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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
|X| Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
|X| Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CFS Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
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[ ] 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.:
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(3) Filing party:
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(4) Date filed:
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2
[cfs logo]
CFS BANCORP, INC.
707 RIDGE ROAD
MUNSTER, INDIANA 46321
(219) 836-5500
March 23, 2001
Dear Stockholder:
You are cordially invited to attend the third Annual Meeting of
Stockholders of CFS Bancorp, Inc. The meeting will be held at the Center for
Visual and Performing Arts located at 1040 Ridge Road, Munster, Indiana, on
Tuesday, April 24, 2001 at 10:00 a.m., Central Time. The matters to be
considered by stockholders at the Annual Meeting are described in the
accompanying materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign, and date your proxy card today and
return it in the envelope provided, even if you plan to attend the Annual
Meeting. This will not prevent you from voting in person, but will ensure that
your vote is counted if you are unable to attend.
Your continued support of and interest in CFS Bancorp, Inc. are sincerely
appreciated.
Best regards,
/s/ Thomas F. Prisby
Thomas F. Prisby
Chairman of the Board and
Chief Executive Officer
3
CFS BANCORP, INC.
707 RIDGE ROAD
MUNSTER, INDIANA 46321
(219) 836-5500
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 2001
------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of CFS Bancorp, Inc. (the "Company") will be held at the Center for
Visual and Performing Arts located at 1040 Ridge Road, Munster, Indiana, on
Tuesday, April 24, 2001 at 10:00 a.m., Central Time, for the following purposes,
all of which are more completely set forth in the accompanying Proxy Statement:
(1) To elect two directors for a three-year term expiring in 2004, and
until their successors are elected and qualified;
(2) To amend the 1998 Stock Option Plan and the 1998 Recognition and
Retention Plan and Trust Agreement by revising the provisions primarily
related to the vesting of options and awards;
(3) To ratify the appointment by the Board of Directors of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
December 31, 2001; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof. Management is not aware of any other
such business.
The Board of Directors has fixed March 9, 2001 as the voting record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and at any adjournment thereof. Only those stockholders of record
as of the close of business on that date will be entitled to vote at the Annual
Meeting or at any such adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MONICA F. SULLIVAN
Monica F. Sullivan
Corporate Secretary
Munster, Indiana
March 23, 2001
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. HOWEVER, IF YOU ARE A
STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED
ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO VOTE IN PERSON AT
THE ANNUAL MEETING.
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CFS BANCORP, INC.
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 2001
This Proxy Statement is furnished to holders of common stock, $0.01 par
value per share ("Common Stock"), of CFS Bancorp, Inc. (the "Company"), the
parent holding company of Citizens Financial Services, FSB (the "Bank"). The
Company acquired all of the Bank's common stock issued in connection with the
conversion of the Bank from the mutual to stock form and the related public
offering of the Common Stock in July 1998 ("the Conversion"). Proxies are being
solicited on behalf of the Board of Directors of the Company to be used at the
Annual Meeting of Stockholders ("Annual Meeting") to be held at the Center for
Visual and Performing Arts located at 1040 Ridge Road, Munster, Indiana, on
Tuesday, April 24, 2001 at 10:00 a.m., Central Time, and at any adjournment
thereof for the purposes set forth in the Notice of Annual Meeting of
Stockholders. This Proxy Statement is first being mailed to stockholders on or
about March 23, 2001.
The proxy solicited hereby, if properly signed and returned to the Company
and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted "FOR" the nominees for director described herein,
"FOR" the proposal to amend the 1998 Stock Option Plan (the "Option Plan") and
the 1998 Recognition and Retention Plan and Trust Agreement (the "Recognition
Plan"), "FOR" ratification of the appointment of Ernst & Young LLP for fiscal
2001 and, upon the transaction of such other business as may properly come
before the meeting, in accordance with the best judgment of the persons
appointed as proxies. Any stockholder giving a proxy has the power to revoke it
at any time before it is exercised by (i) filing with the Secretary of the
Company written notice thereof (Monica F. Sullivan, Corporate Secretary, CFS
Bancorp, Inc., 707 Ridge Road, Munster, Indiana 46321); (ii) submitting a
duly-executed proxy bearing a later date; or (iii) appearing at the Annual
Meeting and giving the Secretary notice of his or her intention to vote in
person. Proxies solicited hereby may be exercised only at the Annual Meeting and
any adjournment thereof and will not be used for any other meeting.
VOTING
Only stockholders of record at the close of business on March 9, 2001
("Voting Record Date") will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 16,431,313 shares of Common Stock outstanding and
the Company had no other class of equity securities outstanding. Each share of
Common Stock is entitled to one vote at the Annual Meeting on all matters
properly presented at the meeting. Directors are elected by a plurality of the
votes cast with a quorum present. The affirmative vote of a majority of the
total votes present in person and by proxy and entitled to vote is required to
ratify the appointment of the independent auditors and to approve the proposal
to amend the Option Plan and Recognition Plan. Abstentions are considered in
determining the presence of a quorum and will not affect the plurality vote
required for the election of directors. However, because of the vote required to
ratify the appointment of the independent auditors and to approve the proposal
to amend the Option Plan and the Recognition Plan, abstentions will have the
effect of a vote against such proposals. Under rules of the New York Stock
Exchange, all of the proposals being considered at the Annual Meeting are
considered "discretionary" items upon which brokerage firms may vote in their
discretion on behalf of their clients if such clients have not furnished voting
instructions. Thus, there are no proposals to be considered at the Annual
Meeting which are considered "non-discretionary" and for which there will be
"broker non-votes".
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INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR
AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides that the Board of
Directors shall be divided into three classes as nearly equal in number as the
then total number of directors constituting the Board of Directors permits. The
directors shall be elected by the stockholders of the Company for staggered
terms and until their successors are elected and qualified.
At the Annual Meeting, stockholders of the Company will be asked to elect
one class of directors, consisting of two directors, for three-year terms
expiring in 2004, and until their successors are elected and qualified.
Mr. Thomas F. Prisby is the brother of James W. Prisby. Mr. Lester is not
related to any other director or executive officer of the Company by blood,
marriage or adoption. Mr. Thomas F. Prisby currently serves as director of the
Company and the Bank. Mr. Lester currently serves as director of the Bank. In
accordance with the Company's Bylaws, the Board nominated Frank D. Lester as a
director of the Company for election at the Annual Meeting.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees for director listed
below. If any person named as a nominee should be unable or unwilling to stand
for election at the time of the Annual Meeting, the proxies will nominate and
vote for any replacement nominee or nominees recommended by the Board of
Directors. At this time, the Board of Directors knows of no reason why any of
the nominees listed below may not be able to serve as a director if elected.
The following tables present information concerning the nominees for
director of the Company, including tenure as a director. Both of the nominees
for director currently serve as directors of the Bank.
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERMS EXPIRING IN 2004
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AGE(1) THE PAST FIVE YEARS SINCE
- ---- ------ --------------------------- --------------
Thomas F. Prisby..................... 59 Chairman of the Board and Chief 1998
Executive Officer of the Company since
1998 and of the Bank since February
1996. Previously, Mr. Prisby served as
the President and Chief Operating
Officer of the Bank from 1989 to 1996.
Mr. Prisby joined the Bank in 1982 as
Executive Vice President. Mr. Thomas F.
Prisby is the brother of Mr. James W.
Prisby.
Frank D. Lester...................... 60 Director of the Bank since 2000. Not Applicable
President of Union Tank Car, Chicago,
Illinois; previously, President of
Procor, Inc., Toronto, Canada, from
1994 to 1999.
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DIRECTORS WHOSE TERMS ARE CONTINUING
DIRECTORS WITH A TERM EXPIRING IN 2002
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AGE(1) THE PAST FIVE YEARS SINCE
---- ------ --------------------------- --------
Sally A. Abbott...................... 66 Director of the Bank since 1986; currently 1998
retired; Ms. Abbott retired from the Bank as a
Vice President in 1994.
Gregory W. Blaine.................... 52 Director of the Bank since 1998; former 1998
Chairman and Chief Executive Officer of TN
Technologies; Mr. Blaine has served in various
capacities with True North Communications,
Inc., the parent of TN Technologies, since
1979, including director of Global Operating
Systems and as a member of the Board from 1990
to 1997.
Thomas J. Burns...................... 67 Director of the Bank since 1994; Mr. Burns has 1998
operated the Burns-Kish Funeral Homes,
Hammond, Indiana, since 1954.
DIRECTORS WITH A TERM EXPIRING IN 2003
Gene Diamond......................... 48 Director of the Bank since 1994; President and 1998
Chief Executive Officer of St. Margaret Mercy
Healthcare Centers, located in Hammond and
Dyer, Indiana, since April 1993.
James W. Prisby...................... 50 Vice Chairman, President and Chief Operating 1998
Officer of the Company since 1998 and of the
Bank since February 1996; previously Executive
Vice President of the Bank from 1993 to 1996
and Corporate Secretary of the Bank from 1977
to 1996. Mr. Prisby joined the Bank in 1974 as
internal auditor.
- ---------------
(1) As of March 9, 2001.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Set forth below is information with respect to the principal occupations
during the last five years for the three executive officers of the Company and
the Bank who do not serve as directors of the Company. All executive officers
are elected annually by the Board of Directors and serve until their successors
are elected and qualified. As of the date hereof, no executive officer set forth
below is related to any director or other executive officer of the Company by
blood, marriage or adoption, and there are no arrangements or understandings
between a director of the Company and any other person pursuant to which such
person was elected an executive officer.
John T. Stephens. Age 56. Mr. Stephens currently serves as Executive Vice
President and Chief Financial Officer of the Company. Mr. Stephens also
currently serves as Executive Vice President, Chief Financial Officer and
Treasurer as well as a director of the Bank and has done so since 1993. Mr.
Stephens joined the Bank in 1983 as Senior Vice President, Chief Financial
Officer and Treasurer.
Jeffrey C. Stur. Age 52. Mr. Stur has served as Senior Vice President of
the Bank for Lending since 1995. Prior to February 1995, Mr. Stur had served as
Vice President of the Bank for Lending since 1980. Mr. Stur has been employed by
the Bank since 1972 and has previously served as a loan officer, a staff
appraiser and the Manager of the Appraisal Department.
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Janice S. Dobrinich. Age 45. Ms. Dobrinich currently is Senior Vice
President of the Bank and the Company. She has served as Senior Vice
President -- Human Resources since 1999. Previously, Ms. Dobrinich served as
Vice President -- Human Resources beginning in 1992. Ms. Dobrinich has been
employed by the Bank since 1977 and has served the Bank as Teller,
Administrative Secretary, Personnel Assistant, Business Services Coordinator,
Personnel Director, Office Manager and Human Resources Manager.
STOCKHOLDER NOMINATIONS
Article IV, Section 4.15 of the Company's Bylaws governs nominations for
election to the Board of Directors and requires all such nominations, other than
those made by the Board of Directors or committee appointed by the Board, to be
made at a meeting of stockholders called for the election of directors, and only
by a stockholder who has complied with the notice provisions in that section.
Stockholder nominations must be made pursuant to timely notice in writing to the
Secretary of the Company. Generally, to be timely, a stockholder's notice must
be delivered to, or mailed, postage prepaid, to the principal executive offices
of the Company not later than 120 days prior to the anniversary date of the
mailing of proxy materials by the Company in connection with the immediately
preceding annual meeting of stockholders of the Company. Each written notice of
a stockholder nomination is required to set forth certain information specified
in the Bylaws. Any such nomination by a stockholder with respect to the Annual
Meeting must have been delivered or received no later than the close of business
on November 27, 2000. No such nominations by stockholders were received.
COMPLIANCE WITH SECTION 16(a) OF THE 1934 ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), requires the officers and directors, and persons who own more than 10% of
the Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and the Nasdaq Stock Market.
Officers, directors and greater than 10% stockholders are required by regulation
to furnish the Company with copies of all Section 16(a) forms they file. The
Company knows of no person who owns 10% or more of the Company's Common Stock.
Based solely on review of the copies of such forms furnished to the
Company, or written representations from its officers and directors, the Company
believes that during, and with respect to, the year 2000, the Company's officers
and directors complied with the reporting requirements promulgated under Section
16(a) of the 1934 Act.
DIRECTOR NOMINATIONS; MEETINGS OF THE BOARD OF THE COMPANY
Nominations for director of the Company are made by the Board of Directors
of the Company. During the fiscal year ended December 31, 2000, the Board of
Directors of the Company met ten (10) times. No director of the Company attended
fewer than 75% of the aggregate of the total number of Board meetings held
during the period for which he or she has been a director and the total number
of meetings held by all committees of the Board on which he or she served during
the periods that he or she served.
COMMITTEES
The Board of Directors of the Company has established an Audit Committee
and a Compensation and Benefits Committee (the "Compensation Committee"), among
others.
The Audit Committee, which is a joint Board committee composed solely of
independent members of the Board of Directors of the Company and the Bank,
reviews the records and affairs of the Company and its financial condition. The
Audit Committee reviews with management and the independent auditors the systems
of internal control and monitors the Company's adherence in accounting and
financial reporting to generally accepted accounting principles. On January 24,
2000, the Audit Committee adopted an Audit Committee Charter. On May 15, 2000,
the Audit Committee amended the Audit Committee Charter, a copy
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of which is attached hereto as Appendix A. The current members of the Audit
Committee are Mr. Blaine, who is Chairman, Ms. Abbott, and Mr. Burns. The Audit
Committee met three (3) times in 2000.
The Compensation Committee is comprised of at least three directors who are
independent of management and the Company. Members of the Compensation Committee
shall be considered independent if they have no relationship to the Company that
may interfere with the exercise of their independence from management and the
Company. All Compensation Committee members are required to be financially
literate, and at least one member will have large company experience in the
areas of human resources and compensation management. During 2000, the members
of the Compensation Committee were Mr. Diamond, who is Chairman, Ms. Abbott, and
Mr. Blaine. No member of the Committee is a current officer or employee of the
Company, the Bank or any of its subsidiaries. Ms. Abbott is a former Vice
President of the Bank who retired in 1994. The Compensation Committee met seven
(7) times in 2000.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting function and internal controls.
Management is responsible for the Company's internal controls and financial
reporting process. The Company's independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon.
The Audit Committee is composed of directors all of whom are independent as
defined by The Nasdaq Stock Market, Inc. listing requirements. The Audit
Committee is governed by an Audit Committee Charter which specifies, among other
things, the scope of the Audit Committee's responsibilities and how those
responsibilities are to be performed. A copy of such charter is attached to this
Proxy Statement as Appendix A. The responsibilities of the Audit Committee
include recommending to the Board an accounting firm to be engaged as the
Company's independent auditors.
The Audit Committee has reviewed and discussed the audited financial
statements with management. In addition, in compliance with applicable
provisions of the Audit Committee Charter, the Audit Committee has discussed
with the Company's independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 "Communication with Audit Committees."
The Audit Committee has received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1
and has discussed with the independent auditors the independent auditor's
independence. Based on the review and discussions referred to above in this
report, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report to
Stockholders, which financial statements were incorporated into the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2000 for
filing with the SEC. The Audit Committee also recommended the selection of Ernst
& Young LLP as the Company's independent auditors for the year ending December
31, 2001.
Sally A. Abbott
Gregory W. Blaine
Thomas J. Burns
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has been established by the Board of Directors
in order to assist in the development and oversight of human resources policies,
compensation policies, incentive plans, stock benefit programs and other
employee compensation and benefits issues. The Compensation Committee also
established policies regarding compensation of the Company's executive officers
and, pursuant to such policies, makes recommendations to the full Board of
Directors for compensation of and benefits to the Company's executive officers.
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The Compensation Committee members recognize that the Company must attract,
retain and motivate the best people to achieve performance goals that reward
management for outstanding performance while serving the financial interests of
the Company and its stockholders.
To do so, the Company must compensate its executives fairly and
competitively in the markets in which it competes. The competitive market for
the Company's executives is primarily banks and thrifts of a similar asset size
located throughout the midwestern United States.
The Company's compensation philosophy is to provide its executives,
including the Chairman and Chief Executive Officer ("CEO"), with conservatively
competitive base salaries along with performance-based annual and long-term
incentives which provide an appropriate balance and focus between near-term and
long-term objectives of the Company. The compensation model for executives of
the Company targets total compensation to be competitive (at least the 50th
percentile) when measured against a range of selected comparable companies,
including financial institutions in the Company's size range. Executive
compensation is comprised of base salary (targeted to the lowest 25th
percentile), short and long-term incentives, and deferred compensation.
In considering the compensation levels for officers of the Company and the
Bank, the Committee reviewed total compensation levels of executives in
comparable positions at selected similar institutions and recommended to the
Board of Directors base and total compensation amounts for each executive based
on such review, among other factors, using a regression formula based on the
Company's $1.7 billion asset size. The Compensation Committee also retained an
independent compensation consultant in order to assist the committee by
preparing a compensation analysis and by compiling compensation data from
various sources, including the latest ECS Financial Institutions Benchmark
Compensation Survey, the most recent BAI Bank Cash Compensation Survey, and the
most recent publicly disclosed compensation data from proxy statements for
selected peer group organizations.
Chairman Prisby's compensation base, targeted to the lowest 25th
percentile, was deemed appropriate and equitable based on:
- the Bank's implementation of its long-term strategic plan to transform
its business model from a traditional thrift to a full-service community
bank and financial center model;
- the Bank's maintenance of capital at adequate levels in excess of
regulatory requirements, sound lending policies, prudent pricing
practices, efficient operating policies and effective investment
management;
- the Bank's implementation of bank-owned life insurance and other tax
expense reduction efforts; and
- management's efforts to enhance stockholder value in a conservative, cost
effective, and revenue generating manner.
While each of the factors described above was considered by the
Compensation Committee, such factors were not assigned a specific weight.
The Compensation Committee is responsible for the approval and
administration of the base salary and annual bonus compensation programs, as
well as awards under the Company's Option Plan and Recognition Plan. In
determining executive compensation levels, the Compensation Committee seeks to
establish salary and bonus levels which will attract and retain qualified
executives when considered with other components of the Company's compensation
structure. The Committee also considers specific annual performance criteria,
and looks to create compensation plans that reward executive officers for
continuous improvement in those areas which contribute to increases in
stockholder value.
The level of any salary increase will be based upon an executive's job
performance over the year in conjunction with the Company's goals of
profitability, growth, and customer satisfaction. Economic conditions and peer
group compensation surveys will provide additional information to support the
compensation planning process.
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Under the Option Plan, the Compensation Committee determines which
officers, key employees and non-employee directors will be granted options,
whether such options will be granted options as incentive or compensatory
options (in case of options to employees), the number of shares subject to each
option, the exercise price of each option and whether such options may be
exercised by delivering other shares of Common Stock. During fiscal 2000, 98
individuals were granted an aggregate of 244,650 options, 227,200 options were
cancelled, leaving a total of 433,325 shares remaining available for issuance
under the Option Plan as of year end. Awards to the Company's executive officers
are reviewed by the Company's compensation consultants and other professionals,
including the Company's accountants and attorneys, as to propriety and
reasonableness as compared to historical levels of grants within the financial
services industry.
Base pay levels for Messrs. Thomas Prisby and James Prisby were not
adjusted in fiscal 2000. Base pay levels for Messrs. Stephens, Stur and Ms.
Dobrinich were adjusted by 2.7%, 13.4% and 10.0%, respectively effective April
2000. Messrs. Thomas Prisby, James Prisby, Stephens and Stur were granted
options of 35,000, 30,000, 10,000 and 5,000 shares, respectively, in fiscal
2000.
In September 2000, the Bank purchased split dollar whole life insurance
policies for the benefit of Messrs. Thomas Prisby and James Prisby. The policies
were issued in their name, but the Bank has agreed to pay all premiums as
required until they terminate their employment or retire from the Bank. However,
as a part of such agreement, the executives have assigned to the Bank their
interest in the policies to the extent of the cash surrender value and death
benefit thereof equal to the premiums paid. Upon their death, any proceeds
remaining, after reimbursing the Bank for the total amount of premiums paid,
will be paid to their beneficiaries under the policies.
Officers, key employees and directors of the Company who are selected by
the Compensation Committee are eligible to receive benefits under the
Recognition Plan. During fiscal 2000, there were no awards made under the
Recognition Plan.
Sally A. Abbott
Gregory W. Blaine
Gene Diamond
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Determinations regarding compensation of the Company's and Bank's employees
are made by the Compensation Committee of the Board of Directors. Ms. Abbott,
who was formerly a Vice President of the Bank until her retirement in 1994, and
Messrs. Diamond and Blaine, are the current members of the Compensation
Committee, and also serve as directors of the Bank.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information concerning
the compensation paid by the Bank for services rendered in all capacities during
the years ended December 31, 2000, 1999 and 1998 to the Chairman and Chief
Executive Officer and the four other highest paid executive officers of the
Company, and its subsidiaries, whose total annual compensation during fiscal
2000 exceeded $100,000. Said officers do not receive separate compensation from
the Company.
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------- -----------------------------------------
AWARDS PAYOUTS
OTHER ----------------------------- -----------
ANNUAL SECURITIES
NAME AND BONUS COMPENSATION RESTRICTED UNDERLYING LTIP
PRINCIPAL POSITION YEAR SALARY (1)(2) (3)(4) STOCK(5) OPTIONS PAYOUTS
-----------------------------------------------------------------------------------------------------------------
Thomas F. Prisby 2000 $322,809 $63,737 $ 44,048 -- 35,000 --
Chairman and Chief 1999 $348,964 $57,840 $204,907 $1,400,000 210,000 --
Executive Officer 1998 $356,383 $89,060 $139,272 -- -- --
-----------------------------------------------------------------------------------------------------------------
James W. Prisby 2000 $277,524 $56,133 $ 27,331 -- 30,000 --
President and Chief 1999 $308,732 $50,804 $180,660 $1,100,000 165,000 --
Operating Officer 1998 $314,830 $78,627 $119,607 -- -- --
-----------------------------------------------------------------------------------------------------------------
John T. Stephens 2000 $209,333 $37,965 $ 12,743 -- 10,000 --
Executive Vice President 1999 $224,222 $33,716 $ 78,966 $ 800,000 120,000 --
and Chief Financial Officer 1998 $231,990 $57,733 $ 53,245 -- -- --
-----------------------------------------------------------------------------------------------------------------
Jeffrey C. Stur 2000 $100,096 $15,946 -- -- 5,000 --
Senior Vice President -- 1999 $ 98,787 $12,932 -- $ 175,000 25,000 --
Commercial Lending 1998 $ 98,191 $46,223 -- -- -- --
-----------------------------------------------------------------------------------------------------------------
Janice S. Dobrinich 2000 $ 87,692 $14,089 -- -- -- --
Senior Vice President -- 1999 $ 84,279 $11,176 -- $ 250,000 30,000 --
Human Resources 1998 $ 72,387 $45,219 -- -- -- --
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- ----------------------------- ----------------
- ----------------------------- ----------------
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION (6)(7)(8)
----------------
Thomas F. Prisby $50,272
Chairman and Chief $58,550
Executive Officer $30,001
---------------------------------------------------------------------------
James W. Prisby $45,134
President and Chief $49,106
Operating Officer $30,001
------------------------------------------------------------------------------------------------------------
John T. Stephens $36,174
Executive Vice President $40,152
and Chief Financial Officer $28,893
----------------------------------------------------------------------------------------------------------------- -----------
- -----
Jeffrey C. Stur $19,388
Senior Vice President -- $22,608
Commercial Lending $25,733
----------------------------------------------------------------------------------------------------------------- -----------
- -----
Janice S. Dobrinich $16,858
Senior Vice President -- $12,023
Human Resources $20,995
-----------------------------------------------------------------------------------------------------------------
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- ------
----------------
- ---------------
(1) For fiscal 2000 includes incentive based bonuses payable in fiscal 2001
based upon 2000 results.
(2) For fiscal 1999, includes incentive-based compensation bonuses which were
paid in fiscal 2000 based on 1999 results. This was a new program in fiscal
1999, and the amount of the individual bonuses had not been determined prior
to distribution of proxy materials for the 2000 Annual Meeting.
(3) Does not include amounts attributable to miscellaneous benefits received by
the named executive officers. In the opinion of management of the Company,
the costs to the Bank of providing such benefits to each of the named
executive officers during the fiscal year ended December 31, 2000 did not
exceed the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for each individual.
(4) Reflects the payment of deferred supplemental retirement benefits in the
amount equal to the difference between the benefits that would be payable
under the Bank's retirement plans but for the limitation set forth in the
Internal Revenue Code of 1986, as amended (the "Code"), with respect to
includable compensation and the maximum benefit payable under the Bank's
retirement plans. Includable compensation does not include supplemental
retirement benefit ("SERP") payments or Recognition Plan benefits.
(5) Represents the grant of 140,000, 110,000, 80,000, 17,500 and 25,000 shares
of restricted Common Stock to Messrs. Thomas Prisby, James Prisby, Stephens,
and Stur and Ms. Dobrinich, respectively, pursuant to the Recognition Plan
which were deemed to have had the indicated value at the date of grant, and
which, with respect to the portion of the grants which remains unvested, had
a fair market value at December 31, 2000 of $1,197,000, $940,500, $684,000,
$149,625 and $213,750, respectively. The awards
(Footnotes continued on following page.)
9
12
vest 20% per year from the date of grant. Dividends paid on the restricted
Common Stock are held by the Recognition Plan and paid to the recipient
when the restricted stock vests.
(6) For fiscal 2000, consists of the Bank's contributions to the Bank's 401(k)
profit sharing plan of $5,100, $5,100, $5,100, $3,409 and $2,975 for the
accounts of Messrs. Thomas Prisby, James Prisby, Stephens and Stur and Ms.
Dobrinich, respectively; $23,651, $23,651, $23,593, $15,929 and $13,883
allocated on behalf of Messrs. Thomas Prisby, James Prisby, Stephens and
Stur and Ms. Dobrinich, respectively, pursuant to the Company's Employee
Stock Ownership Plan ("ESOP") and $21,380, $16,232, and $7,481 allocated to
Messrs. Thomas Prisby, James Prisby and Stephens, respectively, pursuant to
an excess benefit plan for amounts not allocated under the ESOP due to
limits under the Code (the "ESOP SERP"). Also includes, for fiscal year
2000, the present value of the premiums paid as well as the term insurance
paid in each such period for split life insurance purchased by the Bank on
behalf of Messrs. Thomas Prisby and James Prisby.
(7) For fiscal 1999, consists of the Bank's contributions to the Bank's 401(k)
profit sharing plan of $4,800, $5,099, $4,800, $3,124 and $2,575 for the
accounts of Messrs. Thomas Prisby, James Prisby, Stephens and Stur and Ms.
Dobrinich, respectively; contributions of $17,356, 17,356, $17,305, $11,104
and $9,448 for the Accounts of Messrs. Thomas Prisby, James Prisby, Stephens
and Stur and Ms. Dobrinich, respectively, pursuant to the ESOP; and
contributions of $36,395, $26,652 and $18,048 allocated to Messrs. Thomas
Prisby, James Prisby, and Stephens, respectively, pursuant to the ESOP SERP.
(8) For fiscal 1998, includes Bank's contribution to its 401(k) plan allocated
on behalf of Messrs. Thomas Prisby, James Prisby, Stephens and Stur and Ms.
Dobrinich of $9,600, $9,600, $10,000, $7,320 and $6,000, respectively, and
allocations of $20,401, $20,401, $18,893, $18,413 and $14,995, respectively,
pursuant to the ESOP.
STOCK OPTIONS
The following table sets forth certain information concerning grants of
stock options awarded to the named executive officers during the fiscal year
ended December 31, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS GRANT DATE
% OF TOTAL VALUE
OPTIONS OPTIONS GRANTED EXERCISE EXPIRATION GRANT DATE
NAME GRANTED(1) TO EMPLOYEES(2) PRICE(3) DATE PRESENT VALUE(4)
- -------------------------------------------------------------------------------------------------------------------
Thomas F. Prisby 35,000 15.5% $8.50 5/15/10 $77,000
- -------------------------------------------------------------------------------------------------------------------
James W. Prisby 30,000 13.3 $8.50 5/15/10 $66,000
- -------------------------------------------------------------------------------------------------------------------
John T. Stephens 10,000 4.4 $8.50 5/15/10 $22,000
- -------------------------------------------------------------------------------------------------------------------
Jeffrey C. Stur 5,000 2.2 $8.44 3/20/10 $10,900
- ---------------
(1) Consists of stock options exercisable at the rate of 20% per year from the
date of grant.
(2) Percentage of options granted to all employees during fiscal 2000.
(3) In all cases the exercise price was based on the fair market value of a
share of Common Stock on the date of grant.
(4) The fair value of the options granted was estimated using the Black-Scholes
Pricing Model. Under such analysis, the risk-free interest rate was assumed
to be 5.9%, the expected life of the options to be eight years, the expected
volatility to be 26.0% and an expected dividend yield of 3.6%.
10
13
The following table sets forth certain information concerning exercises of
stock options by the named executive officers during the fiscal year ended
December 31, 2000 and options held at December 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
NUMBER OF UNEXERCISED OPTIONS
AT YEAR END
SHARES ACQUIRED VALUE -------------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------
Thomas F. Prisby -- -- 42,000 203,000
- ------------------------------------------------------------------------------------------------
James W. Prisby -- -- 33,000 162,000
- ------------------------------------------------------------------------------------------------
John T. Stephens -- -- 24,000 106,000
- ------------------------------------------------------------------------------------------------
Jeffrey C. Stur -- -- 5,000 25,000
- ------------------------------------------------------------------------------------------------
Janice S. Dobrinich -- -- 6,000 24,000
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- --------------------- -------------------------------------
- --------------------- -------------------------------------
VALUE OF UNEXERCISED OPTIONS
AT YEAR END(1)
-------------------------------------
NAME EXERCISABLE UNEXERCISABLE
- --------------------- -------------------------------------
Thomas F. Prisby $28,875 $192,063
- ------------------------------------------------------------------------------------------------ ---------------------------------
James W. Prisby $22,688 $156,365
- ------------------------------------------------------------------------------------------------ ---------------------------------
John T. Stephens $16,500 $ 87,875
- ------------------------------------------------------------------------------------------------ ---------------------------------
Jeffrey C. Stur $13,438 $ 24,988
- ------------------------------------------------------------------------------------------------ ---------------------------------
Janice S. Dobrinich $ 4,125 $ 16,500
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------ ---------------------------------
- ---------------
(1) Based on a per share market price of $10.6875 at December 31, 2000.
EMPLOYMENT AGREEMENTS
In connection with the conversion of the Bank from a federally chartered
mutual savings bank to a federally chartered stock savings bank, the Company and
the Bank (the "Employers") entered into employment agreements with each of
Messrs. Thomas Prisby, James Prisby and Stephens (the "Executives"), which
agreements superseded existing employment agreements with such persons. The
Employers agreed to employ the Executives for a term of three years, in each
case in their current respective positions. The agreements with the Executives
are at their current salary levels. The Executives' compensation and expenses
are paid by the Employers in the same proportion as the time and services
actually expended by the Executives on behalf of each respective Employer. The
employment agreements are reviewed annually by the Boards of Directors of the
Employers. The term of the Executives' employment agreements are extended daily
for a successive additional one-day period unless the Employers provide notice
not less than 60 days prior to such date, not to extend the employment term.
Each of the employment agreements is terminable with or without cause by
the Employers. The Executives have no right to compensation or other benefits
pursuant to the employment agreements for any period after voluntary termination
or termination by the Employers for cause, disability, retirement or death. In
the event that (i) the Executive terminates his employment because of failure to
comply with any material provision of the employment agreement by the Employers
or the Employers change the Executive's title or duties or (ii) the employment
agreement is terminated by the Employers other than for cause, disability,
retirement or death or by the Executive as a result of certain adverse actions
which are taken with respect to the Executive's employment following a change in
control of the Company, as defined, the Executive will be entitled to a cash
severance amount equal to three times his average annual compensation, as
defined, plus an amount to reimburse the Executive for certain tax obligations
per Section 280(G) of the Code.
A change in control is generally defined in the employment agreements to
include any change in control of the Company required to be reported under the
federal securities laws, as well as (i) the acquisition by any person of 20% or
more of the Company's outstanding voting securities and (ii) a change in a
majority of the directors of the Company during any three-year period without
the approval of at least two-thirds of the persons who were directors of the
Company at the beginning of such period.
Although the above-described employment agreements could increase the cost
of any acquisition of control of the Company, management of the Company does not
believe that the terms thereof would have a significant anti-takeover effect.
The Company and/or the Bank may determine to enter into similar employment
agreements with other officers of the Company and/or the Bank in the future.
11
14
DIRECTORS' COMPENSATION
Members of the Bank's Board of Directors receive $1,800 per meeting
attended of the Board, $350 per Compensation Committee meeting, $250 per
Executive Committee meeting, $300 per Audit Committee meeting, $175 per Asset
Liability Management Committee meeting and $100 per Trust Committee meeting
attended. Mr. Daniel P. Ryan also received $250 per meeting of the Advisory
Board. Messrs. Thomas Prisby, James Prisby and Stephens do not receive fees for
any committees on which they serve. Board fees are subject to periodic
adjustment by the Board of Directors.
RETIREMENT PLAN
The Bank maintains a non-contributory, tax-qualified defined benefit
pension plan (the "Retirement Plan") for eligible employees. All salaried
employees at least age 21 who have completed at least one year of service are
eligible to participate in the Retirement Plan. The Retirement Plan provides for
a benefit for each participant, including executive officers named in the
Executive Compensation Table above, equal to 1.5% of the participant's final
average compensation (highest average annual compensation during 60 consecutive
calendar months) multiplied by the participant's years (and any fraction
thereof) of eligible employment. A participant is fully vested in his or her
benefit under the Retirement Plan after five years of service. The Retirement
Plan is funded by the Bank on an actuarial basis and all assets are held in
trust by the Retirement Plan trustee.
The following table illustrates the annual benefit payable upon normal
retirement at age 65 at various levels of compensation and years of service
under the Retirement Plan.
YEARS OF SERVICE(1)(2)
------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- ------- ------- --------
$ 80,000.................................... $18,000 $24,000 $30,000 $36,000 $ 42,000
100,000.................................... 22,500 30,000 37,500 45,000 52,500
120,000.................................... 27,000 36,000 45,000 54,000 63,000
140,000.................................... 31,500 42,000 52,500 63,000 73,500
160,000.................................... 36,000 48,000 60,000 72,000 84,000
180,000.................................... 40,500 54,000 67,500 81,000 94,500
200,000.................................... 45,000 60,000 75,000 90,000 105,000
220,000.................................... 49,500 66,000 82,500 99,000 115,500
- ---------------
(1) The annual retirement benefits shown in the table are single life annuity
amounts with no offset for Social Security benefits. There are no other
offsets to benefits.
(2) For the fiscal year of the Retirement Plan beginning on July 1, 2000, the
average final compensation used to compute benefits under the Retirement
Plan did not exceed $170,000 in accordance with the Code (as adjusted for
subsequent years pursuant to Code provisions). Benefits in excess of the
limitation are provided through cash payments made annually to each officer
affected by such limitation. For the fiscal year of the Retirement Plan
beginning on July 1, 2000, the maximum annual benefit payable under the
Retirement Plan was $140,000 (as adjusted for subsequent years pursuant to
Code provisions). The maximum years of service credited for benefit purposes
is not limited.
12
15
The following table sets forth the years of credited service and the
average annual earnings (as defined above) determined as of June 30, 2000, the
end of the 1999 plan year, for each of the individuals named in the Summary
Compensation Table.
YEARS OF AVERAGE ANNUAL
CREDITED SERVICE EARNINGS(1)
---------------- --------------
Thomas F. Prisby......................................... 17 $170,000
James W. Prisby.......................................... 25 $170,000
John T. Stephens......................................... 16 $170,000
Jeffrey C. Stur.......................................... 27 $112,443
Janice S. Dobrinich...................................... 23 $ 89,754
- ---------------
(1) Reflects effect of limitation of the amount of compensation that may be used
in calculating benefits under the provisions of the Code.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
In accordance with applicable federal laws and regulations, the Bank offers
mortgage loans to its directors, officers and employees as well as members of
their immediate families for the financing of their primary residences and
certain other loans. These loans are generally made on substantially the same
terms as those prevailing at the time for comparable transactions with
non-affiliated persons. It is the belief of management that these loans neither
involve more than the normal risk of collectibility nor present other
unfavorable features.
Section 22(h) of the Federal Reserve Act generally provides that any credit
extended by a savings institution, such as the Bank, to its executive officers,
directors and, to the extent otherwise permitted, principal stockholder(s), or
any related interest of the foregoing, must be on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions by the savings institution with non-affiliated parties;
unless the loans are made pursuant to a benefit or compensation program that (i)
is widely available to employees of the institution and (ii) does not give
preference to any director, executive officer or principal stockholder, or
certain affiliated interests of either, over other employees of the savings
institution, and must not involve more than the normal risk of repayment or
present other unfavorable features.
13
16
PERFORMANCE GRAPH
The following graph demonstrates comparison of the cumulative total returns
for the Common Stock, the S&P 500, and the SNL $1B-$5B Thrift Index from the
close of trading on July 24, 1998, the date the Common Stock commenced trading,
to the close of trading on December 31, 2000.
CFS BANCORP, INC.
TOTAL RETURN PERFORMANCE
[PERFORMANCE GRAPH]
- -----------------------------------------------------------------------------------------------------------
Period Ending
-----------------------------------------------------------------------
Index 07/24/98 12/31/98 06/30/99 12/31/99 06/30/00 12/31/00
- -----------------------------------------------------------------------------------------------------------
CFS Bancorp, Inc. 100.00 88.77 98.02 84.80 85.06 101.21
- -----------------------------------------------------------------------------------------------------------
S&P 500 100.00 108.47 121.90 131.29 130.74 119.34
- -----------------------------------------------------------------------------------------------------------
SNL $1B-$5B Thrift Index 100.00 85.25 87.37 76.34 71.13 92.28
- -----------------------------------------------------------------------------------------------------------
The above graph represents $100 invested in the Common Stock at $11.4375
per share, the closing price per share as of July 24, 1998, the date it
commenced trading on the Nasdaq Stock Market. The cumulative total returns
include the payment of dividends by the Company.
14
17
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes, as of the Voting Record Date, certain
information as to the Common Stock beneficially owned by (i) the only persons or
entities, including any "group" as that term is used in Section 13(d)(3) of the
1934 Act, who or which was known to the Company to be the beneficial owner of
more than 5% of the issued and outstanding Common Stock, (ii) the directors and
director nominees of the Company, (iii) certain executive officers of the
Company, and (iv) all directors, director nominees and executive officers of the
Company as a group.
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP AS OF PERCENT OF
OR NUMBER OF PERSONS IN GROUP MARCH 9, 2001(1) COMMON STOCK
- ----------------------------- ----------------- ------------
CFS Bancorp, Inc. .......................................... 1,415,874(2) 8.62%
Employee Stock Ownership Plan
707 Ridge Road
Munster, Indiana 46321
Thomson Horstmann & Bryant, Inc. ........................... 1,568,800 9.55%
Park 80 West/Plaza One
Saddle Brook, New Jersey 07663
Directors and Director Nominees:
Sally A. Abbott............................................. 46,918(3)(4) *
Gregory W. Blaine........................................... 28,350(5) *
Thomas J. Burns............................................. 20,800(6) *
Gene Diamond................................................ 66,979(7) *
James W. Prisby............................................. 316,920(3)(8) 1.93%
Thomas F. Prisby............................................ 324,991(3)(9) 1.98%
Daniel P. Ryan.............................................. 281,214(10) 1.71%
Frank D. Lester............................................. 756 *
Other Executive Officers:
John T. Stephens............................................ 198,416(3)(11) 1.21%
Jeffrey C. Stur............................................. 50,039(12) *
Janice S. Dobrinich......................................... 52,521(13) *
All directors, director nominees, and executive officers of
the Company as a group (11 persons)....................... 1,387,904(2) 8.45%
- ---------------
* Represents less than 1% of the outstanding stock.
(1) Based upon filings made pursuant to the 1934 Act and information furnished
by the respective individuals. Under regulations promulgated pursuant to
the 1934 Act, shares of Common Stock are deemed to be beneficially owned by
a person if he or she directly or indirectly has or shares (i) voting
power, which includes the power to vote or to direct the voting of the
shares, or (ii) investment power, which includes the power to dispose or to
direct the disposition of the shares. Unless otherwise indicated, the named
beneficial owner has sole voting and dispositive power with respect to the
shares.
(2) The ESOP was established by an agreement between the Company and Messrs.
James Prisby and Stephens and Ms. Dobrinich who act as trustees of the plan
("Trustees"). Under the terms of the ESOP, the allocated shares held in the
ESOP will be voted in accordance with the instructions of the participating
employees. Unallocated shares held in the ESOP will generally be voted in
the same ratio on any matter as those allocated shares for which
instructions are given, subject in each case to the
(Footnotes continued on following page.)
15
18
fiduciary duties of the ESOP trustees and applicable law. Any allocated
shares which either abstain on the proposal or are not voted will be
disregarded in determining the percentage of stock voted for and against
each proposal by the participants and beneficiaries. As of the Voting
Record Date, 348,850 shares held by the ESOP had been allocated to the
accounts of participating employees. The amount of Common Stock
beneficially owned by directors who serve as Trustees of the ESOP and by
all directors and executive officers as a group does not include the
unallocated shares held by the ESOP.
(3) Includes with respect to Ms. Abbott and Messrs. James Prisby, Thomas Prisby
and Stephens 9,078, 16,137, 19,510, and 14,384 shares, respectively, held
by a trust established by the Company to fund its obligations with respect
to deferred supplemental retirement benefits. Ms. Abbott and Messrs.
Stephens, James Prisby and Thomas Prisby each disclaim beneficial ownership
of such shares except to the extent of their personal pecuniary interests
therein.
(4) Includes 4,800 shares subject to stock options exercisable within 60 days
of March 9, 2001 and 12,800 shares held in the Recognition Plan allocated
to Ms. Abbott.
(5) Includes 4,800 shares subject to stock options exercisable within 60 days
of March 9, 2001, 10,800 shares held in the Recognition Plan allocated to
Mr. Blaine, and 50 shares held by Mr. Blaine's children living at his home.
(6) Includes 4,800 shares subject to stock options exercisable within 60 days
of March 9, 2001 and 12,800 shares held in the Recognition Plan allocated
to Mr. Burns.
(7) Includes 4,800 shares subject to stock options exercisable within 60 days
of March 9, 2001, 12,800 shares held in the Recognition Plan allocated to
Mr. Diamond and 1,170 shares held in an individual retirement plan.
(8) Includes 66,000 shares subject to stock options exercisable within 60 days
of March 9, 2001, 88,000 shares held in the Recognition Plan allocated to
Mr. James Prisby, 6,104 shares allocated to him pursuant to the ESOP,
28,406 shares held in the Bank's 401(k) profit sharing plan, 66,773 shares
held in the James W. Prisby Trust for which Mr. James Prisby is the trustee
and sole beneficiary, 23,000 shares held by Mr. Prisby as custodian for
Phillip Prisby, his son, and 22,500 shares held in a trust for the spouse
of Mr. James Prisby.
(9) Includes 84,000 shares subject to stock options exercisable within 60 days
of March 9, 2001, 112,000 shares held in the Recognition Plan allocated to
Mr. Thomas Prisby, 6,104 shares allocated to him pursuant to the ESOP,
15,648 shares held in the Bank's 401(k) profit sharing plan, 25,150 shares
held in a trust of which Mr. Thomas Prisby is the trustee and sole
beneficiary, 7,310 shares in an individual retirement account and 27,269
shares in a trust for the spouse of Mr. Thomas Prisby.
(10) Includes 10,800 shares which Mr. Ryan has the right to acquire pursuant to
options granted under the stock option plans assumed in the acquisition of
SuburbFed Financial Corp., 24,005 shares received from the Company's ESOP,
42,308 shares rolled over from the Bank's 401(k) profit sharing plan into
Mr. Ryan's individual retirement account, and 10,400 shares subject to
stock options under the Option Plan exercisable within 60 days of March 9,
2001. Mr. Ryan will not be serving as a director subsequent to the Annual
Meeting and the election of his successor.
(11) Includes 48,000 shares subject to stock options which are exercisable
within 60 days of March 9, 2001, 64,000 shares held in the Recognition Plan
allocated to Mr. Stephens, 5,943 shares allocated to him pursuant to the
ESOP, 22,165 shares held in the Bank's 401(k) profit sharing plan and
14,980 shares owned by Mr. Stephens' spouse and daughter.
(12) Includes 11,000 shares subject to stock options which are exercisable
within 60 days of March 9, 2001, 14,000 shares held in the Recognition Plan
allocated to Mr. Stur, 3,022 shares allocated to him pursuant to the ESOP,
13,294 shares held for him in the Bank's 401(k) profit sharing plan 100
shares owned by his son and 5,000 shares owned jointly with Mr. Stur's
spouse.
(13) Includes 12,000 shares subject to stock options which are exercisable
within 60 days of March 9, 2001, 20,000 shares held in the Recognition Plan
allocated to Ms. Dobrinich, 2,505 shares allocated to her pursuant to the
ESOP and 13,670 shares held for her in the Bank's 401(k) profit sharing
plan.
16
19
PROPOSAL TO AMEND THE 1998 STOCK OPTION PLAN AND THE 1998 RECOGNITION
AND RETENTION PLAN AND TRUST AGREEMENT
The Board of Directors of the Company adopted the Option Plan and the
Recognition Plan (together, the "1998 Plans"), both of which were approved by
stockholders of the Company at a Special Meeting of stockholders held on
February 3, 1999. The Company had completed its Conversion and the related
acquisition of SuburbFed Financial Corp. in 1998. Under applicable regulations
of the Office of Thrift Supervision (the "OTS"), stock benefit plans, such as
the 1998 Plans, established or implemented within one year following the
completion of a mutual to stock conversion are required to contain certain
restrictions and limitations. Specifically, the OTS regulations provide, among
other provisions, that awards granted pursuant to such plans begin vesting no
earlier than one year from the date the awards are granted, shall not vest at a
rate in excess of 20% per year and shall not provide for accelerated vesting
except in the case of disability or death. Under the 1998 Plans, in the event of
a change in control of the Company or retirement of the recipient (as defined),
vesting of awards would accelerate if, as of such date, such treatment is either
authorized or is not prohibited by applicable law and regulations.
The OTS has authorized the removal of these limitations regarding
accelerated vesting and vesting rates more than one year after a mutual to stock
conversion, provided that stockholder approval of such amendments to the 1998
Plans is obtained. The Board of Directors of the Company has adopted amendments
to the 1998 Plans, subject to approval by the stockholders, removing the
restrictions described above and providing that (a) new awards shall vest at the
rate determined by the Board or the committee of the Board administering the
1998 Plans (the "Committee") and (b) both existing and new awards shall
accelerate and vest upon a change in control of the Company or upon retirement,
as defined in the 1998 Plans. The 1998 Plans were also amended for conforming
changes including reducing the retirement age for non-employee directors under
the 1998 Plans to 60. These amendments are consistent with the Company's
intentions when it originally adopted the 1998 Plans and such intentions were
fully disclosed in the proxy materials for the Special Meeting.
A copy of the amended Option Plan is attached hereto as Appendix B. A copy
of the amended and restated Recognition Plan is attached hereto as Appendix C.
OTS policy requires that these amendments be presented to stockholders more
than one year after a mutual to stock conversion. The amendments do not increase
the number of shares reserved for issuance under the 1998 Plans or change the
vesting schedule or terms of existing awards under the 1998 Plans, other than to
accelerate the vesting upon a change in control or retirement.
In the event that these amendments to the 1998 Plans are not approved by
stockholders, the vesting of existing awards will not accelerate in the event of
a change in control or retirement (unless authorized at such time or not
prohibited by applicable laws or regulations) and the retirement age of
non-employee directors for purposes of the 1998 Plans will not be reduced, but
the other provisions of the 1998 Plans will remain in effect as originally
adopted.
The Company is not in discussions with respect to any transaction that
would result in a change in control of the Company, and there are no proposals,
arrangements or understandings known to the Company that would result in a
change in control.
The amendments to the 1998 Plans will be deemed to be modifications of
existing options and stock grants made under such plans under the terms of
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation" (the "Interpretation") issued by the Financial Accounting
Standards Board. As a result, upon receipt of stockholder approval, a new
measurement date for determining compensation expense of the existing options
and stock grants will be established. The difference between the fair value of
the Common Stock on April 24, 2001 (the assumed date of approval) and the fair
value of the Common Stock on the original grant dates of the existing options
and stock grants will be treated as compensation expense. The Company has
completed its analysis of the effect of the Interpretation on the Company's
results of operation and, based on current circumstances, does not expect it to
be material.
17
20
The 1998 Plans were adopted by the Company to attract and retain qualified
personnel in key positions, provide officers and employees with a proprietary
interest in the Company as an incentive to contribute to the success of the
Company and reward key employees for outstanding performance. The 1998 Plans are
also designed to retain qualified directors for the Company. The Option Plan
provides for the grant of incentive stock options intended to comply with the
requirements of Section 422 of the Code ("incentive stock options"),
non-incentive or compensatory stock options and stock appreciation rights.
Awards are available for grant to non-employee directors and key employees
of the Company and any subsidiaries, except that non-employee directors are
eligible to receive only awards of non-qualified stock options. Officers, key
employees and non-employee directors of the Company and its subsidiaries who are
selected by the Committee are eligible to receive restricted stock awards under
the Recognition Plan. The 1998 Plans are administered and interpreted by the
Committee, which is comprised solely of two or more non-employee directors. The
members of the Committee currently consist of the members of the Compensation
Committee.
Under the Option Plan, the Committee determines which officers, key
employees and non-employee directors will be granted options and stock
appreciation rights, whether such options will be incentive or compensatory
options (in the case of options granted to employees), the number of shares
subject to each option, the exercise price of each option, whether such options
may be exercised by delivering other shares of Common Stock and when such
options become exercisable. The per share exercise price of a stock option shall
be at least equal to the fair market value of a share of Common Stock when the
option is granted. Under the Recognition Plan, the Committee determines which
officers, key employees and non-employee directors will be granted plan share
awards, the number of shares subject to each award and the vesting schedule of
such awards.
As of March 9, 2001, options to purchase 1,356,850 shares of Common Stock
have been granted and are outstanding under the Option Plan, and 428,525 shares
remain available for future grants under the Option Plan. Included in the grants
under the Option Plan were options covering 245,000 shares to Mr. Thomas Prisby,
195,000 shares to Mr. James Prisby, 130,000 shares to Mr. Stephens, 30,000
shares each to Mr. Stur and Ms. Dobrinich, 26,000 shares to Mr. Ryan, and 12,000
shares to the remaining non-employee directors (five persons).
As of March 9, 2001, restricted stock awards for 707,000 shares have been
granted, 8,800 shares have been cancelled, and 15,950 shares remain available
for restricted stock awards under the Recognition Plan. Included in the
restricted stock awards under the Recognition Plan were awards for 140,000
shares to Mr. Thomas Prisby, 110,000 shares to Mr. James Prisby, 80,000 shares
to Mr. Stephens, 17,500 shares to Mr. Stur, 25,000 shares to Ms. Dobrinich,
16,000 shares each to Messrs. Burns and Diamond and Ms. Abbott, and 13,500
shares to Mr. Blaine. Previously granted awards under the 1998 Plans will vest
at the rate of 20% per year over five years. The proposed amendments to the 1998
Plans will not affect the number of shares previously granted nor change the
vesting schedule of outstanding awards under the 1998 Plans, but will provide
that outstanding awards and newly granted awards will accelerate in certain
circumstances as described above.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR ADOPTION OF
THE AMENDMENTS TO THE OPTION PLAN AND THE 1998 RECOGNITION PLAN TO REDUCE THE
RETIREMENT AGE OF NON-EMPLOYEE DIRECTORS TO 60, AND TO PROVIDE THAT ANY FUTURE
AWARDS GRANTED MAY VEST AT THE RATE DETERMINED BY THE BOARD OF DIRECTORS OR THE
COMMITTEE AND THAT BOTH EXISTING AND FUTURE AWARDS GRANTED UNDER THE 1998 PLANS
WILL ACCELERATE UNDER CERTAIN CIRCUMSTANCES.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Ernst & Young LLP,
independent certified public accountants, to perform the audit of the Company's
financial statements for the year ending December 31, 2001 and further directed
that the selection of auditors be submitted for ratification by the stockholders
at the Annual Meeting.
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The Company has been advised by Ernst & Young LLP that neither that firm
nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
certified public accountants and clients. Ernst & Young LLP will have one or
more representatives at the Annual Meeting who will have an opportunity to make
a statement, if they so desire, and will be available to respond to appropriate
questions.
The Audit Committee has considered, in determining whether to appoint Ernst
& Young LLP as the Company's auditors, whether the provision of services, other
than auditing services, by Ernst & Young LLP is compatible with maintaining the
auditor's independence. In addition to performing auditing services, the
Company's auditor performed other tax and audit-related services for the Company
in fiscal 2000. These other services included completing corporate tax returns,
and reviewing and advising the Company regarding its internal control and
auditing programs for the Company. The Audit Committee believes that Ernst &
Young LLP's performance of these other services is compatible with maintaining
the auditor's independence.
AUDIT FEES
Aggregate amount of the fees billed by Ernst & Young LLP for its audit of
the Company's annual financial statements for fiscal 2000 and for its review of
the Company's unaudited interim financial statements included in reports filed
by the Company under the Exchange Act during such year was $117,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
The Company did not engage or pay any fees to Ernst & Young LLP with
respect to the provision of financial information systems design and
implementation services during fiscal 2000.
AUDIT-RELATED AND OTHER FEES
Ernst & Young LLP billed an additional $67,225 for its audit-related
services, which consisted primarily of reviewing and advising the Company
regarding its internal control and internal audit programs. The aggregate of
fees billed by Ernst & Young LLP for all other services rendered during fiscal
2000 was $89,568, all of which were paid in fiscal 2000. These services
consisted primarily of preparing state and local income tax returns and other
tax-related services.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2001.
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is scheduled to be held in April 2002, must be received at
the principal executive offices of the Company, 707 Ridge Road, Munster, Indiana
46321, Attention: Monica F. Sullivan, Corporate Secretary, no later than
November 23, 2001. If such proposal is in compliance with all of the
requirements of Rule 14a-8 under the 1934 Act, it will be included in the proxy
statement and set forth on the form of proxy issued for such annual meeting of
stockholders. It is urged that any such proposals be sent certified mail, return
receipt requested.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the 1934 Act may be
brought before an annual meeting pursuant to Section 2.14 of the Company's
Bylaws. Any such proposal must also be received no later than November 23, 2001.
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ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 2000 accompanies this Proxy Statement. Such annual report is not
part of the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR FISCAL 2000 REQUIRED TO BE FILED UNDER THE 1934 ACT. SUCH WRITTEN REQUEST
SHOULD BE DIRECTED TO THE COMPANY, 707 RIDGE ROAD, MUNSTER, INDIANA 46321,
ATTENTION: MONICA SULLIVAN, CORPORATE SECRETARY. THE FORM 10-K IS NOT PART OF
THE PROXY SOLICITATION MATERIALS.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than the matters described above in this Proxy Statement. However, if any
other matters should properly come before the meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending the proxy
materials to the beneficial owners of the Common Stock. The Company has retained
Georgeson Shareholder Communications, Inc. to assist with the solicitation of
proxies for a fee not to exceed $5,000, plus reimbursement for out-of-pocket
expenses. In addition to solicitations by mail, directors, officers and
employees of the Company may solicit proxies personally or by telephone without
additional compensation.
By Order of the Board of Directors
/s/ MONICA F. SULLIVAN
Monica F. Sullivan
Corporate Secretary
March 23, 2001
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APPENDIX A
CFS BANCORP, INC. ("COMPANY")
AUDIT COMMITTEE CHARTER
ORGANIZATION
The Audit Committee ("Committee") of the Board of Directors ("Board") shall
be comprised of at least 3 directors who are independent of management and the
Company. Members of the Committee shall be considered independent if they have
no relationship to the Company that may interfere with the exercise of their
independence from management and the Company as defined in the "Blue Ribbon
Committee on Improving the Effectiveness of Corporate Audit Committees." All
Committee members will be financially literate, and at least one member will
have accounting or related financial management expertise.
STATEMENT OF POLICY
The Committee shall provide assistance to the Board in fulfilling its
responsibility to the shareholders and investment community relating to
corporate accounting and reporting practices of the Company and the quality and
integrity of financial reports of the Company. In so doing, it is the
responsibility of the Committee to maintain free and open communication among
the directors, independent auditors, internal auditors, and financial management
of the Company.
RESPONSIBILITIES
In carrying out its responsibilities, the Committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the Company are in accordance with all
requirements and of the highest quality.
In carrying out these responsibilities, the Committee will:
- obtain approval of the full Board of this Charter and review and reassess
this Charter as conditions dictate (at least annually); the Charter
should also be included in the annual report or proxy at least
triennially.
- review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the Company and its
divisions and subsidiaries.
- review and concur with management's appointment, termination, or
replacement of the Director of Internal Audit or such parties as may
perform such duties.
- meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit for the current year,
the procedures to be utilized, and the adequacy of the independent
auditor's compensation, including any comments or recommendations of the
independent auditors.
- meet with the independent auditors regarding quarterly reviews under SAS
71 before the 10-Q is filed. The independent auditors are required to
discuss matters included in SAS 61 prior to filing the 10-Q, covering
significant adjustments, management judgments and accounting estimates,
significant new accounting policies, and disagreements with management.
- review with the independent auditors, the Company's internal auditor, and
financial and accounting personnel, the adequacy and effectiveness of the
accounting and financial controls of the Company, and elicit any
recommendations for the improvement of such internal controls or
particular areas where new or more detailed controls or procedures are
desirable. Particular emphasis should be given to the adequacy of
internal controls to expose any payments, transactions, or procedures
that might be deemed illegal or otherwise improper. Further, the
Committee periodically should review Company policy statements to
determine their adherence to the code of conduct.
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- review reports received from regulators and other legal and regulatory
matters that may have a material effect on the financial statements or
related Company compliance policies.
- review the internal audit function of the Company including the
independence and authority of its reporting obligations, the proposed
audit plans for the coming year, and the coordination of such plans with
the independent auditors.
- inquire of management, the internal auditor, and the independent auditors
about significant risks or exposures and assess the steps management has
taken to minimize such risks to the Company.
- receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit
plan, with explanations for any deviations from the original plan.
- review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the shareholders.
Review with financial management and the independent auditors the results
of their timely analysis of significant financial reporting issues and
practices, including changes in, or adoptions of, accounting principles
and disclosure practices, and discuss any other matters required to be
communicated to the Committee by the auditors. Also review with
management and the independent auditors their judgments about the
quality, not just acceptability, of accounting principles and the clarity
of the financial disclosure practices used or proposed to be used, and
particularly, the degree of aggressiveness or conservatism of the
organization's accounting principles and underlying estimates, and other
significant decisions made in preparing the financial statements.
- provide sufficient opportunity for the internal and independent auditors
to meet with the members of the Committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the Company's financial, accounting,
and auditing personnel, and the cooperation that the independent auditors
received during the course of the audit.
- report the results of the annual audit to the Board. The independent
auditors are to attend the full Board meeting to assist in reporting the
results of the annual audit or to answer other directors' questions.
- on an annual basis, obtain from the independent auditors a written
communication delineating all of their relationships and professional
services as required by Independence Standards Board Standard 98-1,
Independence Discussions with Audit Committees. In addition, review with
the independent auditors the nature and scope of any disclosed
relationships or professional services and take, or recommend that the
Board take, appropriate action to ensure the continuing independence of
the auditors.
- review the report of the Committee in the annual report to shareholders
and the Annual Report on Form 10-K disclosing whether or not the
Committee had reviewed and discussed with management and the independent
auditors, as well as discussed within the Committee (without management
or the independent auditors present), the financial statements and the
quality of accounting principles and significant judgments affecting the
financial statements. In addition, disclose the Committee's conclusion on
the fairness of presentation of the financial statements in conformity
with GAAP based on those discussions.
- submit the minutes of all meetings of the Committee to, or review the
matters discussed at each Committee meeting with, the Board.
- review the Company's disclosure in the proxy statement for its annual
meeting of shareholders that describes that the Committee has satisfied
its responsibilities under this Charter for the prior year.
Adopted 1/24/00
Amended 5/15/00
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APPENDIX B
CFS BANCORP, INC.
AMENDED AND RESTATED
1998 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
CFS Bancorp, Inc. (the "Corporation") hereby establishes this Amended and
Restated 1998 Stock Option Plan (the "Plan") upon the terms and conditions
hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of the
Corporation and its Subsidiary Companies by providing Employees and Non-Employee
Directors with a proprietary interest in the Corporation as an incentive to
contribute to the success of the Corporation and its Subsidiary Companies, and
rewarding Employees and Non-Employee Directors for outstanding performance. All
Incentive Stock Options issued under this Plan are intended to comply with the
requirements of Section 422 of the Code, and the regulations thereunder, and all
provisions hereunder shall be read, interpreted and applied with that purpose in
mind. Each recipient of an Award hereunder is advised to consult with his or her
personal tax advisor with respect to the tax consequences under federal, state,
local and other tax laws of the receipt and/or exercise of an Award hereunder.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option or Stock Appreciation Right granted pursuant
to the terms of this Plan.
3.02 "Bank" means Citizens Financial Services, FSB, the wholly owned
subsidiary of the Corporation.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall mean the occurrence of
any of the following: (i) the acquisition of control of the Corporation as
defined in 12 C.F.R. '574.4, unless a presumption of control is successfully
rebutted or unless the transaction is exempted by 12 C.F.R. '574.3(c)(vii), or
any successor to such sections; (ii) an event that would be required to be
reported in response to Item 1(a) of Form 8-K or Item 6(e) of Schedule 14A of
Regulation 14A pursuant to the Exchange Act, or any successor thereto, whether
or not any class of securities of the Corporation is registered under the
Exchange Act; (iii) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities except for any securities purchased by
the Corporation or the Bank; or (iv) during any period of thirty-six consecutive
months during the term of an Award, individuals who at the beginning of such
period constitute the Board of Directors of the Corporation cease for any reason
to constitute at least a majority thereof unless the election, or the nomination
for election by stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at the
beginning of the period.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
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3.06 "Committee" means a committee of two or more directors appointed by
the Board pursuant to Article IV hereof each of whom shall be a Non-Employee
Director as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor
thereto and within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.
3.07 "Common Stock" means shares of common stock, par value $.01 per
share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which qualifies
an individual for disability benefits under the applicable long-term disability
plan maintained by the Corporation or a Subsidiary Company, or, if no such plan
applies, which would qualify such individual for disability benefits under the
long-term disability plan maintained by the Corporation, if such individual were
covered by that plan.
3.09 "Effective Date" means the day upon which the Board approves this
Plan.
3.10 "Employee" means any person who is employed by the Corporation, the
Bank or any Subsidiary Company, or is an Officer of the Corporation, the Bank or
any Subsidiary Company, but not including directors who are not also Officers of
or otherwise employed by the Corporation, the Bank or any Subsidiary Company.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
3.12 "Fair Market Value" shall be equal to the fair market value per share
of the Corporation's Common Stock on the date an Award is granted. For purposes
hereof, the Fair Market Value of a share of Common Stock shall be the closing
sale price of a share of Common Stock on the date in question (or, if such day
is not a trading day in the U.S. markets, on the nearest preceding trading day),
as reported with respect to the principal market (or the composite of the
markets, if more than one) or national quotation system in which such shares are
then traded, or if no such closing prices are reported, the mean between the
high bid and low asked prices that day on the principal market or national
quotation system then in use, or if no such quotations are available, the price
furnished by a professional securities dealer making a market in such shares
selected by the Committee.
3.13 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.14 "Non-Employee Director" means a member of the Board of the
Corporation or Board of Directors of the Bank or any successor thereto,
including an Advisory Director or a Director Emeritus of the Boards of the
Corporation and/or the Bank, who is not an Officer or Employee of the
Corporation, the Bank or any Subsidiary Company.
3.15 "Non-Qualified Option" means any Option granted under this Plan which
is not an Incentive Stock Option.
3.16 "Offering" means the offering of the Common Stock to the public in
connection with the conversion of the Bank to the stock form of organization and
the issuance of the capital stock of the Bank to the Corporation.
3.17 "Officer" means an Employee whose position in the Corporation or a
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.18 "Option" means a right granted under this Plan to purchase Common
Stock.
3.19 "Optionee" means an Employee or Non-Employee Director or former
Employee or Non-Employee Director to whom an Option is granted under the Plan.
3.20 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Corporation or a Subsidiary Corporation, or, if no such plan is applicable,
which would constitute "retirement" under the Corporation's pension benefit
plan, if such individual were a participant in that plan. With respect to
Non-Employee Directors, retirement means
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retirement from service on the Board of Directors of the Corporation or the Bank
or any successor thereto (including service as an Director Emeritus) after
attaining the age of 60.
3.21 "Stock Appreciation Right" means a right to surrender an Option in
consideration for a payment by the Corporation in cash and/or Common Stock, as
provided in the discretion of the Board or the Committee in accordance with
Section 8.10.
3.22 "Subsidiary Companies" means those subsidiaries of the Corporation,
including the Bank, which meet the definition of "subsidiary corporations" set
forth in Section 424(f) of the Code, at the time of granting of the Option in
question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority to adopt, amend
and rescind such rules, regulations and procedures as, in its opinion, may be
advisable in the administration of the Plan, including, without limitation,
rules, regulations and procedures which (i) deal with satisfaction of an
Optionee's tax withholding obligation pursuant to Section 12.02 hereof, (ii)
include arrangements to facilitate the Optionee's ability to borrow funds for
payment of the exercise or purchase price of an Award, if applicable, from
securities brokers and dealers, (iii) establish the method and arrangements by
which an optionee may defer the recognition of income upon the exercise of a
Non-Qualified Option or Stock Appreciation Right pursuant to Article XIII
hereof, and (iv) include arrangements which provide for the payment of some or
all of such exercise or purchase price by delivery of previously-owned shares of
Common Stock or other property and/or by withholding some of the shares of
Common Stock which are being acquired. The interpretation and construction by
the Committee of any provisions of the Plan, any rule, regulation or procedure
adopted by it pursuant thereto or of any Award shall be final and binding in the
absence of action by the Board.
4.02 Appointment and Operation of the Committee. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board.
The Board from time to time may remove members from, or add members to, the
Committee, provided the Committee shall continue to consist of two or more
members of the Board, each of whom shall be a Non-Employee Director, as defined
in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor thereto. In
addition, each member of the Committee shall be an "outside director" within the
meaning of Section 162(m) of the Code and regulations thereunder at such times
as is required under such regulations. The Committee shall act by vote or
written consent of a majority of its members. Subject to the express provisions
and limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. It may
appoint one of its members to be chairman and any person, whether or not a
member, to be its secretary or agent. The Committee shall report its actions and
decisions to the Board at appropriate times but in no event less than one time
per calendar year.
4.03 Revocation for Misconduct. The Board or the Committee may by
resolution immediately revoke, rescind and terminate any Option, or portion
thereof, to the extent not yet vested, or any Stock Appreciation Right, to the
extent not yet exercised, previously granted or awarded under this Plan to an
Employee who is discharged from the employ of the Corporation or a Subsidiary
Company for cause, which, for purposes hereof, shall mean termination because of
the Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order. Options granted
to a Non-Employee Director who is removed for cause pursuant to the
Corporation's Certificate of Incorporation and Bylaws or the Bank's Charter and
Bylaws shall terminate as of the effective date of such removal.
4.04 Limitation on Liability. Neither the members of the Board nor any
member of the Committee shall be liable for any action or determination made in
good faith with respect to the Plan, any rule, regulation
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or procedure adopted pursuant thereto or any Awards granted thereunder. If a
member of the Board or the Committee is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of anything
done or not done by him in such capacity under or with respect to the Plan, the
Corporation shall, subject to the requirements of applicable laws and
regulations, indemnify such member against all liabilities and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in the best interests of the Corporation and its Subsidiary Companies and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
4.05 Compliance with Law and Regulations. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
The Corporation shall not be required to issue or deliver any certificates for
shares of Common Stock prior to the completion of any registration or
qualification of or obtaining of consents or approvals with respect to such
shares under any federal or state law or any rule or regulation of any
government body, which the Corporation shall, in its sole discretion, determine
to be necessary or advisable. Moreover, no Option or Stock Appreciation Right
may be exercised if such exercise would be contrary to applicable laws and
regulations.
4.06 Restrictions on Transfer. The Corporation may place a legend upon
any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees and Non-Employee Directors of the
Corporation and its Subsidiary Companies as may be designated from time to time
by the Board or the Committee. Awards may not be granted to individuals who are
not Employees or Non-Employee Directors of either the Corporation or its
Subsidiary Companies. Non-Employee Directors shall be eligible to receive only
Awards of Non-Qualified Options pursuant to this Plan.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 Option Shares. The aggregate number of shares of Common Stock which
may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be 1,785,375, which is equal to 10% of the shares of Common
Stock issued in the Offering. None of such shares shall be the subject of more
than one Award at any time (provided that Stock Appreciation Rights and the
related Options shall be deemed to be a single Award), but if an Option as to
any shares is surrendered before exercise, or expires or terminates for any
reason without having been exercised in full, or for any other reason ceases to
be exercisable, the number of shares covered thereby shall again become
available for grant under the Plan as if no Awards had been previously granted
with respect to such shares. Notwithstanding the foregoing, if an Option is
surrendered in connection with the exercise of a Stock Appreciation Right, the
number of shares covered thereby shall not be available for grant under the
Plan. During the time this Plan remains in effect, grants to each Employee and
each Non-Employee Director shall not exceed 25% and 5% of the shares of Common
Stock available under the Plan, respectively, and Awards made to Non-Employee
Directors in the aggregate may not exceed 30% of the number of shares available
under this Plan, in each case subject to adjustment as provided in Article IX.
6.02 Source of Shares. The shares of Common Stock issued under the Plan
may be authorized but unissued shares, treasury shares or shares purchased by
the Corporation on the open market or from private sources for use under the
Plan.
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ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
The Board or the Committee shall, in its discretion, determine from time to
time which Employees and Non-Employee Directors will be granted Awards under the
Plan, the number of shares of Common Stock subject to each Award, whether each
Option will be an Incentive Stock Option or a Non-Qualified Stock Option (in the
case of Employees), the vesting schedule of an Option and the exercise price of
an Option. In making all such determinations there shall be taken into account
the duties, responsibilities and performance of each respective Employee and
Non-Employee Director, his present and potential contributions to the growth and
success of the Corporation, his salary and such other factors deemed relevant to
accomplishing the purposes of the Plan.
ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 Stock Option Agreement. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which shall
set forth the total number of shares of Common Stock to which it pertains, the
exercise price, whether it is a Non-Qualified Option or an Incentive Stock
Option, and such other terms, conditions, restrictions and privileges as the
Board or the Committee in each instance shall deem appropriate, provided they
are not inconsistent with the terms, conditions and provisions of this Plan.
Each Optionee shall receive a copy of his executed Stock Option Agreement.
8.02 Option Exercise Price.
(a) Incentive Stock Options. The per share price at which the
subject Common Stock may be purchased upon exercise of an Incentive Stock
Option shall be no less than one hundred percent (100%) of the Fair Market
Value of a share of Common Stock at the time such Incentive Stock Option is
granted, except as provided in Section 8.09(b), subject to any applicable
adjustment pursuant to Article IX hereof.
(b) Non-Qualified Options. The per share price at which the subject
Common Stock may be purchased upon exercise of a Non-Qualified Option shall
be established by the Committee at the time of grant, but in no event shall
be less than one hundred percent (100%) of the Fair Market Value of a share
of Common Stock at the time such Non-Qualified Option is granted, subject
to any applicable adjustment pursuant to Article IX hereof.
8.03 Vesting and Exercise of Options.
(a) General Rules. Incentive Stock Options and Non-Qualified Options
granted to Optionees shall become vested and exercisable at the rate, to
the extent and subject to such limitations as may be specified by the Board
or the Committee. Notwithstanding the foregoing, except as provided in
Section 8.03(b) hereof, no vesting shall occur on or after an Optionee's
employment or service as a Non-Employee Director with the Corporation and
all Subsidiary Companies is terminated for any reason other than his death,
Disability or Retirement. In determining the number of shares of Common
Stock with respect to which Options are vested and/or exercisable,
fractional shares will be rounded up to the nearest whole number if the
fraction is 0.5 or higher, and down if it is less.
(b) Accelerated Vesting. Unless the Board or the Committee shall
specifically state otherwise at the time an Option is granted, all Options
granted under this Plan shall become vested and exercisable in full on the
date an Optionee terminates his employment with the Corporation or a
Subsidiary Company or service as a Non-Employee Director because of his
death, Disability or Retirement. In addition, all Options granted pursuant
to this Plan shall become immediately vested and exercisable in full in the
event of a Change in Control of the Corporation.
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8.04 Duration of Options.
(a) General Rule. Except as provided in Sections 8.04(b) and 8.09,
each Option or portion thereof granted to an Employee shall be exercisable
at any time on or after it vests and becomes exercisable until the earlier
of (i) ten (10) years after its date of grant or (ii) six (6) months after
the date on which the Employee ceases to be employed by the Corporation and
all Subsidiary Companies, unless the Board or the Committee in its
discretion decides at the time of grant or thereafter to extend such period
of exercise upon termination of employment to a period not exceeding five
(5) years.
Except as provided in Section 8.04(b), each Option or portion thereof
granted to a Non-Employee Director shall be exercisable at any time on or after
it vests and becomes exercisable until the earlier of (i) ten (10) years after
its date of grant or (ii) three (3) years after the date on which the
Non-Employee Director ceases to serve as a director of the Corporation and all
Subsidiary Companies, unless the Board or the Committee in its discretion
decides at the time of grant or thereafter to extend such period of exercise
upon termination of service to a period not exceeding five (5) years.
(b) Exceptions. Unless the Board or the Committee shall specifically
state otherwise at the time an Option is granted: (i) if an Employee
terminates his employment with the Corporation or a Subsidiary Company as a
result of Disability or Retirement without having fully exercised his
Options, the Employee shall have the right, during the three (3) year
period following his termination due to Disability or Retirement, to
exercise such Options, and (ii) if a Non-Employee Director terminates his
service as a director with the Corporation or a Subsidiary Company as a
result of Disability or Retirement without having fully exercised his
Options, the Non-Employee Director shall have the right, during the three
(3) year period following his termination due to Disability or Retirement,
to exercise such Options.
Unless the Board or the Committee shall specifically state otherwise at the
time an Option is granted, if an Employee or Non-Employee Director terminates
his employment or service with the Corporation or a Subsidiary Company following
a Change in Control of the Corporation without having fully exercised his
Options, the Optionee shall have the right to exercise such Options during the
remainder of the original ten (10) year term of the Option from the date of
grant.
If an Optionee dies while in the employ or service of the Corporation or a
Subsidiary Company or terminates employment or service with the Corporation or a
Subsidiary Company as a result of Disability or Retirement and dies without
having fully exercised his Options, the executors, administrators, legatees or
distributees of his estate shall have the right, during the one (1) year period
following his death, to exercise such Options.
In no event, however, shall any Option be exercisable more than ten (10)
years from the date it was granted.
8.05 Nonassignability. Options shall not be transferable by an Optionee
except by will or the laws of descent or distribution, and during an Optionee's
lifetime shall be exercisable only by such Optionee or the Optionee's guardian
or legal representative. Notwithstanding the foregoing, or any other provision
of this Plan, an Optionee who holds Non-Qualified Options may transfer such
Options to his or her spouse, lineal ascendants, lineal descendants, or to a
duly established trust for the benefit of one or more of these individuals.
Options so transferred may thereafter be transferred only to the Optionee who
originally received the grant or to an individual or trust to whom the Optionee
could have initially transferred the Option pursuant to this Section 8.05.
Options which are transferred pursuant to this Section 8.05 shall be exercisable
by the transferee according to the same terms and conditions as applied to the
Optionee.
8.06 Manner of Exercise. Options may be exercised in part or in whole and
at one time or from time to time. The procedures for exercise shall be set forth
in the written Stock Option Agreement provided for in Section 8.01 above.
8.07 Payment for Shares. Payment in full of the purchase price for shares
of Common Stock purchased pursuant to the exercise of any Option shall be made
to the Corporation upon exercise of the Option. All shares sold under the Plan
shall be fully paid and nonassessable. Payment for shares may be made
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by the Optionee (i) in cash or by check, (ii) by delivery of a properly executed
exercise notice, together with irrevocable instructions to a broker to sell the
shares and then to properly deliver to the Corporation the amount of sale
proceeds to pay the exercise price, all in accordance with applicable laws and
regulations, (iii) at the discretion of the Committee, by delivering shares of
Common Stock (including shares acquired pursuant to the exercise of an Option)
equal in Fair Market Value to the purchase price of the shares to be acquired
pursuant to the Option, (iv) at the discretion of the Committee, by withholding
some of the shares of Common Stock which are being purchased upon exercise of an
Option, or (v) any combination of the foregoing. With respect to subclause (iii)
hereof, the shares of Common Stock delivered to pay the purchase price must have
either been (x) purchased in open market transactions or (y) issued by the
Corporation pursuant to a plan thereof, in each case more than six months prior
to the exercise date of the Option.
8.08 Voting and Dividend Rights. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded on
the Corporation's stockholder ledger as the holder of record of such shares
acquired pursuant to an exercise of an Option.
8.09 Additional Terms Applicable to Incentive Stock Options. All Options
issued under the Plan as Incentive Stock Options will be subject, in addition to
the terms detailed in Sections 8.01 to 8.08 above, to those contained in this
Section 8.09.
(a) Notwithstanding any contrary provisions contained elsewhere in
this Plan and as long as required by Section 422 of the Code, the aggregate
Fair Market Value, determined as of the time an Incentive Stock Option is
granted, of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
under this Plan, and stock options that satisfy the requirements of Section
422 of the Code under any other stock option plan or plans maintained by
the Corporation (or any parent or Subsidiary Company), shall not exceed
$100,000.
(b) Limitation on Ten Percent Stockholders. The price at which
shares of Common Stock may be purchased upon exercise of an Incentive Stock
Option granted to an individual who, at the time such Incentive Stock
Option is granted, owns, directly or indirectly, more than ten percent
(10%) of the total combined voting power of all classes of stock issued to
stockholders of the Corporation or any Subsidiary Company, shall be no less
than one hundred and ten percent (110%) of the Fair Market Value of a share
of the Common Stock of the Corporation at the time of grant, and such
Incentive Stock Option shall by its terms not be exercisable after the
earlier of the date determined under Section 8.03 or the expiration of five
(5) years from the date such Incentive Stock Option is granted.
(c) Notice of Disposition; Withholding; Escrow. An Optionee shall
immediately notify the Corporation in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section 421 of the Code) of any shares of
Common Stock acquired through exercise of an Incentive Stock Option, within
two (2) years after the grant of such Incentive Stock Option or within one
(1) year after the acquisition of such shares, setting forth the date and
manner of disposition, the number of shares disposed of and the price at
which such shares were disposed of. The Corporation shall be entitled to
withhold from any compensation or other payments then or thereafter due to
the Optionee such amounts as may be necessary to satisfy any withholding
requirements of federal or state law or regulation and, further, to collect
from the Optionee any additional amounts which may be required for such
purpose. The Committee or the Board may, in its discretion, require shares
of Common Stock acquired by an Optionee upon exercise of an Incentive Stock
Option to be held in an escrow arrangement for the purpose of enabling
compliance with the provisions of this Section 8.09(c).
8.10 Stock Appreciation Rights.
(a) General Terms and Conditions. The Board or the Committee may,
but shall not be obligated to, authorize the Corporation, on such terms and
conditions as it deems appropriate in each case, to grant rights to
Optionees to surrender an exercisable Option, or any portion thereof, in
consideration for the payment by the Corporation of an amount equal to the
excess of the Fair Market Value of the shares of
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Common Stock subject to the Option, or portion thereof, surrendered over
the exercise price of the Option with respect to such shares (any such
authorized surrender and payment being hereinafter referred to as a "Stock
Appreciation Right"). Such payment, at the discretion of the Board or the
Committee, may be made in shares of Common Stock valued at the then Fair
Market Value thereof, or in cash, or partly in cash and partly in shares of
Common Stock.
The terms and conditions with respect to a Stock Appreciation Right may
include (without limitation), subject to other provisions of this Section 8.10
and the Plan: the period during which, date by which or event upon which the
Stock Appreciation Right may be exercised; the method for valuing shares of
Common Stock for purposes of this Section 8.10; a ceiling on the amount of
consideration which the Corporation may pay in connection with exercise and
cancellation of the Stock Appreciation Right; and arrangements for income tax
withholding. The Board or the Committee shall have complete discretion to
determine whether, when and to whom Stock Appreciation Rights may be granted.
(b) Time Limitations. If a holder of a Stock Appreciation Right
terminates service with the Corporation as an Officer or Employee, the
Stock Appreciation Right may be exercised only within the period, if any,
within which the Option to which it relates may be exercised.
(c) Effects of Exercise of Stock Appreciation Rights or
Options. Upon the exercise of a Stock Appreciation Right, the number of
shares of Common Stock available under the Option to which it relates shall
decrease by a number equal to the number of shares for which the Stock
Appreciation Right was exercised. Upon the exercise of an Option, any
related Stock Appreciation Right shall terminate as to any number of shares
of Common Stock subject to the Stock Appreciation Right that exceeds the
total number of shares for which the Option remains unexercised.
(d) Time of Grant. A Stock Appreciation Right granted in connection
with an Incentive Stock Option must be granted concurrently with the Option
to which it relates, while a Stock Appreciation Right granted in connection
with a Non-Qualified Option may be granted concurrently with the Option to
which it relates or at any time thereafter prior to the exercise or
expiration of such Option.
(e) Non-Transferable. The holder of a Stock Appreciation Right may
not transfer or assign the Stock Appreciation Right otherwise than by will
or in accordance with the laws of descent and distribution, and during a
holder's lifetime a Stock Appreciation Right may be exercisable only by the
holder.
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ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance under
this Plan, the number of shares to which any outstanding Award relates, the
maximum number of shares that can be covered by Awards to each Employee and each
Non-Employee Director and the exercise price per share of Common Stock under any
outstanding Option shall be proportionately adjusted for any increase or
decrease in the total number of outstanding shares of Common Stock issued
subsequent to the effective date of this Plan resulting from a split,
subdivision or consolidation of shares or any other capital adjustment, the
payment of a stock dividend, or other increase or decrease in such shares
effected without receipt or payment of consideration by the Corporation. If,
upon a merger, consolidation, reorganization, liquidation, recapitalization or
the like of the Corporation, the shares of the Corporation's Common Stock shall
be exchanged for other securities of the Corporation or of another corporation,
each recipient of an Award shall be entitled, subject to the conditions herein
stated, to purchase or acquire such number of shares of Common Stock or amount
of other securities of the Corporation or such other corporation as were
exchangeable for the number of shares of Common Stock of the Corporation which
such optionees would have been entitled to purchase or acquire except for such
action, and appropriate adjustments shall be made to the per share exercise
price of outstanding Options. Notwithstanding any provision to the contrary
herein and to the extent permitted by applicable laws and regulations and
interpretations thereof, the exercise price of shares subject to outstanding
Awards may be proportionately adjusted upon the payment of a special large and
nonrecurring dividend that has the effect of a return of capital to the
stockholders, providing that the adjustment to the per share exercise price
shall satisfy the criteria set forth in Emerging Issues Task Force 90-9 (or any
successor thereto) so that the adjustments do not result in compensation
expense, and provided further that if such adjustment with respect to Incentive
Stock Options would be treated as a modification of the outstanding Incentive
Stock Options with the effect that, for purposes of Sections 422 and 425(h) of
the Code, and the rules and regulations promulgated thereunder, new Incentive
Stock Options would be deemed to be granted hereunder, then no adjustment to the
per share exercise price of outstanding Incentive Stock Options shall be made.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan with
respect to any shares of Common Stock as to which Awards have not been granted,
subject to any required stockholder approval or any stockholder approval which
the Board may deem to be advisable for any reason, such as for the purpose of
obtaining or retaining any statutory or regulatory benefits under tax,
securities or other laws or satisfying any applicable stock exchange listing
requirements. The Board may not, without the consent of the holder of an Award,
alter or impair any Award previously granted or awarded under this Plan except
as specifically authorized herein.
ARTICLE XI
EMPLOYMENT AND SERVICE RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action taken
by the Committee or the Board in connection with the Plan shall create any right
on the part of any Employee or Non-Employee Director to continue in such
capacity.
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ARTICLE XII
WITHHOLDING
12.01 Tax Withholding. The Corporation may withhold from any cash payment
made under this Plan sufficient amounts to cover any applicable withholding and
employment taxes, and if the amount of such cash payment is insufficient, the
Corporation may require the Optionee to pay to the Corporation the amount
required to be withheld as a condition to delivering the shares acquired
pursuant to an Award. The Corporation also may withhold or collect amounts with
respect to a disqualifying disposition of shares of Common Stock acquired
pursuant to exercise of an Incentive Stock Option, as provided in Section
8.09(c).
12.02 Methods of Tax Withholding. The Board or the Committee is
authorized to adopt rules, regulations or procedures which provide for the
satisfaction of an Optionee's tax withholding obligation by the retention of
shares of Common Stock to which the Employee would otherwise be entitled
pursuant to an Award and/or by the Optionee's delivery of previously owned
shares of Common Stock or other property.
ARTICLE XIII
DEFERRED PAYMENTS
13.01 Deferral of Options and Stock Appreciation Rights. Notwithstanding
any other provision of this Plan, any Optionee may elect, with the concurrence
of the Committee and consistent with any rules and regulations established by
the Committee, to defer the recognition of ordinary income resulting from the
exercise of any Non-Qualified Option not transferred under the provisions of
Section 8.05 hereof and Stock Appreciation Rights.
13.02 Timing of Election. The election to defer the recognition of
ordinary income resulting from the exercise of any eligible Non-Qualified Option
or Stock Appreciation Right must be made at least six (6) months prior to the
date such Option or Stock Appreciation Right is exercised or at such other time
as the Committee may specify. Deferrals of eligible Non-Qualified Options or
Stock Appreciation Rights shall only be allowed for exercises of Options and
Stock Appreciation Rights that occur while the Participant is in active service
with the Corporation or a Subsidiary Company. Any election to defer the ordinary
income resulting from the exercise of an eligible Non-Qualified Option or Stock
Appreciation Right shall be irrevocable as long as the Optionee remains an
Employee or an Non-Employee Director.
13.03 Stock Option Deferral. The deferral of the ordinary income
resulting from the exercise of Non-Qualified Options may be elected by an
Optionee subject to the rules and regulations established by the Committee. The
income resulting from such an exercise shall be credited to a deferred stock
option account established for the Optionee (which may be part of an existing
deferred compensation trust account). The income shall be credited to the
deferred stock option account as a number of deferred shares or share units
equivalent in value to such income. Deferred share units shall be valued at the
Fair Market Value on the date of exercise. Subsequent to exercise, the deferred
shares or share units shall be valued at the Fair Market Value of Common Stock.
Deferred share units shall accrue dividends at the rate paid upon the Common
Stock credited in the form of additional deferred share units. Deferred shares
or share units shall be distributed in shares of Common Stock or cash, at the
discretion of the Committee, upon the Optionee's termination of employment or
service as a director or at such other date, as may be approved by the
Committee, over a period of no more than ten (10) years.
13.04 Stock Appreciation Right Deferral. The deferral of the ordinary
income resulting from the exercise of Stock Appreciation Rights may be made by
an Optionee subject to the rules and regulations established by the Committee.
Upon exercise, the Committee will credit the Optionee's deferred stock option
account with a number of deferred shares or share units equivalent in value to
the difference between the Fair Market Value of a share of Common Stock on the
exercise date and the Exercise Price of the Stock Appreciation Right multiplied
by the number of shares exercised. Deferred shares or share units shall be
valued at the Fair Market Value on the date of exercise. Subsequent to exercise,
the deferred shares or share units shall be valued at the Fair Market Value of
Common Stock. Deferred shares or share units shall accrue
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dividends at the rate paid upon the Common Stock credited in the form of
additional deferred shares or share units. Deferred shares or share units shall
be distributed in shares of Common Stock or cash, at the discretion of the
Committee, upon the Participant's termination of employment or service as a
director or at such other date, as may be approved by the Committee, over a
period of no more than ten (10) years.
13.05 Accelerated Distributions. The Committee may, at its sole
discretion, allow for the early payment of an Optionee's deferred stock option
account in the event of an "unforeseeable emergency" or in the event of the
death or Disability of the Optionee. An "unforeseeable emergency" means an
unanticipated emergency caused by an event beyond the control of the Optionee
that would result in severe financial hardship if the distribution were not
permitted. Such distributions shall be limited to the amount necessary to
sufficiently address the financial hardship. Any distributions under this
provision, shall be consistent with the Code and the regulations promulgated
thereunder. Additionally, the Committee may use its discretion to cause stock
option deferral accounts to be distributed when continuing the program is no
longer in the best interest of the Corporation or one of its Subsidiary
Companies.
13.06 Assignability. No rights to deferred stock option accounts may be
assigned or subject to any encumbrance, pledge or charge of any nature except
that an Optionee may designate a beneficiary pursuant to any rules established
by the Committee.
13.07 Unfunded Status. No Optionee or other person shall have any
interest in any fund or in any specific asset of the Corporation or a Subsidiary
Company by reason of any amount credited pursuant to the provisions hereof. Any
amounts payable pursuant to the provisions hereof shall be paid from the general
assets of the Corporation or a Subsidiary Company and no Optionee or other
person shall have any rights to such assets beyond the rights afforded general
creditors of the Corporation or a Subsidiary Company. However, the Corporation
or a Subsidiary Company shall have the right to establish a reserve, trust or
make any investment for the purpose of satisfying the obligations created under
this Article XIII of the Plan; provided, however, that no Optionee or other
person shall have any interest in such reserve, trust or investment.
ARTICLE XIV
EFFECTIVE DATE OF THE PLAN; TERM
14.01 Effective Date of the Plan. This Plan shall become effective on the
Effective Date, and Awards may be granted hereunder no earlier than the date
that this Plan is approved by stockholders of the Corporation and prior to the
termination of the Plan, provided that this Plan is approved by stockholders of
the Corporation pursuant to Article XV hereof.
14.02 Term of the Plan. Unless sooner terminated, this Plan shall remain
in effect for a period of ten (10) years ending on the tenth anniversary of the
Effective Date. Termination of the Plan shall not affect any Awards previously
granted and such Awards shall remain valid and in effect until they have been
fully exercised or earned, are surrendered or by their terms expire or are
forfeited.
ARTICLE XV
STOCKHOLDER APPROVAL
The Corporation shall submit this Plan to stockholders for approval at a
meeting of stockholders of the Corporation held within twelve (12) months
following the Effective Date in order to meet the requirements of (i) Section
422 of the Code and regulations thereunder, (ii) Section 162(m) of the Code and
regulations thereunder, (iii) the Nasdaq Stock Market for continued quotation of
the Common Stock on the Nasdaq Stock Market and (iv) the regulations of the
Office of Thrift Supervision.
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ARTICLE XVI
MISCELLANEOUS
16.01 Governing Law. To the extent not governed by federal law, this Plan
shall be construed under the laws of the State of Delaware.
16.02 Pronouns. Wherever appropriate, the masculine pronoun shall include
the feminine pronoun, and the singular shall include the plural.
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APPENDIX C
CFS BANCORP, INC.
AMENDED AND RESTATED
1998 RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 CFS Bancorp, Inc. (the "Corporation") hereby establishes the Amended
and Restated 1998 Recognition and Retention Plan (the "Plan") and Trust (the
"Trust") upon the terms and conditions hereinafter stated in this Amended and
Restated 1998 Recognition and Retention Plan and Trust Agreement (the
"Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of the Plan is to retain personnel of experience and ability in
key positions by providing Employees and Non-Employee Directors with a
proprietary interest in the Corporation and its Subsidiary Companies as
compensation for their contributions to the Corporation and its Subsidiary
Companies and as an incentive to make such contributions in the future. Each
Recipient of a Plan Share Award hereunder is advised to consult with his or her
personal tax advisor with respect to the tax consequences under federal, state,
local and other tax laws of the receipt of a Plan Share Award hereunder.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronouns shall
include the feminine pronouns and the singular shall include the plural.
3.01 "Bank" means Citizens Financial Services, FSB, the wholly owned
subsidiary of the Corporation.
3.02 "Beneficiary" means the person or persons designated by a Recipient
to receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall mean the occurrence of
any of the following: (i) the acquisition of control of the Corporation as
defined in 12 C.F.R. '574.4, unless a presumption of control is successfully
rebutted or unless the transaction is exempted by 12 C.F.R. '574.3(c)(vii), or
any successor to such sections; (ii) an event that would be required to be
reported in response to Item 1(a) of Form 8-K or Item 6(e) of Schedule 14A of
Regulation 14A pursuant to the Exchange Act or any successor thereto, whether or
not any class of securities of the Corporation is registered under the Exchange
Act; (iii) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding
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securities except for any securities purchased by the Corporation or the Bank;
or (iv) during any period of thirty-six consecutive months during the term of a
Plan Share Award, individuals who at the beginning of such period constitute the
Board of Directors of the Corporation cease for any reason to constitute at
least a majority thereof unless the election, or the nomination for election by
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means the committee appointed by the Board pursuant to
Article IV hereof.
3.07 "Common Stock" means shares of the common stock, $.01 par value per
share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which qualifies
an individual for disability benefits under the applicable long-term disability
plan maintained by the Corporation or a Subsidiary Company or, if no such plan
applies, which would qualify such individual for disability benefits under the
long-term disability plan maintained by the Corporation, if such individual were
covered by that plan.
3.09 "Effective Date" means the day upon which the Board approves this
Plan.
3.10 "Employee" means any person who is employed by the Corporation, the
Bank, or any Subsidiary Company, or is an Officer of the Corporation, the Bank,
or any Subsidiary Company, but not including directors who are not also Officers
of or otherwise employed by the Corporation, the Bank or a Subsidiary Company.
3.11 "Employer Group" means the Corporation and any Subsidiary which, with
the consent of the Board, agree to participate in the Plan.
3.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
3.13 "Non-Employee Director" means a member of the Board of the
Corporation or the Board of Directors of the Bank or any successor thereto,
including an Advisory Director or a Director Emeritus of the Boards of the
Corporation and/or the Bank, who is not an Officer or Employee of the
Corporation, the Bank or any Subsidiary Company.
3.14 "Offering" means the offering of Common Stock to the public in
connection with the conversion of the Bank to the stock form of organization and
the issuance of the capital stock of the Bank to the Corporation.
3.15 "Officer" means an Employee whose position in the Corporation or a
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.16 "Performance Share Award" means a Plan Share Award granted to a
Recipient pursuant to Section 7.05 of the Plan.
3.17 "Performance Goal" means an objective for the Corporation or any
Subsidiary Company or any unit thereof or any Employee of the foregoing that may
be established by the Committee for a Performance Share Award to become vested,
earned or exercisable. The establishment of Performance Goals are intended to
make the applicable Performance Share Awards "performance-based" compensation
within the meaning of Section 162(m) of the Code, and the Performance Goals
shall be based on one or more of the following criteria:
(i) net income, as adjusted for non-recurring items;
(ii) cash earnings;
(iii) earnings per share;
(iv) cash earnings per share;
(v) return on average equity;
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(vi) return on average assets;
(vii) assets;
(viii) stock price;
(ix) total stockholder return;
(x) capital;
(xi) net interest income;
(xii) market share;
(xiii) cost control or efficiency ratio; and
(xiv) asset growth.
3.18 "Plan Shares" or "Shares" means shares of Common Stock held in the
Trust which may be distributed to a Recipient pursuant to the Plan.
3.19 "Plan Share Award" or "Award" means a right granted under this Plan
to receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII, and includes Performance Share Awards.
3.20 "Recipient" means an Employee or Non-Employee Director who receives a
Plan Share Award or Performance Share Award under the Plan.
3.21 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Corporation or a Subsidiary Company, or, if no such plan is applicable,
which would constitute "retirement" under the Corporation's pension benefit
plan, if such individual were a participant in that plan. With respect to
Non-Employee Directors, retirement means retirement from service on the Board of
Directors of the Corporation or the Bank or any successor thereto (including
service as an Director Emeritus) after attaining the age of 60.
3.22 "Subsidiary Companies" means those subsidiaries of the Corporation,
including the Bank, which meet the definition of "subsidiary corporation" set
forth in Section 424(f) of the Code, at the time of the granting of the Plan
Share Award in question.
3.23 "Trustee" means such firm, entity or persons approved by the Board to
hold legal title to the Plan and the Plan assets for the purposes set forth
herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of the
Board, each of whom shall be a Non-Employee Director, as defined in Rule
16b-3(b)(3)(i) of the Exchange Act. In addition, each member of the Committee
shall be an "outside director" within the meaning of Section 162(m) of the Code
and the regulations thereunder at such times as is required under such
regulations. The Committee shall have all of the powers allocated to it in this
and other Sections of the Plan. The interpretation and construction by the
Committee of any provisions of the Plan or of any Plan Share Award granted
hereunder shall be final and binding in the absence of action by the Board. The
Committee shall act by vote or written consent of a majority of its members.
Subject to the express provisions and limitations of the Plan, the Committee may
adopt such rules, regulations and procedures as it deems appropriate for the
conduct of its affairs. The Committee shall report its actions and decisions
with respect to the Plan to the Board at appropriate times, but in no event less
than once per calendar year.
4.02 Role of the Board. The members of the Committee and the Trustee
shall be appointed or approved by, and will serve at the pleasure of, the Board.
The Board may in its discretion from time to time
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remove members from, or add members to, the Committee, and may remove or replace
the Trustee, provided that any directors who are selected as members of the
Committee shall be Non-Employee Directors.
4.03 Limitation on Liability. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Plan Shares or Plan Share Awards granted under it. If a member of
the Board or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Corporation
shall, subject to the requirements of applicable laws and regulations, indemnify
such member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Corporation and any Subsidiaries and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
4.04 Compliance with Laws and Regulations. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency or stockholders as
may be required.
4.05 Restrictions on Transfer. The Corporation may place a legend upon
any certificate representing shares issued pursuant to a Plan Share Award noting
that such shares may be restricted by applicable laws and regulations.
ARTICLE V
CONTRIBUTIONS
5.01 Amount and Timing of Contributions. The Board shall determine the
amount (or the method of computing the amount) and timing of any contributions
by the Corporation and any Subsidiaries to the Trust established under this
Plan. Such amounts may be paid in cash or in shares of Common Stock and shall be
paid to the Trust at the designated time of contribution. No contributions by
Employees or Non-Employee Directors shall be permitted.
5.02 Investment of Trust Assets; Number of Plan Shares. Subject to
Section 8.02 hereof, the Trustee shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan shall be 714,150 shares of Common Stock,
subject to adjustment as provided in Section 10.01 hereof, which shares shall be
purchased (from the Corporation and/or, if permitted by applicable regulations,
from stockholders thereof) by the Trust with funds contributed by the
Corporation. During the time this Plan remains in effect, Awards to each
Employee and each Non-Employee Director shall not exceed 25% and 5% of the
shares of Common Stock available under the Plan, respectively, and Plan Share
Awards to Non-Employee Directors in the aggregate shall not exceed 30% of the
number of shares available under this Plan, in each case subject to adjustment
as provided in Section 10.01 hereof.
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ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Awards. Plan Share Awards and Performance Share Awards may be made
to such Employees and Non-Employee Directors as may be selected by the Board or
the Committee. In selecting those Employees and Non-Employee Directors to whom
Plan Share Awards and/or Performance Share Awards may be granted, the number of
Shares covered by such Awards and the vesting schedule of such Awards, the Board
or the Committee shall consider the duties, responsibilities and performance of
each respective Employee and Non-Employee Director, his present and potential
contributions to the growth and success of the Corporation, his salary and such
other factors as deemed relevant to accomplishing the purposes of the Plan. The
Board or the Committee may but shall not be required to request the written
recommendation of the Chief Executive Officer of the Corporation other than with
respect to Plan Share Awards and/or Performance Share Awards to be granted to
him.
6.02 Form of Allocation. As promptly as practicable after an allocation
pursuant to Sections 6.01 that a Plan Share Award or a Performance Share Award
is to be issued, the Board or the Committee shall notify the Recipient in
writing of the grant of the Award, the number of Plan Shares covered by the
Award, and the terms upon which the Plan Shares subject to the Award shall be
distributed to the Recipient. The date on which the Board or the Committee so
notifies the Recipient shall be considered the date of grant of the Plan Share
Award or the Performance Share Award. The Board or the Committee shall maintain
records as to all grants of Plan Share Awards or Performance Share Awards under
the Plan.
6.03 Allocations Not Required to any Specific Employee or Non-Employee
Director. No Employee or Non-Employee Director shall have any right or
entitlement to receive a Plan Share Award hereunder, such Awards being at the
total discretion of the Board or the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Subject to the terms hereof, Plan Share Awards
granted shall be earned by a Recipient at the rate determined by the Board
or the Committee pursuant to the provisions of Article VI hereof. If the
employment of an Employee or service as a Non-Employee Director is
terminated prior to the date such Awards are fully vested for any reason
(except as specifically provided in subsections (b), (c) and (d) below),
the Recipient shall forfeit the right to any Shares subject to the Award
which have not theretofore been earned. In the event of a forfeiture of the
right to any Shares subject to an Award, such forfeited Shares shall become
available for allocation pursuant to Section 6.01 hereof as if no Award had
been previously granted with respect to such Shares. No fractional shares
shall be distributed pursuant to this Plan. In determining the number of
Shares which are earned as of any vesting date, if applicable, fractional
shares shall be rounded up to the nearest whole number if the fraction is
0.5 or higher, and down if it is less.
(b) Exception for Terminations Due to Death, Disability or
Retirement. Notwithstanding the general rule contained in Section 7.01(a),
all Plan Shares subject to a Plan Share Award held by a Recipient whose
employment with the Corporation or any Subsidiary Company or service as a
Non-Employee Director terminates due to death, Disability or Retirement
shall be deemed earned as of the Recipient's last day of employment with or
service to the Corporation or any Subsidiary Company (provided, however, no
such accelerated vesting shall occur in the event of Disability if a
Recipient remains employed by at least one member of the Employer Group)
and shall be distributed as soon as practicable thereafter.
(c) Exception for a Change in Control of the
Corporation. Notwithstanding the general rule contained in Section
7.01(a), all Plan Shares subject to a Plan Share Award held by a Recipient
shall be deemed to be earned as of the effective date of a Change in
Control of the Corporation.
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(d) Revocation for Misconduct. Notwithstanding anything hereinafter
to the contrary, the Board may by resolution immediately revoke, rescind
and terminate any Plan Share Award or Performance Share Award or portion
thereof, previously awarded under this Plan, to the extent Plan Shares have
not been distributed hereunder to the Recipient, whether or not yet earned,
in the case of an Employee who is discharged from the employ of the
Corporation or any Subsidiary Company for cause (as hereinafter defined).
Termination for cause shall mean termination because of the Employee's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than
traffic violations or similar offenses) or final cease-and-desist order.
Plan Share Awards granted to a Non-Employee Director who is removed for
cause pursuant to the Corporation's Certificate of Incorporation and Bylaws
or the Bank's Charter and Bylaws shall terminate as of the effective date
of such removal.
7.02 Distribution of Dividends. Any cash dividends (including special
large and nonrecurring dividends including any that has the effect of a return
of capital to the Corporation's stockholders) or stock dividends declared in
respect of each unvested Plan Share Award (including a Performance Share Award)
will be held by the Trust for the benefit of the Recipient on whose behalf such
Plan Share Award (including a Performance Share Award) is then held by the Trust
and such dividends, including any interest thereon, will be paid out
proportionately by the Trust to the Recipient thereof as soon as practicable
after the Plan Share Awards become earned. Any cash dividends or stock dividends
declared in respect of each vested Plan Share held by the Trust will be paid by
the Trust, as soon as practicable after the Trust's receipt thereof, to the
Recipient on whose behalf such Plan Share is then held by the Trust.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Subject to the provisions
of Section 7.05 hereof, Plan Shares shall be distributed to the Recipient
or his Beneficiary, as the case may be, as soon as practicable after they
have been earned.
(b) Form of Distributions. All Plan Shares, together with any Shares
representing stock dividends, shall be distributed in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned
and distributable. Payments representing cash dividends shall be made in
cash.
(c) Withholding. The Trustee may withhold from any cash payment or
Common Stock distribution made under this Plan sufficient amounts to cover
any applicable withholding and employment taxes, and if the amount of a
cash payment is insufficient, the Trustee may require the Recipient or
Beneficiary to pay to the Trustee the amount required to be withheld as a
condition of delivering the Plan Shares. The Trustee shall pay over to the
Corporation or any Subsidiary Company which employs or employed such
Recipient any such amount withheld from or paid by the Recipient or
Beneficiary.
(d) Restrictions on Selling of Plan Shares. Plan Share Awards may
not be sold, assigned, pledged or otherwise disposed of prior to the time
that they are earned and distributed pursuant to the terms of this Plan.
Upon distribution, the Board or the Committee may require the Recipient or
his Beneficiary, as the case may be, to agree not to sell or otherwise
dispose of his distributed Plan Shares except in accordance with all then
applicable federal and state securities laws, and the Board or the
Committee may cause a legend to be placed on the stock certificate(s)
representing the distributed Plan Shares in order to restrict the transfer
of the distributed Plan Shares for such period of time or under such
circumstances as the Board or the Committee, upon the advice of counsel,
may deem appropriate.
7.04 Voting of Plan Shares. After a Plan Share Award (other than a
Performance Share Award) has been made, the Recipient shall be entitled to
direct the Trustee as to the voting of the Plan Shares which are covered by the
Plan Share Award and which have not yet been earned and distributed to him
pursuant to Section 7.03, subject to rules and procedures adopted by the
Committee for this purpose. All shares of Common Stock held by the Trust which
have not been awarded under a Plan Share Award, shares subject to Performance
Share Awards which have not yet vested and shares which have been awarded as to
which Recipients have not directed the voting shall be voted by the Trustee in
its discretion.
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7.05 Performance Awards
(a) Designation of Performance Share Awards. The Committee may
determine to make any Plan Share Award a Performance Share Award by making
such Plan Share Award contingent upon the achievement of a Performance Goal
or any combination of Performance Goals. Each Performance Share Award shall
be evidenced by a written agreement ("Award Agreement"), which shall set
forth the Performance Goals applicable to the Performance Share Award, the
maximum amounts payable and such other terms and conditions as are
applicable to the Performance Share Award. Each Performance Share Award
shall be granted and administered to comply with the requirements of
Section 162(m) of the Code.
(b) Timing of Grants. Any Performance Share Award shall be made not
later than 90 days after the start of the period for which the Performance
Share Award relates and shall be made prior to the completion of 25% of
such period. All determinations regarding the achievement of any
Performance Goals will be made by the Committee. The Committee may not
increase during a year the amount of a Performance Share Award that would
otherwise be payable upon achievement of the Performance Goals but may
reduce or eliminate the payments as provided for in the Award Agreement.
(c) Restrictions on Grants. Nothing contained in the Plan will be
deemed in any way to limit or restrict the Committee from making any Award
or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
(d) Rights of Recipients. Notwithstanding anything to the contrary
herein, a Participant who receives a Performance Share Award payable in
Common Stock shall have no rights as a stockholder until the Common Stock
is issued pursuant to the terms of the Award Agreement.
(e) Transferability. A Participant's interest in a Performance Share
Award may not be sold, assigned, transferred, pledged, or otherwise
encumbered.
(f) Distribution. No Performance Share Award or portion thereof that
is subject to the attainment or satisfaction of a condition of a
Performance Goal shall be distributed or considered to be earned or vested
until the Committee certifies in writing that the conditions or Performance
Goal to which the distribution, earning or vesting of such Award is subject
have been achieved.
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and make
distributions and disbursements from the Trust in accordance with the provisions
of the Plan and Trust and the applicable directions, rules, regulations,
procedures and policies established by the Committee pursuant to the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust that
the Trustee shall have complete authority and discretion with respect to the
arrangement, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustee determines that the holding
of monies in cash or cash equivalents is necessary to meet the obligations of
the Trust. In performing its duties, the Trustee shall have the power to do all
things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
the Common Stock without regard to any law now or hereafter in force
limiting investments for trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and in
making such investment, the Trustee is authorized to purchase Common Stock
from the Corporation or from any other source, and such Common Stock so
purchased may be outstanding, newly issued, or treasury shares.
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(b) To invest any Trust assets not otherwise invested in accordance
with (a) above, in such deposit accounts, certificates of deposit,
obligations of the United States Government or its agencies or such other
investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any
time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in
the name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be maintained
showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may in the
opinion of the Trustee be reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to its rights,
duties and obligations hereunder, and such other legal services or
representation as it may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a dispute
as to the disposition thereof, whether in a segregated account or held in
common with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Board or the Committee.
8.04 Expenses. All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Corporation or, in the
discretion of the Corporation, the Trust.
8.05 Indemnification. Subject to the requirements of applicable laws and
regulations, the Corporation shall indemnify, defend and hold the Trustee
harmless against all claims, expenses and liabilities arising out of or related
to the exercise of the Trustee's powers and the discharge of its duties
hereunder, unless the same shall be due to the Trustee's gross negligence or
willful misconduct.
ARTICLE IX
DEFERRED PAYMENTS
9.01 Deferral of Plan Shares. Notwithstanding any other provision of this
Plan, any Recipient may elect, with the concurrence of the Committee and
consistent with any rules and regulations established by the Committee, to defer
the receipt of Plan Shares subject to Awards granted hereunder.
9.02 Timing of Election. The election to defer the receipt of any Plan
Shares must be made no later than the last day of the calendar year preceding
the calendar year in which the Recipient would otherwise have an unrestricted
right to receive such Plan Shares. Deferrals of eligible Plan Shares shall only
be allowed for those Plan Shares scheduled to vest while the Recipient is in
active service with the Corporation or a Subsidiary Company. Any election to
defer the receipt of eligible Plan Shares shall be irrevocable as long as the
Recipient remains an Employee or a Non-Employee Director.
9.03 Plan Share Award Deferral. The deferral of Plan Shares may be
elected by a Recipient subject to the rules and regulations established by the
Committee. Upon the vesting of such Plan Shares, the Committee shall credit to a
deferred stock award account established for the Recipient (which may be part of
an existing deferred compensation trust account) a number of deferred shares or
share units equivalent in value to the
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number of deferred Plan Shares multiplied by the Fair Market Value of the Common
Stock. Deferred shares or share units shall be valued at the Fair Market Value
on the date the deferred Plan Shares vest. Subsequent to the lapsing of all
restrictions, the deferred shares or share units shall be valued at the Fair
Market Value of the Common Stock. Deferred shares or share units shall accrue
dividends at the rate paid upon the Common Stock credited in the form of
additional deferred share units. Deferred share units shall be distributed in
shares of Common Stock or cash, at the discretion of the Committee, upon the
Recipient's termination of employment or service as a director or at such other
date, as may be approved by the Committee, over a period of no more than ten
(10) years.
9.04 Accelerated Distributions. The Committee may, at its sole
discretion, allow for the early payment of an Recipient's deferred stock award
account in the event of an "unforeseeable emergency" or in the event of the
death or Disability of the Recipient. An "unforeseeable emergency" means an
unanticipated emergency caused by an event beyond the control of the Recipient
that would result in severe financial hardship if the distribution were not
permitted. Such distributions shall be limited to the amount necessary to
sufficiently address the financial hardship. Any distributions under this
provision, shall be consistent with the Code and the regulations promulgated
thereunder. Additionally, the Committee may use its discretion to cause stock
award accounts to be distributed when continuing the program is no longer in the
best interest of the Corporation or one of its Subsidiary Companies.
9.05 Assignability. No rights to deferred stock award accounts may be
assigned or subject to any encumbrance, pledge or charge of any nature except
that a Recipient may designate a beneficiary pursuant to any rules established
by the Committee.
9.06 Unfunded Status. No Recipient or other person shall have any
interest in any fund or in any specific asset of the Corporation or one of its
Subsidiary Companies by reason of any amount credited pursuant to the provisions
hereof. Any amounts payable pursuant to the provisions hereof shall be paid from
the general assets of the Corporation or one of its Subsidiary Companies and no
Recipient or other person shall have any rights to such assets beyond the rights
afforded general creditors of the Corporation or one of its Subsidiary
Companies. However, the Corporation or one of its Subsidiary Companies shall
have the right to establish a reserve, trust or make any investment for the
purpose of satisfying the obligations created under this Article IX of the Plan;
provided, however, that no Recipient or other person shall have any interest in
such reserve, trust or investment.
ARTICLE X
MISCELLANEOUS
10.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any unvested Plan Share Award relates and the maximum
number of Plan Shares which may be granted to any Employee, to any Non-Employee
Director or to all Non-Employee Directors as a group shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of the Common Stock issued subsequent to the effective date of the Plan
resulting from any split, subdivision or consolidation of shares or other
capital adjustment, the payment of a stock dividend or other increase or
decrease in such shares effected without receipt or payment of consideration by
the Corporation. If, upon a merger, consolidation, reorganization, liquidation,
recapitalization or the like of the Corporation or of another corporation, each
recipient of a Plan Share Award shall be entitled, subject to the conditions
herein stated, to receive such number of shares of Common Stock or amount of
other securities of the Corporation or such other corporation as were
exchangeable for the number of shares of Common Stock of the Corporation which
such Recipients would have been entitled to receive except for such action.
10.02 Amendment and Termination of the Plan. The Board may, by
resolution, at any time amend or terminate the Plan, subject to any required
stockholder approval or any stockholder approval which the Board may deem to be
advisable for any reason, such as for the purpose of obtaining or retaining any
statutory or regulatory benefits under tax, securities or other laws or
satisfying any applicable stock exchange listing
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requirements. The Board may not, without the consent of the Recipient, alter or
impair any Plan Share Award previously granted under the Plan except as
specifically authorized herein. Upon termination of the Plan, the Recipient's
Plan Share Awards shall be distributed to the Recipient regardless of whether or
not such Plan Share Award had otherwise been earned under the service
requirements set forth in Article VII. Notwithstanding any other provision of
the Plan, the Plan may not be terminated until such time as all Plan Shares held
by the Trust have been awarded to Plan Recipients and shall be deemed to be
earned prior to the time of termination.
10.03 Nontransferable. Plan Share Awards and Performance Share Awards and
rights to Plan Shares shall not be transferable by a Recipient, and during the
lifetime of the Recipient, Plan Shares may only be earned by and paid to the
Recipient who was notified in writing of the Award pursuant to Section 6.02. No
Recipient or Beneficiary shall have any right in or claim to any assets of the
Plan or Trust, nor shall the Corporation or any Subsidiary Company be subject to
any claim for benefits hereunder.
10.04 Employment or Service Rights. Neither the Plan nor any grant of a
Plan Share Award, Performance Share Award or Plan Shares hereunder nor any
action taken by the Trustee, the Committee or the Board in connection with the
Plan shall create any right on the part of any Employee or Non-Employee Director
to continue in such capacity.
10.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award or Performance Share Award, except as expressly
provided in Sections 7.02, 7.04 and 7.05 above, prior to the time said Plan
Shares are actually earned and distributed to him.
10.06 Governing Law. To the extent not governed by federal law, the Plan
and Trust shall be governed by the laws of the State of Delaware.
10.07 Effective Date. This Plan shall be effective as of the Effective
Date, and Awards may be granted hereunder no earlier than the date this Plan is
approved by the stockholders of the Corporation and prior to the termination of
the Plan. Notwithstanding the foregoing or anything to the contrary in this
Plan, the implementation of this Plan is subject to the approval of the
Corporation's stockholders.
10.08 Term of Plan. This Plan shall remain in effect until the earlier of
(1) ten (10) years from the Effective Date, (2) termination by the Board, or (3)
the distribution to Recipients and Beneficiaries of all the assets of the Trust.
10.09 Tax Status of Trust. It is intended that the trust established
hereby be treated as a Grantor Trust of the Corporation under the provisions of
Section 671 et seq. of the Code, as the same may be amended from time to time.
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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and the corporate seal to be affixed
and duly attested, and the Trustees of the Trust established pursuant hereto
have duly and validly executed this Agreement, all on this th day of ,
2001.
CFS BANCORP, INC.
By:
----------------------------------
Thomas F. Prisby
Chairman of the Board and Chief
Executive Officer
ATTEST: TRUSTEES:
- ----------------------------------------------------- -----------------------------------------------------
Secretary
-----------------------------------------------------
-----------------------------------------------------
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CFS BANCORP,INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
This Proxy is being solicited on behalf of the Board of Directors of CFS Bancorp. Inc., pursuant to its bylaws for use only at the
Annual Meeting of Stockholders to be held on Tuesday, April 24, 2001, and at any adjournment thereof.
1. Election of Directors for three year 2. PROPOSAL to amend the 1998 FOR AGAINST ABSTAIN
terms expiring in 2004 or until their Stock Option Plan and the [ ] [ ] [ ]
successors are elected and qualified. For Withhold For All 1998 Recognition and
All All Except Retention Plan.
Nominees: Thomas F. Prisby and Frank D. Lester
INSTRUCTIONS: To withhold authority to vote [ ] [ ] [ ] 3. PROPOSAL to ratify the FOR AGAINST ABSTAIN
for one or more of the nominees, write and appointment of Ernst [ ] [ ] [ ]
name of such nominee(s) in the space & Young LLP as independent
provided below. auditors of the Company for
the year ending December 31,
--------------------------------------------- 2001.
The Board of Directors recommends a vote FOR
the election of the nominees listed above. The Board of Directors recommends that you vote FOR
proposals 2 and 3.
In their discretion, the proxies are authorized to vote
upon such other matters as may properly come before the
Annual Meeting.
Date: 2001
----------------------
Signature(s)
---------------------------------------------
---------------------------------------------------------
Please sign this Proxy exactly as name appears on your
stock certificate. When shares of the Company are held by
joint tenants, both should sign. When signing this Proxy
as attorney, executor, administrator, trustee, or
guardian, please give full title as such. If the shares
are owned by a corporation, please sign in full corporate
name by President or other authorized officer. If a
partnership or other entity owns the shares, please sign
in partnership name, by authorized person.
The above signed hereby acknowledges receipt of notice of
the Annual Meeting of Stockholders of CFS Bancorp, Inc.
called for April 24, 2001 and the accompanying Proxy
Statement and other materials prior to the signing of
this Proxy.
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
49
REVOCABLE CFS BANCORP, INC. REVOCABLE
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CFS BANCORP, INC. FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 2001 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints the Board of Directors of
CFS Bancorp, Inc. ("Company"), or any successors thereto, as
proxies with full power of substitution, to represent and vote, as
designated below, all the shares of common stock of the Company
held of record by the undersigned on March 9, 2001 at the Annual
Meeting of Stockholders to be held at the Center for Visual and
Performing Arts, located at 1040 Ridge Road, Munster, Indiana, on
Tuesday, April 24, 2001, at 10:00 a.m., Central Time, and any
adjournment thereof.
This Proxy will be voted as directed, but if the proxy card is returned and
properly signed and no instructions are specified, this Proxy will be voted FOR
the election of the Board of Directors' nominees to the Board of Directors, FOR
the proposal to amend the 1998 Stock Option Plan and the 1998 Recognition and
Retention Plan, FOR ratification of the Company's independent auditors, and
otherwise at the discretion of the proxy holders. If you do not return this
card, your shares will not be voted.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------