THIS CONFORMED PAPER FORMAT IS BEING SUBMITTED PURSUANT TO RULE 901(d)
OF REGULATION S-T
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K-A
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
CITIZENS FIRST BANCORP, INC.
(Exact name of registrant as specified in charter)
AMENDMENT No. 1
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Annual Report
Pursuant to Section 13 of the Securities Exchange Act of 1934 for the
fiscal year ended December 31, 1993 on Form 10-K, as set forth in the
pages attached hereto:
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf
by the undersigned, thereunto duly authorized.
CITIZENS FIRST BANCORP, INC.
(Registrant)
Date: April 29, 1994 By: JAMES R. VAN HORN
(Signature)
James R. Van Horn
General Counsel and Secretary
CITIZENS FIRST BANCORP, INC.
INDEX - FORM 10K-A
The following information required by Part III of Form 10-K is being provided by
an amendment on Form 10K-A to the Registrant's Annual Report on Form 10-K in
view of the Registrant's decision to postpone its 1994 Annual Shareholders'
Meeting and the resultant delay in filing the Registrant's definitive proxy
statement with the Securities and Exchange Commission.
PAGE
ITEM 10 - Directors and Executive Officers of Citizens 3
ITEM 11 - Executive Compensation 4
ITEM 12 - Security Ownership of Certain Beneficial Owners and
Management 15
ITEM 13 - Certain Relationships and Related Transactions 16
2
Part III
Item 10 - Directors and Executive Officers of Citizens
Directors of Citizens
Set forth below is information concerning the directors of Citizens First
Bancorp, Inc. (the "Company"), including their age as of the date of this
Form 10K-A, the year during which each individual became a director of the
Company, their principal occupation and business experience during the past
five years and other directorships held. All directors are also directors of
Citizens First National Bank of New Jersey (the "Bank").
Present Occupation; Last 5 Years Business Experience;
Directorships Held; Service as a Company and Bank
Name Director; Age
Daniel Amster Attorney-at-Law; Partner, Amster & Rosensweig; Director
of the Company since 1982 and the Bank since 1974;
Age: 68
Douglas H. Dittrick President and Chief Executive Officer, Douglas
Communications Corporation II (Cable Television);
Director of the Company and the Bank since 1992; Age: 60
Daniel M. Dwyer Attorney-at-Law; President, Dwyer, Dwyer & Dwyer, P.A.;
Director of the Company since 1982 and the Bank since
1977; Age: 60
Robert D. Hunter CPA Consultant; Formerly Executive Partner, R.D. Hunter &
Company, Certified Public Accountants; Also a Director of
Unimed, Inc.; Director of the Company since 1982 and the
Bank since 1973; Age: 69
Samuel M. Lyon, Jr. Attorney-at-Law; From November, 1990 to February, 1992
Chairman of the Board of Directors of the Company and the
Bank; Director of the Company since 1982 and the Bank
since 1976; Age: 69
Allan D. Nichols Chairman of the Board and Chief Executive Officer of the
Company and the Bank since February, 1992; From 1990-1991
Chairman, President and Chief Executive Officer, American
Federal Bank (Dallas, Texas); From 1988-1990 President
and Chief Executive Officer, Sentry Bancshares and Sentry
Bank & Trust (Roswell, Georgia); From 1981-1988 Executive
Vice President, Rainier National Bank (Seattle,
Washington); Director of the Company and the Bank since
1992; Age: 56
Harry Randall, Jr. Attorney-at-Law; Senior Partner, Randall, Randall &
Stevens; Director of the Company since 1982 and the Bank
since 1973; Age: 67
Alfred S. Teo Chairman and Chief Executive Officer, Sigma Plastics
Group (Plastics Manufacturing); Director of the Company
and the Bank since 1992; Age: 48
Rodney T. Verblaauw President and Chief Administrative Officer of the Company
and the Bank; From August, 1990 to February, 1992 also
Acting Chief Executive Officer of the Company and the
Bank; Director of the Company since 1982 and the Bank
since 1980; Age: 56
Walter W. Weber, Jr. Attorney-at-Law; Partner, Weber, Muth & Weber; Director
of the Company since 1982 and the Bank since 1962;
Age: 70
3
Directors are elected at each Annual Meeting to hold office until the next
succeeding Annual Meeting and until their successors shall be elected and shall
qualify. All directors were elected directors at the 1993 Annual Meeting.
Executive Officers
Citizens responded to this segment in the Annual Report for the fiscal year
ended December 31, 1993 on Form 10-K.
Item 11 - Executive Compensation
Meetings and Fees of Board of Directors
All members of the Company's Board of Directors also serve as members of the
Board of Directors of the Bank. The Company's Board has four Committees: Audit,
Compensation, Compliance and Nominating. The Bank's Board has six Committees:
Audit, Compensation, Compliance, Investment, Loan and Trust. During 1993 the
Board of Directors of the Company held 14 meetings and Committees of the Board
held a total of 32 meetings. The Board of Directors of the Bank held 14 meetings
during 1993 and Committees of the Board held a total of 64 meetings. The
attendance at the aggregate of the total number of Board and Committee meetings
for both the Company and the Bank during 1993 exceeded 90% and no director
attended fewer than 75% of the aggregate number of meetings of the Board and
Committees of the Board on which such director served for either the Company or
the Bank.
Directors of the Company receive no compensation from the Company for acting
as directors, since the Company considers the fee paid by the Bank as
compensation to the directors for services both to the Bank and to the Company.
Each non-employee director receives an annual fee of $20,000, which includes
payment for all Board and Committee service. The Company has an unfunded
retirement program for non-employee directors. Each such director with 5 years
or more of service as a director is eligible to participate. The maximum annual
benefit payable to a director, or his beneficiary, for each of the 10 years
following retirement, is the total of all compensation paid to the director for
service as a director for the last 12 months of his service as a director. To be
eligible for the maximum benefit, a director must have 15 years of service as a
director of the Company at retirement. Service as a director of the Bank prior
to formation of the Company in 1982 is included in calculating service under the
plan. All non-employee directors, with the exception of Douglas H. Dittrick and
Alfred S. Teo, have served as directors for at least 15 years. Messrs. Dittrick
and Teo have served as directors for one and two years, respectively. The
benefit of a director retiring with less than 15 years of service is
proportionately reduced. Normal retirement age for purposes of the plan is 65
and each director must retire as of the first Annual Meeting of Shareholders
occurring after the director's 72nd birthday.
Compensation Committee Report
The Compensation Committee of the Board of Directors is comprised of Alfred
S. Teo, Chairman, Daniel Amster, Douglas H. Dittrick and Robert D. Hunter. The
Compensation Committee is responsible for making recommendations to the Board of
Directors for (i) the base salaries of executive officers of the Company and the
Bank, including all officers identified in the Summary Compensation Table, (ii)
bonus payments to be made to officers of the Company and the Bank, and (iii)
options to be granted under the 1985 Stock Incentive Plan. The Board of
Directors makes all decisions regarding these matters after considering the
recommendations of the Compensation Committee.
4
The Company's executive compensation strategy is based on the overall
objectives of attracting and retaining the best possible executive talent;
motivating these executives to achieve business goals that are in the best
interests of both the Company and its shareholders through equity based
compensation plans; and providing overall compensation packages to executives
that recognize individual achievements and the attainment of the Company's
overall financial goals. The principal components of the Company's executive
compensation are base salary, annual bonus and stock options, each of which are
described below.
Under a 1993 amendment to the Internal Revenue Code, the deductibility of
compensation (including stock-based compensation) paid to executive officers of
public companies is limited to $1,000,000. Certain compensation is excluded from
this cap, including compensation which is performance-based under a
pre-established objective performance formula or standard which precludes
discretion. The Company is studying this new cap and intends to comply.
Base Salary
The base salary for a new executive officer is determined by evaluating the
responsibilities of the position and the experience of the individual, with
reference to the competitive marketplace for executive talent and a comparison
of base salaries for comparable positions at other similar companies.
Compensation surveys including information from nationwide and northeastern
banking institutions of comparable size are utilized in determining competitive
salaries, and the Company will generally provide base salaries to new executive
officers which fall within a range between the average and the third quartile of
salaries for these survey groups. Annual salary adjustments are determined by
evaluating the performance of the executive officer, the results of the division
or unit for which such executive officer has responsibility, and the overall
performance of the Company.
The Company and the Bank have a performance appraisal and salary
administration program in effect. In 1993, employees who met the performance
standards for their positions were generally eligible for salary increases of up
to four percent; employees who exceeded the performance standards for their
positions were generally eligible for salary increases up to six percent; and
employees who were rated exceptional were generally eligible for salary
increases exceeding six percent.
In 1993, the base salary for Mr. Nichols, the Company's Chief Executive
Officer, was increased by $25,000 or 6.7 percent, to $400,000, as a result of
his exceptional performance in 1992. The primary factors considered in
establishing Mr. Nichols' salary increase were: the successful recapitalization
of the Company through an oversubscribed rights offering; the termination by the
Office of the Comptroller of the Currency of a Cease and Desist Order with
respect to the Bank; the approval by the Federal Reserve Bank of New York of the
Company's request to resume dividend payments on the Company's Preferred Stock
and to pay nine quarterly dividends which had been in arrears since November,
1990; the recruitment of several experienced executive officers; and the
significant improvement in the Company's core earnings. Each of these
performance factors were weighted equally in evaluating Mr. Nichols'
performance.
Annual Bonus
Executive officers of the Company are eligible for annual cash bonuses. In
making recommendations to the Board of Directors for the award of annual cash
bonuses, the Compensation Committee takes into consideration the overall
financial performance of the Company and the individual performance of
5
executive officers. The results of the division or unit for which each such
executive officer has responsibility are also taken into consideration. Each of
these factors are weighted equally by the Committee in making bonus
recommendations.
Mr. Nichols was awarded a bonus of $80,000 for his performance in 1993. The
primary factors considered in awarding this bonus to Mr. Nichols related to the
Company's 1993 performance compared to specific performance objectives which
were established by the Board of Directors in the beginning of 1993. Each of
these factors were weighted equally. Specifically, the Board established the
objectives of earnings of $25 million, return on average assets of one percent,
and return on average shareholders' equity of fifteen percent. The Board also
established the objective of restoring dividend payments on the Company's Common
Stock. Against these objectives, the Company achieved earnings of $29.1 million,
return on average assets of 1.17 percent and return on average shareholders
equity of 16.05 percent, all excluding an extraordinary credit resulting from a
change in accounting principle; and in December, 1993 the Company announced the
restoration of dividends on the Company's Common Stock. In addition to these
factors, the Compensation Committee and the Board also considered the level of
bonus payments made to the chief executive officers of several New Jersey
banking institutions for 1992 and a survey of the level of bonus payments as a
percentage of salary made by these institutions for 1993. The institutions in
the surveyed group included two New Jersey banking institutions in the eastern
regional bank index reflected in the performance graph located later in this
statement and three other New Jersey banking institutions. The bonus paid to Mr.
Nichols as a percentage of salary was lower than all bonuses paid to the chief
executive officers of the surveyed group.
Stock Options
Under the Company's 1985 Stock Incentive Plan, executive officers are
eligible to receive stock options, stock appreciation rights and stock grants.
Equity based compensation, such as stock options, is designed to align the
interests of executives with the interests of shareholders. The exercise price
for stock options is set at the fair market value of the Company's Common Stock
on the date of grant in order to provide executive officers with an incentive to
enhance shareholder value through future stock price appreciation. In making
recommendations to the Board of Directors for the granting of stock options, the
Compensation Committee takes into consideration the overall financial
performance of the Company and the individual performance of the executive
officers. The results of the division or unit for which each such executive
officer has responsibility and the number of options previously granted to the
executive officer are also taken into consideration.
When Mr. Nichols was hired as the Company's Chief Executive Officer in
February, 1992, he was granted an option to purchase 250,000 shares of the
Company's Common Stock at a per share exercise price of $5.00. In accordance
with the anti-dilution provisions of the 1985 Stock Incentive Plan, as a result
of the Company's successful rights offering in September, 1992, the number of
shares subject to Mr. Nichols' option was increased to 374,222 and the per share
exercise price was reduced to $3.60. In order to provide Mr. Nichols with both a
short- and long-term equity compensation incentive, the exercisability of these
options vests over an approximately three-year period, as follows: 69,444 shares
vested upon his election as Chief Executive Officer on February 26, 1992; 69,444
shares vested on December 31, 1992; 104,167 shares vested on December 31, 1993
and 104,167 shares will vest on December 31, 1994, provided that Mr. Nichols is
employed by the Company on that date.
6
In consideration of the number of options previously granted to Mr. Nichols
and the number of his options which are subject to future vesting, no options
were granted to Mr. Nichols in 1993.
Conclusions
Through the executive officer compensation programs described above, a
significant portion of executive compensation is linked directly to individual
and corporate performance and stock price appreciation. In the case of Mr.
Nichols, based upon the year-end unrealized value of the options for 104,167
shares of Common Stock which vested on December 31, 1993, 41.5% of his 1993
compensation was equity based. The Compensation Committee intends to continue
the policy of linking executive compensation to corporate performance and
shareholder returns.
Submitted by the Compensation Committee:
Alfred S. Teo, Chairman
Daniel Amster
Douglas H. Dittrick
Robert D. Hunter
Compensation Committee Interlocks and Insider Participation
Disclosure rules require the Company to report certain relationships between
members of the Compensation Committee and the Company. Also required is a
disclosure of interlocking relationships among Compensation Committee members
and executive officers who also serve as members of compensation committees or
executive officers at other companies. The purpose of these requirements is to
allow shareholders to determine whether situations may exist which may raise
questions concerning the independence of Compensation Committee members in
making executive compensation decisions or recommendations.
Some of the Company's directors, corporations of which they are executive
officers or shareholders and partnerships of which they are partners, including
members of the Compensation Committee and/or related interests of Committee
members, have had transactions in the ordinary course of business with the Bank,
including borrowings from the Bank. All such loans were made in the ordinary
course of business on terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons not
affiliated with the Company or the Bank and did not involve more than the normal
risk of collectibility or present other unfavorable features.
There are no interlocking relationships between Compensation Committee
members and executive officers at any other company.
7
Executive Compensation
Set forth below is a Summary Compensation Table which sets forth details of
the compensation paid by the Company and its subsidiary to the Company's Chief
Executive Officer and the four other most highly compensated executive officers
in 1993.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
All
Other Other
Annual Restricted Options/ Compen-
Name and Year Compen- Stock SAR's LTIP sation
Principal Position (1) Salary Bonus sation (2) Awards (#)(3) Payouts ($)
Allan D. Nichols 1993 $407,308 $80,000 *** -0- -0- -0- $7,075(4)
Chairman and Chief 1992 $339,423 $50,000 *** -0- 347,222 -0- -0-
Executive Officer
of the Company and
the Bank
Rodney T. Verblaauw 1993 $305,385 $40,000 *** -0- -0- -0- $7,075(4)
President and Chief 1992 $289,192 $25,000 *** -0- -0- -0- $ -0-
Administrative 1991 $357,000 -0- *** -0- -0- -0- $ -0-
Officer of the
Company and the Bank
J. Michael Feeks 1993 $182,740 30,000 *** -0- 10,000 -0- $2,726(4)
Executive Vice 1992 $ 88,173 -0- *** -0- 25,000 -0- -0-
President of the Bank
Jeffrey B. Morris 1993 $179,824 30,000 *** -0- 10,000 -0- -0-
Executive Vice 1992 $ 26,923 -0- *** -0- 25,000 -0- -0-
President of the Bank
Eugene V. Malinowski 1993 $179,824 20,000 *** -0- 10,000 -0- -0-
Treasurer of the 1992 $ 35,673 -0- *** -0- 25,000 -0- -0-
Company; Executive
Vice President and
Chief Financial
Officer of the Bank
<FN>
(1) Messrs. Nichols, Feeks, Morris and Malinowski were hired in 1992.
Accordingly, salary payments reflected for these officers in 1992 represent the
total of payments to them only during their periods of employment in that year.
(2) The Bank provides certain perquisites and other benefits to executive
officers of the Company. The aggregate amount of such compensation did not
exceed the lesser of either $50,000 or 10% of the total of annual salary and
bonus reported for the named executive officers during any of the years
reported.
(3) The figures in this column represent option grants only. The Company has
not granted any Stock Appreciation Rights (SARs).
(4) Represents the amount of employer contributions to the officers' account
under the Bank's 401(k) Plan.
8
STOCK OPTION TABLES
Set forth below are two tables which provide information relating to stock
options granted by the Company to the named executives. The first table,
"Option/SAR Grants in Last Fiscal Year" provides information relating to stock
options granted by the Company to the named executives in 1993, including the
potential value which could be realized by the executives if the options were
held for their entire term and the price of the Company's Common Stock increased
at an annual compounded rate of 5% and 10% during the term of the options. The
second table, "Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values", provides information relating to options which were
exercised by the named executives during 1993, all outstanding options held by
the named executives regardless of when they were granted, and the value of all
"in-the-money" options as of December 31, 1993. An option is "in-the-money" if
the exercise price is below the market value of the Common Stock.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
Potential Realizable
% of Total Value at Assumed Annual
Options Exercise Rates of Stock Price
Granted to or Base Appreciation For
Options Employees Price Expiration Option Term (2)
Name Granted (#) In 1993 ($/Share) Date 5% 10%
Allan D. Nichols -0- N/A N/A N/A N/A N/A
Rodney T. Verblaauw -0- N/A N/A N/A N/A N/A
J. Michael Feeks 10,000 10.5% $6.875 8/17/03 $43,250 $109,312
Jeffrey B. Morris 10,000 10.5% $6.875 8/17/03 $43,250 $109,312
Eugene V. Malinowski 10,000 10.5% $6.875 8/17/03 $43,250 $109,312
<FN>
(1) No Stock Appreciation Rights (SARs) were awarded by the Company during
1993.
(2) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates required to be disclosed and are not intended to forecast
possible future appreciation of the Company's Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES (1)
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End(#) at FY-End ($)(3)
Shares Acquired Value Exercisable/ Exercisable/
on Exercise(#) Realized($) Unexercisable Unexercisable
Allan D. Nichols 20,000 $64,250(2) 233,055/104,167 $763,255/$341,147
Rodney T. Verblaauw -0- N/A 338,976/0 $379,669/N/A
J. Michael Feeks -0- N/A 35,000/0 $ 51,625/N/A
Jeffrey B. Morris -0- N/A 35,000/0 $ 51,625/N/A
Eugene V. Malinowski -0- N/A 35,000/0 $ 51,625/N/A
9
<FN>
(1) The Company has not issued any Stock Appreciation Rights; only options have
been issued.
(2) Represents the aggregate difference between the market value of the shares
acquired on the date of exercise less the exercise price. Mr. Nichols exercised
options to purchase 10,000 shares on July 30, 1993 and an additional 10,000
shares on September 15, 1993. The closing price of the Common Stock on July 30,
1993 was $7.00 and on September 15, 1993 was $6.625. As of the date of this Form
8, Mr. Nichols had not disposed of the shares acquired upon exercise.
(3) The last reported trading price of the Company's Common Stock on December
31, 1993 was $6.875. The values set forth in this column equal the market value
of shares subject to option which were in-the-money on December 31, 1993, less
the aggregate exercise price for such options.
Employment and Change-in-Control Agreements
Mr. Nichols is employed pursuant to an agreement dated February 26, 1992, as
amended as of March 19, 1992. The agreement is for a period of three years and
provides for the employment of Mr. Nichols as Chairman of the Board of Directors
and Chief Executive Officer of the Company and the Bank at an annual salary of
not less than $375,000. On the date the agreement was executed the Bank made a
one-time, non-recurring payment of $25,000 to Mr. Nichols. The agreement also
provides for the granting of options to Mr. Nichols to purchase a total of
250,000 shares of Common Stock at a price of $5.00 per share and subject to the
provisions of the 1985 Stock Incentive Plan (the "1985 Plan"). Pursuant to the
anti-dilution provisions of the 1985 Plan, as a result of the Company's
successful rights offering in September, 1992, the number of shares subject to
option was increased to 347,222 and the per share exercise price was reduced to
$3.60. The right of Mr. Nichols to exercise these options vested with respect to
69,444 shares on February 26, 1992; with respect to an additional 69,444 shares
on December 31, 1992; and with respect to an additional 104,167 shares on
December 31, 1993. The remaining 104,167 shares subject to option are to vest on
December 31, 1994, provided that Mr. Nichols remains employed by the Company and
the Bank on that date. Under the terms of the 1985 Plan, the exercisability of
these remaining options which have not vested is accelerated in the event of a
change-in-control of the Company. On February 26, 2002, all options which have
not been exercised terminate.
The Company and/or the Bank may terminate the agreement with Mr. Nichols at
any time. If the termination is for cause, Mr. Nichols is entitled to be paid
his compensation through the date of termination but not beyond. If the
agreement is terminated by the Company or the Bank without cause or as a result
of a change in control of the Company, then Mr. Nichols shall be entitled to a
termination benefit equal to his annual salary payable, at the Bank's election,
in a lump sum or over a one year period. A "change in control" is deemed to
occur when (a) a person or entity acquires beneficial ownership of forty percent
or more of the outstanding Common Stock; (b) the Company merges or consolidates
with another corporation and the Common Stock of the Company is exchanged for
less than fifty percent of the voting stock of the resulting or surviving
corporation; or (c) fifty percent or more of the members of the Company's Board
of Directors are persons who have not been directors during the preceding
twenty-four months. In the event of Mr. Nichols' death while still employed, his
estate will be entitled to a payment equal to one month of salary for each year,
or partial year, of his employment by the Bank. In the event of Mr. Nichols'
disability, the agreement shall terminate and he shall be entitled to a
continuation of his salary for six months beyond the date of disability.
10
The employment of Mr. Verblaauw is pursuant to an agreement dated January 4,
1994. The agreement is for a period of three years and provides for the
employment of Mr. Verblaauw as President and Chief Administrative Officer of the
Company and the Bank at an annual salary of not less than $300,000. The Company
and/or the Bank may terminate the agreement with Mr. Verblaauw at any time. If
the termination is for cause, Mr. Verblaauw is entitled to be paid his
compensation through the date of termination but not beyond. If the agreement is
terminated by the Company or the Bank without cause or as a result of a
change-in-control of the Company, then Mr. Verblaauw shall be entitled to a
termination benefit equal to his annual salary payable, at the Bank's election,
in a lump sum or over a one year period. The definition of a "change-in-control"
is identical to that contained in the agreement with Mr. Nichols. In the event
of Mr. Verblaauw's death while still employed, his estate will be entitled to a
payment equal to one month of salary for each year, or partial year, of his
employment with the Bank. In the event of Mr. Verblaauw's disability the
agreement shall terminate and he shall be entitled to a continuation of his
salary for six months beyond the date of disability. Upon the execution of this
agreement on January 4, 1994 an employment agreement and change-in-control
agreement among the Company, the Bank and Mr. Verblaauw, both dated September
19, 1989, were terminated.
The Company has entered into change-in-control agreements with certain key
employees, including the officers listed in the Summary Compensation Table. The
agreements provide for certain payments and benefits to these officers in the
event that a change-in-control of the Company occurs and within a certain period
after such a change-in-control (the "Protection Period") the Company and/or the
Bank terminates the employment of the officer, other than upon the officer's
disability or for "cause" (as defined in the agreements). In addition, the
agreements provide that each officer shall be entitled to these payments and
benefits if, during the Protection Period, the officer terminates his employment
for "Good Reason". For the purpose of these agreements, "Good Reason" is defined
to mean: (i) a significant reduction in the officer's authority or duties and
responsibilities from those in effect immediately prior to the
change-in-control; (ii) a reduction in the officer's base salary from that in
effect immediately prior to the change-in-control; (iii) the officer being
required to be based at an office that is greater than twenty road miles from
where the officer's office was located immediately prior to the
change-in-control; or (iv) the failure of any "successor" (as defined in the
agreements) to assent to or assume the change-in-control agreements.
A "change-in-control" is deemed to occur when: (i) a person or entity becomes
the beneficial owner, directly or indirectly, of shares of stock of the Company
having 20% or more of the total number of votes that may be cast for the
election of directors; (ii) the Company consolidates or merges with any person
or entity in a transaction where the Company's Common Stock is exchanged for
less than 50% of the voting stock of the resulting or surviving corporation;
(iii) there is a change in the composition of majority membership of the Board
of Directors over any 24 month period; (iv) the Company executes an agreement
for the acquisition of the Company through the purchase of stock or assets or
for the merger of the Company in which the Common Stock of the Company is to be
exchanged for less than 50% of the voting stock of the resulting or surviving
corporation; or (v) the Company sells all or substantially all of the assets of
the Company.
11
The "Protection Period" means the period commencing on the date a
"change-in-control" occurs and ending, in the case of Messrs. Nichols and
Verblaauw, two years after that date and in the case of Messrs. Feeks, Morris
and Malinowski, one year after that date; provided, however, that if a
"change-in-control" occurs as a result of the Company executing an agreement for
the acquisition or merger of the Company, then the Protection Period shall not
end until two years or one year, as applicable, after the date on which such
acquisition or merger shall have been consummated.
In the event of a termination of the officer's employment by the Company
and/or the Bank, other than upon the disability of the officer or for cause, or
by the officer for Good Reason, during the Protection Period, the Bank shall pay
to the officer an amount equal to a percentage of his base salary in effect
immediately prior to the change-in-control or immediately prior to the date of
termination, whichever is higher. In the case of Messrs. Nichols and Verblaauw,
this percentage is 150% and in the case of Messrs. Feeks, Morris and Malinowski,
this percentage is 100%. Such payments are to be made, at the officer's option,
either in a lump sum or over a period of time. The agreements further provide
for the continuation of life, medical and disability insurance coverages for the
officers following a termination of their employment. The obligation of the Bank
to continue these coverages ends, with respect to Messrs. Nichols and Verblaauw,
on the earlier of two years after the date of termination or upon obtaining
substantially equivalent benefits from a subsequent employer. With respect to
Messrs. Feeks, Morris and Malinowski, this obligation ends on the earlier to
occur of one year from the date of termination or obtaining substantially
equivalent benefits from a subsequent employer. The change-in-control agreement
also provides that to the extent that the agreements cover any matter covered by
any other agreement with the officer, then the terms of the change-in-control
agreements shall prevail.
On March 21, 1994 the Company entered into an Agreement and Plan of Merger
with National Westminster Bank Plc and NatWest Holdings Inc. (the "Merger
Agreement"). The execution of the Merger Agreement constitutes a "change-in-
control" for purposes of the change-in-control agreements described above.
THE PERFORMANCE GRAPH
A paper copy of a line graph comparing the Company's cumulative shareholder
return in relation to a performance indicator of the overall stock market, the
Standard and Poors Composite - 500 Stock Index ("S&P 500"), and in relation to
an index comprised of eastern regional banking institutions is being provided to
the Securities and Exchange Commission. A table of the graph's data points is
presented below. The comparison relates to performance over a five-year period
and tracks, in each instance, the total return of a $100 investment during this
five-year period, assuming the reinvestment of dividends.
12
Standard & Poors
Quarter Composite - 500 Eastern Regional Citizens First
Ended Stock Index Stock Index Bancorp, Inc.
12/88 $100.00 $100.00 $100.00
12/89 131.69 102.02 84.86
12/90 127.58 62.88 19.86
12/91 166.47 110.57 24.04
12/92 179.14 152.70 42.85
12/93 197.19 159.25 57.48
While the Company's Common Stock underperformed the S&P 500 and the Eastern
Regional Bank Index for the five-year period ending December 31, 1993, more
recently the Company's performance has improved. During the two-year period
ending December 31, 1993 the total return for the Company's Common Stock was
139.1%, compared to a 18.5% total return for the S&P 500 and a 44.0% total
return for the Eastern Regional Bank Index during the same period.
PENSION PLAN AND BENEFIT EQUALIZATION PLAN
The Bank has a funded non-contributory qualified retirement plan which
entitles participants, who have survived to age 55 and are fully vested, to an
annual retirement income. The amounts paid under the plan are determined on an
actuarial basis, and no specific amounts are set aside for any individual.
Subject to various exceptions, on reaching the normal retirement age of 65, the
retirement income is equal to 47.5% of the Average Annual Compensation plus
11.25% of average annual compensation in excess of covered compensation, with
the result reduced proportionately if years of service are less than 25. In no
event, however, can any employee receive annual retirement income under the
Pension Plan in excess of $115,641. Average Annual Compensation is the average
annual compensation that would be subject to Social Security taxes, without the
dollar limitation on such taxes, paid to a participant by the Bank during the
period of 3 years out of the last 10 years of service which produces the highest
such average, or actual service if it is less than 3 years. The annual
compensation is limited to compensation levels indicated by IRS Section
401(a)17, which was $235,840 during 1993.
Benefits are payable in the form of a monthly, lifetime annuity normally
commencing on the later of age 65 or the participant's date of retirement. A
participant may elect to receive a reduced monthly retirement payment in the
form of a joint and survivor benefit or an amount which will continue for at
least 10 years or, after death, during the lifetime of another individual. For
purposes of illustration, the amount of annual retirement income under the
Bank's retirement plan (including the Benefit Equalization Plan, described
hereafter) is payable for the employee's life, commencing at age 65. The
benefits illustrated do not take into account optional forms of benefit (i.e.,
joint and survivor benefits).
13
The Bank also had a Benefit Equalization Plan for certain selected management
employees. Although this Plan was terminated on May 6, 1992, the termination of
the Plan does not affect benefits to former participants who were fully vested
prior to its termination and were otherwise entitled to benefits thereunder. The
Plan provides to a participant the retirement benefits which the participant
would have received under the Bank's Pension Plan if the combined plan
limitations of Section 415 and 401(a)17 of the Internal Revenue Code were not in
effect.
ANNUAL BENEFITS FROM RETIREMENT PLAN AND
BENEFIT EQUALIZATION PLAN
Average
Annual 10 Years 15 Years 20 Years 25 Years
Compensation of Service of Service of Service of Service
$ 50,000 $ 10,724 $ 16,086 $ 21,448 $ 26,810
$100,000 $ 22,474 $ 33,711 $ 44,948 $ 56,185
$150,000 $ 34,224 $ 51,336 $ 68,448 $ 85,560
$200,000 $ 45,974 $ 68,961 $ 91,948 $114,935
$250,000 $ 57,724 $ 86,586 $115,448 $144,310
$300,000 $ 69,474 $104,211 $138,948 $173,685
$350,000 $ 81,224 $121,836 $162,448 $203,060
$400,000 $ 92,974 $139,461 $185,948 $232,435
$450,000 $104,724 $157,086 $209,448 $262,810
$500,000 $116,474 $174,711 $232,948 $291,185
As of January 1, 1994 Mr. Nichols had 2 years of credited service to the
Bank, Mr. Verblaauw had 38 years of credited service, Mr. Feeks had 1 year of
credited service, Mr. Morris had 1 year of credited service and Mr.Malinowski
had 1 year of credited service. Mr. Verblaauw's Average Annual Compensation for
purposes of the Pension Plan and Benefit Equalization Plan is $492,638.
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Item 12 - Security Ownership of Certain Beneficial Owners and Management
Shares of
Common Stock
Owned as of
Name February 7, 1994
Daniel Amster (1) (2) 685,410
(1.37%)
Douglas H. Dittrick 10,000
Daniel M. Dwyer (1) 30,485
Robert D. Hunter (1) 87,650
Samuel M. Lyon, Jr. 120,000
Allan D. Nichols (3) 265,055
Harry Randall, Jr. (1)(4) 158,005
Alfred S. Teo (5) 4,806,300
(9.64%)
Rodney T. Verblaauw (1)(6) 514,455
(1.02%)
Walter W. Weber, Jr. (7) 349,944
<FN>
(1) Includes, for the following persons, the number of shares held solely by
their spouse: Mr. Amster 53,242, Mr. Dwyer 1,159, Mr. Hunter 18,304, Mr. Randall
344 and Mr. Verblaauw 3,000.
(2) Includes 538,112 shares held jointly by Mr. Amster with his wife, with
respect to which they have shared voting and investment power.
(3) Includes 233,055 shares subject to currently exercisable stock options.
(4) Includes 12,301 shares held in a trust of which Mr. Randall is co-trustee
and over which he has shared voting and investment power and 5,912 shares held
in a trust of which Mr. Randall is trustee and over which he has sole voting
and investment power.
(5) Includes 3,306,500 shares held jointly by Mr. Teo with his wife, with
respect to which they have shared voting and investment power. Also includes a
total of 1,409,800 shares owned by companies affiliated with Mr. Teo, with
respect to which he has sole voting and investment power, and 90,000 shares
owned by a company affiliated with Mr. Teo with respect to which he has shared
voting and investment power.
(6) Includes 43,426 shares held by the trustee of the Bank's Employee Stock
Ownership Plan for Mr. Verblaauw. Mr. Verblaauw only has voting power over these
shares. Also includes 338,976 shares subject to currently exercisable stock
options.
(7) Includes 37,532 shares held in a trust over which Mr. Weber has sole voting
power. Also includes 209,004 shares held in a trust of which Mr. Weber is
co-trustee and over which he has shared voting and investment power.
15
Information concerning the beneficial ownership of the Company's Common
Stock is set forth above opposite the name of each Director and in the
accompanying footnotes.
Set forth below are the number of shares of the Company's Common Stock
owned by the executive officers of the Company named in the Summary
Compensation Table located earlier in this Form 10K-A, except for Messrs.
Nichols and Verblaauw whose share ownership is reported above in the
information concerning directors:
J. Michael Feeks 40,000 shares
Jeffrey B. Morris 40,125 shares
Eugene V. Malinowski 60,028 shares
As of February 7, 1994 the directors and officers of the Company as a group
(15 individuals) owned 7,236,532 shares, or 14.3% of the Common Stock. All
stock ownership percentages which include or relate to officers holdings assume
the full exercise of stock options which are exercisable immediately or within
60 days after February 7, 1994. The number of options included in the table
above are: Mr. Feeks - 35,000; Mr. Morris - 35,000; and Mr. Malinowski -
35,000.
Item 13 - Certain Relationships and Related Transactions
Certain Transactions
Some of the Company's directors and executive officers, corporations of which
they are executive officers or shareholders, partnerships of which they are
partners, and trusts and estates of which they are fiduciaries have had
transactions in the ordinary course of business with the Bank, including
borrowings from the Bank. All such loans were made in the ordinary course of
business on terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with other persons not affiliated with
the Company or the Bank and did not involve more than the normal risk of
collectibility or present other unfavorable features. The Bank has a first and
second mortgage loan to a partnership in which Daniel M. Dwyer holds a 1%
limited partner interest. The first mortgage loan was current as to all
payments in 1993. The second mortgage loan, granted in 1987 in the amount of
$770,000 and subsequently extended, bears an interest rate equal to the Bank's
floating prime rate and, as of the date of this Form 8, was in a nonaccrual
status. The balance of the second mortgage loan is approximately $689,000. The
Bank is secured by mortgages on an industrial building and is currently in
foreclosure litigation concerning the second mortgage loan. Since Mr. Dwyer is a
limited partner in the partnership, he is not involved in the management of the
partnership, is not a guarantor on either of the loans with the Bank and is not
party to the litigation.
In 1993 the Bank paid legal fees to Dwyer, Dwyer & Dwyer, P.A. (of which
director Daniel M. Dwyer is a partner), Randall, Randall & Stevens (of which
director Harry Randall, Jr. is a partner) and Weber, Muth & Weber (of which
director Walter W. Weber, Jr. is a partner). The total fees paid to Weber, Muth
& Weber in 1993 were $206,400, which represented more than 5% of the gross
income for this firm in 1993. The fees paid to Dwyer, Dwyer & Dwyer, P.A. and
Randall, Randall & Stevens did not reach this 5% threshold. The Bank intends to
utilize the services of such firms in 1994.
16