain from voting. To be approved,ratified the proposal requires (i) the affirmative vote of a majority of the votes cast, in person or by proxy, at the annual meeting,Special Meeting, and (ii) the affirmative vote of a majority of the votes cast at the annual meeting,Special Meeting, in person or by proxy, by shareholders other than Columbia Bank MHC, the Company’s parent mutual holding company.
•
Eligible Shareholders.
Proposal 32 — — In voting on the approval to ratify the appointment of KPMG LLP as2019 Equity Awards to the Company’s independent registered public accounting firm,retired non-employee directors who have been in continuous service with the Company since their retirement, you may vote in favor of the proposal, vote against the proposal or abstain from voting. To be approved,ratified the proposal requires (i) the affirmative vote of a majority of the votes cast, in person or by proxy, at the annual meeting.Special Meeting, and (ii) the affirmative vote of a majority of the votes cast at the Special Meeting, in person or by proxy, by the Eligible Shareholders.
AbstentionsProposal 3 — In voting on the approval to ratify the 2019 Equity Awards to Thomas J. Kemly, you may vote in favor of the proposal, vote against the proposal or abstain from voting. To be ratified the proposal requires (i) the affirmative vote of a majority of the votes cast, in person or by proxy, at the Special Meeting, and Broker Non-Votes(ii) the affirmative vote of a majority of the votes cast at the Special Meeting, in person or by proxy, by the Eligible Shareholders.
Abstentions and “broker non-votes” are not considered “votes cast” and will therefore have no effect on the outcome of any vote takenproposals voted on at the annual meeting.Special Meeting. A broker non-vote occurs when a broker, bank or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker, bank or other nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner. Broker non-votes will not be counted for purposes of determining the existence of a quorum.
Effect of Not Casting Your Vote
If you hold your shares in street name it is critical that you cast your vote if you want it to count in the election of directors (Proposal 1) or with respect to the proposal to approve the Columbia Financial, Inc. 2019 Equity Incentive Plan (Proposal 2).Proposal 1, Proposal 2 and Proposal 3. Current regulations restrict the ability of your bank or broker to
INFORMATION ABOUT THE MEETING
Voting by Proxy
This proxy statement is being sent to you by the Board of Directors of the Company to request that you allow your shares of the Company common stock to be represented at the annual meetingSpecial Meeting by the persons named in the enclosed proxy card. All shares of Company common stock represented at the meeting by properly executed and dated proxies will be voted according to the instructions indicated on the proxy card. If you vote online or by telephone, or if you sign, date and return a proxy card without giving voting instructions, your shares will be voted as recommended by the Company’s Board of Directors.
The Board of Directors recommends that you vote:
•
“FOR” eachFOR the ratification of 2019 Equity Awards made to current non-employee Directors of the nominees for director;
•
“FOR” the approval ofCompany under the Columbia Financial, Inc. 2019 Equity Incentive Plan; and
•
“FOR”FOR the ratification of the appointment2019 Equity Awards made to former non-employee Directors under the Columbia Financial, Inc. 2019 Equity Incentive Plan, who were incumbent directors at the time the awards were made, who are currently retired from the Board of KPMG LLPDirectors of the Company and have been in continuous service with the Company as advisory directors since their retirements; and
•
FOR the Company’s independent registered public accounting firm.ratification of 2019 Equity Awards made to Thomas J. Kemly, President and Chief Executive Officer of the Company under the Columbia Financial, Inc. 2019 Equity Incentive Plan
If any matter not described in this proxy statement is properly presented at the annual meeting,Special Meeting, the persons named in the proxy card will use their judgment to determine how to vote your shares. This includes a motion to adjourn or postpone the meeting in order to solicit additional proxies. If the annual meetingSpecial Meeting is postponed or adjourned, your shares of Columbia Financial common stock may also be voted by the persons named in the proxy card on the new meeting date, unless you have revoked your proxy. The Company does not know of any other matters to be presented at the annual meeting.Special Meeting.
You may revoke your proxy at any time before the vote is taken at the annual meeting.Special Meeting. To revoke your proxy, you must advise the Corporate Secretary of the Company in writing before your Company common stock has been voted at the annual meeting,Special Meeting, deliver a later-dated valid proxy or attend the meeting and vote your shares in person.online. In addition, if you voted by telephone or via the Internet,internet, you may revoke your vote by following the instructions provided for each. Attendance at the annual meetingvirtual Special Meeting will not in itself constitute revocation of your proxy.
If your Columbia Financial common stock is held in street name, you will receive instructions from your broker, bank or other nominee that you must follow to have your shares voted. Your broker, bank or other nominee may allow you to deliver your voting instructions by telephone or by the Internet.internet. Please see the instruction form provided by your broker, bank or other nominee that accompanies this proxy statement. If you wish to change your voting instructions after you have returned your voting instruction form to your broker, bank or other nominees,nominee, you must contact your broker, bank or other nominee.
If you have any questions about voting, please contact our proxy solicitor, Equiniti (US) ServicesAlliance Advisors, LLC, toll free, at 833.270.9824.(833) 501-4813.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting
Unless you elect to receive paper copies of our proxy materials, we are sending our shareholders a Notice of Internet Availability of Proxy Materials (“Notice”) that will instruct you on how to access the proxy materials and proxy card to vote your shares by telephone or over the Internet. If you would like to receive a paper copy of our proxy materials free of charge, please follow the instructions included in the Notice. For more information on the Notice, see “Other Information — Notice and Accessibility of Proxy Materials” below.
It is anticipated that the Notice will be mailed to stockholders on or before April 22, 2019.
The Notice, thisThis Proxy Statement and our Annual Report areis available at our website under Investor Relationsto shareholders online at http://ir.columbiabankonline.com.ir.columbiabankonline.com.
CORPORATE GOVERNANCE
GeneralThe 2019 Equity Incentive Plan and the Awards Made Thereunder
The Company periodically reviewscompleted its corporate governance policies and procedures to ensure that the Company meets the highest standards of ethical conduct, reports results with accuracy and transparency and maintains full compliance with the laws, rules and regulations that govern the Company’s operations.minority stock public offering in April, 2018. As part of this periodic corporate governance review, the Board of Directors reviews and adopts best corporate governance policies and practices for the Company.
Code of Ethics and Business Conduct
The Company has adopted a Code of Ethics and Business Conduct that applies to all of its directors, officers and employees, including its principal executive officer, principal financial officer and principal accounting officer and persons performing similar functions. The Code of Ethics and Business Conduct is available upon written request to Corporate Secretary, Columbia Financial, Inc., 19-01 Route 208 North, Fair Lawn, New Jersey 07410 and on the Company’s website at http://ir.columbiabankonline.com. If the Company amends or grants any waiver from a provision of the Code of Ethics and Business Conduct that applies to its executive officers, it will publicly disclose such amendment or waiver on its website and as required by applicable law, including by filing a Current Report on Form 8-K with the U.S. Securities and Exchange Commission.
Meetings and Committees of the Board of Directors
The Company conducts business through meetings of its Board of Directors and its committees. The Company’s Board of Directors held ten regular meetings and six special meetings during the fiscal year ended December 31, 2018. No director attended fewer than 75% of the total meetings of the Company’s Board of Directors and committees on which such director served.
The following table identifies our standing committees and their members as of April 12, 2019. All members of each committee are independent in accordance with the listing standards of the Nasdaq Stock Market, Inc. The Board of Directors has adopted a written charter for each committee that, among other things, specifies the scope of each committee’s rights and responsibilities. A copy of each committee charter is available in the Investor Relations section of the Company’s website at http://ir.columbiabankonline.com.
| Director | | | Audit
Committee | | | Compensation
Committee | | | Nominating/Corporate
Governance
Committee | | | Risk
Committee | |
| Noel R. Holland | | | | | X | | | | | | X* | | | | | | X | | | | | | X* | | |
| Frank Czerwinski | | | | | | | | | | | X | | | | | | X* | | | | | | X | | |
| Raymond G. Hallock | | | | | X | | | | | | | | | | | | X | | | | | | X | | |
| Thomas J. Kemly. | | | | | | | | | | | | | | | | | | | | | | | X | | |
| Henry Kuiken | | | | | | | | | | | X | | | | | | | | | | | | X | | |
| Michael Massood, Jr. | | | | | X* | | | | | | | | | | | | | | | | | | X | | |
| Elizabeth E. Randall | | | | | X | | | | | | | | | | | | X | | | | | | X | | |
| Robert Van Dyk | | | | | | | | | | | X | | | | | | | | | | | | X | | |
| Number of Meetings in 2018 | | | | | 8 | | | | | | 7 | | | | | | 3 | | | | | | 4 | | |
*
Chairman
Audit Committee. The Audit Committee assists the Board of Directors in discharging its duties related to the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent auditors’ qualifications, independence and performance, the performance of our internal audit function, our accounting and financial reporting process and financial statement audits. Among other things, the responsibilities of the Audit Committee include:
•
Being responsible for the appointment, compensation, retention and oversight of the independent auditors;
•
Reviewing the Company’s annual and quarterly consolidated financial statements with management and the independent auditors;
•
Overseeing internal audit activities;
•
Pre-approving all audit and permissible non-audit services to be performed by the Company’s independent auditors;
•
Authorizing, reviewing, and approving the Audit Committee Report to be included in the Company’s annual proxy statement;
•
Reviewing and approving any third party transactions;
•
Establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by its employees of concerns regarding questionable accounting or auditing matters; and
•
Reviewing the Audit Committee’s performance and the adequacy of the Audit Committee’s charter on an annual basis.
The Company also provides for appropriate funding, as determined by the Audit Committee, for payment of compensation to the Company’s independent auditors, any independent counsel or other advisors engaged by the Audit Committee and for administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.
The Board of Directors has designated Michael Massood, Jr. as an audit committee financial expert under the rules of the Securities and Exchange Commission. Mr. Massood is independent under the listing requirements of the Nasdaq Stock Market, Inc. applicable to audit committee members.
The report of the Audit Committee appears in this proxy statement under the heading “Proposal 3 — Ratification of Independent Registered Public Accounting Firm — Audit Committee Report.”
Compensation Committee. The Compensation Committee establishes, administers and reviews the Company’s policies, programs and procedures for compensating its executive officers and directors. The functions and responsibilities of the Compensation Committee include:
•
Overseeing the Company’s overall compensation structure, policies and programs, and assessing whether the Company’s compensation structure establishes appropriate incentives for management and employees;
•
Reviewing and approving annually the corporate goals and objectives applicable to the compensation of the President and Chief Executive Officer, evaluating at least annually the President and Chief Executive Officer’s performance in light of these goals and objectives, and recommending the President and Chief Executive Officer’s compensation level based on this evaluation;
•
In collaboration with the President and Chief Executive Officer, reviewing and evaluating the performance of the Company’s executive officers and approving such other executive officers’ compensation and benefits;
•
Reviewing, administering and making recommendations to the Board of Directors with respect to the Company’s incentive compensation and equity-based plans;
•
Reviewing and making recommendations to the Board of Directors regarding employment or severance arrangements or plans;
•
Reviewing the Company’s incentive compensation arrangements to determine whether they encourage any excessive risk-taking, reviewing at least annually the relationship between risk management policies and practices and compensation and evaluating compensation policies and practices that could mitigate any such risk;
•
Retaining such compensation consultants, legal counsel or other advisors as the Compensation Committee deems necessary or appropriate for it to carry out its duties, with direct responsibility for the appointment, compensation and oversight of work of such consultants, counsels and advisors;
•
Preparing a report on executive compensation for inclusion in the Company’s annual meeting proxy statement;
•
Reviewing and making recommendations to the Board of Directors with respect to the compensation of the Company’s directors;
•
Developing a succession plan for our executive officer positions, reviewing it periodically and developing and evaluating potential candidates for succession; and
•
Reviewing the Compensation Committee’s performance and the adequacy of its charter on an annual basis.
Nominating/Corporate Governance Committee. The Nominating/Corporate Governance Committee is responsible for assisting the Board of Directors in discharging its duties related to corporate governance and nominating functions. Among other things, the functions and responsibilities of the Nominating/Corporate Governance Committee include:
•
Developing policies on the size and composition of the Company’s Board of Directors;
•
Developing and recommending to the Board of Directors criteria to be used in identifying and selecting nominees for director;
•
Reviewing possible candidates for election to the Board of Directors;
•
Recommending to the Board of Directors candidates for election or re-election to the Board of Directors;
•
Recommending committee structure, composition and assignments;
•
Conducting an annual performance evaluation of the Board of Directors and its committees; and
•
Reviewing the Nominating/Corporate Governance Committee’s performance and the adequacy of its charter on an annual basis.
Minimum Qualifications. The Nominating/Corporate Governance Committee has adopted a set of criteria that it considers when it selects individuals to be nominated for election to the Board of Directors. First, a candidate must meet the eligibility requirements set forth in the Company’s Bylaws, which include an age limitation. A candidate also must meet any qualification requirements set forth in any Board or committee governing documents.
The Nominating/Corporate Governance Committee will considerprospectus for that offering, one of the following criteria in selecting nominees: contributions to the range of talent, skill and expertise appropriateprimary reasons for the Board; financial, regulatory and business experience; knowledge of the banking and financial services industries; familiarity with the operations of public companies and ability to read and understand financial statements; familiarity with the Company’s market area and participation in and ties to local businesses and local civic, charitable and religious organizations; personal and professional integrity, honesty and reputation; ability to represent the best interests of the shareholders ofoffering was for the Company and the best interests of the Bank; ability to devote sufficient time and energy to the performance of his or her duties; independence; current equity holdings in the Company; and any other factors the Nominating/Corporate Governance Committee deems relevant, including age, diversity, size of the Board of
Directors and regulatory disclosure obligations. In its consideration of diversity, the Nominating/Corporate Governance Committee seeks to create a Board that is strong in its collective knowledge and that has a diverse set of skills and experience with respect to management and leadership, vision and strategy, accounting and finance, business operations and judgment, industry knowledge and corporate governance.
In addition, prior to nominating an existing director for re-election to the Board of Directors, the Nominating/Corporate Governance Committee will consider and review an existing director’s Board and committee attendance and performance; length of Board service; experience, skills and contributions that the existing director brings to the Board; and independence.
Director Nomination Process. The process that the Nominating/Corporate Governance Committee follows when it identifies and evaluates individuals to be nominated for election to the Board of Directors is as follows:
For purposes of identifying nominees for the Board of Directors, the Nominating/Corporate Governance Committee relies on personal contacts of the committee members and other members of the Board of Directors, as well as its knowledge of members of the communities served by the Bank. The Nominating/Corporate Governance Committee also will consider director candidates recommended by shareholders in accordance with the policy and procedures set forth below. The Nominating/Corporate Governance Committee has not previously used an independent search firm to identify nominees.
In evaluating potential nominees, Nominating/Corporate Governance Committee determines whether the candidate is eligible and qualified for service on the Board of Directors by evaluating the candidate under the selection criteria set forth above. In addition, the Nominating/Corporate Governance Committee will conduct a check of the individual’s background and interview the candidate to further assess the qualities of the prospective nominee and the contributions he or she would make to the Board.
Consideration of Recommendations by Shareholders. It is the policy of the Nominating/Corporate Governance Committee to consider director candidates recommended by shareholders who appear to be qualified to serve on the Company’s Board of Directors. The Nominating/Corporate Governance Committee may choose not to consider an unsolicited recommendation if no vacancy exists on the Board of Directors and the Nominating/Corporate Governance Committee does not perceive a need to increase the size of the Board of Directors. In order to avoid the unnecessary use of the Nominating/Corporate Governance Committee’s resources, the Nominating/Corporate Governance Committee will consider only those director candidates recommended in accordance with the procedures set forth below.
Procedures to be Followed by Shareholders. To submit a recommendation of a director candidate to the Nominating/Corporate Governance Committee, a shareholder must submit the following information in writing, addressed to the Chairman of the Nominating/Corporate Governance Committee, care of the Corporate Secretary, at the main office of the Company:
1.
The name of the person recommended as a director candidate;
2.
All information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended;
3.
The written consent of the person being recommended as a director candidate to being named in the proxy statement as a nominee and to serving as a director if elected;
4.
As to the shareholder making the recommendation, the name and address, as they appear on the Company’s books, of such shareholder; provided, however, that if the shareholder is not a registered holder of the Company’s common stock, the shareholder should submit his or her name and address along with a current written statement from the record holder of the shares that reflects ownership of the Company’s common stock; and
5.
A statement disclosing whether such shareholder is acting with or on behalf of any other person and, if applicable, the identity of such person.
In order for a director candidate to be considered for nomination by the Board of Directors at the Company’s annual meeting of shareholders, the recommendation must be received by the Nominating/Corporate Governance Committee at least 120 calendar days prior to the date the Company’s proxy statement was released to shareholders in connection with the previous year’s annual meeting, advanced by one year.
Board Leadership Structure
Our Board of Directors has determined that the separation of the offices of Chairman of the Board and President and Chief Executive Officer enhances Board independence and oversight. Moreover, the separation of the positions of Chairman of the Board and President and Chief Executive Officer enables the President and Chief Executive Officer to focus on his responsibilities of running Columbia Financial and Columbia Bank and expanding and strengthening our franchise while enabling the Chairman of the Board to lead the Board of Directors in its fundamental role of providing advice to and independent oversight of management. Consistent with this determination, Noel R. Holland, who is independent under the listing requirements of the Nasdaq Stock Market, serves as Chairman of the Board and Thomas J. Kemly serves as President and Chief Executive Officer.
Board Oversight of Risk Management
Our Board of Directors believes that effective risk management and control processes are critical to our safety and soundness, our ability to predict and manage the challenges that we face and, ultimately, our long-term corporate success. Our Board of Directors, both directly and through its committees, is responsible for overseeing our risk management processes, with each of the committees of our Board of Directors assuming a different and important role in overseeing the management of the risks the Company faces. The Risk Committee, which is comprised of the entire Board of Directors, oversees the identification and management of the various risks we face including, among other things, financial, credit, collateral, consumer compliance, operational, Bank Secrecy Act, fraud, cyber security, vendor and insurable risks.
The Audit Committee of the Board of Directors is responsible for overseeing risks associated with financial matters (particularly financial reporting, accounting practices and policies, disclosure controls and procedures and internal control over financial reporting). The Compensation Committee of the Board of Directors has primary responsibility for risks and exposures associated with our compensation policies, plans and practices, regarding both executive compensation and the Company’s compensation structure generally. In particular, our Compensation Committee, in conjunction with our President and Chief Executive Officer and other members of our management, as appropriate, reviews our incentive compensation arrangements to ensure these programs are consistent with applicable laws and regulations, including safety and soundness requirements, and do not encourage imprudent or excessive risk-taking by our employees. The Nominating/Corporate Governance Committee of the Board of Directors oversees risks associated with the independence of our Board of Directors and potential conflicts of interest.
Our senior management is responsible for implementing our risk management processes, including by assessing and managing the risks we face, including strategic, operational, regulatory, investment and execution risks, on a day-to-day basis, and reporting to our Board of Directors regarding our risk management processes. Our senior management is also responsible for creating and recommending to our Board of Directors for approval appropriate risk appetite metrics reflecting the aggregate levels and types of risk we are willing to accept in connection with the operation of our business and pursuit of our business objectives.
The role of our Board of Directors in our risk oversight is consistent with our leadership structure, with our President and Chief Executive Officer and the other members of senior management having responsibility for assessing and managing our risk exposure, and our Board of Directors and its
PROPOSAL 1. ELECTION OF DIRECTORS
Director Compensation
During 2018, the non-employee directors of Columbia Bank received compensation for service and attendance as follows:
•
The Chairman of the Board of Directors received an annual retainer of $134,500;
•
The Chairman of the Audit Committee received an annual retainer of $7,500;
•
Directors (other than the Chairman of the Board) received an annual retainer of $67,800;
•
Members of the Nominating/Corporate Governance Committee received an annual retainer of $5,000;
•
The Chairman of the Board received an additional fee of $1,500 for each board meeting attended.
•
Directors (other than the Chairman of the Board) received an additional fee of $1,300 for each board meeting attended.
Board members do not receive any additional compensation as a result of their service as directors of Columbia Financial or Columbia Bank MHC.
The following table sets forth the compensation received by individuals who served as our non-employee directors during the year ended December 31, 2018.
| Name | | | Fees Earned
or Paid in
Cash | | | Nonqualified
Deferred
Compensation
Earnings | | | All Other
Compensation(1) | | | Total | |
| Frank Czerwinski | | | | $ | 110,400 | | | | | $ | — | | | | | $ | 1,459 | | | | | $ | 111,859 | | |
| Raymond G. Hallock | | | | | 102,700 | | | | | | — | | | | | | 4,226 | | | | | | 106,926 | | |
| Noel R. Holland | | | | | 187,500 | | | | | | — | | | | | | 4,366 | | | | | | 191,866 | | |
| Henry Kuiken | | | | | 101,600 | | | | | | — | | | | | | 7,255 | | | | | | 108,855 | | |
| Michael Massood, Jr. | | | | | 107,800 | | | | | | — | | | | | | 25,971 | | | | | | 133,771 | | |
| Elizabeth E. Randall | | | | | 105,300 | | | | | | — | | | | | | 706 | | | | | | 106,006 | | |
Jack R. Salvetti(2) | | | | | 97,700 | | | | | | — | | | | | | — | | | | | | 97,700 | | |
| Robert Van Dyk | | | | | 102,900 | | | | | | — | | | | | | 17,393 | | | | | | 120,293 | | |
(1)
Represents health insurance and term life insurance premiums.
(2)
Mr. Salvetti resigned from the Board of Directors effective January 23, 2019.
Director Deferred Compensation Plan. We maintain a Director Deferred Compensation Plan in order to provide a deferred compensation opportunity to directors of Columbia Bank. Under the plan, a director may elect to defer up to 100% of his or her total cash compensation (including retainers and meeting fees) expected to be earned during a plan year. Interest is credited on a director’s account balance at the Federal Funds Rate plus one percent. The interest rate is determined as of the first business day of each year and remains the same for the entire year. Upon a director’s termination of service for any reason (or, if elected by a director, upon a change in control of Columbia Bank), Columbia Bank will pay the director his or her accumulated benefit under the plan (i) in a lump sum payment as soon as practicable following his or her termination of service (or change in control, as applicable) or (ii) if elected by the director, as an annual benefit in twelve equal monthly installments payable over a period of up to ten years on the first day of each month commencing with the month following his or her termination of service (or change in Control, as applicable). The plan further provides that if a director fails to make a payment election, or if a director’s accumulated benefit under the plan is less than $10,000, the director’s benefit will be paid in a lump sum. In addition, a director is permitted to elect to receive an in-service distribution of a specific year’s deferrals as adjusted for interest, subject to certain limitations. In connection with the public offering, in 2018, directors were provided with the opportunity to direct the investment of portions of their plan account balances into phantom shares of common stock by way of a transfer of these amounts to the Columbia Bank Stock-Based Deferral Plan.
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
Overview
The Columbia Financial Board of Directors unanimously recommends that stockholders approve Columbia Financial, Inc.’s 2019 Equity Incentive Plan (referred to in this proxy statement as the 2019 Equity Plan). Our Board of Directors unanimously approved the 2019 Equity Plan on April 16, 2019. The 2019 Equity Plan will become effective on June 6, 2019 (referred to in this proxy statement as the “Plan Effective Date”) if the Columbia Financial stockholders approve the 2019 Equity Plan on that date. No awards have been made under the 2019 Equity Plan.
No awards may be granted under the 2019 Equity Plan after the tenth anniversary of the Plan Effective Date. However, awards outstanding under the 2019 Equity Plan at that time will continue to be governed by the 2019 Equity Plan and the agreements under which they were granted.
The 2019 Equity Plan reflects the following equity compensation plan best practices:
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Individual dollar limits on annual cash and equity non-employee director compensation and individual percentage limits on the maximum amount of shares that may be awarded under the 2019 Equity Plan to any one non-employee director pursuant to the Option Award Pool, as defined herein, and the Full Value Award Pool, as defined herein;
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Limits on the maximum number of shares, in the aggregate, that may be granted to any one employee under the 2019 Equity Plan pursuant to the Option Award Pool and the Full Value Award Pool, respectively;
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Minimum vesting requirement of one year for all equity-based awards, except that up to 5% of authorized shares may be issued pursuant to awards that do not meet this requirement and any award may provide for accelerated vesting for death, disability, involuntary termination without cause, and resignation for “good reason”;
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Provides that performance goals may be established by the Compensation Committee in connection with the grant of awards;
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No grants of below-market stock options or stock appreciation rights (referred to in this proxy statement as SARs);
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No repricing of stock options or SARs and no cash buyout of underwater stock options or SARs;
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No payment of dividends or dividend equivalents on stock options or SARs;
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No payments of dividends or dividend equivalents on any award prior to date on which award vests;
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No liberal change in control definition;
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Double trigger treatment upon change in control except to extent awards are not assumed or replaced in change in control;
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No excise tax gross-ups on “parachute payments”; and
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Awards subject to Columbia Financial recoupment/clawback policy.
The full text of the 2019 Equity Plan is attached as Annex 1 to this proxy statement, and the following summary of the 2019 Equity Plan is qualified in its entirety by reference to Annex 1.
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
Why Columbia Financial Believes You Should Vote to Approve the 2019 Equity Plan
Our Board of Directors believes that equity-based incentive awards can play a key role in the success of Columbia Financial by encouraging and enabling employees, officers and non-employee directors of Columbia Financial and its subsidiaries, affiliates and divisions, including Columbia Bank (as used in this section, Columbia Financial, Columbia Bank and their respective subsidiaries, divisions and affiliates are collectively referred to as, “Columbia Financial”), upon whose judgment, initiative and efforts Columbia Financial has depended and continues to largely depend for the successful conduct of its business, to acquire an ownership stake in Columbia Financial, thereby stimulating their efforts on behalf of Columbia Financial and strengthening their desire to remain with Columbia Financial. The details of the key design elements of the 2019 Equity Plan are set forth in the section entitled “— Plan Summary” beginning on page 20 of this proxy statement. As is further described therein, we believe our continued future success depends in part on our ability to attract, motivate and retain the talented and highly qualified employees and non-employee directors necessary for our continued growth and success.Historically, We Have Not Been Able to Make Equity-Based Incentive Awards
We view the use of Columbia Financial common stock as part of our compensation program as an important component to our future success because we believe it fosters a pay-for-performance culture that is an important element of our overall compensation philosophy. Columbia Financial believes that equity-based compensation motivates employees to create stockholder value because the value employees realize from equity-based compensation is based on Columbia Financial’s stock price performance. Equity-based compensation aligns the compensation interests of our employees with the investment interests of our stockholders and promotes a focus on long-term value creation because Columbia Financial’s equity-based compensation awards can be subject to vesting and/or performance criteria.
If the 2019 Equity Plan is not approved, Columbia Financial will have to rely entirely on the cash component of its employee compensation program to attract new employees and to retain our existing employees, which may not necessarily align employee compensation interests with the investment interests of Columbia Financial stockholders as well as the alignment achieved by equity-based awards. The inability to provide equity-based awards would likely increase cash compensation expense over time and use up cash that might be better utilized if reinvested in Columbia Financial’s business or returned to Columbia Financial’s stockholders. If the 2019 Equity Plan is approved, it is anticipated that one-half of the cash awards granted to executives for the 2018 – 2021 performance period under Columbia Financial’s existing Long Term Incentive Plan will be replaced with equity awards and that all of the Long Term Incentive Plan cash awards granted for the 2019 – 2022 performance period will be replaced with equity awards. If the event the 2019 Equity Plan is not approved, Columbia Financial could also be at a severe competitive disadvantage as it would not be able to use stock-based awards to recruit and compensate its officers and other key employees and thereby could impact our future growth plans.
Equity Awards Will Enable Us to Better Compete for Talent in Our Marketplace
Most of our competitors offer equity-based compensation to their employees and non-employee directors. We view the ability to offer equity-based compensation as an important step in our ability to compete for talent within our marketplace. If the 2019 Equity Plan is not approved, we will be at a significant disadvantage as compared to our competitors to attract“attract and retain our executives as well as directors and this could affect our ability to achieve our business plan growth and goals.
Adoptionqualified personnel” through the establishment of Equity Based Incentive Plans is Routinely Done by Newly Public Financial Institutions
Columbia Financial completed its minority stock offering on April 19, 2018 and its common stock began trading on April 20, 2018. Prior tostock-based benefit plans. The prospectus further disclosed that time, all of Columbia Financial’s common stock was held by Columbia Bank MHC and Columbia Financial could not provide equity-based incentives to its
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
executive officers, employees and non-employee directors. Of the 64 institutions that conducted a full conversion, minority stock offering or a second-step conversion during the period January 2012 through January 2018, 62 of such institutions adopted equity based incentive plans.
Our Share Reserve is as Disclosed in Connection with our Minority Stock Offering
The number of restricted stock awards and stock options that may be granted under the 2019 Equity Plan, measured as a percentage of total outstanding shares issued in the minority stock offering, is consistent with that which was disclosed in connection with our minority stock offering in 2018 and consistent with the amount permitted under federal banking regulations for equity plans adopted within the first year following a minority stock offering. Although we are not bound by the limits imposed under the federal banking regulations since we will be implementing our plan after the one-year period following our offering, we have determined to maintain the size of the share reserve at that limit. The share pool under the 2019 Equity Plan represents 6.86% of the total shares of Columbia Financial common stock outstanding, of which 1.96% is comprised of the Full Value Award Pool and 4.90% is comprised of the Stock Option Award Pool.
Determination of Shares Available and Share Pool under 2019 Equity Plan
Columbia Financial is requesting approval of 7,949,996 shares of its common stock for awards under the 2019 Equity Plan (referred to in this proxy statement as the share pool), subject to adjustment as described in the 2019 Equity Plan. The shares of common stock issued by Columbia Financial under the 2019 Equity Plan will be currently authorized but unissued shares or shares that may subsequently be acquired as treasury shares, including shares that may be purchased on the open market or in private transactions.
In determining the number of shares to request pursuant to the 2019 Equity Plan, Columbia Financial considered a number of factors, including: (i) the recommendations and analysis provided by McLagan, an AON Hewitt Company (“McLagan”), the independent compensation consultant retained by the Compensation Committee to assist in the design and implementation of the 2019 Equity Plan; (ii) industry practices related to the adoption of equity based incentive plans by recently converted institutions; (iii) applicable banking regulations related to the adoption of equity based incentive plans; and (iv) guidelines issued by proxy advisory firms with respect to equity incentive plans, including the potential cost and dilution to stockholders associated with the share pool.
Columbia Financial disclosed to shareholders in its 2018 minority stock offering that it expectedintended to adopt an equity incentive plan that would includeprovide for grants of stock options and shares of restricted common stock and that the Company expected that, in accordance with regulations applicable to plans adopted within one year following an initial public offering, the plan would authorize the grant of a number of stock options and a number of shares of restricted stock, not to exceed 4.90% and 1.96%, respectively, of the Company’s outstanding shares (including shares issued to Columbia Bank MHC and the Bank’s charitable foundation) and the prospectus disclosed the estimated value of the restricted stock awards and stock options covered by a future equity incentive plan. The pro forma data included in the prospectus assumed that the Company would grant restricted shares equal to 1.96 % and 4.90%, respectively,1.96% of the totaloutstanding shares issuedand options to purchase shares equal to 4.90% of the outstanding shares and included the pro forma impact on net income and earnings per share of such equity incentive grants.
The Company did not implement an equity incentive plan until more than one year after the initial public offering, and therefore the regulatory limits described above were not applicable to the proposed plan. Nonetheless, after considering various alternatives, the Company determined to adopt an equity incentive plan that limited the authorized shares to the regulatory limits disclosed in connection with the minority stock offering, including shares issued to the Columbia Bank Foundation.initial public offering. The total amount of shares we disclosed for the equity incentive plans totaled 7,949,996, which is the amount permitted under applicable bank regulations for equity plans implemented in the one year period following a minority stock offering. Even though we are implementing theCompany’s proxy statement dated April 22, 2019 Equity Plan after the one year period, we have determined to maintain the size of the 2019 Equity Plan at the amount disclosed in connection with our minority stock offering.
Application of Share Pool
Columbia Financial has determined that the 2,271,427 may be issued as restricted stock award shares or restricted stock units, including performance shares and performance units (or 1.96% of total outstanding shares of common stock of Columbia Financial (“Full Value Award Pool”)) and 5,678,569 shares may be issued as stock options or SARs (or 4.90% of total outstanding shares of common stock of Columbia Financial (“Option Award Pool”)).
Incentive Stock Options
One of the requirements for the favorable tax treatment available to Incentive Stock Options (“ISOs”) under the Code is that the 2019 Equity Plan must specify, anddescribed the Columbia Financial, stockholders must approve, the number of shares available for issuance pursuant to ISOs. As a result,
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
in order to provide flexibility to the Committee, theInc. 2019 Equity Incentive Plan provides(the “2019 Equity Incentive Plan”), attached a copy of that all or any portionplan as an exhibit, and solicited shareholder approval of the Option Award Pool may be issued pursuant to ISOs.
Current Stock Price
The closing price of Columbia Financial common stock on The Nasdaq Global Select Market on April 18, 2019 was $15.55 per share.
In evaluating this proposal, stockholders should specifically consider the information set forth under the section entitled “— Plan Summary” beginning on page 20 of this proxy statement.Code Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), as in effect prior to the enactment of the Tax Cuts and Jobs Act (“TCJA”) in December 2017, limited to $1 million the deduction that a company was permitted to take for annual compensation paid to each “covered employee” (at that time defined as the CEO and the three other highest paid executive officers employed at the end of the year other than the CFO), except to the extent the compensation qualified as “performance-based” for purposes of Section 162(m). The TCJA retained the $1 million deduction limit, but it repealed the performance-based compensation exemption and expanded the definition of “covered employees” effective for taxable years beginning after December 31, 2017. “Covered employees” for a fiscal year now include any person who served as CEO or CFO of a company at any time during that fiscal year, the three other most highly compensated company executive officers for that fiscal year (whether or not employed on the last day of that fiscal year) and any other person who was a covered employee in a previous taxable year (but not earlier than 2017) as determined pursuant to the pre-TCJA version of Section 162(m). Any awards that Columbia Financial grants pursuant to the 2019 Equity Plan to covered employees, whether performance-based or otherwise, will be subject to the $1 million annual deduction limitation. While the Compensation Committee intends to consider the deductibility of compensation when making equity awards, it is only one factor it considers. Because of the elimination of the performance-based compensation exemption, the Compensation Committee expects that a portion of the compensation paid to covered employees in the form of equity grants under the 2019 Equity Plan may not be deductible by Columbia Financial.
Plan Summary
The following summary of the material terms of the 2019 Equity Plan is qualified in its entirety by reference to the full text of the 2019 Equity Plan, which is attached as Annex 1 to this proxy statement.proposed plan. The 2019 Equity Plan is not a qualified deferred compensation plan under Section 401(a) of the Code and is not intended to be an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974.
Purpose of the 2019 Equity Plan
Theproxy statement stated that “the purpose of the 2019 Equity Plan is to promote the long-term growth and profitability of Columbia Financial and its subsidiaries by (i) providing employees and non-employee directors of Columbia Financial and its subsidiaries, affiliates and division with incentives to maximize stockholdershareholder value and otherwise contribute to the success of Columbia Financial, and (ii) enabling Columbia Financial to attract, retain and reward the best available persons for positions of substantial responsibility and to recognize significant contributions made by such individuals to the Company’s success.
Administration of” For more details on the 2019 Equity Incentive Plan, including a copy of the equity incentive plan, which is attached as an exhibit thereto, see the Company’s 2019 proxy statement, which is available at https://www.sec.gov/Archives/edgar/data/0001723596/000114420419020584/tv515768-def14a.htm.
The 2019 Equity Plan will be administered by the Compensation Committee or such other committee consisting of two or more independent members of the Columbia Financial Board of Directors as may be appointed by the Board of Directors to administer the 2019 Equity Plan (referred to in this proxy statement asalso disclosed to shareholders the “Committee”). If any member of the Committee does not qualify as a
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
“non-employee director” within the meaning of Rule 16b-3 of the Exchange Act, the Columbia Financial Board of Directors will appoint a subcommittee of the Committee, consisting of at least two members of the Columbia Financial Board of Directors, to grantindividual limits imposed on equity awards to officers and members of the Columbia Financial Board of Directors who are subject to Section 16 of the Exchange Act, and each member of such subcommittee must satisfy the above requirements. References to the Committee in this summary include and,any one employee as appropriate, applywell as to any such subcommittee. To the extent permitted by law, the Committee may also delegate its authority to one or more persons who are not members of the Columbia Financial Board of Directors, except that no such delegation will be permitted with respect to officers who are subject to Section 16 of the Exchange Act.
Certain Restrictions
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No dividend equivalents will be granted with respect to any stock option or SAR. Additionally, no dividends or dividend equivalents will be paid currently with respect to any other award while the award is unvested. Instead, any dividends or dividend equivalents with respect to an unvested award will be accumulated or deemed reinvested until such time as the underlying award becomes vested (including, where applicable, the achievement of performance goals).
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The minimum vesting period for each award grantednon-employee director under the 2019 Equity Incentive Plan must be at leastand the overall dollar limit for awards made to any one year, provided that up to 5%non-employee director on an annual basis, which included limits on the aggregate of the shares authorized for issuance under theboth cash and equity awards. The 2019 Equity Plan may be issued pursuant to awards with minimum vesting periods of less than one year. In addition, the minimum vesting requirement does not apply to accelerated vesting on account of death, disability, involuntary termination without cause, or resignation for good reason as otherwise permitted by the 2019 Equity Plan. Although no decision has been made, we anticipateproxy statement further stated that the Committee will impose minimum vesting periods onCompany anticipated that the initial grants made under the 2019 Equity Incentive Plan of no less than three (3) years in connection with performance-based awards and up to five (5) years with respect to the time based awards.
Eligible Participants
Employees of Columbia Financial and its subsidiaries and non-employee members of the Columbia Financial and Columbia Bank’s Board of Directors and will be eligible for selection by the Committee for the grant of awards under the 2019 Equity Plan. As of April 16, 2019, approximately 644 employees of Columbia Financial and its subsidiaries and seven (7) non-employee members of the Columbia Financial Board of Directors were eligible for awards under the 2019 Equity Plan.
Types of Awards
The 2019 Equity Plan provides for the grant of performance shares, performance units, restricted stock, restricted stock units (“RSUs”), non-qualified stock options (“NQSOs”), ISOs, and SARs. ISOs may be granted only to employees of Columbia Financial.
Individual Limits
The Committee will determine the individuals to whom awards will be granted, the number of shares subject to an award, and the other terms and conditions of an award. Subject to adjustment as described in the 2019 Equity Plan:
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For any one non-employee director, the maximum number of stock options and SARs that may be granted over the life of the plan to any one non-employee director shall not exceed 3.5% of the Option Award Pool and the maximum number of restricted stock or RSUs (including performance based awards) that may be granted to any one non-employee director over the life of the plan may not exceed 3.5% of the Full Value Award Pool.
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For any one non-employee director, the maximum aggregate amount of cash paid in any one fiscal year of Columbia Financial to such non-employee director for service as a member of the Board of Directors during such fiscal year, including service performed in such fiscal year
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
but for which payment is not made until the following fiscal year, and grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all equity awards granted in such fiscal year to such non-employee director shall not exceed $1,200,000.
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The maximum number of shares of the Full Value Award Pool that, in the aggregate, may be granted over the life of the 2019 Equity Plan to any one employee participant shall not exceed 25% of the Full Value Award Pool.
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The maximum number of shares of the Option Award Pool that, in the aggregate, may be granted over the life of the 2019 Equity Plan to any one employee participant shall not exceed 25% of the Option Award Pool.
Although no decision has been made, we anticipate that the initial grants made by the Committee to non-employee directors and employees under the Full Value Award Pool and the Option Award Pool will, in each case,individuals would be less than the limits set forth in the 2019 Equity Plan.
Adjustments
The Committee shall make equitable adjustments in the number and class of securities available for issuance under the 2019 Equity Plan (including under any awards then outstanding), the number and type of securities subject to the individual limits set forth in the 2019 Equity Incentive Plan, which was in fact the case. At the time of the issuance of the 2019 proxy statement and the termsas of any outstanding award, as it determines are necessary and appropriate, to reflect any merger, reorganization, consolidation, recapitalization, reclassification, stock split, reverse stock split, spin-off combination, exchange of shares, distribution to stockholders (other than an ordinary cash dividend), or similar corporate transaction or event.
Performance Shares and Units
The Committee will specify the terms of a performance share or performance unit award in the award agreement. A performance share will have an initial value equal to the fair market value of a share on the date of grant. A performance unit will have an initial value that is establishedthe 2019 annual meeting of shareholders, no decisions had been made by the Compensation Committee atnor the timeBoard of grant. In additionDirectors with respect to specific awards to any non-performance terms applicableCompany officer or employee or the non-employee directors (other than to one named executive officer (“NEO”) who was to receive a certain number of equity awards in connection
with her employment agreement), which was consistent with the performance share or performance unit, the Committee will set one or more performance goals which, depending on the extent to which they are met, will determine the number or value of the performance share or unit that will be paid out to the participant. The Committee may provide for payment of earned performance shares/units in cash, shares of Columbia Financial’s common stock, other Columbia Financial securities or any combination thereof. The Committee will also specify any restrictions applicable to the performance share or performance unit award such as continued service, the length of the restriction period (subject to the one-year minimum described above) and whether any circumstances, such as death, disability, or a change in control, shorten or terminate the restriction period. It is anticipated that the initial grants of any performance shares/units that are madedisclosure contained in the first year following shareholder approval2019 proxy statement that no equity awards were outstanding and that any future equity awards were discretionary and were not determinable at that time other than as disclosed.
At the Company’s 2019 annual meeting of shareholders, the proposal to adopt the 2019 Equity Incentive Plan will include a time-based vesting component of a minimum of three (3) years.
Performance shares/units will possess voting rights and will accrue dividend equivalents only to the extent provided in the award agreement evidencing the award; provided, however, that rights to dividend equivalents are permitted only to the extent they comply with, or are exempt from, Section 409Awas approved by an overwhelming majority of the Code (referred to in this proxy statement as Section 409A). Any rights to dividends or dividend equivalents on performance shares/units or any other award subject to performance conditions will be subject tovotes cast by the same restrictions on vesting and payment asCompany’s minority shareholders (which excludes the underlying award.
Performance Measures
A performance objective may be described in terms of company-wide objectives or objectives that are related to a specific division, subsidiary, employer, department, region, or function in which the participant is employed or as some combination of these (as alternatives or otherwise). A performance
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
objective may be measured on an absolute basis or relative to a pre-established target, results for a previous year, the performance of other corporations, or a stock market or other index. The Committee will specify the period over which the performance goals for a particular award will be measured and will determine whether the applicable performance goals have been metshares held by Columbia Bank MHC) with respect to a particular award following the end96.24% of the applicable performance period.
In determining whether any performance goal has been satisfied,votes cast by the Committee may include or exclude any or all items that are unusual or infrequent, including but not limited to (i) charges, costs, benefits, gains or income associated with reorganizations or restructuringsminority shareholders voting on the proposal in favor of Columbia Financial and its subsidiaries, affiliates and divisions, discontinued operations, goodwill, other intangible assets, long-lived assets (non-cash), real estate strategy (e.g., costs related to lease terminations or facility closure obligations), litigation or the resolution of litigation (e.g., attorneys’ fees, settlements or judgments), or currency or commodity fluctuations; and (ii) the effects of changes in applicable laws, regulations, tax laws or accounting principles. In addition, the Committee may adjust any performance goal for a performance period as it deems equitable to recognize unusual or infrequent events affecting Columbia Financial and its subsidiaries, affiliates and divisions, changes in laws or regulations or accounting principles, mergers, acquisitions and divestitures, or any other factors as the Committee may determine.
Restricted Stock and Restricted Stock Unitsplan.
The Committee will specify the termsCompany’s 2020 Annual Report on Form 10-K disclosed to shareholders that in July of a restricted stock or RSU award in the award agreement, including the number of shares of restricted stock or number of RSUs; the purchase price, if any, to be paid for such restricted stock or RSU (which may be equal to or less than the fair market value of a share and may be zero, subject to such minimum consideration as may be required by applicable law); any restrictions applicable to the restricted stock or RSUs such as continued service or achievement of performance goals; the length of the restriction period (subject to the one-year minimum described above) and whether any circumstances, such as death, disability, or a change in control, shorten or terminate the restriction period; the rights of the participant during the restriction period to vote and receive dividends in the case of restricted stock or to receive dividend equivalents in the case of RSUs that accrue dividend equivalents (subject to the limitations described below); and whether RSUs will be settled in cash, shares of Columbia Financial’s common stock or any combination thereof.
Generally, a participant who receives a restricted stock award will have (during and after the restriction period), all of the rights of a stockholder of Columbia Financial with respect to that award, including the right to vote the shares and the right to receive dividends and other distributions to the extent, if any, such shares possess such rights and subject to the limitations described in this paragraph. However, any dividends and other distributions payable on shares of restricted stock during the restriction period shall be either automatically reinvested in additional shares of restricted stock or paid to2019, the Company for the account of the participant, in either case subject to the same vesting restrictions as the underlying award. All terms and conditions for the payment of dividends and other distributions will be included in the award agreement and, to the extent required, comply with the requirements of Section 409A.
A participant receiving an RSU award will not possess voting rights and will accrue dividend equivalents on such units only to the extent provided in the award agreement evidencing the award; provided, however, that any dividend equivalents will be subject to the same vesting restrictions as the underlying award. All terms and conditions for payment of dividends equivalents will be included in the award agreement and, to the extent required, comply with the requirements of Section 409A.
Stock Options
An option provides the participant with the right to buy a specified number of shares at a specified price (referred to in this proxy statement as the exercise price) after certain conditions have been met. The Committee may grant both NQSOs and ISOs under the 2019 Equity Plan. The tax treatment of NQSOs is different from the tax treatment of ISOs as explained below. The Committee will determine
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
and specify in the award agreement evidencing an option whether the option is an NQSO or ISO, the number of shares subject to the option, the exercise price of the option and the period of time during which the option may be exercised, any restrictions applicable to the option such as continued service, the length of the restriction period (subject to the one-year minimum described above) and whether any circumstances, such as death, disability, or a change in control, shorten or terminate the restriction period. Generally (except as otherwise described in the 2019 Equity Plan), no option can be exercisable more than 10 years after the date of grant and the exercise price of a stock option must be at least equal to the fair market value of a share on the date of grant of the option. However, with respect to an ISO granted to a participant who is a stockholder holding more than 10% of Columbia Financial’s total voting stock, the ISO cannot be exercisable more than five years after the date of grant and the exercise price must be at least equal to 110% of the fair market value of a share on the date of grant. ISOs cannot behad granted, under the 2019 Equity Incentive Plan, after April 16, 2029. Dividend equivalents will not be paid1,389,570 shares of restricted stock with respecta grant date fair value of $15.60 per share, and options to options.
A participant may paypurchase 3,707,901 shares of Company common stock, with a grant date fair value of $4.25 per option. Those grants were made to executive officers, directors and a total of 1,444 employees of the exercise price under an optionCompany. The Company’s 2020 proxy statement disclosed that the Company granted to each non-employee director 34,038 shares of restricted stock and options to purchase 83,294 shares of common stock, in cash; in a cash equivalent approved byeach case vesting ratability over five years. The 2020 proxy statement disclosed that the Committee; if approved by the Committee, by tendering previously acquired shares (or delivering a certification or attestation of ownership of such shares) having an aggregate fair market value at the time of exercise equalrestricted stock and options granted to the total option exercise price (providednon-employee Directors had a grant date fair value of $884,993. The 2020 proxy statement also disclosed that the tendered shares must have been held by the participant for any period required by the Committee); or by a combination of these payment methods. The Committee may also allow cashless exercises as permitted under the Federal Reserve Board’s Regulation T, subjectCompany granted to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the 2019 Equity Plan’s purpose and applicable law. No certificate representing a share (to the extent shares are so evidenced) will be delivered until the full option price has been paid.
Stock Appreciation Rights
A SAR entitles the participant to receive cash,Mr. Kemly 134,134 shares of Columbia Financial’stime-vested restricted stock vesting ratability over five years, options to purchase 656,471 shares of common stock or any combination thereof, as the Committee may determine, in an amount equal to the excessvesting ratability over five years, and 134,135 shares of the fair market value of a share on the exercise date over the exercise price for the SAR, after certain conditions have been met. The Committee will determine and specify in the SAR award agreement the number of shares subject to the SAR, the SAR price (which generally must be at least equal to the fair market value of a share on the date of grant of the SAR) and the period of time during which the SAR may be exercised, any restrictions applicable to the SAR such as continued service, the length of the restriction period (subject to the one-year minimum described above) and whether any circumstances, such as death, disability, or a change in control, shorten or terminate the restriction period. Generally, no SAR can be exercisable more than 10 years after the date of grant. SARs may be granted in tandem with a stock option or independently. If a SAR is granted in tandem with a stock option, the participant may exercise the stock option or the SAR, but not both. Dividend equivalents will not be paid with respect to SARs.
Termination of Employment
Subject to certain exceptions, generally, if a participant ceases to perform services for Columbia Financial and its subsidiaries for any reason (i) all of the participant’sperformance-vested restricted stock RSUs, performance shares, and performance units that were not vested on the date of such cessation shall be forfeited immediately upon such cessation, (ii) all of the participant’s stock options and SARs that were exercisable on the date of such cessation shall remain exercisable for, and shall otherwise terminatewould vest at the end of three years if certain performance targets were met. The restricted stock and options granted to Mr. Kemly had a periodgrant date fair value of 90 days after$6,974,998, which in part replaced existing long-term incentive compensation as explained below. The restricted stock and options described above for the datenon-employee directors and Mr. Kemly are referred to as the “2019 Equity Awards.” The 2020 proxy statement further disclosed that Raymond G. Hallock and Henry Kuiken were retiring from the Board of such cessation, but in no event after the expiration date of the stock options or SARs, and (iii) all of the participant’s stock options and SARs that were not exercisable on the date of such cessation shall be forfeited immediately upon such cessation. The Committee may provide that a participant shall be eligible for a full or prorated award upon a cessation of the participant’s service relationship due to death, disability, involuntary termination without cause or resignation for good reason. For an award subject to one or more performance objectives, the Committee may provide for payment of any such full or prorated award prior to certification of such performance objectives or without regard to whether they are certified.
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
Change in Control
The Committee may, in its sole discretion, provide that any time-based vesting requirement applicable to an Award shall be deemed satisfied in full in the event that both a change in control and a cessation of the participant’s service relationship with Columbia Financial and its subsidiaries occurs or if the surviving entity in such change in control does not assume or replace the award in the change in control. With respect to an award that is subject to one or more performance objectives, the Committee may, in its sole discretion, provide that in the event of a change in control, achievement of such performance objective shall be determinedDirectors effective as of the effective date2020 Annual Meeting, but would continue to remain in service with the Company as advisory directors. Under the terms of the Change in Control or such performance objective shall be deemed achieved at the target level of performance.
Transferability
No ISO may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than upon the participant’s death to a beneficiary or by will or the laws of descent and distribution. Unless the Committee determines otherwise consistent with securities and other applicable laws, rules and regulations, (i) no award shall be sold, transferred, pledged, assigned or otherwise alienated or hypothecated by a participant other than upon the participant’s death, to a beneficiary or by will or the laws of descent and distribution, and (ii) each option and SAR outstanding to a participant may be exercised during the participant’s lifetime only by the participant or his or her guardian or legal representative (provided that an ISO may be exercised by such guardian or legal representative only if permitted by the Code and any regulations promulgated thereunder). In the event of a transfer otherwise permitted by the Committee, appropriate evidence of any transfer to the transferee shall be delivered to Columbia Financial at its principal executive office. If all or part of an Award is transferred to a transferee, the transferee’s rights thereunder shall be subject to the same restrictions and limitations with respect to the award as the participant. Any permitted transfer of an award will be without payment of consideration by the transferee.
Amendment and Termination
The Columbia Financial Board of Directors or the Committee may at any time terminate and from time to time amend the 2019 Equity Incentive Plan, their respective equity awards continue to vest as long as they remain in whole or in part, but no such action shall materially adversely affect any rights or obligationsservice with respect to any awards previously granted under the 2019 Equity Plan unless such action is required by applicable law or any listing standards applicable to Columbia Financial’s common stock or the affected participants consent in writing. To the extent required by Section 422Company as advisory directors. As a result of the Code, other applicable law, or any such listing standardsCompany’s mandatory director retirement age, Defendant Frank Czerwinski is expected to retire as a director of the Company at the Company’s 2022 Annual Meeting and it is anticipated that he will serve as an advisory director for the stockholders are required to approve a specific type of amendment to the 2019 Equity Plan, no such amendment shall be effective unless approved by the stockholders of Columbia Financial.
The Committee may amend an outstanding award agreement in a manner not inconsistentCompany following his retirement. Consistent with the terms of the 2019 Equity Incentive Plan, buthis equity awards will continue to vest as long as he remains in service with the amendment will not be effective withoutCompany as a member of the participant’s written consent ifadvisory board.
The 2020 proxy statement further disclosed to investors that prior to 2019, the amendment is materially adverseCompany had granted its NEOs, including Mr. Kemly, annual Long-Term Incentive Plan (“Cash LTIP”) cash awards using a three-year performance period. The proxy statement stated that for 2019, the 2019 Equity Incentive Plan replaced the Cash LTIP and as a result no new Cash LTIP awards were granted in 2019, and further stated that the equity awards granted to the participant. However,NEOs in 2019 under the 2019 Equity Incentive Plan replaced one half of the earnings opportunity under the Cash LTIP awards previously granted for the 2018 to 2020 performance cycle. No additional Cash LTIP awards were granted to Mr. Kemly in 2020 or 2021, and the Company has committed not to make any additional Cash LTIP awards to Mr. Kemly in 2022 if Mr. Kemly’s 2019 Equity Awards are ratified by the shareholders.
In discussing the equity awards made to the non-employee directors and Mr. Kemly in 2019, the 2020 proxy statement described the process the Compensation Committee cannot repriceand the Board of Directors of the Company undertook in determining the size, terms and conditions of the equity awards, including, among other things, (i) the retention by the Compensation Committee of an independent compensation consultant to provide advice and information to the Compensation Committee with respect to the equity awards made under the 2019 Equity Incentive Plan to the NEOs and the non-employee directors; (ii) bank regulatory guidelines on such plans; (iii) awards made by identified peer group companies that had undergone a stock option or SAR exceptconversion transaction (the “Conversion Peer Group”); (iv) the fact that the executives and non-employee directors had never previously had the opportunity to participate in accordance with the adjustment provisionsorganizational value growth of the Company through equity ownership and the value of such individuals in contributing to the success of the Company and the expected contribution of such individuals going forward; and (v) the common industry practice for the prevalence and magnitude of equity awards following conversion transactions taking into account awards made by the Conversion Peer Group. For a further discussion of the 2019 Equity Plan (as described above) or in connection with a change in control. For this purpose, a repricing generally is an amendment toAwards and the terms of an outstanding stock option or SAR that would reduce the exercise price of that stock option or SAR or a cancellation of an outstanding stock option or SAR with a per share exercise price that is more than fair market value at the time of such cancellation in exchange for cash, another award or a stock option or SAR with an exercise price or SAR price that is less than the option exercise price or SAR price of the original stock option or SAR.
Certain Federal Income Tax Consequences
The following is intended only as a brief summary of the federal income tax rules relevant to the primary types of awards available for issuance under the 2019 Equity Plan and is based on the terms of the Code as currently in effect. The applicable statutory provisions are subject to change in the future (possibly with retroactive effect), as are their interpretations and applications. Because federalprocess
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
income tax consequences may vary as a result of individual circumstances, participants are encouraged to consult their personal tax advisors with respect to their tax consequences. The following summary is limited only to United States federal income tax treatment. It does not address state, local, gift, estate, social security or foreign tax consequences, which may be substantially different.
Performance Share/Unit Awards
A participant generally is not taxed upon the grant of a performance share/unit. The participant will recognize taxable income at the time of settlement of the performance share/unit in an amount equal to the amount of cash and the fair market value of the shares received upon settlement (subject to the short swing profits rule). The income recognized will be taxable at ordinary income tax rates. Columbia Financial generally will be entitled to a deduction in an amount equal to the amount of ordinary income recognizedundertaken by the participant, subject to the requirements of Section 162(m), as applicable. Any gain or loss recognized upon the disposition of the shares acquired pursuant to settlement of a performance share/unit will qualify as long-term capital gain or loss if the shares have been held for more than one year after settlement.
Awards of Shares; Restricted Stock Awards
A participant generally will recognize taxable ordinary income upon the receipt of shares as a stock award or restricted stock award if the shares are not subject to a substantial risk of forfeiture. The income recognized will be equal to the fair market value of the shares at the time of receipt less any purchase price paid for the shares. If the shares are subject to a substantial risk of forfeiture, the participant generally will recognize taxable ordinary income when the substantial risk of forfeiture lapses. If the substantial risk of forfeiture lapses in increments over several years, the participant will recognize income in each year in which the substantial risk of forfeiture lapses as to an increment. If the participant cannot sell the shares without being subject to suit under Section 16(b) of the Exchange Act (the short swing profits rule), the shares will be treated as subject to a substantial risk of forfeiture. The income recognized upon lapse of a substantial risk of forfeiture will be equal to the fair market value of the shares determined as of the time that the substantial risk of forfeiture lapses less any purchase price paid for the shares. Columbia Financial generally will be entitled to a deduction in an amount equal to the amount of ordinary income recognized by the participant, subject to the requirements of Section 162(m), as applicable.
Alternatively, if the shares are subject to a substantial risk of forfeiture, the participant may make a timely election under Section 83(b) of the Code (referred to in this proxy statement as Section 83(b)) to recognize ordinary income for the taxable year in which the participant received the shares in an amount equal to the fair market value of the shares at that time. That income will be taxable at ordinary income tax rates. If a participant makes a timely Section 83(b) election, the participant will not recognize income at the time the substantial risk of forfeiture lapsesCompany with respect to the shares. Atgranting of those awards, see the time of disposition of the shares, a participant who has made a timely Section 83(b) election will recognize capital gain or loss in an amount equalCompany’s 2020 proxy statement, which is available at https://www.sec.gov/Archives/edgar/data/0001723596/000110465920045536/tm2015330-1_def14a.htm#tCDAA.
The 2020 proxy statement disclosed to the difference between the amount realized upon sale and the ordinary income recognized upon receipt of the share (increased by the amount paid for the shares, if any). If the participant forfeits the shares after making a Section 83(b) election, the participant is not entitled to a deduction with respect to the income recognized as a result of the election but will be entitled to a capital loss equal to the excess (if any) of the amount paid for the shares (if any) over the amount realized upon forfeiture (if any). To be timely, the Section 83(b) election must be made within 30 days after the participant receives the shares. Columbia Financial will generally be entitled to a deduction in an amount equal to the amount of ordinary income recognized by the participant at the time of the election.
Restricted Stock Units
A participant generally is not taxed upon the grant of an RSU. Generally, if an RSU is designed to be paid on or shortly after the RSU is no longer subject to a substantial risk of forfeiture, then at the time of payment the participant will recognize ordinary income equal to the amount of cash and the fair
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
market value of the shares received by the participant (subject to the short swing profits rule) and Columbia Financial will be entitled to an income tax deduction for the same amount, subject to the requirements of Section 162(m), as applicable. However, if an RSU is not designed to be paid on or shortly after the RSU is no longer subject to a substantial risk of forfeiture, the RSU may be deemed a nonqualified deferred compensation plan under Section 409A. In that case, if the RSU is designed to meet the requirements of Section 409A, then at the time of payment the participant will recognize ordinary income equal to the amount of cash and the fair market value of the shares received by the participant, and Columbia Financial will be entitled to an income tax deduction for the same amount. However, if the RSU is not designed to meet the requirements of Section 409A, the participant will be subject to ordinary income when the substantial risk of forfeiture lapses as well as an additional twenty percent (20%) excise tax, and additional tax could be imposed each following year.
Nonqualified Stock Options; Stock Appreciation Rights
A participant generally is not taxed upon the grant of an NQSO or SAR, unless the NQSO or SAR has a readily ascertainable fair market value. However, the participant must recognize ordinary income upon exercise of the NQSO or SAR in an amount equal to the difference between the NQSO or SAR exercise price and the fair market value of the shares acquired on the date of exercise (subject to the short swing profits rule). Columbia Financial generally will have a deduction in an amount equal to the amount of ordinary income recognized by the participant in Columbia Financial’s tax year during which the participant recognizes ordinary income.
Upon the sale of shares acquired pursuant to the exercise of an NQSO or SAR, the participant will recognize capital gain or loss to the extentshareholders that the amount realized from the sale is different than the fair market value of the shares on the date of exercise (or, if the participant was subject to Section 16(b) of the Exchange Act and did not make a timely election under Section 83(b), the fair market value on the delayed determination date, if applicable). This gain or loss will be long-term capital gain or loss if the shares have been held for more than one year after exercise.
Incentive Stock Options
A participant is not taxed on the grant or exercise of an ISO. The difference between the exercise price and the fair market value of the shares covered by the ISO on the exercise date will, however, be a preference item for purposes of the alternative minimum tax. If a participant holds the shares acquired upon exercise of an ISO for at least two years following the ISO grant date and at least one year following exercise, the participant’s gain or loss, if any, upon a subsequent disposition of the shares is long-term capital gain or loss. The amount of the gain or loss is the difference between the proceeds received on disposition and the participant’s basis in the shares (which generally equals the ISO exercise price). If a participant disposes of shares acquired pursuant to exercise of an ISO before satisfying these holding periods and realizes an amount in excess of the exercise price, the amount realized will be taxed to the participant as ordinary income up to the fair market value of the shares on the exercise date and any additional amount realized will be taxable to the participant as capital gain in the year of disposition; however, if the exercise price exceeds the amount realized on sale, the difference will be taxed to the participant as a capital loss. Columbia Financial is not entitled to a federal income tax deduction on the grant or exercise of an ISO or on the participant’s disposition of the shares after satisfying the holding period requirement described above. If the holding periods are not satisfied, Columbia Financial will be entitled to a deduction in the year the participant disposes of the shares in an amount equal to any ordinary income recognized by the participant.
In order for an option to qualify as an ISO for federal income tax purposes, the grant of the option must satisfy various other conditions specified in the Code. In the event an optionCompensation Committee intended to be an ISO fails to qualify as an ISO, it will be taxed as an NQSO as described above.
Golden Parachute Payments
The terms of the award agreement evidencing an award under the 2019 Equity Plan may provide for acceleratedAwards to cover a multi-year period, as reflected through the multi-year performance and vesting or accelerated payoutperiods of the award in connection with a change in ownership or
PROPOSAL 2. APPROVAL OF THE COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
control of Columbia Financial. Ingrants, and as such, event, certain amounts with respectthe Company did not anticipate granting additional equity awards to the award may be characterized as “parachute payments” undercurrent NEOs, or to the golden parachute provisionsnon-employee directors, for a period of years. In fact, no additional equity awards were granted to Mr. Kemly, or to any of the Code. Under Section 280Gnon-employee director recipients of the Code, no federal income tax deduction is allowed to Columbia Financial for “excess parachute payments” made to “disqualified individuals,” and receipt of such payments subjects the recipient to a 20% excise tax under Section 4999 of the Code. For this purpose, “disqualified individuals” are generally officers, stockholders or highly compensated individuals performing services for Columbia Financial, and the term “excess parachute payments” includes payments in the nature of compensation which are contingent on a change in ownership or effective control of Columbia Financial, to the extent that such payments (in present value) equal or exceed three times the recipient’s average annual taxable compensation from Columbia Financial for the previous five years. Certain payments for reasonable compensation for services rendered after a change of control and payments from tax-qualified plans are generally not included in determining “excess parachute payments.” If payments or accelerations may occur with respect to awards granted under the 2019 Equity Plan, certain amountsAwards, in connection with such awards may possibly constitute “parachute payments”2020 or 2021, and be subjectthe Company has committed not to these “golden parachute” tax provisions.
New 2019 Equity Plan Benefits
Columbia Financial has not had an equity plan and therefore there are nomake any additional equity awards outstanding. Except as disclosed below, any future awards to executive officers, non-employee directorsthe Defendants during the remainder of 2021 or employees of Columbia Financial underduring 2022 if the 2019 Equity PlanAwards granted to the Defendants are discretionary and cannot be determined at this time. As a result,ratified by the benefits and amounts that will be received or allocated under the 2019 Equity Plan are not determinable at this time, and Columbia Financialshareholders. The Company has not included a table that reflectsmade any determination concerning compensation in 2023 or beyond, and any such future awards. In connection withcompensation determinations will depend on numerous factors, including the hiringperformance and financial outlook of our Executive Vice President, Headthe Company, the competitive landscape, the actions of Consumer Banking, Columbia Financial agreed that,peer companies, and numerous other factors.
For a discussion of the Company’s compensation philosophy and highlights of the Company’s performance for the year ended December 31, 2021, see “Compensation Discussion and Analysis” beginning on page 12.
The Pascal Litigation
On April 30, 2020, Fredric D. Pascal, who purchased shares of the Company’s common stock in the eventinitial public offering, filed a lawsuit (the “Pascal Action”) in the Court of Chancery of the State of Delaware (the “Court”) derivatively on behalf of the Company received stockholderand as a class action on behalf of himself and all other shareholders challenging the approval of the 2019 Equity Incentive Plan and the executive would receive $125,000awards to Mr. Kemly and the non-employee directors of Full Value Awardsthe Company (collectively the “Defendants”) made in 2019 under the 2019 Equity Incentive Plan (i.e., the 2019 Equity Awards) (the “Complaint”). A copy of that Complaint is attached as part of her compensation package with Columbia Financial.Exhibit A. Shareholders should read the Complaint in its entirety to understand fully its allegations.
ApprovalThe Complaint alleged, as disclosed in the Company’s 2020 proxy statement, that the grant date value of the 2019 Equity Awards was $884,993 to each non-employee director and that the grant date value of the 2019 Equity Awards to Mr. Kemly was $6.97 million, that such amounts were far larger than the equity awards made by other companies that had undergone mutual holding company conversions between 2015 and 2018, and that the Defendants awarded themselves equity grants that were “patently excessive and unjustified.” The Complaint also alleges that the 2019 Equity Awards were the cumulation of a “ten-step” internal process that was substantially complete, but not disclosed as such, when the directors sought shareholder approval of the 2019 Equity Incentive Plan requiresand that the affirmative2019 Equity Awards were based on an equity plan that was specifically designed to be large enough to accommodate the grants, and that such was not disclosed to shareholders. The Complaint further alleges that the 2019 Equity Awards were based upon a “cherry-picked set of purported ‘peer companies’ that had been deliberately designed to favor outlier companies that had made the largest conversion grants” and were the byproduct of professional advice from a compensation consultant who expressly disclaimed the peer selection process that the directors used to approve the grants. The Complaint alleges that the grant of the 2019 Equity Awards constituted a breach of fiduciary duty by the Defendants, that the Defendants were unjustly enriched as a result of those awards, and that the Defendants breached their fiduciary duties by omitting material information in the 2019 proxy statement (i.e., alleging that the Board had already decided to make large equity grants to themselves prior to issuance of the proxy statement) by which approval of the 2019 Equity Incentive Plan was solicited.
The Complaint sought relief rescinding and canceling all of the 2019 Equity Awards, invaliding the 2019 Equity Incentive Plan and awarding damages against Defendants and in favor of the Company as a result of Defendants’ alleged breaches of fiduciary duty, plus pre-judgment and post-judgment interest. Upon a motion by Defendants, the Court dismissed Count III of the Complaint (alleging that the 2019 Equity Incentive Plan was not validly approved because the proxy statement allegedly omitted material information), and discovery proceeded on Counts I and II of the Complaint.
Settlement of the Pascal Action and the Ratification Votes
In the second half of 2021, Defendants discussed pursuing a stockholder ratification vote with respect to the 2019 Equity Awards. In lieu of proceeding to trial, Defendants decided to pursue stockholder ratification
because they fundamentally disagreed with Plaintiff’s assertions that the 2019 Equity Grants were excessive or were unfair, and believed that an appropriate way to resolve the Pascal Action, without the further cost and distraction of litigation, would be to allow the stockholders to determine whether the 2019 Equity Awards should be permitted to remain outstanding. Defendants based this belief in part on the results of the advisory “say on pay” votes on the compensation of the Company’s NEOs taken in 2020 and 2021, in which 94.29% and 97.50%, respectively, of the Company’s minority stockholders voting at the meeting (which excludes the vote of (i) a majorityColumbia Bank MHC) voted in favor of the votes cast, in person or by proxy,“say on pay” advisory votes. With the vote of Columbia Bank MHC included, 98.17% and 98.9%, respectively, of the Company’s shareholders voting at the annual meeting, and (ii) a majoritymeetings voted in favor of the votes cast at“say on pay” advisory votes.
Accordingly, in October of 2021, as the annual meeting,parties were close to completing the discovery process, Defendants in person orthe Pascal Action proposed to the Plaintiff that the action be resolved, subject to approval by proxy,the Court, by agreeing to subject the 2019 Equity Awards to a binding vote of the Company’s shareholders, other than Columbia Bank MHC and the Company’s parent mutual holding company.
THE COLUMBIA FINANCIAL BOARD OF DIRECTORS RECOMMENDS THAT COLUMBIA FINANCIAL STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE COLUMBIA FINANCIAL, INC.Defendants and certain affiliated persons. The parties negotiated Defendants’ proposal, and following additional discussions, entered into a Stipulation of Settlement dated December 10, 2021 subject to approval by the Court, to resolve the Pascal Action by subjecting the 2019 EQUITY INCENTIVE PLAN.
PROPOSAL 3. RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit CommitteeEquity Awards to the binding votes of shareholders that will occur at the Special Meeting. Notice of the Boardproposed settlement of Directors has appointed KPMG LLPthe Pascal Action was provided to all shareholders of the Company and, after a hearing, the Court approved the proposed settlement of the Pascal Action on February 7, 2022. Pursuant to the settlement, the Court issued a Final Order and Judgment dismissing all claims that were or could have been asserted in the Pascal Action and directing that the Special Meeting be held and that that the Company’s independent registered public accounting firm forvotes described herein occur. The Court also approved an award of attorney’s fees to the 2019 fiscal year, subjectPlaintiff’s counsel in the amount of $1.3 million. The Company does not expect the Settlement or the award of attorney’s fees to ratification by shareholders. A representativethe Plaintiff’s counsel to have a material impact on its financial condition or results of KPMG LLP is expectedoperations.
The Effect of a Vote in Favor of Ratification
Pursuant to be present at the annual meeting to respond to appropriate questions from shareholders and will haveterms of the opportunity to make a statement should he or she desire to do so.
Ifsettlement of the Pascal Action, if the ratification of the appointment2019 Equity Awards is approved, those awards will remain outstanding and will not be subject to further legal challenge by any past, present or future shareholder of the independent registered public accounting firmCompany.
A vote in favor of ratification for all or any one of the proposals will not increase the amount of equity awards outstanding to any of the Defendants. Rather, a vote in favor of ratification will result in the 2019 Equity Awards remaining outstanding, despite the claims asserted in the Pascal Action. The awards that have already vested prior to the date of the Special Meeting will be the property of the recipients of those awards, and the remaining awards will be earned by the persons to whom those awards were granted provided that the vesting requirements of those awards are met. If the 2019 Equity Awards are ratified by stockholders, the Company has committed (a) not to make any additional equity awards to the Defendants during 2022, and (b) not to make any Cash LTIP awards to Mr. Kemly in 2022.
The Effect of a Vote Against Ratification
Pursuant to the terms of the settlement of the Pascal Action, if the ratification vote is not approved by a majorityfor all or any one of the votes cast atproposals, the annual meeting,Company will cancel all of the Audit2019 Equity Awards, including awards that already have vested, that were the subject of the failed ratification proposal(s). If the ratification vote is unsuccessful and the equity grants are cancelled with respect to one or all of the proposals, the Compensation Committee will consider other independent registered public accounting firms.granting replacement awards to the affected parties. In making that determination, the Compensation Committee will consider the results of the shareholder votes on the relevant proposal. In addition, if the ratification ofvote is not approved with respect to Mr. Kemly’s 2019 Equity Awards, the independent registered public accounting firm is approved by shareholders at the annual meeting, the AuditCompensation Committee may also consider other independent registered public accounting firmswhether to pay cash to Mr. Kemly to reflect the cash payments he would have received under the Cash LTIP if it had not been canceled and replaced with the 2019 Equity Awards. It is likely that the Compensation Committee will approve some amount of replacement awards in the futureevent of a failed ratification vote for any one of the proposals, since an express purpose of the Company’s initial public offering was to provide the Company with the ability to attract and retain qualified personnel through equity incentives. However, whether such awards will be granted and, if it determinesso, the timing and amount of such awards cannot be determined.
Interests of Certain Persons
In considering the recommendation of our Board of Directors with respect to Proposals 1, 2 and 3 below, shareholders should be aware that the directors who are Defendants (including Mr. Kemly) have certain interests, which may present them with conflicts of interests in connection with these proposals. As discussed above, the shares held by directors who are Defendants (including Mr. Kemly), family members of Defendants who reside in the same household as a Defendant and entities controlled by a Defendant will not participate in the ratification vote. For information on the number of shares of Company common stock owned by the Defendants, see “Stock Ownership” below.
PROPOSAL NO. 1 – RATIFICATION OF THE 2019 EQUITY AWARDS TO CURRENT NON-EMPLOYEE DIRECTORS
As discussed herein, in 2019, each of the Company’s non-employee directors was awarded 34,038 shares of restricted stock, and 83,294 stock options exercisable at the then-market price of the Company’s common stock of $15.60 per share, in each case vesting ratability over five years. As disclosed in the 2020 proxy statement, each non-employee director received awards that had a grant date fair value of $884,993. As of the date of this proxy statement, 40% of the 2019 Equity Awards granted to the non-employee directors have vested, and if the awards are not canceled, an additional 20% of each will vest in July of 2022, 2023 and 2024 (assuming the conditions for vesting are met). The terms of the non-employee 2019 Equity Awards are consistent with the 2019 Equity Incentive Plan. The non-employee director 2019 Equity Awards were in addition to the cash compensation paid to the non-employee directors, comprising an annual retainer of $67,800 ($134,500 for the Chairman of the Board of Directors) and additional fees for serving on board committees and certain per-meeting fees.
Requested Shareholder Approval
The Board of Directors believes that shareholder ratification of the non-employee director 2019 Equity Awards is in the best interests of the Company and its shareholders because those awards appropriately rewarded our highly-qualified non-employee directors, who we believe were and are critical to our long-term success, for services rendered and to be rendered to us during the period that the awards were and are subject to vesting. Notwithstanding the claims in the Pascal Action, we believe that the 2019 Equity Awards were reasonable and appropriate when made and continue to be such, considerationwere in line with market practice for institutions similar in size to the Company, motivated and compensated our non-employee directors for services as non-employee directors, and aligned the interests of our non-employee directors with those of our shareholders. The Board of Directors believes that ratifying the 2019 Equity Awards made to the non-employee directors is in the best interests of the Company and its shareholders.
We are asking shareholders to ratify the non-employee director 2019 Equity Awards. If our shareholders do ratify the non-employee director 2019 Equity Awards, those awards will remain outstanding and will not be subject to legal challenge by any past, current or future shareholder of the Company. If our shareholders do not ratify the non-employee director 2019 Equity Awards, those equity awards will be cancelled, including those awards that already have vested. If the ratification is not successful, the Compensation Committee will consider whether issuance of replacement awards is appropriate, and in making that determination will consider, among other things, the results of the shareholder vote. We believe that failure to ratify the non-employee director 2019 Equity Awards may have an adverse effect on our non-employee directors’ motivation and on our ability to retain those directors, although no director has threatened to resign.
The Board of Directors recommends a vote “FOR”FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm.
Audit and Non-Audit Fees
The following table sets forth the fees billed2019 Equity Awards to the Company for the years ending December 31, 2018 and December 31, 2017 for services provided by KPMG LLP.non-employee directors.
| | | | 2018 | | | 2017 | |
Audit Fees(1) | | | | $ | 1,050,000 | | | | | $ | 575,000 | | |
Audit-Related Fees(2) | | | | | 333,500 | | | | | | 857,101 | | |
Tax Fees(3) | | | | | 61,511 | | | | | | 61,000 | | |
| All Other Fees | | | | | — | | | | | | — | | |
PROPOSAL NO. 2 – RATIFICATION OF THE 2019 EQUITY AWARDS TO RETIRED NON-EMPLOYEE DIRECTORS WHO WERE INCUMBENT DIRECTORS AT THE TIME OF THE AWARDS AND WHO HAVE CONTINUED TO BE IN SERVICE WITH THE COMPANY AS ADVISORY DIRECTORS FOLLOWING THEIR RETIREMENT
(1)
For both years, includes fees for performanceAs a result of the auditCompany’s retirement policy for non-Employee Directors, Defendants Raymond G. Hallock and review of financial statements and fees relating to the review of public filings, including the audit conducted in connection with the Company’s change in fiscal year.
(2)
For both years, includes fees for services in connection with the Company’s initial public offering and assurance and related services reasonably related to the performanceHenry Kuiken retired as directors of the audit or review of financial statements that are not reported as “Audit Fees.”
(3)
For both years, includes fees forCompany on May 22, 2020 but, under the preparation of federal and state consolidated tax returns, claims for refunds and tax payment-planning services for tax compliance, tax planning and tax advice.
Pre-Approval of Services by the Independent Registered Public Accounting Firm
The Audit Committee is responsible for appointing, setting compensation and overseeing the workterms of the independent registered public accounting firm. In accordance with its charter, the Audit Committee approves, in advance, all audit and permissible non-audit services2019
PROPOSAL 3. RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Any proposed specific engagement may be presented to the Audit Committee for consideration at its next regular meeting or, if earlier consideration is required, to the Audit Committee or one or more of its members. The member oradvisory directors. As members to whom such authority is delegated shall report any specific approval of services at the next regular meeting of the Audit Committee. The Audit Committee will regularly review summary reports detailing all services being provided to the Company by its independent registered public accounting firm.
During the year ended December 31, 2018, all services were approved, in advance, by the Audit Committee in complianceadvisory board, Messrs. Hallock and Kuiken meet quarterly with these procedures.
Audit Committee Report
The Company’s management is responsible for the Company’s internal control over financial reporting. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statementsMr. Kemly and issuing an opinion on the conformity of those financial statements with generally accepted accounting principles. The Audit Committee oversees the Company’s internal controls over financial reporting on behalfMr. Holland, Chairman of the Board of Directors.
In this context, the Audit Committee has met and held discussions with management and the independent registered public accounting firm. Management representedDirectors, to the Audit Committee thatdiscuss the Company’s consolidated financial statements were prepared in accordancebusiness, including economic and strategic initiatives, business developments, relations with generally accepted accounting principles,key customers, and the Audit Committee has reviewedrelated matters. They also attend business development and discussed the consolidated financial statements with management and the independent registered public accounting firm. The Audit Committee discussed with the independent registered public accounting firm all communications required by generally accepted accounting standards.
In addition, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirementscommunity events as representatives of the PublicCompany. Mr. Hallock served as President and Chief Executive Officer of the Company Accounting Oversight Board and has discussed withfor ten years, ending in December 2011, served on the independent registered public accounting firm the accounting firm’s independence fromBoards of Directors for the Company and its management.subsidiary for 21 years and, prior to becoming President and Chief Executive Officer of the Company, had served the Company and its subsidiary in various senior level positions since 1978. In concludingaddition, during Mr. Hallock’s tenure with the Bank he was active with the New Jersey Bankers Association, including service in various executive officer positions with the association, culminating in serving as Chairman of the organization for a one year period. Mr. Kuiken and his family own one of the largest building supply companies in northern New Jersey and Mr. Kuiken thus has relationships with, and insight into the business needs of many of the Company’s current and potential customers. Prior to his retirement, Mr. Kuiken had served on the Boards of Directors of the Company and its subsidiary for more than 30 years. Management of the Company values that advice of Messrs. Hallock and Kuiken and believes that the accounting firminput of the advisory board provides significant benefits to the Company. Messrs. Hallock and Kuiken each receive annual cash compensation of $2,000 for their service as members of the advisory board and are reimbursed for their travel expenses to attend advisory board meetings.
Requested Shareholder Approval
The Board of Directors believes that shareholder ratification of the non-employee director 2019 Equity Awards made to the directors who subsequently retired from the board of directors of the Company but who continue to remain in service with the Company through their service as advisory directors is independent,in the Auditbest interests of the Company and its shareholders. The awards appropriately rewarded our highly-qualified non-employee directors, each of whom were in active service as directors of the Company at the time of the awards, and who we believe were and are critical to our long-term success. The awards were made in 2019 for services rendered and to be rendered to the Company and its subsidiary by such individuals during the period of time in which the awards were and are subject to vesting, all of which was and is consistent with the terms of the 2019 Equity Incentive Plan. Notwithstanding the claims in the Pascal Action, we believe that the 2019 Equity Awards were reasonable and appropriate when made and continue to be such, were in line with market practice for institutions similar in size to the Company, were and are consistent with the terms of the 2019 Equity Incentive Plan, motivated and compensated our non-employee directors for services as non-employee directors, and aligned the interests of our non-employee directors with those of our shareholders. The Board of Directors believes that ratifying the 2019 Equity Awards made to the non-employee directors who are retired but currently serving the Company as advisory directors is in the best interests of the Company and its shareholders.
We are asking shareholders to ratify the non-employee director 2019 Equity Awards that were made in 2019 to individuals who were then serving as directors of the Company and who have continuously provided services to the Company following their retirement through their service as advisory directors. If our shareholders do ratify the non-employee director 2019 Equity Awards to these individuals, those awards will remain outstanding and will not be subject to legal challenge by any past, current or future shareholder of the Company. If the 2019 Equity Awards to the Company’s retired directors are not ratified, they will be cancelled, including those awards that already have vested. If the ratification is not successful, the Compensation Committee considered,will consider whether issuance of replacement awards is appropriate, and in making that determination will consider, among other factors, whether the non-audit services provided by the independent registered public accounting firm were compatible with their independence.
The Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for their audit. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discussthings, the results of the shareholder vote. We believe that failure to ratify the non-employee director 2019 Equity Awards to these individuals may have an adverse effect on their examination,motivation and on our ability to retain the valuable services that these individuals continue to provide to the Company as advisory directors, although no former non-employee director has threatened to resign from the advisory board.
The Board of Directors recommends a vote FOR the ratification of the 2019 Equity Awards to the former non-employee directors, who were incumbent directors at the time of the awards, who subsequently retired from the board of directors of the Company but who continue to remain in service with the Company through their evaluationservice as advisory directors.
PROPOSAL NO. 3 – RATIFICATION OF THE 2019 EQUITY AWARDS TO THOMAS J. KEMLY
As discussed herein, in 2019, Thomas J. Kemly, President and Chief Executive Officer of the Company, was granted 134,134 time-vested shares of restricted stock and options to purchase 656,471 shares of common stock, in each case vesting ratability over five years. Mr. Kemly was also granted 134,135 shares of performance-vested restricted stock, which will vest in July of 2022 if the specified performance targets are met. The 2020 proxy statement disclosed that the 2019 Equity Awards granted to Mr. Kemly had a grant date fair value of $6,974,998. Forty percent of Mr. Kemly’s time-vested shares of restricted stock and 40% of Mr. Kemly’s stock options have vested. An additional 20% of Mr. Kemly’s time-vested equity awards will vest in July of 2022, 2023 and 2024 (assuming the conditions for vesting are met). The terms of Mr. Kemly’s equity awards are consistent with the 2019 Equity Incentive Plan. The 2019 Equity Awards granted to Mr. Kemly were in addition to his cash and other compensation, which totaled $1,806,676 in 2019 (excluding changes in pension value and nonqualified deferred compensation earnings).
Requested Shareholder Approval
The Board of Directors believes that shareholder ratification of Mr. Kemly’s 2019 Equity Awards is in the best interests of the Company and its shareholders because those awards appropriately rewarded Mr. Kemly, who we believe has been and is critical to the Company’s long-term success, for services rendered and to be rendered to the Company during the period that the awards were and are subject to vesting. Notwithstanding the claims in the Pascal Action, we believe that the 2019 Equity Awards granted to Mr. Kemly were reasonable and appropriate when granted and continue to be such, in line with market practice for institutions similar in size to the Company, motivated and compensated Mr. Kemly for services as President and Chief Executive Officer, and aligned his interests with those of the Company and its shareholders. The Board of Directors believes that ratifying Mr. Kemly’s 2019 Equity Awards is in the best interests of the Company and its shareholders.
We are asking shareholders to ratify Mr. Kemly’s 2019 Equity Awards. If our shareholders do ratify the 2019 Equity Awards to Mr. Kemly, those awards will remain outstanding and will not be subject to legal challenge by any past, current or future shareholder of the Company. If the shareholders do not ratify Mr. Kemly’s 2019 Equity Awards, those awards will be cancelled, including those awards that have already vested. If the ratification is not successful, the Compensation Committee will consider whether issuance of replacement awards to Mr. Kemly is appropriate, and in making that determination will consider, among other things, the results of the shareholder vote. We believe that failure to ratify the 2019 Equity Awards granted to Mr. Kemly may have an adverse effect on Mr. Kemly’s motivation and our ability to retain Mr. Kemly as President and Chief Executive of the Company, although Mr. Kemly has not threatened to resign.
The Board of Directors recommends a vote FOR the ratification of the 2019 Equity Awards to Mr. Kemly.
COMPENSATION DISCUSSION AND ANALYSIS
The following compensation discussion and analysis (“CD&A”) provides a detailed description of the Company’s internal control over financial reporting,executive compensation philosophy, plans and programs, and the overall quality offactors used by the Company’s financial reporting process.
In performing all of these functions,Compensation Committee for determining 2021 compensation for the Audit Committee acts only in an oversight capacity. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for financial statements and reports, and of the independent registered public accounting firm who, in its report, expresses an opinion on the conformity of the Company’s financial statements to generally accepted accounting principles. The Audit Committee’s oversight does not provide it with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.
Furthermore, the Audit Committee’s considerations and discussions with management and the independent registered public accounting firm do not assure that the Company’s financial statements are presented in accordance with generally accepted accounting principles, that the audit of the Company’s consolidated financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board or that the Company’s independent registered public accounting firm is in fact “independent.”
| Name | | | Title | |
| Thomas J. Kemly | | | President and Chief Executive Officer | |
| Dennis E. Gibney | | | Executive Vice President and Chief Financial Officer | |
| E. Thomas Allen, Jr. | | | Senior Executive Vice President and Chief Operating Officer | |
| John Klimowich | | | Executive Vice President and Chief Risk Officer | |
| Allyson Schlesinger | | | Executive Vice President, Head of Consumer Banking | |
| Oliver E. Lewis, Jr. | | | Executive Vice President, Head of Commercial Banking | |
Executive Summary
2021 Business Highlights and Results
Despite the continuing challenges of the COVID-19 pandemic, the Company achieved another successful year in 2021. Below are some of the highlights of our financial and operational performance for the year ended 2021 in support of our strategic plan:
•
We completed the acquisition of Freehold Bank, a New Jersey savings bank in the private mutual holding company form of organization, with assets of approximately $295 million.
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We entered into a merger agreement with RSI Bank, a New Jersey savings bank in the private mutual holding company form of organization, with assets of approximately $626 million.
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Our annual net income increased to $92.0 million, or $0.88 per basic and diluted share, relative to annual net income for 2020 of $57.6 million, or $0.52 per basic and diluted share.
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Return on average assets and return on average equity for 2021 were 1.01% and 8.98%, respectively, relative to 0.66% and 5.67%, respectively for 2020.
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We achieved asset growth of 4.8% and deposit growth of 11.7%.
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Net interest income grew by 5.2% and noninterest income grew by 24.2%.
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Non-performing assets declined by 51.7% and our non-performing assets were 0.04% of total assets at December 31, 2021.
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Loans modified for borrowers impacted by COVID during 2020 were reduced to four loans totaling $24.3 million, or 0.4% of the portfolio, by year end.
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During 2021, Columbia Bank assisted over 1,600 organizations retaining their employees by originating over $239 million of Paycheck Protection Program Loans under the second tranche of this program.
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We continued to advance several digital banking enhancements to support our customers and we enhanced the security and efficiency of our technology infrastructure.
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We repurchased 6.1 million shares of our common stock during 2021.
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We continued to enhance the diversity of our executive management team and Board of Directors.
“Say on Pay” Vote and Shareholder Alignment
On May 20, 2021, shareholders voted on a non-binding resolution to approve the compensation for the Named Executive Officers, commonly referred to as a “Say on Pay” vote. The resolution was approved with an affirmative vote of 98.9% of votes cast, which reflects a strong vote of confidence in our executive compensation program and practices.
Executive Compensation and Shareholder Engagement
The Compensation Committee utilizes the following best practices to ensure that executive compensation is aligned with shareholder interests:
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A significant portion of equity compensation is performance-based.
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Short term incentive payments are performance-based.
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Performance-based equity awards also contain extended, service-based vesting requirements.
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Executive stock ownership guidelines require executives to own and maintain a meaningful ownership position.
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Incentive compensation is subject to recoupment under the Company’s “clawback” policy.
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Employment agreement change in control provisions require a “double trigger” to be paid.
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Employment agreements do not contain tax gross-ups.
The Compensation Committee believes that each of these elements provides a meaningful reward opportunity to the NEOs, focuses our leadership team on our short-term financial results and long-term strategic objectives and links realized pay directly to performance.
Executive Compensation Philosophy
| | | OBJECTIVE | | | | COMPENSATION DESIGN CRITERIA | | |
| | | Accountability for Business Performance | | | | •
Tie compensation in large part to the Company’s financial and operating performance, so that executives are held accountable for the performance of the business for which they are responsible and for achieving the goals stated in the Company’s annual Business Plan. | | |
| | | Accountability for Long-Term Equity Performance | | | | •
Include meaningful incentives to create long-term shareholder value while not promoting excessive risk taking. | | |
| | | Competition | | | | •
Reflect the competitive marketplace so we can attract, retain, and motivate talented executives throughout the volatility of business cycles. | | |
| | | WHAT WE DO | | | | WHAT WE DON’T DO | | |
| | | ✓
Use independent compensation consultants ✓
Have stock ownership guidelines ✓
Use competitive benchmarking for NEO compensation and non-employee director compensation ✓
Use meaningful incentives in our executives’ compensation that create long-term shareholder value while not incentivizing excessive risk-taking
✓
Grant equity that vests over multiple years ✓
Have short and long term incentive plans based on performance ✓
Limit perquisites to NEOs ✓
Recoupment of incentive compensation through clawback policy | | | | X
No tax gross ups X
No pledging of our stock X
No hedging X
No unapproved trading plans X
No dividends on unvested/unearned equity X
No excessive risk creation X
No repricing of stock options X
No “single trigger” change in control severance under employment agreements | | |
Factors for Determining Compensation
Role of Compensation Committee
The Compensation Committee is made up of independent directors as required under the Nasdaq listing rules. Details on the Compensation Committee’s functions are described in the Committee’s charter, which has been approved by the Board and is available on our Investor Relations website.
The Compensation Committee has appointed, subjectthe authority to shareholder ratification,obtain advice and assistance from internal or external legal, human resources, accounting or other experts, advisors, or consultants as it deems desirable or appropriate. The Compensation Committee has sole authority to retain and terminate any compensation consultant and to approve the selectionfee arrangements and the terms of engagement. For 2021, the Compensation Committee engaged an independent consulting firm, which specializes in executive compensation (see page 18 below).
For 2021, the Compensation Committee reviewed and approved all aspects of compensation plans and policies applicable to the NEOs, including participation and performance measures. In carrying out its duties, the Compensation Committee considered the relationship of corporate performance to total compensation; set salary and incentive compensation levels; and reviewed the adequacy and effectiveness of various compensation and benefit plans. The Chair of the Compensation Committee reported committee actions to the Board following each committee meeting.
The Compensation Committee worked closely with Mr. Kemly to review and discuss his recommendations for the NEOs and other executive officers. The Compensation Committee also considered the market and peer group analysis provided by the compensation consultant to assess market practices, the mix of fixed and variable compensation, and the levels of compensation for each named executive. The Compensation Committee reviewed and approved individually-determined salary increases for the other NEOs as recommended by Mr. Kemly for the 2021 calendar year.
The Compensation Committee reviewed and accepted the self-evaluation (including relevant quantitative and qualitative accomplishments) of Mr. Kemly for the 2020 calendar year and provided feedback to Mr. Kemly. The Compensation Committee used this evaluation in making compensation decisions concerning Mr. Kemly and approved a base salary increase for Mr. Kemly as recommended by the Chair of the Compensation Committee for the 2021 calendar year.
Role of CEO and Management
Members of our senior management team attend regular meetings in which executive compensation, Company performance, individual performance and competitive compensation levels and practices are discussed and
For more information on the Columbia Bank Performance Achievement Incentive Plan and the Columbia Bank Long-Term Incentive Plan, see “— Cash Incentive Plans” below.
(2)
Details of the amounts disclosed in the “All Other Compensation” column for 2018 are provided in the table below.
| | | | Mr. Kemly | | | Mr. Gibney | | | Mr. Allen | |
| Company matching contributions to 401(k) plan | | | | $ | 8,250 | | | | | $ | 8,250 | | | | | $ | 8,250 | | |
| Executive term life insurance premiums | | | | | 2,528 | | | | | | 877 | | | | | | 1,181 | | |
| Car allowances | | | | | 18,667 | | | | | | — | | | | | | 15,544 | | |
| Mobile phone allowances | | | | | 777 | | | | | | 713 | | | | | | 701 | | |
| Club dues | | | | | 11,410 | | | | | | — | | | | | | — | | |
Employment Agreements with Named Executive Officers
We have entered into three-year employment agreements with Messrs. Kemly, Gibney and Allen. Each employment agreement provides for a three-year term. The Board of Directors of Columbia Financial and Columbia Bank may extend the terms of the employment agreements with the executives annually for another twelve month period, unless the executive gives notice of non-renewal at least sixty days prior to such extension. Current base salaries under the employment agreements for Messrs. Kemly, Gibney and Allen are $775,000, $392,000 and $450,000, respectively.practices. The Compensation Committee looked to the CEO, other members of executive management, and outside legal counsel for advice in the Boarddesign and implementation of Directors annually reviews the executives’ base salaries.compensation plans, programs, and practices. In addition, to base salary, the agreements provide that the executives shall be eligibleCEO and other members of executive management at times attended portions of Compensation Committee meetings to participate in the short-termpresentation of materials and long-term incentiveto discuss management’s point of view regarding compensation plansissues.
Role of Columbia Bank. Independent Compensation Consultants
The executives shall also be entitledCompensation Committee retained the services of an independent compensation consultant, GK Partners (“GK Partners”), to continue participation in any fringe benefit arrangements in which he was participatingperform a competitive assessment of the Company’s executive and director compensation programs, as well as to provide guidance on the effective datechanging regulatory environment governing executive compensation. The annual executive and director assessments include, but are not limited to, an assessment of the employment agreement. In addition, the agreements provide for reimbursement of reasonable travel and other business expenses incurred in connection with theCompany’s financial performance relative to its peers, an assessment of the executive’s duties.Company’s compensation program compared to its peers, recommendations for total cash compensation opportunities (base salary and cash incentives), and a comparative benchmark study of executive compensation and non-employee director compensation.
If the executive’s employment is terminated by Columbia Financial or Columbia BankA representative of GK Partners attended Compensation Committee and Board meetings during the term of the agreement, without cause, including a resignation for good reason (as defined2020 and 2021, upon request, to review compensation data and participate in the agreement), but excluding termination for cause or due to death, disability, retirement or following a change in control, the executive would be entitled to a payment equal to a multiple (i.e., three times for Mr. Kemly,general discussions on compensation and two times for Messrs. Gibney and Allen) of the sum of: (i) his annual base salary plus (ii) his target annual bonus in effect on the termination date. The severance payment shall be paid to the executive as salary continuation in substantially equal installments over the thirty-six or twenty-four month period, respectively, in accordance with Columbia Bank’s customary payroll practices, subject to the receipt of a signed release of claims from the executive within the time frame set forth in the agreement. Assuming the executives elect continued medical, vision and dental coverage under COBRA, Columbia Bank will reimburse the executives the amount equal to the monthly COBRA premium paid by the executives for such coverage less the active employee premium for such coverage for a period of 36 months, in the case of Mr. Kemly, and 24 months, in the case of Messrs. Gibney and Allen. In addition, each executive would receive any unpaid annual bonusbenefits for the completed fiscal yearNEOs and toBoard members. While the extent there are any outstanding equity plan awards made toCompensation Committee considered input from GK Partners when making compensation decisions, the executives, the treatment of such awards upon termination would be determined in accordance with the terms of the applicable equity planCompensation Committee’s final compensation decisions reflect many factors and award agreements.
If the executive’s employment is terminated during the term of the agreement by Columbia Financial or Columbia Bank without cause, including a resignation for good reason (as defined in the agreements), within 24 months after a change in control (as also defined in the agreements), each executive would be entitled to a payment equal to a multiple of three times of the sum of: (i) his annual base salary (or his base salary in effect immediately before the change in control, if higher) plus (ii) his annual target bonus (or his target bonus in effect immediately before the change in control, if higher). The severance payment shall be paid to the executive within sixty days of the termination date in a single lump sum payment. The payment shall also include a sum equal to his prior year bonus in a lump sum on the date on which the annual bonus would have been paid to executive but for executive’s
termination of employment. In addition, each executive shall receive a lump sum payment equal to the cost of providing continued life, medical, vision and dental coverage for 36 months following termination less the active employee charge for such coverage in effect on the termination date. To the extent there are any outstanding equity plan awards made to executives, the treatment of such awards upon termination would be determined in accordance with the terms of the applicable equity plan and award agreements.
For purposes of the executive’s ability to resign and receive a payment under the agreement, “good reason” would include the occurrence of any of the following events: (i) a material reduction in the executive’s base salary or target bonus under the cash incentive plans, if applicable, except for reductions proportionate with similar reductions to all other members of the executive leadership team; (ii) a material adverse change in executive’s position that results in a demotion in the executive’s status within Columbia Financial or Columbia Bank; (iii) a change in the primary location at which the Executive is required to perform the duties of his employment with Columbia Financial and Columbia Bank to a location that is more than thirty (30) miles from the location of the Bank’s headquarters as of the date of the agreement; or (iv) a material breach by Columbia Financial or Columbia Bank of any written agreement between the Executive, on the one hand, and any of Columbia Financial and Columbia Bank or any other affiliate of Columbia Financial, on the other hand, unless arising from the Executive’s inability to materially perform his duties contemplated hereunder.considerations.
The employment agreements provide for a “best net benefits” approach inCompensation Committee considered the event that severance benefitsindependence of GK Partners under the agreements or otherwise result in “excess parachute payments” under Section 280Gapplicable SEC and Nasdaq listing rules and concluded there was no conflict of the Internal Revenue Code of 1986, as amended. The best net benefits approach reduces an executive’s payments and benefits to avoid triggering the excise tax if the reduction would result in a greater after-tax amount to the executive officer compared to the amount the executive officer would receive net of the excise tax if no reduction were made.
Under the employment agreements, if the executive is terminated due to disability, the employment agreement will terminate and the executive will receive an amount equal to one times the sum of his base salary and target bonus in effect on the termination date less the amount expected to be paid to executive under the Columbia Bank long term disability plan, payable as salary continuation in substantially equal installments over a twelve-month period. For these purposes, disability will occur on the date on which the insurer or administrator of the Bank’s long-term disability insurance determines that executive is eligible to commence benefits under such insurance. If the executive dies while employed, (i) the executive will remain entitled to life insurance benefits pursuant to Columbia Bank’s plans, programs, arrangements and practices in this regard and (ii) Columbia Bank will pay to his designated beneficiary an amount equal to one times the sum of the executive’s base salary and target bonus in effect on the termination date.
Retirement Benefits
Tax-Qualified Defined Benefit Pension Plan. The Columbia Bank Retirement Plan (“Retirement Plan”) is a tax-qualified defined benefit retirement plan that covers approximately 976 eligible current employees, former employees and retirees of Columbia Bank. All of the named executive officers participate in the Pension Plan. If a participant elects to retire upon the attainment of age 65, and the participant was hired prior to July 1, 2005, the plan provides that the participant’s normal retirement benefit will equal 2% of his or her average annual compensation for each plan year and month of service, up to a maximum of 45 years. If a participant elects to retire upon attainment of age 65, and the participant was hired on or after July 1, 2005, the plan provides that the participant’s normal retirement benefit will equal 1.8% of his or her average annual compensation for each plan year and month of service, up to a maximum of 45 years. Participants who have attained age 55 and have completed 10 years of service may retire early. If the participant was hired prior to July 1, 2005, his or her benefit will be reduced by 3% for each year of early commencement between age 55 and 65; if the participant was hired on or after July 1, 2005, his or her benefit will be reduced by 1/15th for each year of early commencement between age 60 and 65 and an additional 1/30th for each year of early
commencement between age 55 and 60. Participants become fully vested in their accrued plan benefit after five years of service. Under the plan, “average annual compensation” is defined as the average of a participant’s compensation for the period of five consecutive years during which his or her compensation was the highest. The Pension Plan, which was closed to new participants effective October 1, 2018, was overfunded at December 31, 2018, with assets representing 130% of our benefit obligation at that date.
Non-Qualified Retirement Income Maintenance Plan. The Columbia Bank Retirement Income Plan (“RIM”) is a non-qualified and unfunded defined benefit retirement plan that provides supplemental retirement benefits to certain highly compensated employees of Columbia Bank and First Jersey Title Services, Inc. whose benefits under the tax-qualified Pension Plan are limited due to the restrictions of Section 415 and/or Section 401(a)(17) of the Internal Revenue Code. All of the named executive officers are eligible to participate in the RIM. A participant’s benefit under the RIM are equal to the excess of (i) the benefit that would be payable to the participant in accordance with the terms of the tax-qualified Pension Plan disregarding the limitations imposed by Section 415 and Section 401(a)(17) of the Internal Revenue Code, less (ii) the benefit actually payable to the participant under the tax-qualified Pension Plan after taking such limitations into account. A participant’s RIM benefit will be paid at the time and in the form elected by the participant; the default time and form of payment is a life annuity with a minimum of 120 monthly payments commencing on the first day of the month following the month in which the participant separates from service, provided that if the participant is a “specified employee” for purposes of Section 409A of the Internal Revenue Code on the date of the participant’s separation from service, payment will be delayed for six months following the participant’s separation from service. At December 31, 2018, the years of credited service to determine benefits under the Pension Plan for each of Messrs. Kemly, Gibney and Allen were 38 years, 41∕2 years and 24 years, respectively, and the aggregate present value of the accumulated benefit for each of Messrs. Kemly, Gibney and Allen under the Retirement Plan and the RIM was equal to $7.5 million, $191,378, and $3.0 million, respectively. The aggregate change in the actuarial present value of the accumulated pension benefits from the year ended 2017 for each of Messrs. Kemly, Gibney and Allen was equal to ($264,259), $14,867 and $24,317, respectively.
401(k) Plan. The Columbia Bank Savings and Investment Plan (the “401(k) Plan”) is a tax-qualified defined contribution plan that covers eligible employees of Columbia Bank and First Jersey Title Services, Inc. All named executive officers are eligible to participate in the 401(k) Plan. Participants may elect to make salary reduction contributions, subject to annual limitations imposed by the Internal Revenue Code. For 2018, the compensation deferral contribution limit was $18,500; provided, however, that participants who have attained age 50 were permitted to contribute an additional $6,000. In addition, Columbia Bank makes matching contributions to the 401(k) Plan on behalf of each participant each year in an amount equal to 100% of up to the first 3% (or first 4.5% for new employees after September 30, 2018) of a participant’s compensation that the participant contributes to the Plan for the year. Participants are permitted to direct the investment of their account balances under the 401(k) Plan among a variety of investment options selected by our internal Savings Investment Plan Committee. Columbia Financial common stock was added as an investment option in connection with the public offering. Participants are immediately 100% vested in their account balances attributable to compensation deferral contributions. Participants become vested in their account balances attributable to matching contributions in installments: 25% after two years of service, 50% after three years of service, 75% after four years of service and 100% after five years of service. Participants may take distributions of their vested account balances following separation from service. During employment, participants may borrow from their vested account balances and take distributions of their vested account balances after attainment of age 591∕2 or on account of hardship.
Non-Qualified Savings Income Maintenance Plan. The Columbia Bank Savings Income Maintenance Plan (the “SIM”) is a non-qualified and unfunded defined contribution retirement plan for the benefit of certain highly compensated employees of Columbia Bank and First Jersey Title Services, Inc. All named executive officers are eligible to participate in the SIM. Under the SIM, a participant may defer between 3% and 13% of the participant’s compensation above the salary limit
imposed by Section 401(a)(17), reduced by the amount of Federal Insurance Contribution Act taxes that the participant must pay in a plan yearinterest with respect to such compensation. In addition, Columbia Bank may make matching contributions equal to a portion of a participant’s compensation deferred under the SIM. For 2018, Columbia Bank made matching contributions in an amount equal to 100% of up to the first 3% of a participant’s compensation in excess of $275,000 that the participant deferred under the SIM. Participants earn a return on their notional account balances based on investment in phantom investment funds (identical to those available under the 401(k) Plan) selected by participants. The SIM does not guarantee a rate of return and none of the investment funds provide above market earnings. Participants are immediately 100% vested in their account balances attributable to compensation deferral contributions. Participants become vested in their account balances attributable to matching contributions in installments: 25% after two years of service, 50% after three years of service, 75% after four years of service and 100% after five years of service. A participant’s vested account balance will be distributed to the participant in a single lump sum upon the earlier of the participant’s separation from service or a change in control of Columbia Bank. If distribution is triggered by separation from service, it will be made on the first day of the month next following the two-month anniversary of the participant’s separation from service, provided that if the participant is a “specified employee” for purposes of Section 409A of the Internal Revenue Code on the date of the participant’s separation from service, payment will be delayed for six months following the participant’s separation from service. .If distribution is triggered by a change in control, it will be made on the first day of the month next following the change in control. In connection with the public offering of Columbia Financial common stock, in 2018 participants in the SIM were provided with the opportunity to direct the investment of portions of their SIM account balances into phantom shares of Columbia Financial common stock by way of a transfer of these amounts to the Columbia Bank Stock-Based Deferral Plan. In addition, the Compensation Committee may, in its discretion, specify an annual window period during a particular calendar year during which participants may direct the investment of portions of their SIM account balances into phantom shares of Columbia Financial common stock by way of a transfer of these amounts to the Columbia Bank Stock-Based Deferral Plan. The Compensation Committee specified such a window in 2018.consultant.
Stock-Based Deferral Plan. In connection our minority public offering, in 2018 we established the Columbia Bank Stock-Based Deferral Plan. In connection with the public offering of Columbia Financial common stock, participants in the SIM and Columbia Bank Director Deferred Compensation Plan were provided with the opportunity to direct the investment of portions of their account balances under those plans into phantom shares of Columbia Financial common stock by way of a transfer of these amounts to the Columbia Bank Stock-Based Deferral Plan. Beginning with 2019, the Stock-Based Deferral Plan allows certain eligible officers and directors to defer future compensation into the plan and make investments of the deferrals in phantom shares of Columbia Financial common stock.
Employee Stock Ownership Plan. In connection with its minority public offering, Columbia Bank adopted an employee stock ownership plan for eligible employees. All eligible employees, including our named executive officers, who were employees as of the closing of the offering of Columbia Bank or any of its affiliates who have adopted the employee stock ownership plan began participation in the plan as of the later of January 1, 2018 or their date of hire. Otherwise, an eligible employee will begin participation in the plan on the first day of the month following or coincident with the completion of six months of employment with Columbia Bank or the affiliate of Columbia Bank that has adopted the plan.
Supplemental Executive Retirement Plan. In connection with its minority public offering, Columbia Bank adopted an ESOP supplemental executive retirement plan (“ESOP SERP”) to provide for supplemental retirement benefits related to its employee stock ownership plan. The ESOP SERP provides benefits to eligible officers (those designated by the Board of Directors of Columbia Bank) that cannot be provided under the employee stock ownership plan as a result of eligibility requirements of the plans and/or limitations imposed by the Internal Revenue Code, but that would have been provided under the plan, but for these eligibility requirements and/or Internal Revenue Code limitations.
Each of the named executive officers is a participant in the ESOP SERP. In addition to providing benefits that would otherwise be lost as a result of eligibility requirements or the Internal Revenue Code limitations on tax-qualified plans, the ESOP SERP also provides a supplemental benefit upon a change of control prior to the scheduled repayment of the employee stock ownership plan loan. Under the terms of the ESOP SERP, each participant is eligible to receive a cash payment in the event of a change in control equal to the dollar value of the stock benefit the executives would have received under the employee stock ownership plan had the executives remained employed throughout the term of the loan, less: (i) the shares of common stock allocated under the employee stock ownership plan on each participant’s behalf; and (ii) the shares of common stock credited to each participant’s supplemental ESOP account under the SERP. ESOP SERP benefits are nonforfeitable and, therefore, are distributable upon termination of employment for any reason.
Cash Incentive Plans
Annual Incentive Plan. We maintain an annual cash incentive plan — the Performance Achievement Incentive Plan (“PAIP”) — that is designed to align the interests of our employees with the overall performance of Columbia Bank. All exempt employees, including the named executive officers, are eligible to participate in the PAIP, subject to certain eligibility requirements. A participant is eligible to earn a target incentive award for a calendar year defined as a percentage of the participant’s base salary. The participant’s target incentive opportunity for a year will be adjusted based on Columbia Bank’s return on average assets for the year. The participant will be eligible to earn a percentage of the adjusted target incentive based on achievement of a combination of overall Columbia Bank, department/team and individual performance goals. Awards for the named executive officers are approved by the Compensation Committee of the Board.
Long Term Incentive Plan. We also maintain a long-term cash incentive plan — the Long-Term Incentive Plan (“LTIP”) — that that is focused on ensuring alignment and commitment to achieving long-term financial results for Columbia Bank. The Compensation Committee of the Board approves participants annually from employees at the senior vice president level and above, subject to certain eligibility requirements. The named executive officers are participants in the LTIP. LTIP awards are granted annually using a three-year performance period. A participant is eligible to earn a target LTIP award for a performance period defined as a percentage of the participant’s base salary. The participant will be eligible for a percentage of the target award for a performance period based on achievement of a one or more performance measures established by the Compensation Committee of the Board for that performance period. Once the Compensation Committee determines achievement of the performance goals for a performance period, two-thirds of the earned amount is paid in cash within two and a half months following completion of the performance period and one-third of the earned amount is paid one year later. In the event the Company’s 2019 Equity Incentive Plan is approved by our shareholders at the annual meeting, we anticipate that one-half of the LTIP awards granted for the 2018 – 2021 performance period will be replaced with equity awards and that all of the LTIP awards granted for the 2019 – 2022 performance period will be replaced with equity awards.
Risk Considerations in our Compensation Program
The Compensation Committee has assessed the Company’s compensation programs and has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on Columbia Financial.the Company. Our RiskCompensation Committee has also assessed Columbia Financial’sthe Company’s executive and broad-based compensation and benefits programs to determine if the programs’ provisions and operations create undesired or unintentional risk of a material nature. This risk assessment process included a review of program policies and practices; a program analysis to identify risk and risk control related to the programs; and determinations as to the sufficiency of risk identification, the balance of potential risk to potential reward, risk control, and the support of the programs and their risks to company strategy. Although the Compensation Committee reviews all compensation programs, it focuses on the programs with variability of payout, with the ability of a participant to directly affect payout and the controls on participant action and payout.
Competitive benchmarking is one of many factors considered by the Compensation Committee in making executive compensation decisions. The Compensation Committee generally reviews data gathered from the proxy statements of our Compensation Consultants
In 2018, the Company’s Compensation Committee retained the services of an independent compensation consultant, GK Partners Inc., to perform a competitive assessment of the Company’s executive and director compensation programs,peer group (as defined below) as well as industry surveys for benchmarking purposes in its review and analysis of base salaries, discretionary bonuses and short-term and long-term cash incentives, and equity grants to establish our executive compensation program. The Compensation Committee reviews the peer group annually and updates the peer group as appropriate to ensure that the peer group continues to consist of financial institutions with business models and demographics and a reasonable range of financial performance similar to the Company.
In 2020, the Compensation Committee engaged GK Partners to conduct an annual comparative marketplace benchmarking study of NEO and non-employee director cash and equity compensation with respect to the Company’s peer group for the Compensation Committee to utilize in reviewing and approving compensation for the NEOs in 2021.
The Compensation Committee’s considered the following factors in reviewing its peer group: total assets, net income, ROE, ROAA, EPS, market capitalization, non-interest income, efficiency ratio, loan to asset ratio, loan to deposit ratio, number of full time employees, and net income per employee. For purposes of reviewing and approving 2021 executive compensation, in 2020 the Compensation Committee selected publicly traded financial institutions with assets between approximately $5.2 billion and $17.6 billion as of December 31, 2019 from the Northeast and Mid-Atlantic regions. The median asset size of the peer group was $8.8 billion, placing the Company at slightly below the 50th percentile in asset size, with asset size at year end 2020 of $8.2 billion. The peer group approved by the Compensation Committee in December 2020 for setting executive compensation for 2021 included the following 20 banks, 19 of which were used in the previous year:
| | Atlantic Union Bankshares Corp. | | | Independent Bank Group | |
| | Berkshire Hills Bancorp, Inc. | | | Kearny Financial Corp. | |
| | Brookline Bancorp, Inc. | | | Lakeland Bancorp, Inc. | |
| | Community Bank System, Inc. | | | Meridian Bancorp, Inc. | |
| | ConnectOne Bancorp, Inc. | | | NBT Bancorp, Inc. | |
| | Customers Bancorp, Inc. | | | OceanFirst Financial Corp. | |
| | Dime Community Bancshares, Inc. | | | Peapack-Gladstone Financial Corp. | |
| | Eagle Bancorp, Inc. | | | Provident Financial Services, Inc. | |
| | Flushing Financial, Inc. | | | Sandy Spring Bancorp, Inc. | |
| | Independent Bank Corp. | | | WSFS Financial Corp. | |
The peer group was utilized by the Compensation Committee in December 2020 for purposes of determining executive compensation and compensation of non-employee directors for 2021.
Employment Agreements with our NEOs
The Compensation Committee believes that employment agreements are necessary to attract and retain qualified executives and ensure the stability of our executive management team. Our employment agreements with our NEOs generally set forth the terms of the executive’s employment with the Company and also promise severance benefits if the executive is involuntarily terminated without cause or, in some cases, if the executive voluntarily terminates his or her employment for good reason. The retention of key management is essential to and in our shareholders’ best interests. The Compensation Committee believes reasonable severance benefits help ensure the continued dedication and efforts of management without undue concern for or distraction by their personal, financial and employment security. Similarly, in the context of a potential change in control transaction, the Compensation Committee believes that employment agreements effectively motivate executives to remain engaged and strive to create shareholder value, despite the risk of job loss or the loss of equity vesting opportunity. In addition, these severance arrangements are necessary to attract and retain qualified executives who may have other job alternatives that may appear to them to be less risky absent these arrangements. For a description of the terms of the employment agreements with our NEOs, see the discussion below on page 24.
| | | COMPENSATION ELEMENT | | | | PURPOSE | | |
| | | Other Benefits | | | | •
Provide participation in the same benefits programs as our other employees, including our ESOP; •
Provide participation in an ESOP SERP for supplemental retirement benefits; and •
Limit annual benefits and perquisites and use as competitively appropriate and necessary only to attract and retain executive talent. | | |
Base Salary
Our NEO base salaries are set at levels that are intended to reflect the competitive marketplace in attracting, retaining, motivating and rewarding high performing executives. In determining base salaries, the Compensation Committee considers the following elements: (i) individual performance based on experience and scope of responsibility, (ii) non-financial performance indicators including strategic developments for which an executive has responsibility and managerial accountability, (iii) compensation paid by peers, (iv) functionality of the executive management team, (v) economic conditions in the Company’s market areas and (vi) analyses or guidance from independent consultants during the annual review process. The base salaries are intended to compensate the NEOs for the day-to-day services performed for the Company and the Bank.
In establishing base salaries for our NEOs for 2021, the Compensation Committee reviewed the factors discussed above and determined that base salary increases were appropriate given our strong financial performance in 2020, our relative positioning to our peers and to maintain competitive base salaries. Below are changes to NEO base salaries from 2020 to 2021.
| NEOs | | | 2020 Base Pay(1)
$ | | | 2021 Base Pay(1)
$ | | | % Change | |
| Thomas J. Kemly | | | | | 795,000 | | | | | | 818,900 | | | | | | 3.01 | | |
| Dennis Gibney | | | | | 402,000 | | | | | | 412,000 | | | | | | 2.49 | | |
| E. Thomas Allen | | | | | 460,000 | | | | | | 472,000 | | | | | | 2.61 | | |
| John Klimowich | | | | | 350,000 | | | | | | 370,000 | | | | | | 5.71 | | |
| Allyson Schlesinger | | | | | 365,000 | | | | | | 380,000 | | | | | | 4.11 | | |
| Oliver E. Lewis, Jr. | | | | | — | | | | | | 350,000 | | | | | | — | | |
(1)
Amounts in table represent NEO base salaries at the end of the period presented.
(2)
Mr. Lewis became Executive Vice President, Head of Commercial Banking on January 2, 2021.
Short-Term Incentives
Performance Achievement Incentive Plan. We maintain an annual cash incentive plan – the Performance Achievement Incentive Plan (“PAIP”) – that is designed to align the interests of our employees with the overall performance of the Company. All exempt employees (excluding commissioned employees), including the NEOs, are eligible to participate in the PAIP, subject to certain eligibility requirements. A participant is eligible to earn a target incentive award for a calendar year defined as a percentage of the participant’s base salary. For 2021, the participant’s target incentive opportunity was adjusted based on the changing regulatory environment governing executive compensation. Company’s return on average assets and net interest margin, as was done in prior years, and the participant was eligible to earn a percentage of the adjusted target incentive based on achievement of a combination of overall Company, department/team and individual performance goals. Awards for the NEOs are approved by the Compensation Committee.
When designing the 2021 PAIP and when considering whether the target performance metrics for a payout under the 2021 PAIP are achieved, the Compensation Committee had the discretion to take into account categories of significant, unplanned and unusual items that would be excluded from the performance metrics, whether the resulting impact was positive or negative, because they distort our operating performance. This
practice, which is consistent with the practices of peer group companies, ensures that our executives will not be unduly influenced in their day-to-day decision-making because they would neither benefit, nor be penalized, as a result of certain unexpected and uncontrollable events or strategic initiatives that may positively or negatively affect the performance metric in the short-term.
The annual executiveperformance measures for the 2021 PAIP included the same corporate goals for each NEO and director assessments include,specific individual goals depending on the individual roles and responsibilities of each NEO, with each NEO’s individual scorecard, other than with respect to Mr. Kemly and Mr. Allen, setting forth the weightings assigned to each performance measure.
The following table summarizes the thresholds, targets, and maximum parameters and actual 2021 performance for each of the applicable financial metrics selected under the 2021 PAIP:
| | | 2021 Performance Measures(1) | | | | Threshold
Parameter
(Dollars in
Millions) | | | | Target
Parameter
(Dollars in
Millions ) | | | | Stretch
Parameter
(Dollars in
Millions) | | | | 2021
Actual
Performance
(Dollars in
Millions) | | |
| | | Core Net Income of Columbia Bank | | | | | $ | 61.2 | | | | | | $ | 72.6 | | | | | | $ | 82.8 | | | | | | $ | 94.9 | | | |
| | | Efficiency Ratio of Columbia Bank | | | | | | 60.90% | | | | | | | 57.90% | | | | | | | 54.90% | | | | | | | 53.90% | | | |
| | | Non-Performing Assets to Total Assets | | | | | | 0.50% | | | | | | | 0.25% | | | | | | | 0.10% | | | | | | | 0.04% | | | |
(1)
Payouts earned for intermediate performance levels are determined using straight line interpolation. Individual performance measures which do not have specific dollar or percentage thresholds but rather are tied to department performance or similar measures are not included in table but are not limitedset forth in the table below.
The weighting assigned to an assessmenteach NEO in the categories that are applicable to them are set forth below:
| | | 2021 Performance Measures* | | | | Mr. Kemly | | | | Mr. Gibney | | | | Mr. Allen | | | | Mr. Klimowich | | | | Ms. Schlesinger | | | | Mr. Lewis | | |
| | | Net Income of Columbia Bank | | | | | | 35.0% | | | | | | | 25.0% | | | | | | | 35.0% | | | | | | | 25.0% | | | | | | | 25.0% | | | | | | | 25.0% | | | |
| | | Efficiency Ratio of Columbia Bank | | | | | | 35.0% | | | | | | | 25.0% | | | | | | | 35.0% | | | | | | | 25.0% | | | | | | | 25.0% | | | | | | | 25.0% | | | |
| | | Non-Performing Assets to Total Assets | | | | | | 30.0% | | | | | | | 20.0% | | | | | | | 30.0% | | | | | | | 20.0% | | | | | | | 20.0% | | | | | | | 20.0% | | | |
| | | Other(1) | | | | | | 0.0% | | | | | | | 30.0% | | | | | | | 0.0% | | | | | | | 30.0% | | | | | | | 30.0% | | | | | | | 30.0% | | | |
| | | Total | | | | | | 100.0% | | | | | | | 100.0% | | | | | | | 100.0% | | | | | | | 100.0% | | | | | | | 100.0% | | | | | | | 100.0% | | | |
(1)
The “Other” category includes overall individual and/or department performance that is directly relevant to the NEOs position and the performance of the business unit under their purview and generally relates to non-revenue producing items, other than with respect to Ms. Schlesinger and Mr. Lewis.
For purposes of determining the level of achievement for each of the performance measures under the 2021 PAIP, the Compensation Committee reviewed the applicable financial metrics, as derived from our 2021 financial results, and the individual and department metrics. For the 2021 performance year, the Compensation Committee certified achievement of the pre-established performance measures for the CEO and each of the other NEOs as reflected in the table above.
After review and discussion, the successful execution of individual and departmental strategic objectives in 2021 coupled with the Company’s financial performance relativeresulted in payouts generally ranging between 113.0% and 134.89% of each NEO’s target 2021 PAIP opportunity, as is set forth below.
| NEO | | | Target Opportunity
($) | | | Payout as a Percent of
Target Opportunity
(%)(1) | |
| Thomas J. Kemly | | | | | 612,128 | | | | | | 125 | | |
| Dennis Gibney | | | | | 284,280 | | | | | | 117.5 | | |
| E. Thomas Allen | | | | | 352,820 | | | | | | 125 | | |
| John Klimowich | | | | | 212,750 | | | | | | 113 | | |
| Allyson Schlesinger | | | | | 218,500 | | | | | | 134.9 | | |
| Oliver E. Lewis, Jr. | | | | | 201,250 | | | | | | 130.5 | | |
(1)
The Company’s 2021 audit report, which will be filed no later than March 1, 2022 with the Company’s Annual Report on Form 10-K, may result in adjustments to the performance measures under the PAIP. The PAIP awards are subject to adjustment if the performance measures change as a result of the audit.
The actual dollar amounts earned by our NEOs in fiscal year 2021, pursuant to the 2021 PAIP, are disclosed in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table below.
Discretionary Bonus Payments. We limit the use of discretionary bonus payment to extraordinary circumstances to rectify inequities or recognize outstanding performance. In 2021, the Company made no discretionary bonus payments to the NEOs.
Long-Term Equity Incentives
2019 Equity Incentive Plan. On June 6, 2019, shareholders of the Company approved the 2019 Equity Incentive Plan, which provided for the grant of stock-based awards to officers, employees and non-employee directors of the Company and its peers, an assessmentsubsidiaries. The Company may grant options, stock appreciations rights, restricted stock, restricted units, unrestricted stock awards, cash based awards, performance awards, and dividend equivalent rights. The total number of shares of the Company’s common stock reserved for issuance under the plan are 7,949,996.
Both incentive stock options and non-qualified stock options may be granted under the Equity Incentive Plan, with total shares reserved for options equaling 5,678,569 with 2,012,505 shares remaining available for grant as options as of December 31, 2021. The total number of shares reserved for restricted stock or restricted units is 2,271,427, with 850,808 shares remaining available for grant as restricted stock or restricted units as of December 31, 2021.
The following table sets forth the annual equity awards that were granted in 2021 to our NEOs. The stock awards and options granted in 2021 vest over a three year period at a rate of 33 1/3% per year.
| | | | | | Stock Awards
(Number of Shares) | | | Grant Date Fair
Value of
Stock Awards ($)(1) | | | Option Awards
(Number of Options) | | | Grant Date Fair
Value of
Option Awards ($)(1) | | |
| | | Oliver E. Lewis, Jr. | | | | | 23,516 | | | | | $ | 419,996 | | | | | | 57,026 | | | | | | 279,998 | | | |
(1)
Reflects the aggregate grant date fair value of restricted stock awards granted in 2021 under the 2019 Equity Incentive Plan, calculated in accordance with FASB ASC Topic 718 for stock-based compensation. The amounts were calculated based on the Company’s stock price on the date of grant, which was March 22, 2021.
Retirement Benefits and Deferred Compensation
We maintain broad-based tax-qualified pension, tax-qualified employee stock ownership, and tax-qualified 401(k) plans. Generally, all employees of the Company are eligible to participate in these plans, including the NEOs. However, the pension plan was closed to new participants effective October 1, 2018.
In addition to the tax-qualified plans described above, we provide our NEOs and other highly compensated employees with benefits under a nonqualified retirement and deferred compensation plans, as described below.
See the narrative accompanying the pension benefit tables and nonqualified deferred compensation tables for details regarding these plans as well as the discussion of such plans below under “Executive Compensation.”
Other Benefits
We provide our NEOs with a set of core benefits that are generally available to our other full-time employees (e.g., coverage for medical, dental, vision care, prescription drugs, and basic life insurance and long-term disability coverage), plus voluntary benefits that a NEO may select (e.g., supplemental life insurance).
Employment Agreements with Named Executive Officers
We have entered into employment agreements with each of our NEOs. For a detailed description of our employment agreements with our NEOs, please see the section entitled “Summary of Executive Agreements and Potential Payments upon Termination or Change in Control” beginning on page 34.
Additional Compensation Practices and Policies
Clawback Policy
The Company has a policy for the recoupment of incentive compensation (the “Clawback Policy”). Under the Clawback Policy, if we restate our financial statements, or a financial statement or the calculation of a performance goal or metric is materially inaccurate, the Compensation Committee, in its sole discretion, may require recoupment from our executive officers, including our NEOs, of the portion of any annual or long-term cash or equity-based incentive or bonus compensation paid, provided, or awarded to any executive officer that represents the excess over what would have been paid if such event had not occurred.
Stock Ownership Guidelines
The Company’s Share Ownership and Retention Policy that sets forth stock ownership guidelines that are robust and reflect current corporate governance trends. We require our executive officers and non-employee directors to own or acquire shares of Company stock having a fair market value equal to the following amounts:
| Title | | | Amount | |
| President and Chief Executive Officer | | | 5x base salary | |
| Senior Executive Vice Presidents | | | 3x base salary | |
| Executive Vice Presidents | | | 3x base salary | |
| Non-Employee Directors | | | 3x annual fees and retainers for service on the Board | |
Each of these individuals must fulfill their ownership requirement within five years of becoming subject to the Share Ownership and Retention Policy, and individuals are further required to fulfill 25% and 50% of their ownership requirement within two and three years, respectively, of becoming subject to the Share Ownership and Retention Policy. In the event of a participant receiving a raise in his or her base salary or annual retainer, leading to an increase in the ownership requirement, the participant will be provided additional one year from the time of the increase to achieve the required incremental increase in his or her ownership of shares. For purposes of determining ownership, the following shall be taken into account: (i) shares owned directly by the individual or his or her immediate family members residing in the same household, or shares held through a trust for the benefit of the individual or the individual’s dependent family members residing in the same household; (ii) shares owned through a qualified employee benefit plan, including the 401(k) Plan, or through the ESOP; (iii) share equivalents held in a non-qualified, deferred compensation arrangements; and (iv) 100% of restricted stock, or restricted stock units, the vesting of which is contingent on time or performance.
Each NEO’s and non-employee director’s stock ownership level is reviewed annually by the Company and the Nominating and Governance Committee. As of December 31, 2021, all current NEOs were in compliance with their respective stock ownership levels.
Anti-Hedging and Pledging Policies
The Company has a written policy that prohibits our directors and officers from hedging the value of our stock by the purchase and sale of puts, calls, options, or other derivative securities based on Company stock, or other transactions related to the monetization of the value of our stock. In addition, our officers, directors and employees are not allowed to pledge Company stock as collateral or acquire Company stock on margin.
No Tax Gross Ups
Our employment agreements with our NEOs do not provide for tax “gross ups” and instead provide for a “best net benefits” approach in the event that severance benefits under the agreements or otherwise result in “excess parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended. The best net benefits approach reduces an executive’s payments and benefits to avoid triggering the excise tax if the reduction would result in a greater after-tax amount to the executive officer compared to the amount the executive officer would receive net of the excise tax if no reduction were made.
Perquisites
We annually review the perquisites that we make available to our named executive officers. The primary perquisites for these individuals include automobile allowances and certain club dues. See “Executive Compensation — Summary Compensation Table” for detailed information on the perquisites provided to our NEOs.
Tax and Accounting Considerations
To the greatest extent possible, we structure our compensation programs in a tax-efficient manner. Section 162(m) of the Internal Revenue Code generally does not allow a tax deduction to public companies for compensation in excess of $1 million paid to the CEO or other NEOs and certain former NEOs. Prior to 2018, compensation was specifically exempt from the deduction limit to the extent that it was “performance-based” as previously defined in Section 162(m) of the Internal Revenue Code. For taxable years beginning on and after January 1, 2018, the Tax Cuts and Jobs Act of 2017 generally eliminated the “performance-based” compensation exemption and expanded the $1 million per covered employee annual limitation on tax deductibility to a larger group of named executive officers. In addition, the 2017 tax law also provides that any named executive officer who was a covered employee in taxable years beginning on and after January 1, 2017, will continue to be a covered employee for all subsequent taxable years (even after employment termination). As a result, the Company may not take a tax deduction for any compensation paid to its covered employees in excess of $1 million annually per covered employee with the exception of “performance-based” compensation paid pursuant to a written binding contract that was in effect on November 2, 2017, and that was not modified in any material respect on or after such date.
The Compensation Committee believes that tax deductibility is but one factor to consider in developing an appropriate compensation package for executives. As such, the Compensation Committee reserves and will exercise its discretion in this area to design a compensation program comparedthat serves the long-term interests of the Company but which may not qualify for tax deductibility under Section 162(m) of the Internal Revenue Code.
In addition to its peers, recommendationsSection 162(m) of the Internal Revenue Code, the Compensation Committee considers other tax and accounting provisions in developing the pay programs for the NEOs, including:
•
The annual rules applicable to fair value-based methods of accounting for stock compensation; and
•
The overall income tax rules applicable to various forms of compensation.
While the Compensation Committee generally tries to compensate the NEOs in a manner that produces favorable tax and accounting treatment, the main objective is to develop fair and equitable compensation arrangements that appropriately incentivize, reward, and retain the NEOs and aligns our performance goals with shareholder returns.
Share usage requirements and resulting potential shareholder dilution from equity compensation awards is also considered by the Compensation Committee in determining the size of long-term incentive grants.
(4)
Reflects the aggregate grant date fair value of stock options granted in 2019 under the 2019 Equity Incentive Plan, calculated in accordance with FASB ASC Topic 718 for stock-based compensation based upon a fair value of $4.25 for each option using the Black-Scholes option pricing model, other than Mr. Lewis. With respect to Mr. Lewis, a fair value of $4.91 was used for each option using the Black-Scholes option pricing model. The actual value, if any, realized by a named executive officer from any option will depend on the extent to which the market value of the common stock exceeds the exercise price of the option on the date the option is exercised. Accordingly, there is no assurance that the value realized by a named executive officer will be at or near the value estimated above.
(5)
For 2021, represents non-discretionary, performance-based cash payments earned by each named executive officer during each year presented under the PAIP, which is described above under “Short-Term Incentives.” For 2021, specific amounts were as follows:
| | | | Columbia Bank Performance
Achievement Incentive Plan(a) | |
| Mr. Kemly | | | | $ | 765,160 | | |
| Mr. Gibney | | | | | 334,029 | | |
| Mr. Allen | | | | | 441,025 | | |
| Mr. Klimowich | | | | | 240,408 | | |
| Ms. Schlesinger | | | | | 294,737 | | |
| Mr. Lewis | | | | | 262,719 | | |
(a)
Represents performance-based payments earned under the PAIP, which is previously discussed in more detail under the section entitled “Short-Term Incentives” above. The Company’s 2021 audit report, which will be filed no later than March 1, 2022 with the Company’s Annual Report on Form 10-K, may result in adjustments to the performance measures under the PAIP. The PAIP awards are subject to adjustment if the performance measures change as a result of the audit. The amounts reported for 2021 were based on 2021 performance and will be paid to the NEOs on March 4, 2022.
For 2019 and 2020, in addition to awards made under the PAIP for such years, the sum in this column also represents awards made prior to 2019 under the Columbia Bank Long-Term Incentive Plan (“Cash LTIP”), which plan was terminated in 2019. Prior to termination of the Cash LTIP, Cash LTIP awards were granted annually using a three-year performance period. A participant was eligible to earn a target Cash LTIP award for a performance period with the amount of such awards based on a percentage of the participant’s base salary. The participant was eligible to earn a percentage of the target award for a performance period based on achievement of one or more performance measures established by the Compensation Committee of the Board for that performance period with two-thirds of the earned amount paid in cash within two and a reviewhalf months following completion of the performance period and one-third of the earned amount paid in cash one year later subject to continued employment of the participant during that year. Under the Cash LTIP, awards were granted annually using a three-year performance period, with (i) two-thirds of a participant’s award for each three-year performance period earned at the end of the performance period and (ii) the remaining one-third earned one year later, subject to the participant’s continued employment as of the end of the one year period following the end of the performance period.
(6)
Reflects the actuarial change in pension value in each individual’s accrued benefit under the defined benefit pension plan (and the supplemental plans) from December 31 of the prior year to December 31 of the reported year. Pension values may fluctuate significantly from year to year depending on a number of factors, including age and the assumptions used to determine the present value of a named executive officer’s accumulated benefit, including interest rates. The change in pension value reflects changes in interest rate assumptions, age, service and earnings during 2021. See “— Retirement Benefits” footnote 2 to the pension plan table below for more information.
(7)
Details of the amounts disclosed in the “All Other Compensation” column for 2021 are provided in the table below, which reflects the types and dollar amounts of perquisites and other personal benefits
provided to the NEOs in 2021. Except as otherwise noted, the actual incremental costs to the Company of providing the perquisites and other personal benefits to the NEOs was used.
| | | | Mr. Kemly | | | Mr. Gibney | | | Mr. Allen | | | Mr. Klimowich | | | Ms. Schlesinger | | | Mr. Lewis | |
Company contribution to ESOP
and ESOP SERP(a) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Company matching contributions
to 401(k) plan and SIM(b) | | | | | 8,700 | | | | | | 8,700 | | | | | | 8,700 | | | | | | 8,700 | | | | | | 8,700 | | | | | | 11,263 | | |
Executive term life insurance
premiums(c) | | | | | 3,333 | | | | | | 383 | | | | | | 1,669 | | | | | | 712 | | | | | | — | | | | | | — | | |
| Car allowances(d) | | | | | 8,441 | | | | | | — | | | | | | 8,691 | | | | | | — | | | | | | 15,091 | | | | | | 11,742 | | |
| Mobile phone allowances(e) | | | | | 720 | | | | | | 720 | | | | | | 720 | | | | | | 720 | | | | | | 720 | | | | | | 720 | | |
| Club dues(f) | | | | | 18,069 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
(a)
Information regarding regular ESOP allocations and allocations under the related ESOP SERP for each NEO will not be available from our third party service provider until after the date of this proxy statement and is therefore not included in the calculation of “All Other Compensation” in the Summary Compensation Table. The Company anticipates that this information will be available in early March 2022 and the Company will prepare and file a Current Report on Form 8-K disclosing the ESOP and ESOP SERP allocations for each NEO promptly following receipt of such information.
(b)
Reflects the cost of matching contributions under our tax-qualified 401(k) plan and SIM.
(c)
Reflects the amount of imputed income for bank owned life insurance.
(d)
Reflects the car allowance of each NEO during 2021 as part of our car allowance program.
(e)
Reflects the mobile phone allowance of each NEO during 2021 as part of our mobile phone program.
(f)
Reflects the payment of club dues for each NEO under our club membership policy.
Grants of Plan Based Awards
The following table summarizes grants made in 2021 to Mr. Lewis under the 2019 Equity Incentive Plan. No other NEO received any grants under the 2019 Equity Incentive Plan during 2021. The material terms of the Company’s annual and long-term incentive programs are described in the Compensation Discussion and Analysis beginning on page 12 of this Proxy Statement.
| Name | | | Grant
Date | | | Estimated Future
Payments Under
Non-Equity Incentive
Plan Awards | | | Estimated Future
Payouts Under
Equity Incentive
Plan Awards | | | All Other
Stock
Awards:
Number of
Shares of
Stock
(#)(1)(3) | | | All Other
Option
Awards;
Number of
Securities
Underlying
Options | | | Exercise
or Base
Price of
Option
Awards ($/Sh) | | | Grant
Date Fair
Value of
Stock
and
Options
Awards
($)(2)(3) | |
| | Threshold
($) | | | Target
($) | | | Maximum
($) | | | Threshold
(#) | | | Target
(#) | | | Maximum
(#) | |
| Oliver E. Lewis, Jr. | | | | | 03/22/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 23,516 | | | | | | — | | | | | | — | | | | | | 419,996 | | |
| | | | | | 03/22/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 57,026 | | | | | $ | 17.86 | | | | | | 279,998 | | |
(1)
The information in this column represents time-vested restricted stock awards granted in 2021 under the 2019 Equity Incentive Plan. The stock awards vest in three approximately equal installments commencing on March 22, 2022.
(2)
The information in this column represents time-vested stock option awards granted in 2021 under the 2019 Equity Incentive Plan. The stock options vest in three approximately equal annual installments commencing on March 22, 2022.
(3)
The amounts reported are the aggregate grant date fair value of the awards computed in accordance with
the FASB ASC Topic 718 for share-based payments. The grant date fair value of all restricted stock awards is equal to the number of awards multiplied by $17.86, the closing price for the Company’s common stock on the date of grant. The grant date fair value for stock option awards is equal to the number of options multiplied by a fair value of $4.91, which was computed using the Black-Scholes option pricing model.
Outstanding Equity Awards at 2021 Fiscal Year End
The following table shows information regarding all unvested equity awards held by our NEOs on December 31, 2021. With the exception of Mr. Lewis, who became an NEO in January 2021, no equity awards were made to the NEOs in 2021. These awards are subject to forfeiture until vested, and the ultimate value of performance-based awards is unknown. The material terms and conditions of the equity awards reported in this table are described in the “Long-Term Incentives” section of the Compensation Discussion and Analysis beginning on page 12 of this Proxy Statement. No equity award granted to a NEO has been transferred to any other person, trust or entity.
| | | | Option Awards | | | Stock Awards | |
| Name | | | Grant
Date | | | Number of
Securities
Underlying
Unexercised
Stock
Options
Exercisable(1) | | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable(1)(4) | | | Option
Exercise
Price | | | Option
Expiration
Date | | | Number of
Shares of
Restricted
Stock
Not
Vested(2)(4) | | | Market
Value of
Shares or
Units of
Restricted
Stock Not
Vested(3) | | | Number
of
Unearned
Performance
Shares | | | Market
Value
of Unearned
Performance
Shares | |
| Thomas J. Kemly | | | | | 07/23/2019 | | | | | | 262,588 | | | | | | 393,883 | | | | | $ | 15.60 | | | | | | 07/23/2029 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | |
| | | | | | 07/23/2019 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 214,616 | | | | | | 4,476,890 | | | | | | — | | | | | | — | | |
| Dennis E. Gibney | | | | | 07/23/2019 | | | | | | 96,000 | | | | | | 144,000 | | | | | $ | 15.60 | | | | | | 07/23/2029 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 07/23/2019 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 78,462 | | | | | | 1,636,718 | | | | | | — | | | | | | — | | |
| E. Thomas Allen, Jr. | | | | | 07/23/2019 | | | | | | 112,941 | | | | | | 169,412 | | | | | $ | 15.60 | | | | | | 07/23/2029 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 07/23/2019 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 92,308 | | | | | | 1,925,545 | | | | | | — | | | | | | — | | |
| John Klimowich | | | | | 07/23/2019 | | | | | | 75,294 | | | | | | 112,941 | | | | | $ | 15.60 | | | | | | 07/23/2029 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 07/23/2019 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 61,539 | | | | | | 1,283,703 | | | | | | — | | | | | | — | | |
| Allyson Schlesinger | | | | | 07/23/2019 | | | | | | 62,117 | | | | | | 93,177 | | | | | $ | 15.60 | | | | | | 07/23/2029 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 07/23/2019 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 50,770 | | | | | | 1,059,063 | | | | | | — | | | | | | — | | |
| Oliver E. Lewis, Jr. | | | | | 12/16/2019 | | | | | | 7,058 | | | | | | 10,589 | | | | | $ | 17.00 | | | | | | 07/23/2029 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 12/16/2019 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 5,718 | | | | | | 119,278 | | | | | | — | | | | | | — | | |
| | | | | | 03/22/2021 | | | | | | — | | | | | | 57,026 | | | | | $ | 17.86 | | | | | | 03/22/2031 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 03/22/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 23,516 | | | | | | 490,544 | | | | | | — | | | | | | — | | |
(1)
Represents stock options granted pursuant to the 2019 Equity Incentive Plan that vest in five approximately equal annual installments commencing on July 23, 2020.
(2)
Represents stock awards granted pursuant to the 2019 Equity Incentive Plan that vest 20% per year based on continued employment through the fifth anniversary of the grant date (subject to certain exceptions) and performance-based stock awards granted in 2019 for which the performance metrics have been met at target as of December 31, 2021 but such shares remain subject to continued employment through the third anniversary of the grant date (subject to certain exceptions).
(3)
Based on the Company’s closing stock price of $20.86 on December 31, 2021.
(4)
Represents stock options and restricted stock awards granted to Mr. Lewis in 2021 pursuant to the 2019 Equity Incentive Plan that vest in three approximately equal annual installments commencing on March 22, 2022.
Code on the date of the participant’s separation from service, payment will be delayed for six months following the participant’s separation from service.
Pension Benefits Table. The following table shows the actuarial present value of the accumulated benefit under our tax-qualified pension plan and the RIM, along with the number of years of credited service under the respective plans, for each of our named executive officers.
| Name | | | Plan Name | | | Number of Years
of
Credited Service | | | Present Value of
Accumulated Benefit(1) | |
| Thomas J. Kemly | | | Columbia Bank Retirement Plan | | | | | 40.67 | | | | | | 4,327,332 | | |
| | | | Columbia Bank Retirement
Income Maintenance Plan | | | | | 40.67 | | | | | | 7,725,765 | | |
| Dennis E. Gibney | | | Columbia Bank Retirement Plan | | | | | 7.50 | | | | | | 406,744 | | |
| | | | Columbia Bank Retirement
Income Maintenance Plan | | | | | 7.50 | | | | | | 168,932 | | |
| E. Thomas Allen, Jr. | | | Columbia Bank Retirement Plan | | | | | 27.25 | | | | | | 2,971,349 | | |
| | | | Columbia Bank Retirement
Income Maintenance Plan | | | | | 27.25 | | | | | | 1,877,664 | | |
| John Klimowich | | | Columbia Bank Retirement Plan | | | | | 36.17 | | | | | | 3,280,266 | | |
| | | | Columbia Bank Retirement
Income Maintenance Plan | | | | | 36.17 | | | | | | 511,867 | | |
| Allyson Schlesinger | | | Columbia Bank Retirement Plan | | | | | 3.25 | | | | | | 212,059 | | |
| | | | Columbia Bank Retirement
Income Maintenance Plan | | | | | 3.25 | | | | | | 56,721 | | |
| Oliver E. Lewis, Jr. | | | Columbia Bank Retirement Plan | | | | | — | | | | | | — | | |
| | | | Columbia Bank Retirement
Income Maintenance Plan | | | | | — | | | | | | — | | |
(1)
The Company provides its actuaries with certain rate assumptions used in measuring its benefit obligations under the Pension Plan. The most significant of these is the discount rate used to calculate the period-end present value of the benefit obligations, and the expense to be included in the following year’s financial statements. The discount rate assumption for 2021 was determined based on a cash flow-yield curve model specific to the Company’s Pension Plan. The Pension Plan was overfunded at December 31, 2021, with assets representing 158.5% of our benefit obligation at that date.
Pay Ratio
The Company is required by SEC rules to disclose the median of the annual total compensation of all employees of the Company (excluding the Chief Executive Officer), the annual total compensation of the Chief Executive Officer, and the ratio of these two amounts (the “pay ratio”). The pay ratio below is a reasonable estimate based on the Company’s payroll records and the methodology described below, and was calculated in a manner consistent with SEC rules. Because SEC rules for identifying the median employee and calculating the pay ratio allow companies to use variety of methodologies, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies may have different employment and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
For purposes of calculating the 2021 pay ratio, the Company selected December 31, 2021 as the determination date for identifying the median employee. Year-to-date taxable wages paid from January 1, 2021 to December 31, 2021 for all employees as of the determination date, with the exception of Mr. Kemly, were arrayed from lowest to highest. Wages of newly hired permanent employees were adjusted to represent wages for the entire measurement period. This period captured all incentive payments for the tax year as well as the vesting of equity awards, as applicable. The median employee was identified, and total compensation for the
median employee was calculated in the manner required for the Summary Compensation Table. Mr. Kemly’s total compensation for 2021, as disclosed in the Summary Compensation Table, was $1,990,119 and the median employee’s was $117,690 producing a ratio of 17 to 1.
Nonqualified Deferred Compensation
Supplemental Executive Retirement Plan. The Columbia Bank ESOP Supplemental Executive Retirement Plan (“ESOP SERP”) is a nonqualified and unfunded defined contribution retirement plan that provides supplemental retirement benefits related to its tax-qualified employee stock ownership plan. The ESOP SERP provides benefits to eligible officers of the Company and its subsidiaries designated by the Board that cannot be provided under the tax-qualified employee stock ownership plan but for the eligibility requirements of the plans or limitations imposed by the Internal Revenue Code. All NEOs are eligible to participate in the ESOP SERP. A NEO becomes vested in these benefits in 25% increments after completing two, three, four and committeefive years of service with the Company. In addition to providing benefits that would otherwise be lost as a result of eligibility requirements or the Internal Revenue Code limitations on tax-qualified plans, the ESOP SERP also provides a supplemental benefit upon a change of control prior to the scheduled repayment of the tax-qualified employee stock ownership plan loan. Under the terms of the ESOP SERP, each NEO is eligible to receive a cash payment in the event of a change in control equal to the dollar value of the stock benefit the NEO would have received under the tax-qualified employee stock ownership plan and ESOP SERP had the executives remained employed throughout the term of the loan, less the shares of common stock allocated under the tax-qualified employee stock ownership plan and ESOP SERP on the NEO’s behalf. The supplemental change in control benefits under the ESOP SERP are nonforfeitable and distributable upon termination of employment for any reason.
Non-Qualified Savings Income Maintenance Plan. The Columbia Bank Savings Income Maintenance Plan (the “SIM”) is a non-qualified and unfunded defined contribution retirement plan for the benefit of certain highly compensated employees of the Company and its subsidiaries. All NEOs are eligible to participate in the SIM. Under the SIM, a participant may defer between 3% and 13% of the participant’s compensation above the salary limit imposed by Section 401(a)(17), reduced by the amount of Federal Insurance Contribution Act taxes that the participant must pay in a plan year with respect to such compensation. In addition, the Company may make matching contributions equal to a portion of a participant’s compensation deferred under the SIM. For 2021, Columbia Bank made matching contributions in an amount equal to 100% of up to the first 3% of a participant’s compensation in excess of $295,000 that the participant deferred under the SIM including all of the NEOs other than Mr. Lewis, whose match was based on 4.5% of his compensation. Participants earn a return on their notional account balances based on investment in phantom investment funds (similar to those available under the 401(k) Plan) selected by participants. The SIM does not guarantee a rate of return and none of the investment funds provide above market earnings. Participants are immediately 100% vested in their account balances attributable to compensation deferral contributions. Participants generally become vested in their account balances attributable to matching contributions in installments – 25% after two years of service, 50% after three years of service, 75% after four years of service and 100% after five years of service – and become 100% vested upon death. A representativeparticipant’s vested account balance will be distributed to the participant in a single lump sum upon the earlier of GK Partners Inc. attendedthe participant’s separation from service or a change in control of Columbia Bank. If distribution is triggered by separation from service, it will be made on the first day of the month next following the two-month anniversary of the participant’s separation from service, provided that if the participant is a “specified employee” for purposes of Section 409A of the Internal Revenue Code on the date of the participant’s separation from service, payment will be delayed for six months following the participant’s separation from service. If distribution is triggered by a change in control, it will be made on the first day of the month next following the change in control.
Stock-Based Deferral Plan. In connection with the public offering of Columbia Financial common stock in 2018, participants in the SIM and the Columbia Bank Director Deferred Compensation Plan were provided with the opportunity to direct the investment of portions of their account balances under those plans into phantom shares of Columbia Financial common stock by way of a transfer of these amounts to the new Columbia Bank Stock-Based Deferral Plan. The Plan Administrator may, in its discretion, specify an annual window period during which participants may direct the investment of portions of their SIM and the Columbia Bank Director Deferred Compensation Plan account balances into phantom shares of Columbia Financial common stock by way of a transfer of these amounts to the Columbia Bank Stock-Based Deferral
Plan. This plan in effect is an additional phantom investment alternative available with respect to the SIM and the Columbia Bank Director Deferred Compensation Plan. As a result, data for this plan is not included in the table below.
Nonqualified Deferred Compensation Table. The following table discloses contributions made under the SIM and the ESOP SERP for each named executive officer in 2021, along with the earnings and balances on each executive’s account as of December 31, 2021.
| Name | | | Plan | | | Executive
Contributions
in Last Fiscal
Year | | | Company
Contributions
in Last Fiscal
Year(1) | | | Aggregate
Earnings in
Last Fiscal
Year(2) | | | Aggregate
Balance at
Last Fiscal
Year End(3) | |
| Thomas J. Kemly | | | Columbia Bank Savings Income Maintenance Plan | | | | | 95,099 | | | | | | 2,086 | | | | | | — | | | | | | 1,436,130 | | |
| | | | ESOP Supplemental Executive Retirement Plan | | | | | — | | | | | | | | | | | | — | | | | | | 346,208 | | |
| Dennis E. Gibney | | | Columbia Bank Savings Income Maintenance Plan | | | | | 26,969 | | | | | | — | | | | | | — | | | | | | 242,787 | | |
| | | | ESOP Supplemental Executive Retirement Plan | | | | | — | | | | | | | | | | | | — | | | | | | 112,225 | | |
| E. Thomas Allen, Jr. | | | Columbia Bank Savings Income Maintenance Plan | | | | | 56,473 | | | | | | — | | | | | | — | | | | | | 154,653 | | |
| | | | ESOP Supplemental Executive Retirement Plan | | | | | — | | | | | | | | | | | | — | | | | | | 152,407 | | |
| John Klimowich | | | Columbia Bank Savings Income Maintenance Plan | | | | | 14,104 | | | | | | — | | | | | | — | | | | | | 68,676 | | |
| | | | ESOP Supplemental Executive Retirement Plan | | | | | — | | | | | | | | | | | | — | | | | | | 69,683 | | |
| Allyson Schlesinger | | | Columbia Bank Savings Income Maintenance Plan | | | | | 22,913 | | | | | | — | | | | | | — | | | | | | 35,818 | | |
| | | | ESOP Supplemental Executive Retirement Plan | | | | | — | | | | | | | | | | | | — | | | | | | 47,618 | | |
| Oliver E. Lewis, Jr. | | | Columbia Bank Savings Income Maintenance Plan | | | | | — | | | | | | — | | | | | | — | | | | | | 15,997 | | |
| | | | ESOP Supplemental Executive Retirement Plan | | | | | — | | | | | | | | | | | | — | | | | | | — | | |
(1)
Represents the Company’s contribution to each NEO’s SIM and ESOP Supplemental Executive Retirement Plan (“ESOP SERP”) account in respect of each NEOs 2021 compensation even though such amounts were not credited until 2022 (which amounts are included in the 2021 “All Other Compensation” column of the Summary Compensation Table). The ESOP SERP data for 2021 is not available from our third party service provider as of the date of this proxy statement. As noted in footnote 7 to the Summary Compensation Table, the Company will prepare and file a Current Report on Form 8-K disclosing the ESOP and ESOP SERP allocations with respect to the NEOs promptly after receipt of such information.
(2)
The Company does not provide above-market or preferential rates and, as a result, the notional earnings are not included in the 2021 Summary Compensation Table.
(3)
Represents the aggregate year-end balances of each NEO under the SIM and the ESOP SERP as of the end of 2021 plus Company contributions in respect of 2021 compensation that were not credited until 2022. The amount of the Company’s contribution to the NEO’s ESOP SERP for 2021 is not included in the total amount reported in this column as it is not available as of the date of this proxy statement. See footnote 1 above with respect to the ESOP SERP. Deferral balances of NEOs under the SIM were notionally invested among a variety of mutual fund alternatives and our common stock, and deferral balances under the ESOP SERP were notionally invested in shares of our common stock.
Summary of Executive Employment Agreements and Potential Payments Upon Termination or Change in Control
We have entered into two-year employment agreements with Messrs. Kemly, Gibney, Allen, Klimowich, Lewis and Ms. Schlesinger. Each employment agreement provides for a two-year term. The Board may extend the terms of the employment agreements with the NEOs annually for another twelve month period, unless the NEO gives notice of non-renewal at least sixty days prior to such extension. The Compensation Committee annually reviews the NEO’s base salaries. In addition to base salary, the agreements provide that the NEOs shall be eligible to participate in the short-term and Board meetingslong-term incentive compensation plans of Columbia Bank. Each NEO shall also be entitled to continue participation in any fringe benefit arrangements in which he or she was participating on the effective date of the employment agreement. In addition, the agreements provide for reimbursement of reasonable travel and other business expenses incurred in connection with the performance of the NEO’s duties.
If a NEO’s employment is terminated by Columbia Financial or Columbia Bank during 2018,the term of the agreement, without cause, including a resignation for good reason (as defined in the agreement), but excluding termination for cause or due to death, disability, retirement, the executive would be entitled to a payment equal to a multiple (three times for Mr. Kemly and two times for Messrs. Gibney, Allen, and Klimowich and one times for Ms. Schlesinger and Mr. Lewis) of the sum of: (i) his or her annual base salary plus (ii) his or her target annual bonus in effect on the termination date. The severance payment shall be paid to the NEO as salary continuation in substantially equal installments over the thirty-six, twenty-four or twelve month period, respectively, in accordance with Columbia Bank’s customary payroll practices, subject to the receipt of a signed release of claims from the NEO within the time frame set forth in the agreement. Assuming the NEO elects continued medical, vision and dental coverage under COBRA, Columbia Bank will reimburse the executive the amount equal to the monthly COBRA premium paid by the NEO for such coverage less the active employee premium for such coverage for a period of 36 months, in the case of Mr. Kemly, and 24 months, in the case of Messrs. Gibney, Allen, and Klimowich and 12 months in the case of Ms. Schlesinger and Mr. Lewis or such lesser period as may be required under COBRA.
If executive NEO’s employment is terminated during the term of the agreement by Columbia Financial or Columbia Bank without cause, including a resignation for good reason (as defined in the agreements), within 24 months after a change in control (as also defined in the agreements), the NEO would be entitled to a payment equal to a multiple of three times (two times in the case of Ms. Schlesinger and Mr. Lewis) of the sum of: (i) his or her annual base salary (or his base salary in effect immediately before the change in control, if higher) plus (ii) his or her annual target bonus (or his target bonus in effect immediately before the change in control, if higher). The severance payment shall be paid to the NEO within sixty days of the termination date in a single lump sum payment. The payment shall also include a sum equal to his or her prior year bonus in a lump sum on the date on which the annual bonus would have been paid to NEO but for NEO’s termination of employment. In addition, each NEO shall receive a lump sum payment equal to the cost of providing continued life, medical, vision and dental coverage for 36 months following termination less the active employee charge for such coverage in effect on the termination date.
For purposes of the NEO’s ability to resign and receive a payment under the agreement, “good reason” would include the occurrence of any of the following events: (i) a material reduction in the NEO’s base salary or target bonus under the cash incentive plans, if applicable, except for reductions proportionate with similar reductions to all other members of the executive leadership team; (ii) a material adverse change in NEO’s position that results in a demotion in the NEO’s status within Columbia Financial or Columbia Bank; (iii) a change in the primary location at which the NEO is required to perform the duties of his employment with Columbia Financial and Columbia Bank to a location that is more than thirty (30) miles from the location of the Bank’s headquarters as of the date of the agreement; or (iv) a material breach by Columbia Financial or Columbia Bank of any written agreement between the NEO, on the one hand, and any of Columbia Financial and Columbia Bank or any other affiliate of Columbia Financial, on the other hand, unless arising from the NEO’s inability to materially perform his or her duties under the agreement.
Section 280G of the Internal Revenue Code provides that severance payments that equal or exceed three times an individual’s base amount are deemed to be “excess parachute payments” if they are contingent upon request,a change in control. An individual’s base amount is generally equal to reviewan average of the individual’s taxable compensation datafor the five taxable years preceding the year a change in control occurs. The employment agreements with our NEOs provide for a “best net benefits” approach in the event that severance benefits under the agreements or otherwise result in “excess parachute payments” under Section 280G. The best net benefits approach reduces a NEO’s payments and benefits to avoid triggering the excise tax if the reduction would result in a greater after-tax amount to the NEO compared to the amount the NEO would receive net of the excise tax if no reduction were made.
Under the employment agreements, if executive NEO’s employment terminates as a result of disability, the employment agreement will terminate and the NEO will receive an amount equal to one time the sum of his or her base salary and target bonus in effect on the termination date less the amount expected to be paid to the NEO under the Columbia Bank long term disability plan, payable as salary continuation in substantially equal installments over a twelve-month period. For these purposes, disability will occur on the date on which the insurer or administrator of the Bank’s long-term disability insurance determines that the NEO is eligible to commence benefits under such insurance. If the NEO dies while employed, (i) the NEO will remain entitled
to life insurance benefits pursuant to Columbia Bank’s plans, programs, arrangements and practices in this regard and (ii) Columbia Bank will pay to his or her designated beneficiary an amount equal to one time the sum of the NEO’s base salary and target bonus in effect on the termination date.
Under the 2019 Equity Incentive Plan and the award agreements for the equity awards made to the NEOs, in the event of a change in control (as defined in the plan) and the involuntary separation of the NEO from service with the Company and participateits affiliates without cause within 12 months of the change in general discussionscontrol and prior to the last vesting date for such awards, if such awards are not assumed by the surviving entity in the change in control, all such awards that are unvested at the time of the change in control will become immediately vested upon the effective date of the change in control.
As disclosed under “Nonqualified Deferred Compensation” at page 33 above, under the terms of the ESOP SERP, an NEO will receive an additional cash payment in the event of a change in control equal to the benefit the NEO would have received under the ESOP and the ESOP SERP had the NEO remained employed throughout the term of the ESOP loan, less the benefits actually provided under the ESOP and ESOP SERP on compensationthe NEO’s behalf. The supplemental change in control benefits credited to NEO accounts under the ESOP SERP are nonforfeitable and will be distributed upon termination of employment for any reason. Payments under the ESOP SERP are not categorized as parachute payments and, therefore, do not count towards a participating executive’s limitation under Section 280G of the Internal Revenue Code.
Each NEO’s account balance under the SIM will become fully vested upon the NEO’s death. RIM benefits forare described in more detail under “Nonqualified Deferred Compensation” at page 33 above.
Messrs. Kemly, Allen and Klimowich are vested in their RIM benefits and they have each elected to receive payment of their accrued benefits under the RIM upon a change in control (as defined in the RIM). RIM benefits are described in more detail under “Pension Benefits” at page 31 above.
Tabular Information Regarding Potential Payments to Executives Upon Termination or a Change in Control
The following table summarizes the estimated payments to which the named executive officers were entitled upon termination as of December 31, 2021. Benefits payable under the Retirement Plan, the RIM, the 401(k) Plan and Board members. While the Compensation Committee considered input from GK Partners Inc. when makingvested balances under non-qualified, deferred compensation decisions, the Compensation Committee’s final compensation decisions reflect many factors and considerations.
In addition, during 2018, the Compensation Committee also retained the services of a second independent compensation consultant, McLagan to advise the Compensation Committee in connection with the development and implementation of the Company’s 2019 Equity Incentive Plan.plans are not included. For additional information on the services McLagan providedbenefits payable to our named executive officers upon termination or a change in control, see “— Employment Agreements with Named Executive Officers.”
| | | | Thomas J.
Kemly | | | Dennis E.
Gibney | | | E. Thomas
Allen, Jr. | | | John
Klimowich | | | Allyson
Schlesinger | | | Oliver E.
Lewis, Jr. | |
| Death: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Employment Agreements(1) | | | | $ | 1,431,028 | | | | | $ | 696,280 | | | | | $ | 824,820 | | | | | $ | 582,750 | | | | | $ | 598,500 | | | | | $ | 551,250 | | |
| Executive Life Insurance | | | | $ | 1,228,500 | | | | | $ | 618,000 | | | | | $ | 708,500 | | | | | $ | 555,500 | | | | | $ | — | | | | | $ | — | | |
Performance Achievement Incentive Plan(2) | | | | $ | 765,160 | | | | | $ | 334,029 | | | | | $ | 441,025 | | | | | $ | 240,408 | | | | | $ | 294,737 | | | | | $ | 262,719 | | |
| Equity Awards(3) | | | | $ | 2,024,163 | | | | | $ | 740,025 | | | | | $ | 870,611 | | | | | $ | 580,421 | | | | | $ | 478,862 | | | | | $ | 382,372 | | |
| Total | | | | $ | 5,448,851 | | | | | $ | 2,388,334 | | | | | $ | 2,844,956 | | | | | $ | 1,959,079 | | | | | $ | 1,372,099 | | | | | $ | 1,196,341 | | |
| Disability: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Employment Agreements(4) | | | | $ | 1,431,028 | | | | | $ | 696,280 | | | | | $ | 824,820 | | | | | $ | 582,750 | | | | | $ | 598,500 | | | | | $ | 551,250 | | |
Performance Achievement Incentive Plan(2) | | | | $ | 765,160 | | | | | $ | 334,029 | | | | | $ | 441,025 | | | | | $ | 240,408 | | | | | $ | 294,737 | | | | | $ | 262,719 | | |
| Equity Awards(3) | | | | $ | 2,024,163 | | | | | $ | 740,025 | | | | | $ | 870,611 | | | | | $ | 580,421 | | | | | $ | 478,862 | | | | | $ | 382,372 | | |
| Total | | | | $ | 4,220,351 | | | | | $ | 1,770,334 | | | | | $ | 2,136,456 | | | | | $ | 1,403,579 | | | | | $ | 1,372,099 | | | | | $ | 1,196,341 | | |
| Retirement: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Employment Agreements | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Performance Achievement Incentive Plan(2) | | | | $ | 765,160 | | | | | $ | 334,029 | | | | | $ | 441,025 | | | | | $ | 240,408 | | | | | $ | 294,737 | | | | | $ | 262,719 | | |
| | | | Thomas J.
Kemly | | | Dennis E.
Gibney | | | E. Thomas
Allen, Jr. | | | John
Klimowich | | | Allyson
Schlesinger | | | Oliver E.
Lewis, Jr. | |
| Equity Awards | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
| Total | | | | $ | 765,160 | | | | | $ | 334,029 | | | | | $ | 441,025 | | | | | $ | 240,408 | | | | | $ | 294,737 | | | | | $ | 262,719 | | |
Involuntary Termination by
Company without Cause or
Resignation by Executive
for Good Reason Prior to
Change in Control: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Employment Agreements(5) | | | | $ | 5,136,589 | | | | | $ | 1,803,764 | | | | | $ | 2,145,425 | | | | | $ | 1,483,084 | | | | | $ | 893,237 | | | | | $ | 862,694 | | |
| Equity Awards | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
| Total | | | | $ | 5,136,589 | | | | | $ | 1,803,764 | | | | | $ | 2,145,425 | | | | | $ | 1,483,084 | | | | | $ | 893,237 | | | | | $ | 862,694 | | |
Involuntary Termination by
Company without Cause or
Resignation by Executive
for Good Reason Upon or
After Change in Control: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Employment Agreements(6) | | | | $ | 5,214,934 | | | | | $ | 2,577,220 | | | | | $ | 3,025,005 | | | | | $ | 2,143,009 | | | | | $ | 1,491,737 | | | | | $ | 1,462,668 | | |
| Equity Awards(7)(10) | | | | $ | 6,548,714 | | | | | $ | 2,394,157 | | | | | $ | 2,816,652 | | | | | $ | 1,877,773 | | | | | $ | 1,549,173 | | | | | $ | 821,773 | | |
| ESOP SERP(8) | | | | $ | 2,200,806 | | | | | $ | 874,882 | | | | | $ | 1,102,784 | | | | | $ | 633,858 | | | | | $ | 441,970 | | | | | $ | 161,351 | | |
Potential Forfeiture (Best Net
After Tax)(9) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | (175,739) | | | | | $ | (411,897) | | |
| Total | | | | $ | 13,964,454 | | | | | $ | 5,846,259 | | | | | $ | 6,944,441 | | | | | $ | 4,654,641 | | | | | $ | 3,307,141 | | | | | $ | 2,033,896 | | |
(1)
Reflects payment under the applicable employment agreement equal to the sum of (1) the executive’s base salary in effect on December 31, 2021 and (2) target annual bonus in effect on December 31, 2021, plus the amount of the executive’s life insurance death benefit.
(2)
In the event of separation from service with the Company due to death, disability, or retirement, an executive would receive a prorated portion of the PAIP award earned for the year in which such separation occurs based on the period of active employment during such year. The amounts included in the table reflect 100% of the earned PAIP award given for 2021 given the assumption that separation occurs on the last day of the year.
(3)
In the event of separation from service with the Company due to death or disability, an executive would vest in 50% of his or her net outstanding 2021 stock options and time-vested restricted stock, unless the executive is already vested in at least 50% of such awards in which case there is no accelerated vesting, and in 50% of his or her outstanding 2021 performance-based restricted stock (at target). The amount included in the table for the time-based and performance-based restricted stock awards reflects 50% of the total number of outstanding shares multiplied by the closing market price of our common stock on December 31, 2021 of $20.86. The amount included in the table for stock options reflects the difference between the aggregate market value of 50% of the underlying shares as of December 31, 2021, calculated based on the closing market price of our common stock on that day of $20.86 and the aggregate exercise price 50% of all outstanding stock options.
(4)
Reflects payment under the applicable employment agreement equal to the sum of (A) the executive’s base salary in effect on December 31, 2021, and (B) target annual bonus in effect on December 31, 2021. This payment will be reduced by the amount expected to be paid to the executive under the Company’s program of long-term disability insurance over the 12-month period following the executive’s termination.
(5)
Reflects payment under the applicable employment agreement equal to the sum of (1) two times (three times for Mr. Kemly and one times for Ms. Schlesinger and Mr. Lewis) the sum of the executive’s (A) base salary in effect on December 31, 2021, and (B) target annual bonus in effect on December 31, 2021, (2) 18 times (12 times for Ms. Schlesinger and Mr. Lewis) an amount which after taxes (determined using an assumed aggregate 40% tax rate) equals the difference between (A) the Company’s monthly COBRA
premium for the type of Company-provided group health plan coverage in effect on December 31, 2021, for the executive, and (B) the active employee charge for such coverage, (3) the unpaid bonus due to the executive for the 2021 fiscal year of the Company.
(6)
Reflects payment under the applicable employment agreement equal to the sum of (1) three times (two times for Ms. Schlesinger and Mr. Lewis) the sum of the Executive’s (A) base salary in effect on December 31, 2021, and (B) target annual bonus in effect on December 31, 2021, (2) 36 times an amount which after taxes (determined using an assumed aggregate 40% tax rate) equals the difference between (A) the Company’s monthly COBRA premium for the type of Company-provided group health plan coverage in effect on December 31, 2021, for the executive, and (B) the active employee charge for such coverage, and (3) the unpaid bonus due to the executive for the 2021 fiscal year of the Company.
(7)
In the event of separation from service with the Company without Cause within 12 months after the effective date of a change in control, an executive would become 100% vested in the executive’s 2021 outstanding stock options, time-based restricted stock and performance-based restricted stock. For the performance based restricted stock, the executive would vest at target. The amount included in the table for the time-based and performance-based restricted stock awards reflects the total number of outstanding shares multiplied by the closing market price of our common stock on December 31, 2021 of $20.86. The amount included in the table for stock options reflects the difference between the aggregate market value of 100% of the underlying shares as of December 31, 2021 calculated based on the closing market price of our common stock on that day of $20.86 and the aggregate exercise price of all outstanding stock options.
(8)
Represents additional benefit due in the event of a change in control and full repayment of all outstanding ESOP loans and is based on the prior year’s ESOP and ESOP SERP allocations as such information for 2021 is not available as of the date of this proxy statement.
(9)
These payments are subject to reduction if the parachute amounts associated with the payments under Section 280G of the Internal Revenue Code equal or exceed three times the executive’s average taxable compensation received from the Company for the five-year period ending December 31, 2021, and if the executive would receive on an after-tax basis by reducing the payments that he or she would receive by getting all the payments and paying the 20% excise tax imposed by Section 4999 of the Internal Revenue Code. The potential reduction could be less or greater depending on the actual circumstances at the time of a real transaction.
(10)
Assumes that the surviving entity in such change in control does not assume or replace the equity awards in connection with the developmentchange in control.
DIRECTOR COMPENSATION
Elements of Director Compensation
Director Fees. During 2021, the non-employee directors of Columbia Bank received compensation for service and implementationattendance as follows:
•
The Chairman of the Board of Directors received an annual retainer of $134,500;
•
The Chairman of the Audit Committee received an annual retainer of $7,500;
•
The Chairman of the Nominating and Corporate Governance Committee received an annual retainer of $7,500;
•
Directors (other than the Chairman of the Board) received an annual retainer of $67,800;
•
Members of the Nominating/Corporate Governance Committee received an annual retainer of $5,000;
•
The Chairman of the Board received an additional fee of $1,500 for each Board meeting attended; and
•
Directors (other than the Chairman of the Board) received an additional fee of $1,300 for each Board meeting attended.
Board members do not receive any additional compensation as a result of their service as directors of Columbia Bank MHC and, with exception of special meetings of Columbia Financial only, do not receive any additional compensation as a result of their services as directors of Columbia Financial.
Long-Term Equity Program. The 2019 Equity Incentive Plan see “Proposal 2 — Approvalwas adopted by the Company and approved by our shareholders to enhance the alignment between the financial interests of our employees and non-employee directors and those of our shareholders. No equity awards were made to the Columbia Financial, Inc. 2019 Equity Incentive Plan.”Company’s non-employee directors in 2021.
2021 Director Compensation
The Compensation Committee regularly reviewsfollowing table sets forth the services providedcompensation received by its outside compensation consultantsindividuals who served as our non-employee directors during the year ended December 31, 2021.
| | | Name(1)(2) | | | Fees Earned
or Paid in
Cash
($) | | | Stock
Awards
($) | | | Option
Awards
($) | | | Nonqualified
Deferred
Compensation
Earnings ($)(3) | | | All Other
Compensation ($)(4) | | | Total ($) | | |
| | | Frank Czerwinski | | | | | 113,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,778 | | | | | | 114,778 | | | |
| | | Noel R. Holland | | | | | 165,735 | | | | | | — | | | | | | — | | | | | | 24,765 | | | | | | 3,830 | | | | | | 194,330 | | | |
| | | James M. Kuiken | | | | | 105,500 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 105,500 | | | |
| | | Michael Massood, Jr. | | | | | 113,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | 14,043 | | | | | | 127,043 | | | |
| | | Elizabeth E. Randall | | | | | 55,250 | | | | | | — | | | | | | — | | | | | | 55,250 | | | | | | 1,243 | | | | | | 111,743 | | | |
| | | Lucy Sorrentini | | | | | 55,042 | | | | | | — | | | | | | — | | | | | | 55,042 | | | | | | 30,012 | | | | | | 140,096 | | | |
| | | Daria Stacy-Walls Torres(5) | | | | | 6,950 | | | | | | — | | | | | | — | | | | | | 42,550 | | | | | | — | | | | | | 49,500 | | | |
| | | Robert Van Dyk | | | | | 109,200 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 109,200 | | | |
| | | Paul Van Ostenbridge | | | | | 109,200 | | | | | | — | | | | | | — | | | | | | — | | | | | | 142 | | | | | | 109,342 | | | |
(1)
As of December 31, 2021, each director other than Ms. Sorrentini, Mr. Kuiken and believes that such outside compensation consultants are independent in providing executive compensation consulting services.
Mr. Van Ostenbridge, held 20,423 shares of unvested restricted stock. As of December 31, 2021, each of Ms. Sorrentini, Mr. Kuiken and Mr. Van Ostenbridge held 2,211 shares of unvested restricted stock.
38(2)
As of December 31, 2021, each director other than Ms. Sorrentini, Mr. Kuiken, Ms. Torres and Mr. Van Ostenbridge, held 49,977 shares of unvested stock options. As of December 31, 2021, neither Ms. Sorrentini, Mr. Kuiken, Ms. Torres and Mr. Van Ostenbridge had any options outstanding.
(3)
Represents director fees deferred under the Stock-Based Deferral Plan.
(4)
Includes imputed income for bank owned life insurance for Mr. Czerwinski, Mr. Holland, Mr. Massood, Ms. Randall and Mr. Van Ostenbridge and premiums for health insurance paid by Columbia Bank on behalf of Mr. Massood, Mr. Holland and Ms. Sorrentini.
(5)
Ms. Torres was appointed to the Board of Directors effective July 26, 2021.
STOCK OWNERSHIP
STOCK OWNERSHIPStock Ownership Tables
The following table provides information as of April 12, 2019the Record Date about the persons and entities known to the Company to be the beneficial owners of more than 5% of the Company’s outstanding common stock. A person or entity may be considered to beneficially own any shares of common stock over which the person or entity has, directly or indirectly, sole or shared voting or investment power.
| Name and Address | | | Number of
Shares Owned | | | Percent of
Common Stock
Outstanding(1) | |
Columbia Bank MHC
19-01 Route 208 North
Fair Lawn, New Jersey 07410 | | | | | 62,580,155 | | | | | | 54.0% | | |
| | | Name and Address | | | Number of
Shares Owned | | | Percent of
Common Stock Outstanding(1) | | |
| | | Columbia Bank MHC
19-01 Route 208 North
Fair Lawn, New Jersey 07410 | | | | | 69,930,210 | | | | | | 65.5% | | | |
(1)
Based on 115,889,175106,811,453 shares of Company common stock outstanding and entitled to vote as of April 12, 2019.the Record Date.
The following table provides information as of April 12, 2019the Record Date about the shares of Columbia Financial common stock that may be considered to be beneficially owned by each director or nominee for director of the Company, by the executive officers of the Company and by all directors and executive officers of the Company as a group. A person may be considered to beneficially own any shares of common stock over which he or she has directly or indirectly, sole or shared voting or investment power. Unless otherwise indicated, none of the shares listed are pledged as security and each of the named individuals has sole voting and sole investment power with respect to the number of shares shown. As of April 12, 2019,the Record Date, none of our directors or executive officers beneficially owned more than 1% of the Company’s outstanding shares of common stock and the number of shares beneficially owned by all directors and executive officers as a group totaled 0.74%2.7% of our outstanding shares.
Name | | | Number of
Shares
Owned(1)
| |
Directors: | | |
Noel R. Holland | | | | | 55,339 | | |
Frank Czerwinski | | | | | 55,000 | | |
Raymond G. Hallock | | | | | 55,000 | | |
Thomas J. Kemly | | | | | 158,498 | | |
Henry Kuiken | | | | | 93,426 | | |
Michael Massood, Jr. | | | | | 48,030 | | |
Elizabeth E. Randall | | | | | 34,158 | | |
Robert Van Dyk | | | | | 55,000 | | |
Executive Officers Who Are Not Directors: | | |
E. Thomas Allen, Jr. | | | | | 63,288 | | |
Joseph F. Dempsey | | | | | 5,320 | | |
Dennis E. Gibney | | | | | 72,322 | | |
Geri M. Kelly | | | | | 57,077 | | |
John Klimowich | | | | | 22,925 | | |
Mark S. Krukar | | | | | 38,612 | | |
Brian W. Murphy | | | | | 32,206 | | |
Allyson Schlesinger | | | | | 6,633 | | |
All directors and executive officers as a group (16 persons) | | | | | 852,834 | | |
| | | Name | | | Number of
Shares Owned(1) | | | Number of Shares That
May Be Acquired Within
60 Days By Exercising
Options | | |
| | | Directors: | | | | | | | | | | | | | | |
| | | Noel R. Holland | | | | | 92,800 | | | | | | 33,317 | | | |
| | | Frank Czerwinski(2) | | | | | 89,038 | | | | | | 33,317 | | | |
| | | Thomas J. Kemly(3) | | | | | 469,972 | | | | | | 262,588 | | | |
| | | James M. Kuiken | | | | | 4,816 | | | | | | — | | | |
| | | Michael Massood, Jr. | | | | | 87,998 | | | | | | 33,317 | | | |
| | | Elizabeth E. Randall | | | | | 88,582 | | | | | | 33,317 | | | |
| | | Lucy Sorrentini | | | | | 6,861 | | | | | | — | | | |
| | | Robert Van Dyk(4) | | | | | 131,038 | | | | | | 33,317 | | | |
| | | Paul Van Ostenbridge | | | | | 9,141 | | | | | | — | | | |
| | | Daria Stacy-Walls Torres | | | | | 2,631 | | | | | | — | | | |
| | | Executive Officers Who Are Not Directors: | | | | | | | | | | | | | | |
| | | E. Thomas Allen, Jr. | | | | | 185,930 | | | | | | 112,941 | | | |
| | | Damodaram Bashyam | | | | | 41,219 | | | | | | 36,601 | | | |
| | | Dennis E. Gibney(5) | | | | | 188,762 | | | | | | 96,000 | | | |
| | | W Justin Jennings | | | | | — | | | | | | — | | | |
| | | Geri M. Kelly | | | | | 130,403 | | | | | | 60,235 | | | |
| | | John Klimowich | | | | | 110,750 | | | | | | 75,294 | | | |
| | | Mark S. Krukar | | | | | 112,640 | | | | | | 56,470 | | | |
| | | Oliver E. Lewis, Jr. | | | | | 33,316 | | | | | | 7,058 | | | |
| | | Brian W. Murphy(6) | | | | | 67,686 | | | | | | 31,058 | | | |
| | | Allyson Schlesinger | | | | | 83,826 | | | | | | 62,117 | | | |
| | | All Directors, Director Nominees and Executive Officers as a Group (20 persons) | | | | | 1,937,409 | | | | | | 966,947 | | | |
(1)
This column includes shares of Company common stock beneficially owned as follows:
| Name | | | Columbia Bank
Employee Stock
Ownership Plan
(ESOP) | | | Columbia Bank
Savings and
Investment Plan
(401(k) Plan) | | | Columbia Bank
Savings Income
Maintenance Plan | | | Columbia Bank
Stock Based
Deferral Plan | |
| Noel R. Holland | | | | | — | | | | | | — | | | | | | — | | | | | | 5,339 | | |
| Frank Czerwinski | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Raymond G. Hallock | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Thomas J. Kemly | | | | | 936 | | | | | | 23,462 | | | | | | 41,572 | | | | | | 26,215 | | |
| Henry Kuiken | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Michael Massood, Jr. | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Elizabeth E. Randall | | | | | — | | | | | | — | | | | | | — | | | | | | 101 | | |
| Robert Van Dyk | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| E. Thomas Allen, Jr. | | | | | 936 | | | | | | 31,000 | | | | | | 1,352 | | | | | | 4,000 | | |
| Joseph F. Dempsey | | | | | — | | | | | | — | | | | | | — | | | | | | 320 | | |
| Dennis E. Gibney | | | | | 936 | | | | | | — | | | | | | — | | | | | | 386 | | |
| Geri M. Kelly | | | | | 936 | | | | | | 25,050 | | | | | | 577 | | | | | | 2,535 | | |
| John Klimowich | | | | | 936 | | | | | | 17,143 | | | | | | 1,109 | | | | | | 423 | | |
| Mark S. Krukar | | | | | 936 | | | | | | 24,085 | | | | | | 1,713 | | | | | | 3,178 | | |
| Brian W. Murphy | | | | | 936 | | | | | | 30,000 | | | | | | 33 | | | | | | 138 | | |
| Allyson Schlesinger | | | | | — | | | | | | — | | | | | | — | | | | | | 507 | | |
Section 16(a) Beneficial Ownership Reporting Compliance
| | | | | | Columbia
Bank
Employee
Stock
Ownership
Plan
(ESOP) | | | Columbia
Bank
Supplemental
Executive
Retirement
Plan
(SERP) | | | Columbia
Bank
Savings and
Investment
Plan
(401(k) Plan) | | | Columbia Bank
Savings Income
Maintenance
Plan | | | Columbia Bank
Stock Based
Deferral
Plan | | | Columbia
Financial, Inc.
2019 Equity
Incentive Plan(1) | | |
| | | Noel R. Holland | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 8,762 | | | | | | 20,423 | | | |
| | | Frank Czerwinski(2) | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 20,423 | | | |
| | | Thomas J. Kemly(3) | | | | | 3,354 | | | | | | 16,595 | | | | | | 40,926 | | | | | | 41,572 | | | | | | 47,068 | | | | | | 214,616 | | | |
| | | James M. Kuiken | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,211 | | | |
| | | Michael Massood, Jr. | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 20,423 | | | |
| | | Elizabeth E. Randall | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,258 | | | | | | 20,423 | | | |
| | | Lucy Sorrentini | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,245 | | | | | | 2,211 | | | |
| | | Daria Stacy-Walls Torres | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,631 | | | | | | — | | | |
| | | Robert Van Dyk(4) | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 20,423 | | | |
| | | Paul Van Ostenbridge | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,211 | | | |
| | | E. Thomas Allen, Jr. | | | | | 3,354 | | | | | | 7,306 | | | | | | 31,000 | | | | | | 1,352 | | | | | | 5,584 | | | | | | 92,308 | | | |
| | | Damodaram Bashyam | | | | | 1,120 | | | | | | 503 | | | | | | — | | | | | | — | | | | | | — | | | | | | 29,647 | | | |
| | | Dennis E. Gibney(5) | | | | | 3,354 | | | | | | 5,378 | | | | | | — | | | | | | — | | | | | | 1,953 | | | | | | 78,462 | | | |
| | | Geri M. Kelly | | | | | 3,354 | | | | | | 2,760 | | | | | | 25,050 | | | | | | 1,003 | | | | | | 8,719 | | | | | | 49,231 | | | |
| | | John Klimowich | | | | | 3,354 | | | | | | 3,339 | | | | | | 17,143 | | | | | | 2,836 | | | | | | 2,831 | | | | | | 61,539 | | | |
| | | Mark S. Krukar | | | | | 3,354 | | | | | | 2,962 | | | | | | 25,364 | | | | | | 4,761 | | | | | | 8,507 | | | | | | 46,154 | | | |
| | | Oliver E. Lewis, Jr. | | | | | 2,256 | | | | | | — | | | | | | — | | | | | | — | | | | | | 872 | | | | | | 29,234 | | | |
| | | Brian W. Murphy(6) | | | | | 3,354 | | | | | | 1,184 | | | | | | 30,000 | | | | | | 246 | | | | | | 2,180 | | | | | | 25,385 | | | |
| | | Allyson Schlesinger | | | | | 2,418 | | | | | | 2,282 | | | | | | — | | | | | | 1,717 | | | | | | 6,641 | | | | | | 50,770 | | | |
(1)
Represents shares of the Securities Exchange Act of 1934 requiresunvested restricted stock granted under the Company’s executive officers2019 Equity Incentive Plan.
(2)
Includes 35,000 shares held in a revocable trust.
(3)
Includes 5,933 shares held by Mr. Kemly’s spouse and directors,7,755 shares held by one of Mr. Kemly’s children.
(4)
Includes 6,000 shares held by Mr. Van Dyk’s spouse and persons who own more than 10% of any registered class of the Company’s equity securities, to file reports of ownership and changes1,000 shares held in ownership with the Securities and Exchange Commission. Executive officers, directors and greater than 10% shareholders are requireda trust for which Mr. Van Dyk’s spouse serves as trustee.
(5)
Includes 10,000 shares held by regulation to furnishMr. Gibney’s spouse.
(6)
Mr. Murphy will be retiring from the Company with copies of all Section 16(a) reports they file.in 2022. Includes 100 shares held by Mr. Murphy’s daughter.
Based solely on its review of the copies of the reports it has received and written representations provided to the Company from the individuals required to file the reports, the Company believes that each of its executive officers and directors has complied with applicable reporting requirements for transactions in Columbia Financial common stock during the year ended December 31, 2018, except for one late Form 4 filed by Thomas J. Kemly with respect to one acquisition transaction regarding shares of Company common stock and one late Form 4 filed by Michael Massood, Jr. with respect one acquisition transaction regarding shares of Company common stock.
Stock Ownership Guidelines
Our Board of Directors has adopted a Share Ownership and Retention Policy, which sets forth stock ownership guidelines that are robust and reflect current corporate governance trends. We require our executive officers and non-employee directors to own or acquire shares of Company stock having a fair market value equal to the following amounts:
| | Title | | | Amount | |
| | President and Chief Executive Officer | | | 5 x5x base salary | |
| | Senior Executive Vice Presidents | | | 3 x3x base salary | |
| | Executive Vice Presidents | | | 3 x3x base salary | |
| | Non-Employee Directors | | | 3 x3x annual fees and retainers for service on the Board of Directors | |
Each of these individuals must fulfill their ownership requirement within five years of becoming subject to the Share Ownership and Retention Policy, and individuals are further required to fulfill 25% and 50% of their ownership requirement within two and three years, respectively, of becoming subject to the Share Ownership and Retention Policy. In the event of a participant receiving a raise in his or her base salary or annual retainer, leading to an increase in the ownership requirement, the participant will be provided additional one year from
the time of the increase to achieve the required incremental increase in his or her ownership of shares. For purposes of determining ownership, the following shall be taken into account in computing ownership: (i) shares owned directly by the individual or his or her immediate family members residing in the same household, or shares held through a trust for the benefit of the individual or the individual’s dependent family members residing in the same household; (ii) shares owned through a qualified employee benefit plan, including the 401(k) Plan, or through the ESOP; (iii) share equivalents held in a non-qualified, deferred compensation arrangements; and (iv) 100% of restricted stock, or restricted stock units, the vesting of which is contingent on time or performance.
OTHER INFORMATION
Policies and Procedures for Approval of Related Persons Transactions
We maintain a Policy and Procedures Governing Related Person Transactions, which is a written policy and set of procedures for the review and approval or ratification of transactions involving related persons. Under the policy, related persons consist of directors, director nominees, executive officers, persons or entities known to us to be the beneficial owner of more than five percent of any outstanding class of the voting securities of the Company, or immediate family members or certain affiliated entities of any of the foregoing persons.
Transactions covered by the policy consist of any financial transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, in which:
•
the aggregate amount involved will or may be expected to exceed $25,000 in any calendar year;
•
the Company is, will, or may be expected to be a participant; and
•
any related person has or will have a direct or indirect material interest.
The policy excludes certain transactions, including:
•
any compensation paid to an executive officer of the Company if the Compensation Committee of the Board approved (or recommended that the Board approve) such compensation;
•
any compensation paid to a director of the Company if the Board or an authorized committee of the Board approved such compensation; and
•
any transaction with a related person involving consumer and investor financial products and services provided in the ordinary course of the Company’s business and on substantially the same terms as those prevailing at the time for comparable services provided to unrelated third parties or to the Company’s employees on a broad basis (and, in the case of loans, in compliance with the Sarbanes-Oxley Act of 2002).
Related person transactions will be approved or ratified by the Audit Committee. In determining whether to approve or ratify a related person transaction, the Audit Committee will consider all relevant factors, including:
•
whether the terms of the proposed transaction are at least as favorable to the Company as those that might be achieved with an unaffiliated third party;
•
the size of the transaction and the amount of consideration payable to the related person;
•
the nature of the interest of the related person;
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whether the transaction may involve a conflict of interest; and
•
whether the transaction involves the provision of goods and services to the Company that are available from unaffiliated third parties.
A member of the Audit Committee who has an interest in the transaction will abstain from voting on approval of the transaction, but may, if so requested by the chair of the Audit Committee, participate in some or all of the discussion.
Transactions with Related Persons
The Sarbanes-Oxley Act of 2002 generally prohibits loans by Columbia Financial to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption from such prohibition for loans by Columbia Bank to its executive officers and directors in compliance with federal
banking regulations. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured financial institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk of repayment or present other unfavorable features. Columbia Bank is therefore prohibited from making any new loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public. Notwithstanding this rule, federal regulations permit a financial institution to make loans to executive officers and directors at reduced interest rates if the loan is made under a benefit program generally available to all other employees and does not give preference to any executive officer or director over any other employee. Columbia Bank currently offers such a program to its executive officers and directors.
Pursuant to Columbia Financial’s Audit Committee Charter, the audit committee periodically reviews, no less frequently than quarterly, a summary of Columbia Financial’s transactions with directors and executive officers of Columbia Financial and with firms that employ directors, as well as any other related person transactions, to recommend to the disinterested members of the Board of Directors that the transactions are fair, reasonable and within our policy and should be ratified and approved. Also, in accordance with banking regulations and its policy, the Board of Directors reviews all loans made to a director or executive officer in an amount that, when aggregated with the amount of all other loans to such person and his or her related interests, exceed the greater of $25,000 or 5% of Columbia Financial’s capital and surplus (up to a maximum of $500,000) and such loan must be approved in advance by a majority of the disinterested members of the Board of Directors. Additionally, pursuant to Columbia Financial’s Code of Ethics and Business Conduct, all executive officers and directors of Columbia Financial must disclose any existing or potential conflicts of interest to the President and Chief Executive Officer of Columbia Financial. Such potential conflicts of interest include, but are not limited to: (1) Columbia Financial conducting business with or competing against an organization in which a family member of an executive officer or director has an ownership or employment interest; and (2) the ownership of more than 1% of the outstanding securities or capital value of a business or where such investment represents more than 5% of the total assets of the executive officer or director and/or family members.
The aggregate amount of loans by Columbia Bank to its executive officers and directors and their affiliates was $1.4 million at December 31, 2018. As of that date, these loans were performing according to their original terms.
Shareholder Proposals and Nominations
The Company must receivedeadline for receiving proposals that shareholders seek to include in the proxy statement for the Company’s next annual meeting of shareholders was no later than December 10, 2019.11, 2021. If next year’sthe Company’s 2022 annual meeting is held on a date more than 30 calendar days from June 6, 2020,May 20, 2022, a shareholder proposal must be received by a reasonable time before the Company begins to print and mail its proxy solicitation for such annual meeting. Any shareholder proposals will be subject to the requirements of the proxy rules adopted by the Securities and Exchange Commission.
The Company’s Bylaws provide that a person may not be nominated for election as a director of the Company unless that person is nominated by or at the direction of the Company’s Board of Directors or by a shareholder who has given appropriate notice to the Company before the meeting. Similarly, a shareholder may not bring business before an annual meeting unless the shareholder has given the Company appropriate notice of their intention to bring that business before the meeting. The Company’s secretary must receive notice of the nomination or proposal not less than 90 days before the annual meeting; provided, however, that if less than 100 days’ notice of prior public disclosure of the date of the meeting is given or made to the shareholders, notice by the shareholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meetingAnnual Meeting was mailed or such public disclosure was made. A shareholder who desires to raise new business must provide certain information to the Company
concerning the nature of the new business, the shareholder, the shareholder’s ownership in the Company and the shareholder’s interest in the business matter. Similarly, a shareholder wishing to nominate any person for election as a director must provide the Company with certain information concerning the nominee and the proposing shareholder. A copy of the Company’s Bylaws may be obtained from the Company.
Shareholder Communications
The Company encourages shareholder communications to the Board of Directors and/or individual directors. Shareholders who wish to communicate with the Board of Directors or an individual director should send their communications to the care of Mayra L. Rinaldi, Corporate Secretary, Columbia Financial, Inc. 19-01 Route 208 North, Fair Lawn, New Jersey 07410. Communications regarding financial or accounting policies should be sent to the attention of the Chairperson of the Audit Committee. All other communications should be sent to the attention of the Chairperson of the Nominating/Corporate Governance Committee.
Notice and AccessibilityCosts of Proxy Materials
For our 2019 annual meeting, to save significant printing and mailing expenses, the Company is furnishing its proxy statement and annual report via the Internet according to the SEC rules for “Notice and Access.” On April 22, 2019, the Company mailed the Notice to all shareholders, who had not previously elected to receive their proxy materials by mail or electronically, containing instructions on how to access this proxy statement and our annual report and how to vote online. Upon receipt of the Notice, shareholders may choose to request a printed copy of proxy materials at no charge, and this preference will be maintained for future mailings.
To further reduce costs, if you and others who share your address own your shares in “street name,” your broker or other holder of record may be sending only one annual report and proxy statement to your address. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, if a shareholder residing at such an address wishes to receive a separate annual report or proxy statement in the future, he or she should contact the broker or other holder of record. If you own your shares in “street name” and are receiving multiple copies of our annual report and proxy statement, you can request householding by contacting your broker or other holder of record.
MiscellaneousSolicitation
The Company will pay the cost of this proxy solicitation. In addition to the solicitation of proxies by mail, Equiniti (US) Services LLC, a proxy solicitation firm, will assist the Company in soliciting proxies for the annual meeting. The Company will pay Equiniti (US) Services LLC a fee of $10,000, plus reasonable out of pocket expenses and $5.50 per shareholder call, for these services. The Company will also reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of the Company.
In addition to solicitingthe solicitation of proxies by mail, directors,Alliance Advisors, LLC, a proxy solicitation firm, will assist the Company in soliciting proxies for the Special Meeting. The Company will pay Alliance Advisors, LLC a fee of $7,500, plus reasonable out of pocket expenses for these services. Directors, officers and employees of the Company may also solicit proxies personally or by telephone. Nonetelephone, but none of these persons will receive additional compensation for these activities.
A copy of the Company’s Form 10-K for the year ended December 31, 2018 as filed with the Securities and Exchange Commission, will be furnished without charge to all persons who were shareholders as of the close of business on April 12, 2019 upon written request to Mayra L. Rinaldi, Corporate Secretary, Columbia Financial, Inc. 19-01 Route 208 North, Fair Lawn, New Jersey 07410.
| IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE VERIFIED STOCKHOLDER DERIVATIVE AND CLASS ACTION COMPLAINT On behalf of Nominal Defendant Columbia Financial, Inc. (“Columbia Financial” or the “Company”), Plaintiff Fredric D. Pascal (“Plaintiff”) asserts claims for breach of fiduciary duty and unjust enrichment against members of the FREDRIC D. PASCAL, derivatively on behalf of COLUMBIA FINANCIAL, INC., and individually on behalf of himself and all other similarly situated stockholders of COLUMBIA FINANCIAL, INC., Plaintiff, vs. FRANK CZERWINSKI, RAYMOND G. HALLOCK, NOEL R. HOLLAND, THOMAS J. KEMLY HENRY KUIKEN, , MICHAEL MASSOOD JR., ELIZABETH E. RANDALL, AND ROBERT VAN DYK, Defendants, -and- COLUMBIA FINANCIAL, INC., a Delaware Corporation, Nominal Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) C.A. No. _________________ PUBLIC VERSION May 20, 2020 EFiled: May 20 2020 03:29PM EDT Transaction ID 65648590 Case No. 2020-0320-SG |
| 2 Company’s board of directors (the “Board”).1 On behalf of himself and all other similarly situated stockholders of Columbia Financial, Plaintiff also asserts a claim against members of the Board for breaching their fiduciary duty of candor. NATURE AND SUMMARY OF THE ACTION 1. This is a stockholder derivative and class action brought to hold Columbia Financial’s directors accountable for abusing their positions and breaching their fiduciary duties by (i) awarding themselves over $13,000,000 of stock, and (ii) misleading stockholders when seeking their approval of the Company’s new 2019 Equity Incentive Plan (the “Incentive Plan”) that the directors specifically designed and intended to use for their own self-dealing purposes. 2. During most of 2019, Columbia Financial’s Board comprised eight directors (collectively, the “Directors”): (a) non-employee directors Frank Czerwinski (“Czerwinski”), Raymond G. Hallock (“Hallock”), Noel R. Holland (“Holland”), Henry Kuiken (“Kuiken”), Michael Massood Jr. (“Massood”), 1 Plaintiff’s allegations are made upon personal knowledge as to himself and his own acts, and upon information and belief as to all other matters, based upon the investigation conducted by and through his attorneys, which included a review of documents Plaintiff obtained from the Company in connection with a March 19, 2020 books and records demand under 8 Del. C. § 220, documents filed with the U.S. Securities and Exchange Commission (the “SEC”), various media and analyst reports. The documents were produced subject to a non-disclosure agreement, which required Plaintiff to maintain the confidentiality of the documents. As such, the Verified Complaint has been filed under seal. |
| 3 Elizabeth E. Randall (“Randall”), Robert Van Dyk (“Dyk”), and (b) Thomas J. Kemly (“Kemly”), Chief Executive Officer and President.2 3. On April 19, 2018, Columbia Financial completed its partial conversion from a mutual bank holding company to a stock company and became a publicly- traded entity. A market practice has developed in which the directors of banks that have completed a so-called mutual-to-stock conversion issue special equity awards to themselves. In order to avoid certain federal regulations that would otherwise apply to equity awards issued within a year of the bank’s conversion, these awards usually are made a little more than a year after the conversion has been completed. Typically, the awards are modestly sized. For example, in a sample of 72 companies that completed mutual-to-stock conversions over a ten-year period, the median and average awards were $87,884 and $210,343, respectively, for non-employee directors, and $512,320 and $1,213,189, respectively, for the bank’s chief executive officer (“CEO”). Of the eight companies that, like Columbia Financial, completed partial conversions between 2015 and 2018, the average award was $170,481 for non-employee directors and $1,154,164 for the CEO. 2 Jack R. Salvetti (“Salvetti”) resigned from the Board in January 2019 (before the challenged awards were granted), and Paul Van Ostenbridge (“Ostenbridge”) joined the Board on November 26, 2019 (after the challenged awards were granted). |
| 4 4. In a gross and calculated overreach, the Directors awarded themselves special equity awards following the Company’s partial conversion in amounts that are patently excessive and unjustified. Specifically, on July 23, 2019, the Directors granted themselves in excess of $13 million of awards under the Incentive Plan – $884,993 for each of the seven non-employee directors and $6.97 million for Kemly (the “Conversion Grants”), as displayed in the following chart: Name Restricted Stock Stock Options Total Czerwinski $530,993 $354,000 $884,993 Hallock $530,993 $354,000 $884,993 Holland $530,993 $354,000 $884,993 Kemly $4,184,996 $2,790,002 $6,974,998 Kuiken $530,993 $354,000 $884,993 Massood $530,993 $354,000 $884,993 Randall $530,993 $354,000 $884,993 Van Dyk $530,993 $354,000 $884,993 Total $13,169,949 5. As described in detail below, the Conversion Grants were (a) the culmination of a “10-step” internal process that was substantially complete, but not disclosed, when the Directors sought approval of the Incentive Plan; (b) based on an Incentive Plan that was, unbeknownst to stockholders who were never told, specifically designed to be large enough to accommodate the grants; (c) based on a cherry-picked set of purported “peer companies” that had been deliberately designed to favor outlier companies that had made the largest conversion grants; and (d) the |
| 5 byproduct of professional advice from a compensation consultant who expressly disclaimed the peer selection process that the Directors used. PARTIES 6. Plaintiff Fredric D. Pascal owns 500 shares of Columbia Financial common stock, which he purchased in the Company’s April 2018 Minority Stock Offering (defined below) and has held continuously since. 7. Nominal Defendant Columbia Financial is a Delaware corporation with its principal place of business in Fair Lawn, New Jersey. 8. Defendant Czerwinski has served on the Board since 1994. 9. Defendant Hallock has served on the Board since 1999. He previously served as Columbia Bank’s President and Chief Executive Officer from January 2002 until his retirement in December 2011. Hallock will retire from the Board following the 2020 Annual Meeting of Stockholders on May 22, 2020 (the “2020 Annual Meeting”), but he will continue to serve as an advisory director following retirement. 10. Defendant Holland has served on the Board since 2005. 11. Defendant Kemly has served as Company’s President and Chief Executive Officer since 2011 and as a Board member since 2006. |
| 6 12. Defendant Kuiken has served on the Board since 1987. Kuiken will retire from the Board following the 2020 Annual Meeting, but he will continue to serve as an advisory director following retirement. 13. Defendant Massood has served on the Board since 2003. 14. Defendant Randall has served on the Board since 2003. 15. Defendant Van Dyk has served on the Board since 1994. FURTHER SUBSTANTIVE ALLEGATIONS Columbia Financial’s MHC Conversion 16. Founded in 1927 and headquartered in Fair Lawn, New Jersey, Columbia Bank is a federally chartered savings bank which operates 64 full-service banking offices in New Jersey. 17. In 1997, Columbia Bank reorganized into a mutual holding company structure. This reorganization led to the formation of Columbia Financial, MHC (the “MHC”) and Columbia Financial (i.e., the Company). Columbia Financial became the holding company of Columbia Bank, and the MHC became the federally chartered mutual holding company of Columbia Financial with ownership of all of Columbia Financial’s common stock. 18. Many mutual banks eventually convert into a stock form of ownership. In a “standard conversion,” the bank fully converts into a stock company that becomes wholly-owned by public stockholders. In an “MHC conversion,” a bank |
| 7 partially converts to stock form by offering its depositors a minority percentage of the total shares outstanding, with the mutual holding company maintaining majority ownership. After an MHC conversion, the bank can complete its transformation to a fully public stock form of ownership via a “second-step conversion.” 19. On April 19, 2018, the Company completed its MHC or partial conversion (the “Conversion”) by conducting a minority stock offering through which it issued 49,832,345 shares of common stock to the Columbia Bank Employee Stock Ownership Plan (“ESOP”) and to depositors of the Bank who subscribed to the offering (the “Minority Stock Offering”). A total of 3,476,675 shares were issued to the Columbia Bank Foundation, Columbia Bank’s charitable foundation, and the MHC retained ownership of the remaining 62,580,155 shares. On April 20, 2018, following completion of the Conversion, Columbia Financial’s common stock began trading on the Nasdaq Global Select Market under the ticker symbol “CLBK.” Defendants’ 2018 and 2019 Cash Compensation 20. The Board fixes the annual compensation of the Company’s non- employee directors based on recommendations from the Compensation Committee. As stated in its Charter, the Compensation Committee “shall review annually and make recommendations to the Board of Directors regarding non-employee Director compensation.” The Compensation Committee is responsible for determining the compensation of the Company’s named executive officers, including the CEO. |
| 8 21. During the 2018 and 2019 fiscal years, the Compensation Committee members were Holland (the Chair), Czerwinski, Kuiken, and Van Dyk. 22. In the Company’s 2018 fiscal year, the non-employee directors received (i) a cash retainer of $67,800 (except the Chairman of the Board, who received a $134,500 cash retainer); (ii) a $1,300 fee for each Board meeting attended (with the Chairman of the Board receiving $1,500 for each meeting attended); and (iii) payments to cover health insurance and life insurance premiums. Finally, the Company paid a $7,500 cash retainer to the Chairman of the Audit Committee and a $5,000 cash retainer to each member of the Nominating/Corporate Governance Committee. 23. On April 22, 2019, the Company filed a Schedule 14A Definitive Proxy Statement with the SEC (the “2019 Proxy”) in connection with its 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”). As disclosed in the 2019 Proxy and as set forth in the following chart, pursuant to the non-employee director compensation program, during the 2018 fiscal year Columbia Financial’s non- employee directors paid themselves total compensation worth $122,160 on average per director: |
| 9 Director Total Czerwinski $111,859 Hallock $106,926 Holland $191,866 Kuiken $108,855 Massood $133,771 Randall $106,006 Salvetti $97,700 Van Dyk $120,293 Average $122,160 24. As also disclosed in the 2019 Proxy, for the 2018 fiscal year, Kemly’s compensation package comprised (i) a base salary of $745,000, (ii) the opportunity to receive a cash bonus under two separate executive bonus programs, the Performance Annual Incentive Plan (the “PAIP”) and the Long-Term Cash Incentive Plan (the “LTIP”), and (iii) perquisites valued at $41,632. 25. Under the PAIP, executives have the opportunity to be paid an annual cash bonus that is set at a percentage of the executive’s base salary and is based on the achievement of annual performance goals. Under the LTIP, executives have the opportunity to receive a cash bonus based on the achievement of performance goals over a three-year period. During 2018, Kemly received $530,184 under the PAIP and $364,721 under the LTIP. Accordingly, for the 2018 fiscal year, Kemly received a total compensation package valued at $1,681,487. |
| 10 26. According to the 2019 Proxy, in 2018, the Compensation Committee retained the services of GK Partners, Inc. (“GK”), a compensation consulting firm run by Greg Keshishian (“Keshishian”). GK was retained to, among other things, “perform a competitive assessment of the Company’s executive and director compensation programs.” In July 2018, GK presented its report, titled “Senior Management and Non-Employee Directors 2018 Compensation Review” to the Compensation Committee (the “2018 Compensation Report”). 27. In its review, GK analyzed the non-employee director and executive compensation packages of 19 peer banks that were selected based on asset size, profitability, rates of return, market capitalization, location and lines of business (the “2018 Peers”). According to the 2018 Compensation Report, the 2018 Peers paid their non-employee directors an average compensation package of $118,615. The median was $106,053, and the amounts ranged from $94,222 at the 25th percentile to $131,547 at the 75th percentile. Only one of the 19 companies topped $200,000, with Flushing Financial Corp. (“Flushing Financial”) paying its non-employee directors an average of $227,040. At $122,160, Columbia Financial’s non-employee director compensation package was slightly above the average and the median. 28. According to the 2018 Compensation Report, the average compensation paid to CEOs in the 2018 Peer group was $2.27 million and the |
| 11 median was $1.66 million. Thus, with total compensation of $1.68 million, Kemly was a tick above the median. 29. As disclosed in Columbia Financial’s Schedule 14A Definitive Proxy Statement filed with the SEC on April 10, 2020 (the “2020 Proxy”), the Board used the 2018 Compensation Report “for purposes of determining 2019 compensation” for both the Company’s non-employee directors and executive officers. In so doing, the Board determined not to make any changes to the non-employee director compensation program for 2019. As disclosed in the 2020 Proxy, the non-employee director compensation program for 2019 was kept exactly the same, resulting in the following payments to the Company’s non-employee directors (not including the Conversion Grants): Director3 Total Czerwinski $126,252 Hallock $130,868 Holland $208,462 Kuiken $123,293 Massood $140,338 Randall $112,573 Van Dyk $133,293 Average $139,297 3 Salvitti, who resigned in January 2019, and Ostenbridge, who joined the Board on November 26, 2019, are excluded. |
| 12 30. With respect to the CEO, the Compensation Committee increased Kemly’s salary from $745,000 to $775,000. Thus, for 2019, Kemly received a $775,000 base salary, cash payments of $486,996 under the PAIP (based on a maximum opportunity to receive as much as $629,688) and $362,739 under the LTIP, and perquisites valued at $181,941. In total, Kemly received $1,806,676 in compensation (not counting the Conversion Grant). 31. GK conducted another review of the Company’s non-employee director and executive compensation program in June 2019. This time, GK used an updated set of 20 peer banks (the “2019 Peers”) and prepared a report titled “Senior Management and Non-Employee Directors 2019 Compensation Review” (the “2019 Compensation Report”). The 2019 Compensation Report showed that the 2019 Peers paid their non-employee directors $122,761 on average. The median was $105,784, and the amounts ranged from $96,142 at the 25th percentile to $117,045 at the 75 th percentile. Only two companies, Flushing Financial (at $225,065) and Eagle Bancorp Inc. (at $319,792) topped $200,000. At an average of $139,297, Columbia Financial’s non-employee directors found themselves slightly above the 75th percentile. 32. The 2019 Compensation Report showed that the companies in the 2019 Peer group paid their CEOs an average bonus of just over $2 million and a median |
| 13 award of $1.97 million. Counting the portion of the PAIP that Kemly failed to earn, he was right at the median. The Board Creates the Incentive Plan and Approves the Conversion Grants 33. As noted above, a practice has developed in which the insiders of banks that undergo mutual-to-stock conversions issue special equity awards to themselves following the conversion. These awards typically are issued a little more than a year after the conversion so as to avoid the regulations imposed by the Board of Governors of the Federal Reserve System (the “FRB”) regarding stock-based incentive compensation plans adopted within the first year following a conversion. 34. In the prospectus filed in connection with the Minority Stock Offering, the Company indicated that it intended to adopt an equity incentive plan following the Conversion, but did not indicate or provide any information about the large Conversion Grants the Directors had planned. 35. In Proposal 2 of the 2019 Proxy (“Proposal 2”), the Board sought stockholder approval of the Incentive Plan, which included a reserve of 7,949,996 shares of Columbia Financial common stock for equity awards to the Company’s 651 employees, officers, and non-employee directors. 36. On June 6, 2019, the Company’s stockholders approved the Incentive Plan (albeit, as described below, based on the Directors’ false and misleading disclosures). |
| 14 37. On July 23, 2019, the Directors approved their Conversion Grants. Specifically, each non-employee director received an award of 34,038 shares of time-based restricted stock (valued at $530,993 using the $15.60 per share closing price of the Company’s common stock on the date of grant) and 83,294 stock options (valued by the Company at $354,000 using the Black-Scholes option pricing model). The restricted stock awards and options vest ratably over a five-year period. The awards continue to vest following a director’s retirement from the Board, so long as he or she continues to serve as an advisory director. 38. Kemly, the lone executive on the Board, received a Conversion Grant comprised of 134,134 shares of time-based restricted stock (valued at $2,092,490 using the $15.60 per share closing price), an award of performance-based restricted stock pursuant to which Kemly could receive up to 134,135 shares of common stock based on the achievement of performance goals over a three-year period (valued by the Company at $2,092,506), and 656,471 stock options (valued by the Company at $2,790,002 using the Black-Scholes option pricing model). Kemly’s time-based restricted stock awards and options vest ratably over a five-year period. 39. In total, the Directors granted themselves over $13 million of equity awards, a grand total of 1,746,064 shares, roughly 22% of the total shares reserved under the Incentive Plan. As shown in the following chart, each non-employee director received $884,993 worth of awards, while Kemly received $6,974,998: |
| 15 Name Restricted Stock Stock Options Total Czerwinski $530,993 $354,000 $884,993 Hallock $530,993 $354,000 $884,993 Holland $530,993 $354,000 $884,993 Kemly $4,184,996 $2,790,002 $6,974,998 Kuiken $530,993 $354,000 $884,993 Massood $530,993 $354,000 $884,993 Randall $530,993 $354,000 $884,993 Van Dyk $530,993 $354,000 $884,993 Total $13,169,949 40. On April 10, 2020, the Company filed its 2020 Proxy in connection with its 2020 Annual Meeting. According to the 2020 Proxy, mutual holding companies that undertake conversions typically issue “larger” equity awards to executives and directors than the typical annual equity awards at other public financial institutions. As further described in the 2020 Proxy, the Compensation Committee, with the help of its special consultant, McLagan, developed a special “peer group” of 15 converted banks that the Directors used to determine the Conversion Grants (the “Conversion Peer Group”). 41. The Conversion Peer Group comprised the following companies, displayed below along with the type of conversion undertaken and the date the conversion was completed: |
| 16 Name Type Date Beneficial Bancorp, Inc. ("Beneficial") Second-Step 1/13/2015 Blue Hills Bancorp, Inc. ("Blue Hills") Standard 7/22/2014 Clifton Bancorp, Inc. ("Clifton") Second-Step 4/2/2014 Entegra Financial Corp. ("Entegra") Standard 10/1/2014 First Connecticut Bancorp, Inc. ("First Cnct") Standard 6/30/2011 First Northwest Bancorp ("First Northwest") Standard 1/30/2015 Franklin Financial Corporation ("Franklin") Standard 4/28/2011 HarborOne Bancorp, Inc. ("HarborOne") MHC 6/30/2016 Home Trust Bancshares, Inc. ("Home Trust") Standard 7/11/2012 Investors Bancorp, Inc. ("Investors Bancorp") Second-Step 5/8/2014 Kearny Financial Corp. ("Kearny") Second-Step 5/9/2015 Meridian Bancorp, Inc. ("Meridian") Second-Step 7/29/2014 Northfield Bancorp, Inc. ("Northfield") Second-Step 1/25/2013 Oritani Financial Corp. ("Oritani") Second-Step 6/24/2010 Provident Bancorp, Inc. ("Provident") MHC 7/16/2015 42. The following two charts show the grant date fair value of the awards received by the non-employee directors and CEOs at the companies in the Conversion Peer Group shortly following their respective conversions: |
| 17 Name NEDs4 Name CEO Investors Bancorp $2,159,400 Investors Bancorp $16,699,999 Oritani $1,746,106 Oritani $7,435,698 Beneficial $929,253 Beneficial $6,787,740 Kearny $928,184 Kearny $5,439,680 First Cnct $760,332 HarborOne $4,419,639 Northfield $687,150 Blue Hills $3,943,200 HarborOne $530,752 Northfield $3,599,150 Blue Hills $513,347 Meridian $3,573,750 Clifton $488,991 First Cnct $3,234,691 Home Trust $381,089 Clifton $2,389,338 Franklin $340,420 Home Trust $2,151,243 Meridian $285,900 Franklin $1,702,100 First Northwest $215,900 Provident $1,362,476 Provident $145,995 First Northwest $952,500 Entegra $135,779 Entegra $786,720 43. With respect to directors, the Conversion Peer Group ranges from Entegra, whose non-employee directors received an average award of $135,779, to Investors Bancorp, whose non-employee directors received an average award of $2,159,400. The median company, Blue Hills, awarded its non-employee directors $513,347. With respect to CEOs, the dataset ranges from the $786,720 received by the CEO of Entegra to the $16,699,999 received by the CEO of Investors Bancorp, with the median award represented by Meridian, whose CEO received $3,573,750. 4 Chart shows the average award per director. |
| 18 44. Despite the fact that the Directors carefully chose these “peers,” the $884,993 equity award received by Columbia Financial’s non-employee directors was 72.4% more than the median, while Kemly’s $6,974,998 award was 95.17% more than the median. The Conversion Grants appear strangely outsized, then, based on the median of the Directors’ preferred peer group. However, because the Company’s non-employee directors rank 5th, and Kemly 4th, among the Conversion Peer Group, the Directors sought to create the appearance that their Conversion Grants were within at least some range of reasonableness merely based on the fact that awards at a handful of other banks were even larger. As explained below, this tactic falls apart when it becomes apparent that the Conversion Peer Group is comprised largely of outliers. The Directors Cherry-Picked the Conversion Peer Group 45. As an initial matter, despite the representation in the 2020 Proxy that converted mutual holding companies grant “larger” equity awards than the typical public bank, the reality is that, for the vast majority of converted banks, these special grants are not that large after all. For example, in Laidlaw v. Beneficial Bancorp, Inc., (Cir. Ct. Balt.e City, Md. 2018) (the “Beneficial Action”), a stockholder derivative action challenging the conversion awards granted by Beneficial (one of the companies in the Conversion Peer Group), the Amended Complaint included a list of 72 companies that had recently undergone a mutual-to-stock conversion. |
| 19 Among these 72 companies, the median award for non-employee directors was just $87,884 and the average award was $210,343. Forty of these 72 companies (55.55%) awarded their non-employee directors an average grant of less than $100,000, and an additional 19 (26.39%) awarded between $100,000 and $300,000 per director. Only nine of the 72 companies (including Clifton, Blue Hills, Northfield, First Cnct, Oritani, and Investors Bancorp, all selected by the Directors to join their Conversion Peer Group) awarded over $488,000, with just two (Oritani and Investors Bancorp) over $850,000. (Kearny and HarborOne, which had not yet made awards, would soon join the top of this list, and were also included in the Conversion Peer Group.) 46. Similarly, with respect to CEO awards, the median was just $512,320 and the average was $1,213,189. Exactly half (36) of the 72 companies awarded less than $500,000 to the CEO, 15 awarded between $500,001 and $1,000,000, and another ten awarded between $1,000,001 and $2,000,000. Only 11 companies awarded their CEO more than $2 million (including HomeTrust, Clifton, First Cnct, Meridian, Northfield, Blue Hills, Oritani, and Investors Bancorp, all Conversion Peer Group companies), with just two (Oritani and Investors Bancorp) over $5 million. 47. As another comparator, McLagan advised the Compensation Committee to favor companies that had, like Columbia Financial, undergone an MHC, i.e., a partial conversion, and to favor more recent conversions over older |
| 20 ones. The following two charts show the grant date fair value of the post-conversion awards to non-employee directors and CEOs at all nine companies that underwent an MHC conversion between January 1, 2015 and late 20185: Name6 N E D s 7 Name CEO Columbia Financial $884,993 Columbia Financial $6,974,998 HarborOne $530,752 HarborOne $4,419,639 PDL $411,038 PDL $2,055,363 Provident $145,995 Provident $1,362,476 Community $130,473 FFBW $617,403 FFBW $82,255 Community $544,580 Cincinnati Bancorp $29,518 Cincinnati Bancorp $111,636 SSB $23,738 SSB $109,611 Seneca $10,080 Seneca $12,600 48. Looking at this more representative sample, the extent to which Columbia Financial’s Directors chose to enrich themselves becomes much more apparent: the average award issued to non-employee directors at these other companies was $170,481 and for the CEOs the average award was $1,154,164. 5 See https://www.spglobal.com/marketintelligence/en/news-insights/latest-news- headlines/46746373. 6 The names of the following banks are abbreviated in the chart: SSB Bancorp, Inc. (“SSB”), Seneca Financial Corp. (“Seneca”), FFBW, Inc. (“FFBW”), PDL Community Bancorp (“PDL”), and Community First Bancshares, Inc. (“Community”). 7 Chart shows the average award per director. |
| 21 49. Thus, the Conversion Peer Group was not the representative sample of the “larger” equity awards granted by all converted banks that it purported to be. Instead, the Conversion Peer Group was a carefully-constructed assembly of the Directors’ now fellow outliers who collectively represent a fringe slice of a market practice that otherwise predominantly involves modestly sized post-conversion equity awards. 50. As described further below, having been advised at the outset to select a peer group “carefully,” the Compensation Committee (with the Board’s approval) focused on the largest conversion awards issued at other banks, casting off other more representative companies whose directors had awarded themselves comparatively much less. 51. In other words, the Directors chose to pay themselves unfair awards that they knew were well above prevailing market practice, and to place themselves in the notorious company of other directors who likewise took advantage of their stockholders. As discussed below, the Directors were always intent on giving themselves outsized awards and they never changed course after embarking on a “10-step” process that began in October 2018. 52. On October 23, 2018, the Compensation Committee held a meeting, which Kemly joined (the “October Meeting”). Chris Gattuso of Kilpatrick Townsend (“KT”), the Company’s legal counsel, and Keshishian of GK Partners |
| 22 were also present. At this meeting, Gattuso made a presentation to the Compensation Committee which focused on the “Next Steps” necessary to accomplish the Conversion Grants (the “KT October 2018 Presentation”). The “Next Steps” comprised ten “Action Items,” which were carefully planned out with specific timelines. 53. First, the Board would hold an “education session” in November 2018. Second, in the first quarter of 2019, the Compensation Committee would meet and, with the help of a compensation consultant, authorize the preparation of terms and conditions for a new equity incentive plan (i.e., the Incentive Plan). In steps three through five outside counsel would prepare the initial term sheet for the Incentive Plan’s terms and conditions, followed by the Compensation Committee and the Board, respectively, approving those terms and conditions (scheduled for late March/early April). In step six, the Incentive Plan would be presented to the Company’s stockholders at the 2019 Annual Meeting, and following approval, an S- 8 would be filed with the SEC registering the shares reserved under the Incentive Plan (step seven). In step eight, the Compensation Committee would “meet to determine specific awards under Plan in consultation with its compensation consultant (this may involve one or more meetings of the Committee).” In step nine, the Compensation Committee would “make[] recommendations to the full Board as to equity awards for named executives and non-employee directors.” And finally, |
| 23 in step ten, the Board would “review[] Committee recommendations and following approval of the Board of such recommendations, awards are made to executives and non-employee directors.” 54. In November 2018, the Board held an “education session” in which a representative of KT made a presentation (the “KT November 2018 Presentation”), which included the 10 “Next Steps” that needed to be accomplished. The Board was specifically cautioned at this time that “following several court decisions, there is now a more onerous rule applied to board decisions on compensation matters,” namely, the “entire fairness” standard, and that there would be “difficulty” in getting a case dismissed under this standard. Accordingly, the Board would need to, among other things, pay “careful consideration of the peer group selected” before granting equity awards. 55. On December 17, 2018, the Compensation Committee convened its next meeting, which Kemly, Gattuso, and Keshishian joined (the “December Meeting”). At this time, the Compensation Committee interviewed McLagan to serve as the Compensation Committee’s special consultant for the Conversion Grant process. As described in the minutes of the December Meeting, Bryan Lemke (“Lemke”) of McLagan “introduce[d] his proposal to serve as a special committee in connection with the” Conversion Grant. If engaged, Lemke explained how McLagan “could assist in designing the [P]lan, and developing potential strategies |
| 24 for distributing equity awards to executives, directors, and other key officers.” As part of the engagement, McLagan would assist the Compensation Committee in developing a “peer group” of other recently converted organizations that had made post-conversion equity grants. 56. At the December Meeting, Lemke distributed a presentation titled “Conversion Peer Group,” dated December 14, 2018 (the “McLagan December 2018 Presentation”). The presentation identified 26 “Potential Peers,” including all 15 companies that eventually made the Conversion Peer Group, and was highlighted by the inclusion of conspicuous and ill-foreboding outliers such as Investors Bancorp, Oritani, Beneficial, and Kearny. The 26 “Potential Peers” included three companies that underwent MHC conversions, eight companies that underwent standard conversions, and another 15 companies that underwent second-step conversions. 57. At the conclusion of the December Meeting, the Compensation Committee agreed to retain McLagan. In a special Board meeting held that same day, the Board was apprised of McLagan’s retention. An official retainer letter was signed on December 21, 2018. 58. Of the 26 “Potential Peers,” McLagan advised the Compensation Committee to select between 18 and 23 of them for a final peer group (i.e., to remove anywhere between three and eight of the companies). The Compensation Committee |
| 25 ultimately removed 11 of the peers, and approved the remaining 15 at a meeting held on January 23, 2019 (the “January Meeting”). 59. With respect to the 11 companies removed from the working list, the following two charts show the value of the awards granted to the non-employee directors and CEOs at those companies following their respective conversions: Name NEDs8 Name CEO Territorial Bancorp $849,384 Territorial Bancorp $4,244,953 Waterstone Financial $715,000 Waterstone Financial $3,673,500 Charter Financial $266,469 Charter Financial $1,756,462 Northwest Bancshares $225,960 Rockville Financial $1,405,128 Rockville Financial $124,130 Northwest Bancshares $838,000 OmniAmerican Banc. $115,870 Capitol Federal Fin. $769,778 Viewpoint Financial $96,968 Viewpoint Financial $732,652 Capitol Federal Fin. $87,556 OmniAmerican Banc. $722,238 Fox Chase Bancorp $69,308 SI Financial $579,250 SI Financial $33,000 Fox Chase Bancorp $255,520 Cincinnati Bancorp $29,518 Cincinnati Bancorp $111,636 60. The Compensation Committee’s selection process is cherry-picking at its finest. First, out of the 26 companies, the Compensation Committee removed the companies with the seven lowest conversion awards to non-employee directors. These same seven removed companies also represented seven of the eight lowest awards granted to the CEO. By removing the lowest-paying companies, the Compensation Committee substantially raised the median and average awards of the 8 Chart shows the average award per director. |
| 26 final peer group. The removal of Capital Federal is perhaps the most striking example of the results-oriented selection process. Capital Federal was the second largest of the 26 “Potential Peers” at the time of its conversion, but the Compensation Committee was sure to exclude it on account of the modest size of its conversion awards ($87,556 for non-employee directors and $769,778 for the CEO). 61. Second, the Compensation Committee manufactured reasons to keep in the highest-paid peers. For example, McLagan recommended “more recent conversions” and “larger institutions at the time of their conversion.” Of the 11 removed peers, eight had conversions more recently than Oritani and three were larger than Oritani at the time of their conversion. But Oritani ($1,746,106 for its non-employee directors and $7.44 million for its CEO) and Northfield ($687,150 for its non-employee directors and $3.6 million for its CEO) were both kept in purportedly “due to their New Jersey location.” 62. Third, the inclusion of second-step conversions (Investors Bancorp, Oritani, Beneficial, Kearny, Northfield, Clifton, and Meridian) is highly questionable at best. Each of these companies had, years earlier, undergone an MHC conversion and received equity awards following that process. The Compensation Committee could have either used those awards as a comparator or not used those companies at all. Indeed, at the January Meeting, McLagan advised the Compensation Committee that preference should be “given to MHC conversions” |
| 27 over second-step conversions. And in fact, as described further below, McLagan’s initial proposed grant ranges utilized only MHC and standard conversions, only to be “refined” later following “additional conversations” with the Compensation Committee and the Board. In at least one presentation, McLagan even noted that “the Second Step peers likely granted equity following their MHC conversion as well.” But of course, leaving out second-step conversions was not an attractive option for the Directors, as these conversions included the four largest awards given in recent memory (Investors Bancorp, Oritani, Beneficial, and Kearny). 63. And fourth, with respect to two of the companies in the Conversion Peer Group, Beneficial, and Investors Bancorp, the directors agreed to rescind substantial portions of their conversion grants after being sued for breach of fiduciary duty. Remarkably, the Directors were aware of this when they included the Beneficial and Investors Bancorp awards in their Conversion Peer Group on an unadjusted basis. 64. In the Beneficial Action, each of the non-employee directors forfeited $300,000 of equity awards (with one non-employee director forfeiting $370,000), while each of the non-employee directors of Investors Bancorp forfeited $900,000 of equity awards, with the CEO forfeiting his entire award. Not only did the Compensation Committee include these companies as peers, but it also used the value of pre-forfeiture awards despite McLagan specifically informing them that it |
| 28 was “important to note that directors at Beneficial and Investors forfeited a portion of their awards as a result of shareholder litigation.” 65. In addition to the 26 “Potential Peers,” the McLagan December 2018 Presentation also included five additional companies (the “Additional Peers”) that had recently undergone an MHC conversion: SSB, Seneca, FFBW, PDL, and Community. These companies were recent MHC conversions, the preferred type of company to be included in the Conversion Peer Group. As of December 2018, these five companies had “not yet disclosed post-conversion awards due in part to the recent close of their conversions.” The following two charts show the value of the conversion awards ultimately made at these companies: Name NEDs Name CEO PDL $411,038 PDL $2,055,363 Community $130,473 FFBW $617,403 FFBW $82,255 Community $544,580 SSB $23,738 SSB $109,611 Seneca $10,080 Seneca $12,600 66. Following the Board’s approval of the Conversion Peer Group on January 23, 2019, exactly six months would pass before the Conversion Grant was made. By then, three of these companies (PDL, FFBW, and Community) had already made and disclosed (either in a proxy or in Form 4 filings) their respective conversion awards. The data was therefore readily available to the Directors. As |
| 29 shown above, these companies issued very modest awards (with even PDL issuing relatively modest awards compared to the Conversion Grant). But inclusion of this data set would ruin the Defendants’ perfectly-constructed sample of outliers. And so, none of the Additional Peers were added to the Conversion Peer Group. 67. Indeed, likely recognizing that the Conversion Peer Group was improperly constructed, McLagan conspicuously sought to distance itself from the Directors’ decisions. Following the selection of the Conversion Peer Group, McLagan’s presentations (described further below) opened with the following disclaimer: Peer data is provided as context, but it should not dictate grant strategy. Alignment with peer conversion grant practices is not a matter of market compensation competitiveness. In addition, while large grants have been common following conversions in the past, they stand out compared to general market equity grant practices and are increasingly scrutinized. (the “Disclaimer”). The Board Designs the Incentive Plan to Accommodate the Conversion Grants 68. After approving the Conversion Peer Group, the Compensation Committee moved to Step 2: designing the Incentive Plan, including the size of the share reserve. On March 5, 2019, the Compensation Committee convened a meeting, which Kemly, Lemke, and Gattuso joined (the “March 5 Compensation Committee Meeting”). As described in the minutes of the March 5 Compensation |
| 30 Committee Meeting, to aid the Compensation Committee in deciding how many shares to reserve in the Incentive Plan Lemke was asked to “provide[] the [Compensation] Committee with initial broad, estimated equity grant ranges in order to determine the size of the share pool authorization for the equity plan, based on equity plans adopted by recently converted institutions.” This is a remarkably backwards approach. While directors typically conform awards to an equity plan, here the Directors were working the other way around – designing the Incentive Plan to ensure that it could accommodate their anticipated Conversion Grants. 69. In response to this request, at the March 5 Compensation Committee Meeting, Lemke provided a presentation, dated March 1, 2019, titled “Post- Conversion Equity Grants – Potential Range Estimates” (the “McLagan March 1 Presentation”). According to this presentation, McLagan was still “currently conducting market research” based on the Conversion Peer Group that had recently been approved, but had been asked to “provide initial broad, estimated equity grant ranges in order to frame expectations for the planning process.” Based on “preliminary research” that focused on MHC and standard conversions, McLagan estimated a grant range of $350,000 to $750,000 for non-employee directors and $6 million for the CEO. As described in the minutes of the March 5 Compensation Committee Meeting, Lemke stated that these numbers were “solely to assist the Committee in designing the plan and that recommendations on proposed grant |
| 31 ranges will be refined and presented at a later date and the estimate provided could very well change based upon a number of factors.” As further stated in the McLagan March 1 Presentation, McLagan would “deliver formal grant recommendations following a review of market information, qualitative factors, and additional conversations with Columbia Bank.” 70. Also at the March 5 Compensation Committee Meeting, Gattuso made a presentation highlighting the “standard terms and conditions” of the proposed equity plan, which included a discussion titled “Proposed Equity Incentive Plan: Discussion of Terms and Conditions” (the “KT March 5 Presentation”). Following a discussion of the “standard terms and conditions,” the Compensation Committee “agreed to authorize the preparation of a draft term sheet for the proposed plan for consideration by the [Compensation] Committee at its next meeting,” (the “Term Sheet”) with various “open items” (including the aggregate share reserve) to be filled in later. 71. In addition to determining the aggregate share reserve under the Incentive Plan, the KT March 5 Presentation indicated that the “open items” included the “Treatment of Non-Employee Director Award[s].” 72. In December 2017, the Delaware Supreme Court held in In re Investors Bancorp, Inc. S'holder Litig., 177 A.3d 1208 (Del. 2017) that director self- compensation decisions are subject to entire fairness review (as opposed to the |
| 32 director-friendly business judgment rule standard) unless (a) stockholders specifically approve the compensation in question or (b) the compensation resulted from the operation of a self-executing stockholder-approved plan (one in which the directors have no discretion over their compensation) (the “Investors Bancorp Decision”). Prior to the Investors Bancorp Decision, directors could receive business judgment rule protection for their awards if the awards were issued under an equity incentive plan with “meaningful limits” on the size of awards. At the March 5 Compensation Committee Meeting, KT advised that the Compensation Committee would need to decide what type of director limit to put in the Incentive Plan. 73. On March 25, 2019, the Compensation Committee convened a meeting, which Kemly, Lemke, Gattuso, and Keshishian also joined (the “March 25 Compensation Committee Meeting”). At this meeting, Lemke made a presentation, dated March 22, 2019, titled “Post-Conversion Equity Grants – Market Practice Summary & Analysis” (the “McLagan March 22 Presentation”). KT also presented the draft Term Sheet outlining the Incentive Plan’s terms and conditions, subject to the remaining “open items,” including the aggregate share reserve, where the Compensation Committee was considering two numbers: 7,949,997 and 7,463,262. 74. As explained in the Overview of its March 22 Presentation, McLagan had “conducted market research based on an approved peer group” and compiled |
| 33 “both summary data as well as detailed peer-by-peer views of conversion grants.” McLagan’s March 22 Presentation included the Disclaimer followed by a table, titled “Grant Date Fair Value – Total Equity,” which laid out the grant date fair value of the conversion awards at each Conversion Peer Group. 75. As described in the minutes of the March 25 Compensation Committee Meeting, Lemke “presented the [Compensation] Committee with a report that contained summary data as well as detailed peer-by-peer review of conversion grants in an effort to have an understanding of past market practices surrounding actual award values, number of shares, percentage of approved pool granted, and other quantitative market-based parameters.” The report “detailed a full summary of market information along with an analysis of relevant peers’ grant methodologies.” 76. With this information in hand, the Compensation Committee was able to finish designing the Incentive Plan (i.e. Step 2). As further stated in the minutes of the March 25 Compensation Committee Meeting, “this presentation was for purposes of allowing the Committee to address the open issues on design of the plan…” Following the March 25 Compensation Committee Meeting and a further Compensation Committee meeting on April 2, 2019 (the “April 2 Compensation Committee Meeting”), all of the “open items” were resolved. Among other things, the Compensation Committee determined to use the 7,949,997 aggregate share reserve (later reduced by a share to 7,949,996) and include a $1.2 million annual |
| 34 limit on the amount of cash and equity that could be awarded to a non-employee director. 77. At the conclusion of the April 2 Compensation Committee Meeting, the Committee approved the Term Sheet as modified (completing Step 3), and agreed to recommend the Term Sheet to the Board for approval (completing Step 4). The Compensation Committee “further approved and directed [KT] to prepare the draft of the [Plan], consistent with the approved Term Sheet.” 78. Following the April 2 Compensation Committee Meeting, the Board convened a meeting with Lemke, Gattuso, and Keshishian also in attendance (the “April 2 Board Meeting”). As described in the minutes, the purpose of the April 2 Board Meeting was to serve as an “education session for the Board to understand the terms and elements of the proposed plan and be ready to consider the adoption of the [Incentive Plan] at the April 16, 2019 meeting.” Gattuso reviewed, among other things, the “standard terms and conditions of the proposed plan,” and “presented the Board with an overview of the plan process to date and the various meetings held by the Compensation Committee in reviewing and developing the peer group and the terms of the proposed [Incentive Plan].” 79. At the same meeting, Lemke presented a report, dated April 1, 2019, titled “Post-Conversion Equity Grants – Pool Modeling and Market Data Summary” and prefaced with the Disclaimer (the “April 1 McLagan Presentation”). The April |
| 35 1 McLagan Presentation included, among other things, a list of the Conversion Peer Group and a summary of the value of the awards issued by those peers in connection with their respective conversions. 80. As further described in the minutes of the April 2 Board Meeting, Lemke reviewed with the Board, among other things, “the peer gr oup that was approved by the Compensation Committee…and [the] value of awards made by the peer group companies following their conversion transactions.” 81. On April 16, the Board adopted resolutions approving the Incentive Plan and its presentation to stockholders for approval at the 2019 Annual Meeting (Step 5 was completed). The Board Procures Stockholder Approval of the Incentive Plan . . . Based on a False and Misleading Proxy 82. On April 22, 2019, the Company filed its 2019 Proxy, which sought stockholder approval of the Incentive Plan in Proposal 2. 83. As stated in Proposal 2, prior to the MHC Conversion, the Company was unable to issue equity-based compensation because all of the Company’s common stock was held by the MHC. As of April 16, 2019, the Company had 651 employees (including executive officers) and non-employee directors. 84. As discussed above, in the first quarter of 2019 the Compensation Committee specifically designed the terms of the Incentive Plan to accommodate the |
| 36 large awards the Directors contemplated for themselves, having even asked McLagan to provide them with potential grant ranges so that plan capacity would not be an issue. Moreover, by the time the Board adopted the Incentive Plan on April 16, 2019, the Directors had finished their market research and reviewed “detailed peer-by-peer views of conversion grants.” 85. But the 2019 Proxy told stockholders exactly nothing about the anticipated Conversion Grants and the Board’s substantially advanced process of issuing those awards, instead leading stockholders to believe that the Incentive Plan had been designed as a routine equity compensation plan for the Company’s over 650 employees and directors. This could not have been further from the truth. 86. Indeed, on June 7, 2019, one day after the Incentive Plan was approved by stockholders, the Compensation Committee Chairman specifically noted that “given the detailed materials that have been reviewed by the [Compensation] Committee to date and the discussions held in past meetings,” the Directors were ready to formulate grant recommendations. 87. In asking stockholders to approve the vehicle that the Directors would use to engage in a $13 million self-dealing transaction, the Board indicated that the shares reserved under the Incentive Plan would be used for a variety of vaguely beneficial purposes, including to ensure the Company’s “continued future success,” which “depends in part on [its] ability to attract, motivate and retain the talented and |
| 37 highly qualified employees and non-employee directors necessary for [the Company’s] continued growth and success.” 88. The 2019 Proxy further stated that the Company’s “ability to offer equity-based compensation” was “an important step in [the Company’s] ability to compete for talent within [its] marketplace.” Most of the Company’s competitors offer equity-based compensation to their employees and non-employee directors, the 2019 Proxy noted, and if the Incentive Plan was not approved, the Company would be “at a significant disadvantage as compared to [its] competitors to attract and retain [its] executives as well as directors,” which “could affect [the Company’s] ability to achieve [its] business plan growth and goals.” 89. The 2019 Proxy further stated that the ability to issue equity-based compensation would enable the Company’s “employees, officers and non-employee directors…upon whose judgment, initiative and efforts Columbia Financial has depended and continues to largely depend for the successful conduct of its business, to acquire an ownership stake in Columbia Financial, thereby stimulating their efforts on behalf of Columbia Financial and strengthening their desire to remain with Columbia Financial.” 90. In this way, the Incentive Plan would help “foster[] a pay-for- performance culture” because equity-based compensation would “motivate[] employees to create stockholder value because the value employees realize from |
| 38 equity-based compensation is based on Columbia Financial’s stock price performance.” Equity-based compensation would also “align[] the compensation interests of [the Company’s] employees with the investment interests of [the Company’s] stockholders and promote[] a focus on long-term value creation because Columbia Financial’s equity-based compensation awards can be subject to vesting and/or performance criteria.” On the other hand, if the Incentive Plan was not approved, the 2019 Proxy warned that the Company would “have to rely entirely on the cash component of its employee compensation program to attract new employees and to retain [its] existing employees, which may not necessarily align employee compensation interests with the investment interests of Columbia Financial stockholders as well as the alignment achieved by equity-based awards.” 91. As described in detail above, however, the Incentive Plan had another purpose, one that was paramount to the Directors and yet not disclosed to stockholders: namely, to fund the upcoming Conversion Grants. Indeed, the Directors had previously identified stockholder approval of the Incentive Plan as Step 6 in a 10 Step process that would culminate with the Conversion Grants, and the Directors specifically designed the Incentive Plan to accommodate the Conversion Grants. None of this was disclosed, however. 92. Instead, as detailed above, the Board touted the Incentive Plan’s abstract beneficial purposes (such as its importance in attracting, motivating, and |
| 39 retaining employees, in saving cash, and in promoting a pay-for-performance culture). Certainly, in determining whether to vote in favor or against the Incentive Plan, stockholders would find it important to know that the shares – indeed over 20% of them, as it turned out – were earmarked for the Conversion Grants, which was a specifically intended use for the Incentive Plan and the type of transaction that the Compensation Committee’s own advisor described as one that “stand[s] out compared to general market equity grant practices” and that is “increasingly scrutinized.” 93. As described above, many of the Incentive Plan’s most important features (including the aggregate share reserve of 7,949,996 and the $1.2 million annual limit on director compensation) were specifically designed with the Conversion Grants in mind. In Proposal 2, however, the 2019 Proxy disclosed only that the Board had considered a “number of factors” in selecting 7,949,996 as the aggregate share reserve, but made no mention whatsoever of the upcoming Conversion Grants. And instead of disclosing that the $1.2 million annual director limit was intended to accommodate the contemplated “large” conversion grants, the 2019 Proxy described this provision as somehow an “equity compensation plan best practice[].” 94. By the time the 2019 Proxy was filed, the Compensation Committee had selected the Conversion Peer Group and examined the value of the awards that |
| 40 each of those companies issued following their respective conversions. As described below, these facts were not disclosed until the 2020 Proxy, nine months after the Conversion Grants were made. But stockholders would have found these facts much more useful had they been prese nted in the relevant decision-making context, namely whether to approve the Incentive Plan. 95. Given the advanced stage of the Conversion Grant process, it was highly misleading for the Board to conceal all of its detailed planning and timelines and hide behind the disclosure that “the benefits and amounts that will be received or allocated under the 2019 Equity Plan are not determinable at this time.” 96. The 2019 Proxy’s lack of disclosure is all the more egregious given the Board’s disclosure of other very specific anticipated uses of the Incentive Plan’s shares. As disclosed in Proposal 2, “[i]f the 2019 Equity Plan is approved, it is anticipated that one-half of the cash awards granted to executives for the 2018 – 2021 performance period under Columbia Financial’s existing [LTIP] will be replaced with equity awards and that all of the [LTIP] cash awards granted for the 2019 – 2022 performance period will be replaced with equity awards.” In fact, at the April 2 Compensation Committee Meeting, the Compensation Committee was informed that this anticipated use would be included in the 2019 Proxy. Disclosure of the anticipated Conversion Grants apparently was not deemed important. |
| 41 97. Likewise, the 2019 Proxy disclosed that in “connection with the hiring of our Executive Vice President, Head of Consumer Banking, Columbia Financial agreed that, in the event the Company received stockholder approval of the [Plan], the executive would receive $125,000 of Full Value Awards as part of her compensation package with Columbia Financial.” Yet, again, nothing about the roughly $13 million in anticipated Conversion Grants was disclosed. 98. The Conversion Grant process continued to develop after the 2019 Proxy was filed but before the 2019 Annual Meeting. No update was provided to stockholders. 99. Specifically, on May 20, 2019, still 17 days before the 2019 Annual Meeting, the Compensation Committee convened a meeting (the “May 20 Compensation Committee Meeting”). All four Compensation Committee members attended, as did Kemly, Lemke, Gattuso, and Keshishian. At the May 20 Compensation Committee Meeting, Lemke presented a report, dated May 17, 2019, titled “Post-Conversion Equity Grants – Preliminary Straw Models” (the “May McLagan Presentation”). According to the minutes of the May 20 Compensation Committee Meeting, the purpose of the meeting and the May McLagan Presentation was to facilitate discussion of “initial proposed grant strategies for executives and directors,” focused on “award structure, rather than award values.” At the meeting, the non-employee directors discussed awarding themselves a “‘larger’ conversion |
| 42 grant in 2019” that would be comprised of restricted stock (60% weight) and stock options (40% weight). With respect to awards for executives, including Kemly, the Compensation Committee discussed an allocation of 60% restricted stock (½ of which is time-vested, ½ of which is performance-vested) and 40% stock options. 100. At the May 20 Compensation Committee Meeting, a “Tentative Meeting Schedule” (the “Meeting Schedule”) was also passed around that specifically mapped out the remaining process, including the dates and times of seven meetings that would begin the day after the 2019 Annual Meeting. As disclosed in the Meeting Schedule, on June 7, 2019, the Compensation Committee planned to meet to discuss the equity grant to Kemly. The Compensation Committee scheduled meetings for June 24-25 to discuss awards to non-employee directors and others. Another Compensation Committee meeting was scheduled for July 9 to discuss any potential adjustments followed by a presentation to the full Board on July 9. This was to be followed by a final review of the Compensation Committee scheduled for July 22, and approval by the Board scheduled for July 23, 2019. 101. On May 28, 2019, nine days before the 2019 Annual Meeting, the Board convened a special meeting, where Holland reported to the Board that the Compensation Committee had met on May 20th to “review preliminary information on how the [Incentive Plan] would be implemented, if approved.” |
| 43 102. Despite these developments, the 2019 Proxy was never updated to include material information regarding the upcoming Conversion Grants. 103. Putting aside this failure to update stockholders prior to the 2019 Annual Meeting, based on their extensive planning and preparation, the Directors knew they would be ready to issue the Conversion Grants as soon as stockholders approved the Incentive Plan. Indeed, at the June 7, 2019 meeting held one day after the Incentive Plan was approved and described further below, Holland noted that the “significant time spent in reviewing and discussing the materials provided by the compensation consultants over these past few months” had positioned the Directors to make the “large grants” purportedly made by other “recently converted institutions.” 104. On June 6, 2019, the Company’s stockholders voted to approve the Incentive Plan based on the false and misleading 2019 Proxy. 105. Because the vote to approve the Incentive Plan was uninformed and based on a false and misleading 2019 Proxy, the vote should be deemed ineffective and the Incentive Plan, and all awards granted thereunder, should be invalidated. As Planned, the Directors Issue Their Outsized Conversion Grants 106. Following the Incentive Plan’s approval, the Directors engaged in another series of meetings culminating in the formal approval of the Conversion Grants. Most of these meetings appear to have been held on a pro forma basis to |
| 44 create the appearance of distance between stockholder approval of the Incentive Plan and the Conversion Grants. Indeed, as described above, the post-Annual Meeting schedule had been set well in advance and came with instructions for ensuring the appearance of deliberation. In reality, with the peer data driving their decision- making process having been prepared and reviewed during the prior months, the Directors were focused merely on further papering the record. 107. On June 7, 2019, the Compensation Committee convened a meeting, attended by Lemke and Gattuso to discuss Kemly’s Conversion Grant (the “June 7 Compensation Committee Meeting”). As described in the minutes, this meeting began with an “update” from Chairman Holland who “discussed . . . that there has been significant time spent in reviewing and discussing the materials provided by the compensation consultants over these past few months as to the various types of awards under the Plan, the manner in which peer group institutions made awards under plans adopted following a conversion transaction (including the methodology and vesting periods) and the practices of such recently converted institutions to make large grants shortly after the adoption of equity plans by such institutions in the Company’s peer group following a conversion transaction, which awards tend to be reflective of both past and future services (emphasis added).” 108. Accordingly, Holland “noted that given the detailed materials that have been reviewed by the [Compensation] Committee to date and the discussions held |
| 45 in past meetings, he would like to be in a position following Lemke’s presentation for the [Compensation] Committee to formulate its initial recommendation on the equity awards for the CEO today.” 109. Holland also reminded the Compensation Committee that the discussion would be centered around the assumption that 60% of Kemly’s equity award would be in the form of restricted stock (half with time-vesting and half with- performance vesting). 110. As Holland effectively acknowledged, the substantive analysis and discussions regarding the Conversion Grants had occurred several months earlier, and thus just one day after the 2019 Annual Meeting the Compensation Committee was ready to determine Kemly’s award. 111. After Holland spoke, Lemke presented a report, dated June 7, 2019, titled “Potential CEO Awards” (the “June 7 McLagan Presentation”), which referenced “potential CEO grant amounts” that ranged from $5.44 million to $7.79 million. Thus, consistent with prior discussions, a “large grant” was a given, and the only thing left to decide was just how large Kemly’s award would be. 112. After reviewing and discussing the “peer group data,” the Compensation Committee “preliminarily determined that a multiple of 9x [Kemly’s $775,000] salary,” or $6,975,000, “would be reasonable and appropriate for the CEO |
| 46 award.” This multiple was less than the “median total CEO grant as a multiple of salary within the second step peer group,” which was purportedly 10.05%. 113. More specifically, the following chart (based on data included in the McLagan March 22 Presentation) shows the award that each CEO in the second step peer group received as a multiple of their salary at the time: Name Salary Value of Award Multiple of Salary Investors Bancorp $1,000,000 $16,699,999 16.70 Oritani $592,088 $7,435,698 12.56 Kearny $450,000 $5,439,680 12.09 Beneficial $675,154 $6,787,740 10.05 (median) Northfield $676,000 $3,599,150 5.32 Meridian $675,000 $3,573,750 5.29 Clifton $650,000 $2,389,338 3.68 114. This further evidences the extent to which the Compensation Committee was cherry-picking its peer group. As an initial matter, using a multiple of salary to measure a “reasonable” conversion grant is illogical and arbitrary at best. For example, earlier that year, Kemly received a $30,000 salary raise; without that raise, a conversion award based on a 9x salary multiple would automatically be $270,000 less. At the same time, had the peer CEOs received higher salaries, which would lower their salary multiples, Kemly presumably would “deserve” a smaller award. Using salary multiples was simply a convenient way for the Board to manufacture a comparison that put Kemly’s award below the median. In other |
| 47 words, it was a contrived means for the Directors to show they were being “reasonable.” 115. But the true purpose of further narrowing the Conversion Peer Group to these particular companies, and focusing on the median award, is obvious. In so doing, only four companies had become relevant to how much Kemly would be paid: Investors Bancorp, Oritani, Beneficial, and Kearny – the four extreme outliers in a true sample size comprised of dozens and dozens of modest conversion awards awarded in the past decade. 116. In order to further prolong the process for the sake of appearances, at the conclusion of the June 7 Compensation Committee Meeting, the Compensation Committee determined to “make its final decision on the CEO multiple following its meeting with Mr. Keshishian to review the CEO’s overall compensation again, in light of the Committee’s preliminary determination.” 117. On June 24, 2019, the Compensation Committee convened a meeting, which Lemke, Gattuso, and Keshishian joined (the “June 24 Compensation Committee Meeting”), and discussed the awards for the non-employee directors. 118. At the June 24 Compensation Committee Meeting, Lemke presented a report, dated June 21, 2019, titled “Potential Director Awards” (the “June 21 McLagan Presentation”), which referenced “potential total director grant amounts per director.” The range started at $536,785 and ended at $1,288,358. In other |
| 48 words, consistent with prior discussions and as was the case with Kemly in the prior meeting, it was clear the non-employee directors’ awards were going to be large and the only question was just how large they would be. 119. The Compensation Committee reached a “preliminary recommendation” of awarding directors “equity equal to approximately 9 times cash compensation, which would result in a grant value of approximately $966,000.” This 9x multiple was purportedly less than “the peer group median [of] 10.35x cash compensation.” But as with Kemly, this multiplier exercise was a contrivance specifically designed to place the non-employee directors on the same list – but “below” the median – of outliers who had paid themselves outsized awards. 120. Holland asked that the Compensation Committee “think about this preliminary recommendation, taking into account the purposes of the [Plan] and recent shareholder litigation involving non-employee director compensation and that the discussion would be continued tomorrow.” 121. As described in the minutes of the June 24 Compensation Committee Meeting: The [Compensation] Committee discussed that one of the purposes of the Plan is to enable the Company to retain and reward the best available persons for positions of substantial responsibility and to recognize significant contributions made by such individuals to the Company’s success and that in considering larger grants to non- employee directors, the contributions made by the Board, who all have served more than 15 years on the Board of Directors of the Company, |
| 49 is a factor as is the desire to continue to have such individuals to continue to contribute in the future, particularly as the Company is in its early stages of being a public company. 122. Of course, that the Conversion Grant purportedly satisfied one of the Incentive Plan’s “purposes” is backwards – the Directors crafted that Incentive Plan with the Conversion Grants in mind. In any event, during the eight months since their process began, there is no evidence in any of the meeting minutes that the Directors ever discussed their “significant contributions” or the Company’s “purported desire to have such individuals continue to contribute in the future.” The Directors were engaged merely in a window dressing exercise at this point. 123. On June 24, 2019, the Board convened a special meeting, where Holland reported that the Compensation Committee had decided on a “potential award amount” for the CEO and that it “was still in process of considering awards for Directors and would continue the discussion at its next meeting.” 124. On June 25, 2019, the Compensation Committee convened a meeting, which Lemke, Gattuso, and Keshishian attended, and effectively engaged in a repeat discussion of its meeting the day before (the “June 25 Compensation Committee Meeting”). After Holland noted, again, that “litigation is a possibility,” Gattuso “reminded the [Compensation] Committee that one of the purposes of the [Plan] is to enable Columbia to reward eligible participants who have provided important contributions to the Company and the Bank and to recognize significant |
| 50 contributions made by such individuals to the Company’s success, which is designed to recognize both past and future service.” 125. After “further discussion,” the Compensation Committee determined to “recommend a grant award to non-employee directors that would be equal to 8.25x average director compensation, totaling approximately $885,000.” 126. On July 9, 2019, at 8:30 a.m., the Compensation Committee convened a meeting, which Lemke, Gattuso, and Keshishian attended (the “July 9 Compensation Committee Meeting”), and Keshishian presented the 2019 Compensation Review that was referenced at the June 7 Compensation Committee Meeting. After this presentation, no changes to Kemly’s $6,975,000 award recommendation were made. 127. On July 9, 2019, at 12:45 p.m., the Board convened a special meeting, attended by Lemke, Gattuso, and Keshishian (the “July 9 Board Meeting”). At the July 9 Board Meeting, Holland informed the Board that the Compensation Committee was “recommending to the Board” that Kemly be granted an award valued at $6,975,000 and that the Compensation Committee would “meet one more time to finalize its recommendation and the Board will be asked to vote on the final recommendation at its July 23rd Board meeting.” 128. With respect to the awards to the non-employee directors, Holland “advised the Board that after significant discussion and review of peer group |
| 51 practices, overall director compensation and the status of litigation involving non- employee director compensation, the Committee has preliminarily determined to recommend that equity awards” valued at $885,000 be granted to each of the non- employee directors. 129. On July 22, 2019, the Compensation Committee convened another meeting (the “July 22 Compensation Committee Meeting”), and after more “discussion,” officially approved the Conversion Grants, as well as the underlying award agreements (the “Award Agreements”), and recommended that the Board do the same. On July 23, 2019, the Board met and adopted resolutions approving the Conversion Grants. The Board’s Disclosure of the Conversion Grants Is Misleading 130. The Board did not immediately disclose the details of the Conversion Grants, waiting instead nearly nine months to do so, when disclosure was required by SEC rules and could therefore no longer be avoided. 131. On April 10, 2020, the Company filed its 2020 Proxy in connection with the 2020 Annual Meeting. In the 2020 Proxy, SEC rules required the Company to disclose the executive compensation and non-employee director compensation decisions made by the Board during the Company’s 2019 fiscal year. Among other things, SEC rules required the Company to disclose tables showing the grant date fair value of the awards received by named executive officers and non-employee |
| 52 directors during the fiscal 2019 year. As a result, the extremely large amounts of compensation the Directors approved for themselves would became apparent and the Directors accordingly sought to rationalize their decision. 132. According to the 2020 Proxy, “equity awards made following a [mutual-to-stock conversion] are larger than typical annual equity grants by other public financial institutions,” and McLagan “assisted the Compensation Committee in developing a comparative peer group for reference in designing the [Plan] and for making equity awards under that plan.” As further explained in the 2020 Proxy, McLagan “examined the grant practices of other converted institutions to assist the Committee in establishing parameters regarding competitive practices, regulatory considerations and shareholder responses.” McLagan also “developed a list of institutions that converted since 2009 that included mutual holding company conversions, regardless of asset size, and second-step conversions and standard conversions with assets greater than $900 million.” This list was “presented to the Compensation Committee along with McLagan’s recommendation of 15 converted institutions to form the peer group, and after review and discussion the [Compensation] Committee approved the recommended peer group.” The 2020 Proxy then listed the 15 companies that formed the Conversion Peer Group. 133. As an initial matter, this lengthy and detailed disclosure is perhaps most notable for where it did not appear: in the 2019 Proxy. Everything described in the |
| 53 above paragraph had already happened by the time the 2019 Proxy was filed. If this information was important to know after the fact, it was even more important for stockholders to know before they voted on the Incentive Plan. But of course, these disclosures were not made in the 2019 Proxy because had stockholders known about the upcoming Conversion Grants, they may have expressed their displeasure and rejected the Incentive Plan. 134. In terms of the Directors’ attempt to rationalize their indulgence, in describing the Conversion Grants, the 2020 Proxy states that the “Compensation Committee intends the 2019 equity awards to cover a multi-year period, as reflected through the multi-year vesting periods of the grants.” This representation is false. 135. In fact, the Compensation Committee considered, but refused, to designate the Conversion Grants as multi-year awards. At the June 24 Compensation Committee Meeting, Chairman Holland “asked the [Compensation] Committee to consider whether [the Conversion Grants] could represent the total awarded over the next 3-5 years to non-employee directors.” At the June 24 Compensation Committee Meeting, the Compensation Committee concluded only that the Conversion Grants “could represent the total awarded to the director over the next 3-5 years.” Neither the resolutions adopted by the Compensation Committee or the Board, nor the Awards Agreements, designate the Conversion Grants as multi-year awards. That the Board would misleadingly characterize the |
| 54 Conversion Grants as a “multi-year” award in the 2020 Proxy is dishonest and further evidence of the Directors’ wrongdoing. 136. Moreover, even if the Conversion Grants were “multi-year” awards, they remain excessive and unfair. As described above, in the 2019 Compensation Review, GK found that the Company’s 20 peer banks paid their non-employee directors an average of $122,761 per director, with only two companies even topping $200,000. The Board’s average annual non-employee director compensation was $122,160 in 2018 and $139,297 in 2019, which the Board determined to be fair. If the “multi-year” awards are spread over five years, this would add an additional $177,000 in compensation for each non-employee director in each year from 2019- 2023. Thus, instead of a one-time unfair award of $885,000, the non-employee directors would instead receive five consecutive unfair annual compensation packages of approximately $300,000 per year. 137. In describing the rationale for the Conversion Grants, the 2020 Proxy stated: In determining the amount of restricted stock and option awards non- employee directors would receive, the Compensation Committee considered the Board of Directors’ role in setting the strategic direction for the Company and its role in completing the Company’s initial public stock offering in 2018. The Compensation Committee also considered the directors’ past contributions, their industry knowledge, their financial expertise and the role they would play in the Company’s future. The Compensation Committee also reviewed survey data regarding awards made to directors of the peer group companies |
| 55 following a conversion transaction…, bank regulatory guidelines for equity awards to non-employee directors following an initial public offering by a company in the mutual holding company structure, and the Company’s stock ownership requirement for non-employee directors. With respect to the award to Kemly, the 2020 Proxy stated: In 2019, we made awards under the 2019 Equity Incentive Plan to each of our NEOs taking into account a number of factors, including individual and corporate performance, tenure with the organization and future potential to impact our organization. In addition, we considered the fact that our executive team had never previously had the ability to participate in organizational value growth through equity ownership, as well as our shareholders’ expectations of significant equity ownership for executives. We also considered common industry practice for both the prevalence and magnitude of equity awards following a conversion transaction, with reference to the post-conversion peer group discussed above on page 29. 138. As described above, these explanations are unsupported by the actual record of the Board’s deliberations. Indeed, many of these factors were not discussed at all. Others were discussed at the end of the process, long after the decisions were made, an afterthought at best. Again, these dishonest disclosures highlight that the Board was aware that the size of their Conversion Grants could not legitimately be justified. The “survey data” is the one specific consideration that the Board did pay significant attention to, and as shown above, it illustrates only that the Directors were well aware that they were giving themselves outsized awards. |
| 56 DEMAND FUTILITY ALLEGATIONS 139. Plaintiff realleges each allegation contained above as if set forth herein. 140. Plaintiff brings this action derivatively on behalf of Columbia Financial to redress injuries suffered, and to be suffered, by the Company as a direct and proximate result of the Defendants’ misconduct. Columbia Financial is named as a nominal defendant solely in a derivative capacity. 141. Plaintiff has owned Columbia Financial stock continuously throughout the course of wrongful conduct and continues to hold Columbia Financial Stock. 142. Plaintiff will adequately and fairly represent the interests of Columbia Financial in enforcing and prosecuting its rights and has retained counsel with substantial experience in stockholder derivative litigation. 143. At the time of this filing there are nine directors on the Board: Czerwinski, Hallock, Holland, Kemly, Kuiken, Massood, Randall, Van Dyk, and Van Ostenbridge (the “Current Board”). Each member of the Current Board other than Van Ostenbridge (who joined the Board in November 2019) has been named as a defendant in this action. 144. Plaintiff did not make a demand on the Current Board prior to instituting this action because such a demand would be futile. 145. Each of Czerwinski, Hallock, Holland, Kemly, Kuiken, Massood, Randall, and Van Dyk, and therefore a majority of the Current Board, received |
| 57 Conversion Grants. Each of Czerwinski, Hallock, Holland, Kemly, Kuiken, Massood, Randall, and Van Dyk thus have a strong financial incentive to refuse to authorize any corrective action that would involve the rescission, cancellation, or disgorgement of the Conversion Grants. Accordingly, because each of Czerwinski, Hallock, Holland, Kemly, Kuiken, Massood, Randall, and Van Dyk are interested in the Conversion Grants, none of them would be able impartially to consider a demand. Demand is therefore excused. 146. Kemly’s portion of the Conversion Grants (or any recipient’s portion for that matter) cannot be separated for demand futility purposes. As described above, the Conversion Grants were, among other things, awarded under the same tainted process, based on the same set of faulty peers, approved at the same meeting, and effectively one transaction. Accordingly, no individual recipient of a portion of the Conversion Grants (e.g., Holland) will be able impartially to consider a demand seeking the rescission of another individual recipient’s portion of the Conversion Grants (e.g., Kemly), as any good faith attempt to do so would require them to question the fairness of their own portion of the same transaction. CLASS ACTION ALLEGATIONS 147. Pursuant to Rule 23 of the Rules of the Court of Chancery of the State of Delaware, Plaintiff brings this action on his own behalf and as a class action on behalf of those who held Columbia Financial stock at the close of business on April |
| 58 12, 2019, which was the record date for stockholders entitled to vote at the 2019 Annual Meeting, and who continue to hold shares through the present (the “Class”). The Defendants are excluded from the Class, as are the Defendants’ affiliates, immediate families, legal representatives, heirs, successors or assigns, and any entity in which the Defendants have or had a controlling interest. 148. The action is properly maintainable as a class action. 149. The Class is so numerous that joinder of all members is impracticable. The Company had 115,889,175 outstanding shares of common stock as of April 12, 2019. While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through discovery, upon information and belief, there are thousands of members in the Class. 150. Questions of law and fact are common to the Class, including the following: (i) whether the 2019 Proxy contained materially false and misleading statements, or omitted information necessary to render those statements not misleading; (ii) whether Plaintiff and other members of the Class have been or will be harmed by the wrongs complained of herein; and (iii) whether Plaintiff and the Class are entitled to injunctive relief as a result of Defendants’ wrongful conduct. |
| 59 151. Plaintiff is committed to prosecuting this action and has retained counsel experienced in litigation of this nature. Plaintiff’s claims are typical of the claims of other members of the Class and Plaintiff has the same interests as other members of the Class. Columbia Financial stockholders were forced to cast an uninformed vote as a result of the materially false and misleading 2019 Proxy. Accordingly, Plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 152. The prosecution of separate actions by individuals members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class that would establish incompatible standards of conduct for Defendants, or adjudications with respect to individual members of the Class that would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair their ability to protect their interests. 153. Defendants have acted, and refused to act, on grounds that apply generally to the Class, and have caused injury to the Class, such that final injunctive or declaratory relief is appropriate on behalf of the Class as a whole. 154. The questions of law and fact common to the members of the Class predominate over any questions affecting only its individual members, such that a |
| 60 class action is superior to any other available method for fairly and efficiently adjudicating the controversy. COUNT I Breach of Fiduciary Duty (Derivative Claim Against the Defendants) 155. Plaintiff re-alleges each allegation contained above as if set forth herein. 156. As directors of the Company, each Defendant owed fiduciary duties to the Company and its stockholders. 157. The Conversion Grants, a conflicted transaction approved by self- interested Defendants, are subject to entire fairness review. Each Defendant breached his/her fiduciary duty of loyalty by granting and accepting the Conversion Grants in amounts that were excessive and unfair to the Company. Each Defendant breached his/her fiduciary duty of loyalty by failing to candidly and completely disclose material information concerning the Conversion Grants. Each Defendant is jointly and severally liable for the injury caused to the Company by the excessive and unfair Conversion Grants. 158. As a result of Defendants’ actions, the Company has been and will be damaged. 159. Plaintiff, on behalf of the Company, has no adequate remedy at law. |
| 61 COUNT II Unjust Enrichment (Derivative Claim Against the Defendants) 160. Plaintiff re-alleges each allegation contained above as if set forth herein. 161. Each Defendant received excessive and unfair financial benefits as a result of the Conversion Grants. 162. It would be unconscionable and against fundamental principles of justice and equity for Defendants to retain the benefits of the excessive and unfair Conversion Grants. 163. Plaintiff, on behalf of the Company, has no adequate remedy at law. COUNT IIII Breach of Fiduciary Duty (Individual and Class Claim against the Defendants) 164. Plaintiff re-alleges the allegations in paragraphs 1-138 and 147-154 contained above as if set forth herein. 165. The Defendants owe fiduciary duties to the Company’s stockholders, including the duty to speak truthfully when seeking stockholder action. 166. The Defendants breached their fiduciary duty by causing the Company to issue the 2019 Proxy, which the Defendants knew omitted material information and contained false and misleading representations in connection with the stockholders’ vote on the Incentive Plan. |
| 62 167. As a result, the vote on the Incentive Plan was not fully informed. The Incentive Plan, therefore, should be declared invalid and cancelled. 168. Plaintiff and the Class are being, and will continue to be, harmed. 169. Plaintiff and the Class have no adequate remedy at law. PRAYER FOR RELIEF WHEREFORE, Plaintiff requests entry of an order as follows: A. Declaring this action to be a properly maintained class action and derivative action and certifying Plaintiff as the Class representative and his counsel as Class counsel; B. Rescinding, cancelling, and/or ordering disgorgement of the Conversion Grants, including all shares of Columbia Financial common stock issued thereunder; C. Declaring that Defendants breached their fiduciary duty to the Company’s stockholders; D. Declaring the stockholder vote on the Incentive Plan at the 2019 Annual Meeting ineffective; E. Invalidating the Incentive Plan and rescinding all awards and shares issued thereunder; F. Awarding damages (including without limitation compensatory and rescissory damages), against all Defendants in favor of the Company as a result of |
| 63 Defendants’ breaches of fiduciary duties, plus pre-judgment and post-judgment interest; G. Awarding Plaintiff the costs and disbursements of this action, including reasonable allowance of fees and costs for Plaintiff’s attorneys, experts, and accountants; and H. Granting Plaintiff such other and further relief as the Court may deem just and proper. Of Counsel: Steven J. Purcell Douglas E. Julie Robert H. Lefkowitz Kaitlyn T. Devenyns PURCELL JULIE & LEFKOWTIZ LLP 708 Third Avenue, Sixth Floor New York, New York 10017 212-725-1000 Dated: April 30, 2020 SMITH, KATZENSTEIN & JENKINS LLP /s/ Neal C. Belgam David A. Jenkins (No. 932) Neal C. Belgam (No. 2721) 1000 West Street, Suite 1501 Wilmington, Delaware 19801 (302) 652-8400 ncb@skjlaw.com Attorneys for Plaintiff FREDRIC D. PASCAL, derivatively on behalf of COLUMBIA FINANCIAL, INC., and individually on behalf of himself and all other similarly situated stockholders of COLUMBIA FINANCIAL, INC. |
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COLUMBIA FINANCIAL, INC. C/O BROADRIDGE CORPORATE ISSUER SOLUTIONS P.O.BOX 1342 BRENTWOOD, NY 11717 SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on April 3, 2022 for shares held directly and by 11:59 p.m. Eastern Time on April 2, 2022 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/CLBK2022SM You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.VOTE BY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on April 3, 2022 for shares held directly and by 11:59 p.m. Eastern Time on April 2, 2022 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDSTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY The BoardofDirectors recommends you vote FORproposals1,2 and 3.ForAgainst Abstain1.The ratification of the 2019 EQUITY INCENTIVE PLAN
COLUMBIA FINANCIAL, INC. 2019 EQUITY INCENTIVE PLAN
ARTICLE 1 — PURPOSE AND GENERAL PROVISIONS
1.1 Establishment of Plan. Columbia Financial, Inc., a Delaware corporation (the “Company”), hereby establishes an equity incentive compensation plan to be known as the “Columbia Financial, Inc. 2019 Equity Incentive Plan” (the “Plan”), as set forth in this document.
1.2 Purpose of Plan. The purpose 2.The ratification of the Plan is to promote the long-term growth and profitability of the Company and its Affiliates by (i) providing certain employees and non-employee directors of the Company and its Affiliates with incentives to maximize shareholder value and otherwise contribute to the success of the Company and with recognition for significant contributions to the Company’s success, and (ii) enabling the Company to attract, retain and reward the best available persons for positions of substantial responsibility.
1.3 Types of Awards.2019 Equity Awards under the Plan may be made to eligible Participants in the form of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or any combination thereof.
1.4 Effective Date. The Plan was adopted by the Board offormer non-employee Directors of the Company on April 16, 2019, contingent upon approval by the Company’s shareholders. The Plan became effective on June 6, 2019, the date on which the Company’s shareholders approved the Plan (the “Effective Date”).
1.5 Termination of the Plan. No awards shall be granted under the Plan after the tenth (10th) anniversary of the Effective Date (except as provided in Section 5.7(a) below). Awards granted under the Plan on or prior to the tenth (10th) anniversary of the Effective Date shall remain outstanding beyond that date in accordance with the terms and conditions of the Plan and the Agreements corresponding such Awards.
ARTICLE 2 — DEFINITIONS
Except where the context otherwise indicates, the following definitions apply:
“AFFILIATE” means any entity that, directly or indirectly through on or more intermediaries, controls, is controlled by, or is under common control with the Company, including among others Columbia Bank. With respect to all purposes of the Plan, including but not limited to, the establishment, amendment, termination, operation and administration of the Plan, the Company and the Committee shall be authorized to act on behalf of all other entities included within the definition of “Affiliate.”
“AGREEMENT” means the written or electronic agreement evidencing an Award granted to a Participant under the Plan. As determined by the Committee, each Agreement shall consist of either (i) a written agreement in a form approved by the Committee and executed on behalf of the Company by an officer duly authorized to act on its behalf, or (ii) an electronic notice of Award in a form approved by the Committee and recorded by the Company (or its designee) in an electronic recordkeeping system used for the purpose of tracking Awards, and if required by the Committee, executed or otherwise electronically accepted by the recipient of the Award in such form and manner as the Committee may require. The Committee may authorize any officer of the Company (other than the particular Award recipient) to execute any or all Agreements on behalf the Company.
“AWARD” means an award granted to a Participant under the Plan that consists of one or more Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or a combination of these.
“BOARD” means the Board of Directors of the Company.
“CHANGE IN CONTROL” means the occurrence of one of the following events:
(a) if any Person, other than an Exempt Person, 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 30% or more (the “CIC Percentage”) of the combined voting power of the Company’s then-outstanding securities; provided, however, that if such Person first obtains the approval of the Board to acquire the CIC Percentage, then no Change in Control shall be deemed to have occurred unless and until such Person obtains a CIC Percentage ownership of the combined voting power of the Company’s then-outstanding securities without having first obtained the approval of the Board; or
(b) if any Person, other than an Exempt Person, 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 greater than 50% of the combined voting power of the Company’s then-outstanding securities, whether or not the Board shall have first given its approval to such acquisition; or
(c) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board (the “Incumbent Directors”) cease for any reason to constitute a majority of the Board; provided, however, that any new directors whose election, nomination for election by the Company’s shareholders or appointment was approved by a vote of at least one-half of the directors then still in office who either were directors at the beginning of the period or whose election, nomination or appointment was previously so approved shall be considered Incumbent Directors; and further provided, however, that no individual shall be considered an Incumbent Director if such individual’s election, nomination or appointment to the Board was in connection with an actual or threatened “election contest” (as described in Rule 14a-12(c) under the Exchange Act) with respect to the election or removal of directors (an “Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any such Election Contest or Proxy Contest; or
(d) the consummation of a merger or consolidation of the Company with any other corporation; provided, however, a Change in Control shall not be deemed to have occurred: (i) if such merger or consolidation would result in all or a portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) either directly or indirectly more than 50% of the combined voting power of the securities of the Company or such surviving entity outstanding immediately after such merger or consolidation in substantially the same proportion as their ownership immediately prior to the merger or consolidation, or (ii) if the corporate existence of the Company is not affected and following the merger or consolidation, the directors of the Company prior to such merger or consolidation constitute at least a majority of the Board of the Company or the entity that directly or indirectly controls the Company after such merger or consolidation; or
(e) the sale or disposition by the Company of all or substantially all the Company’s assets, other than a sale to an Exempt Person;
provided, however, that in no event shall a reorganization of the Company or Columbia Bank solely within its corporate structure or a second-step conversion constitute a Change in Control.
“CODE” means the Internal Revenue Code of 1986, as now in effect and as hereafter amended from time to time. Any reference to a particular section of the Code includes any applicable regulations promulgated under that section. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.
“COMMITTEE” means the Compensation Committee of the Board or such other committee consisting of two or more members of the Board as may be appointed by the Board from time to time to administer this Plan pursuant to Article 3. All of the members of the Committee shall be independent
directors within the meaning of the NASDAQ’s listing standards (as applicable). If any member of the Committee does not qualify as an “Independent Director” within the meaning of Rule 16b-3 under the Exchange Act, the Board shall appoint a subcommittee of the Committee, consisting of at least two Independent Directors, to grant Awards to Insiders; each member of such subcommittee shall satisfy the requirements of (i) and (ii) above. References to the Committee in the Plan shall include and, as appropriate, apply to any such subcommittee.
“COMMON STOCK” means the Common Stock, par value $.01 per share, of the Company, and any other shares into which such stock may be changed by reason of a recapitalization, reorganization, merger, consolidation or any other change in the corporate structure or capital stock of the Company.
“COMPANY” means Columbia Financial, Inc., a Delaware corporation, and its successors and assigns.
“DISABILITY” means, with respect to any Incentive Stock Option, a disability as determined under Code section 22(e)(3), and with respect to any other Award, unless provided otherwise in an Agreement (in which case such definition shall apply for purposes of the Plan with respect to that particular Award), (i) with respect to a Participant who is eligible to participate in a program of long-term disability insurance maintained by the Employer, the date on which the insurer or administrator under such program of long-term disability insurance determines that the Participant is eligible to commence benefits under such program, and (ii) with respect to any Participant (including a Participant who is eligible to participate in a program of long-term disability insurance maintained by the Employer), the Participant’s inability, due to physical or mental incapacity, to substantially perform the Participant’s duties and responsibilities for the Employer for one hundred eighty (180) days out of any three hundred sixty-five (365) day period or one hundred twenty (120) consecutive days.
“EFFECTIVE DATE” shall have the meaning ascribed to such term in Section 1.4 hereof.
“EMPLOYEE” means any individual whom the Employer treats as a common law employee for payroll tax purposes, either within or outside the United States.
“EMPLOYER” means the Company, each Affiliate, and any division of the Company or an Affiliate thereof.
“EXCHANGE ACT” means the Securities Exchange Act of 1934, as now in effect and as hereafter amended from time to time. Any reference to a particular section of the Exchange Act includes any applicable regulations promulgated under that section. All citations to sections of the Act or rules thereunder are to such sections or rules as they may from time to time be amended or renumbered.
“EXEMPT PERSON” means any employee benefit plan of the Employer or a trustee or other administrator or fiduciary holding securities under an employee benefit plan of the Employer.
“FAIR MARKET VALUE” of a share of Common Stock of the Company means, as of the date in question,
(a) if the Common Stock is listed for trading on the NASDAQ, the closing sale price of a share of Common Stock on such date, as reported by the NASDAQ or such other source as the Committee deems reliable, or if no such reported sale of the Common Stock shall have occurred on such date, on the last day prior to such date on which there was such a reported sale;
(b) if the Common Stock is not listed for trading on the NASDAQ but is listed for trading on another national securities exchange, the closing sale price of a share of Common Stock on such date as reported on such exchange, or if no such reported sale of the Common Stock shall have occurred on such date, on the last day prior to such date on which there was such a reported sale;
(c) if the Common Stock is not listed for trading on a national securities exchange but nevertheless is publicly traded and reported (through the OTC Bulletin Board or otherwise), the closing sale price of a share of Common Stock on such date, or if no such reported sale of the Common Stock shall have occurred on such date, on the last day prior to such date on which there was such a reported sale; or
(d) if the Common Stock is not publicly traded and reported, the fair market value as established in good faith by the Committee or the Board.
For purposes of subsection (c) above, if the Common Stock is not traded on the NASDAQ but is traded on more than one other securities exchange on the given date, then the largest exchange on which the Common Stock is traded shall be referenced to determine Fair Market Value.
Notwithstanding the foregoing but subject to the next paragraph, if the Committee determines in its discretion that an alternative definition of Fair Market Value should be used in connection with the grant, exercise, vesting, settlement or payout of any Award, it may specify such alternative definition in the Agreement applicable to the Award. Such alternative definition may include a price that is based on the opening, actual, high, low, or average selling prices of a share of Common Stock on the NASDAQ or other securities exchange on the given date, the trading date preceding the given date, the trading date next succeeding the given date, or an average of trading days.
Notwithstanding the foregoing, (i) in the case of an Option or SAR, Fair Market Value shall be determined in accordance with a definition of fair market value that permits the Award to be exempt from Code section 409A; and (ii) in the case of an Option that is intended to qualify as an ISO under Code section 422, Fair Market Value shall be determined by the Committee in accordance with the requirements of Code section 422.
“409A AWARD” means an Award that is not exempt from Code section 409A.
“FULL VALUE AWARD” means an Award of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units.
“FULL VALUE AWARD POOL” shall have the meaning ascribed to such term in in Section 4.1.
“INCENTIVE STOCK OPTION” or “ISO” means an Option which is designated as an “incentive stock option” and intended to meet the requirements of Code section 422.
“INSIDER” shall mean an individual who is, on the relevant date, subject to the reporting requirements of Exchange Act section 16(a).
“NASDAQ” means The NASDAQ Stock Market LLC or its successor.
“NON-EMPLOYEE DIRECTOR” means any individual who is a member of the Board and who is not also employed by the Employer.
“NONQUALIFIED STOCK OPTION” or “NSO” means any Option which is not designated as an “incentive stock option” or that otherwise does not meet the requirements of Code section 422.
“OPTION” means an Award granted under Article 5 which is either an Incentive Stock Option or a Nonqualified Stock Option. An Option shall be designated as either an Incentive Stock Option or a Nonqualified Stock Option, and in the absence of such designation, shall be treated as a Nonqualified Stock Option.
“OPTION EXERCISE PRICE” means the price at which a share of Common Stock may be purchased by a Participant pursuant to the exercise of an Option.
“OPTION AWARD POOL” shall have the meaning ascribed to such term in in Section 4.1.
“PARTICIPANT” means an Employee or Non-Employee Director who is eligible to receive or has received an Award under this Plan.
“PERFORMANCE PERIOD” shall have the meaning ascribed to such term in Section 8.3.
“PERFORMANCE SHARE” means an Award under Article 8 of the Plan that is valued by reference to a share of Common Stock, which value may be paid to the Participant by delivery of cash or other property as the Committee shall determine upon achievement of such performance objectives during the relevant Performance Period as the Committee shall establish at the time of such Award or thereafter.
“PERFORMANCE UNIT” means an Award under Article 8 of the Plan that has a value set by the Committee (or that is determined by reference to a valuation formula specified by the Committee), which value may be paid to the Participant by delivery of cash or other property as the Committee shall determine upon achievement of such performance objectives during the relevant Performance Period as the Committee shall establish at the time of such Award or thereafter.
“PERSON” means any “person” or “group” as those terms are used in Exchange Act Sections 13(d) and 14(d).
“PLAN” means the Columbia Financial, Inc. 2019 Equity Incentive Plan, set forth in this document and as it may be amended from time to time.
“RESTRICTED STOCK” means an Award of shares of Common Stock under Article 7 of the Plan, which shares are issued with such restrictions as the Committee, in its sole discretion, may impose, including but not limited to an Award of shares that the Committee grants to an Non-Employee Director with no restrictions.
“RESTRICTED STOCK UNIT” or “RSU” means an Award under Article 7 of the Plan that is valued by reference to a share of Common Stock, which value may be paid to the Participant by delivery of cash or other property as the Committee shall determine and that has such restrictions as the Committee, in its sole discretion, may impose, including but not limited to an Award that the Committee grants to an Non-Employee Director with no restrictions.
“RESTRICTION PERIOD” means the period commencing on the date an Award of Restricted Stock or an RSU is granted and ending on such date as the Committee shall determine, during which time the Award is subject to forfeiture as provided in the Agreement.
“STOCK APPRECIATION RIGHT” or “SAR” means an Award granted under Article 6 which provides for delivery of cash or other property as the Committee shall determine with a value equal to the excess of the Fair Market Value of a share of Common Stock on the day the Stock Appreciation Right is exercised over the specified purchase price.
“TANDEM SAR” means a Stock Appreciation Right granted to a Participant in connection with an Option as described in Section 6.4.
ARTICLE 3 — ADMINISTRATION; POWERS OF THE COMMITTEE
3.1 General. This Plan shall be administered by the Committee.
3.2 Authority of the Committee.
(a) Subject to the provisions of the Plan, the Committee shall have the full and discretionary authority to (i) select the persons who are eligible to receive Awards under the Plan, (ii) determine the form and substance of Awards made under the Plan and the conditions and restrictions, if any, subject to which such Awards will be made, (iii) modify the terms of Awards made under the Plan, (iv) interpret, construe and administer the Plan and Awards granted thereunder, (v) make any adjustments necessary or desirable in connection with Awards made under the Plan to eligible Participants located outside the United States, and (vi) adopt, amend, or rescind such rules and regulations, and make such other determinations, for carrying out the Plan as it may deem appropriate.
(b) The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Agreement in the manner and to the extent it shall deem desirable to carry it into effect.
(c) Notwithstanding anything herein to the contrary, the Committee’s determinations under the Plan and the Agreements are not required to be uniform; rather, the Committee shall be entitled to make non-uniform and selective determinations under the Plan and the Agreements.
(d) Decisions of the Committee on all matters relating to the Plan shall be in the Committee’s sole discretion and shall be conclusive, final and binding on all parties. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with applicable federal and state laws and rules and regulations promulgated pursuant thereto.
(e) In the event the Company shall assume outstanding equity awards or the right or obligation to make such awards in connection with the acquisition of another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards as it shall deem equitable and appropriate to prevent dilution or enlargement of benefits intended to be made under the Plan.
(f) In making any determination or in taking or not taking any action under the Plan, the Committee may obtain and may rely on the advice of experts, including but not limited to employees of the Company and professional advisors.
3.3 Delegation of Authority. The Committee may, in its discretion, at any time and from time to time, delegate to one or more of its members such of its authority as it deems appropriate (provided that any such delegation shall be to at least two members of the Committee with respect to Awards to Insiders). The Committee may, at any time and from time to time, delegate to one or more other members of the Board such of its authority as it deems appropriate. To the extent permitted by law and applicable stock exchange rules, the Committee may also delegate its authority to one or more persons who are not members of the Board, except that no such delegation will be permitted with respect to Insiders.
3.4 Agreements. Each Award granted under the Plan shall be evidenced by an Agreement. Each Agreement shall be subject to and incorporate, by reference or otherwise, the applicable terms and conditions of the Plan, and any other terms and conditions, not inconsistent with the Plan, as may be imposed by the Committee, including without limitation, provisions related to the consequences of termination of employment. A copy of such Agreement shall be provided to the Participant, and the Committee may, but need not, require that the Participant sign (or otherwise acknowledge receipt of) a copy of the Agreement or a copy of a notice of grant. Each Participant may be required, as a condition to receiving an Award under this Plan, to enter into an agreement with the Company containing such non-compete, confidentiality, and/or non-solicitation provisions as the Committee may adopt and approve from time to time (as so modified or amended, the “Non-Compete Agreement”). The provisions of the Non-Compete Agreement may also be included in, or incorporated by reference in, the Agreement.
3.5 Indemnification. No member or former member of the Committee or the Board or person to whom the Committee has delegated responsibility under the Plan shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted under it. The Company shall indemnify and hold harmless each member and former member of the Committee and the Board against all cost or expense (including counsel fees and expenses) or liability (including any sum paid in settlement of a claim with the approval of the Board) arising out of any act or omission to act in connection with the Plan, unless arising out of such member’s or former member’s own willful misconduct, fraud, bad faith or as expressly prohibited by statute. Such indemnification shall be in addition (without duplication) to any rights to indemnification or insurance the member or former member may have as a director or under the by-laws of the Company or otherwise.
3.6 Minimum Vesting Requirement. Notwithstanding anything herein to the contrary, each equity-based Award shall vest no earlier than the one-year anniversary of the date of grant of the Award; provided, however, that: (i) up to 5% of the Full Value Award Pool and up to 5% of the Option Award Pool Award, as the Full Value Award Pool and Option Award Pool Award may be adjusted pursuant to Section 4.3, may be issued pursuant to Awards that do not satisfy this minimum vesting requirement; and (ii) the Committee may provide for accelerated vesting of an Award in full or in part prior to the one-year anniversary of the date of grant of the Award pursuant to Article 10.
3.7 Minimum Holding Period. As a condition of receipt of an Award, the Agreement may require the Participant to agree to hold vested Shares received under the Award (including but not limited to Shares received upon exercise of an Option) for one year following the vesting or exercise date (as applicable). The foregoing limitation shall not apply to the extent an Award vests or is exercised due to death, Disability or involuntary termination of employment following a Change in Control, or to the extent that (i) the Participant directs the Company to withhold, or the Company elects to withhold, with respect to such vesting or exercise or, in lieu thereof, to retain or sell without notice a number of shares of Stock sufficient to cover to the taxes required to be withheld at the minimum statutory withholding rates, or (ii) the participant exercises an Option by net settlement, and in the case of (i) and (ii) herein, only to the extent of the Shares withheld for tax or net settlement purposes.
3.8 Restrictions on Dividends and Dividend Equivalents. Notwithstanding anything herein to the contrary, dividend equivalents shall not be paid with respect to Options or SARs. Dividends and dividend equivalents with respect to a Restricted Stock Award, Restricted Stock Unit, Performance Share or Performance Unit shall be subject to the same vesting requirements as the underlying Award; in no event shall dividends or dividend equivalents be paid on any such Award prior to the date on which such Award has become vested.
ARTICLE 4 — SHARES AVAILABLE UNDER THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the aggregate number of shares of Common Stock that are available for issuance pursuant to (i) Full Value Awards granted under the Plan is 2,271,427 (the “Full Value Award Pool”), and (ii) Options and SARs granted under the Plan is 5,678,569 (the “Option Award Pool Award”). All of the Option Award Pool may, but is not required to, be issued pursuant to Incentive Stock Options. If Awards are granted in substitution or assumption of awards of an entity acquired, by merger or otherwise, by the Company (or any Affiliate), to the extent such grant shall not be inconsistent with the terms, limitations and conditions of Code section 422, Exchange Act Rule 16b-3 or applicable NASDAQ rules, the number of shares subject to such substitute or assumed Awards shall not increase or decrease the Full Value Award Pool or Option Award Pool (as applicable).
The shares issued pursuant to Awards under the Plan shall be made available from shares currently authorized but unissued or shares currently held (or subsequently acquired) by the Company as treasury shares, including shares purchased in the open market or in private transactions.
The following rules shall apply for purposes of the determination of the number of shares of Common Stock available for grants of Awards under the Plan:
(a) Each Option shall be counted as one share subject to an Award and deducted from the Option Award Pool.
(b) Each share of Restricted Stock and each Restricted Stock Unit that may be settled in shares of Common Stock shall be counted as one share subject to an Award and deducted from the Full Value Award Pool. Restricted Stock Units that may not be settled in shares of Common Stock shall not result in a deduction from the Full Value Award Pool.
(c) Each Performance Share that may be settled in shares of Common Stock shall be counted as one share subject to an Award, based on the number of shares that would be paid under the Performance Share for achievement of target performance, and deducted from the Full Value Award Pool. Each Performance Unit that may be settled in shares of Common Stock shall be counted as a number of shares subject to an Award, based on one multiplied by the number of shares that would be paid under the Performance Unit for achievement of target performance, with the number determined by dividing the value of the Performance Unit at the time of grant by the Fair Market Value of a share of Common Stock at the time of grant, and this number shall be deducted from the Full Value Award Pool. In both cases, in the event that the Award is later settled based on above-target performance, the number of shares of Common Stock corresponding to the above-target performance, calculated pursuant to the applicable methodology specified above,
shall be deducted from the Full Value Award Pool at the time of such settlement; in the event that the Award is later settled upon below-target performance, the number of shares of Common Stock corresponding to the below-target performance, calculated pursuant to the applicable methodology specified above, shall be added back to the Full Value Award Pool. Performance Shares and Performance Units that may not be settled in shares of Common Stock shall not result in a deduction from the Full Value Award Pool.
(d) Each Stock Appreciation Right that may be settled in shares of Common Stock shall be counted as one share subject to an Award and deducted from the Option Award Pool. Stock Appreciation Rights that may not be settled in shares of Common Stock shall not result in a reduction from the Option Award Pool. If a Stock Appreciation Right is granted in connection with an Option and the exercise of the Stock Appreciation Right results in the loss of the Option right, the shares subject to such related Option shall be added back to the Option Award Pool.
(e) If, for any reason, any shares subject to an Award under the Plan are not issued or are returned to the Company, for reasons including, but not limited to, a forfeiture of Restricted Stock or a Restricted Stock Unit, or the termination, expiration or cancellation of an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Share or Performance Unit, or settlement of any Award in cash rather than shares, such shares shall again be available for Awards under the Plan and shall be added to the Full Value Award Pool or Option Award Pool (as applicable).
(f) Notwithstanding anything to contrary contained herein, if the exercise price and/or tax withholding obligation under an Award is satisfied by the Company retaining shares or by the Participant tendering shares (either by actual delivery or attestation), the number of shares so retained or tendered shall be deemed delivered for purposes of determining the Option Award Pool and shall not be available for further Awards under the Plan. To the extent an SAR that may be settled in shares of Common Stock is, in fact, settled in shares of Common Stock, the gross number of shares subject to such Stock Appreciation Right shall be deemed delivered for purposes of determining the Option Award Pool and shall not be available for further Awards under the Plan. Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options shall not be available for Awards under the Plan and shall not be added to the Option Award Pool.
4.2 Individual Limits. Subject to adjustment as provided in Section 4.3, the following rules shall apply to Awards under the Plan:
(a) The maximum number of Options and Stock Appreciation Rights that are not Full Value Awards that, in the aggregate, may be granted to any one Participant other than a Non-Employee Director over the lifetime of the Plan, all of which may be granted during any one calendar year, is equal to twenty-five percent (25%) of the Option Award Pool.
(b) The maximum number of Full Value Awards that, in the aggregate, may be granted to any one Participant other than a Non-Employee Director over the lifetime of the Plan, all of which may be granted during any one calendar year, is equal to twenty-five percent (25%) of the Full Value Award Pool.
(c) For any one Non-Employee Director:
(i) Over the lifetime of the Plan, the maximum number of Options and Stock Appreciation Rights that, in the aggregate, may be granted to such Non-Employee Director is equal to three and one half percent (3.5%) of the Option Award Pool;
(ii) Over the lifetime of the Plan, the maximum number of Full Value Awards that, in the aggregate, may be granted to such Non-Employee Director is equal to three and one half percent (3.5%) of the Full Value Award Pool;
(iii) For any one fiscal year of the Company, the sum of the following amounts shall not exceed one million two hundred thousand dollars ($1,200,000): (A) the amount of cash
compensation that, in the aggregate, may be payable for such fiscal year to such Non-Employee Director in respect of such Non-Employee Director’s service as a member of the Board during such fiscal year, including but not limited to service performed in such fiscal year but for which payment is made in the following fiscal year, and (B) the grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all Awards that, in the aggregate, may be granted in such fiscal year to such Non-Employee Director.
4.3 Adjustment of Shares. If any change in corporate capitalization, such as a stock split, reverse stock split, stock dividend, or any corporate transaction such as a reorganization, reclassification, merger or consolidation or separation, including a spin-off, of the Company or sale or other disposition by the Company of all or a portion of its assets, any other change in the Company’s corporate structure, or any distribution to shareholders (other than an ordinary cash dividend) results in the outstanding shares of Common Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares or other securities of the Company, or for shares of stock or other securities of any other corporation (or new, different or additional shares or other securities of the Company or of any other corporation being received by the holders of outstanding shares of Common Stock), or a material change in the value of the outstanding shares of Common Stock as a result of the change, transaction or distribution, then the Committee shall make equitable adjustments, as it determines are necessary and appropriate to prevent the enlargement or dilution of benefits intended to be made available under the Plan, in:
(a) the number and class of stock or other securities that comprise the Full Value Award Pool and Option Award Pool as set forth in Section 4.1, including, without limitation, with respect to Incentive Stock Options;
(b) the limitations on the aggregate number of shares of Common Stock that may be awarded to any one Participant under various Awards as set forth in Section 4.2;
(c) the number and class of stock or other securities subject to outstanding Awards, and which have not been issued or transferred under an outstanding Award;
(d) the Option Exercise Price under outstanding Options, the exercise price under outstanding Stock Appreciation Rights, and the number of shares of Common Stock to be transferred in settlement of outstanding Awards; and
(e) the terms, conditions or restrictions of any Award and Agreement, including but not limited to the price payable for the acquisition of shares of Common Stock.
It is intended that, if possible, any adjustment contemplated above shall be made in a manner that satisfies applicable legal requirements as well as applicable requirements with respect to taxation (including, without limitation and as applicable in the circumstances, Code section 424 and Code section 409A) and accounting (so as to not trigger any charge to earnings with respect to such adjustment).
Without limiting the generality of the above, any good faith determination by the Committee as to whether an adjustment is required in the circumstances and the extent and nature of any such adjustment shall be final, conclusive and binding on all persons.
ARTICLE 5 — STOCK OPTIONS
5.1 Grant of Options. Subject to the terms and provisions of the Plan, the Committee may from time to time grant Options to eligible Participants. The Committee shall have sole discretion in determining the number of shares subject to Options granted to each Participant. The Committee may grant a Participant ISOs, NSOs or a combination thereof, and may vary such Awards among Participants; provided that the Committee may grant Incentive Stock Options only to individuals who are employees within the meaning of Code section 3401(c) of the Company or its subsidiaries (as defined for this purpose in Code section 424(f)). Notwithstanding anything in this Article 5 to the
contrary, except for Options that are specifically designated as intended to be subject to Code section 409A, the Committee may only grant Options to individuals who provide direct services on the date of grant of the Options to the Company or another entity in a chain of entities in which the Company or another such entity has a controlling interest (within the meaning of Treasury Regulation section 1.409A-1(b)(5)(iii)(e)) in each entity in the chain.
5.2 Agreement. Each Option grant shall be evidenced by an Agreement that shall specify the Option Exercise Price, the duration of the Option, the number of shares of Common Stock to which the Option pertains, the conditions upon which the Option shall become vested and exercisable (subject to Section 3.7) and such other provisions as the Committee shall determine. The Option Agreement shall further specify whether the Award is intended to be an ISO or an NSO. Any portion of an Option that is not designated in the Agreement as an ISO or otherwise fails or is not qualified as an ISO (even if designated as an ISO) shall be an NSO. Dividend equivalents shall not be paid with respect to Options.
5.3 Option Exercise Price. The per share Option Exercise Price for each Option shall not be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an Option Exercise Price lower than set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another Option in a manner satisfying the provisions of Code section 424(a) relating to a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation; provided that the Committee determines that such Option Exercise Price is appropriate to preserve the economic benefit of the replaced award and will not impair the exemption of the Option from Code section 409A (unless the Committee clearly and expressly foregoes such exemptionwere incumbent directors at the time the Option is granted).
5.4 Duration of Options. Each Option shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary of its grant date other than an Option granted to a Participant outside the United States. If an Agreement does not specify an expiration date, the Option’s expiration date shall be the 10th anniversary of its grant date.
5.5 Exercise of Options. Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall specify, including conditions related to the employment of the Participant with the Employer or provision of services by the Participant to the Employer, which need not be the same for each grant or for each Participant. The Committee may provide in the Agreement for rights upon the occurrence of events specified in the Agreement. Upon exercise of an Option, the number of shares of Common Stock subject to exercise under any related SAR shall automatically be reduced by the number of shares represented by the Option or portion thereof which is surrendered.
5.6 Payment. Options shall be exercised, in whole or in part, by the delivery of an oral, written or electronic notice of exercise to the Company or its designated representative in the form prescribed by the Company, setting forth the number of shares of Common Stock with respect to which the Option is to be exercised and satisfying any requirements that the Committee may apply from time to time. Full payment of the Option Exercise Price for such shares (less any amount previously paid by the Participant to acquire the Option) must beawards were made, on or prior to the Payment Date, as defined below. The Option Exercise Price shall be paid to the Company in United States dollars either: (a) in cash, (b) by check, bank draft, money order or other cash equivalent approved by the Committee, (c) if approved by the Committee, by tendering previously acquired shares of Common Stock (or delivering a certification or attestation of ownership of such shares) having an aggregate Fair Market Value at the time of exercise equal to the total Option Exercise Price (provided that the tendered shares must have been held by the Participant for any period required by the Committee), (d) if approved by the Committee, by cashless exercise as permitted under Federal Reserve Board’s Regulation T, subject to applicable securities law restrictions, (e) by any other means which the Committee determines to be consistent with the Plan’s purpose and applicable law, including a net exercise; or (f) by a combination of the foregoing. “Payment Date” shall mean the date on which a sale transaction in connection with a
cashless exercise (whether or not payment is actually made pursuant to a cashless exercise) would have settled in connection with the subject option exercise. No certificate or cash representing a share of Common Stock shall be delivered until the full Option Exercise Price has been paid.
5.7 Special Rules for ISOs. The following rules apply notwithstanding any other terms of the Plan.
(a) No ISOs may be granted under the Plan after April 16, 2029.
(b) In no event shall any Participant who owns (within the meaning of Code section 424(d)) stock of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any “parent” or “subsidiary” (within the meaning of Code section 424(e) or (f), respectively) be eligible to receive an ISO (i) at an Option Exercise Price less than one hundred ten percent (110%) of the Fair Market Value of a share of Common Stock on the date the ISO is granted, or (ii) that is exercisable later than the fifth (5th) anniversary date of its grant date.
(c) The aggregate Fair Market Value of shares of Common Stock with respect to which incentive stock options (within the meaning of Code section 422) granted to a Participant are first exercisable in any calendar year under the Plan and all other incentive stock option plans of the Employer shall not exceed One Hundred Thousand Dollars ($100,000). For this purpose, Fair Market Value shall be determined with respect to a particular incentive stock option on the date on which such incentive stock option is granted. In the event that this One Hundred Thousand Dollar ($100,000) limit is exceeded with respect to a Participant, then ISOs granted under this Plan to such Participant shall, to the extent and in the order required by Treasury Regulations under Code section 422, automatically become NSOs granted under this Plan.
(d) Solely for purposes of determining the limit on ISOs that may be granted under the Plan, the provisions of Section 4.1 that replenish the Option Award Pool shall only be applied to the extent permitted by Code section 422 and the regulations promulgated thereunder.
ARTICLE 6 — STOCK APPRECIATION RIGHTS
6.1 Grant of SARs. Subject to the terms and provisions of the Plan, the Committee may grant SARs to Participants in such amounts and upon such terms, and at any time and from time to time, as the Committee shall determine. The Committee may grant Tandem SARs or SARs that are unrelated to Options. A Stock Appreciation Right shall entitle the holder, within the specified period (which may not exceed 10 years), to exercise the SAR and receive in exchange therefor a payment having an aggregate value equal to the amount by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the specified purchase price, times the number of shares with respect to which the SAR is exercised. The Committee may provide in the Agreement for automatic exercise on a certain date, for payment of the proceeds on a certain date, and/or for rights upon the occurrence of events specified in the Agreement. Notwithstanding anything in this Article 6 to the contrary, except for SARs that are specifically designated as intended to be subject to Code section 409A, the Committee may only grant SARs to individuals who provide direct services on the date of grant of the SARs to the Company or another entity in a chain of entities in which the Company or another such entity has a controlling interest (within the meaning of Treasury Regulation section 1.409A-1(b)(5)(iii)(e)) in each entity in the chain.
6.2 Agreement. Each SAR grant shall be evidenced by an Agreement that shall specify the exercise price, the duration of the SAR, the number of shares of Common Stock to which the SAR pertains, the conditions upon which the SAR shall become vested and exercisable (subject to Section 3.7) and such other provisions as the Committee shall determine. Dividend equivalents shall not be paid with respect to SARs.
6.3 Duration of SARs. Each SAR shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no SAR shall be exercisable later than the tenth (10th) anniversary of its grant date other than an SAR granted to a participant outside the United States. If an Agreement does not specify an expiration date, the SAR’s expiration date shall be the 10th anniversary of its grant date.
6.4 Tandem SARs. A Tandem SAR shall entitle the holder, within the specified exercise period for the related Option, to surrender the unexercised related Option, or a portion thereof, and to receive in exchange therefor a payment having an aggregate value equal to the amount by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the Option Exercise Price per share, times the number of shares subject to the Option, or portion thereof, which is surrendered. Each Tandem SAR shall be subject to the same terms and conditions as the related Option, including limitations on transferability, and shall be exercisable only to the extent such Option is exercisable and shall terminate or lapse and cease to be exercisable when the related Option terminates or lapses. The grant of SARs related to ISOs must be concurrent with the grant of the ISOs. With respect to NSOs, the grant either may be concurrent with the grant of the NSOs, or in connection with NSOs previously granted under Article 5, which are unexercised and have not terminated or lapsed.
6.5 Payment. The Committee shall have sole discretion to determine in each Agreement whether the payment with respect to the exercise of a Stock Appreciation Right will be in the form of all cash, all shares of Common Stock, or any combination thereof. Unless and to the extent the Committee specifies otherwise, such payment will be in the form of shares of Common Stock. If payment is to be made in shares, the number of shares shall be determined based on the Fair Market Value of a share on the date of exercise. The Committee shall have sole discretion to determine and set forth in the Agreement the timing of any payment made in cash or shares, or a combination thereof, upon exercise of SARs.
6.6 Exercise Price. The exercise price for each Stock Appreciation Right shall be determined by the Committee and shall not be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the date the SAR is granted. Notwithstanding the foregoing, an SAR may be granted with an exercise price lower than set forth in the preceding sentence if such SAR is granted pursuant to an assumption or substitution for another SAR in a manner satisfying the provisions of Code section 424(a) relating to a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation; provided that the Committee determines that such SAR exercise price is appropriate to preserve the economic benefit of the replaced award and will not impair the exemption of the SAR from Code section 409A (unless the Committee clearly and expressly foregoes such exemption at the time the SAR is granted).
6.7 Exercise of SARs. SARs shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall specify, including conditions related to the employment of the Participant with the Employer or provision of services by the Participant to the Employer, which need not be the same for each grant or for each Participant. The Committee may provide in the Agreement for rights upon the occurrence of events specified in the Agreement. Upon exercise of a Tandem SAR, the number of shares of Common Stock subject to exercise under the related Option shall automatically be reduced by the number of shares represented by the Option or portion thereof which is surrendered.
ARTICLE 7 — RESTRICTED STOCK AND RESTRICTED STOCK UNITS
7.1 Grant of Restricted Stock and Restricted Stock Units. Subject to provisions of the Plan, the Committee may from time to time grant Awards of Restricted Stock and Restricted Stock Units (“RSUs”) to Participants. Awards of Restricted Stock and RSUs may be made either alone or in addition to or in tandem with other Awards granted under the Plan.
7.2 Agreement. The Restricted Stock or RSU Agreement shall set forth the terms of the Award, as determined by the Committee, including, without limitation, the number of shares of Restricted Stock or the number of RSUs granted; the purchase price, if any, to be paid for such Restricted Stock or RSUs, which may be equal to or less than Fair Market Value of a share and may be zero, subject to such minimum consideration as may be required by applicable law; any restrictions applicable to the Restricted Stock or RSU such as continued service or achievement of performance objectives; the length of the Restriction Period, if any (subject to Section 3.7), and any circumstances that will shorten or terminate the Restriction Period; and rights of the Participant to vote or receive dividends with
respect to the shares during the Restriction Period. The Committee shall have sole discretion to determine and specify in each RSU Agreement whether the RSUs will be settled in the form of all cash, all shares of Common Stock, or any combination thereof. Unless and to the extent the Committee specifies otherwise, such settlement will be in the form of shares of Common Stock.
7.3 Certificates. Upon an Award of Restricted Stock to a Participant, shares of restricted Common Stock shall be registered in the Participant’s name. Certificates, if issued, may either (i) be held in custody by the Company until the Restriction Period expires or until restrictions thereon otherwise lapse, and/or (ii) be issued to the Participant and registered in the name of the Participant, bearing an appropriate restrictive legend and remaining subject to appropriate stop-transfer orders. If required by the Committee, the Participant shall deliver to the Company one or more stock powers endorsed in blank relating to the Restricted Stock. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, unrestricted certificates for such shares shall be delivered to the Participant or registered in the Participant’s name on the Company’s or transfer agent’s records; provided, however, that the Committee may cause such legend or legends to be placed on any such certificates as it may deem advisable under the terms of the Plan and the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state law. Concurrently with the lapse of any risk of forfeiture applicable to the Restricted Stock, the Participant shall be required to pay to the Company an amount necessary to satisfy any applicable federal, state and local tax requirements as set out in Article 13 below.
7.4 Dividends and Other Distributions. Except as provided in this Article 7 or in the applicable Agreement, a Participant who receives a Restricted Stock Award shall have (during and after the Restriction Period), with respect to such Restricted Stock Award, all of the rights of a shareholder of the Company, including the right to vote the shares and the right to receive dividends and other distributions to the extent, if any, such shares possess such rights; provided, however, that (i) any dividends and other distributions payable on such shares of Restricted Stock during the Restriction Period shall be either automatically reinvested in additional shares of Restricted Stock or paid to the Company for the account of the Participant, in either case subject to the same restrictions on vesting as the underlying Award, and (ii) all terms and conditions for payment of such dividends and other distributions shall be included in the Agreement related to the Award and shall, to the extent required, comply with the requirements of Code section 409A. The Committee shall determine whether interest shall be paid on such amounts, the rate of any such interest, and the other terms applicable to such amounts (again, provided that all such terms shall, to the extent required, comply with Code section 409A). A Participant receiving a Restricted Stock Unit Award shall not possess voting rights and shall accrue dividend equivalents on such Units only to the extent provided in the Agreement relating to the Award; provided, however, that (i) any dividend equivalents payable on such Restricted Stock Unit Award shall be subject to the same restrictions on vesting as the underlying Award, and (ii) all terms and conditions for payment of such dividend equivalents shall be included in the Agreement related to the Award and shall, to the extent required, comply with the requirements of Code section 409A.
ARTICLE 8 — PERFORMANCE SHARES AND UNITS
8.1 Grant of Performance Shares and Performance Units. The Committee may grant Performance Shares and Performance Units to Participants in such amounts and upon such terms, and at any time and from time to time, as the Committee shall determine.
8.2 Agreement. The Performance Share or Performance Unit Agreement shall set forth the terms of the Award, as determined by the Committee, including, without limitation, the number of Performance Shares or Performance Units granted; the purchase price, if any, to be paid for such Performance Shares or Performance Units, which may be equal to or less than Fair Market Value of a share and may be zero, subject to such minimum consideration as may be required by applicable law; the performance objectives applicable to the Performance Shares or Performance Units; and any additional restrictions applicable to the Performance Shares or Performance Units such as continued service (subject to Section 3.7). The Committee shall have sole discretion to determine and specify in
each Performance Shares or Performance Units Agreement whether the Award will be settled in the form of all cash, all shares of Common Stock, or any combination thereof. Unless and to the extent the Committee specifies otherwise, such settlement will be in the form of shares of Common Stock. Any such shares may be granted subject to any restrictions deemed appropriate by the Committee.
8.3 Value of Performance Shares and Performance Units. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a share of Common Stock on the date of grant. In addition to any non-performance terms applicable to the Award, the Committee shall set performance objectives in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Shares, Performance Units or both, as applicable, that will be paid out to the Participant. For purposes of this Article 8, the time period during which the performance objectives must be met shall be called a “Performance Period.” The Committee may, but is not obligated to, set such performance objectives by reference to the performance measures set forth in Article 9.
8.4 Earning of Performance Shares and Performance Units. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of the Performance Shares or Performance Units shall be entitled to receive a payout of the number and value of Performance Shares or Performance Units, as applicable, earned by the Participant over the Performance Period, if any, to be determined as a function of the extent to which the corresponding performance objectives have been achieved and any applicable non-performance terms have been met.
8.5 Dividends and Other Distributions. A Participant receiving Performance Shares or Performance Units shall not possess voting rights. A Participant receiving Performance Shares or Performance Units or any other Award that is subject to performance conditions shall accrue dividend equivalents on such Award only to the extent provided in the Agreement relating to the Award; provided, however, that (i) any dividend equivalents payable on such Performance Shares or Performance Units shall be subject to the same restrictions on vesting as the underlying Award, and (ii) all terms and conditions for payment of such dividend equivalents shall be included in the Agreement related to the Award and shall, to the extent required, comply with the requirements of Code section 409A.
ARTICLE 9 — PERFORMANCE MEASURES
9.1 In General. The Committee may, in its discretion, include performance objectives in any Award. The Committee may provide for a threshold level of performance below which no amount of compensation will be paid, and it may provide for the payment of differing amounts of compensation for different levels of performance.
9.2 Definitions of Performance Objectives. If the Committee makes an Award subject to a particular performance objective, the Committee shall adopt or confirm a written definition of that performance objective at the time the performance objective is established. The performance objective for an Award may be described in terms of Company-wide objectives or objectives that are related to a specific division, subsidiary, Employer, department, region, or function in which the participant is employed or as some combination of these (as alternatives or otherwise). A performance objective may be measured on an absolute basis or relative to a pre-established target, results for a previous year, the performance of other corporations, or a stock market or other index. If the Committee specifies more than one individual performance objective for a particular Award, the Committee shall also specify, in writing, whether one, all or some other number of such objectives must be attained.
9.3 Determinations of Performance. For each Award that has been made subject to a performance objective, within an administratively practicable period following the end of each Performance Period, the Committee shall determine whether the performance objective for such Performance Period has been satisfied. If a performance objective for a Performance Period is not achieved, the Committee in its sole discretion may pay all or a portion of that Award based on such
criteria as the Committee deems appropriate, including without limitation individual performance, Company-wide performance or the performance of the specific division, subsidiary, Employer, department, region, or function employing the participant.
9.4 Adjustments and Exclusions. In determining whether any performance objective has been satisfied, the Committee may include or exclude any or all items that are unusual or non-recurring, including but not limited to (i) charges, costs, benefits, gains or income associated with reorganizations or restructurings of the Employer, discontinued operations, goodwill, other intangible assets, long-lived assets (non-cash), real estate strategy (e.g., costs related to lease terminations or facility closure obligations), litigation or the resolution of litigation (e.g., attorneys’ fees, settlements or judgments), or currency or commodity fluctuations; and (ii) the effects of changes in applicable laws, regulations or accounting principles. In addition, the Committee may adjust any performance objective for a Performance Period as it deems equitable to recognize unusual or non-recurring events affecting the Employer, changes in tax laws or regulations or accounting procedures, mergers, acquisitions and divestitures, or any other factors as the Committee may determine. To the extent that a performance objective is based on the price of the Company’s common stock, then in the event of any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, any merger, consolidation, spin-off, reorganization, partial or complete liquidation or other distribution of assets (other than a normal cash dividend), issuance of rights or warrants to purchase securities or any other corporate transaction having an effect similar to any of the foregoing, the Committee shall make or provide for such adjustments in such performance objective as the Committee in its sole discretion may in good faith determine to be equitably required in order to prevent dilution or enlargement of the rights of participants.
ARTICLE 10 — TERMINATION OF SERVICE RELATIONSHIP, BLACKOUT PERIODS AND CHANGE IN CONTROL
10.1 Termination of Service Relationship.
(a) Except as otherwise provided by the Committee, if a Participant ceases to be an Employee or Non-Employee Director of, or to otherwise perform services for, the Company and its Affiliates for any reason (i) all of the Participant’s Options and SARs that were exercisable on the date of such cessation shall remain exercisable for, and shall otherwise terminate at the end of, a period of 90 days after the date of such cessation, but in no event after the expiration date of the Options or SARs, (ii) all of the Participant’s Options and SARs that were not exercisable on the date of such cessation shall be forfeited immediately upon such cessation, and (iii) all of the Participant’s Restricted Stock, RSUs, Performance Shares, and Performance Units that were not vested on the date of such cessation shall be forfeited immediately upon such cessation.
(b) The Committee may, in its sole discretion and in such manner as it may from time to time prescribe (including, but not by way of limitation, in granting an Award or in an individual employment agreement, severance plan or individual severance agreement), provide that a Participant shall be eligible for a full or prorated Award in the event of a cessation of the Participant’s service relationship with the Employer due to death, disability, involuntary termination without cause or resignation for good reason. With respect to Awards that are subject to one or more performance objectives, the Committee may, in its sole discretion, provide that any such full or prorated Award will be paid prior to when any or all such performance objectives are certified (or without regard to whether they are certified) in the event of a cessation of the Participant’s service relationship with the employer due to death, disability, involuntary termination without cause or resignation for good reason.
(c) The transfer of an Employeecurrently retired from the Company to an Affiliate, from an Affiliate to the Company, or from one Affiliate to another shall not be considered a termination of employment. Consistent with the provisions of Code Section 409A (as applicable), it shall not be considered a termination of employment if an Employee is placed on military, disability or sick leave or such
other leave of absence which is considered by the Committee as continuing intact the employment relationship. If an Employee’s employment or other service relationship is with an Affiliate and that entity ceases to be an Affiliate, a termination of employment shall be deemed to have occurred when the entity ceases to be an Affiliate unless the Employee transfers his or her employment or other service relationship to the Company or its remaining Affiliate. An Non-Employee Director’s cessation of service on the Board shall not be considered a termination of the Non-Employee Director’s service relationship with the Company if the former Non-Employee Director continues to provide services to the Company as a member of the Advisory Board of Directors of the Company, or its Affiliate without interruptionand have been in the Non-Employee Director’s period of service; such service as a member of the Advisory Board of Directors of the Company or its Affiliate shall be consideredcontinuous service with the Company as advisory directors since their retirements. 000000R1.0.0.241 _ 0000531355 3. Theratification of 2019 Equity Awards made to Thomas J. Kemly, President and Chief Executive Officer, under000theColumbia Financial, Inc. 2019 Equity Incentive Plan.NOTE: To transact such other business as may properly come before the meeting and any adjournment or its Affiliate with respect to Awards outstanding to the former Non-Employee Director.
10.2 Special Rule for Company Blackout Periods. The Company has established a securities trading policy (the “Policy”) relative to disclosure and trading on inside information as described in the Policy. Under the Policy, certain Employees and Non-Employee Directorspostponement of the Company are prohibited from trading stockmeeting.Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other securities of the Company during certain “blackout periods”fiduciary, please give full title as described in the Policy.such. Joint owners should each sign personally. All holders must sign. If under the above provisions or the terms of the applicable Agreement, the last date on which an Option or SAR can be exercised falls within a blackout period imposed by the Policy, the applicable exercise period shall automatically be extended by this Section 10.2 by a number of days equal to the number of United States business days that the applicable blackout period is in effect. The Committee shall interpret and apply the extension automatically provided by the preceding sentence to ensure that in no event shall the term of any Option or SAR expire during an imposed blackout period.
10.3 Change in Control.
(a) The Committee may, in its sole discretion and in such manner as it may from time to time prescribe (including, but not by way of limitation, in granting an Award or in an individual employment agreement, severance plan or individual severance agreement), provide that a Participant shall be eligible for a full or prorated Award in the event that both a Change in Control and a cessation of the Participant’s service relationship with the Employer occurs or if the surviving entity in such Change in Control does not assume or replace the Award in the Change in Control. With respect to Awards that are subject to one or more performance objectives, the Committee may, in its sole discretion, provide that any such full or prorated Award will be paid under the provisions of this Section 10.3 prior to when any or all such performance objectives are certified (or without regard to whether they are certified).
(b) In the event of a Change in Control, the Committee may, in its discretion, cause each Award to be assumed or for an equivalent Award to be substituted by the successor corporation or a parent or subsidiary of such successor corporation and adjusted as appropriate. In addition or in the alternative, the Committee may, in its discretion, cancel all or certain types of outstanding Awards at or immediately prior to the time of the Change in Control provided that the Committee either (i) provides that the Participant is entitled to a payment (in cash or shares) equal to the value of the portion of the Award that would be vested upon the Corporate Transaction, as determined below and to the extent there is any such value, or (ii) at least 15 days prior to the Change in Control (or, if not feasible to provide 15 days’ notice, within a reasonable period prior to the Change in Control), notifies the Participant that, subject to rescission if the Change in Control is not successfully completed within a certain period, the Award will be terminated and, if the Award is an Option, SAR or similar right, provides the Participant the right to exercise the portion of the Option, SAR or similar right that would be vested upon the Change in Control prior to the Change in Control. For this purpose, the value of the Award that would be vested upon the Change in Control shall be measured as of the date of the Change in Control and shall equal the value of the cash, shares or other property that would be payable to the Participant for such vested Award (or, if the Award is an Option, SAR or similar right, upon exercise of the vested
Award) less the amount of any payment required to be tendered by the Participant upon such exercise. The Committee may adopt such valuation methodologies for outstanding Awards as it deems reasonable in the event of a cash settlement and, in the case of Options, SARs or similar rights, but without limitation on other methodologies, may base such settlement solely upon the excess (if any) of the per share amount payable upon or in respect of such event over the exercise price of such Option, SAR or similar right and may cancel each Option, SAR or similar right with an exercise price greater than the per share amount payable upon or in respect of such event without any payment to the person holding such Option, SAR or similar right. For example, under this provision, in connection with a Change in Control, the Committee is permitted to cancel all outstanding Options under the Plan in consideration for payment to the holders thereof of an amount equal to the portion of the consideration that would have been payable to such holders pursuant to the Change in Control if their vested Options had been fully exercised immediately prior to such Change in Control, less the aggregate Option Exercise Price that would have been payable therefor, or if the amount that would have been payable to the Option holders pursuant to such Change in Control if their vested Options had been fully exercised immediately prior thereto would be less than the aggregate Option Exercise Price that would have been payable therefor, the Committee can cancel any or all such Options for no consideration or payment of any kind. Payment of any amount payable pursuant to this cancellation provision may be made in cash or, in the event that the consideration to be received in such transaction includes securities or other property, in cash and/or securities or other property in the Committee’s discretion. Any actions taken pursuant to this Section 10.3(b) shall be valid with respect to a 409A Award only to the extent that such action complies with Code section 409A.
ARTICLE 11 — BENEFICIARY DESIGNATION
To the extent permitted by the Committee, each Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any vested but unpaid Award is to be paid in case of the Participant’s death. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company or its designee during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s beneficiary as determined under the Company’s 401(k) plan.
ARTICLE 12 — DEFERRALS
The Committee may permit a Participant to defer such Participant’s receipt of the payment of cash or the delivery of shares that would otherwise be due to such Participant by virtue of the lapse or waiver of restrictions with respect to RSUs, or the satisfaction of any requirements or objectives with respect to Performance Shares and Performance Units. If any such deferral election is permitted or required, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals, which rules and procedures shall comply with Code section 409A. The deferral of Option and SAR gains is prohibited.
ARTICLE 13 — WITHHOLDING TAXES
13.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of or in connection with this Plan or any Award.
13.2 Share Withholding. Except as otherwise determined by the Committee or provided in the Agreement corresponding to an Award:
(a) With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock or Restricted Stock Units, upon the achievement of performance objectives related to Performance Shares or Performance Units, or upon any other taxable event arising as a result of or in connection with an Award granted hereunder that is settled in shares of Common Stock, unless other arrangements are made with the consent of the Committee, Participants shall satisfy the withholding requirement by having the Company withhold shares of Common Stock having a Fair Market Value on the date the tax is to be determined equal to not more than the amount necessary to satisfy the Company’s withholding obligations at the minimum statutory withholding rates (or at any greater rate that will not result in adverse accounting or tax treatment, as determined by the Committee). All such withholding arrangements shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
(b) A Participant may elect to deliver shares of Common Stock to satisfy, in whole or in part, the withholding requirement. Such an election must be made on or before the date the amount of tax to be withheld is determined. Once made, the election shall be irrevocable. The Fair Market Value of the shares to be delivered will be determined as of the date the amount of tax to be withheld is determined. Such delivery must be made subject to the conditions and pursuant to the procedures established by the Committee with respect to the delivery of shares of Common Stock in payment of the corresponding Option Exercise Price.
(c) A Participant who is classified by the Company as an officer at the time the tax withholding requirement arises with respect to his or her Restricted Stock or, to the extent settled in shares of Common Stock, his or her Restricted Stock Units, Performance Shares, Performance Units, Options or SARs, may elect to satisfy such withholding requirement by delivering payment of the tax required to be withheld in cash or by check on the date on which the amount of tax to be withheld is determined. Once made, the election shall be irrevocable.
ARTICLE 14 — AMENDMENT AND TERMINATION
14.1 Amendment or Termination of Plan. The Board or the Committee may at any time terminate and from time to time amend the Plan in whole or in part, but no such action shall materially adversely affect any rights or obligations with respect to any Awards previously granted under the Plan, unless such action is required by applicable law or any listing standards applicable to the Common Stock or the affected Participants consent in writing. To the extent required by Code section 422, other applicable law, and/or any such listing standards, no amendment shall be effective unless approved by the shareholders of the Company.
14.2 Amendment of Agreement. The Committee may, at any time, amend outstanding Agreements in a manner not inconsistent with the terms of the Plan; provided, however, except as provided in Sections 14.3, 14.4 and 15.9, if such amendment is materially adverse to the Participant, as determined by the Committee, the amendment shall not be effective unless and until the Participant consents, in writing, to such amendment. To the extent not inconsistent with the terms of the Plan, the Committee may, at any time, amend an outstanding Agreement in a manner that is not unfavorable to the Participant without the consent of such Participant. Except for adjustments as provided in Sections 4.3 or in connection with a Change in Control , the terms of outstanding awards may not be amended to reduce the exercise price of outstanding Awards or cancel outstanding Options or SARs with per share exercise prices that are more than the Fair Market Value at the time of such cancellation in exchange for cash, other awards, or Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs without shareholder approval.
14.3 Dissolution or Liquidation. Each outstanding Award shall terminate immediately prior to the consummation of the dissolution or liquidation of the Company, unless otherwise determined by the Committee.
ARTICLE 15 — MISCELLANEOUS PROVISIONS
15.1 Restrictions on Shares. If the Committee determines that the listing, registration or qualification upon any securities exchange or under any law of shares subject to any Award is necessary or desirable as a condition of, or in connection with, the granting of same or the issue or purchase of Shares thereunder, no such Award may be exercised in whole or in part (as applicable), no such Award may be paid out (as applicable) and no shares may be issued pursuant to such Award (as applicable) unless such listing, registration or qualification is effected free of any conditions not acceptable to the Committee. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any listing standards applicable to the Common Stock and any applicable federal or state laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. In making such determination, the Committee may rely upon an opinion of counsel for the Company.
Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares under the Plan or make any other distribution of the benefits under the Plan unless such delivery or distribution would comply with all applicable state, federal and foreign laws (including, without limitation and if applicable, the requirements of the Securities Act of 1933), and any applicable requirements of any securities exchange or similar entity.
15.2 Rights of a Shareholder. Except as provided otherwise in the Plan or in an Agreement, no Participant awarded an Option, SAR, RSU, Performance Share or Performance Unit shall have any right as a shareholder with respect to any shares covered by such Award prior to the date of issuance to him or her or his or her delegate of a certificate or certificates for such shares or the date the Participant’s name is registered on the Company’s books as the shareholders of record with respect to such shares.
15.3 Transferability. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than upon the Participant’s death, to a beneficiary in accordance with Article 11 or by will or the laws of descent and distribution. Unless the Committee determines otherwise consistent with securities and other applicable laws, rules and regulations, (i) no Award granted under the Plan shall be sold, transferred, pledged, assigned or otherwise alienated or hypothecated by a Participant other than upon the Participant’s death, to a beneficiary in accordance with Article 11 or by will or the laws of descent and distribution, and (ii) each Option and SAR outstanding to a Participant may be exercised during the Participant’s lifetime only by the Participant or his or her guardian or legal representative (provided that Incentive Stock Options may be exercised by such guardian or legal representative only if permitted by the Code and any regulations promulgated thereunder). In the event of a transfer to a Permitted Transferee as permitted under this Section 15.3 or by the Committee, appropriate evidence of any transfer to the Permitted Transferee shall be delivered to the Company at its principal executive office. If all or part of an Award is transferred to a Permitted Transferee, the Permitted Transferee’s rights thereunder shall be subject to the same restrictions and limitations with respect to the Award as the Participant. For the avoidance of doubt, any permitted transfer of an Award will be without payment of consideration by the Permitted Transferee.
15.4 No Fractional Shares. Unless provided otherwise in the Agreement applicable to an Award, no fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award and any fractional share otherwise payable pursuant to an Award shall be forfeited.
15.5 No Implied Rights. Nothing in the Plan or any Agreement shall confer upon any Participant any right to continue in the employ or service of the Employer, or to serve as a Non-Employee Director thereof, or interfere in any way with the right of the Employer to terminate the Participant’s employment or other service relationship at any time and for any reason. Unless otherwise determined by the Committee, no Award granted under the Plan shall be deemed salary or compensation for the purpose
of computing benefits under any employee benefit plan, severance program, or other arrangement of the Employer for the benefit of its employees. No Participant shall have any claim to an Award until it is actually granted under the Plan. An Award of any type made in any one year to an eligible Participant shall neither guarantee nor preclude a further grant of that or any other type of Award to such Participant in that year or any subsequent year. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall, except as otherwise provided by the Committee, be no greater than the right of an unsecured general creditor of the Company.
15.6 Expenses of the Plan. The expenses of the Plan shall be borne by the Company. The Company shall not be required to establish any special or separate fund or make any other segregation of assets to assume the payment of any Award under the Plan.
15.7 Compliance with Laws. The Plan and the grant of Awards shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any United States government or regulatory agency as may be required. It is the intent of the Company that the awards made hereunder comply in all respects with Rule 16b-3 under the Exchange Act and that any ambiguities or inconsistencies in construction of the Plan be interpreted to give effect to such intention. Any provision herein relating to compliance with Rule 16b-3 under the Exchange Act shall not be applicable with respect to participation in the Plan by Participants who are not Insiders.
15.8 Recoupment/Clawback. All Awards are subject to recoupment in accordance with the Company’s recoupment, clawback and/or recovery policies in effect from time to time. In addition, the Committee may include such recoupment, clawback and/or recovery provisions in an Agreement as the Committee determines necessary or appropriate.
15.9 Regulatory Requirements. The grant and settlement of Awards under the Plan shall be conditioned upon and subject to compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations promulgated thereunder.
15.10 Whistleblower Protection. Nothing contained in this Plan or any Agreement (i) shall be deemed to prohibit any Participant from responding to a subpoena or order of a court or other governmental authority to testify or give evidence or engaging in conduct otherwise protected by the Sarbanes-Oxley Act; (ii) shall be deemed to prohibit any Participant from providing truthful information in good faith to any federal, state, or local governmental body, agency, or official investigating an alleged violation of any antidiscrimination or other employment-related law or otherwise gathering information or evidence pursuant to any official investigation, hearing, trial, or proceeding; (iii) is intended in any way to intimidate, coerce, deter, persuade, or compensate any Participant with respect to providing, withholding, or restricting any communication whatsoever to the extent prohibited under 18 U.S.C. §§ 201, 1503, or 1512 or under any similar or related provision of state or federal law; and (iv) is intended to require any Participant to provide notice to the Employer or its attorneys before reporting any possible violations of federal law or regulation to any governmental agency or entity (“Whistleblower Disclosures”) or to provide notice to the Employer or its attorneys after any Participant has made any such Whistleblower Disclosures.
15.11 Successors. The terms of the Plan and outstanding Awards shall be binding upon the Company and its successors and assigns.
15.12 Tax Elections. Each Participant agrees to give the Committee prompt written notice of any election made by such Participant under Code section 83(b) or any similar provision thereof. Notwithstanding the preceding sentence, the Committee may condition any award on the Participant’s not making an election under Code section 83(b).
15.13 Uncertificated Shares. To the extent that the Plan provides for issuance of certificates to reflect the transfer of shares of Common Stock, the transfer of such shares may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange on which shares of Common Stock are traded.
15.14 Compliance with Code Section 409A. At all times, this Plan shall be interpreted and operated (i) with respect to 409A Awards in accordance with the requirements of Code section 409A, and (ii) to maintain the exemptions from Code section 409A of Options, SARs and Restricted Stock and any Awards designed to meet the short-term deferral exception under Code section 409A. To the extent there is a conflict between the provisions of the Plan relating to compliance with Code section 409A and the provisions of any Agreement issued under the Plan, the provisions of the Plan control. Moreover, any discretionary authority that the Committee may have pursuant to the Plan shall not be applicable to a 409A Award to the extent such discretionary authority would conflict with Code section 409A. In addition, to the extent required to avoid a violation of the applicable rules under Code section 409A by reason of Code section 409A(a)(2)(B)(i), any payment under an Award shall be delayed until the earliest date of payment that will result in compliance with the rules of Code section 409A(a)(2)(B)(i) (regarding the required six-month delay for distributions to specified employees that are related to a separation from service). To the extent that the Plan or a 409A Award provides for payment upon the recipient’s termination of employment as an Employee or cessation of service as an Non-Employee Director, the 409A Award shall be deemed to require payment upon the individual’s “separation from service” within the meaning of Code section 409A. To the extent any provision of this Plan or an Agreement would cause a payment of a 409A Award to be made because of the occurrence of a Change in Control, then such payment shall not be made unless such Change in Control also constitutes a “change in ownership”, “change in effective control” or “change in ownership of a substantial portion of the Company’s assets” within the meaning of Code section 409A. Any payment that would have been made except for the application of the preceding sentence shall be made in accordance with the payment schedule that would have applied in the absence of a change in control. To the extent that this Plan or a 409A Award provides for payment upon the recipient’s Disability, then such payment shall not be made unless the recipient’s Disability also constitutes disability within the meaning of Code section 409A(a)(2)(C). Any payment that would have been made except for the application of the preceding sentence shall be made in accordance with the payment schedule that would have applied in the absence of a Disability (and other Participant rights that are tied to a Disability, such as vesting, shall not be affected by the prior sentence). Any payment that would have been made except for the application of the preceding sentence shall be made in accordance with the payment schedule that would have applied in the absence of a Disability. To the extent an Award is a 409A Award and is subject to a substantial risk of forfeiture within the meaning of Code section 409A (or will be granted upon the satisfaction of a condition that constitutes such a substantial risk of forfeiture), any compensation due under the Award (or pursuant to a commitment to grant an Award) shall be paidpartnership, please sign in full not later than the 60th day following the date on which there is no longer such a substantial risk of forfeiture with respect to the Award (and the Participant shall have no right to designate the year of the payment), unless the Committee shall clearly and expressly provide otherwise at the time of granting the Award. In the event that an Award shall be deemed not to comply with Code section 409A, then neither the Company, the Board, the Committee nor itscorporate or their designees or agents, nor any of their affiliates, assigns or successors (each a “protected party”) shall be liable to any Award recipient or other person for actions, inactions, decisions, indecisions or any other role in relation to the Planpartnership name by a protected party if made or undertaken in good faith or in reliance on the advice of counsel (who may be counsel for the Company), or made or undertaken by someone other than a protected party.
15.15 Legal Construction.authorized officer.Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners)Date
(a) If any provision of this Plan or an Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Agreement, it shall be stricken and the remainder of the Plan or the Agreement shall remain in full force and effect.
(b) Where the context admits, words in any gender shall include the other gender, words in the singular shall include the plural and words in the plural shall include the singular.
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(c) ToImportant Notice Regarding the extent not preemptedAvailability of Proxy Materials for the Special Meeting:The Notice and Proxy Statement is available at www.proxyvote.comCOLUMBIA FINANCIAL, INC.Special Meeting of ShareholdersApril 4, 2022 10:00 AMThis proxy is solicited by federal law, the PlanBoard of DirectorsThe shareholder(s) hereby appoint(s) Mayra L. Rinaldi and Dennis E. Gibney, or either of them, as proxies, each with the power to appoint his or her substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all Agreements hereunder shallof the shares of common stock of COLUMBIA FINANCIAL, INC. that the shareholder(s) is/are entitled to vote at the Special Meeting of Shareholders to be construedheld at 10:00 AM, local time on April 4, 2022, exclusively via live webcast at www.virtualshareholdermeeting.com/CLBK2022SM, and any adjournment or postponement thereof.This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations.R1.0.0.242 _ 0000531355Continued and governed by the laws of the State of Delaware, without giving effect to any choice of law provisions. Unless otherwise provided in the applicable Agreement, the recipient of an Award is deemed to submit to the exclusive jurisdiction and venue of the Federal and state courts of Delaware to resolve any and all issues that may arise out of or relate to the Plan or such Agreement.
A-be signed on reverse side22
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