SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CORNERSTONE BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
CORNERSTONE BANCORP, INC.
550 Summer Street
Stamford, Connecticut 06901
(203) 356-0111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on May 17, 2000
April 5, 2000
To the Shareholders of Cornerstone Bancorp:
Notice is hereby given that the Annual Meeting of Shareholders of
Cornerstone Bancorp, Inc. (the "Bancorp") will be held at Cornerstone Bank, 550
Summer Street, Stamford, Connecticut 06901, on May 17, 2000, at 4:00 p.m. local
time, for the purpose of considering and voting upon the following matters:
1. To elect five directors for terms to expire at the 2003 Annual Meeting of
Shareholders;
2. To ratify the appointment of KPMG LLP as the Bancorp's independent auditors
for the fiscal year ending December 31, 2000; and
3. To transact such other business as may properly be brought before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 31, 2000 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the 2000 Annual Meeting of Shareholders and any adjournments
thereof.
By Order of the Board of Directors
Norman H. Reader, President
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE 2000 ANNUAL MEETING.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE WHETHER OR NOT
YOU PLAN TO ATTEND THE 2000 ANNUAL MEETING IN PERSON. SHAREHOLDERS OF RECORD WHO
ATTEND THE MEETING MAY REVOKE THE PROXY AND VOTE IN PERSON.
CORNERSTONE BANCORP, INC.
550 Summer Street
Stamford, Connecticut 06901
(203) 356-0111
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 17, 2000
General
This Proxy Statement is furnished to shareholders of Cornerstone Bancorp,
Inc. (the "Bancorp") in connection with the solicitation of proxies by the Board
of Directors for use at the Annual Meeting of Shareholders of the Bancorp to be
held on May 17, 2000, and any and all adjournments or postponements thereof (the
"2000 Annual Meeting"). This Proxy Statement, the Notice of Annual Meeting, the
enclosed form of Proxy and the 1999 Annual Report to Shareholders are first
being mailed to shareholders on or about April 5, 2000. As used in this Proxy
Statement, references to the "Bancorp" include references to Cornerstone
Bancorp, Inc. and to its wholly-owned subsidiary, Cornerstone Bank.
Record Date, Voting Rights
Only shareholders of record at the close of business on March 31, 2000 (the
"Record Date") are entitled to notice of and to vote at the 2000 Annual Meeting.
On the Record Date, there were 1,081,795 shares of common stock of the Bancorp,
par value $.01 per share (the "Common Stock"), outstanding and entitled to vote.
Each shareholder is entitled to one vote, in person or by proxy, for each share
of Common Stock held of record in his or her name at the close of business on
the Record Date. The presence, in person or by proxy, of a majority of the
aggregate number of shares of Common Stock outstanding on the Record Date is
necessary to constitute a quorum at the 2000 Annual Meeting. Abstentions and
broker non-votes will be included in the calculation of the number of votes
represented at the 2000 Annual Meeting for purposes of determining whether a
quorum has been achieved.
Solicitation, Revocation and Use of Proxies
In addition to solicitation of proxies by mail, proxies may also be
solicited by telephone or personal interview by employees of the Bancorp who
will not receive additional compensation therefor. The expense of soliciting
proxies will be borne by the Bancorp. The Bancorp will also reimburse brokerage
firms and others for their expenses in forwarding proxy materials to the
beneficial owners of the Common Stock.
A shareholder giving a proxy may revoke it at any time before it is voted by
delivery of a written notice of such revocation or a duly executed proxy bearing
a later date to the Secretary of the Bancorp or by attending the 2000 Annual
Meeting and revoking the proxy at such time. Attendance at the 2000 Annual
Meeting will not itself revoke a proxy. Shares represented by properly executed
proxies will be voted at the 2000 Annual Meeting in accordance with the
specifications thereon. Shareholders of record who are present at the 2000
Annual Meeting may vote by ballot.
Each proxy received will be voted as directed; however, if no direction is
indicated, the proxy will be voted in Item 1 "FOR" the election of the Bancorp's
------ ---
nominees to the Board of Directors; in Item 2 "FOR" the ratification of the
------ ---
appointment of KPMG LLP as the Bancorp's independent auditors for the fiscal
year ending December 31, 2000; and in the discretion of the proxy holder as to
such other matters as may properly come before the 2000 Annual Meeting.
-1-
Security Ownership of Principal Shareholders
The following table sets forth certain information known to the Bancorp
regarding the beneficial ownership of the Common Stock as of the Record Date by
each person known by the Bancorp to own beneficially more than five percent of
the outstanding Common Stock.
Name and Address of Beneficial Owner Shares Beneficially Owned Percent of Class
- -------------------------------------- ---------------------------- -----------------
Stuart Weitzman....................... 87,219(a) 8.1%
169 Taconic Road
Greenwich, Connecticut 06831
Melvin A. Maisel...................... 86,937(b) 8.0%
36 Birchwood Dr.
Greenwich, Connecticut 06831
First Manhattan Co.................... 75,000(c) 6.9%
437 Madison Ave.
New York, New York 10022
_____________
(a) The shares shown as beneficially owned by Mr. Weitzman were those reported
as beneficially owned by him as of December 31, 1999 in his Schedule 13G
filed with the Securities and Exchange Commission (the "SEC"). Such schedule
indicates that Mr. Weitzman has sole voting and dispositive power with
respect to all shares reported as beneficially owned.
(b) Information with respect to Mr. Maisel's beneficial ownership is described
below in "Security Ownership of Management."
(c) The shares shown as beneficially owned by First Manhattan Co. were those
reported as beneficially owned by it as of December 31, 1999 in its Schedule
13 G filed with the SEC. Such schedule indicates that First Manhattan Co.
has shared voting power with respect to 63,000 shares and shared dispositive
power with respect to all 75,000 shares.
Security Ownership of Management
The following table sets forth certain information known to the Bancorp
regarding the beneficial ownership of the Common Stock as of the Record Date by
(i) each director of the Bancorp, (ii) the executive officers of the Bancorp
named in the Summary Compensation Table on page 7 and (iii) all directors and
executive officers of the Bancorp as a group. Except as otherwise indicated,
all shares are owned directly. Except as indicated by footnote and subject to
community property laws where applicable, the persons named in the table have
sole voting and investment power with respect to all shares shown as
beneficially owned by them.
Name of Beneficial Owner Shares Beneficially Owned Percent of Class
- ------------------------ -------------------------- ----------------
Joseph S. Field, Jr........................ 35,898(a) 3.3%
J. James Gordon............................ 2,219(b) *
James P. Jakubek........................... 31,586(c) 2.8%
Stanley A. Levine.......................... 10,923(d) 1.0%
Joseph A. Maida............................ 9,581(e) *
Melvin A. Maisel........................... 86,937(f) 8.0%
Ronald C. Miller........................... 41,714(g) 3.8%
Courtney A. Nelthropp...................... 2,833(h) *
-2-
Martin Prince.............................. 43,870(i) 4.0%
Norman H. Reader........................... 44,519(j) 4.0%
Paul H. Reader............................. 30,534(k) 2.8%
Donald Sappern............................. 3,755(l) *
Patrick Tisano............................. 14,325(m) 1.3%
Joseph D. Waxberg.......................... 5,270(n) *
All directors and executive officers as a
Group (15 persons)....................... 375,540(o) 31.0%
_____________
* Less than 1% of the outstanding Common Stock.
(a) Includes 33,833 shares owned by Mr. Field in an individual retirement
account, 440 shares owned by Mr. Field's spouse in an individual retirement
account and 1,625 shares that may be acquired within 60 days of the Record
Date upon exercise of stock options.
(b) Includes 1,350 shares that may be acquired within 60 days of the Record
Date upon exercise of stock options.
(c) Includes 1,166 shares owned by Mr. Jakubek as custodian for his minor
children and 29,700 shares that may be acquired within 60 days of the
Record Date upon exercise of stock options.
(d) Includes 6,367 shares owned by Mr. Levine's spouse and 3,550 shares that
may be acquired within 60 days of the Record Date upon exercise of stock
options.
(e) Includes 2,564 shares owned by Mr. Maida's minor children and 3,550 shares
that may be acquired within 60 days of the Record Date upon exercise of
stock options.
(f) Includes 137 shares owned by Mr. Maisel's spouse, 81,957 shares owned by
Mr. Maisel in an individual retirement account and 3,550 shares that may be
acquired within 60 days of the Record Date upon exercise of stock options.
(g) Includes 20,230 shares owned jointly with Mr. Miller's spouse, 2,613 shares
owned by Mr. Miller's spouse in a retirement plan, 14,713 shares owned by
Mr. Miller in an individual retirement account and 3,550 shares that may be
acquired within 60 days of the Record Date upon exercise of stock options.
(h) Includes 1,208 shares owned jointly with Mr. Nelthropp's spouse and 1,625
shares that may be acquired within 60 days of the Record Date upon exercise
of stock options.
(i) Includes 15,125 shares owned by a corporate pension plan in which Mr.
Prince and his spouse participate and for which they are both trustees,
24,603 shares owned jointly by Mr. Prince and his spouse and 3,550 shares
that may be acquired within 60 days of the Record Date upon exercise of
stock options.
(j) Includes 35,200 shares that may be acquired within 60 days of the Record
Date upon exercise of stock options.
(k) Includes 800 shares owned jointly with Mr. Reader's spouse, 2,486 owned by
Mr. Reader's minor children and 25,850 shares that may be acquired within
60 days of the Record Date upon exercise of stock options.
(l) Includes 3,346 shares owned by Mr. Sappern in an individual retirement
account and 409 shares owned by a corporation which is 100% owned by Mr.
Sappern.
(m) Includes 8,913 shares owned by a trust for the benefit of Mr. Tisano and
his spouse in which his son is a trustee, 1,862 shares owned jointly with
Mr. Tisano's spouse and 3,550 shares that may be acquired within 60 days of
the Record Date upon exercise of stock options.
(n) Includes 800 shares that may be acquired within 60 days of the Record Date
upon exercise of stock options.
(o) Includes 128,450 shares that may be acquired within 60 days of the Record
Date upon exercise of stock options.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, required
the Bancorp's directors, executive officers and persons who beneficially own
more than 10% of the Common Stock to file certain reports with the SEC during
and for the year ended December 31, 1999 concerning their beneficial ownership
of the Common Stock. Based solely upon the Bancorp's review of the copies of
such reports received by it, and on written representations by certain reporting
persons, the Bancorp believes that during the year ended December 31, 1999, all
such reports were filed on a timely basis except for a Form 3 for Donald Sappern
was filed late.
-3-
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors is classified into three classes. The five directors
serving in Class II have terms expiring at the 2000 Annual Meeting. The Board of
Directors has nominated the Class II directors currently serving on the Board of
Directors, Stanley A. Levine, Ronald C. Miller, Martin Prince, Patrick Tisano
and Dr. Joseph D. Waxberg, for election to serve as directors of the Bancorp
until the 2003 Annual Meeting of Shareholders and until their successors are
elected and qualified or until their earlier resignation or removal. Each
nominee is currently a director of the Bancorp. In the event that any of the
nominees becomes unable to serve, an event which the Board of Directors does not
expect, the shares represented by proxy may be voted for a substitute nominee to
be designated by the Board of Directors or a committee thereof, unless the proxy
withholds authority to vote for all nominees.
If a quorum is present at the 2000 Annual Meeting, the election of directors
will require the affirmative vote of a plurality of the votes cast by the shares
of Common Stock entitled to vote. Abstentions by shareholders and broker non-
votes with respect to the election of directors will not be included in
determining whether nominees have received the vote of such plurality.
The following sets forth certain information regarding the nominees named
above and the other directors of the Bancorp whose terms will continue after the
2000 Annual Meeting.
Nominees for Terms Expiring in 2003
Stanley A. Levine, age 62, has served as a director of the Bancorp since
1985. He has been an independent pharmacist for more than the past five years.
Ronald C. Miller, age 55, has served as a director of the Bancorp since
1985. He has been the owner of Miller's Hallmark, a chain of greeting cards
stores, for more than the past five years.
Martin Prince, age 70, has served as a director of the Bancorp since 1986.
He has been the owner and CEO of DLX Industries, Inc., a vinyl goods
manufacturing company, for more than the past five years.
Patrick Tisano, age 81, has served as a director of the Bancorp since 1986.
Prior to his retirement in 1992, he was the owner of the Die Craft Tool Company,
a tool and die company.
Dr. Joseph D. Waxberg, age 77, has served as a director of the Bancorp since
1985. He has been a physician practicing for more than the past five years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
---
THE ELECTION OF SUCH NOMINEES.
Continuing Directors
Terms Expiring in 2001:
James P. Jakubek, age 50, has served as a director of the Bancorp since
1996. He has been the Executive Vice President and Chief Operating Officer of
the Bancorp since joining the Bancorp in 1991.
Joseph A. Maida, age 51, has served as a director of the Bancorp since 1985.
He has been a certified public accountant with Maida & Maida, an accounting
firm, for more than the past five years.
Melvin L. Maisel, age 75, has served as a director of the Bancorp since
1985. He has been the owner and President of Stabilization Plans for Business,
Inc., an estate and retirement planning firm, for more than the past five years.
Norman H. Reader, age 75, has been President, Chief Executive Officer and a
director of the Bancorp since 1985.
-4-
Paul H. Reader, age 41, has served as a director of the Bancorp since 1999.
He has been the Senior Vice President of the Bancorp since 1985. Paul Reader is
the son of Norman Reader.
Terms Expiring in 2002:
Joseph S. Field Jr., age 61, has served as a director of the Bancorp since
1993. He has been a partner at Field Group, a real estate development firm, for
more than the past five years.
J. James Gordon, age 69, has served as a director of the Bancorp since 1995.
He has been the President of Gordon Textiles International, Ltd., a textile
sales and consulting agency, for more than the past five years. Mr. Gordon also
serves as a director of Liz Claiborne, Inc.
Courtney A. Nelthropp, age 58, has served as a director of the Bancorp since
1993. He has been the President of Printing and Graphics Emporium, Inc., a
printing company, for more than the past five years.
Donald Sappern, age 71, has served as a director of the Bancorp since 1999.
He has been the President and owner of Donald Sappern Co., an insurance agency,
for more than the past five years.
Committees and Meetings
The Board of Directors has established the following committees, the members
of which are appointed by the Board of Directors:
The Compliance/Audit Committee, comprised of Messrs. Field, Gordon, Jakubek,
Nelthropp, Sappern and Tisano, is responsible for reviewing the adequacy of
internal procedures and controls, as well as reviewing the audits and
implementing recommendations made by the Bancorp's independent auditors. The
Compliance/Audit Committee met four times during 1999.
The Funds Management Committee, which includes Messrs. Maisel, Reader,
Prince and Waxberg, is responsible for setting and enforcing investment policy,
interest rate risk policies and liquidity policy. The Funds Management
Committee also is responsible for general supervision of pricing, profitability
goals and policies, as well as dividend and tax planning. The Funds Management
Committee met 11 times during 1999.
The Loan/Compensation Committee, comprised of Messrs. Jakubek, Maida,
Miller, Levine, Norman Reader and Paul Reader, is responsible for the approval
of extensions of credit and the terms under which Bancorp credit will be
extended. The Loan/Compensation Committee also reviews officer lending limits,
approves changes to the Bancorp's loan policy, and approves compensation levels
and promotions. The Loan/Compensation Committee met 27 times during 1999.
The Nominating Committee, which includes Messrs. Gordon, Levine, Maisel,
Miller, Norman Reader and Waxberg, is responsible for selecting and presenting
potential candidates to the Board of Directors. The Nominating Committee met
one time during 1999. The nominees for election as directors at the 2000 Annual
Meeting were nominated by the full Board of Directors.
During 1999, the Board of Directors held a total of 12 meetings. Each
director attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
all committees of the Board of Directors on which such director served.
Director Compensation
Directors who are not otherwise employed by the Bancorp ("Outside
Directors") receive $200 for each Board of Directors meeting and $200 for each
committee meeting attended. At the election of each director, fees may be paid
either in cash or shares of Common Stock, or a combination thereof, pursuant to
the Bancorp's Directors Compensation Plan. Under the plan, directors accumulate
compensation credit for attending Board and committee meetings during each one-
year period ending on the date of each annual meeting of the Bancorp. The Board
of Directors, by a majority vote, may adjust the amount of the credits from time
to time. Outside Directors may elect to receive their compensation earned under
the plan in the form of cash or shares of Common Stock, based on an annual
election made by each
-5-
Outside Director at the first Board meeting subsequent to each annual meeting.
Outside Directors who elect cash receive such compensation at each Board
Meeting. Outside Directors who elect to receive shares of Common Stock are
issued a whole number of shares equal to their accumulated compensation credit
divided by the fair market value of the shares of Common Stock as of the date of
each Board Meeting. Outside Directors who elect shares receive share
certificates for a whole number of shares and cash payments in lieu of
fractional shares on the last business day of May of each year. The Board of
Directors, by a majority vote, may amend or terminate the Directors Compensation
Plan at any time; provided, however, that certain material amendments may not be
made without shareholder approval. During 1999, 583 shares of Common Stock were
issued under the Directors Compensation Plan.
Outside Directors also receive a formula grant of non-qualified stock
options ("NQOs") under the Bancorp's 1996 Incentive and Non-Qualified Stock
Option Plan. At the first meeting of the Board following each annual meeting,
each Outside Director is granted NQOs to purchase 250 shares of Common Stock.
The exercise price of such NQOs is the fair market value of the Common Stock on
the date of grant. The NQOs do not vest until the Outside Director has served
five full consecutive years on the Board, except that NQOs for any Outside
Director who has completed such service vest immediately. All NQOs granted to
Outside Directors expire ten years after the date of grant.
Officers or employees of the Bancorp who serve on the Board of Directors
receive no additional compensation for their services in that capacity.
Certain Transactions
As of December 31, 1999, loans to directors, principal officers and their
associates and affiliated businesses totaled $4,437,000, or approximately 28%,
of the Bancorp's equity capital accounts. All loans made by the Bancorp to such
persons were made in the ordinary course of business on substantially the same
terms, including interest rates, collateral and repayment terms, as those
prevailing at the time for comparable transactions with other persons. Such
loans do not involve more than the normal risk of collectability or present
other unfavorable features.
-6-
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information regarding the
compensation paid by the Bancorp to the Chief Executive Officer and the two
other executive officers whose total salary and bonus for fiscal 1999 exceeded
$100,000 (together, the "Named Executive Officers") for services rendered during
each of the last three years.
Summary Compensation Table
Long -Term
Compensation
------------
Awards
------
Securities
Annual Compensation Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options (#) Compensation ($) (1)
- ------------------------------- ---- ------------------------ ----------- --------------------
Norman H. Reader 1999 154,250 28,750 0 4,200
President and Chief 1998 160,625 27,500 0 4,200
Executive Officer 1997 167,000 22,992 8,250 4,200
James P. Jakubek 1999 125,000 46,750 0 5,000
Executive Vice President 1998 125,000 45,000 0 5,000
And Chief Operating Officer 1997 125,000 35,624 13,200 4,740
Paul H. Reader 1999 100,000 36,000 0 4,300
Senior Vice President 1998 100,000 35,000 0 4,188
1997 100,000 30,000 14,575 4,004
____________
(1) Represents amounts attributable to matching contributions made by the
Bancorp under the Bancorp's 401(k) Plan.
Stock Option Exercises and Fiscal Year-End Option Values
The following table sets forth information concerning option holdings as of
December 31, 1999 with respect to the Named Executive Officers.
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values
Shares Number of Securities Value of Unexcerised
Acquired Value Underlying Unexercised In-the-Money Options
on Realized Options at FY-End (#) at FY-End ($) (1)
Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
-------- --- ------------------------------ -------------------------------
Norman H. Reader 0 0 35,200 0 45,815 0
James P. Jakubek 0 0 29,700 0 28,050 0
Paul H. Reader 0 0 25,850 0 18,700 0
____________
(1) Based on the fair market value of the Common Stock as of December 31, 1999,
$11.25 minus the exercise price of the options.
Employment Contracts and Change in Control Arrangements
Effective July 1, 1998, the Bancorp entered into a new employment agreement
with Norman H. Reader pursuant to which Mr. Reader serves as President of the
Bancorp. The employment agreement provides for an initial annual
-7-
base salary of $154,250, with scheduled annual reductions in salary commensurate
with reductions in Mr. Reader's duties commencing on July 1, 1999 and
culminating on July 1, 2004, at which time the agreement provides that Mr.
Reader's annual base salary will be $77,750. Mr. Reader is also entitled to
participate in compensation and benefit plans available to executive officers of
the Bancorp. The employment agreement also provides that beginning on July 1,
2005, or upon the earlier termination of Mr. Reader's employment by the Bancorp
without cause, in connection with a change in control or potential change in
control of the Bancorp, or by reason of disability, the Bancorp will pay to Mr.
Reader a supplemental retirement benefit of $65,000 per year until June 30,
2011.
The employment agreement will terminate on the earlier of June 30, 2005, or
the earlier of (i) Mr. Reader's death or disability, (ii) voluntary termination
by Mr. Reader or (iii) termination of Mr. Reader by the Bancorp (either for
cause or otherwise). If Mr. Reader's employment is terminated by the Bancorp
without cause, the Bancorp is obligated to pay him a lump sum cash payment as
liquidated damages in an amount equal to the present value as of the date of
termination of (i) the scheduled salary amounts provided for in the agreement,
each reduced by $65,000, and (ii) an amount deemed paid in each remaining year
of the term of the employment agreement equal to the highest discretionary bonus
paid to Mr. Reader during the term of the agreement. In addition, for twelve
months following any termination of Mr. Reader's employment without cause, or
for 36 months following termination due to a change in control of the Bancorp,
Mr. Reader shall be entitled to continue to participate in the Bancorp's
compensation plans and to receive all benefits as if such termination had not
occurred.
If there is a change in control of the Bancorp or the Bancorp seeks to
terminate Mr. Reader's employment agreement following a potential change in
control, but prior to the potential change in control being effected, he is
entitled to the following: (i) all of the benefits he was entitled to in the
event of a termination without cause and (ii) a single lump sum payment equal to
three times the highest annual salary provided under the employment agreement
plus three times the highest discretionary bonus paid to him at any time during
the term of the employment agreement.
Effective July 15, 1998, the Bancorp entered into a new employment agreement
with James P. Jakubek pursuant to which Mr. Jakubek serves as Executive Vice
President of the Bancorp. The employment agreement provides for an initial
annual base salary of $125,000, which amount is subject to annual increases as
determined by the Board. Mr. Jakubek is also entitled to participate in
compensation and benefit plans available to executive officers of the Bancorp.
The employment agreement will terminate on the earlier of (i) Mr. Jakubek's
death or disability, (ii) voluntary termination by Mr. Jakubek or (iii)
termination of Mr. Jakubek by the Bancorp (either for cause or otherwise). If
Mr. Jakubek's employment is terminated by the Bancorp without cause, the Bancorp
would be obligated to pay him a lump sum cash payment in an amount equal to the
sum of (x) his then current annual salary, plus (y) the highest bonus awarded to
him at any time during the 36-month period ending with the date of termination.
In addition, for twelve months following any termination of Mr. Jakubek's
employment without cause, or for 36 months following termination due to a change
in control of the Bancorp, Mr. Jakubek shall be entitled to continue to
participate in the Bancorp's compensation plans and to receive all benefits as
if such termination had not occurred.
If there is a change in control of the Bancorp or if the Bancorp seeks to
terminate Mr. Jakubek's employment agreement following a potential change in
control but prior to the potential change in control being effected, he is
entitled to the following: (i) an adjustment in his then current salary to give
him cumulative cost of living increases for the period from July 15, 1998
through the date of the change in control, and annual increases based on the
Consumer Price Index (the "CPI") on each anniversary of the change in control;
(ii) a credit for years of service with the Bancorp, plus five additional years,
for purposes of vesting and calculation of benefits under any benefit plan of
the Bancorp or of any successor entity; (iii) eighteen months notice of
termination of employment, during which period he would be entitled to receive,
without offset for any reason, payment of his CPI adjusted salary, plus the
highest bonus received by him during the period commencing with the 36th month
preceding the change in control and ending with the date of termination; and
(iv) following the 18-month period referred to in (iii) above, at his election,
either a lump sum cash payment or 36 monthly periodic payments in an amount
equal to the sum of three times his CPI adjusted salary, plus three times the
highest bonus received by him during the period commencing with the 36th month
preceding the change in control and ending with the date of termination.
Effective July 15, 1998, the Bancorp entered into a new employment agreement
with Paul H. Reader pursuant to which Mr. Reader serves as Senior Vice President
of the Bancorp. The employment agreement provides for an initial annual base
salary of $100,000, which amount is subject to annual increases as determined by
the Board. Mr. Reader is also entitled to participate in compensation and
benefit plans available to executive officers of the Bancorp. The employment
agreement will terminate on the earlier of (i) Mr. Reader's death or disability,
(ii) voluntary termination by Mr. Reader or (iii) termination of Mr. Reader by
the Bancorp (either for cause or otherwise). If Mr.
-8-
Reader's employment is terminated by the Bancorp without cause, the Bancorp
would be obligated to pay him a lump sum cash payment in an amount equal to the
sum of (x) his then current annual salary, plus (y) the highest bonus awarded to
him at any time during the 36-month period ending with the date of termination.
In addition, for twelve months following any termination of Mr. Reader's
employment without cause, or for 36 months following termination due to a change
in control of the Bancorp, Mr. Reader shall be entitled to continue to
participate in the Bancorp's compensation plans and to receive all benefits as
if such termination had not occurred.
If there is a change in control of the Bancorp or if the Bancorp seeks to
terminate Mr. Reader's employment agreement following a potential change in
control but prior to the potential change in control being effected, he is
entitled to the following: (i) an adjustment in his then current salary to give
him cumulative cost of living increases for the period from July 15, 1998
through the date of the change in control, and annual increases based on the
Consumer Price Index (the "CPI") on each anniversary of the change in control;
(ii) a credit for years of service with the Bancorp, plus five additional years,
for purposes of vesting and calculation of benefits under any benefit plan of
the Bancorp or of any successor entity; (iii) eighteen months notice of
termination of employment, during which period he would be entitled to receive,
without offset for any reason, payment of his CPI adjusted salary, plus the
highest bonus received by him during the period commencing with the 36th month
preceding the change in control and ending with the date of termination; and
(iv) following the 18-month period referred to in (iii) above, at his election,
either a lump sum cash payment or 36 monthly periodic payments in an amount
equal to the sum of three times his CPI adjusted salary, plus three times the
highest bonus received by him during the period commencing with the 36th month
preceding the change in control and ending with the date of termination.
For purposes of the employment agreements, the definition of "change in
control" of the Bancorp is the same as the definition in the Bancorp's 1996
Incentive and Non-Qualified Stock Option Plan described below.
In addition to provisions relating to a change in control of the Bancorp in
the employment agreements described above, the Bancorp's stock option plans
specifically define certain "change events" that will trigger acceleration of
the vesting of outstanding options. The 1996 Incentive and Non-Qualified Stock
Option Plan and the Bancorp's predecessor plan (which has outstanding awards),
the 1986 Incentive and Non-Qualified Stock Plan, each provides for certain
"Change Events": (i) a reorganization, merger, or consolidation of the Bancorp
in which the Bancorp is not the surviving corporation; (ii) the dissolution or
liquidation of the Bancorp; or (iii) a sale or lease of 50% or more, computed on
the basis of book value, of the Bancorp's consolidated assets. The 1996
Incentive and Non-Qualified Stock Option Plan also includes as a Change Event a
"Change of Control," which is deemed to have occurred if (A) any person becomes
the beneficial owner of 25% or more of the total number of voting shares of the
Bancorp, (B) any person holds revocable or irrevocable proxies, as to the
election or removal of directors of the Bancorp, for 25% or more of the total
number of voting shares of the Bancorp, (C) any person has entered into an
agreement or received an option for the acquisition of beneficial ownership of
25% or more of the total number of voting shares of the Bancorp, whether or not
the requisite approval for such acquisition has been received under the
applicable laws or the respective regulations issued thereunder; or (D) as the
result of or in connection with any cash tender or exchange offer, merger, or
other business combination, sale of assets or contested election, or any
combination of the foregoing transactions, the persons who were directors of the
Bancorp before such transaction shall cease to constitute at least two-thirds of
the Board of Directors of the Bancorp or any successor corporation. In the event
such a Change Event occurs, any then-existing deferral periods for exercising
any stock option shall be accelerated and all outstanding options will be
exercisable in full on or before a date fixed by the Loan/Compensation Committee
prior to the effective time of the Change Event.
ITEM 2
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE BANCORP'S INDENPENDENT
AUDITORS FOR FISCAL YEAR ENDING DECEMBER 31, 2000
The Board of Directors, upon recommendation of the Compliance/Audit
Committee, has selected KPMG LLP as independent auditors to audit the
consolidated financial statements of the Bancorp for the fiscal year ending
December 31, 2000. KPMG LLP served as the Bancorp's independent auditors for the
fiscal year ended December 31, 1999 and has reported on the Bancorp's
consolidated financial statements for such year. Representatives of KPMG LLP are
expected to be present at the 2000 Annual Meeting, will have the opportunity to
make a statement if they desire to do so, and will be available to respond to
appropriate questions from shareholders.
-9-
While shareholder ratification is not required for the selection of KPMG LLP
since the Board of Directors has the responsibility for selecting the Bancorp's
independent auditors, the selection is being submitted for ratification at the
2000 Annual Meeting with a view toward soliciting the shareholders' opinions,
which the Board of Directors will take into consideration in future
deliberations. The affirmative vote of a majority of the votes cast at the 2000
Annual Meeting in person or by proxy is necessary for the ratification of the
appointment by the Board of Directors of KPMG LLP as independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF KPMG
---
LLP AS INDEPENDENT AUDITORS OF THE BANCORP FOR THE FISCAL YEAR ENDING DECEMBER
31, 2000.
OTHER MATTERS
The Board of Directors knows of no other business to be brought before the
2000 Annual Meeting. If, however, any other business should properly come
before the 2000 Annual Meeting, the persons named in the accompanying proxy will
vote the proxy as in their discretion they may deem appropriate, unless they are
directed by the proxy to do otherwise.
SHAREHOLDER PROPOSALS
Shareholder proposals submitted for inclusion in next year's proxy materials
must be received by the Bancorp no later than December 6, 2000. Shareholder
proposals submitted to be considered at the 2001 Annual Meeting without
inclusion in next year's proxy materials must be received by the Bancorp no
later than February 16, 2001. If the Bancorp is not notified of a shareholder
proposal by February 19, 2001, then proxies held by management of the Bancorp
may provide the discretion to vote against such shareholder proposal, even
though such proposal is not discussed in the Proxy Statement. Proposals should
be addressed to Leigh A. Hardisty, Secretary, Cornerstone Bancorp, Inc., 550
Summer Street, Stamford, Connecticut 06901. It is urged that such proposals be
sent by certified mail, return receipt requested.
Nominations of persons for election to the Board of Directors may be made by
any shareholder of the Bancorp entitled to vote for the election of directors
who complies with certain notice procedures set forth in the Bancorp's
Certificate of Incorporation and Bylaws. Shareholder nominations must be made
pursuant to timely notice in writing to the Secretary of the Bancorp. To be
timely, a shareholder's nomination must be delivered or mailed to the Secretary
of the Bancorp at the principal executive offices of the Bancorp not fewer than
60 days nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that if the date of the annual meeting
is more than 30 days before or more than 60 days after such an anniversary date,
notice by the shareholder, to be timely, must be so delivered no earlier than 90
days prior to such annual meeting and no later than the later of 60 days prior
to such annual meeting or 10 days following public announcement of the date of
such meeting. A shareholder's nomination must set forth, to the extent known:
(a) as to each person whom the shareholder proposes to nominate for election or
reelection as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (including such person's written consent to
being named in the proxy statement as a nominee and to serve as a director if
elected); and (b) as to the shareholder making the nomination, (i) the name and
address of such shareholder and (ii) the number of shares of Common Stock owned
by such shareholder.
By Order of the Board of Directors
Norman H. Reader, President
April 5, 2000
-10-
CORNERSTONE BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
May 17, 2000
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of CORNERSTONE BANCORP, INC. (the "Bancorp")
hereby appoints James P. Jakubek, Stanley A. Levine and Ronald C. Miller, and
each or any of them, as proxies of the undersigned with full power of
substitution, to vote all the shares of Common Stock of the Bancorp which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Bancorp (the "Annual Meeting") to be held at Cornerstone Bank, 550 Summer
Street, Stamford, Connecticut 06901, at 4:00 p.m. on May 17, 2000, and at any
adjournment or postponement thereof, with all the power the undersigned would
have if personally present, hereby revoking any proxy heretofore given. Any of
such proxies or their substitutes who attend the Annual Meeting (or if only one
shall be present, then that one) may exercise all of the powers hereby granted.
The undersigned hereby acknowledges receipt of the proxy statement for the
Annual Meeting and instructs the proxies to vote as instructed on the reverse
side hereof.
The undersigned also hereby grants the proxies discretionary authority to vote
upon such other matters as may properly come before the Annual Meeting.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION AS DIRECTORS
OF ALL NOMINEES LISTED, AND "FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG
LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF SHAREHOLDERS of
CORNERSTONE BANCORP, INC.
May 17, 2000
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
- ---------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
YOUR CONTROL NUMBER IS [RIGHT ARROW] [_______________]
- Please Detach and Mail in the Envelope Provided -
A [X] Please mark your
votes as in this
example.
The Board of Directors recommends a vote "FOR" Items 1 and 2.
FOR WITHHELD
1. To elect the [_] [_] Nominees: Stanley A. Levine
following persons Ronald C. Miller
as directors: Martin Prince
Patrick Tisano
Dr. Joseph D. Waxberg
For, except vote withheld from the following nominee(s):
- -----------------------------------------------
2. To ratify the appointment of KPMG LLP as the FOR AGAINST ABSTAIN
Bancorp's independent auditors for the fiscal year [_] [_] [_]
ending December 31, 2000.
MARK HERE FOR ADDRESS CHANGE AND MARK LABEL ACCORDINGLY [_]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [_]
Signature: ____________________________________________ Date: _______________
Signature: ____________________________________________ Date: _______________
Important: Please sign exactly as your name appears hereon. Joint owners must
both sign. Attorney, executor, administrator, trustee or guardian must give full
title as such. A corporation or partnership must sign in its name by authorized
person.