CARVER BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 6035 APPLICATION PENDING
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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c/o CARVER FEDERAL SAVINGS BANK
75 WEST 125TH STREET
NEW YORK, NEW YORK 10027-4512
(212) 876-4747
(Address, including ZIP Code, and telephone number,
including area code, of registrant's principal executive offices)
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. /x/
CALCULATION OF REGISTRATION FEE
=======================================================================================================================
Title of each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered(1) Offering Price Per Share(2) Aggregate Offering Price (2) Registration Fee
- -----------------------------------------------------------------------------------------------------------------------
Common Stock 2,314,375 $8.00 $18,515,000 $6,384
$.01 par value
- -----------------------------------------------------------------------------------------------------------------------
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(1) Based on the number of shares of common stock of Carver Bancorp, Inc.
to be issued in exchange for the same number of shares of common stock
of Carver Federal Savings Bank in connection with the reorganization of
Carver Federal Savings Bank as described in the Proxy
Statement-Prospectus.
(2) The proposed maximum offering price per share reflects the market price
of the common stock of Carver Federal Savings Bank to be converted and
exchanged in connection with the reorganization described in the Proxy
Statement-Prospectus, computed in accordance with Rule 457(f)(1) under
the Securities Act of 1933. It is based on the average of the high and
low prices of the common stock on June 4, 1996, as reported on the
Nasdaq National Market System. The proposed maximum aggregate offering
price is estimated solely for the purpose of calculating the
registration fee.
CARVER BANCORP, INC.
Cross Reference Sheet Required by Item 501(b) of Regulation S-K
CAPTION CAPTION IN PROXY STATEMENT-PROSPECTUS
------- -------------------------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Facing Page; Cross-Reference Sheet; Notice of
Front Cover Page of Prospectus . . . . . . . . . . Annual Meeting of Stockholders; Outside Front
Cover Page of Proxy Statement-Prospectus.
2. Inside Front and Outside Back Cover Pages of Available Information; Table of Contents.
Prospectus . . . . . . . . . . . . . . . . . . . .
3. Risk Factors, Ratio of Earnings to Fixed Charges Summary of the Proxy Statement-Prospectus;
and Other Information . . . . . . . . . . . . . . General Information; Proposal 3 -- Formation of
Holding Company -- Terms and Conditions to the
Reorganization.
4. Terms of the Transaction . . . . . . . . . . . . . Summary of the Proxy Statement-Prospectus;
General Information; Proposal 3 -- Formation of
Holding Company -- Conditions to the
Reorganization, Description of Bancorp Capital
Stock, Certain Differences in Stockholder Rights,
Tax Consequences of the Reorganization,
Accounting Treatment of the Reorganization,
Market for the Common Stock; Appendix A --
Agreement and Plan of Reorganization.
5. Pro Forma Financial Information . . . . . . . . . Pro Forma Consolidated Capitalization.
6. Material Contracts with the Company Being Acquired Proposal 1 -- Election of Directors -- Employee
Benefit Plans, Employment Agreements; Proposal 3
-- Formation of Holding Company -- Management of
Carver; Appendix A -- Agreement and Plan of
Reorganization.
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters . . Not Applicable.
8. Interests of Named Experts and Counsel . . . . . . Not Applicable.
9. Disclosure of Commission Position on Proposal 3 -- Formation of Holding Company --
Indemnification for Securities Act Liabilities . . Certain Differences in Stockholder Rights --
Limitation of Liability and Indemnification of
Directors, Officers and Employees.
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CAPTION CAPTION IN PROXY STATEMENT-PROSPECTUS
------- -------------------------------------
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants . . . Not Applicable.
11. Incorporation of Certain Information by Reference Not Applicable.
12. Information with Respect to S-2 or S-3 Registrants Not Applicable.
13. Incorporation of Certain Information by Reference Not Applicable.
14. Information With Respect to Registrants Other Than Proposal 3 -- Formation of Holding Company --
S-3 or S-2 Registrants . . . . . . . . . . . . . . Parties to the Reorganization, Business of
Bancorp, Description of Bancorp Capital Stock,
Market for the Common Stock, Dividend Policy,
Regulation and Supervision, Management of
Bancorp.
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies . . . . Not Applicable.
16. Information With Respect to S-2 or S-3 Companies . Not Applicable.
17. Information With Respect to Companies Other Than Proposal 3 -- Formation of Holding Company --
S-3 or S-2 Companies . . . . . . . . . . . . . . . Parties to the Reorganization, Business of the
Bank, Market for the Common Stock, Dividend
Policy, Regulation and Supervision, Management's
Discussion and Analysis of Financial Condition
and Results of Operations, Management of Carver.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorization Notice of Annual Meeting of Stockholders; Summary
are to be Solicited . . . . . . . . . . . . . . . of the Proxy Statement-Prospectus; General
Information; Proposal 1 -- Election of Directors;
Proposal 2 -- Ratification of Appointment of
Independent Auditors; Proposal 3 -- Formation of
Holding Company -- Conditions to the
Reorganization, Management of Bancorp, Management
of Carver; Form of Proxy; Appendix B -- Dissenter
and Appraisal Rights.
19. Information if Proxies, Consents or Authorizations Not Applicable.
are not to be Solicited or in an Exchange Offer .
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[LETTERHEAD OF CARVER FEDERAL SAVINGS BANK]
June ___, 1996
Dear Stockholder:
You are invited to attend the 1996 annual meeting of stockholders of Carver Federal Savings Bank ("Carver" or the "Bank"), which will be held on July 29, 1996 at 9:00 a.m., New York time, at the Adam Clayton Powell State Office Building, 163 West 125th Street, Third Floor, New York, New York (the "Annual Meeting").
At the Annual Meeting, you will be asked to consider and vote upon: (1) the election of two directors to serve for a three-year term expiring in 1999 and one director to serve for a one-year term expiring in 1997; (2) the ratification of the appointment of Mitchell & Titus, LLP as independent auditors for the Bank for the year ending March 31, 1997; and (3) a proposal to form a holding company for the Bank by the adoption and approval of an Agreement and Plan of Reorganization dated as of May 21, 1996 among the Bank, Carver Bancorp, Inc., a newly-formed Delaware business corporation organized at the direction of the Bank to be a savings and loan holding company, and Carver Interim Federal Savings Bank, which is being organized as a wholly owned subsidiary of Carver Bancorp, Inc. to facilitate the reorganization of the Bank. In addition, management will report on the operations and activities of the Bank and there will be an opportunity for you to ask questions about the Bank's business.
It is very important that your shares be represented at the Annual Meeting, regardless of whether or not you plan to attend in person. The adoption of the Agreement and Plan of Reorganization requires the approval of a majority of the outstanding shares of Carver Common Stock. Consequently, a failure to vote will have the same effect as a vote against these proposals. I urge you to execute, date and return the enclosed proxy card in the enclosed postage-paid envelope as soon as possible to ensure that your shares will be voted at the Annual Meeting.
YOUR VOTE IS IMPORTANT WHETHER OR NOT YOU PLAN
TO ATTEND THE ANNUAL MEETING IN PERSON.
The Board of Directors of Carver has determined that the matters to be considered at the Annual Meeting are in the best interests of the Bank and its stockholders. For the reasons set forth in the Proxy Statement-Prospectus, the Board unanimously recommends a vote FOR each matter to be considered.
On behalf of the Board of Directors, I urge you to vote FOR the persons nominated to serve as directors, FOR approval of the ratification of appointment of the independent auditors and FOR approval of the Agreement and Plan of Reorganization.
Sincerely yours,
Thomas L. Clark, Jr.
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 29, 1996
NOTICE IS HEREBY GIVEN that the 1996 annual meeting of stockholders of Carver Federal Savings Bank ("Carver" or the "Bank") will be held on July 29, 1996 at 9:00 a.m., New York time, at the Adam Clayton Powell State Office Building, 163 West 125th Street, Third Floor, New York, New York (the "Annual Meeting"). The Annual Meeting has been called for the following purposes:
1. To elect two directors to serve for a three-year term expiring at the 1999 annual meeting and until their respective successors have been duly elected and qualified and to elect one director to serve for a one-year term expiring at the 1997 annual meeting and until her respective successor has been duly elected and qualified;
2. To ratify the appointment of Mitchell & Titus, LLP as independent auditors for the Bank for the year ending March 31, 1997;
3. To consider and vote upon the formation of a savings and loan holding company for Carver by the adoption and approval of the Agreement and Plan of Reorganization dated as of May 21, 1996 (the "Plan of Reorganization" or "Plan") among the Bank, Carver Bancorp, Inc. ("Bancorp" or the "Company"), and Carver Interim Federal Savings Bank ("Interim"), pursuant to which Carver will become a wholly owned subsidiary of Bancorp and all of the outstanding shares of common stock of Carver (other than shares held by stockholders exercising dissenters' rights, if any) will be converted into and exchanged for, on a one-for-one basis, shares of common stock of Bancorp (a copy of the Plan is attached as Appendix A to the Proxy Statement-Prospectus accompanying this Notice); and
4. To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
Pursuant to the Bylaws of Carver, the Board of Directors has fixed June 10, 1996 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement thereof. Only holders of Carver Common Stock as of the close of business on the record date will be entitled to vote at the Annual Meeting or any adjournment or postponement thereof.
Each Carver stockholder has the right to demand from Carver payment for the fair value of such stockholder's shares; provided, that such stockholder (1) files with Carver, before the vote on the approval of the Plan, a writing which demands payment for the shares at fair value if the Plan is approved, and (2) does not vote such shares in favor of the Plan. Carver and any such stockholder shall in such case have the rights and duties and shall follow the procedures set forth in Section 552.14 of the Rules and Regulations of the Office of Thrift Supervision, a copy of which is attached as Appendix B to the Proxy Statement-Prospectus accompanying this Notice.
THE CARVER BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS
OF CARVER COMMON STOCK VOTE FOR APPROVAL OF ALL OF THE PROPOSALS.
WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT-PROSPECTUS. ANY STOCKHOLDER PRESENT AT THE ANNUAL MEETING, INCLUDING ANY ADJOURNMENT OR POSTPONEMENT THEREOF, MAY REVOKE SUCH HOLDER'S PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL MEETING.
By Order of the Board of Directors
Margaret R. Lewis
Corporate Secretary
New York, New York
June ___, 1996
PROXY STATEMENT
CARVER FEDERAL SAVINGS BANK
75 WEST 125TH STREET
NEW YORK, NEW YORK 10027-4512
(212) 876-4747
ANNUAL MEETING OF STOCKHOLDERS
JULY 29, 1996
PROSPECTUS
CARVER BANCORP, INC.
Common Stock, par value $0.01 per share
This document serves as a Proxy Statement for the 1996 annual meeting of stockholders of Carver Federal Savings Bank ("Carver" or the "Bank"), to be held on July 29, 1996 at 9:00 a.m., New York time, at the Adam Clayton Powell State Office Building, 163 West 125th Street, Third Floor, New York, New York, and at any adjournment or postponement thereof (the "Annual Meeting"), and is being used by the Board of Directors of the Bank to solicit the proxies of the Bank's stockholders in connection therewith. This Proxy Statement-Prospectus, with the accompanying proxy card, is first being sent or given to Carver's stockholders on or about June ___, 1996.
As more fully described in this Proxy Statement-Prospectus, the purpose of the Annual Meeting is (1) to elect two directors to serve for a three-year term and one director to serve for a one-year term; (2) to ratify the appointment of Mitchell & Titus, LLP as independent auditors for the Bank for the fiscal year ending March 31, 1996; (3) to consider and vote upon the formation of a savings and loan holding company by the adoption and approval of the Agreement and Plan of Reorganization dated as of May 21, 1996 (the "Plan of Reorganization" or "Plan") among Carver, Carver Bancorp, Inc. ("Bancorp"), a newly-formed Delaware business corporation organized at the direction of the Bank, and Carver Interim Federal Savings Bank ("Interim"), which will be, upon formation, a wholly owned subsidiary of Bancorp, pursuant to which Interim will be merged with and into Carver and Bancorp will become the holding company for Carver (the "Reorganization"); and (4) to transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
This document also serves as a Prospectus in connection with the issuance by Bancorp of up to 2,314,375 shares of Bancorp common stock, par value $0.01 per share ("Bancorp Common Stock"). Upon the effective date of the Reorganization (the "Effective Date"), all outstanding shares of Carver common stock, par value $0.01 per share ("Carver Common Stock") (other than shares held by stockholders exercising dissenters' rights, if any), will be converted into and exchanged for an equal number of shares of Bancorp Common Stock, on a one-for-one basis.
Under the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations of the Securities and Exchange Commission (the "SEC"), the solicitation of stockholders of Carver to approve the proposed Plan of Reorganization constitutes an offering of Bancorp Common Stock. Bancorp has filed with the SEC a registration statement on Form S-4 under the Securities Act (the "Registration Statement") with respect to such offering, and this Proxy Statement-Prospectus constitutes the prospectus of Bancorp filed as part of the Registration Statement. This Proxy Statement-Prospectus does not contain all of the information set forth in the Registration Statement and the related exhibits, certain parts of which are omitted in accordance with the rules and regulations of the SEC.
This Proxy Statement-Prospectus shall not constitute a prospectus for a public reoffering of Bancorp Common Stock issuable pursuant to the Plan of Reorganization.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT-PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS, NOR ANY OFFER OR SOLICITATION MADE HEREUNDER, SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION SET FORTH OR INCORPORATED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION OR ANY OTHER FEDERAL AGENCY OR ANY STATE SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, OFFICE OR OTHER AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
The date of this Proxy Statement-Prospectus is June ___, 1996.
AVAILABLE INFORMATION
Carver is subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files periodic reports and other information with the Office of Thrift Supervision (the "OTS"). Such reports and other information when filed by the Bank can be inspected and copied at the public reference facilities maintained by the OTS at 1776 G Street, N.W., Washington, D.C. 20552, or at the OTS Regional Office located at 10 Exchange Place, 18th Floor, Jersey City, New Jersey 07302.
Bancorp is not currently subject to the information reporting requirements of the Exchange Act and, accordingly, has not filed reports, proxy statements or other information with the SEC. All of the Bancorp Common Stock is currently owned by Carver, and there is, therefore, no public trading market for Bancorp Common Stock. If the Reorganization is consummated, Bancorp Common Stock will be registered under the Exchange Act, and Bancorp will file periodic reports with the SEC. In addition, in accordance with the rules and regulations of the SEC in connection with annual meetings of the stockholders of Bancorp, proxy statements accompanied or preceded by annual reports to stockholders will be furnished to stockholders of Bancorp. Such reports will contain financial information that has been examined and reported upon, with an opinion expressed, by an independent public accounting firm.
This Proxy Statement-Prospectus does not contain all of the information set forth in the Registration Statement and the related exhibits which Bancorp has filed with the SEC, and to which reference is hereby made. The Registration Statement, including exhibits, can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, New York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies can be obtained at prescribed rates from the SEC Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 20549.
Bancorp will file a registration statement on Form H-(b)(10) under the Home Owners' Loan Act, as amended ("HOLA"), with the OTS. In addition, Carver has filed with the OTS an application on Form H-(e)1-S under HOLA. The non-confidential portions of the applications and, when filed, registration statement can be inspected at the OTS Regional Office located at 10 Exchange Place, 18th Floor, Jersey City, New Jersey 07302.
A copy of the Bank's Annual Report for the fiscal year ended March 31, 1996 (the "Annual Report") accompanies this Proxy Statement-Prospectus. The Annual Report contains financial statements, prepared in conformity with generally accepted accounting principles, for the years ended March 31, 1995 and 1996 and certain other information and should be read in connection with this Proxy Statement-Prospectus.
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SUMMARY OF THE PROXY STATEMENT-PROSPECTUS . . . . . . . . . . . . . . . . . . . . . . . 6
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF THE BANK . . . . . . . . . . . . . . 10
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Record Date and Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Votes Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Rights of Dissenting Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . 13
Revocability of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Security Ownership of Certain Beneficial Owners . . . . . . . . . . . . . . . . . . 15
Stock Ownership of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . 17
PROPOSAL 1
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Information with Respect to Nominees and Continuing Directors . . . . . . . . . . . 18
Nominees for Election as Directors . . . . . . . . . . . . . . . . . . . . . . . . 18
Continuing Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Board and Committee Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Directors' Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . 24
Performance Graph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Certain Employee Benefit Plans and Employment Agreements . . . . . . . . . . . . . 26
Transactions with Certain Related Persons . . . . . . . . . . . . . . . . . . . . . 29
Compliance with Section 16(a) of the Securities Exchange Act of 1934 . . . . . . . 30
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . 30
PROPOSAL 3
FORMATION OF HOLDING COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
PARTIES TO THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Carver Federal Savings Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Carver Bancorp, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Carver Interim Federal Savings Bank . . . . . . . . . . . . . . . . . . . . . . . . 32
DESCRIPTION OF THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Reasons for the Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Description of the Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . 33
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Conditions to the Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . 34
Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Exchange of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Effect of the Reorganization on Employee Benefit Plans . . . . . . . . . . . . . . 35
DESCRIPTION OF BANCORP CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 35
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Bancorp Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Anti-Takeover Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
DESCRIPTION OF CARVER CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . 37
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
The Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Bank Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
CERTAIN DIFFERENCES IN STOCKHOLDER RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 38
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Rights of Issuer to Repurchase Stock . . . . . . . . . . . . . . . . . . . . . . . 38
Limitation of Liability and Indemnification of Directors, Officers and Employees . 39
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Special Meetings of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . 40
Certain Anti-Takeover Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 40
TAX CONSEQUENCES OF THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . 44
ACCOUNTING TREATMENT OF THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . 45
MARKET FOR THE COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
PRO FORMA CONSOLIDATED CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . 47
BUSINESS OF BANCORP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
BUSINESS OF THE BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Lending Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Asset Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Mortgage-Backed and Related Securities . . . . . . . . . . . . . . . . . . . . . . 64
Investment Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Deposit Activity and Other Sources of Funds . . . . . . . . . . . . . . . . . . . . 68
Subsidiary Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Market Area and Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
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Page
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
FEDERAL AND STATE TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Federal Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
State and Local Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
REGULATION AND SUPERVISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Regulation of Federal Savings Associations . . . . . . . . . . . . . . . . . . 79
Regulation of Holding Company . . . . . . . . . . . . . . . . . . . . . . . . . 88
Federal Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . 90
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Asset/Liability Management . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Interest Rate Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . 91
Average Balance, Interest and Average Yields and Rates . . . . . . . . . . . . 92
Rate/Volume Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Comparison of Financial Condition at March 31, 1996 and 1995 . . . . . . . . . 94
Comparison of Financial Condition at March 31, 1995 and 1994 . . . . . . . . . 95
Comparison of Operating Results for the Years Ended March 31, 1996 and 1995 . . 95
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Provision for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Income Tax Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Comparison of Operating Results for the Years Ended March 31, 1995 and 1994 . . 98
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Non-Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Income Tax Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Extraordinary Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Cumulative Effect of Change in Accounting for Income Taxes . . . . . . . . . . 100
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . 100
Regulatory Capital Position . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Impact of Inflation and Changing Prices . . . . . . . . . . . . . . . . . . . . 101
Impact of New Accounting Standards . . . . . . . . . . . . . . . . . . . . . . 102
POSSIBLE IMPACT OF PROPOSED LEGISLATION . . . . . . . . . . . . . . . . . . . . . . 102
MANAGEMENT OF BANCORP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
MANAGEMENT OF CARVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Compensation and Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 106
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
PROPOSALS FOR 1997 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . 107
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . F-1
CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . F-2
APPENDIX A -- PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B -- SECTION 552.14 OF RULES AND REGULATIONS OF OTS . . . . . . . B-1
APPENDIX C -- CERTIFICATE OF INCORPORATION OF BANCORP . . . . . . . . . . . C-1
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SUMMARY OF THE PROXY STATEMENT-PROSPECTUS
This Summary is qualified in its entirety by the detailed information contained in this Proxy Statement-Prospectus, the Appendices hereto and the documents referred to herein.
ANNUAL MEETING OF STOCKHOLDERS
Time and Place of the The Annual Meeting will be held on July 29, 1996 at 9:00 a.m., New
Annual Meeting . . . . . . . . York time, at the Adam Clayton Powell State Office Building, 163
West 125th Street, Third Floor, New York, New York. See "General
Information -- General."
Purpose of the Annual The purpose of the Annual Meeting is to (1) elect two directors,
Meeting . . . . . . . . . . . each to serve for a three-year term expiring in 1999 and one
director to serve for a one-year term expiring in 1997; (2) ratify
the appointment of Mitchell & Titus, LLP as independent auditors
for the Bank for the fiscal year ending March 31, 1997; (3)
consider and vote upon the Plan of Reorganization pursuant to which
Interim will be merged with and into Carver and Carver will become
a wholly owned subsidiary of Bancorp, and all of the outstanding
shares of Carver Common Stock (other than shares held by
stockholders exercising dissenters' rights, if any) will be
converted into and exchanged for, on a one-for-one basis, shares of
Bancorp Common Stock; and (5) transact such other business as may
properly come before the Annual Meeting, See "General Information,"
"Proposal 1 -- Election of Directors," "Proposal 2 -- Ratification
of Appointment of Independent Auditors" and "Proposal 3 --
Formation of Holding Company."
Record Date . . . . . . . . . . . The Board of Directors of Carver has fixed the close of business on
June 10, 1996 as the record date (the "Record Date") for the
determination of stockholders entitled to notice of and to vote at
the Annual Meeting and at any adjournment or postponement thereof.
See "General Information -- Record Date and Voting."
Beneficial Ownership by On April 30, 1996 the directors and executive officers of Carver
Directors and beneficially owned in the aggregate 198,741 shares of Carver Common
Executive Officers . . . . . . . Stock. See "General Information -- Stock Ownership of Management."
Additional Information . . . . . For additional information, telephone Raymond L. Bruce, Corporate
Counsel, Carver Federal Savings Bank, at (212) 876-4747.
|
FORMATION OF HOLDING COMPANY
The Parties to the Carver, Carver Bancorp, Inc. and Carver Interim Federal Savings
Reorganization . . . . . . . . Bank.
Carver Federal Savings Carver is a federally chartered stock savings bank organized under
Bank . . . . . . . . . . . . . the rules and regulations of the OTS. Carver conducts its business
through 8 full service banking offices located in the boroughs of
Brooklyn, Manhattan and Queens in the City of New York, and Nassau
County in the State of New York. Carver's administrative offices
are located at 75 West 125th Street, New York, New York, 10027-
4512, and its telephone number is (212) 876-4747.
On October 24, 1995, the Bank converted from mutual to stock form
and issued 2,314,375 shares of its common stock, par value $0.01
per share.
Carver Bancorp, Inc. . . . . . . Bancorp is a business corporation incorporated as a wholly owned
subsidiary of Carver under the General Corporation Law of the State
of Delaware. Bancorp was organized at the direction of Carver for
the purpose of acquiring all of the issued and outstanding shares
of Carver Common Stock pursuant to the Plan of Reorganization.
Bancorp's telephone number and address are the same as those given
for Carver above.
Carver Interim Federal Interim is a stock-form savings bank formed under the Rules and
Savings Bank . . . . . . . . . Regulations of the OTS (the "OTS Regulations"). Interim is being
organized as a wholly owned subsidiary of Bancorp for the purpose
of being merged with and into Carver pursuant to the Plan of
Reorganization.
Reasons for the The Board of Directors of Carver believes that a holding company
Reorganization . . . . . . . . structure will provide greater flexibility to meet the future
competitive and financial needs of the Bank. The Reorganization
will also increase flexibility with respect to potential expansion
through mergers and acquisitions, which may be funded by additional
equity offerings. A holding company structure will also allow the
Board of Directors of Bancorp to repurchase shares of Bancorp
Common Stock and declare dividends in the future, although there
are no present plans to do so.
Description of the Under the Plan of Reorganization, Interim will merge with and into
Reorganization . . . . . . . . Carver, with Carver as the surviving institution, and all of the
outstanding shares of Carver Common Stock (other than shares held
by stockholders exercising dissenters' rights, if any) will be
converted into and exchanged for, on a one-for-one basis, shares of
Bancorp Common Stock. Thereafter, Interim will cease to exist as a
separate entity and Carver will become a wholly owned subsidiary of
Bancorp and will continue its current business and operations as a
federally chartered stock savings bank using its current name. The
Plan of Reorganization is incorporated by reference into this Proxy
Statement-Prospectus and attached hereto as Appendix A.
|
See "Proposal 3 -- Formation of Holding Company -- Conditions to the
Reorganization."
Management of Bancorp . . . . . . The Board of Directors of Bancorp is comprised of the members of
the Board of Directors of Carver. The officers of Bancorp are the
senior officers of Carver. See "Proposal 3 -- Formation of Holding
Company -- Management of Bancorp."
Conditions and Required The consummation of the Reorganization is subject to the
Regulatory Approvals . . . . . satisfaction of several significant conditions, including: the
adoption and approval of the Plan of Reorganization by the holders
of at least a majority of the outstanding shares of Carver Common
Stock; the approval of the organization of Interim by the OTS, the
approval of the merger of Interim with and into Carver by the OTS,
the approval by the OTS of the application of Bancorp to acquire
all of the capital stock of the Bank; and the receipt by Carver of
a favorable opinion of counsel as to the federal income tax
consequences of the Reorganization. There is no assurance that
such conditions will be satisfied. See "Tax Consequences of the
Reorganization" and "Conditions to the Reorganization" under
"Proposal 3 -- Formation of Holding Company."
Comparison of Stockholder While the Certificate of Incorporation of Bancorp (the "Certificate
Rights . . . . . . . . . . . of Incorporation"), attached hereto as Appendix C, is similar in
many respects to the current Federal Stock Charter of Carver (the
"Federal Stock Charter"), certain differences will exist following
the Reorganization between the rights of the stockholders of
Bancorp and those of Carver. These differences will include such
matters as limitations on the liability of directors,
indemnification of directors, officers and employees, appraisal
rights and antitakeover protections. See "Proposal 3 -- Formation
of Holding Company -- Certain Differences in Stockholder Rights."
Anti-Takeover Effects . . . . . . The Certificate of Incorporation and Bylaws of Bancorp and the
Federal Stock Charter and Bylaws of Carver contain provisions that
may be relevant to potential changes in control. See "Proposal 3
-- Formation of Holding Company -- Certain Anti-takeover
Provisions."
Federal Income Tax The Plan of Reorganization is conditioned, in part, upon the
Consequences . . . . . . . . . receipt by Carver of an opinion of counsel to the effect that for
federal income tax purposes: (1) no gain or loss will be
recognized by stockholders of Carver on the transfer of their
shares of Carver Common Stock to Bancorp solely in exchange for
shares of Bancorp Common Stock; (2) no gain or loss will be
recognized by Bancorp upon its receipt of shares of Carver Common
Stock in exchange for shares of Bancorp Common Stock; (3) the
aggregate basis of the shares of Bancorp Common Stock to be
received by Carver's stockholders will be the same as the aggregate
basis of the shares of Carver Common Stock exchanged therefor; and
(4) the holding period of the shares of Bancorp Common Stock to be
received by Carver's stockholders will include the holding period
of Carver
|
Common Stock exchanged therefor, provided that each such
stockholder held such shares of Carver Common Stock as a capital
asset on the Effective Date. Each stockholder is urged to consult
his own tax advisor as to the specific consequences of the
Reorganization to the stockholder under federal, state and any
other applicable tax laws. See "Proposal 3 -- Formation of Holding
Company -- Tax Consequences of the Reorganization."
Accounting Treatment of the It is expected that the Reorganization will be characterized as,
Reorganization . . . . . . . . and treated similarly to, a "pooling of interests" for financial
reporting and related purposes. See "Proposal 3 -- Formation of
Holding Company -- Accounting Treatment of the Reorganization."
Regulation and Supervision . . . After the Effective Date, Bancorp will be subject to regulation by
the OTS as a savings and loan holding company under the HOLA.
Carver will continue to be subject to regulation by the OTS and the
FDIC. See "Proposal 3 -- Formation of Holding Company --
Regulation and Supervision."
Market for Stock . . . . . . . . The Bank's Common Stock is currently traded on the Nasdaq National
Market System under the symbol "CARV". Following the
Reorganization, it is expected that Bancorp Common Stock will be
traded on the Nasdaq National Market System under the same symbol.
See "Market For The Common Stock" and "Dividend Policy" under
"Proposal 3 -- Formation of Holding Company."
Effective Date . . . . . . . . . The Effective Date will be the later of the date of the (a)
consummation of the Plan or (b) date specified on the endorsement
by the Secretary of the OTS of the articles of combination with
respect to the Plan of Reorganization in accordance with the Rules
and Regulations of the OTS. See "Proposal 3 -- Formation of
Holding Company -- Conditions to the Reorganization, -- Effective
Date."
Rights of Dissenting Holders of shares of Carver Common Stock are entitled to dissent
Stockholders . . . . . . . . . from the Plan of Reorganization and to receive the fair value of
their shares if they follow certain statutory procedures. See
"General Information -- Appraisal Rights, "Proposal 3 -- Formation
of Holding Company -- Rights of Dissenting Stockholders" and
Appendix B.
Stockholder Vote Required Approval of the Plan of Reorganization will require the vote of the
for Approval . . . . . . . . . holders of a majority of the outstanding shares of Carver Common
Stock entitled to vote thereon.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF CARVER UNANIMOUSLY RECOMMENDS THAT
MANAGEMENT . . . . . . . . . . STOCKHOLDERS VOTE FOR THE ADOPTION OF THE PLAN OF REORGANIZATION.
|
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF THE BANK
The selected consolidated financial and other data of the Bank set forth below is derived in part from and should be read in conjunction with the Consolidated Financial Statements of the Bank and Notes thereto presented elsewhere in this Proxy Statement-Prospectus.
AT MARCH 31,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
SELECTED FINANCIAL CONDITION DATA:
TOTAL AMOUNT OF:
Assets . . . . . . . . . . . . . $367,657 $367,962 $308,507 $330,725 $323,998
Loans . . . . . . . . . . . . . . 82,608 48,460 51,020 56,533 51,710
Mortgage-backed securities . . . 131,105 181,134 153,843 235,676 243,590
Investment securities . . . . . . 8,937 18,035 12,018 14,779 10,892
Securities available-for-sale . . 114,328 93,328 71,572 - --
Excess of cost over assets 1,669 1,899 2,141 2,676 3,206
acquired . . . . . . . . . . . .
Cash and cash equivalents . . . . 10,026 11,818 9,053 10,435 4,603
Deposits . . . . . . . . . . . . 256,952 248,446 252,474 256,068 246,930
Borrowed funds . . . . . . . . . 73,948 82,318 39,930 59,000 61,345
Stockholders' equity . . . . . . 34,765 34,801 14,170 13,418 13,223
NUMBERS OF:
Deposit accounts . . . . . . . . 45,815 44,324 44,593 44,744 45,668
Offices . . . . . . . . . . . . . 8 8 8 8 8
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YEAR ENDED MARCH 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SELECTED OPERATING DATA:
Interest income ..................... $ 23,529 $ 19,750 $ 17,464 $ 21,081 $ 21,937
Interest expense .................... 13,594 10,532 10,167 13,063 14,989
---------- ---------- ---------- ---------- ----------
Net interest income ................. 9,935 9,218 7,297 8,018 6,948
Provision for loan losses ........... 131 334 19 812 192
---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses .................. 9,804 8,884 7,278 7,206 6,756
---------- ---------- ---------- ---------- ----------
Non-interest income:
Gain on sales of assets .......... . -- -- 1,127 -- 3,565
Other ............................ 608 576 565 452 511
---------- ---------- ---------- ---------- ----------
Total non-interest income ...... 608 576 1,692 452 4,076
---------- ---------- ---------- ---------- ----------
Non-interest expenses:
Loss on sale of foreclosed
real estate ...................... 77 34 159 475 2
Other ............................ 8,976 7,907 7,690 6,758 6,733
---------- ---------- ---------- ---------- ----------
Total non-interest expense ..... 9,053 7,941 7,849 7,233 6,735
---------- ---------- ---------- ---------- ----------
Income before income taxes,
extraordinary income and
cumulative effect of change in
accounting principal ............. 1,359 1,519 1,121 425 4,097
Income taxes ........................ 606 674 613 230 1,682
---------- ---------- ---------- ---------- ----------
Income before extraordinary income
and cumulative effect of
change in accounting principle ... 753 845 508 195 2,415
Extraordinary income, net of
income taxes ........................ . -- -- 323 -- --
---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
change in accounting
principles ....................... 753 845 831 195 2,415
Cumulative effect of change in
accounting principles ............ . -- -- 252 -- --
---------- ---------- ---------- ---------- ----------
Net income .......................... $ 753 $ 845 $ 1,083 $ 195 $ 2,415
========== ========== ========== ========== ==========
Net income per common share (1) ..... $ 0.35 $ 0.40 -- -- --
Weighted average number of common
shares outstanding .................. 2,156,346 2,136,615 -- -- --
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(1) Historical net income per common shares from October 24, 1994 (date of Conversion) to March 31, 1995 was $0.17.
AT OR FOR THE YEAR ENDED MARCH 31,
--------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
SELECTED FINANCIAL RATIOS AND OTHER DATA:
PERFORMANCE RATIOS:
Return on average assets(1) ......................... 0.21% 0.25% 0.35% 0.06% 0.86%
Return on average equity (2) ........................ 2.16 3.61 7.88 1.48 20.54
Interest rate spread (3) ............................ 2.63 2.74 2.38 2.50 2.48
Net interest margin (4) ............................. 2.85 2.91 2.43 2.56 2.57
Operating expenses to average assets (5) ............ 2.48 2.38 2.46 2.07 2.40
Equity-to-assets (6) ................................ 9.45 9.46 4.59 4.06 4.08
Net interest income to operating expenses (7) .... 1.10x 1.17x 0.95x 1.19x 1.03x
Average interest-earning assets to average
interest-bearing liabilities ..................... 1.07x 1.05x 1.02x 1.01x 1.01x
ASSET QUALITY RATIOS:
Non-performing assets to total assets (8) ........... 0.97% 0.56% 1.24% 1.53% 1.30%
Non-accrual loans and accruing loans 90 days or
more past due to total loans ........................ 3.85 3.39 6.73 8.17 8.14
Allowance for loan losses to total loans ............ 1.42 2.10 2.35 2.74 1.58
Allowance for loan losses to non-performing
loans ............................................... 37.05 61.79 34.95 33.53 20.38
Allowance for loan losses to non-accrual loans ...... 59.29 70.17 57.56 41.62 21.22
Net loan charge-offs to average loans ............... 0.00 1.06 0.65 1.63 0.43
|
(1) Net income divided by average total assets.
(2) Net income divided by average total equity.
(3) Combined weighted average interest rate earned less combined weighted
average interest rate cost.
(4) Net interest income divided by average interest-earning assets.
(5) Non-interest expenses less loss on foreclosed real estate, divided by
average total assets.
(6) Total equity divided by assets at period end.
(7) Net interest income divided by non-interest expenses less loss on
foreclosed real estate.
(8) Non-performing assets consist of non-accrual loans, accruing loans 90
days or more past due and property acquired in settlement of loans.
GENERAL INFORMATION
GENERAL
This Proxy Statement-Prospectus is being furnished to stockholders of
Carver, in connection with the solicitation of proxies by the Board of Directors
of Carver to be used at the Annual Meeting to be held on July 29, 1996, at 9:00
a.m., at the Adam Clayton Powell State Office Building, 163 W. 125th Street,
Third Floor, New York, New York, and at any adjournment or postponement thereof.
HOLDERS OF CARVER COMMON STOCK ARE REQUESTED PROMPTLY TO SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD TO CARVER IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE ANNUAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST PROPOSAL 3.
RECORD DATE AND VOTING
The Board of Directors of Carver has fixed the close of business on June 10, 1996 as the record date (the "Record Date") for the determination of the holders of Carver Common Stock entitled to receive notice of and to vote at the Annual Meeting. Only holders of record of Carver Common Stock at the close of business on that date will be entitled to vote at the Annual Meeting and at any adjournment or postponement thereof. At the close of business on the Record Date, there were 2,314,375 shares of Carver Common Stock outstanding.
Each holder of shares of Carver Common Stock outstanding on the Record Date will be entitled to one vote for each share held of record upon each matter properly submitted at the Annual Meeting and at any adjournment or postponement thereof. The presence, in person or by proxy, of the holders of at least a majority of the total number of outstanding shares of Carver Common Stock entitled to vote at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. If a quorum is not obtained, or if fewer shares of Carver Common Stock are voted in favor of either Proposal 2 or 3 than the number required for approval, it is expected that the Annual Meeting will be postponed or adjourned for the purpose of allowing additional time for obtaining additional proxies or votes, and, at any subsequent reconvening of the Annual Meeting, all proxies will be voted in the same manner as such proxies would have been voted at the original convening of the Annual Meeting (except for any proxies which have theretofore effectively been revoked or withdrawn).
If the enclosed proxy card is properly executed and received by Carver in time to be voted at the Annual Meeting, the shares represented thereby will be voted in accordance with the instructions marked thereon. EXECUTED PROXIES WITH NO INSTRUCTIONS INDICATED THEREON WILL BE VOTED FOR EACH OF THE PROPOSALS SET FORTH IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF STOCKHOLDERS.
Management is not aware of any matters other than those set forth in the Notice of Annual Meeting of Stockholders that may be brought before the Annual Meeting. If any other matters properly come before the Annual Meeting, including, among other things, a motion to adjourn or postpone the Annual Meeting to another time or place or both for the purpose of soliciting additional proxies or otherwise, the persons named in the accompanying proxy will vote the shares represented by all properly executed proxies on such matters in such manner as shall be determined by a majority of the Board of Directors of Carver.
VOTES REQUIRED
A plurality of the votes cast is sufficient to elect directors. A majority of the votes of the stockholders represented in person or by proxy and entitled to vote at the Annual Meeting is sufficient to ratify the appointment of Mitchell & Titus, LLP as independent auditors for the Bank. Approval of the Plan of Reorganization requires the approval of a majority of the outstanding shares of the Bank.
SHARES AS TO WHICH THE "ABSTAIN" BOX HAS BEEN SELECTED ON THE PROXY CARD WITH RESPECT TO THE APPOINTMENT OF MITCHELL & TITUS, LLP AS INDEPENDENT AUDITORS FOR THE BANK (PROPOSAL 2), WILL BE COUNTED AS PRESENT AND ENTITLED TO VOTE AND WILL HAVE THE EFFECT OF A VOTE AGAINST THAT PROPOSAL. IN CONTRAST, SHARES UNDERLYING BROKER NON-VOTES WILL NOT BE COUNTED AS PRESENT AND ENTITLED TO VOTE AND WILL HAVE NO EFFECT ON THE VOTE WITH RESPECT TO PROPOSAL 2.
THE REQUIRED VOTE OF CARVER STOCKHOLDERS ON THE PLAN OF REORGANIZATION (PROPOSAL 3) IS BASED UPON THE NUMBER OF OUTSTANDING SHARES OF CARVER COMMON STOCK, AND NOT THE NUMBER OF THOSE SHARES THAT ARE ACTUALLY VOTED. ACCORDINGLY, THE FAILURE TO SUBMIT A PROXY CARD OR TO VOTE IN PERSON AT THE ANNUAL MEETING OR THE ABSTENTION FROM VOTING BY A CARVER STOCKHOLDER WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO THIS PROPOSAL. BROKER NON-VOTES WILL NOT BE COUNTED AS HAVING BEEN VOTED IN PERSON OR BY PROXY AT THE ANNUAL MEETING AND WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO PROPOSAL 3.
RIGHTS OF DISSENTING STOCKHOLDERS
Any stockholder of Carver has the right to demand payment from Carver
of the fair or appraised value of his shares of Carver Common Stock upon
compliance with Section 552.14 of the OTS Regulations. (See Appendix A for the
full text of the Plan of Reorganization and Appendix B for the full text of
Section 552.14). Any stockholder intending to enforce this right may not vote in
favor of the Plan of Reorganization and must file with Carver, before or at the
Annual Meeting (but before the stockholders' vote), written demand of payment
for his shares of Carver Common Stock if the Plan of Reorganization is approved.
If the Plan of Reorganization is approved by Carver's stockholders at the Annual
Meeting, each stockholder who has filed a written demand and has not voted in
favor of the Plan of Reorganization will be notified of the approval by Carver
within ten days of completion of the Reorganization. A stockholder may not
dissent as to less than all of the shares of Carver Common Stock beneficially
held of record by such stockholder. Upon filing such written demand, the
stockholder will cease to have the rights of a stockholder to receive dividends
or to vote, except for dividends or other distributions payable to, or a vote to
be taken by stockholders of record at a date on or prior to the effective date
of the Reorganization. Withdrawal of any written demand may be made at any time
within 60 days after the effective date of the Reorganization. Upon withdrawal
of such written demand, or if the Reorganization is not consummated, the
stockholder will have no right to receive payment for his shares of Carver
Common Stock but will instead be reinstated with all the rights of a
stockholder.
Within 60 days of the effective date of the Reorganization, a dissenting stockholder must submit the certificates representing his shares of Carver Common Stock to American Stock Transfer & Trust Co., the Bank's transfer agent, which shall place a legend on such certificates indicating that a written demand has been filed and shall thereafter return such certificates to the stockholder.
Within ten days after the effective date of the Reorganization, the Bank shall give written notice of the effective date of the Reorganization and make a written offer to all dissenting stockholders to pay a specified amount, which it considers to be a fair amount, for the shares of Carver Common Stock. If within 60 days of the effective date of the Reorganization any dissenting stockholder and Carver agree on the price to be paid for the stockholder's Carver Common Stock, the agreed upon payment will be made within 90 days of the effective date of the Reorganization upon the surrender of the certificates representing the Carver Common Stock.
If Carver and any dissenting stockholder fail to agree on the price to be paid within the specified period, then the dissenting stockholder may file a petition with the OTS demanding a determination of the fair value of the shares. If the required petition is not filed within the 60-day period, a dissenting stockholder shall lose all dissenters' rights. It is possible that the exercise by a stockholder of his or her rights under Section 552.14 may cause such person to incur some personal expense.
In the event that stockholders, through the exercise of dissenters' rights, would cause the Bank's total risk-based capital ratio to fall below 8.0%, or would cause the Bank's tier 1 risk-based capital ratio to fall
below 4.0% or would cause the Bank's core capital ratio to fall below 3.0%, the Bank will not complete the Reorganization without the further approval of the OTS.
REVOCABILITY OF PROXIES
The presence of a stockholder at the Annual Meeting will not
automatically revoke such stockholder's proxy. However, a stockholder may revoke
a proxy at any time prior to its exercise by (i) delivering to the Corporate
Secretary of Carver a written notice of revocation prior to the Annual Meeting,
(ii) delivering to the Corporate Secretary of Carver prior to the Annual Meeting
a duly executed proxy bearing a later date or (iii) attending the Annual
Meeting, filing a written notice of revocation with the secretary of the
meeting, and voting in person.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of Carver and its subsidiaries may solicit proxies for the Annual Meeting from Carver stockholders personally or by telephone or telegram without additional remuneration therefor. Carver will also provide persons, firms, banks and corporations holding shares in their names or in the names of nominees, which in either case are beneficially owned by others, proxy material for transmittal to such beneficial owners and will reimburse such record owners for their expenses in doing so. Carver has retained Morrow & Co., Inc., a proxy soliciting firm, to aid in the solicitation of proxies at a fee of $3,000 plus expenses. The cost of solicitation of proxies for the Carver Annual Meeting, including the fees of Morrow & Co., Inc., will be borne by Carver. A Carver stockholder may authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission to Morrow & Co., Inc., provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information (such as a prescribed identification code) from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as to those persons believed by management to be beneficial owners of more than 5% of the outstanding shares of Carver Common Stock on April 30, 1996, except as otherwise indicated. The beneficial owners of Carver Common Stock are not currently subject to the stock ownership reporting requirements of the Exchange Act. Accordingly, the most recent information available to the Bank regarding the beneficial ownership of Carver Common Stock is set forth in the table below. Other than those persons listed below, the Bank is not aware of any person or group that beneficially owns more than 5% of the outstanding shares of Carver Common Stock as of April 30, 1996.
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING (1)
- -------------- ------------------- --------- ---------------
Common Stock Carver Federal Savings Bank 182,132 (2) 7.87%
Employee Stock Ownership Plan
Trust (the "ESOP Trust")
75 West 125th Street
New York, New York 10027
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(1) The total number of shares of Carver Common Stock outstanding on April 30, 1996 was 2,314,375 shares.
(2) The Administrative Committee, established to administer the Carver Federal Savings Bank Employee Stock Ownership Plan (the "ESOP"), consists of the members of the Board of Directors. The ESOP's assets are held in the ESOP Trust, for which M. Moran Weston and David R. Jones serve as trustees (the "ESOP Trustees"). The Administrative Committee instructs the ESOP Trustees regarding the investment of funds contributed to the ESOP. Carver Common Stock purchased by the ESOP Trust is held in a suspense account and allocated to participants' accounts annually based on contributions made to the ESOP by the Bank. Shares released from the suspense account are allocated among participants in proportion to their compensation, as defined in the ESOP, for the year the contributions are made up to the limits permitted under the Internal Revenue Code of 1986 (the "Code"). The ESOP Trustees must vote all allocated shares held in the ESOP Trust in accordance with the instructions of participants. As of April 30, 1996, 22,765 shares had been allocated, but not distributed, to participants. Under the ESOP, unallocated shares or shares for which no voting instructions have been received will be voted by the ESOP Trustees in the same proportion as allocated shares with respect to which the ESOP Trustees receive instructions. In the absence of any voting instructions with respect to allocated shares, the Board of Directors, on behalf of the Bank, directs the voting of all shares of unallocated stock, or in the absence of such directions from the Board of Directors, the ESOP Trustees have sole discretion with respect to the voting of such shares. Except as described above, Dr. Weston and Mr. Jones, as the ESOP Trustees, have shared voting power and investment power over the shares held in the ESOP Trust. Each member of the Board of Directors and each of the ESOP Trustees disclaim beneficial ownership of the shares held in the ESOP.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information as of April 30, 1996 as to shares of Carver Common Stock beneficially owned by each director of the Bank, each Named Executive Officer of the Bank identified in the Summary Compensation Table appearing elsewhere herein and all directors and executive officers as a group. Ownership information is based upon information furnished by the respective individuals. For purposes of this table, an individual is considered to "beneficially own" any securities (a) over which such individual exercises sole or shared voting or investment power, or (b) of which such individual has the right to acquire beneficial ownership, including the right to acquire beneficial ownership by the exercise of stock options, within 60 days after April 30, 1996. As used herein, "voting power" includes the power to vote, or direct the voting of, such securities, and "investment power" includes the power to dispose of, or direct the disposition of, such securities. Except as otherwise indicated, each person and the group shown in the table has sole voting and investment power with respect to the shares indicated.
AMOUNT AND PERCENT OF
NATURE OF COMMON
BENEFICIAL STOCK
NAME TITLE OWNERSHIP OUTSTANDING(1)
- ---- ----- --------- --------------
Thomas L. Clark, Jr.(2) President and Chief 322 *
Executive Officer,
Director
David N. Dinkins Director 2,700 *
Linda H. Dunham Director 1,500 *
Richard T. Greene Director 3,500 *
Herman Johnson(3) Director 300 *
David R. Jones(4) Chairman of the Board, 2,500 *
Director
M. Moran Weston, Ph.D.(4) Vice Chairman of the 1,500 *
Board, Director
Biswarup Mukherjee(5) Executive Vice President 3,187 *
and Chief Financial
Officer
All directors and executive
officers as a group 198,741 8.59%
(11 persons)(6)(7)
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* Less than 1% of outstanding Carver Common Stock.
(1) Percentages with respect to each person or group of persons have been calculated on the basis of 2,314,375 shares of Carver Common Stock, the number of shares of Carver Common Stock outstanding as of April 30, 1996. No officer or director has the right to acquire beneficial ownership of additional shares of Carver Common Stock within 60 days after April 30, 1996.
(2) Includes 222 shares held by the trustee of the Carver Federal Savings Bank 401(k) Savings Plan in RSI Retirement Trust ("401(k) Plan") which are allocable to the account of Mr. Clark.
(3) Includes 50 shares held jointly by spouse and son and 50 shares held individually by spouse over which Mr. Johnson has shared voting power and dispositive power.
(Notes continued on next page)
(4) Does not include 182,132 shares held by the ESOP Trust for which Mr.
Jones and Dr. Weston serve as the ESOP Trustees. See Note 6.
(5) Includes 1,174 shares held by the trustee of the 401(k) Plan which are allocable to the account of Mr. Mukherjee, and as to which he shares voting and dispositive power, and 1,313 shares allocated to Mr. Mukherjee under the ESOP as to which he has sole voting power, but no dispositive power, except in limited circumstances.
(6) Includes 2,469 shares held by the ESOP Trust that have been allocated as of April 30, 1996 to the individual accounts of the executive officers under the ESOP and as to which such executive officers have sole voting power, but no dispositive power, except in limited circumstances. Also includes 20,296 shares held by the ESOP Trust and allocated to the individual accounts of the other Bank employees, as to which Dr. Weston and Mr. Jones, as the ESOP Trustees, have no voting and shared dispositive power, and 159,367 unallocated shares held by the ESOP Trust, as to which Dr. Weston and Mr. Jones, as the ESOP Trustees, and the Board of Directors on behalf of the Bank, share voting and dispositive power. Each member of the Board of Directors and each of the ESOP Trustees disclaim beneficial ownership of the shares held in the ESOP.
(7) Includes 100 shares over which the directors and executive officers share voting and dispositive power, and 1,396 shares allocable to the individual accounts of the executive officers under the 401(k) Plan and as to which such executive officers have sole dispositive power and shared voting power with Mr. Mukherjee and Margaret R. Lewis, as members of the Committee established to administer the 401(k) Plan.
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
GENERAL
The Charter of the Bank provides that the Board of Directors shall be divided into three classes, as nearly equal in number as possible. The directors of each class serve for a term of three years, with one class elected each year. In all cases, directors serve until their successors are elected and qualified.
The Carver Board currently consists of seven members. The Board of Directors has nominated for election as directors David N. Dinkins and David R. Jones to serve for three years and until their successors are elected and qualified. On March 19, 1996, the Board of Directors of the Bank increased the size of the Board of Directors from six to seven members and appointed Ms. Dunham to fill the newly created vacancy. Ms. Dunham has been appointed to serve as a director in the class with a term expiring in 1997. The Bylaws of the Bank provide that if the Board of Directors expands its size by appointing an additional director, such director must be put up for election at the next annual meeting of stockholders. The Board of Directors appointed Ms. Dunham to serve in the class of directors whose term expires in 1997. Therefore, she has been nominated to serve for an initial one-year term as director, with a term expiring in 1997.
Each nominee has consented to being named in the Proxy Statement-Prospectus and to serve if elected. However, if any nominee is unable to serve, the shares represented by all properly executed proxies which have not been revoked will be voted for the election of such substitute as the Board of Directors may recommend or the size of the Board of Directors may be reduced to eliminate the vacancy. At this time, the Board knows of no reason why any nominee might be unavailable to serve. Directors shall be elected by a plurality of the votes cast at the Annual Meeting.
INFORMATION WITH RESPECT TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth certain information with respect to each nominee for election as a director and each director whose term does not expire at the Annual Meeting ("Continuing Director"). There are no arrangements or understandings between the Bank and any director or nominee pursuant to which such person was elected or nominated to be a director of the Bank. For information with respect to security ownership of directors, see "General Information -- Stock Ownership of Management."
End of
NAME Age(1) Term Position Held with the Bank Director Since
- ---- ------ ---- --------------------------- --------------
NOMINEES FOR A THREE-YEAR
TERM EXPIRING IN 1999
David N. Dinkins 69 1996 Director 1996
David R. Jones 48 1996 Chairman of the Board, Director 1989
NOMINEE FOR A ONE-YEAR
TERM EXPIRING IN 1997
Linda H. Dunham 46 1996 Director 1996
CONTINUING DIRECTORS
Thomas L. Clark, Jr. 52 1998 President, Chief Executive Officer 1995
and Director
Richard T. Greene 82 1997 Director 1968
Herman Johnson, CPA 60 1998 Director 1981
M. Moran Weston, Ph.D. 86 1997 Vice Chairman of the Board, 1949
Director
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(1) As of April 30, 1996.
The principal occupation and business experience of each nominee for election as director and each Continuing Director is set forth below.
NOMINEES FOR ELECTION AS DIRECTORS
DAVID N. DINKINS, the 106th Mayor of New York City, is Professor in the Practice of Public Affairs at the Columbia University School of International and Public Affairs and is a Senior Fellow at the Barnard-Columbia Center for Urban Policy. He is a member of the Advisory Board of the Taubman Center for State and Local Government at Harvard University's Kennedy School of Government and of the Visiting Committee of the Robert J. Milano Graduate School of Management and Urban Policy at the New School for Social Research. Mr. Dinkins is also the host of "Dialogue with Dinkins," a twice-weekly public affairs radio program on WLIB- AM. He serves on the boards of directors of the American Stock Exchange, AMREP, New World Communications Group Inc., Transderm Laboratories Corporation, Wertheim Schroder Investment Services and on the International Advisory Board of Independent Newspaper Holdings. He is also on the board of directors of the Aaron Diamond Foundation, the Andrew Goodman Foundation, the Association to Benefit Children, the Federation of Protestant Welfare Agencies, Friends of the Nelson Mandela Children's Fund, Goods for Guns, Hope for Infants, the Howard Samuels Foundation, International House, the Lenox
Hill Neighborhood Association, the March of Dimes, the New York State International Partnership Program and the New York Junior Tennis League. He is a member of the Advisory Board of the Children's Health Fund, Citizens for Service, Shared Interest, the South African-American Organization, the Advisory Council of the Respect for Law Alliance, the Board of Advisors of the Aristide Foundation for Democracy and the Steering Committee of the Association for a Better New York. He is a member of the Honorary Board of Directors of the Rowell Foster Children's Positive Plan, an Honorary Life Trustee of the Community Service Society of New York and an Honorary Trustee of the Friends of Harlem Hospital. He is a founding member of the Black and Puerto Rican Legislative Caucus of New York State, the Council of Black Elected Democrats of New York State, 100 Black Men and the Black Americans in Support of Israel Committee. He is the first male member of the National Women's Political Caucus and was the former Vice President of the United States Conference of Mayors.
LINDA H. DUNHAM is Vice President of TCB Management Corporation, a management company which oversees the McDonald's restaurants which she co-owns and operates. Prior to joining TCB Management Corporation, Ms. Dunham was employed by Chemical Bank for 16 years in various capacities. Ms. Dunham is also Secretary of the Board of Directors of The Children's Oncology Society of New York, the Vice Chair of the Board of Trustees of Community Service Society of New York, a member of the Board of Directors of Aaron Davis Hall and a member of the National Board of Directors of Ronald McDonald Children's Charities.
DAVID R. JONES is President and Chief Executive Officer of the Community Service Society of New York ("CSS"). One of the nation's oldest and largest nonprofit social welfare organizations, the 150-year-old agency uses direct help, research, advocacy and litigation to alleviate the effects of poverty, focusing on the areas of education, health delivery, income security and affordable housing. Prior to joining CSS, Mr. Jones served for three years as Executive Director of the New York City Youth Bureau and as Special Advisor to Mayor Edward I. Koch. A member of the New York State and Federal Bars, he previously worked for four years as a litigator at the law firm of Cravath, Swaine & Moore. Earlier, he had been a clerk for federal Judge Constance Baker Motley and one of the last interns for U.S. Senator Robert R. Kennedy. Mr. Jones is currently on the boards of directors of the New York City Health and Hospital Corporation, which runs 21 public hospitals and clinics; the Puerto Rican Legal Defense and Education Fund; and the New York Foundation. A charter trustee of Wesleyan University, he also serves on the advisory boards of the John F. Kennedy School of Government and the Barnard-Columbia Center for Leadership on Urban Public Policy, and as a trustee of the New York Historical Society. He is the author of the "Urban Agenda" column which appears in the Amsterdam News and ethnic papers throughout the nation and host of the CUNY-TV show of the same name.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL OF ALL OF THE NOMINEES FOR ELECTION AS DIRECTORS.
CONTINUING DIRECTORS
THOMAS L. CLARK, Jr., is currently President and Chief Executive Officer, a position he assumed on February 1, 1995. Mr. Clark is also a member of the Bank's Board of Directors. Prior to assuming his current position, Mr. Clark was employed by the New York State Banking Department from 1976 until 1995 and, from 1987 until 1995, served as Deputy Superintendent of Banks for New York State and as secretary of the New York State Banking Board. From 1970 until 1976, Mr. Clark was employed by Buffalo Savings Bank in various capacities. Mr. Clark is the founder and president of African-American Men of Westchester, Inc. In addition, Mr. Clark was recently elected Vice Chairman of the American League of Financial Institutions, the national trade association representing minority savings institutions, serves as Vice Chairman of the Community Bankers Association of New York State's Community Reinvestment Committee and is a member of the Advisory Board of Small Business Development Centers of New York State.
HERMAN JOHNSON is currently self-employed as a certified public accountant in Brooklyn, New York, and has been so employed in such profession since 1962. Mr. Johnson currently serves as Chairman of the
Board of Trustees of Mt. Sinai Baptist Church in Brooklyn and has been a Trustee since 1966. He formerly served as a Trustee of the Interfaith Medical Center in Brooklyn from 1987 to 1991.
RICHARD T. GREENE is the immediate past President and Chief Executive Officer of Carver, positions he had held since joining the Bank in 1960. Mr. Greene currently serves on the boards of directors for the Harlem Urban Development Corp., the New York City Housing Partnership and Thrift Association Service Corporation. He also is a member of various community organizations, including Harlem Business Alliance, President's Council, Museum of the City of New York and One Hundred Black Men, Inc. Mr. Greene also served two terms as a director of the Federal Home Loan Bank of New York from 1989 to 1990 and from 1991 to 1992.
M. MORAN WESTON, PH.D., is a founding Director of Carver and has served continuously as a Director since 1948. He was President of Carver during 1968 and 1969, Chairman of the Board from 1980 to 1995 and has served as Vice Chairman of the Board since 1995. He is Rector Emeritus of the St. Philip's Episcopal Church and Canon-Emeritus of the Episcopal Cathedral of St. John the Divine, both in New York City. In addition, Dr. Weston has served as a Trustee of St. Augustine's College in Raleigh, North Carolina and of Mt. Sinai Medical Center and Hospital since 1971. He is Trustee Emeritus of Columbia University and Professor Emeritus of Social History of the State University of New York, and has been awarded honorary doctorate degrees by Fordham University, Columbia University and the Virginia Theological Seminary. He is also a member of various community organizations, including Weston United Community Renewal, the National Association of Affordable Housing, the NAACP Legal Defense Fund and six non- profit housing companies providing approximately 1,000 units of housing. He was Trustee of the Foreign Policy Association for nine years, a Director of the New York City Chapter of the American Red Cross for nine years, and a founding President of the Greater Harlem Nursing Home, the Greater Harlem Community Service Council, the Upper Manhattan Day Care Center and a residential service facility for mentally handicapped persons.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Bank holds regular monthly meetings and holds special meetings as needed. During the year ended March 31, 1996, the Board met 17 times. No director attended fewer than 75% in the aggregate of the total number of Board meetings held while he was a member during the year ended March 31, 1996 and the total number of meetings held by committees on which he served during such fiscal year. The Board of Directors of the Bank has standing Audit, Executive and Compensation Committees and an Investment, Asset, Liability and Interest Rate Risk Committee, the nature and composition of which are described below.
Audit Committee. The Audit Committee consists of Directors Herman Johnson (Chairman), David R. Jones and Richard T. Greene. This committee meets at least once annually to review and approve the independent audit report. This committee met 12 times during fiscal year 1996.
Executive Committee. The Executive Committee is authorized to act as appropriate between meetings of the Board of Directors. Members of this committee are Directors Thomas L. Clark, Jr. (Chairman), Richard T. Greene, David R. Jones and Herman Johnson. This committee met 12 times during fiscal year 1996.
Compensation Committee. The Compensation Committee consists of Directors M. Moran Weston (Chairman), David R. Jones and Richard T. Greene. This committee meets at least annually to evaluate the performance of the executive officers and to establish compensation for those individuals. This committee met 1 time during fiscal year 1996.
Investment, Asset, Liability and Interest Rate Risk Committee. The Investment, Asset, Liability and Interest Rate Risk Committee consists of Directors Herman Johnson (Chairman), David R. Jones, Richard T. Greene, Thomas L. Clark, Jr. and M. Moran Weston. This committee meets at least quarterly to evaluate
and approve asset classifications and reserves for losses. Classifications recommended by this committee are reviewed and ratified by the Board of Directors. This committee held 5 meetings during fiscal year 1996.
The Board of Directors, acting as nominating committee, met in March, 1996 to select the nominees for election as directors at the Annual Meeting. In accordance with the Bylaws of the Bank, no nominations for election as directors, except those made by the Board acting as nominating committee, shall be voted upon at the Annual Meeting unless properly made by a stockholder. No nominations for directors have been received from stockholders for the elections to be held at the Annual Meeting as of the date of this Proxy Statement-Prospectus. To be timely, notice of a stockholder's nomination for an annual meeting must be delivered to the Secretary of the Bank no later than 5 days prior to the Annual Meeting.
DIRECTORS' COMPENSATION
Directors' Fees. Effective as of October 1995, the Bank's directors, other than Mr. Clark, receive fees ranging from $600 to $850 per Board meeting attended; the Chairman and Vice Chairman receive a fee of $850 per meeting. In addition, the Chairman and Vice Chairman of the Board each receive a quarterly retainer fee of $1,000. Fees for executive committee meetings are $700 per meeting and $475 for all other committee meetings. Mr. Clark does not receive fees for his attendance at meetings of the Board or its committees. During fiscal year 1996, the Bank's directors' fees totaled $115,025.
Director Retirement Plan. In connection with the mutual to stock conversion of the Bank (the "Conversion"), the Bank's Board of Directors adopted the Carver Federal Savings Bank Retirement Plan for Nonemployee Directors (the "Directors' Plan"), for directors (i) who are members of the Bank's Board of Directors, and (ii) who are not employees. A participant in the Directors' Plan will receive, on each of the ten annual anniversary dates of his or her retirement, an amount equal to the product of his or her "Vested Percentage" and the fees he or she received for service on the Board during the calendar year preceding his or her retirement. A participant's "Vested Percentage" is based on his or her overall years of service on the Board of Directors of the Bank, and increases from 0% for less than six years of service and to 33% for between six and ten years of service, to 67% for between eleven and nineteen years of service, and to 100% for more than twenty years of service. However, in the event a participant terminates service on the Board due to "disability" (as such term is defined in the Directors' Plan), the participant's Vested Percentage becomes 100% regardless of his or her years of service. In the event of a director's death, the director's Vested Percentage becomes 100%, and a survivor benefit equal to 50% of the annual amount which would have been payable to the director had he or she survived will be paid to his or her surviving spouse. The Bank will pay such benefits from its general assets, and expects to establish a trust in order to hold assets with which to pay benefits. Trust assets will be subject to the claims of the Bank's general creditors.
Option Plan. The Bank maintains the Carver Federal Savings Bank 1995 Stock Option Plan (the "Option Plan") for the benefit of its directors and certain key employees. Under the Option Plan, each outside director who was a director on the effective date of the Option Plan was granted options to purchase 6,943 shares of Carver Common Stock, except that Directors Richard T. Greene and M. Moran Weston each were granted non-statutory stock options to purchase 10,415 shares of Carver Common Stock. Such options were granted on September 12, 1995 at an exercise price of $10.38 per share. Any individual who becomes an outside director following the effective date of the Option Plan will be granted options to purchase 1,000 shares of Carver Common Stock with an exercise price equal to the fair market value of Carver Common Stock on the date of the grant. The Option Plan also provides for automatic option grants to certain employees as of the effective date of the Option Plan, including Mr. Clark and Mr. Mukherjee, who were granted 34,715 and 13,886 Shares of Carver Common Stock, respectively, on September 12, 1995 at an exercise price of $10.38 per share. In addition, the Option Plan provides for additional discretionary option grants to those employees selected by the committee established to administer the Option Plan with an exercise price equal to the fair market value of Carver Common Stock on the date of the grant. Options granted under the Option Plan vest in five equal annual installments commencing on the first anniversary of the effective date of the grant, provided the recipient is still a director or employee of the Bank on such date. Upon death or disability, all options previously granted automatically become exercisable.
Management Recognition Plan. The Bank maintains the Carver Federal Savings Bank Management Recognition Plan (the "MRP") for the benefit of its directors and certain key employees. Under the MRP, each outside director who was a director on the effective date of the MRP received an automatic grant of 3,471 shares of restricted stock, except that Directors Richard T. Greene and M. Moran Weston each received 5,207 shares of restricted stock. Any individual who becomes an outside director following the effective date of the MRP will be granted 1,000 shares of restricted stock. The MRP also provides for automatic grants of restricted stock to certain employees as of the effective date of the MRP, including Mr. Clark and Mr. Mukherjee who received 17,357 and 10,415 shares of restricted stock, respectively. In addition, the MRP provides for additional discretionary grants of restricted stock to those employees selected by the committee established to administer the MRP. Awards vest in five equal annual installments commencing on the first anniversary date of the award, provided the recipient is still a director or employee of the Bank on such date. Awards will be 100% vested upon termination of service due to death or disability. When shares become vested and are distributed, the recipients will receive an amount equal to any accrued dividends with respect thereto.
Supplemental Executive Retirement Agreement. In order to secure and reward the services of Richard T. Greene (the "SERA Participant"), the President and Chief Executive Officer of the Bank at the time, the Board of Directors of the Bank entered into a supplemental executive retirement agreement (the "SERA"), effective January 30, 1995. The Bank expects to establish an irrevocable grantor trust to hold assets to provide itself with a source of funds to assist the Bank in the meeting of its liabilities under the SERA.
Pursuant to the terms of the SERA, upon the SERA Participant's termination of employment with the Bank effective February 1, 1995, he became entitled to receive annual payments from the Bank in an amount equal to (i) 50% of his "Average Annual Compensation," less (ii) his "Annual Offset Amount." Under the SERA, "Average Annual Compensation" means the average of the SERA Participant's highest annual compensation for three of the five calendar years preceding his termination of employment, and "Annual Offset Amount" means the sum of the SERA Participant's primary social security benefits and the benefits which the SERA Participant would receive in the form of an annuity under the Pension Plan or the 401(k) Savings Plan (but only to the extent attributable to Bank matching contributions) upon his termination of employment. Such annual payments shall be made for 10 years, except that in the event of the SERA Participant's death, a 50% death benefit will be payable to his surviving spouse, if any. Termination for just cause would result in his forfeiture of all retirement benefits under the SERA. Mr. Greene became eligible for payments under the SERA.
Deferred Compensation Plan. The Bank's Board of Directors has established the Carver Federal Savings Bank Deferred Compensation Plan (the "Deferred Compensation Plan"), effective August 10, 1993, for the exclusive benefit of members of the Bank's Board of Directors, the Bank's President and Executive Vice President and other employees as the Bank's Board of Directors may select, in its discretion. Pursuant to the terms of the Deferred Compensation Plan, directors may elect to defer the receipt of all or part of their future fees, and eligible employees may elect to defer receipt of up to 25% of their future compensation. Deferred amounts will be credited to a bookkeeping account in the participant's name, which will also be credited quarterly with the investment return which would have resulted if such deferred amounts had been invested, based upon the participant's choice, between either Carver Common Stock or the Bank's highest annual rate of interest on certificates of deposit, regardless of their term. Changes in participant elections generally become effective only as of the following January 1st, except that elections designating a beneficiary or ceasing future contributions will be given immediate effect.
A participant may elect to have the amounts deferred and any related accumulated earnings thereon distributed beginning during the first 15 days of January of either the calendar year immediately following termination of employment, a specific date following employment not later than the year in which the participant will attain 80 years of age or the year in which the participant attains 80 years of age. At the election of the participants, distributions will either be in a lump sum or monthly over a period of not more than 10 years. Participants may change elections as to the timing or form of distributions only with respect to subsequently deferred compensation. Effective as of July 1, 1995, the deferral of fees and compensation
by directors and eligible employees under the Deferred Compensation Plan will be governed by the Carver Federal Savings Bank Incentive Compensation Plan (the "Incentive Compensation Plan").
Incentive Compensation Plan. Under the Incentive Compensation Plan, effective as of September 12, 1995, directors and eligible employees may elect to defer the receipt of all or part of their future fees and/or compensation. Pursuant to the terms of the Incentive Compensation Plan, any deferred amounts will be credited to a bookkeeping account in accordance with the terms of the deferred compensation agreement ("Deferred Compensation Agreement") entered into with the individual director or employee. Such accounts will be adjusted annually to reflect the investment return which would have resulted if such deferred amounts had been invested, based on the participant's choice, in one of the following: (i) Carver Common Stock; (ii) the Bank's highest annual rate of interest on 12-month certificates of deposit; or (iii) the "Multiplier," which generally is the sum of certain indicators with respect to the Bank's performance, times two percent. A participant will receive distributions of deferred amounts in accordance with the terms of their respective Deferred Compensation Agreements. A participant may change the investment selection applicable to his or her account or elections as to the timing and form of distributions from such account only with respect to subsequently deferred fees or compensation.
In addition to providing for deferred compensation for directors and eligible employees, the Incentive Compensation Plan provides incentive compensation to certain eligible employees, including Mr. Clark and Mr. Mukherjee, in the form of bonuses, stock options and restricted stock.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Bank (the "Compensation Committee") is responsible for establishing the policies which govern employee annual compensation and stock ownership programs. The Compensation Committee annually reviews and makes recommendations to the Board of Directors regarding the compensation of the Bank's executive officers, including the compensation of Mr. Clark, the President and Chief Executive Officer ("CEO") of the Bank. The overall compensation structure of the Bank is aimed at establishing a total compensation package that both rewards strong individual and Bank performance and remains competitive with compensation levels at similar institutions.
For the 1996 fiscal year, base salaries were set at levels determined, in the subjective judgment of the Compensation Committee, to be commensurate with the respective executive officers' customary duties and responsibilities. Benefit plans, consisting of a pension plan, 401(k) Plan, ESOP and group insurance coverages, are designed to provide for the health and welfare of all employees, including the executives, and their families, as well as for their long-term financial and retirement needs.
When determining salary levels, the Compensation Committee also took into account the addition of the Option Plan, the MRP and the Incentive Compensation Plan that were adopted in connection with the Bank's initial public offering. The Compensation Committee concluded that, considering the then prevailing salary levels and the addition of longer-term performance incentives using options and restricted stock, the Bank's compensation program constituted a total compensation package that was competitive with that of comparable institutions. The Compensation Committee reviews and updates the Bank's compensation program on an ongoing basis in order to continue to offer a total compensation package that provides incentive for strong individual and Bank performance and is competitive with comparable banking institutions.
Incentive Compensation. The Incentive Compensation Plan provides for incentive compensation in the form of cash bonuses, stock options and restricted stock based upon the annual performance of the Bank in comparison to its pre-established goals and, in the case of certain executive officers, the individual performance of the executive officer. Discretionary bonuses for fiscal 1996, when granted, will be determined in the subjective judgment of the committee established to administer the Incentive Compensation Plan, with the intention of rewarding effort, performance and results at levels above and beyond those assumed in
establishing base salary rates. The Compensation Committee believes that incentive compensation should be an integral component of the Bank's total compensation package.
Stock Ownership Programs. The Compensation Committee believes that providing executive officers with significant stock ownership and stock options aligns the interests of executive officers with the interests of stockholders. In this regard, the Bank adopted the ESOP, the Option Plan and the MRP in connection with its initial public offering in 1994. As of the end of fiscal 1996, no stock has been allocated under the ESOP. However, once stock is allocated, each of the other executive officers will have an individual account within the ESOP Trust which is invested primarily if not exclusively in employer securities, with the result that a portion of each executive officer's long-term retirement savings is tied to the performance of the Bank. Mr. Clark will not be eligible to participate in the ESOP until July 1, 1996.
Following the adoption of the Option Plan, the Bank granted stock options to provide employees, including the executive officers, with an incentive for future performance through their equity interests in the Bank. The size of the grants was based in part on practices of other similar institutions and in part on the executive officer's performance and position in the organization. Since these grants, no further stock options have been granted to the Bank's executive officers under the Option Plan. The MRP is designed to encourage valued executive officers to remain with the Bank through the potential of having increased equity interests. Following the adoption of the MRP, the Company made awards under the MRP to certain employees including Messrs. Clark, Mukherjee, Dabney and Bruce and to Ms. Lewis. Since these awards, no further shares under the MRP have been awarded to the Bank's executive officers.
Chief Executive Officer. The Compensation Committee reviewed the performance of Mr. Clark as CEO of the Bank over the past year. The Committee concluded that his performance was outstanding, in terms of achieving the Bank's goals and objectives as set forth in the Bank's strategic operating plan, building a solid and talented management team and managing the Bank's growth since the successful initial public offering of the Bank. Mr. Clark also actively participated in a variety of outside organizations and causes which served to benefit the Bank and the banking industry. These factors were used to determine Mr. Clark's salary, options and MRP awards.
COMPENSATION COMMITTEE
M. Moran Weston, Chairman
David R. Jones
Richard T. Greene
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
One of the responsibilities of the Compensation Committee is to determine the level of compensation for executive officers of the Bank. Mr. Greene, who served as President and Chief Executive Officer of the Bank until January 31, 1995, is a member of the Compensation Committee. There are no other interlocks, as defined under the SEC's rules, between the Compensation Committee and corporate affiliates of members of the Compensation Committee or otherwise.
PERFORMANCE GRAPH
In accordance with the regulations of the SEC, set forth below is a line graph comparing the cumulative total return of Carver Common Stock with that of the Nasdaq Stock Market and the SNL Thrift Index for the period from October 25, 1994, the date that the Bank became a public company, through March 29, 1996. The graph is based on an investment of $100.00 on October 25, 1994 at the initial public offering price of $10.00 and assumes the reinvestment of dividends in additional shares of the same class of equity securities as those below.
CARVER FEDERAL SAVINGS BANK
STOCK PRICE PERFORMANCE
Period Ending
--------------------------------------------------------
10/25/94 12/30/94 06/30/95 12/29/95 03/29/96
-------- -------- -------- -------- --------
Carver FSB-NY............. 100.00 62.50 78.13 90.00 87.50
Nasdaq Total Return....... 100.00 97.27 121.29 137.57 143.98
SNL Thrift Index.......... 100.00 94.24 120.91 147.01 149.32
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Notes:
THERE CAN BE NO ASSURANCE THAT STOCK PERFORMANCE WILL CONTINUE INTO THE FUTURE WITH THE SAME OR SIMILAR TRENDS DEPICTED IN THE GRAPH ABOVE.
SUMMARY COMPENSATION TABLE
The following table sets forth cash and noncash compensation for the fiscal years ended March 31, 1996, 1995 and 1994 awarded to or earned by the Bank's Chief Executive Officer and by each other executive officer whose compensation exceeded $100,000 for services rendered in all capacities to the Bank during the fiscal year ended March 31, 1996 ("Named Executive Officers"). No other officers received total compensation in excess of $100,000 in fiscal 1996.
SUMMARY COMPENSATION TABLE
Long Term Compensation
------------------------------------------
Annual Compensation Awards Payouts
------------------------------------ ------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted
Annual Stock LTIP All Other
Name and Principal Compensation Awards Options Payouts Compensation
Positions Year Salary($) Bonus($)(1) ($)(2) ($)(1) (#)(1) ($) ($)
- ------------------------------- ---- --------- ----------- ------------ ---------- ------- ------- ------------
Thomas L. Clark 1996 165,000 -- -- 186,588 34,715 -- 1103(4)
President and Chief Executive 1995 27,288 -- -- -- -- -- --
Officer (3) 1994 -- -- -- -- -- -- --
Biswarup Mukherjee 1996 115,000 -- -- 111,961 13,886 -- 5,417(5)
Executive Vice President and 1995 103,903 -- -- -- -- -- 4,784
Chief Financial Officer 1994 94,425 1,722 -- -- -- -- 4,620
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(1) As of April 30, 1996, the committee established to administer the Incentive Compensation Plan has not determined the amount, if any, of cash bonuses, stock options and restricted stock to be awarded to Mr. Clark and Mr. Mukherjee under such plan.
(2) Does not include perquisites and other personal benefits the value of which did not exceed the lesser of $50,000 or 10% of salary and bonus.
(3) The compensation earned by Mr. Clark for his service for fiscal year ended March 31, 1995 reflects his appointment to the position of President and Chief Executive Officer of the Bank on February 1, 1995.
(4) Includes $95.00 in matching contributions allocated to Mr. Clark's account under the Bank's 401(k) Plan for the fiscal year ended March 31, 1996.
(5) Includes $2,897, $4,784 and $4,620 in matching contributions allocated to Mr. Mukherjee's account under the Bank's 401(k) Plan for the fiscal years ended March 31, 1996, 1995 and 1994, respectively.
CERTAIN EMPLOYEE BENEFIT PLANS AND EMPLOYMENT AGREEMENTS
Employment Agreements. The Bank has entered into employment agreements (the "Employment Agreements") with Mr. Clark in his capacity as President and Chief Executive Officer and Mr. Mukherjee in his capacity as Executive Vice President and Chief Financial Officer (the "Executives").
The Employment Agreement with Mr. Clark became effective on January 3, 1995 and provides for a term of three years, with an annual base salary equal to $165,000. The Employment Agreement with Mr. Mukherjee became effective on April 14, 1995 and also provides for a term of three years, with an annual base salary of $100,000. On each anniversary date from the date of commencement of the Employment Agreements, the term of employment will be extended for an additional one-year period beyond the then effective expiration date so that the remaining term shall be three years, upon a determination by the Board of Directors that the performance of the Executive has met the required performance standards and that such Employment Agreement should be extended. The Employment Agreements provide the Executives with a
salary review by the Board of Directors not less often than annually, as well as with inclusion in any discretionary bonus plans, retirement and medical plans, customary fringe benefits and vacation and sick leave. The Employment Agreements will terminate upon each Executive's death or disability (as defined in the Employment Agreements), and are terminable by the Bank in each case for "just cause" (as defined in the Employment Agreements). In the event of termination for just cause, no severance benefits are available. If the Bank terminates one of the Executives without just cause, the Executive will be entitled to severance benefits equal to his salary from the date of termination through the remaining term of the Employment Agreement (but in no event less than a 12 month period in the case of Mr. Mukherjee), and the cost to the Executive of obtaining all health, life, disability and other benefits which the Executive would have been eligible to participate in through the remaining term of the Employment Agreement, based upon benefit levels substantially equal to those that the Bank provided for the Executive at the date of termination of employment. If the Employment Agreements are terminated due to an Executive's disability, the Executive will be entitled to compensation and benefits for (i) any period during the term of the Employment Agreement and prior to the establishment of the Executive's disability during which the Executive is unable to work due to the physical or mental infirmity, or (ii) any period of disability which is prior to the Executive's termination of employment. In the event of an Executive's death during the term of his Employment Agreement, his estate will be entitled to receive his salary through the last day of the calendar month in which his death occurred. Severance benefits payable to the Executive or to his estate will be paid in a lump sum or in installments, as he (or his estate) elects. The Executives are able to voluntarily terminate their Employment Agreements by providing 60 days' written notice to the Board of Directors of the Bank, in which case the Executives are entitled to receive only their compensation, vested rights and benefits up to the date of termination.
Each of the Employment Agreements contains provisions stating that in
the event of the Executive's involuntary termination of employment in connection
with, or within one year after, any "change in control" of the Bank (as defined
in the Employment Agreements), other than for "just cause," the Executive will
be paid within 10 days of such termination an amount equal to the difference
between (i) 2.99 times his "base amount," as defined in Section 280G(b)(3) of
the Code, and (ii) the sum of any other parachute payments, as defined under
Section 280G(b)(2) of the Code, that the Executive receives on account of the
change in control. An Executive's "base amount" is generally the average of the
Executive's annual taxable compensation from the Bank for each of the most
recent five taxable years ending before the date on which a change of control
occurs. A "change in control" generally refers to the acquisition, by any person
or entity, of the ownership of or power to vote more than 25% of the Bank's
voting stock, the control of the election of a majority of the Bank's directors,
or the exercise of a controlling influence over the management or policies of
the Bank. In addition, under the Employment Agreements, a change in control
occurs when, during any consecutive two-year period, directors of the Bank at
the beginning of such period cease to constitute two-thirds of the Board of
Directors of the Bank unless the election of replacement directors was approved
by a two-thirds vote of the initial directors then in office. The Employment
Agreements provide that within five business days of a change in control, the
Bank shall fund, or cause to be funded, a trust in the amount of 2.99 times the
Executive's base amount, that will be used to pay the Executive amounts owed to
him upon termination other than for just cause within one year of the change in
control. The amount to be paid to the Executive from this trust upon his
termination is determined according to the procedures outlined in the Employment
Agreement with the Bank, and any money not paid to the Executive is returned to
the Bank.
The Employment Agreements also provide for a similar lump sum payment to be made in the event of the Executive's voluntary termination of employment within one year following a change in control, upon the occurrence, or within 90 days thereafter, of certain specified events following the change in control which have not been consented to in writing by the Executive, including (i) the requirement that the Executive perform his principal executive functions more than 35 miles from the Bank's current primary office, (ii) a material reduction in the Executive's base compensation as then in effect, (iii) the failure of the Bank to continue to provide the Executive with compensation and benefits provided for under the Employment Agreement or with substantially similar benefits, (iv) the assignment to the Executive of duties and responsibilities that are materially different from those normally associated with his position with the Bank, (v) a material reduction in the Executive's authority and responsibility, and (vi), in the case of Mr. Clark, a failure to re-elect the Executive to the Bank's Board of Directors. In the event that the Executives prevail
over the Bank in a legal dispute as to the Employment Agreements, they will be reimbursed for their legal and other expenses.
Pension Plan. The Bank maintains a non-contributory, tax-qualified defined benefit plan (the "Pension Plan"). As required, the Bank annually contributes an amount to the Pension Plan necessary to satisfy the actuarially determined minimum funding requirements in accordance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Employees who are 18 years of age or older and who have completed one year of service with the Bank are eligible to participate in the Pension Plan. Participants become 100% vested after five years of service, death, or termination of the Pension Plan, regardless of the participant's years of service. The Pension Plan also provides for early retirement benefits, on an actuarially reduced basis, at the election of a participant who terminates employment after age 55.
Under the Pension Plan, each participant is entitled to a retirement benefit equal to the greater of (a) the product of 50% of final earnings (as defined in the Pension Plan) reduced by 50% of the social security amount (as defined in the Pension Plan) times the ratio of number of years of credited service (as defined in the Pension Plan) up to a maximum of 15, over 15 if the participant's employment ceased after the normal retirement age (as defined in the Pension Plan) or multiplied by the ratio of the number of years of credited service divided by the greatest of (i) 15 and (ii) the number of years of credited service he or she would have had on his or her normal retirement date, if the participant's employment ceased prior to the normal retirement age (as defined in the Pension Plan), or (b) $25 multiplied by the number of the participants' months of credited service.
The following table sets forth the estimated annual benefits that would be payable under the Pension Plan in the form of a single life annuity before reduction for the social security amount upon retirement at the normal retirement date. The amounts are expressed at various levels of compensation and years of service.
YEARS OF CREDITED SERVICE
--------------------------------------------------------------------------
FINAL EARNINGS 15 20 25 30 35
- -------------- -------- -------- -------- -------- --------
$100,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
150,000 75,000 75,000 75,000 75,000 75,000
200,000(1) 100,000 100,000 100,000 100,000 100,000
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(1) Under Section 401(a)(17) of the Code, a participant's compensation in excess of $150,000 (as adjusted to reflect cost-of- living increases) is disregarded for purposes of determining final earnings.
Final earnings equal the average of the participant's highest three consecutive calendar years of taxable compensation during the last 10 full calendar years of employment prior to termination, or the average of the Participant's annual compensation over his or her total service, if less.
The following table sets forth the years of credited service and the final earnings determined as of March 31, 1996 for each of the individuals named in the Summary Compensation Table.
YEARS OF CREDITED SERVICE
-------------------------
NAME YEARS MONTHS FINAL EARNINGS
- -------------------- ----- ------ --------------
Thomas J. Clark, Jr. 1 2 $161,710
Biswarup Mukherjee 9 4 $ 92,837
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Option Plans. The following table discloses for the CEO and the Named Executive Officers, the gain or "spread" that would be realized if the stock options granted to such individuals were exercised when the Bank's stock price had appreciated by the percentage rates indicated from the closing market price on the date of the grant.
OPTION/SAR GRANTS IN FISCAL YEAR 1993
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATE OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------- -----------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR
GRANTED FISCAL YEAR BASE PRICE EXPIRATION 5% 10%
NAME (#) (%) ($ PER SHARE) DATE ($) ($)
- -------------------- ------------ ------------ ------------- ---------- ------- -------
Thomas L. Clark, Jr. 34,715 36% 10.38 9/11/05 226,689 574,186
Biswarup Mukherjee 13,886 14.4% 10.38 9/11/05 90,676 229,674
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The following table provides certain information with respect to the number of shares of Carver Common Stock acquired through the exercise of, or represented by, outstanding stock options held by the Named Executive Officers on April 30, 1996. Also reported is the value for any "in-the-money" options, which represent the positive spread between the exercise price of any such existing stock options and the fiscal year-end price of Carver Common Stock, which was $8.75 per share.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS AT FISCAL
YEAR-END YEAR-END(2)
(#) ($)
------------------------- -------------------------
NAME(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------- ------------------------- -------------------------
Thomas L. Clark, Jr. 0 / 34,715 -- / --
Biswarup Mukherjee 0 / 13,886 -- / --
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(1) Neither of the Named Executive Officers exercised options during the fiscal year ended March 31, 1996.
(2) None of the outstanding stock options held by the Named Executive Officers are "in-the-money" options.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Under current law, Carver offers loans to its directors, officers and employees, which loans are made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than the normal risk of collectibility or present other unfavorable features. Furthermore, loans above the greater of $25,000 or 5% of the Bank's capital and surplus (up to $500,000) to the Bank's directors and executive officers must be approved in advance by a disinterested majority of the Bank's Board of Directors. Under prior law, however, Carver had a policy of offering loans to directors, officers, employees and their
immediate family members residing at the same address on terms substantially equivalent to those offered to the public, except the interest rates on loans were reduced so long as the director, officer or employee remained at the Bank.
The following table sets forth information at March 31, 1996 relating to loans made to directors and executive officers of the Bank whose terms included reduced interest rates or other preferential terms and whose total aggregate balances exceeded $60,000 at any time since April 1, 1995.
HIGHEST
BALANCE
BALANCE AT SINCE
TYPE OF DATE ORIGINAL INTEREST MARCH 31, APRIL 1,
NAME AND RELATION TO BANK LOAN ORIGINATED AMOUNT RATE 1996 1995
- ------------------------- ---- ---------- ------ ---- ---- ----
Biswarup Mukherjee
Executive Vice President
and Chief Financial Officer Mortgage 9/13/88 $160,000 8.25% $127,485 $133,087
Herman Johnson
Director Mortgage 10/18/89 150,000 8.50 $126,831 $131,085
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the federal securities laws, the Bank's directors, executive officers, and any person holding more than ten percent of the Bank's Common Stock are required to file initial reports of ownership of the Bank's Common Stock and reports of changes in that ownership to the OTS and the National Association of Securities Dealers, Inc. Specific due dates for these reports have been established and the Bank is required to disclose in this Proxy Statement any failure to file by these dates during the fiscal year ended March 31, 1996. All of these requirements were satisfied during the fiscal year ended March 31, 1996, except that Mr. Johnson did not disclose purchases of Carver Common Stock by members of his immediate family in his initial report following the public offering of Carver Common Stock. This situation was subsequently corrected. In making these disclosures, the Company has relied on written representations of its directors and executive officers and copies of the reports that they have filed with the OTS.
The Board of Directors has appointed the firm of Mitchell & Titus, LLP as independent auditors for the Bank for the fiscal year ending March 31, 1997, subject to ratification of such appointment by the stockholders. Representatives of Mitchell & Titus, LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so, and will be available to respond to questions.
On November 21, 1995, the Board of Directors determined to replace Radics & Co., LLC (formerly Stephen P. Radics & Co.), the Bank's independent auditors for the 1995 fiscal year with the firm of Mitchell & Titus, LLP, who were engaged on November 21, 1995. The Bank's business relationship with Radics & Co., LLC had always been good, and none of the reports of Radics & Co., LLC on the financial statements of the Bank for either of the past two fiscal years contained an adverse opinion or a disclaimer of opinion or was qualified or modified as to uncertainty, audit scope or accounting principles. During the Bank's two most recent fiscal years, there was no disagreement with Radics & Co., LLC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Radics & Co., LLC, would have caused it to make reference to the subject matter of the disagreement in connection with its reports.
During the Bank's two most recent fiscal years, neither the Bank nor anyone on its behalf consulted Mitchell & Titus, LLP regarding the application of accounting principles to a specific completed or contemplated transaction or the type of audit opinion that might be rendered on the Bank's financial statements, and no written or oral advice concerning the same was provided to the Bank that was an important factor considered by the Bank in reaching a decision as to any accounting, auditing or financial reporting issue.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF MITCHELL & TITUS, LLP AS INDEPENDENT
AUDITORS FOR THE BANK.
GENERAL
Bancorp, Carver and Interim entered into the Plan of Reorganization as of May 21, 1996, pursuant to which Interim will merge with and into Carver and Bancorp will thereby become a savings and loan holding company with Carver as its wholly owned subsidiary. In connection with the Reorganization, all of the outstanding shares of Carver Common Stock (other than shares held by stockholders exercising dissenters' rights, if any) will be converted into and exchanged for, on a one-for-one basis, shares of Bancorp Common Stock. A copy of the Plan of Reorganization is set forth as Appendix A to this Proxy Statement-Prospectus and is incorporated herein by reference. The discussion below is qualified in its entirety by such reference.
Bancorp is a newly-formed Delaware business corporation that was organized by Carver for the purpose of effecting the Reorganization and, therefore, has no operating history. As part of the Reorganization, Interim is being organized as a wholly owned subsidiary of Bancorp. If the Reorganization is approved by the holders of Carver Common Stock, and subject to the satisfaction of all other conditions set forth in the Plan of Reorganization, including receipt of all required regulatory approvals, Interim will be merged with and into Carver on the Effective Date, with Carver as the surviving federal savings bank.
After the Effective Date, Carver will continue its existing business and operations as a wholly owned subsidiary of Bancorp. The consolidated assets, liabilities, stockholders' equity and income of Bancorp immediately following the Effective Date will be the same as those of Carver immediately prior to the Effective Date. The Board of Directors of Bancorp is, and upon the Effective Date will continue to be, comprised of the members of the Board of Directors of Carver. The officers of Bancorp are, and upon the Effective Date will continue to be, certain officers of Carver. See "Management of Bancorp." Carver will continue to operate under the name "Carver Federal Savings Bank" and its deposit accounts will continue to be insured by the FDIC. The corporate existence of Carver will continue unaffected and unimpaired by the Reorganization, except that all of the outstanding shares of Carver Common Stock (other than shares held by stockholders exercising dissenters' rights, if any) will be owned by Bancorp. Carver's stockholders prior to the Effective Date will, in turn, own all of the outstanding shares of Bancorp Common Stock, having received that stock in exchange for their shares of Carver Common Stock as part of the Reorganization.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL
OF THE FORMATION OF A SAVINGS AND LOAN HOLDING COMPANY.
PARTIES TO THE REORGANIZATION
CARVER FEDERAL SAVINGS BANK
Carver was chartered in 1948 and began operations in 1949 as Carver Federal Savings and Loan Association, a federally chartered mutual savings and loan association, at 53 West 125th Street in New York City, at which time, the Bank obtained federal deposit insurance and became a member of the Federal Home Loan Bank ("FHLB") of New York. In 1961, Carver opened its first branch office in the Bedford-Stuyvesant section of Brooklyn, New York and over the next 20 years added three other branches in Brooklyn and Manhattan, New York. In 1982, the Bank acquired Allied Federal Savings and Loan Association in a supervisory transaction. The Bank opened its Roosevelt, Long Island office in 1984 and acquired two additional branches in 1989 and 1990. The Bank converted to a federal savings bank in 1986 and changed its name at that time to Carver Federal Savings Bank. On October 24, 1994, the Bank converted from mutual to stock form (the "Conversion") and issued 2,314,375 shares of its common stock, par value $0.01 per share.
Carver was founded to provide an African-American operated institution where residents of underserved communities could invest their savings and obtain credit. The Bank's principal business consists of attracting passbook and other savings accounts through its branch offices and investing those funds in mortgage loans and other investments permitted to federal savings banks. Based on asset size as of March 31, 1996, Carver is the largest minority-run financial institution in the United States.
CARVER BANCORP, INC.
Bancorp was organized in May, 1996 at the direction of the Board of
Directors of the Bank to become a savings and loan holding company with Carver
as its wholly owned subsidiary. Bancorp, upon the approval of the OTS to become
a savings and loan holding company, will be subject to regulation by the OTS.
After completion of the Reorganization, Bancorp will conduct business initially
as a unitary savings and loan holding company. See "Regulation and Supervision
- -- Savings and Loan Holding Company Regulation." Upon consummation of the
Reorganization, Bancorp will have no significant assets other than the shares of
the Bank's capital stock acquired in the Reorganization, and will have no
significant liabilities. The management of Bancorp is set forth under
"Management of Bancorp." Initially, Bancorp will neither own nor lease any
property, but will instead use the premises, equipment and furniture of the
Bank. At the present time, Bancorp does not intend to employ any persons other
than certain executive officers, but will utilize the support staff of the Bank
from time to time. Additional employees will be hired as appropriate, to the
extent Bancorp expands its business in the future.
Bancorp's executive office is located at 75 West 125th Street, New York 10027-4512, and its telephone number is (212) 876-4747.
CARVER INTERIM FEDERAL SAVINGS BANK
Interim is a stock-form savings bank formed under the rules and regulations of the OTS. Interim is being organized as a wholly owned subsidiary of Bancorp for the purpose of being merged with and into Carver pursuant to the Plan of Reorganization.
DESCRIPTION OF THE REORGANIZATION
REASONS FOR THE REORGANIZATION
The Board of Directors of Carver believes that a holding company structure will provide greater flexibility to meet the future competitive and financial needs of the Bank. As a savings and loan holding company, Bancorp will not be subject to the same regulatory restrictions as the Bank and will be able to engage in a broader range of business activities than are currently permissible for federal savings banks. See "Regulation and Supervision -- Savings and Loan Holding Company Regulation." The Reorganization will also allow Bancorp greater flexibility in the management of its corporate affairs than Carver currently has, including the right to repurchase its stock in response to hostile takeover attempts and in other circumstances as deemed appropriate by its Board of Directors. Any such repurchases would be subject to applicable law, and there are currently no agreements or understandings with respect to the repurchase of the capital stock of the Bank prior to the Effective Date or the capital stock of Bancorp after the Reorganization. The Board of Directors of Bancorp expects that, after completion of the Reorganization, it will consider the possibility of implementing a regular program of share repurchases. See "Certain Differences in Stockholder Rights" and "Certain Anti-Takeover Provisions" for a comparison of anti-takeover provisions and other stockholder rights contained in the charter documents of Carver and Bancorp.
The Reorganization will also increase flexibility with respect to potential expansion through mergers and acquisitions. As a holding company, Bancorp will be able to acquire other banks through the issuance of its stock in exchange for the stock of such other banks, or by a merger of its bank subsidiary with such other bank. There are currently no agreements or understandings with respect to any such mergers or acquisitions.
DESCRIPTION OF THE REORGANIZATION
The Reorganization will be accomplished through the following steps:
1. Bancorp has been incorporated as a wholly owned subsidiary of Carver. The primary purpose of Bancorp is to become the holding company for Carver.
2. Interim is being organized as a wholly owned subsidiary of Bancorp.
3. Interim will be merged with and into Carver, with Carver as the surviving institution.
4. As part of the merger, the shares of Bancorp Common Stock held by Carver will be cancelled, and all of the shares of Carver Common Stock outstanding prior to the merger (other than shares held by stockholders exercising dissenters' rights, if any) will be converted into and exchanged for, on a one-for-one basis, shares of Bancorp Common Stock, with the result that the stockholders of Carver will become the sole stockholders of Bancorp.
5. The shares of common stock of Interim which are outstanding prior to the merger will be converted into shares of Carver Common Stock (and not further converted into shares of Bancorp Common Stock), with the result that, after the merger, all of the issued and outstanding shares of Carver Common Stock will be owned by Bancorp.
6. All shares acquired by Carver as a result of the exercise of dissenters' rights will be cancelled upon receipt.
Bancorp will receive an initial cash infusion from Carver in the amount of $100,000. Shortly after consummation of the Reorganization, management of the Bank expects to make a capital distribution of $5.7 million to Bancorp, which may be used by Bancorp after the Reorganization to conduct the activities described in "Reasons for the Reorganization" as well as to fund any cash dividends that may be declared. See "Dividend Policy."
EFFECTIVE DATE
The Effective Date will be the later of the date of (a) the consummation of the Plan or (b) the date specified on the endorsement by the Secretary of the OTS of the articles of combination with respect to the Plan of Reorganization in accordance with the OTS Regulations.
CONDITIONS TO THE REORGANIZATION
The Plan of Reorganization provides that the obligations of Carver, Bancorp and Interim to consummate the Reorganization are subject to the satisfaction of the following conditions: (1) the approval of the Plan of Reorganization by an affirmative vote of the holders of a majority of the outstanding shares of Carver Common Stock; (2) the approval by the OTS of the Plan of Reorganization and the transactions contemplated therein, including the formation of Interim, the merger of Interim with and into Carver, and the acquisition by Bancorp of all of the issued and outstanding shares of Carver Common Stock (other than shares held by stockholders exercising dissenters' rights, if any); (3) the receipt of a favorable ruling from the Internal Revenue Service or a favorable opinion of counsel as to the federal income tax consequences of the Reorganization; (4) the registration with the SEC of Bancorp Common Stock under the Securities Act; (5) compliance with all applicable state securities or "blue sky" laws relating to the issuance and distribution of Bancorp Common Stock; and (6) the receipt of all other consents and approvals and the satisfaction of all other requirements necessary to the consummation of the Reorganization.
AMENDMENT AND TERMINATION
The Plan of Reorganization provides that it may be amended by the parties thereto in whole or in part at any time prior to the Effective Date, whether before or after approval by the stockholders, to the extent authorized by applicable law. However, after approval by the stockholders of the Bank, the Plan may not be amended in any way deemed by the Board of Directors to be materially adverse to the stockholders.
The Plan of Reorganization further provides that it may be terminated
at any time prior to the Effective Date (whether before or after approval by the
stockholders of Carver): (1) at the option of the Board of Directors of Carver
or Bancorp or the incorporator of Interim if any one or more of the conditions
to the obligations of any of them under the Plan of Reorganization shall not
have been satisfied and shall not have been waived at or prior to the Effective
Date; (2) at the option of the Board of Directors of Carver for any reason; or
(3) by the mutual agreement of the Boards of Directors of Carver and Bancorp and
the incorporator of Interim. In addition, in the event that stockholders,
through the exercise of dissenters' rights, would cause the Bank's total
risk-based capital ratio to fall below 8.0%, or would cause the Bank's Tier 1
risk-based capital ratio to fall below 4.0% or would cause the Bank's core
capital ratio to fall below 3.0%, the Bank will not complete the Reorganization
without the further approval of the OTS.
EXCHANGE OF STOCK CERTIFICATES
In connection with the exchange of Carver Common Stock for Bancorp Common Stock, it will not be necessary for stockholders of Carver to exchange their certificates for certificates representing shares of Bancorp Common Stock. On the Effective Date, non- dissenting stockholders of Carver will automatically become stockholders of Bancorp and each outstanding certificate representing shares of Carver Common Stock will automatically represent, and will be deemed for all purposes to evidence ownership of, the same number of shares of Bancorp Common Stock.
After the Effective Date, as currently outstanding certificates of Carver Common Stock are presented for transfer, or, upon the request of any holder of Carver Common Stock, the registrar and transfer agent for Carver Common Stock and Bancorp Common Stock (the "Transfer Agent") will issue new stock certificates representing the same number of shares of Bancorp Common Stock as the number of shares of Carver Common Stock surrendered therefor. Upon surrender, each certificate representing Carver Common Stock will be cancelled. After the Effective Date, there will be no further registration of transfers of shares of Carver Common Stock on the records of Carver.
If any certificate representing shares of Bancorp Common Stock is to be issued in a name other than that in which the certificate of Carver Common Stock surrendered in exchange therefor is registered, it will be a condition of the issuance thereof that the certificate surrendered in exchange be properly endorsed and otherwise in proper form for transfer. The person requesting such transfer will be required to pay to the Transfer Agent any transfer or other tax required by reason of the issuance of a certificate for shares of Bancorp Common Stock in a name other than that of the registered holder of the certificate surrendered or establish to the satisfaction of the Transfer Agent that such tax has been paid or is not payable.
EFFECT OF THE REORGANIZATION ON EMPLOYEE BENEFIT PLANS
On the Effective Date, the ESOP, the Option Plan, the MRP and the Incentive Compensation Plan will be assumed by Bancorp. Stock options to purchase shares of Carver Common Stock granted under the Option Plan and Incentive Compensation Plan and outstanding prior to the Reorganization will automatically become options to purchase the same number of shares of Bancorp Common Stock upon identical terms and conditions and for an identical price. Similarly, stock appreciation rights with respect to shares of Carver Common Stock granted under the Option Plan, if any, will automatically become stock appreciation rights with respect to shares of Bancorp Common Stock, and grants of restricted shares of Carver Common Stock under the MRP and Incentive Compensation Plan will automatically become grants of restricted shares of Bancorp Common Stock. Bancorp will assume all of Carver's obligations with respect to such outstanding options, stock appreciation rights and restricted stock. Any shares of Carver Common Stock reserved for future issuance under the Option Plan, MRP or Incentive Compensation Plan will automatically be converted into an equal number of shares of Bancorp Common Stock and will be reserved for issuance under the respective plans. Shares of Carver Common Stock held by the ESOP will automatically become shares of Bancorp Common Stock.
The Reorganization will not trigger any change in control provisions contained in any of the employment agreements with the Bank's officers. All other employee benefit plans of Carver will be unchanged by the Reorganization. See "Management of Carver -- Compensation and Employee Benefit Plans."
DESCRIPTION OF BANCORP CAPITAL STOCK
GENERAL
The Certificate of Incorporation of Bancorp authorizes the issuance of capital stock consisting of 10,000,000 shares of common stock, par value $0.01 per share, and 2,000,000 shares of preferred stock, par value $0.01 per share (the "Bancorp Preferred Stock"). There are 100 shares of Bancorp Common Stock currently issued and outstanding, all of which are owned by Carver. On the Effective Date, such shares will be cancelled, and there will be, subject to the exercise of dissenters' rights, if any, 2,314,375 shares outstanding as a result of the exchange of shares of Bancorp Common Stock for shares of Carver Common Stock. Because all of the issued and outstanding shares of Bancorp Common Stock are owned by Carver, there is currently no established public trading market for Bancorp Common Stock.
In the future, the authorized but unissued and unreserved shares of Bancorp Common Stock and the authorized and unissued shares of Bancorp Preferred Stock will be available for issuance for general corporate purposes, including, but not limited to, possible issuance as stock dividends or stock splits, future mergers or acquisitions, or future private placements or public offerings. Bancorp's Board of Directors may (i) divide, and cause the issuance of, one or more series of the authorized shares of Bancorp Preferred Stock, (ii) fix the number of shares constituting any such new series, and (iii) fix the dividend rate, terms, conditions, conversion and exchange rights, redemption rights (including sinking fund provisions), liquidation preferences and voting rights, if any, of any such new series. Such rights and preferences may be superior to those of Bancorp Common Stock. Except as otherwise may be required to approve a merger or other transaction in which the additional authorized shares of Bancorp Common Stock or authorized shares of Bancorp Preferred Stock would be issued, no stockholder approval will be required for the issuance of those shares. See "Certain
Differences in Stockholder Rights" for a discussion of the rights of the holders of Bancorp Common Stock as compared to the holders of Carver Common Stock. In addition, the Company may be restricted in its ability to register additional shares of capital stock after completion of the Reorganization due to certain requirements of the SEC related to financial statement disclosures and related disclosures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
COMMON STOCK
General. Each share of Bancorp Common Stock has the same relative rights as, and is identical in all respects to, each other share of Bancorp Common Stock. Until such time as voting Bancorp Preferred Stock is issued, if ever, the holders of shares of Bancorp Common Stock will possess all rights, including exclusive voting rights, pertaining to the capital stock of Bancorp. The relative rights of shares of Bancorp Common Stock do not materially differ from the relative rights of shares of Carver Common Stock.
Dividend Rights. The holders of Bancorp Common Stock will be entitled to dividends when, as and if declared by Bancorp's Board of Directors out of funds legally available therefor. The payment of dividends by Bancorp will depend on Bancorp's net income, financial condition, regulatory requirements and other factors, including the results of Carver's operations. See "Dividend Policy" for restrictions on the payment of dividends on Bancorp Common Stock. Bancorp has no present intention to pay dividends, but may consider doing so in the future.
Voting Rights. Each share of Bancorp Common Stock will entitle the holder thereof to one vote on all matters upon which stockholders have the right to vote. In addition, the Board of Directors of Bancorp is classified so that approximately one-third of the directors will be elected each year. Stockholders of Bancorp will not be entitled to cumulate their votes for the election of directors. See "Certain Anti-Takeover Provisions."
Liquidation Rights. In the event of any liquidation, dissolution or winding up of Bancorp, the holders of shares of Bancorp Common Stock will be entitled to receive, after payment of all debts and liabilities of Bancorp and subject to the prior rights, if any, of holders of shares of Bancorp Preferred Stock, all remaining assets of Bancorp available for distribution in cash or in kind. In the event of any liquidation, dissolution or winding up of Carver, Bancorp, as the holder of all shares of Carver Common Stock, upon completion of the Reorganization, would be entitled to receive payment of all debt, and liabilities of Carver (including all deposits and accrued interest thereon) and all remaining assets of Carver available for distribution in cash or in kind.
Preemptive Rights; Redemption. Holders of shares of Bancorp Common Stock will not be entitled to preemptive rights with respect to any shares that may be issued. Bancorp Common Stock is not subject to call or redemption.
BANCORP PREFERRED STOCK
No Bancorp Preferred Stock is being issued in connection with the Reorganization and the Board of Directors of Bancorp has no present plan or intention to issue any Bancorp Preferred Stock. The Board of Directors may, without action of the stockholders of Bancorp, issue shares of Bancorp Preferred Stock from time to time in one or more series with distinctive serial designations, preferences, limitations and other rights.
The Board of Directors is authorized to determine, among other things, with respect to each series which may be issued: (i) the dividend rate, conditions of payment of dividends, dividend preferences, if any, and whether dividends would be cumulative and, if so, the date from which dividends on such series would accumulate; (ii) whether, and upon what terms, such series would be redeemable and, if so, the redemption price and terms and conditions of redemption; (iii) the preference, if any, to which such series would be entitled in the event of voluntary or involuntary liquidation, dissolution or winding up of Bancorp; (iv) whether or not a sinking fund would be provided for the redemption of such series and, if so, the terms and conditions thereof; (v) whether, and upon what terms, such series would be convertible into or exchangeable
for shares of any other class of capital stock or other series of Bancorp Preferred Stock; and (vi) whether, and to what extent, the holders of such series would enjoy voting rights, if any, in addition to those prescribed by law. With regard to dividends, redemption and liquidation preference, any particular series of Bancorp Preferred Stock may rank junior to, on a parity with or senior to any other series of Bancorp Preferred Stock.
It is not possible to state the actual effect of the authorization of Bancorp Preferred Stock upon the rights of holders of Bancorp Common Stock, until the Board of Directors determines the specific rights of the holders of a series of Bancorp Preferred Stock. However, such effects might include (a) restrictions on dividends on Bancorp Common Stock if dividends on Bancorp Preferred Stock have not been paid; (b) dilution of the voting power of Bancorp Common Stock to the extent that Bancorp Preferred Stock has voting rights; (c) dilution of the equity interest of Bancorp Common Stock to the extent that Bancorp Preferred Stock is converted into Bancorp Common Stock; or (d) Bancorp Common Stock not being entitled to share in Bancorp's assets upon liquidation until satisfaction of any liquidation preference granted the holders of Bancorp Preferred Stock. Issuance of Bancorp Preferred Stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could make it more difficult for a third party to acquire a majority of the outstanding voting stock. Accordingly, the issuance of Bancorp Preferred Stock may be used as an "anti-takeover" device without further action on the part of the stockholders of Bancorp.
ANTI-TAKEOVER PROVISIONS
See "Certain Differences in Stockholder Rights -- Certain Anti-Takeover Provisions" for a description of certain provisions contained in the Certificate of Incorporation and Bylaws of Bancorp that might have the effect of delaying, deferring or preventing a change in control of Bancorp.
DESCRIPTION OF CARVER CAPITAL STOCK
GENERAL
The Bank's Federal Stock Charter authorizes the issuance of up to 5,000,000 shares of common stock (the "Bank Common Stock") and 1,000,000 shares of serial preferred stock (the "Bank Preferred Stock"). The Bank Preferred Stock may be issued in classes and series having such rights, preferences, privileges and restrictions as the Board of Directors of the Bank may determine from time to time.
The Bank Preferred Stock may be issued by the Bank in one or more series from time to time as determined by the Bank's board of directors by the adoption of a supplementary provision in the Bank's Federal Stock Charter. No Bank Preferred Stock has been authorized by the Board of Directors at this time.
THE COMMON STOCK
Under the Bank's Federal Stock Charter, each holder of shares of Bank Common Stock is entitled to one vote per share on all matters requiring stockholder action and to participate equally (subject to any preference which may hereafter be established in favor of the Bank Preferred Stock) with the other holders of Bank Common Stock in any dividends, when, as and if declared by the Board of Directors of the Bank from funds legally available therefor. See "Dividend Policy." Subject to any preferential rights established in favor of any outstanding Bank Preferred Stock, each share of Bank Common Stock is entitled to equal rights in the event of liquidation. Stockholders of Carver do not have the right to cumulate their votes for the election of directors.
The holders of the Bank Common Stock have no preemptive or other rights to subscribe for additional shares of any class of capital stock of the Bank. Without preemptive rights, a stockholder's ownership position in the Bank is subject to dilution if additional shares of capital stock are issued by the Bank. The Bank Common Stock is not redeemable.
BANK PREFERRED STOCK
The Board of Directors may, without action of the stockholders of the Bank, issue shares of Bank Preferred Stock from time to time in one or more series with distinctive serial designations, preferences, limitations and other rights. The Board of Directors is authorized to determine the same features with respect to the Bank Preferred Stock as those of Bancorp Preferred Stock.
No Bank Preferred Stock is being issued in connection with the Reorganization and there is currently no Bank Preferred Stock outstanding. The Board of Directors of the Bank has no present plan or intention to issue any Bank Preferred Stock.
CERTAIN DIFFERENCES IN STOCKHOLDER RIGHTS
GENERAL
The rights of the holders of Carver Common Stock are currently governed by the OTS Regulations and by Carver's Federal Stock Charter and the Bylaws adopted thereunder. The rights of the holders of Bancorp Common Stock will be governed by Delaware General Corporation Law ("DGCL"), by Bancorp's Certificate of Incorporation and the Bylaws adopted thereunder and by the applicable regulations of the SEC. Certain differences in stockholder rights arise from this change of governing law. The following discussion summarizes the material differences as reflected in Bancorp's Certificate of Incorporation and Bylaws and is not intended to be a complete statement of all differences affecting the rights of stockholders. This discussion is qualified in its entirety by reference to Bancorp's Certificate of Incorporation, a copy of which is attached hereto as Appendix C. If the Reorganization is not consummated, any action affecting the rights of stockholders of Carver, including any change in control, will continue to be subject to the relevant provisions of Carver's Federal Stock Charter and Bylaws and the OTS Regulations. For a description of Bancorp Common Stock, see "Description of Bancorp Capital Stock -- Common Stock." For a description of provisions contained in the Certificate of Incorporation and Bylaws of Bancorp that may be deemed to have an anti-takeover effect, see "-- Certain Anti-Takeover Provisions."
PAYMENT OF DIVIDENDS
The ability of Carver to pay dividends on its common stock is restricted by OTS Regulations and by tax considerations related to federally chartered savings banks. See "Regulation and Supervision -- Restrictions on Dividends and Other Capital Distributions." Although Bancorp's ability to pay dividends will not be subject to these restrictions, such restrictions will indirectly affect the Company because dividends from the Bank will be a primary source of funds of the Company for the payment of dividends to stockholders of the Company. Bancorp will be limited by certain restrictions imposed generally on Delaware corporations. Subject to certain limitations and exceptions, dividends may be paid only out of a Delaware corporation's surplus (as defined by the DGCL) or its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. See "Dividend Policy" and "Regulation and Supervision -- Savings and Loan Holding Company Regulation." Bancorp has no present intention to pay dividends but may consider doing so in the future.
RIGHTS OF ISSUER TO REPURCHASE STOCK
Under the OTS Regulations, Carver may repurchase its stock under certain specific conditions, but only with the prior approval of the OTS. See "Regulation and Supervision -- Restrictions on Dividends and Other Capital Distributions." Under the DGCL, no prior approval is required and, therefore, Bancorp will be allowed to purchase its own stock in the open market subject to applicable law and the availability of funds therefor. See "Regulation and Supervision -- Savings and Loan Holding Company Regulation" for a description of the restrictions on the repurchase by Bancorp of its stock. Bancorp may consider repurchases of its stock in the future.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
The Certificate of Incorporation of Bancorp contains provisions that limit the personal liability of directors to Bancorp or to its stockholders for monetary damages for breach of fiduciary duty, except to the extent such limitation is not permitted by the DGCL. Section 102(b)(7) of the DGCL provides that such a provision shall not eliminate or limit the personal liability of a director (1) for any breach of the director's duty of loyalty to the corporation or its stockholders; (2) for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law; (3) under Section 174 of the DGCL, which imposes liability for the unlawful payment of dividends or unlawful stock purchase or redemption; or (4) for any transaction from which the director received an improper personal benefit. The provisions in Bancorp's Certificate of Incorporation apply only to the liability of a director acting in his capacity as such and not to actions brought other than by a stockholder or Bancorp. Bancorp's Certificate of Incorporation contains provisions that require indemnification of the directors and officers and permits indemnification of employees of Bancorp and any of its direct or indirect subsidiaries. To be entitled to indemnification, it must be determined that, in general terms, the person acted in good faith and in a manner believed to be in, or not opposed to, the best interests of Bancorp and, with respect to a criminal action, had no reasonable cause to believe his or her conduct was unlawful.
Under present OTS regulations, the Bank must indemnify its directors, officers and employees for any costs incurred in connection with any litigation involving any such person's activities as a director, officer or employee if such person obtains a final judgment on the merits in his or her favor. In addition, indemnification is permitted in the case of a settlement, a final judgment against such person or a final judgment in such person's favor, other than on the merits, if a majority of disinterested directors determine that such person was acting in good faith within the scope of his or her employment as he or she could reasonably have believed under the circumstances was in the best interest of the Bank or its stockholders. The Bank also is permitted to pay ongoing expenses incurred by a director, officer or employee if a majority of disinterested directors concludes that such person may ultimately be entitled to indemnification.
Bancorp's Certificate of Incorporation defines in greater detail than the OTS Regulations the circumstances under which a person may be entitled to indemnification and the procedures for obtaining indemnification and for resolving disputes over indemnification. Indemnification by Carver may be paid only after prior notice to, and no objection by, the OTS, but Bancorp would not be subject to such procedure. Under the Federal Deposit Insurance Act, as amended ("FDIA"), both Carver and Bancorp would be prohibited from paying any indemnification with respect to any liability or legal expense incurred by a director, officer, or employee as result of an action or proceeding by a federal banking agency resulting in a civil money penalty or certain other remedies against such person.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling Bancorp pursuant to the forgoing provisions, Bancorp has been informed that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
APPRAISAL RIGHTS
Under the OTS Regulations, a stockholder of a federally chartered savings bank which engages in a merger, consolidation or sale of all or substantially all of its assets has the right to demand from such savings bank payment of the fair or appraised value of his or her stock in the savings bank, subject to specified procedural requirements. This regulation also provides, however, that the stockholders of a federally chartered savings bank with stock which is listed on a national securities exchange or quoted on the Nasdaq Stock Market are not entitled to appraisal rights if the stockholder is required to accept only "qualified consideration" for his or her stock, which is defined to include cash, shares of stock of any association or corporation which at the effective date of the merger will be listed on a national securities exchange or quoted on the Nasdaq Stock Market or any combination of such shares of stock and cash. The relevant OTS regulations governing a stockholder's appraisal rights are attached hereto as Appendix B.
After the Reorganization, the rights of appraisal of dissenting stockholders will be governed by the DGCL. The DGCL provides that dissenting stockholders have appraisal rights in certain instances. However, the DGCL generally does not confer appraisal rights if a corporation's stock is held of record by more than 2,000 stockholders, or if it is listed on a national securities exchange or listed on the Nasdaq National Market System, provided that stockholders receive only certain forms of consideration in exchange for their shares of stock.
SPECIAL MEETINGS OF STOCKHOLDERS
The Bank's Bylaws provide that special meetings of the stockholders of the Bank may be called by the Chairman, President, a majority of the Board of Directors or the holders of not less than one-tenth of the outstanding capital stock of the Bank entitled to vote at the meeting. The Bylaws also provide that any action required to be taken at a meeting of the stockholders may be taken without a meeting if consent in writing is given by all of the stockholders entitled to vote on the subject matter. The Company's Certificate of Incorporation and Bylaws contain a provision pursuant to which special meetings of stockholders of the Company may only be called by the Chairman, the President and Chief Executive Officer, or by resolution of at least three-fourths of the Directors then in office.
CERTAIN ANTI-TAKEOVER PROVISIONS
General. The principal purpose of any anti-takeover provision is to protect the interests of a corporation and its stockholders in the event of a sudden takeover attempt. Such provisions are intended to require a hostile purchaser to deal fairly with stockholders and to give a corporation's board of directors a better opportunity to analyze prospective business combinations and tender offers, evaluate alternatives, and make careful recommendations to stockholders. Such provisions could have the effect of making more difficult, or discourage, a merger, tender offer, proxy contest, or assumption of control and change of incumbent management, even when a majority of stockholders considers such a course to be in its best interests. However, the Board of Directors of Bancorp believes that the disadvantages of discouraging such actions are outweighed by the best interests of the stockholders as a whole and by the benefits obtained by protecting the ability of the Board to negotiate with a proponent of an unfriendly or unsolicited proposal to take over or restructure Bancorp.
The following discussion focuses on certain provisions of Bancorp's Certificate of Incorporation and Bylaws and, where applicable, the corresponding provisions of Carver's Federal Stock Charter and Bylaws that could be relevant to change in control situations and that may affect the rights of stockholders.
Capital Stock. Carver's Charter authorizes the issuance of up to 5,000,000 shares of common stock and 1,000,000 shares of serial preferred stock and Bancorp's Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares of common stock and 2,000,000 shares of preferred stock. Although neither Carver nor Bancorp has any arrangements, understandings or plans at the present time for the issuance or use of additional shares of common stock or any of the shares of authorized preferred stock, the availability of such shares will provide Carver or Bancorp with flexibility in structuring financings and acquisitions and meeting other corporate needs that may arise.
As permitted by the DGCL, Bancorp's Board of Directors may, without stockholder approval, issue additional shares of Bancorp Common Stock or authorize the issuance of a series of preferred stock with rights and preferences that could impede the completion of a transaction to which management is opposed. Bancorp's ability to issue additional capital stock is subject to applicable law, including the duty of directors to exercise their business judgment in the best interests of Bancorp and its stockholders.
Board of Directors. Carver's Charter provides that the authorized number of directors shall not be fewer than five nor more than fifteen, as fixed in Carver's Bylaws. Bancorp's Certificate of Incorporation and Bylaws provide that the authorized number of directors shall not be fewer than five nor more than fifteen, with the exact number to be fixed by resolution of Bancorp's Board of Directors. The Board of Bancorp will initially be composed of seven directors, the same number of directors currently on Carver's Board of
Directors. See "Management of Bancorp." Carver's Bylaws and Bancorp's Certificate of Incorporation provide for a board of directors that is to be divided into three classes, which shall be as nearly equal in number as possible. The power to fill vacancies for each of Carver and Bancorp is vested in their respective Boards of Directors. The overall effect of such provisions may be to prevent a person or entity from immediately acquiring control of Carver or Bancorp through an increase in the number of directors and the election of such person or of such person's or entity's nominees to fill such newly created vacancies.
The DGCL provides that a director serving on a classified board may be removed by the holders of a majority of the shares entitled to vote thereon, but only for cause, unless the certificate of incorporation provides otherwise. The Bylaws of Carver provide that any director may be removed only for cause, at a meeting of stockholders expressly called for that purpose by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Bancorp's Certificate of Incorporation provides that any director may be removed only for cause by a vote of the holders of 80% of the shares then entitled to vote at an election of directors. The classified Board of Directors, the enhanced requirement for removal of directors of Bancorp and the related provisions discussed above could make it more difficult for stockholders to force an immediate change in the composition of a majority of the composition of a majority of the Board of Directors.
Action Without a Stockholder Meeting. Carver's Bylaws provide that the stockholders may act without a meeting if consent in writing, describing the action to be taken, is given by all stockholders entitled to vote on the action. Bancorp's Certificate of Incorporation prohibits stockholder action by written consent in lieu of an annual or special meeting of stockholders. Although stockholders of Bancorp are not permitted to take action by written consent while stockholders of Carver are permitted to do so, taking significant corporate action through written consent is difficult to achieve due to the requirement that all Carver stockholders entitled to vote on the action provide written consent.
Notice of Director Nominations and Stockholder Proposals. The Bank's Bylaws generally provide that stockholders may submit nominations for election of directors at an annual meeting of stockholders and any new business to be taken up at an annual meeting by filing a submission in writing with the Bank at least five days before the date of any such meeting.
Bancorp's Bylaws provide that all nominations for election to the Board of Directors and proposals for any new business, other than those made by the Chairman of the Board, the President and Chief Executive Officer or by resolution of at least three- fourths of the directors then in office, shall be made by a stockholder who has complied with the written notice provisions in the Bylaws. These written notice provisions provide for a longer period of notice to the Company than the five days required by the Bank.
The Bylaw procedures regarding stockholder proposals and nominations are intended to provide the Board of Directors of Bancorp with the information deemed necessary to evaluate a stockholder proposal or nomination and other relevant information, such as existing stockholder support, as well as the time necessary to consider and evaluate such information in advance of a meeting. The procedures will give incumbent directors advance notice of a business proposal or nomination. This may make it easier for incumbent directors to defeat a stockholder proposal or nomination, even when certain stockholders may view such proposal or nomination as in the best interests of the Company or its stockholders.
Stockholder Vote Required to Approve Certain Business Combinations. Under the OTS Regulations, business combinations, such as mergers, consolidations, purchases and sales of substantially all of the assets of an institution, require the approval of the holders of two-thirds of the outstanding voting stock entitled to vote thereon.
The Certificate of Incorporation requires the approval of the holders of at least 80% of the Company's outstanding shares of voting stock, together with the affirmative vote of the Company's outstanding shares not beneficially owned by an Interested Stockholder (as defined below) to approve certain "Business Combinations," as defined therein, and related transactions. Under Delaware law, absent this provision, Business Combinations, including mergers, consolidations and sales of all or substantially all of the assets of
a corporation must, subject to certain exceptions, be approved by the vote of the holders of only a majority of the outstanding shares of Common Stock of the Company and any other affected class of stock. Under the Certificate of Incorporation, at least 80% approval of stockholders is required in connection with any transaction involving an Interested Stockholder except (i) in cases where the proposed transaction has been approved in advance by a majority of those members of the Company's Board of Directors who are unaffiliated with the Interested Stockholder and were directors prior to the time when the Interested Stockholder became an Interested Stockholder or (ii) if the proposed transaction meets certain conditions set forth therein which are designed to afford the stockholders a fair price in consideration for their shares in which case, if a stockholder vote is required, approval of only a majority of the outstanding shares of voting stock would be sufficient. The term "Interested Stockholder" is defined to include any individual, corporation, partnership or other entity (other than the Company or its subsidiary) which owns beneficially or controls, directly or indirectly, 10% or more of the outstanding shares of voting stock of the Company. This provision of the Certificate of Incorporation applies to any "Business Combination," which is defined to include (i) any merger or consolidation of the Company or any of its subsidiaries with or into any Interested Stockholder or Affiliate (as defined in the Certificate of Incorporation) of an Interested Stockholder; (ii) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition to or with any Interested Stockholder or Affiliate of 5% or more of the assets of the Company or combined assets of the Company and its subsidiary; (iii) the issuance or transfer to any Interested Stockholder or its Affiliate by the Company (or any subsidiary) of any securities of the Company other than on a pro rata basis to all stockholders; (iv) the adoption of any plan for the liquidation or dissolution of the Company proposed by or on behalf of any Interested Stockholder or Affiliate thereof; and (v) any reclassification of securities, recapitalization, merger or consolidation of the Company which has the effect of increasing the proportionate share of Common Stock or any class of equity or convertible securities of the Company owned directly or indirectly by an Interested Stockholder or Affiliate thereof.
Evaluation of Offers. The Certificate of Incorporation of the Company further provides that the Board of Directors of the Company, when evaluating any offer to the Company from another party to (i) make a tender or exchange offer for any equity security of the Company, (ii) merge or consolidate the Company with another corporation or entity or (iii) purchase or otherwise acquire all or substantially all of the properties and assets of the Company, may, in connection with the exercise of its judgment in determining what is in the best interest of the Company and the stockholders of the Company, give due consideration to the extent permitted by law to all relevant factors, including, without limitation, the financial and managerial resources and future prospects of the other party, the possible effects on the business of the Company and its subsidiaries and on the employees, customers, suppliers and creditors of the Company and its subsidiaries, the effects on the communities in which the Company's and its subsidiaries' facilities are located and the commitment and ability of the other party to remain faithful to the special mission of the Company and its subsidiaries in the communities in which the Company and its subsidiaries are located in the tradition begun by the Bank. By having these standards in the Certificate of Incorporation of the Company, the Board of Directors may be in a stronger position to oppose such a transaction if the Board concludes that the transaction would not be in the best interest of the Company, even if the price offered is significantly greater than the then market price of any equity security of the Company.
Amendment of Certificate of Incorporation and Bylaws. Carver's Charter provides that amendments of the Charter must be proposed by the Board of Directors, approved by the OTS and thereafter approved by the holders of a majority of the total votes of stockholders entitled to vote thereon. Carver's Bylaws permit the amendment of the Bylaws by a vote of a majority of the Board of Directors or by holders of a majority of the total votes of stockholders present in person or by proxy at a meeting and entitled to vote thereon. Amendments of Carver's Bylaws may also require approval of the OTS.
Bancorp's Certificate of Incorporation generally provides that, in addition to any affirmative vote required by applicable law and any voting rights granted to or held by holders of any series of Bancorp Preferred Stock, any alteration, amendment, repeal or rescission (collectively, any "Change") of any provision of the Certificate of Incorporation must be approved by a majority of the directors of Bancorp then in office and by the affirmative vote of the holders of a majority (or such greater proportion as may otherwise be
required pursuant to any specific provision of the Certificate of Incorporation) of the total votes eligible to be cast by the holders of all outstanding shares of Bancorp Common Stock entitled to vote. In addition to the above requirement, a Change to certain provisions of the Certificate of Incorporation must also be approved either (i) by not less than a majority of the authorized number of directors and, if one or more Interested Stockholders exist, by not less than a majority of the Disinterested Directors or (ii) by the affirmative vote of the holders of not less than two-thirds of the total votes eligible to be cast by the holders of all outstanding shares of the capital stock of Bancorp entitled to vote thereon and, if the Change is proposed by or on behalf of an Interested Stockholder or a director who is an Affiliate or Associate of an Interested Stockholder, by the affirmative vote of the holders of not less than a majority of the total votes eligible to be cast by holders of all outstanding shares entitled to vote thereon not beneficially owned by an Interested Stockholder or an Affiliate or Associate thereof. Amendment of the provision relating to business combinations must also be approved by either (i) a majority of the Disinterested Directors, or (ii) the affirmative vote of not less than eighty percent (80%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the Voting Stock, voting together as a single class, together with the affirmative vote of not less than fifty percent (50%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the Voting Stock not beneficially owned by any Interested Stockholder or Affiliate or Associate thereof, voting together as a single class. Capitalized terms are as defined in the Certificate of Incorporation. Furthermore, the Company's Certificate of Incorporation provides that provisions of the Certificate of Incorporation and Bylaws that contain supermajority voting requirements may not be altered, amended, repealed or rescinded without a vote of the Board or holders of capital stock entitled to vote thereon that is not less than the supermajority specified in such provision. Absent these provisions, the DGCL provides that a corporation's certificate of incorporation and bylaws may be amended by the holders of a majority of the corporation's outstanding capital stock. The Certificate of Incorporation also provides that the Board of Directors is authorized to make, alter, amend, rescind or repeal any of the Company's Bylaws in accordance with the terms thereof, regardless of whether the Bylaw was initially adopted by the stockholders. However, this authorization neither divests the stockholders of their right, nor limits their power to adopt, amend, rescind or repeal any Bylaw under the DGCL. These provisions could have the effect of discouraging a tender offer or other takeover attempt where the ability to make fundamental changes through Bylaw amendments is an important element of the takeover strategy of the acquiror.
The provisions of Bancorp's Certificate of Incorporation limiting the liability of directors, as described above, may not be repealed or amended without the affirmative vote of the holders of 80 percent of the total votes eligible to be cast by the holders of all of the outstanding shares of the capital stock of Bancorp entitled to vote thereon.
Section 203 of Delaware General Corporate Law. The State of Delaware
has a statute designed to provide Delaware corporations with additional
protection against hostile takeovers. The takeover statute, which is codified in
Section 203 of the DGCL ("Section 203"), is intended to discourage certain
takeover practices by impeding the ability of a hostile acquiror to engage in
certain transactions with the target company.
In general, Section 203 provides that a "Person" (as defined therein) who owns 15% or more of the outstanding voting stock of a Delaware corporation (an "Interested Stockholder") may not consummate a merger or other business combination transaction with such corporation at any time during the three-year period following the date such "Person" became an Interested Stockholder. The term "business combination" is defined broadly to cover a wide range of corporate transactions including mergers, sales of assets, issuances of stock, transactions with subsidiaries and the receipt of disproportionate financial benefits.
The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
an Interested Stockholder, the Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder; (ii) any business combination involving a person who
acquired at least 85% of the outstanding voting stock in the transaction in
which he became an Interested Stockholder, with the number of shares outstanding
calculated without regard to those shares owned by the corporation's directors
who are also officers and by certain employee stock plans; (iii) any business
combination with an Interested Stockholder
that is approved by the Board of Directors and by a two-thirds vote of the
outstanding voting stock not owned by the Interested Stockholder; and (iv)
certain business combinations that are proposed after the corporation had
received other acquisition proposals and which are approved or not opposed by a
majority of certain continuing members of the Board of Directors. A corporation
may exempt itself from the requirement of the statute by adopting an amendment
to its Certificate of Incorporation or Bylaws electing not to be governed by
Section 203. At the present time, the Board of Directors does not intend to
propose any such amendment.
Additional Change in Control Regulation. Prior approval of the OTS under the Change in Bank Control Act, as amended, is required for an acquisition of control of a federal savings bank, such as Carver, by a company or by individuals. Such prior approval would be required for a direct acquisition of control of Carver or for an indirect acquisition of control of Carver through an acquisition of control of Bancorp. For such purpose, an acquiror is deemed to have acquired control by acquiring more than 25% of any class of voting stock, and an acquisition of "control" is presumed if, among other things, a person acquires more than 10% of any class of voting securities if the acquiror also benefits from any of various "control factors" specified in the OTS Regulations. Among the "control factors" are the acquiror being a holder of one of the two largest holdings of the institution's voting stock; the acquiror, together with the acquiror's representatives and nominees, constituting more than one member of the institution's board of directors; or the acquiror having the power to dispose of, or the ability to vote other than through revocable proxies, more than 25% of the institution's voting stock.
The Exchange Act requires that a purchaser of any class of a corporation's securities registered under the Exchange Act notify the SEC and such corporation within ten days after its purchases exceed 5% of the outstanding shares of that class of securities. This notice must disclose the background and identity of the purchaser, the source and amount of funds used for the purchase, the number of shares owned and, if the purpose of the transaction is to acquire control of the corporation, any plans to materially alter the corporation's business or corporate structure. In addition, any tender offer to acquire a corporation's securities is subject to the limitations and disclosure requirements of the Exchange Act.
TAX CONSEQUENCES OF THE REORGANIZATION
The consummation of the Reorganization is conditioned, in part, upon receipt by Carver of an opinion of counsel to Carver to the effect that, for federal income tax purposes: (1) no gain or loss will be recognized by stockholders of Carver on the transfer of their shares of Carver Common Stock to Bancorp solely in exchange for Bancorp Common Stock; (2) no gain or loss will be recognized by Bancorp upon its receipt of shares of Carver Common Stock in exchange for shares of Bancorp Common Stock; (3) the aggregate basis of the shares of Bancorp Common Stock to be received by Carver's stockholders will be the same as the aggregate basis of the shares of Carver Common Stock exchanged therefor; and (4) the holding period of Bancorp Common Stock to be received by Carver's stockholders will include the holding period of the shares of Carver Common Stock exchanged therefor, provided that each such stockholder held such shares of Carver Common Stock as a capital asset on the Effective Date.
Thacher Proffitt & Wood, the Bank's special counsel for the Reorganization, has opined, subject to the limitations and qualifications in its opinion, that the Reorganization will not be a taxable transaction to Bancorp, Carver or Carver's stockholders who do not elect to exercise dissenters' rights for New York State or New York City income and corporate franchise tax purposes. Though the matter is not free from doubt, it is likely that the Reorganization will not cause the Bank to incur any New York State real estate transfer tax or real property gains tax or any New York City real property transfer tax.
Thacher Proffitt & Wood, the Bank's special counsel for the Reorganization, will not express an opinion as to whether or to what extent payments to stockholders who exercise dissenters rights or payments by Carver to Bancorp of an amount that exceeds the current and accumulated earnings and profits of Carver will cause Carver to have income. In addition, Thacher Proffitt & Wood will not express an opinion as to the tax consequences to stockholders of exercising their dissenters rights with respect to any shares of Carver
Common Stock. Any stockholder of Carver considering exercising such dissenter's rights should consult his tax advisor for specific advice with respect to the federal income tax consequences thereof.
Each stockholder is urged to consult his own tax advisor as to the specific consequences of the Reorganization to the stockholder under federal, state and any other applicable laws.
ACCOUNTING TREATMENT OF THE REORGANIZATION
The Reorganization is expected to be characterized as, and treated similarly to, a "pooling of interests" (rather than a "purchase") for financial reporting and related purposes, with the result that the accounts of Carver and Bancorp will be combined.
MARKET FOR THE COMMON STOCK
Although there is an established market for the Bank's common stock which is currently quoted on the Nasdaq Stock Market under the Bank's current symbol, "CARV," as a newly formed company, the Company has never issued capital stock and consequently there is no established market for its Common Stock. It is expected that Bancorp Common Stock will be at least as liquid as the Bank's Common Stock since the number of outstanding shares of Company Common Stock following the Reorganization will match the number of Shares of Bank Common Stock prior to the Reorganization. However, there can be no assurance that an active and liquid trading market for the Company Common Stock will develop, or if developed, will be maintained.
The Company's Common Stock will be quoted on the Nasdaq Stock Market under the symbol "CARV." The Company expects to retain the Bank's market makers for the Common Stock, but there can be no assurance that the Company will be able to retain these market-makers.
Making a market involves maintaining bid and ask quotations and being able, as principal, to effect transactions in reasonable quantities at those quoted prices, subject to various securities laws and other regulatory requirements. Additionally, the development of a liquid public market depends on the existence of willing buyers and sellers, the presence of which is not within the control of the Company, the Bank or any market maker. Since there can be no assurance that an active and liquid trading market for Bancorp Common Stock will develop or that, if developed, it will continue, investors in Bancorp Common Stock could have difficulty disposing of their shares and should not view Bancorp Common Stock as a short-term investment. The absence of an active and liquid trading market for Bancorp Common Stock could affect the price and liquidity of Bancorp Common Stock.
At June 10, 1996, there were 2,314,375 shares of Bank Common Stock outstanding which were held of record by [1,253] stockholders. Since October 24, 1994, the Bank Common Stock has traded on the Nasdaq Stock Market under the symbol "CARV." The following table shows the high and low per share sales price of the Bank Common Stock as reported on the Nasdaq Stock Market. No dividends were declared during the periods indicated.
PRICE RANGE
-----------------------
QUARTER ENDED HIGH LOW
- --------------------------------------------------- ---------- ----------
Fiscal year ended March 31, 1995:
Third Quarter ............................ 8 1/4 6 1/8
Fourth Quarter ........................... 7 5/8 6 1/4
Fiscal year ended March 31, 1996:
First Quarter ............................ 8 1/8 6 5/8
Second Quarter ........................... 11 6 13/16
Third Quarter ............................ 10 8 1/2
Fourth Quarter ........................... 9 1/2 8 1/4
Fiscal year ending March 31, 1997:
First Quarter (through June 10, 1996) .... [8 3/4] [7 5/8]
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DIVIDEND POLICY
The Board of Directors of Bancorp will have the authority to declare dividends on the Common Stock, subject to statutory and regulatory requirements. The Board of Directors may consider a policy of paying cash dividends on the Common Stock in the future; however, no decision has been made as to the amount or timing of such dividends. Declarations of dividends by the Board of Directors, if any, will depend upon a number of factors, including investment opportunities available to Bancorp or Carver, capital requirements, regulatory limitations, Bancorp's and Carver's results of operations, financial and tax considerations and general economic conditions. Bancorp will receive an initial cash infusion from Carver in the amount of $100,000. Shortly after consummation of the Reorganization, management of the Bank expects to make a capital distribution of $5.7 million to Bancorp, which may be used by Bancorp after the Reorganization to, among other things, fund the payment of cash dividends, if any are declared. No assurances can be given that dividends, if commenced, will continue to be paid.
Carver has not paid cash or stock dividends since the date of the Conversion. There are significant regulatory limitations on the Bank's ability to pay dividends depending on its capital structure and the overall health of the institution. An insured depository institution may not make a capital distribution if, following such distribution, the institution will be "undercapitalized" as that term is defined for purposes of the prompt corrective action provisions of the FDICIA. In addition, the OTS Regulations limit the ability of savings associations to pay dividends and make other capital distributions according to the institution's level of capital and income, with the greatest flexibility afforded to institutions that meet or exceed their fully phased-in capital requirements. Capital distributions include cash dividends, payments to repurchase, redeem, retire or otherwise acquire an institution's shares, payments to stockholders of another institution in a cash-out merger, other distributions charged against capital and any other transaction that the OTS determines to entail a payout of capital. The OTS also may prohibit a proposed capital distribution that would otherwise be permitted by regulation if the OTS determines that the distribution would constitute an unsafe or unsound practice. Although the Bank is currently in compliance with all capital ratios, there can be no assurance that this will continue or that the OTS will not otherwise prevent the Bank from paying dividends or otherwise making capital distributions.
Unlike the Bank, Bancorp is not subject to OTS regulatory restrictions on the payment of dividends to its stockholders, although the source of such dividends could be, in part, dependent upon dividends from the Bank in addition to the net proceeds retained by Bancorp and earnings thereon. Bancorp is subject to the requirements of Delaware law, which generally limit dividends to an amount equal to the excess of the net
assets of Bancorp (the amount by which total assets exceed total liabilities) over its statutory capital, or if there is no such excess, to its net profits for the current and/or immediately preceding fiscal year.
PRO FORMA CONSOLIDATED CAPITALIZATION
The following table presents the capitalization of Carver as of March 31, 1996 and the pro forma consolidated capitalization of Bancorp and its subsidiary, Carver, as of March 31, 1996, as adjusted to give effect to the Reorganization as described in this Proxy Statement-Prospectus.
CARVER BANCORP AND SUBSIDIARY
------------------------ --------------------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
-------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------ ---------- ------
Stockholders' equity:
Preferred stock, par value $0.01 per share:
Authorized . . . . . . . . . . . . . . . . . . . . 1,000,000 -- 2,000,000 --
Issued and outstanding . . . . . . . . . . . . . . -- -- -- --
Common stock, par value $.01 per share:
Authorized . . . . . . . . . . . . . . . . . . . . 5,000,000 -- 10,000,000 --
Issued and outstanding . . . . . . . . . . . . . . 2,314,375 23 2,314,375 23
Additional paid-in capital . . . . . . . . . . . . . . . . 21,436 21,436
Retained earnings (deficit) . . . . . . . . . . . . . . . . 16,098 16,098
Common Stock acquired by ESOP . . . . . . . . . . . . . . . (1,548) (1,548)
Unrealized (loss) on securities available for sale, net . . (1,245) (1,245)
Total stockholders' equity . . . . . . . . . . . . . . . . 34,765 34,765
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BUSINESS OF BANCORP
GENERAL
Bancorp is a business corporation organized under the laws of the State of Delaware on May 9, 1996. The only office of Bancorp, and its principal place of business, is located at the administrative offices of Carver at 75 West 121st Street, New York 10027-4589. Bancorp's telephone number is (212) 876-4747.
Bancorp was organized for the purpose of becoming the holding company of Carver. On the Effective Date, Carver will become a wholly owned subsidiary of Bancorp, which will thereby become a savings and loan company, and each stockholder of Carver will, subject to the exercise of dissenters' rights, become a stockholder of Bancorp without any change in the number of shares owned or in respective ownership percentages.
Bancorp has not yet undertaken any operating business activities and does not currently propose to do so. In the future, Bancorp may become an operating company or acquire other thrift institutions, commercial banks or bank holding companies, or engage in or acquire such other activities or businesses as may be permitted by applicable law, although there are no present plans or intentions to do so.
Subject to regulatory approval and/or consent, it is expected that Bancorp will receive an initial cash infusion from Carver in the amount of $100,000 and shortly after consummation of the Reorganization, Carver will transfer to Bancorp cash and/or investment securities having a value of $5.7 million to be used for working capital and other purposes. Additional financial resources may be available to Bancorp in the future through borrowings, debt or equity financings, or dividends from acquired entities or new businesses. Some or all of the foregoing will be subject to compliance with certain regulatory and tax restrictions. In particular,
dividends from Carver to Bancorp will be subject to regulatory limitations and will result in taxable income to Carver to the extent that they are deemed not to be made out of Carver's net profits or surplus. See "Market for the Common Stock" and "Dividend Policy."
Because Bancorp is a newly formed corporation with no operating history, historical information with respect to legal proceedings, dividends, management's discussion of operations, financial data or accountants is not available. There is currently no established public trading market on which Bancorp Common Stock is traded and Bancorp does not have any record of paying dividends. See "Description of Bancorp Capital Stock," "Market for the Common Stock" and "Dividend Policy."
PROPERTY
Initially, Bancorp will neither own nor lease any real or personal property but will utilize the premises, and property of Carver without the payment of any rental fees to Carver.
COMPETITION
It is expected that for the near future the primary business of Bancorp will be the ongoing business of Carver. Therefore, the competitive conditions to be faced by Bancorp will be the same as those faced by Carver. In addition, many banks and financial institutions have formed, or are in the process of forming, holding companies. It is likely that these holding companies will attempt to acquire commercial banks, thrift institutions or companies engaged in bank-related activities. Thus, Bancorp will face competition in undertaking any such acquisitions and in operating subsequent to any such acquisitions. Bancorp has no present plans or intentions to undertake any such acquisitions. See "Business of the Bank -- Competition."
EMPLOYEES
At the present time, Bancorp does not intend to have any employees other than its management. See "Management of Bancorp." It will utilize the support staff of Carver from time to time without the payment of any fees. If Bancorp acquires other financial institutions or pursues other lines of business, it may at such time hire additional employees.
BUSINESS OF THE BANK
GENERAL
Carver was chartered in 1948 and began operations in 1949 as Carver Federal Savings and Loan Association, a federally chartered mutual savings and loan association, at 53 West 125th Street in New York City, at which time, the Bank obtained federal deposit insurance and became a member of the Federal Home Loan Bank ("FHLB") of New York. In 1961, Carver opened its first branch office in the Bedford-Stuyvesant section of Brooklyn, New York and over the next 20 years added three other branches in Brooklyn and Manhattan, New York. In 1982, the Bank acquired Allied Federal Savings and Loan Association in a supervisory transaction. The Bank opened its Roosevelt, Long Island office in 1984 and acquired two additional branches in 1989 and 1990. The Bank converted to a federal savings bank in 1986 and changed its name at that time to Carver Federal Savings Bank. On October 24, 1994, the Bank converted from mutual to stock form and issued 2,314,375 shares of its common stock, par value $0.01 per share.
Carver was founded to provide an African-American operated institution where residents of underserved communities could invest their savings and obtain credit. The Bank's principal business consists of attracting passbook and other savings accounts through it branch offices and investing those funds in mortgage loans and other investments permitted to federal savings banks. The Bank has undertaken a restructuring of its balance sheet and is now placing primary emphasis on its whole loan portfolio through direct lending, as well as the purchase of whole loans. As a result of this effort, the loan portfolio is expected to substantially increase as a percentage of total assets. Therefore, future earnings for the Bank will be
derived more from direct lending and purchase activities than from investing in securities. The Bank is also continuing its strategy of growth by leveraging its strong capital position through increased average borrowings to fund increases in average interest-earning assets. Based on asset size as of March 31, 1996, Carver is the largest minority-run financial institution in the United States.
LENDING ACTIVITIES
General. The principal lending activity of the Bank is the origination of conventional mortgage loans for the purpose of purchasing or refinancing owner-occupied, one- to four-family residential properties in its primary market area. At March 31, 1996, one- to four-family mortgage loans comprised $58.5 million, or 69.23%, of the Bank's gross loan portfolio. The Bank also originates or participates in loans for the construction or renovation of commercial property and residential housing developments and occasionally originates permanent financing upon completion. In addition, the Bank originates consumer loans secured by deposits, second mortgages on residential property, or automobiles, as well as unsecured personal loans and occasionally originates loans secured by commercial and nonresidential real estate.
Prior to the 1980s, the Bank's residential lending activities consisted primarily of originating fixed-rate mortgage loans with maturities of up to 30 years for retention in the loan portfolio. Fundamental changes in the regulation of savings institutions in the early 1980s and prevailing economic conditions at the time combined to increase significantly both the level and volatility of the Bank's cost of funds. Since the early 1980s, the Bank has sought to build a more rate-sensitive loan portfolio by originating adjustable-rate mortgages and purchasing adjustable-rate loans. Carver has continued to originate fixed-rate mortgage loans, primarily for sale in the secondary market, and maintains a portfolio of such loans originated in the early 1980s. The types of adjustable-rate mortgages offered have one- and three-year adjustment periods with interest rate adjustments based upon the one- and three-year U.S. Treasury bills, respectively. At March 31, 1996, the Bank's one- to four-family mortgage loan portfolio had $42.5 million of adjustable-rate loans (comprising 71.13% of such portfolio) and $17.3 million (or 28.87% of such portfolio) of fixed-rate loans.
The Bank has continued to originate fixed-rate, one- to four-family mortgage loans in response to consumer demand generated by the recent decline in market interest rates. In an environment of declining interest rates, borrowers tend to prefer long-term, fixed-rate mortgage loans rather than adjustable-rate mortgage loans with short-term interest rate changes. In the recent period of rising interest rates, however, borrowers tended to prefer adjustable-rate loans because of their initially lower interest rates. Because the Bank's adjustable-rate loans are originated for retention in its own portfolio rather than for sale in the secondary market, such originations depend upon the level of interest rate risk that the Bank is willing to accept given its capital, profitability and other factors. In turn, its origination of fixed-rate loans depends upon the Bank's ability to dispose of such loans in the secondary market and thus depends in large part upon satisfaction of loan underwriting guidelines established by potential loan purchasers.
The Bank intends to continue monitoring the interest rate environment, prepayment activity, interest rate risk and other factors in developing its strategy with respect to the volume and pricing of its fixed-rate loans and in its lending activities generally.
Loan Portfolio Composition. The following table sets forth selected data relating to the composition of Carver's loan portfolio by type of loan at the dates indicated.
AT MARCH 31,
----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------------- ---------------- ---------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
Real estate loans: (DOLLARS IN THOUSANDS)
One- to four-family ......... $58,547 70.23% $31,572 61.63% $32,302 59.93% $37,355 64.05% $35,129 65.17%
Multi-family ................ 2,490 2.94 2,165 4.23 2,384 4.42 2,726 4.67 2,900 5.38
Nonresidential .............. 11,138 13.18 8,660 16.90 8,862 16.45 9,157 15.70 5,442 10.10
Construction ................ 6,971 8.24 3,179 6.21 3,932 7.30 1,899 3.26 2,149 3.99
Consumer and commercial loans:
Savings account ............. 1,011 1.20 1,099 2.14 1,209 2.24 1,576 2.70 1,711 3.17
Student education ........... 1,162 1.37 1,346 2.63 1,457 2.70 1,729 2.96 1,573 2.92
Other(1) .................... 3,244 3.84 3,209 6.26 3,749 6.96 3,886 6.66 5,003 9.27
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
$84,563 100.00% $51,230 100.00% $53,895 100.00% $58,328 100.00% $53,907 100.00%
======= ======= ======= ======= =======
Add:
Premium on loans ............ 882 366 537 560 382
Less:
Loans in process ............ (1,406) (1,853) (1,911) (439) (977)
Deferred fees and loan
discounts ................... (225) (208) (233) (319) (744)
Allowance for loan losses ... (1,206) (1,075) (1,268) (1,597) (858)
------- ------- ------- ------- -------
Total ................... $82,608 $48,460 $51,020 $56,533 $51,710
======= ======= ======= ======= =======
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(1) Other loans include second mortgage, home equity, personal, auto and commercial business loans.
Loan Maturity Schedule. The following table sets forth information at March 31, 1996 regarding the dollar amount of loans maturing in Carver's portfolio, including scheduled repayments of principal, based on contractual terms to maturity. Demand loans, loans having no schedule of repayments and no stated maturity and overdrafts are reported as due in one year or less. The table below does not include any estimate of prepayments, which significantly shorten the average life of all mortgage loans and may cause the Bank's actual repayment experience to differ from that shown below.
DUE DURING THE YEAR ENDING DUE AFTER DUE AFTER DUE AFTER
MARCH 31, 3 THROUGH 5 THROUGH 10 THROUGH
-------------------------- 5 YEARS AFTER 10 YEARS AFTER 20 YEARS AFTER
1997 1998 1999 MARCH 31, 1996 MARCH 31, 1996 MARCH 31, 1996
---- ---- ---- -------------- -------------- --------------
(IN THOUSANDS)
Real estate loans:
One- to four-family .............. $14,012 $ 2,433 $ 2,533 $ 5,800 $ 2,843 $ 24
Multi-family ..................... 122 94 125 4 725 878
Nonresidential ................... 3,222 620 1,465 2,352 787 --
Construction ..................... 2,704 4,267 -- -- -- --
Consumer and commercial loans:
Savings accounts ................. 1,011 -- -- -- -- --
Student education ................ -- -- -- -- 1,162 --
Other ............................ 747 -- 523 979 990 --
------- ------- ------- ------- ------- -------
Total ................................ $21,818 $ 7,414 $ 4,646 $ 9,135 $ 6,507 $ 902
======= ======= ======= ======= ======= =======
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DUE AFTER 20
YEARS AFTER
MARCH 31, 1996 TOTAL
-------------- -----
(IN THOUSANDS)
Real estate loans:
One- to four-family .............. $30,902 $58,547
Multi-family ..................... 542 2,490
Nonresidential ................... 2,692 11,138
Construction ..................... -- 6,971
Consumer and commercial loans:
Savings accounts ................. -- 1,011
Student education ................ -- 1,162
Other ............................ 5 3,244
------- -------
Total ................................ $34,141 $84,563
======= =======
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The following table sets forth, at March 31, 1996, the dollar amount of loans maturing subsequent to the year ending March 31, 1997 which have predetermined interest rates and floating or adjustable interest rates.
PREDETERMINED FLOATING OR
RATE ADJUSTABLE RATES TOTAL
------------- ---------------- -----
(IN THOUSANDS)
Real estate loans:
One- to four-family $15,962 $28,843 $44,535
Multi-family 1,952 416 2,368
Nonresidential 5,306 2,610 7,916
Construction 4,267 -- 4,267
Consumer and commercial loans:
Savings accounts -- -- --
Student education 554 608 1,162
Other 1,274 1,223 2,497
------- ------- -------
Total $29,045 $33,700 $62,745
======= ======= =======
|
Scheduled contractual principal repayments of loans do not necessarily reflect the actual life of such assets. The average life of long-term loans is substantially less than their contractual terms due to prepayments. In addition, due-on-sale clauses in mortgage loans generally give Carver the right to declare a conventional loan due and payable in the event, among other things, that a borrower sells the real property subject to the mortgage and the loan is not repaid. The average life of mortgage loans tends to increase when current mortgage loan market rates are substantially higher than rates on existing mortgage loans and tends to decrease when current mortgage loan market rates are substantially lower than rates on existing mortgage loans.
One- to Four-Family Residential Lending. Carver's principal lending activity has been the origination of loans secured by first mortgages on existing one- to four-family residences in the Bank's market area. The mortgage loan amounts range between $28,000 and $499,000. At March 31, 1996, $59.8 million, or 70.66%, of the Bank's total loans were secured by one- to four-family residences, a substantial majority of which were existing, owner-occupied, single-family residences in the Bank's market area. The Bank's current policy is to sell its fixed-rate loan originations to the Federal National Mortgage Association ("FNMA") or the State of New York Mortgage Agency ("SONYMA") and to retain its adjustable-rate loan originations in its portfolio. At March 31, 1996, $42.50 million, or 71.13%, of the Bank's one- to four-family residential loans had adjustable interest rates, and $17.3 million, or 28.87%, had fixed rates. During the year ended March 31, 1996, the Bank originated $11.2 million of adjustable-rate loans, which represents 83.63% of total loan originations for the year.
Carver's one- to four-family residential mortgage loans generally are for terms of 25 to 30 years, amortized on a monthly basis, with principal and interest due each month. Residential real estate loans often remain outstanding for significantly shorter periods than their contractual terms. Borrowers may refinance or prepay loans at their option without penalty. These loans customarily contain "due-on-sale" clauses which permit the Bank to accelerate repayment of a loan upon transfer of ownership of the mortgaged property.
The Bank's lending policies generally limit the maximum loan-to-value ratio on one- to four-family residential mortgage loans secured by owner-occupied properties to 95% of the lesser of the appraised value or purchase price, with private mortgage insurance required on loans with loan-to-value ratios in excess of 80%. The maximum loan-to-value ratio on mortgage loans secured by non-owner-occupied properties is limited to 80%. Under a special loan program the loan-to-value ratio may go to 100%. This special loan program consists of loans originated and sold to SONYMA secured by detached single family homes purchased by first time home buyers under SONYMA.
Carver's fixed-rate, one- to four-family residential mortgage loans are underwritten in accordance with applicable guidelines and requirements for sale to FNMA or SONYMA in the secondary market. The Bank has emphasized the origination of fixed-rate loans for immediate or prompt sale to FNMA since 1993 and to SONYMA since 1984. The Bank also originates, to a limited extent, loans underwritten according to Federal Home Loan Mortgage Corporation ("FHLMC") standards. Loans are sold without recourse, and servicing of loans sold to FNMA is retained by the Bank while servicing for loans sold to SONYMA transfers with the loans. All loans, whether held in portfolio or serviced after sale, are serviced by an outside sub-servicer. At March 31, 1996, the Bank, through its sub-servicer, was servicing approximately $4.3 million of loans for others.
Carver offers one-year, three-year, five/one and five/three year adjustable-rate, one- to four-family residential mortgage loans. These loans are indexed to the weekly average rate on the one-year and three-year U.S. Treasury securities, respectively, adjusted to a constant maturity (usually, one year), plus a margin of 275 basis points. The rates at which interest accrues on these loans are adjustable every one or three years, generally with limitations on adjustments of two percentage points per adjustment period and six percentage points over the life of the one-year adjustable-rate mortgage and five percentage points over the life of a three-year adjustable-rate mortgage.
The retention of adjustable-rate loans in the Bank's portfolio helps reduce the Bank's exposure to increases in prevailing market interest rates. However, there are unquantifiable credit risks resulting from potential increases in costs to borrowers in the event of upward repricing of adjustable-rate loans. It is possible that during periods of rising interest rates, the risk of default on adjustable-rate loans may increase due to increases in interest costs to borrowers. Further, adjustable-rate loans which provide for initial rates of interest below the fully indexed rates may be subject to increased risk of delinquency or default as the higher, fully indexed rate of interest subsequently replaces the lower, initial rate. In order to mitigate such risk, the Bank qualifies borrowers at a rate equal to two percentage points above any discounted introductory rate on one year ARM's, one percentage point above any discounted introductory rate on three year ARM's and at the discounted introductory rate on five/three ARM's.. In addition, although adjustable-rate loans allow the Bank to increase the sensitivity of its interest-earning assets to changes in interest rates, the extent of this interest sensitivity is limited by the periodic and lifetime interest rate adjustment limitations and the ability of borrowers to convert the loans to fixed-rates. Accordingly, there can be no assurance that yields on the Bank's adjustable-rate loans will fully adjust to compensate for increases in the Bank's cost of funds. Finally, adjustable-rate loans increase the Bank's exposure to decreases in prevailing market interest rates, although decreases in the Bank's cost of funds would tend to offset this effect.
Construction Lending. Carver also offers construction loans to qualified developers for construction of one- to four-family residences in the Bank's market area. Typically, the Bank has emphasized lending to individuals to refurnish or rehabilitate multi-family dwellings or church buildings and construction of planned residential developments. The Bank does not lend to private developers for speculative single-family housing construction. These loans generally have adjustable interest rates and are underwritten in accordance with the same standards as the Bank's mortgages on existing properties, except the loans generally provide for disbursement in stages during a construction period from 12 to 24 months, during which period the borrower is required to make monthly payments of accrued interest on the outstanding loan balance. Construction loans generally have a maximum loan-to-value ratio of 70%. Borrowers must satisfy all credit requirements which would apply to the Bank's permanent mortgage loan financing for the subject property. While the Bank's construction loans generally require repayment in full upon the completion of construction, the Bank occasionally makes construction loans with the intent to convert to permanent loans following construction.
The Bank currently originates such loans primarily for the construction of churches, multi-family buildings, planned residential developments and affordable housing programs. At March 31, 1996, the Bank had $6.9 million in construction loans outstanding, comprising 8.24% of the Bank's gross loan portfolio. The largest construction loan outstanding at March 31, 1996 was a $1.7 million participation in a $2.9 million loan to fund construction of 22 two-family homes in the Bedford-Stuyvesant section of Brooklyn, New York. These loans are currently performing according to the terms and conditions of their respective notes. Subsequent to completion of the dwelling units, Carver expects to offer permanent financing to the individual purchasers, subject to their respective satisfaction of underwriting standards.
Construction financing generally is considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property's value at completion of construction or development and the estimated cost (including interest) of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, the Bank may be required to advance funds beyond the amount originally committed to permit completion of the development. If the estimate of value proves to be inaccurate, the Bank may be confronted, at or prior to the maturity of the loan, with a project having a value which is insufficient to assure full repayment. The ability of a developer to sell developed lots or completed dwelling units will depend on, among other things, demand, pricing, availability of comparable properties and economic conditions. The Bank has sought to minimize this risk by limiting construction lending to qualified borrowers in the Bank's market area limiting the aggregate amount of outstanding construction loans and imposing a stricter loan-to-value ratio requirement than required for one- to four-family mortgage loans.
Nonresidential Lending. The Bank occasionally originates nonresidential loans to churches as permanent financing following completion of construction. At March 31, 1996, nonresidential mortgage loans totaled $11.1 million, or 13.18% of the gross loan portfolio. These loans generally have 5, 7 or 10 year terms with 15, 20 or 25 year amortization periods and a balloon payment due at the end of the term, and generally have no greater than a 60% loan-to-value ratio. The Bank determines the appropriate amount and type of security for such loans based upon the structure of the particular religious organization. As a general matter, the Bank will obtain a first mortgage on the underlying real property and personal guarantees of key members of the congregation and will also require the church to obtain key person life insurance on specific members of the church's leadership. In addition, the Bank performs a cash flow analysis of the church to determine its ability to service the proposed loan. Under the Bank's current loan policy, the maximum loan amount for such lending is $1.0 million. Loans to churches generally average approximately $300,000. At March 31, 1996, non-residential church loans totaled $4.8 million, or approximately 5.70% of the Bank's gross loan portfolio. Management believes that Carver has originated the most church loans in its market area. The largest of such loans outstanding was a $925,000 construction loan to a church located in the New York City borough of Bronx. This loan was performing according to the terms of the loan at March 31, 1996.
Loans secured by nonresidential real estate generally are larger and involve greater risks than one- to four-family residential mortgage loans. Because payments on loans secured by such properties are often dependent on voluntary contributions by members of the church's congregation, repayment of such loans may be subject to a greater extent to adverse conditions in the economy. The Bank seeks to minimize these risks in a variety of ways, including reviewing the church's financial condition, requiring personal guarantees of church leaders or key person life insurance on the pastor of the congregation, limiting the size of such loans and establishing the quality of the collateral securing the loan.
Under the loans-to-one-borrower limits of the OTS, with certain limited exceptions, loans and extensions of credit to a person outstanding at one time generally shall not exceed 15% of the unimpaired capital and surplus of the savings banks. Loans and extensions of credit fully secured by readily marketable collateral may comprise an additional 10% of unimpaired capital and surplus. At March 31, 1996, the Bank had no lending relationships in excess of the OTS loans-to-one-borrower limits.
Multi-Family and Commercial Real Estate Lending. The Bank engages in the origination of multi-family and commercial real estate loans in order to benefit from the higher origination fees and interest rates, as well as shorter terms to maturity and repricing, than could be obtained from one- to four-family mortgage loans. Multi-family and commercial property lending, however, entails significant additional risks compared with one- to four-family residential lending. For example, such loans typically involve large loan balances to single borrowers or groups of related borrowers, the payment experience on such loans typically is dependent on the successful operation of the real estate project, and these risks can be significantly impacted by supply and demand conditions in the market for multi-family residential units.
The Bank's multi-family residential loans are primarily secured by apartment buildings and mixed-use structures typically with more than 15 units within the Bank's delineated area although loans may be extended for structures with less than 15 units if owner-occupied. The maximum loan amounts for such loans are $750,000 and may not exceed 70% of the lesser of cost or appraised value or purchase price whichever is less. Such loans generally amortize on the basis of a 10, 15, 20 and 25 year period but require a balloon payment after five years. The Bank has recently started issuing fifteen year fixed rate loans based on match funding from the Federal Home Loan Bank under the Community Investment Program. At March 31, 1996, multi-family loans totaled $2.5 million and comprised 2.94% of the Bank's gross loan portfolio. Because of regulatory limitations on amount that the Bank may lend to a single borrower or group of related borrowers, and to minimize its overall risk in such lending, Carver generally originates and sells participiation interests in larger multi-family loans or acquires participation interests in such loans. In particular, the Bank has participated through the Thrift Associations Service Corporation ("TASCO"), a lending consortium formed by smaller New York thrift institutions to facilitate their participation in larger real estate development
projects, in loans secured by low-income housing projects located in New York City. The Bank has also participated in other loans originated by this consortium for multi-family housing and for other purposes. At March 31, 1996, all such loans were performing in accordance with their original or restructured terms.
At March 31, 1996, the Bank held approximately $934,000 (net of reserves) in participations in TASCO loans and did not have any real estate owned attributable to TASCO participations. The Bank has been required to establish reserves in connection with the restructuring of various TASCO participations. The stockholders in TASCO have recently approved a proposal to liquidate the entity which will involve the sale or other disposition of the remaining TASCO loans. At March 31, 1996, such disposition was still in process. See "Asset Quality -- Nonperforming Assets."
Consumer Lending. Carver has given new emphasis to consumer lending. The Bank's consumer loans primarily consist of loans secured by deposit accounts at the Bank, government-guaranteed loans to finance higher education (some of which are sold in the secondary market), automobile loans, personal loans, home equity loans or second mortgages on single-family residences in the Bank's market area. At March 31, 1996, the Bank had approximately $3.0 million in consumer loans, or 3.61% of the Bank's gross loan portfolio.
Carver makes loans secured by deposits for up to 90% of the amount of the deposit. The interest rate on these loans generally is at 10.00%, and interest is billed on a monthly basis. These loans are payable on demand, and the deposit account must be pledged as collateral to secure the loan.
Carver has participated in the Federal Family Education Loan Program since 1964. The Bank's student loans are guaranteed by the New York Higher Education Service Corporation, an independent agency of the State of New York. At March 31, 1996, the student loan portfolio totaled approximately $1.2 million, or 1.37% of the Bank's loan portfolio.
The Bank also originates second mortgage loans secured by the borrower's residence. These loans, combined with the first mortgage loan, are limited to 75% of the appraised value of the residence.
On September 19, 1995, the Board of Directors pursuant to the Office of Thrift Supervision regulation 12 C.F.R. Section 516.2 and 545.82, passed a resolution approving the formation of an operating subsidiary named C.F.S.B. Credit Corp. to undertake the operations regarding the issuance of credit cards. The resolution also includes a capital investment of $75,000 along with a revolving line of credit of $2,500,000.
On March 1, 1996, the Bank started its credit card operations, issuing both secured, unsecured and business Visa and MasterCards. The interest rate on these credit cards is generally 4.50% above The Wall Street Journal Published Prime Lending Rate. As of March 31, 1996 the Bank had 47 cards issued with $240,000 line of credit and outstanding balance of $9,000.
Consumer loans generally involve more risk than first mortgage loans. Repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance as a result of damage, loss or depreciation, and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Further, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered. These loans may also give rise to claims and defenses by a borrower against Carver, and a borrower may be able to assert against the Bank claims and defenses which it has against the seller of the underlying collateral. In underwriting consumer loans, the Bank considers the borrower's credit history, an analysis of the borrower's income, expenses and ability to repay the loan and the value of the collateral. The Bank's risks associated with consumer loans are further minimized by the modest amount of consumer loans made by the Bank that are not secured by certificates of deposit or otherwise guaranteed as to repayment. At March 31, 1996 the Bank had $877,000 in unsecured personal loans or 1.04% of the Bank's gross loan portfolio.
Other Commercial Loans. The Bank also makes a limited number of commercial loans, secured by passbook accounts and for terms of up to two years with interest-only payments until maturity, with the interest rate negotiated on a loan-by-loan basis. At March 31, 1996, the Bank had $1.1 million in commercial loans outstanding, of which the largest such loan was to a church for $600,000 secured by a $600,000 certificate of deposit and for a five-year term with an interest rate at two percentage points above the certificate rate.
Loan Processing and Approval. Carver's loan originations are derived from a number of sources, including referrals by realtors, builders, depositors, borrowers and mortgage brokers, as well as walk-in customers. Loans are originated by the Bank's personnel who receive either a salary, salary plus commissions or commissions. Loan application forms are available at each of the Bank's offices and are submitted to the loan origination office located in the Bank's loan center located next to the Bank's Chelsea Office for processing. Applications for all fixed-rate one- to four-family real estate loans are underwritten in accordance with FNMA and SONYMA guidelines, and all of the loan applications for other types of loans are underwritten in accordance with the Bank's own comparable guidelines, as stated in the Bank's lending policy, which are comparable to those of FNMA and SONYMA.
Upon receipt of a completed loan application from a prospective borrower, a credit report and verifications are ordered to verify specific information relating to the loan applicant's employment, income and credit standing. It is the Bank's policy to obtain an appraisal of the real estate intended to secure a proposed mortgage loan from a fee appraiser approved by the Bank.
It is Carver's policy to record a lien on the real estate securing the loan and to obtain a title insurance policy which insures that the property is free of prior encumbrances. Borrowers must also obtain hazard insurance policies prior to closing and, when the property is in a flood plain as designated by the Department of Housing and Urban Development, paid flood insurance policies. Most borrowers are also required to advance funds on a monthly basis together with each payment of principal and interest to a mortgage escrow account from which the Bank makes disbursements for items such as real estate taxes and hazard insurance.
The Board of Directors has the overall responsibility and authority for general supervision of Carver's loan policies. The Board has established written lending policies for the Bank. The Bank's chief lending officer has authority to approve all consumer loans below $50,000, the President has authority to approve such loans below $100,000, and the executive committee of the Board of Directors must approve loans at or above $100,000. The credit card manager has authority to approve credit limits up to $50,000. All mortgage loans that conform to FNMA standards and limits can be approved by the Chief Lending Officer. The Officers' Loan Committee composed of the President, the Chief Lending Officer, and another member appointed by the Board, approves non-conforming loans up to $450,000. Loans above $450,000 must be approved by the executive committee of the Board of Directors, and loans above $750,000 must be approved by the full Board of Directors.
Loan applicants are promptly notified of the decision of the Bank. It has been management's experience that substantially all approved loans are funded.
Originations, Purchases and Sales of Loans. Originations of one- to four-family real estate loans are generally within the Bank's market area, although the Bank does occasionally extend loans to other boroughs of New York City in which it does not presently have branches. All such loans, however, satisfy the Bank's underwriting criteria regardless of location, and the Bank seeks to further reduce its lending risk by limiting its lending to the New York City Metropolitan area. In fiscal year 1996, the Bank increased its emphasis on lending by hiring new employees to pursue originations of one- to four-family loans throughout the Bank's market area and establishing a Loan Center in the Chelsea area. The Bank also continues to offer fixed-rate mortgage loans in response to consumer demand but requires that such loans satisfy guidelines of either FNMA or SONYMA to ensure subsequent sale in the secondary market. Management believes the increase in fiscal year 1996 in originations of one- to four-family loans was due both to the new employees hired solely
to originate loans as well as the Bank's continued emphasis on FNMA loans to satisfy consumer demand for 30-year loans with fixed interest rates while managing the Bank's interest rate risk exposure.
The Bank purchases adjustable and fixed rate one- to four-family residential real estate loans for its portfolio to manage its interest rate risk and to satisfy its regulatory requirement of investment in housing-related loans. Loans purchased by the Bank entail certain risks not necessarily associated with loans the Bank originates. In an effort to reduce these risks, with its existing personnel and through the use of an independent consultant, the Bank has sought to ensure that purchased loans satisfy the Bank's underwriting standards and do not otherwise have a higher risk of collection or loss than loans originated by the Bank, although specific rates and terms may differ from those offered by the Bank. The Bank further seeks to reduce its risk by requiring in each buy/sale agreement a series of warrants and representations as to the underwriting standards and the enforceability of the legal documents. The warrants and representations remain in effect for the life of the loan. Anything found to be misrepresented must be cured within ninety (90) days of discovery or trigger certain repurchase provisions in the buy/sale agreement. For the fiscal year ended, loans purchased from a New York based commercial bank consisting of single family residential mortgages total $26.3 million, which represents 7.15% of total assets at March 31, 1996. The loans consist of $9.4 million or 36.0% of fixed rate mortgages and $16.9 million or 64.0% of adjustable rate mortgage loans.
The following table sets forth certain information with respect to Carver's loan originations, purchases and sales during the periods indicated.
YEAR ENDED MARCH 31,
-------------------------------------
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
Loans originated:
Real estate:
One- to four-family ................ $ 8,162 $ 7,859 $ 3,829
Multi-family ....................... 1,720 125 400
Nonresidential ..................... 1,953 -- 900
Construction ....................... 828 1,884 2,928
Consumer .............................. 734 1,442 1,359
------- ------- -------
Total loans originated .............. $13,397 $11,310 $ 9,416
======= ======= =======
Loans purchased ......................... $26,333 $ -- $ --
======= ======= =======
Loans sold(1) ........................... $ 1,948 $ 3,940 $ 1,666
======= ======= =======
|
(1) Comprised solely of one- to four-family loans, with loans purchased with servicing.
Interest Rates and Loan Fees. Interest rates charged by Carver on mortgage loans are primarily determined by competitive loan rates offered in its market area and minimum yield requirements for loans purchased by the FNMA and SONYMA. Mortgage loan rates reflect factors such as prevailing market interest rate levels, the supply of money available to the savings industry and the demand for such loans. These factors are in turn affected by general economic conditions, the monetary policies of the federal government, including the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), the general supply of money in the economy, tax policies and governmental budget matters.
Carver charges fees in connection with loan commitments and originations, rate lock-ins, loan modifications, late payments and changes of property ownership and for miscellaneous services related to its
loans. Loan origination fees are calculated as a percentage of the loan principal. The Bank typically receives fees of between zero and three points (one point being equivalent to 1% of the principal amount of the loan) in connection with the origination of fixed-rate and adjustable-rate residential mortgage loans. The loan origination fee, net of certain direct loan origination expenses, is deferred and accrete into income over the contractual life of the loan using the interest method. If a loan is prepaid, refinanced or sold, all remaining deferred fees with respect to such loan are taken into income at such time.
In addition to the foregoing fees, Carver receives fees for servicing loans for others. Servicing activities include the collection and processing of mortgage payments, accounting for loan funds and paying real estate taxes, hazard insurance and other loan-related expenses out of escrowed funds. Loan servicing fees usually are charged as a percentage (usually, between 1/4% and 3/8%) of the balance of the loans being serviced. Income from these activities varies from period to period with the volume and type of loans originated, sold and purchased, which in turn is dependent on prevailing market interest rates and their effect on the demand for loans in the Bank's market area.
ASSET QUALITY
Nonperforming Assets. When a borrower fails to make a payment on a loan, immediate steps are taken by Carver's sub-servicer to have the delinquency cured and the loan restored to current status. Once the payment grace period has expired (in most instances 15 days after the due date), a late notice is mailed to the borrower within two business days, and a late charge of four to five percent of the payment is imposed, if applicable. If payment is not promptly received, the borrower is contacted by telephone, and efforts are made to formulate an affirmative plan to cure the delinquency. If a loan becomes 30 days in default, a letter is mailed to the borrower requesting payment by a specified date. If a loan becomes 60 days past due, the Bank seeks to make personal contact with the borrower and also has the collateral property inspected. If a mortgage becomes 90 days past due, a letter is sent to the borrower demanding payment by a certain date and indicating that a foreclosure suit will be filed if the deadline is not met. If payment is still not made, management may pursue foreclosure or other appropriate action.
The following table sets forth information with respect to Carver's nonperforming assets at the dates indicated. Loans generally are placed on non-accrual status when they become 90 days past due. The table does not reflect approximately $1.9 million in federal funds and certificates of deposits at March 31, 1996, which Carver had invested in Nationar Trust Company and which are no longer earning interest. For further information, see " -- Investment Activities" and "-- Legal Proceedings."
AT MARCH 31,
--------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Loans accounted for on a non-accrual basis (1):
Real estate:
One- to four-family ........................... $ 672 $ 520 $1,027 $1,818 $1,348
Multi-family .................................. 478 -- -- -- 689
Nonresidential ................................ 284 339 893 1,881 1,881
Construction .................................. 521 521 -- -- --
Consumer and commercial ....................... 79 152 283 138 125
------ ------ ------ ------ ------
Total ......................................... 2,034 1,532 2,203 3,837 4,043
------ ------ ------ ------ ------
Accruing loans contractually past due 90 days
or more:
Real estate:
One- to four-family ........................... 4
Multi-family .................................. 55 -- 85 709 --
Nonresidential ................................ 217 -- 291 -- --
Construction .................................. 611 -- 992 -- --
Consumer and commercial ....................... 334 208 57 217 168
------ ------ ------ ------ ------
Total ......................................... 1,221 208 1,425 926 168
------ ------ ------ ------ ------
Total of non-accrual and accruing 90 day
past due loans ........................... 3,255 1,740 3,628 4,763 4,211
Other nonperforming assets (2):
Real estate owned:
One- to four-family ........................... 285 273 50 38 4
Multi-family .................................. -- -- 140 255 --
Nonresidential ................................ 29 29 -- -- --
------ ------ ------ ------ ------
Total other nonperforming assets .............. 314 302 190 293 4
------ ------ ------ ------ ------
Total nonperforming assets .................... $3,569 $2,041 $3,818 $5,056 $4,215
====== ====== ====== ====== ======
Non-accrual and accruing 90 day past due loans
to total loans, net ............................ 3.93% 4.20% 6.73% 8.17% 8.14%
====== ====== ====== ====== ======
Nonperforming assets to total assets .............. 0.97% 0.56% 1.24% 1.53% 1.30%
====== ====== ====== ====== ======
Troubled debt restructurings (3):
Real estate:
Multi-family and commercial ................... $ -- $1,468 $1,758 $ -- $ --
====== ====== ====== ====== ======
|
A significant portion of the Bank's nonperforming assets are attributable to loan participations purchased from TASCO (i.e., the Thrift Associations Service Corporation), a service corporation formed by approximately 50 savings institutions in New York State to originate and invest in loans on multi-family and commercial properties in New York State and to sell participations in such loans to member institutions.
The Bank's TASCO loan participations include a $988,000 participation in a $71.2 million loan by TASCO and other financial institutions to a partnership secured by a 20-story hotel located in Manhattan. The lead lender on this project was placed in conservatorship with the FDIC, which continues to control the project. The FDIC has agreed to certain modifications to the loan and has given the borrower an option to purchase the loan for approximately 50% of its face amount. Through March 31, 1996, the Bank provided an allowance for loan losses in the amount of $553,000 in connection with this participation. As of March 31, 1996, the modified loan was performing in accordance with its terms and has been taken off non-accrual status.
Through TASCO, the Bank also acquired a $770,000 participation in a $23.4 million loan to a partnership secured by a 734-unit co-operative housing project located in Kew Gardens Hills, New York. As a result of various restructurings of this loan, the carrying value of Carver's participation has been reduced to $478,000 at March 31, 1996. At March 31, 1996 the loan was not performing in accordance with its restructured terms and was placed on non-accrual status. Through March 31, 1996, the Bank provided an allowance for loan losses in the amount of $240,000 in connection with this participation. This loan was sold during May 1996 at an additional loss of $86,000.
The Bank's only other TASCO participation is a 10.5% participation in $3.8 million loan secured by a two-story office building in Long Island City, New York. The borrower and sole tenant of this building is also the developer originally involved in the Kew Gardens Hills project described above. This loan for the building in Long Island City, however, has performed in accordance with its original terms. At March 31, 1996, the carrying value of this asset was $370,000.
The stockholders in TASCO have approved a liquidation of the company which is expected to be completed when purchasers can be found for its remaining assets. The Bank does not anticipate that it will incur any additional losses on its investment in TASCO which has previously been written down to $0.
In addition to the TASCO participations, the Bank had an $893,000 participation, since written down to $413,000, in a $2.4 million loan to finance the first construction phase of a project to renovate a historic theater into office space. The writedown was based upon a reduced appraisal value obtained by the lead lender. Although this phase of the renovation has been completed and leased out, the borrower is currently in bankruptcy and rents are being paid into the bankruptcy court. The lead lender on this project is also in receivership with the FDIC. At March 31, 1996, the Bank's participation remained $413,000 and the entire amount of the loan was classified as non-accrual because it was not performing according to its terms.
Asset Classification and Allowances for Losses. Federal regulations require savings institutions to classify their assets on the basis of quality on a regular basis. An asset is classified as "substandard" if it is determined to be inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. An asset is classified as "doubtful" if full collection is highly questionable or improbable. An asset is classified as "loss" if it is considered uncollectible, even if a partial recovery could be expected in the future. The regulations also provide for a "special mention" designation, described as assets which do not currently expose a savings institution to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving management's close attention. Assets classified as substandard or doubtful require a savings institution to establish general allowances for loan losses. If an asset or portion thereof is classified loss, a savings institution must either establish specific allowances for loan losses in the amount of the portion of the asset classified loss, or charge off such amount. Federal examiners may disagree with a savings institution's classifications. If a savings institution does not agree with an examiner's classification of an asset, it may appeal this determination to the OTS Regional
Director. At March 31, 1996, Carver had $1.7 million of assets classified as substandard (including $314 of real estate acquired in settlement of loans), $1.8 million of assets classified as doubtful, and $752,000 of assets classified as loss. The aggregate of the aforementioned classifications and designations totaled $4.3 million, which represented 1.17% of the Bank's total assets and 12.5% of the Bank's tangible regulatory capital, at March 31, 1996.
Carver reviews monthly its assets to determine whether any assets require classification or re-classification. The Bank does not maintain a specific "watch list" of loans with potential problems. However, it does prepare a monthly list of those loans originated by the Bank with outstanding balances in excess of $100,000 and those loans purchased by the Bank with outstanding balances in excess of $100,000 which are delinquent 30 days or more, and this list is reviewed at the regular monthly meetings of the Board of Directors. Additionally, the Bank has a centralized loan processing structure that relies upon an outside servicer, which generates a monthly report of nonperforming loans. The Bank uses the Internal Auditor for its loan review, and his report is submitted quarterly to the Board of Directors for review and approval prior to implementation of any classifications.
In originating loans, Carver recognizes that credit losses will occur and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the security for the loan. It is management's policy to maintain a general allowance for loan losses based on, among other things, regular reviews of delinquencies and loan portfolio quality, character and size, the Bank's and the industry's historical and projected loss experience and current and forecasted economic conditions. The Bank increases its allowance for loan losses by charging provisions for possible losses against the Bank's income. Federal examiners may disagree with the savings institution as to the appropriate level of the institution's allowance for loan losses.
The OTS, along with the other federal banking regulators, adopted a
joint policy statement on the adequacy of general valuation allowances
applicable to all federally insured depository institutions. The policy
statement provides that the primary responsibility for judging the adequacy of
general valuation allowances lies with management. Examiners will evaluate the
methodology and process used by management to establish such allowances. In
addition, examiners will judge the adequacy of the allowance by calculating
whether the allowance is at least equal to the following percentages of assets:
(i) the amount of estimated credit losses estimated to result over the next
twelve months from unclassified and Special Mention assets based on annual net
charge-offs experienced during the previous two or three years; (ii) 15% of
Substandard assets; and (iii) 50% of Doubtful assets.
Management actively monitors Carver's asset quality and charges off loans and properties acquired in settlement of loans against the allowances for losses on loans and such properties when appropriate and provides specific loss reserves when necessary. Although management believes it uses the best information available to make determinations with respect to the allowances for losses, future adjustments may be necessary if economic conditions differ substantially from the economic conditions in the assumptions used in making the initial determinations.
Carver's methodology for establishing the allowance for loan losses takes into consideration probable losses that have been identified in connection with specific loans as well as losses that have not been identified but can be expected to occur. Management conducts regular reviews of the Bank's loans and evaluates the need to establish general and specific allowances on the basis of this review. General allowances are established by the Board of Directors on at least a quarterly basis based on an assessment of risk in the Bank's loans taking into consideration the composition and quality of the portfolio, delinquency trends, current charge-off and loss experience, the state of the real estate market and economic conditions generally. Specific allowances are provided for individual loans, or portions of loans, when ultimate collection is considered improbable by management based on the current payment status of the loan and the fair value or net realizable value of the security for the loan. At the date of foreclosure or other repossession or at the date the Bank
determines a property is an impaired property, the Bank transfers the property to real estate acquired in settlement of loans at the lower of cost or fair value, less estimated selling costs. Fair value is defined as the amount in cash or cash-equivalent value of other consideration that a real estate parcel would yield in a current sale between a willing buyer and a willing seller. At March 31, 1996, the Bank held $314,000, net of loss allowance, in real estate acquired in settlement of loans. Any amount of cost in excess of fair value is charged-off against the allowance for loan losses. The Bank records an allowance for estimated selling costs of the property immediately after foreclosure. Subsequent to acquisition, the property is periodically evaluated by management and an allowance is established if the estimated fair value of the property, less estimated costs to sell, declines. If, upon ultimate disposition of the property, net sales proceeds exceed the net carrying value of the property, a gain on sale of real estate is recorded. See Note 1 of Notes to Consolidated Financial Statements.
The following table sets forth an analysis of Carver's allowance for loan losses for the periods indicated.
YEAR ENDED MARCH 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Balance at beginning of period ................... $ 1,075 $ 1,268 $ 1,597 $ 858 $ 1,468
------- ------- ------- ------- -------
Loans charged-off (1):
Real estate:
One- to four-family .......................... -- 43 21 75 174
Multi-family ................................. -- -- 276 -- 628
Commercial ................................... -- 481 -- -- --
Consumer ..................................... -- 3 52 -- --
------- ------- ------- ------- -------
Total charge-offs ............................ -- 527 349 75 802
------- ------- ------- ------- -------
Recoveries:
Consumer ....................................... 19 -- 1 2 --
------- ------- ------- ------- -------
Total recoveries ............................. 19 -- 1 2 --
------- ------- ------- ------- -------
Net loans charged-off (Recoveries) ............... (19) 527 348 73 802
------- ------- ------- ------- -------
Provision for losses ............................. 150 334 19 812 192
------- ------- ------- ------- -------
Balance at end of period ......................... $ 1,206 $ 1,075 $ 1,268 $ 1,597 $ 858
======= ======= ======= ======= =======
Ratio of net charge-offs to average
loans outstanding .............................. 0.00% 1.06% 0.65% 0.15% 1.78%
======= ======= ======= ======= =======
Ratio of allowance to total loans ................ 1.42% 2.10% 2.35% 2.74% 1.58%
======= ======= ======= ======= =======
Ratio of allowance to nonperforming loans ........ 37.05% 61.79% 34.95% 33.53% 20.38%
======= ======= ======= ======= =======
Ratio of allowance to nonaccrual loans ........... 59.29% 70.17% 57.56% 41.62% 21.22%
======= ======= ======= ======= =======
|
(1) Loans are charged-off when management determines that they are uncollectible.
The following table allocates the allowance for loan losses by asset category at the dates indicated. The allocation of the allowance to each category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category.
AT MARCH 31,
----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------------ ------------------ ------------------ ------------------ ------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN LOANS IN LOANS IN
EACH EACH EACH EACH EACH
CATEGORY TO CATEGORY TO CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
------ ----------- ------ ----------- ------ ----------- ------ ----------- ------ -----------
(DOLLARS IN THOUSANDS)
Loans:
Real estate --
One- to four-family ...... $ 165 69.23% $ 165 64.80% $ 231 63.97% $ 287 69.22% $ 143 73.23%
Multi-family ............. 75 2.94 75 4.23 49 4.42 341 4.67 316 5.38
Nonresidential ........... 616 13.18 616 16.90 782 16.44 783 15.70 208 10.10
Construction ............. 15 8.24 15 6.20 15 7.30 11 3.26 18 3.99
Consumer, commercial
and other .............. 335 6.41 204 7.87 191 7.87 175 7.15 173 7.30
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total allowance for loan
losses ................. $1,206 100.00% $1,075 100.00% $1,268 100.00% $1,597 100.00% $ 858 100.00%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
|
Numerous financial institutions throughout the United States have incurred losses in recent years due to significant increases in loss provisions and charge-offs resulting largely from higher levels of loan delinquencies and foreclosures. Depressed real estate market conditions have adversely affected the economies of various regions and have had a severe impact on the financial condition and businesses of many of the financial institutions doing business in these areas. Considerable uncertainty exists as to the future improvement or deterioration of the real estate markets in these regions, or of its ultimate impact on these financial institutions.
As a result of declines in real estate market values and significant losses experienced by many financial institutions, there has been a greater level of scrutiny by regulatory authorities of the loan portfolios of financial institutions undertaken as part of examinations of such institutions by the FDIC, OTS or other regulators. Results of recent examinations indicate that these regulators may be applying more conservative criteria in evaluating real estate market values, requiring significantly increased provisions for losses on loans and real estate acquired in settlement of such loans. While management believes Carver has established its existing loss allowances in accordance with generally accepted accounting principles, there can be no assurance that regulators, in reviewing the Bank's assets, will not make the Bank increase its loss allowance, thereby negatively affecting the Bank's reported financial condition and results of operations.
MORTGAGE-BACKED AND RELATED SECURITIES
Carver maintains a significant portfolio of mortgage-backed securities in the form of Government National Mortgage Association ("GNMA") pass-through certificates, FNMA and FHLMC participation certificates and collateralized mortgage obligations ("CMOs"). GNMA pass-through certificates are guaranteed as to the payment of principal and interest by the full faith and credit of the U.S. Government, while FNMA and FHLMC certificates are each guaranteed by their respective agencies as to principal and interest. Mortgage-backed securities generally entitle the Bank to receive a pro rata portion of the cash flows from an identified pool of mortgages. CMOs are securities issued by special purpose entities generally collateralized by pools of mortgage-backed securities. The cash flows from such pools are segmented and paid in accordance with a predetermined priority to various classes of securities issued by the entity. The Bank's CMOs are primarily adjustable-rate CMOs issued by the Resolution Trust Corporation ("RTC"). The Bank also invests in pools of loans guaranteed as to principal and interest by the Small Business Administration ("SBA"). The Bank has also invested $70.5 million in mutual funds which invest primarily in adjustable-rate mortgage-backed securities. See "--Investment Activities."
Although mortgage-backed securities generally yield from 60 to 100 basis points less than whole loans, they present substantially lower credit risk and are more liquid than individual mortgage loans and may be used to collateralize obligations of the Bank. Because the Bank receives regular payments of principal and interest from its mortgage-backed securities, these investments provide more consistent cash-flows than investments in other debt securities which generally only pay principal at maturity. Mortgage-backed securities also help the Bank meet certain definitional tests for favorable treatment under federal banking and tax laws. See "Regulation -- Qualified Thrift Lender Test" and "Taxation."
Mortgage-backed securities, however, expose the Bank to certain unique risks. In a declining rate environment, accelerated prepayments of loans underlying these securities expose the Bank to the risk that it will be unable to obtain comparable yields upon reinvestment of the proceeds. In the event the mortgage-backed security has been funded with an interest-bearing liability with a maturity comparable to the original estimated life of the mortgage-backed security, the Bank's interest rate spread could be adversely affected. Conversely, in a rising interest rate environment, the Bank may experience a lower than estimated rate of repayment on the underlying mortgages, effectively extending the estimated life of the mortgage-backed security and exposing the Bank to the risk that it may be required to fund the asset with a liability bearing a higher rate of interest. The Bank seeks to avoid interest rate risk by investing in adjustable-rate mortgage-backed securities, which constitute 59.61% of the mortgage-backed securities portfolio. The mortgage-backed securities in the Bank's available-for-sale portfolio adjust in accordance with a treasury index
which generally lags changes in general market rates. In order to protect the value of this security in a rising rate environment, the Bank has entered into a four-year interest rate cap agreement with a money center bank. Whenever the three-month London Inter-Bank Offered Rate ("LIBOR") exceeds the 5.5% strike rate, Carver will receive the difference multiplied by the $20.0 million "notional" amount of the agreement. The $410,000 cost of the cap agreement is being amortized over the four-year life of the contract using the straight-line method. Any contractual payments earned on the interest rate protection agreement are treated as yield adjustments on the hedged securities.
The OTS has adopted a statement of policy with respect to investments in mortgage derivative products which are defined to include CMOs, real estate mortgage investment conduits ("REMICs"), CMO and REMIC residuals and stripped mortgage-backed securities ("SMBSs"). The policy distinguishes between high-risk and non high-risk mortgage securities. Mortgage derivative products with an average life or price volatility in excess of a benchmark 30-year mortgage-backed pass-through security are considered high-risk mortgage securities. Under the policy, savings associations may generally only invest in high-risk mortgage securities in order to reduce interest rate risk. In addition, all high-risk mortgage securities acquired after February 9, 1992 must be carried in the institution's trading account or as assets held for sale. At March 31, 1996, the Bank had no mortgage derivative products which met the definition of high-risk mortgage securities.
The following table sets forth information regarding Carver's mortgage-backed securities at the dates indicated.
AT MARCH 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
HELD TO MATURITY:
GNMA ................................................ $ 13,297 $ 22,108 $ 8,127
FNMA ................................................ 46,246 63,389 56,766
FHLMC ............................................... 55,420 77,627 67,761
SBA ................................................. 2,603 2,961 3,328
CMOs:
RTC ............................................. 11,137 12,440 14,846
FHLMC ........................................... 1,703 1,703 1,871
FNMA ............................................ -- -- --
Other ........................................... 699 906 1,144
-------- -------- --------
Total CMOs .................................. 13,539 15,049 17,861
-------- -------- --------
Total Held to Maturity ............... 131,106 181,134 153,843
-------- -------- --------
AVAILABLE-FOR-SALE:
GNMA ................................................ 23,058 19,735 17,858
FNMA ................................................ 10,433 -- --
FHLMC ............................................... 8,239 -- --
-------- -------- --------
Total Available for Sale .................... 41,730 19,735 17,858
-------- -------- --------
Total Mortgage-Backed Securities ... $172,836 $200,869 $171,701
======== ======== ========
|
The following table sets forth information regarding the scheduled maturities, carrying value, market value and weighted average yields for Carver's mortgage-backed securities (including mortgage-backed securities available-for-sale) at March 31, 1996. Expected maturities will differ from contractual maturities due to scheduled repayments and because borrowers may have the right to call or prepay obligations with or without prepayment penalties. The following table does not take into consideration the effects of scheduled repayments or the effects of possible prepayments.
ONE TO FIVE YEARS FIVE TO TEN YEARS MORE THAN TEN YEARS TOTAL INVESTMENT PORTFOLIO
----------------- ----------------- ------------------- -----------------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING MARKET AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE VALUE YIELD
-------- ------- -------- ------- -------- ------- -------- ------ -------
(DOLLARS IN THOUSANDS)
GNMA ........................ $ 10 12.75% $ -- --% $ 37,345 6.60% $ 36,355(1) $ 36,298 6.60%
FNMA ........................ -- -- -- -- 56,679 6.55 56,679(2) 55,714 6.56
FHLMC ....................... 11,475 7.20 3,556 8.96 48,629 6.80 63,660(3) 63,846 6.99
SBA ......................... -- -- -- -- 2,603 6.70 2,603 2,669 6.70
CMOs:
RTC ..................... -- -- -- 11,137 6.88 11,137 10,864 6.88
FHLMC ................... 1,703 5.53 -- -- -- -- 1,703 1,686 5.53
Other ................... -- -- 699 6.18 699 687 6.18
------- ------ -------- -------- --------
Total ............... $13,188 $3,556 $157,092 $172,836 $171,764
======= ====== ======== ======== ========
|
(1) Includes $13.3 million in securities available-for-sale.
(2) Includes $46.2 million in securities available-for-sale.
(3) Includes $55.4 million in securities available-for-sale.
INVESTMENT ACTIVITIES
Carver is permitted under federal law to make certain investments, including investments in securities issued by various federal agencies and state and municipal governments, deposits at the FHLB of New York, certificates of deposits in federally insured institutions, certain bankers' acceptances and federal funds. The Bank may also invest, subject to certain limitations, in commercial paper having one of the two highest investment ratings of a nationally recognized credit rating agency, and certain other types of corporate debt securities and mutual funds. Federal regulations require the Bank to maintain an investment in FHLB of New York stock and a minimum amount of liquid assets which may be invested in cash and specified securities. From time to time, the OTS adjusts the percentage of liquid assets which savings banks are required to maintain. For additional information, see "Regulation -- Liquidity Requirements."
Carver invests in investment securities in order to diversify its assets, manage cash flow, obtain yield and maintain the minimum levels of liquid assets required by regulatory authorities. Such investments generally include sales of federal funds, and purchases of federal government and agency securities and qualified deposits in other financial institutions. The Bank has also invested in mutual funds which invest solely in adjustable-rate mortgage-backed securities. Although these funds yield less than the underlying securities, these funds generally are more sensitive to changes in interest rates and are less volatile than mortgage-backed securities. Unlike investments in mortgage-backed securities held to maturity, however, investments in mutual funds expose the Bank to the risk of principal loss as a result of market declines. The funds in which the Bank is currently invested are open-end, no load funds. Investment decisions generally are made by the Internal Investment Committee in accordance with investment strategies approved by the Investment Committee of the Board of Directors.
Effective March 31, 1994, the Bank adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" which generally requires that debt and equity securities that have readily determinable fair values be carried at fair value unless they are classified as held to maturity. In connection with the adoption of SFAS No. 115, the Bank designated $54.5 million of investment securities, including those previously classified as held- to-maturity, and $17.7 million of adjustable-rate mortgage-backed securities as available-for-sale. Unrealized holding gains or losses for securities available-for-sale are reported net of deferred income taxes as a separate component of retained earnings. On December 30, 1995 the Bank reclassified $25.9 million of investment securities from held to maturity to available-for-sale, as permitted under a one time opportunity permitted by the Financial Accounting Standards Board and regulatory agencies.
The following table sets forth the carrying value of Carver's investments at the dates indicated.
AT MARCH 31,
--------------------------------
1996 1995 1994
-------- -------- --------
HELD TO MATURITY: (IN THOUSANDS)
Debt securities:
U.S. government and agency securities ...................... $ 8,937 $ 18,035 $ 12,018
Other investments:
FHLB stock ................................................. 3,120 3,120 1,833
-------- -------- --------
Total held to maturity ....................................... 12,057 21,155 13,851
-------- -------- --------
AVAILABLE-FOR-SALE:
Equity securities (1):
Smith Breeden Short Duration U.S. Government
Series Fund ............................................. 63,619 64,668 44,587
Federated ARMs Fund - Institutional Shares ................. 6,789 6,754 6,902
Asset Management Fund Adjustable-Rate Mortgage Portfolio ... 99 99 99
Portfolio Share Funds ...................................
Common and preferred stocks ................................ 2,090 2,071 2,126
Other investments:
Federal funds sold ......................................... 6,800 7,000 4,500
Total available for sale ................................. 79,397 80,592 58,214
-------- -------- --------
Total investment securities .................................. $ 91,454 $101,747 $ 72,065
======== ======== ========
|
(1) Equity securities were classified as available-for-sale at March 31, 1996, 1995 and 1994.
The following table sets forth the scheduled maturities, carrying values, market values and average yields for Carver's investments at March 31, 1996.
ONE YEAR OR LESS ONE TO FIVE YEARS TOTAL INVESTMENT PORTFOLIO
----------------- ----------------- ----------------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING MARKET AVERAGE
VALUE YIELD VALUE YIELD VALUE VALUE YIELD
-------- ------- -------- ------- -------- ------ -------
(DOLLARS IN THOUSANDS)
U.S. government and agency
securities ........................ $ -- --% $ 8,937 4.98% $ 8,937 $ 8,814 4.98%
Federal funds sold .................... 6,800 5.00 -- -- 6,800 6,800 5.00
Equity securities ..................... 70,507 6.38 -- -- 70,507 70,507 6.38
Common and preferred stocks ........... 2,090 7.90 -- -- 2,090 2,090 7.90
FHLB stock ............................ -- -- 3,120 7.28 3,120 3,120 7.28
------- ------- ------- -------
Total investments ................... $79,397 $12,057 $91,454 $91,331
======= ======= ======= =======
|
On February 6, 1995, the New York State Banking Department (the "Department") took possession of Nationar Trust Company ("Nationar"), a trust company owned by sixty-seven New York savings banks. The Department will manage the business of Nationar until a suitable buyer is found. As of February 6, 1995, Carver had invested $1,366,000 in federal funds and $600,000 in certificate of deposits, or a total of $1,966,000, with Nationar. This $1,966,000 investment has been reclassified, net of a $256,000 allowance for estimated losses, to other assets on Carver's statement of financial condition. At a hearing on April 10, 1996, pursuant to the recommendation of the Superintendent of Banks of the State of New York Banking Department (the "Superintendent"), the judge in the instant case entered an order directing the return of the $600,000 in certificates of deposit that had been deposited with Nationar. The Bank received these funds, plus interest, in early June 1996. As a result, the Bank will recover the valuation allowance of 13.0% on the $600,000 amount.
DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS
General. Deposits are the primary source of Carver's funds for lending and other investment purposes. In addition to deposits, the Bank derives funds from loan principal repayments, interest payments and maturing investments. Loan repayments and interest payments are a relatively stable source of funds, while deposit inflows and outflows are significantly influenced by prevailing market interest rates and money market conditions. Borrowings may be used to supplement the Bank's available funds, and from time to time the Bank has borrowed funds from the FHLB of New York and through reverse repurchase agreements.
Deposits. The Bank attracts deposits principally from within its market area by offering a variety of deposit instruments, including passbook and statement accounts and certificates of deposit which range in term from 91 days to seven years. Deposit terms vary, principally on the basis of the minimum balance required, the length of time the funds must remain on deposit and the interest rate. The Bank also offers Individual Retirement Accounts ("IRAs"). Carver's policies are designed primarily to attract deposits from local residents through the Bank's branch network rather than from outside the Bank's market area. The Bank also holds deposits from various municipal and other governmental agencies. The Bank does not accept deposits from brokers due to their rate sensitivity. The Bank's interest rates, maturities, service fees and withdrawal penalties on deposits are established by management on a periodic basis. Management determines deposit interest rates and maturities based on the Bank's funds acquisition and liquidity requirements, the rates paid by the Bank's competitors, the Bank's growth goals and applicable regulatory restrictions and requirements.
Deposits in Carver as of March 31, 1996 were represented by the various programs described below.
WEIGHTED AGGREGATE
AVERAGE BALANCE PERCENTAGE
INTEREST MINIMUM MINIMUM (IN OF TOTAL
RATE TERM CATEGORY BALANCE THOUSANDS) DEPOSITS
- -------- ---- -------- ------- ---------- --------
1.86% None NOW accounts $ 500 $ 16,916 6.58%
2.50 None Savings and club 300 141,873 55.21
Money market savings
3.17 None accounts 500 19,444 7.57
-0- None Other demand accounts 500 6,046 2.36
Total savings accounts 184,279 71.72
--------- ------
CERTIFICATES OF DEPOSIT
-----------------------
3.69 91 days Fixed-term, fixed-rate 2,500 1,700 0.66
4.71 182-365 days Fixed-term, fixed-rate 2,500 18,404 7.16
5.29 1-2 years Fixed-term, fixed-rate 1,000 15,444 6.01
5.33 2-3 years Fixed-term, fixed-rate 1,000 14,236 5.54
4.45 3-4 years Fixed-term, fixed-rate 1,000 8 0.01
6.23 4-5 years Fixed-term, fixed-rate 1,000 11,954 4.65
6.74 5-10 years Fixed-term, fixed-rate 500 70 0.03
5.39 30 days Negotiable 80,000 10,857 4.22
--------- ------
Total Certificates of Deposit 72,673 28.28
--------- ------
Total Deposits $ 256,952 100.00%
========= ======
|
The following table sets forth the change in dollar amount of deposits in the various types of accounts offered by Carver between the dates indicated.
BALANCE AT PERCENTAGE BALANCE AT PERCENTAGE BALANCE AT PERCENTAGE
MARCH 31, OF TOTAL INCREASE MARCH 31, OF TOTAL INCREASE MARCH 31, OF TOTAL
1996 DEPOSITS (DECREASE) 1995 DEPOSITS (DECREASE) 1994 DEPOSITS
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS)
Savings and club . . . . . . $ 141,873 55.21% $ 953 $ 140,920 56.72% $(1,165) $142,085 56.28%
Money market savings . . . . 19,444 7.57 1,546 17,898 7.21 (2,547) 20,445 8.10
NOW and demand accounts . . . 22,962 8.94 4,317 18,645 7.50 2,322 16,323 6.46
Certificates of deposit . . . 72,673 28.28 1,690 70,983 28.57 (2,638) 73,621 29.16
--------- ------ ------ --------- ------ ------- -------- ------
Total deposits . . . . . . . $ 256,952 100.00% $8,506 $ 248,446 100.00% $(4,028) $252,474 100.00%
========= ====== ====== ========= ====== ======= ======== ======
|
The following table sets forth the average balances and interest rates based on month-end balances for certificates of deposit and non-certificate accounts as of the dates indicated.
YEAR ENDED MARCH 31,
------------------------------------------------------------------------
1996 1995 1994
-------------------- --------------------- ---------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
-------- ------- --------- ------- --------- -------
(DOLLARS IN THOUSANDS)
Non-interest-bearing demand . . $ 4,761 0.00% $ 3,814 0.00% $ 2,913 0.00%
Savings and club . . . . . . . 140,204 2.50 144,092 2.43 140,447 2.65
Certificates . . . . . . . . . 74,060 5.35 70,684 4.41 75,745 4.58
Money market savings accounts . 18,770 3.70 19,135 2.82 24,277 2.66
NOW accounts . . . . . . . . . 15,539 2.02 13,904 1.62 9,876 2.03
-------- --------- ---------
Total . . . . . . . . . . . $253,334 $ 251,629 $ 253,258
======== ========= =========
|
The following table sets forth time deposits in specified weighted average interest rate categories as of the dates indicated.
AT MARCH 31,
--------------------------------------
1996 1995 1994
-------- --------- ---------
(IN THOUSANDS)
2% - 3.99% . . . . . . $ 1,686 $ 1,820 $ 42,405
4% - 5.99% . . . . . . 58,907 60,292 21,998
6% - 7.99% . . . . . . 12,037 8,871 6,631
8% - 9.99% . . . . . . -- -- 2,587
-------- --------- ---------
Total . . . . . . . $ 72,673 $ 70,983 $ 73,621
======== ========= =========
|
The following table sets forth the amount and maturities of time deposits in specified weighted average interest rate categories at March 31, 1996.
AMOUNT DUE
----------------------------------------------------------------
LESS THAN AFTER
RATE ONE YEAR 1-2 YEARS 2-3 YEARS 3 YEARS TOTAL
--------- --------- --------- ------- -------
(IN THOUSANDS)
2% - 3.99% . . . . . . . . . . . . $ -- $ -- $ -- $ 52 $ 52
4% - 5.99% . . . . . . . . . . . . 45,275 14,209 5,970 823 66,277
6% - 7.99% . . . . . . . . . . . . -- 151 -- 6,193 6,344
------- ------- ------ ------ -------
Total . . . . . . . . . . . . . $45,275 $14,360 $5,970 $7,068 $72,673
======= ======= ====== ====== =======
|
The following table indicates the amount of Carver's certificates of deposit of $100,000 or more by time remaining until maturity as of March 31, 1996.
CERTIFICATES
MATURITY PERIOD OF DEPOSITS
--------------- ------------
(IN THOUSANDS)
Three months or less . . . . . $ 16,906
Three through six months . . . 15,700
Six through 12 months . . . . . 12,670
Over 12 months . . . . . . . . 27,397
--------
Total . . . . . . . . . . . $ 72,673
========
|
The following table sets forth Carver's deposit reconciliation for the periods indicated.
YEAR ENDED MARCH 31,
---------------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
Deposits at beginning of period . . . . . . . . . . . . . . $248,446 $252,474 $256,068
Net increase (decrease) before interest credited . . . . . 134 (11,501) (11,493)
Interest credited . . . . . . . . . . . . . . . . . . . . . 8,372 7,473 7,899
-------- -------- --------
Deposits at end of period . . . . . . . . . . . . . . . . . $256,952 $248,446 $252,474
======== ======== ========
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The increase in deposits of $8.5 million, or 3.42%, to $257.0 million at March 31, 1996 from $248.5 million at March 31, 1995 was offset in part by a decrease in FHLB borrowings. The Bank attributes the increase in deposits to interest credited to depositors.
Borrowings. Savings deposits historically have been the primary source of funds for Carver's lending, investment and general operating activities. The Bank is authorized, however, to use advances and securities sold under agreement to repurchase (Repos) from the FHLB of New York to supplement its supply of lendable funds and to meet deposit withdrawal requirements. The FHLB of New York functions as a central reserve bank providing credit for savings institutions and certain other member financial institutions. As a member of the FHLB system, the Bank is required to own stock in the FHLB of New York and is authorized to apply for advances. Advances are made pursuant to several different programs, each of which has its own interest rate and range of maturities. Advances from the FHLB of New York are secured by the Bank's stock in the FHLB and a blanket pledge of the Bank's mortgage loan and mortgage-backed securities portfolios. At March 31, 1996, the Bank had $25.4 million in advances and $22.0 million in securities sold under agreements to repurchase outstanding from the FHLB of New York.
The following table sets forth certain information regarding the Bank's short-term borrowings at the dates and for the periods indicated:
AT OR FOR THE
YEAR ENDED MARCH 31,
---------------------------------------
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
Amounts outstanding at end of period:
FHLB advances . . . . . . . . . . . . . . . . . . . . $25,400 $62,400 $30,400
Securities sold under agreements to repurchase . . . . 47,000 18,188 9,530
Weighted average rate paid at period end:
FHLB advances . . . . . . . . . . . . . . . . . . . . 6.84% 7.20% 4.52%
Securities sold under agreements to repurchase . . . . 5.60% 7.22 3.50
Maximum amount of borrowings outstanding at any month end:
FHLB advances . . . . . . . . . . . . . . . . . . . . $62,400 $62,400 $54,000
Securities sold under agreements to repurchase . . . . 47,000 18,188 9,530
Approximate average amounts outstanding for period:
FHLB advances . . . . . . . . . . . . . . . . . . . . $45,538 $45,049 $42,293
Securities sold under agreements to repurchase . . . . 25,654 9,177 2,383
Approximate weighted average rate paid during period (1):
FHLB advances . . . . . . . . . . . . . . . . . . . . 7.52% 5.56% 5.16%
Securities sold under agreements to repurchase . . . . 6.36% 6.02 3.50
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SUBSIDIARY ACTIVITIES
As a federally chartered savings institution, Carver is permitted to invest up to 2% of its assets in subsidiary service corporations plus an additional 1% in subsidiaries engaged in specified community purposes. Other than a recently established subsidiary of the Bank, as further discussed below, Carver's only investment in service corporations is its interest in a captive insurance corporation for financial institutions. At March 31, 1996, the net book value of the Bank's service corporation investments was $399,000.
Carver is also authorized to make investments of any amount in operating subsidiaries that engage solely in activities that federal savings institutions may conduct directly. On March 8, 1995, the Bank formed C.F.S.B. Realty Corp. as a wholly-owned subsidiary which will hold real estate acquired through foreclosure pending eventual disposition. At March 31, 1996, this subsidiary had $335,000 in total capital and net operation expense of $70,000.
On September 19, 1995, the Bank formed C.F.S.B. Credit Corp. as a wholly-owned subsidiary which will undertake the operations regarding the issuance of credit cards. At March 31, 1996, this subsidiary had $63,000 in total capital and net operation expense of $12,000.
MARKET AREA AND COMPETITION
The Bank's primary market area for deposits consists of the areas served by its eight branches and the Bank considers its lending market to include Bronx, Kings, New York, Queens and Richmond counties, together comprising New York City, and Lower Westchester and Nassau Counties, New York. The Bank's branches are primarily located in economically disadvantaged areas of New York City which have traditionally been characterized by high unemployment, low income and low levels of home ownership. The majority of the Bank's branches are located in areas where the number of persons below the poverty line is greater than
27% of the population and constitutes as much as 41% of the population in some areas according to 1990 census figures. The number of persons on some form of public assistance exceeds 30% of the population in these areas according to the same census. Although the New York metropolitan area enjoys a fairly diversified economy, the manufacturing base which has traditionally provided jobs to residents of the communities served by the Bank has been steadily shrinking and the other sectors of the economy have failed to provide comparable employment opportunities. The New York metropolitan area has also recently experienced an economic downturn which raised general unemployment rates throughout the region and which particularly affected the communities served by the Bank. Although the New York metropolitan area is generally believed to have begun recovering from the downturn, the communities served by the Bank have historically lagged in such recoveries.
Although the Bank's branches are located in areas that have been historically undeserved by other financial institutions, the Bank is facing increasing competition for deposits and residential mortgage lending in its immediate market areas. Management believes that this competition has become more intense as a result of an increased examination emphasis by federal banking regulators on financial institutions' fulfillment of their responsibilities under the Community Reinvestment Act. Many of the Bank's competitors have substantially greater resources than the Bank and offer a wider array of financial services and products than the Bank. The Bank believes that it can compete with these institutions by offering a competitive range of services as well as through the personalized attention and community commitment which has always been the Bank's hallmark.
EMPLOYEES
As of March 31, 1996, Carver had 96 full-time and 14 part-time employees, none of whom was represented by a collective bargaining agreement. Management believes its relations with its employees are good.
PROPERTIES
The following table sets forth certain information regarding Carver Federal's offices and other material properties at March 31, 1996.
NET BOOK
YEAR OWNED OR VALUE AT MARCH
OPENED LEASED LEASE EXPIRATION DATE 31, 1996
------ -------- --------------------- ----------------------
(DOLLARS IN THOUSANDS)
MAIN OFFICE:
75 West 125th Street 1996 Owned -- $5,640
New York, New York
BRANCH OFFICES:
2815 Atlantic Avenue 1990 Owned -- 356
Brooklyn, New York
(East New York Office)
1281 Fulton Street 1989 Owned -- 1,964
Brooklyn, New York
(Bedford-Stuyvesant
Office)
1009-1015 Nostrand Avenue 1975 Owned -- 238
Brooklyn, New York
(Crown Heights Office)
261 8th Avenue 1964 Leased 10/31/04 --
New York, New York
(Chelsea Office)
117-02 Guy Brewer 1981 Leased 11/30/96 --
Boulevard
Jamaica, New York
(Jamaica Office)
115-02 Merrick Boulevard 1982 Leased 2/28/11 --
Jamaica, New York
(St. Albans Office)
302 Nassau Road 1985 Leased 6/30/05 --
Roosevelt, New York ------
(Roosevelt Office)
Total $8,198
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The net book value of Carver Federal's investment in premises and equipment totaled approximately $9.9 million at March 31, 1996.
LEGAL PROCEEDINGS
From time to time, Carver Federal is a party to various legal proceedings incident to its business. At March 31, 1996, except as set forth below, there were no legal proceedings to which the Bank or its subsidiary was a party, or to which any of their property was subject, which were expected by management to result in a material loss.
On January 2, 1996, the United States District Court for the Southern District of New York dismissed the class action encaptioned Dougherty v. Carver Federal Savings Bank for lack of subject matter jurisdiction. The class action complaint contained allegations of material misrepresentations and omissions of material facts in the Bank's prospectus for its initial public offering and the failure to have the appraisal of the Bank's shares prepared by an independent appraiser. By separate order on the same date, the court made its ruling applicable to Gomberg v. Carver Federal Savings Bank and Uminer v. Carver Federal Savings Bank, two other class actions filed in the Southern District of New York which asserted claims essentially identical to those asserted in Dougherty v. Carver Federal Savings Bank. The plaintiffs in Dougherty v. Carver Federal Savings Bank have filed notice in the United States Court of Appeals for the second circuit of their intention to appeal. The case(s) are now pending appeal in the United States Court of Appeals for the Second Circuit.
On September 19, 1995, Carver Federal Savings Bank filed an action for declaratory judgment, for damages for breach of contract, and for breach of a contractual trust, against Nationar and the Superintendent, in the Supreme Court of New York State, County of New York. When the Superintendent sold Carver Federal Savings Bank's ESOP loan to a third party purchaser, it did not transfer Carver's $1,966,000 in collateral along with the loan. The $1,966,000 in collateral consisted of two separate sums in the amounts of $1,366,000 and $600,000. The purpose of the lawsuit was to secure the return of the entire $1,966,000 in collateral rather than a portion of it. The Bank believes that it has adequate reserves at 13.0% of the claims, against possible loss on these claims.
By order entered April 10, 1996, on the recommendation of the Superintendent, the Court directed the return of $600,000 in collateral. The Bank received these funds, plus interest, in early June 1996. As a result, the Bank will recover the valuation allowance of 13.0% on the $600,000 amount. Since the Bank expects that it will receive 90% of the $1,366,000 amount as a general creditor, the lawsuit has been discontinued.
FEDERAL AND STATE TAXATION
FEDERAL TAXATION
General. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or Bancorp. The Bank has not been subject to a tax audit within the past five fiscal years. For federal income tax purposes, after the Reorganization, Bancorp and the Bank will file consolidated income tax returns and report their income on a calendar year basis using the accrual method of accounting and will be subject to federal income taxation in the same manner as other corporations with some exceptions, including particularly the Bank's tax reserve for bad debts, discussed below.
Tax Bad Debt Reserves. Savings institutions such as the Bank which meet certain definitional tests primarily relating to their assets and the nature of their business ("qualifying thrifts") are permitted to establish a tax reserve for bad debts and to make annual additions thereto, which additions may, within specified formula limits, be deducted in arriving at their taxable income. The Bank's deduction with respect to "qualifying loans," which are generally loans secured by certain interests in real property, may be computed using an amount based on the Bank's actual loss experience (the "Experience Method"), or a percentage equal to 8% of the Bank's taxable income (the "PTI Method"), computed without regard to this deduction and with additional modifications and reduced by the amount of any permitted addition to the non-qualifying reserve.
Use of the PTI Method has the effect of reducing the marginal rate of federal tax on the Bank's income to 31.3%, exclusive of any minimum or environmental tax, as compared to the generally applicable maximum corporate federal income tax rate of 34%. (The marginal rate of tax would be 32.2% if the Bank's taxable income exceeds $10,000,000 and is therefore subject to a maximum tax rate of 35%). The Bank's deduction with respect to non-qualifying loans must be computed under the Experience Method which is based on the Bank's actual charge-offs. Each year the Bank reviews the most favorable way to calculate the deduction attributable to an addition to the tax bad debt reserve.
The Bank presently satisfies the qualifying thrift definitional tests. If the Bank failed to satisfy such tests in any taxable year, it would be unable to use the PTI Method in computing additions to its tax bad debt reserve and may be required to recapture (i.e., take into income) a portion of its bad debt reserves over a multi-year period. Such bad debt reserve recapture could cause the Bank to incur substantial tax liability. (If the Bank were a "large bank," which it now is not, at the time it failed to satisfy such tests, it would be unable to make additions to its tax bad debt reserve. Instead, the Bank would be permitted to deduct bad debts only as they occur and would be required to recapture its cumulative bad debt reserves over a multi-year period.) Among other things, the qualifying thrift definitional tests require the Bank to hold at least 60% of its assets as "qualifying assets." Qualifying assets generally include cash, obligations of the United States or any agency or instrumentality thereof, certain obligations of a state or political subdivision thereof, loans secured by interests in improved residential real property or by savings accounts, student loans and property used by the Bank in the conduct of its banking business. The Bank's ratio of qualifying assets to total assets exceeded 60% through the close of its last taxable year. Although there can be no assurance that the Bank will satisfy the 60% test in the future, management believes that this level of qualifying assets can be maintained by the Bank.
The amount of the addition to the reserve for losses on qualifying real property loans under the PTI Method cannot exceed the amount necessary to increase the balance of the reserve for losses on qualifying real property loans at the close of the taxable year to 6% of the balance of the qualifying real property loans outstanding at the end of the taxable year. As of the close of its last taxable year, the Bank's tax reserve for bad debts on qualifying real property loans was less than 6% of its qualifying real property loans outstanding. Also, if the Bank uses the PTI Method, its aggregate addition to its reserve for losses on qualifying real property loans cannot, when added to the addition to the reserve for losses on non-qualifying loans, exceed the amount by which: (i) 12% of the amount that the total deposits or withdrawable accounts of depositors of the Bank at the close of the taxable year exceeds (ii) the sum of the Bank's surplus, undivided profits and reserves at the beginning of such year. As of the close of its last taxable year, 12% of the Bank's deposits and withdrawable accounts, less its surplus, undivided profits and reserves, exceeded the balance of its reserve for losses on qualifying real property loans.
Pending Legislation Regarding Bad Debt Reserves. Under pending legislative proposals, the PTI Method would be repealed and the Bank would be permitted to use only the Experience Method of computing additions to its bad debt reserve. In addition, the Bank would be required to recapture (i.e., take into income) over a six year period beginning April 1, 1996 the excess of the balance of its bad debt reserves as of March 31, 1996 over the greater of (a) the balance of such reserves as of March 31, 1988 or (b) an amount that would have been the balance of such reserves as of March 31, 1996 had the Bank always computed the additions to its reserves using the Experience Method. (If the Bank were a "large bank," which it now is not, it would be unable to make additions to its tax bad debt reserve, would be permitted to deduct bad debts only as they occur and would additionally be required to recapture over a six year period the excess of the balance of its bad debt reserves as of March 31, 1996 over the balance of such reserves as of March 31, 1988). However, under the proposed legislation, such recapture requirements would be suspended for each of two successive taxable years beginning April 1, 1996 in which the Bank originates a minimum amount of certain residential loans based upon the average of the principal amounts of such loans made by the Bank during its six taxable years preceding 1996.
Distributions. To the extent that: (i) the Bank's tax bad debt reserve for losses on qualifying real property loans exceeds the amount that would have been allowed under the Experience Method (the "Excess
Bad Debt Reserve"); and (ii) the Bank makes "non-dividend distributions" to Bancorp that are considered to have been made from the Excess Bad Debt Reserve or the supplemental reserve for losses on loans ("Excess Distributions"), then an amount based on the amount distributed will be included in the Bank's taxable income. Non-dividend distributions include distributions in excess of the Bank's current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation. However, dividends paid out of the Bank's current or accumulated earnings and profits will not be considered to result in a distribution from the Bank's bad debt reserves.
The amount of additional taxable income created from an Excess Distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the Excess Distribution. Thus, if, after the Reorganization, the Bank makes a "non-dividend distribution" that is an Excess Distribution, approximately one and one-half times the amount so used would be includable in gross income for federal income tax purposes, assuming a 34% federal corporate income tax rate. See "Regulation and Supervision" and "Dividend Policy" for limits on the payment of dividends by the Bank. The Bank does not intend to pay dividends that would result in a recapture of any portion of its tax bad debt reserves.
Under pending legislative proposals, if the Bank makes a non-dividend distribution, as defined above, an amount, as computed above, will be included in the Bank's taxable income, but the maximum amount of reserves subject to such inclusion will be the balance of the Bank's bad debt reserves as of March 31, 1988, or a lesser amount if the Bank's loan portfolio has decreased since March 31, 1988.
Corporate Alternative Minimum Tax. The Code imposes a tax ("AMT") on alternative minimum taxable income ("AMTI") at a rate of 20%. AMTI is increased by certain preference items, including the excess of the tax bad debt reserve deduction using the PTI Method over the deduction that would have been allowable under the Experience Method. Only 90% of AMTI can be offset by net operating loss carryovers of which the Bank currently has none. AMTI is also adjusted by determining the tax treatment of certain items in a manner that negates the deferral of income resulting from the regular tax treatment of those items. Thus, the Bank's AMTI is increased by an amount equal to 75% of the amount by which the Bank's adjusted current earnings exceeds its AMTI (determined without regard to this adjustment and prior to reduction for net operating losses). In addition, for taxable years beginning after December 31, 1986 and before January 1, 1996, an environmental tax of 0.12% of the excess of AMTI (with certain modifications) over $2 million is imposed on corporations, including the Bank, whether or not an AMT is paid. The Bank does not expect to be subject to the AMT, but may be subject to the environmental tax liability. Under pending legislative proposals, the environmental tax would be extended to taxable years beginning before January 1, 2007.
Elimination of Dividends; Dividends Received Deduction. Bancorp may exclude from its income 100% of dividends received from the Bank as a member of the same affiliated group of corporations. A 70% dividends received deduction generally applies with respect to dividends received from corporations that are not members of such affiliated group, except that an 80% dividends received deduction applies if Bancorp and the Bank own more than 20% of the stock of a corporation paying a dividend. Under pending legislative proposals, the 70% dividends received deduction would be reduced to 50% with respect to dividends paid after enactment of the legislation.
STATE AND LOCAL TAXATION
State of New York. The Bank and Bancorp are subject to New York State franchise tax on net income or one of several alternative bases, whichever results in the highest tax. "Net income" means federal taxable income with adjustments. The Bank and Bancorp will file combined returns. The New York State tax rate for fiscal years 1996 and 1997 is 11.0925% and 10.6425%, respectively (including temporary surcharges for fiscal years ending 6.25% and 1.25%, respectively and a 17% commuter transportation surcharge) of net income. In general, Bancorp will not be required to pay New York State tax on dividends and interest received from the Bank or on gains realized on the sale of Bank stock.
New York City. The Bank and Bancorp are also subject to a similarly calculated New York City banking corporation tax of 9% on income allocated to New York City.
Delaware Taxation. As a Delaware holding company not earning income in Delaware, Bancorp is exempted from Delaware corporate income tax but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.
REGULATION AND SUPERVISION
GENERAL
The Bank is subject to extensive regulation, examination, and supervision by the OTS, as its chartering agency, and the FDIC, as its deposit insurer. The Bank's deposit accounts are insured up to applicable limits by the SAIF administered by the FDIC, and it is a member of the FHLB of New York. The Bank must file reports with the OTS and the FDIC concerning its activities and financial condition, and it must obtain regulatory approvals prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions. The OTS and the FDIC conduct periodic examinations to assess the Bank's compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which a savings association can engage and is intended primarily for the protection of the insurance fund and depositors. Assuming that the holding company form of organization is utilized, the Company, as a savings association holding company, will also be required to file certain reports with, and otherwise comply with, the rules and regulations of the OTS and of the Securities and Exchange Commission (the "SEC") under the federal securities laws.
The OTS and the FDIC have significant discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such policies, whether by the OTS, the FDIC, or the Congress, could have a material adverse impact on the Company, the Bank, and the operations of both.
The following discussion is intended to be a summary of the material statutes and regulations applicable to savings associations, and it does not purport to be a comprehensive description of all such statutes and regulations.
REGULATION OF FEDERAL SAVINGS ASSOCIATIONS
Business Activities. The Bank derives its lending and investment powers
from the Home Owner's Loan Act, as amended ("HOLA"), and the regulations of the
OTS thereunder. Under these laws and regulations, the Bank may invest in
mortgage loans secured by residential and commercial real estate, commercial and
consumer loans, certain types of debt securities, and certain other assets. The
Bank may also establish service corporations that may engage in activities not
otherwise permissible for the Bank, including certain real estate equity
investments and securities and insurance brokerage. These investment powers are
subject to various limitations, including (a) a prohibition against the
acquisition of any corporate debt security that is not rated in one of the four
highest rating categories; (b) a limit of 400% of an association's capital on
the aggregate amount of loans secured by non-residential real estate property;
(c) a limit of 10% of an association's assets on commercial loans; (d) a limit
of 35% of an association's assets on the aggregate amount of consumer loans and
acquisitions of certain debt securities; (e) a limit of 5% of assets on
non-conforming loans (loans in excess of the specific limitations of HOLA); and
(f) a limit of the greater of 5% of assets or an association's capital on
certain construction loans made for the purpose of financing what is or is
expected to become residential property.
Loans to One Borrower. Under HOLA, savings associations are generally subject to the same limits on loans to one borrower as are imposed on national banks. Generally, under these limits, a savings association
may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of the association's unimpaired capital and surplus. Additional amounts may be lent, not in excess of 10% of unimpaired capital and surplus, if such loans or extensions of credit are fully secured by readily-marketable collateral. Such collateral is defined to include certain debt and equity securities and bullion, but generally does not include real estate. At March 31, 1996, the Bank's limit on loans to one borrower was $5.2 million. At March 31, 1996, the Bank's largest aggregate amount of loans to one borrower was $1.3 million and the second largest borrower had an aggregate balance of $925,000.
QTL Test. HOLA requires a savings association to meet a QTL test. Under the QTL test, a savings association is required to maintain at least 65% of its "portfolio assets" in certain "qualified thrift investments" in at least nine months of the most recent twelve-month period. "Portfolio assets" means, in general, an association's total assets less the sum of (a) specified liquid assets up to 20% of total assets, (b) certain intangibles, including goodwill and credit card and purchased mortgage servicing rights, and (c) the value of property used to conduct the association's business. "Qualified thrift investments" includes various types of loans made for residential and housing purposes, investments related to such purposes, including certain mortgage-backed and related securities, and consumer loans up to 10% of the association's portfolio assets. At March 31, 1996, the Bank maintained approximately 75.4% of its portfolio assets in qualified thrift investments. The Bank had also met the QTL test in each of the prior 12 months and was, therefore, a qualified thrift lender.
A savings association that fails the QTL test must either operate under certain restrictions on its activities or convert to a bank charter. The initial restrictions include prohibitions against (a) engaging in any new activity not permissible for a national bank, (b) paying dividends not permissible under national bank regulations, (c) obtaining new advances from any FHLB, and (d) establishing any new branch office in a location not permissible for a national bank in the association's home state. In addition, within one year of the date a savings association ceases to meet the QTL test, any company controlling the association would have to register under, and become subject to the requirements of, the Bank Holding Company Act of 1956, as amended. If the savings association does not requalify under the QTL test within the three-year period after it failed the QTL test, it would be required to terminate any activity and to dispose of any investment not permissible for a national bank and would have to repay as promptly as possible any outstanding advances from an FHLB. A savings association that has failed the QTL test may requalify under the QTL test and be free of such limitations, but it may do so only once.
Capital Requirements. The OTS regulations require savings associations to meet three minimum capital standards: a tangible capital ratio requirement of 1.5% of total assets as adjusted under the OTS regulations, a leverage ratio requirement of 3% of core capital to such adjusted total assets, and a risk-based capital ratio requirement of 8% of core and supplementary capital to total risk-based assets. In determining the amount of risk-weighted assets for purposes of the risk-based capital requirement, a savings association must compute its risk-based assets by multiplying its assets and certain off-balance sheet items by risk-weights, which range from 0% for cash and obligations issued by the United States Government or its agencies to 100% for consumer and commercial loans, as assigned by the OTS capital regulation based on the risks OTS believes are inherent in the type of asset.
Tangible capital is defined, generally, as common stockholder's equity (including retained earnings), certain noncumulative perpetual preferred stock and related earnings, minority interests in equity accounts of fully consolidated subsidiaries, less intangibles other than certain purchased mortgage servicing rights and investments in and loans to subsidiaries engaged in activities not permissible for a national bank. Core capital is defined similarly to tangible capital, but core capital also includes certain qualifying supervisory goodwill and certain purchased credit card relationships. Supplementary capital currently includes cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, and the allowance for loan and lease losses. The allowance for loan and lease losses includable in supplementary capital is limited to a maximum of 1.25% of risk-weighted assets, and the
amount of supplementary capital that may be included as total capital cannot exceed the amount of core capital.
When determining its compliance with the risk-based capital requirement, a savings association with "above normal" interest rate risk is required to deduct a portion of such capital from its total capital to account for the "above normal" interest rate risk. A savings association's interest rate risk is measured by the decline in the net portfolio value of its assets (i.e., the difference between incoming and outgoing discounted cash flows from assets, liabilities and off-balance sheet contracts) resulting from a hypothetical 2% increase or decrease in market rates of interest, divided by the estimated economic value of the association's assets, as calculated in accordance with guidelines set forth by the OTS. At the times when the 3-month Treasury bond equivalent yield falls below 4%, an association may compute its interest rate risk on the basis of a decrease equal to one-half of that Treasury rate rather than on the basis of 2%. A savings association whose measured interest rate risk exposure exceeds 2% would be considered to have "above normal" risk. The interest rate risk component is an amount equal to one-half of the difference between the association's measured interest rate risk and 2%, multiplied by the estimated economic value of the association's assets. That dollar amount is deducted from an association's total capital in calculating compliance with its risk-based capital requirement. Any required deduction for interest rate risk becomes effective on the last day of the third quarter following the reporting date of the association's financial data on which the interest rate risk was computed.
At March 31, 1996, the Bank met each of its capital requirements. The table below presents the Bank's regulatory capital as compared to the OTS regulatory capital requirements at March 31, 1996:
BANK CAPITAL REQUIREMENTS EXCESS CAPITAL
---- -------------------- --------------
(IN THOUSANDS)
Tangible capital . . . . . . . . . . $33,462 $ 5,495 $27,967
Core capital . . . . . . . . . . . . 33,522 10,992 22,530
Risk-based capital . . . . . . . . . 33,801 9,638 24,163
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A reconciliation between regulatory capital and GAAP capital at March 31, 1996 in the accompanying financial statements is presented below:
TANGIBLE CAPITAL CORE CAPITAL RISK BASED CAPITAL
---------------- ------------ ------------------
(IN THOUSANDS)
GAAP capital . . . . . . . . . . . . . . . . . . . . $34,765 $34,765 $34,765
Unrealized loss on securities available-for-sale,
net . . . . . . . . . . . . . . . . . . . . . . . . . 1,245 1,245 1,245
General valuation allowances . . . . . . . . . . . . 0 0 319
Qualifying intangible assets . . . . . . . . . . . . 0 60 60
Goodwill . . . . . . . . . . . . . . . . . . . . . . (1,609) (1,609) (1,609)
Excess of net deferred tax . . . . . . . . . . . . . (939) (939) (939)
Assets required to be deducted . . . . . . . . . . . 0 0 (40)
------- ------- -------
Regulatory capital . . . . . . . . . . . . . . . . . $33,462 $33,522 $33,801
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Limitation on Capital Distributions. OTS regulations currently impose limitations upon capital distributions by savings associations, such as cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger, and other distributions charged against capital. At least 30-days written notice must be given to the OTS of a proposed capital distribution by a savings association, and capital distributions in excess of specified earnings or by certain institutions are subject to approval by the OTS. An association that has capital in excess of all fully phased-in regulatory capital requirements before and after a proposed capital distribution and that is not otherwise restricted in making capital distributions, could, after prior notice but without the approval of the OTS, make capital distributions during a calendar year equal to the greater of (a) 100% of its net earnings to date during the calendar year plus the amount that would reduce by one-half its "surplus capital ratio" (the excess capital over its fully phased-in capital requirements) at the beginning of the calendar year, or (b) 75% of its net earnings for the previous four quarters. Any additional capital distributions would require prior OTS approval. In addition, the OTS can prohibit a proposed capital distribution, otherwise permissible under the regulation, if the OTS has determined that the association is in need of more than normal supervision or if it determines that a proposed distribution by an association would constitute an unsafe or unsound practice. Furthermore, under the OTS prompt corrective action regulations, the Bank would be prohibited from making any capital distribution if, after the distribution, the Bank failed to meet its minimum capital requirements, as described above. See "--Prompt Corrective Regulatory Action."
The OTS has proposed regulations that would simplify the existing procedures governing capital distributions by savings associations. Under the proposed regulations, the approval of the OTS would be required only for an association that is deemed to be in troubled condition or that is undercapitalized or would be undercapitalized after the capital distribution. A savings association would be able to make a capital distribution without notice to or approval of the OTS if it is not held by a savings association holding company, is not deemed to be in troubled condition, has received either of the two highest composite supervisory ratings, and would continue to be adequately capitalized after such distribution. Notice would have to be given to the OTS by any association that is held by a savings association holding company or that had received a composite supervisory rating below the highest two composite supervisory ratings. An association's capital rating would be determined under the prompt corrective action regulations. See "--Prompt Corrective Regulatory Action."
Liquidity. The Bank is required to maintain an average daily balance of liquid assets (cash, certain time deposits, bankers' acceptances, specified United States Government, state or federal agency obligations, shares of certain mutual funds and certain corporate debt securities and commercial paper) equal to a monthly average of not less than a specified percentage of its net withdrawable deposit accounts plus short-term borrowings. This liquidity requirement may be changed from time to time by the OTS to any amount within the range of 4% to 10% depending upon economic conditions and the savings flows of member institutions, and is currently 5%. OTS regulations also require each savings association to maintain an average daily balance of short-term liquid assets at a specified percentage (currently 1%) of the total of its net withdrawable deposit accounts and borrowings payable in one year or less. Monetary penalties may be imposed for failure to meet these liquidity requirements. The Bank's average liquidity ratio for the month ended March 31, 1996 was 27.5%, which exceeded the applicable requirements. The Bank has never been subject to monetary penalties for failure to meet its liquidity requirements.
Assessments. Savings associations are required by OTS regulation to pay assessments to the OTS to fund the operations of the OTS. The general assessment, paid on a semi-annual basis, is computed upon the savings association's total assets, including consolidated subsidiaries, as reported in the association's latest quarterly Thrift Financial Report. During January 1996, the Bank paid an assessment of $88,600.
Branching. Subject to certain limitations, HOLA and the OTS regulations permit federally chartered savings associations to establish branches in any state of the United States. The authority to establish such a branch is available (a) in states that expressly authorize branches of savings associations located in another
state and (b) to an association that qualifies as a "domestic building and loan association" under the Internal Revenue Code of 1986, which imposes qualification requirements similar to those for a "qualified thrift lender" under HOLA. See "--QTL Test." The authority for a federal savings association to establish an interstate branch network would facilitate a geographic diversification of the association's activities. This authority under HOLA and the OTS regulations preempts any state law purporting to regulate branching by federal savings associations.
Community Reinvestment. Under the Community Reinvestment Act ("CRA"), as implemented by OTS regulations, a savings association has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the OTS, in connection with its examination of a savings association, to assess the association's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such association. The CRA also requires all institutions to make public disclosure of their CRA ratings. The Bank received a "Satisfactory" CRA rating in its most recent examination.
In April 1995, the OTS and the other federal banking agencies adopted amendments revising their CRA regulations. Among other things, the amended CRA regulations substitute for the prior process-based assessment factors a new evaluation system that would rate an institution based on its actual performance in meeting community needs. In particular, the proposed system would focus on three tests: (a) a lending test, to evaluate the institution's record of making loans in its assessment areas; (b) an investment test, to evaluate the institution's record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses; and (c) a service test, to evaluate the institution's delivery of services through its branches, ATMs, and other offices. The amended CRA regulations also clarify how an institution's CRA performance would be considered in the application process.
Transactions with Related Parties. The Bank's authority to engage in
transactions with its "affiliates" is limited by the OTS regulations and by
Sections 23A and 23B of the Federal Reserve Act ("FRA"). In general, an
affiliate of the Bank is any company that controls the Bank or any other company
that is controlled by a company that controls the Bank, excluding the Bank's
subsidiaries other than those that are insured depository institutions. The OTS
regulations prohibit a savings association (a) from lending to any of its
affiliates that is engaged in activities that are not permissible for bank
holding companies under Section 4(c) of the Bank Holding Company Act ("BHC Act")
and (b) from purchasing the securities of any affiliate other than a subsidiary.
Section 23A limits the aggregate amount of transactions with any individual
affiliate to 10% of the capital and surplus of the savings association and also
limits the aggregate amount of transactions with all affiliates to 20% of the
savings association's capital and surplus. Extensions of credit to affiliates
are required to be secured by collateral in an amount and of a type described in
Section 23A, and the purchase of low quality assets from affiliates is generally
prohibited. Section 23B provides that certain transactions with affiliates,
including loans and asset purchases, must be on terms and under circumstances,
including credit standards, that are substantially the same or at least as
favorable to the association as those prevailing at the time for comparable
transactions with nonaffiliated companies. In the absence of comparable
transactions, such transactions may only occur under terms and circumstances,
including credit standards, that in good faith would be offered to or would
apply to nonaffiliated companies.
The Bank's authority to extend credit to its directors, executive officers, and 10% shareholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the FRA and Regulation O of the Federal Reserve Board ("FRB") thereunder. Among other things, these provisions require that extensions of credit to insiders (a) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features and (b) not exceed certain limitations on the amount of credit
extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the association's capital. In addition, extensions of credit in excess of certain limits must be approved by the association's board of directors.
Enforcement. Under the Federal Deposit Insurance Act ("FDI Act"), the OTS has primary enforcement responsibility over savings associations and has the authority to bring enforcement action against all "institution-affiliated parties," including any controlling stockholder or any shareholder, attorney, appraiser and accountant who knowingly or recklessly participates in any violation of applicable law or regulation or breach of fiduciary duty or certain other wrongful actions that causes or is likely to cause a more than a minimal loss or other significant adverse effect on an insured savings association. Civil penalties cover a wide range of violations and actions and range from $5,000 for each day during which violations of law, regulations, orders, and certain written agreements and conditions continue, up to $1 million per day for such violations if the person obtained a substantial pecuniary gain as a result of such violation or knowingly or recklessly caused a substantial loss to the institution. Criminal penalties for certain financial institution crimes include fines of up to $1 million and imprisonment for up to 30 years. In addition, regulators have substantial discretion to take enforcement action against an institution that fails to comply with its regulatory requirements, particularly with respect to its capital requirements. Possible enforcement actions range from the imposition of a capital plan and capital directive to receivership, conservatorship, or the termination of deposit insurance. Under the FDI Act, the FDIC has the authority to recommend to the Director of OTS that enforcement action be taken with respect to a particular savings association. If action is not taken by the Director of the OTS, the FDIC has authority to take such action under certain circumstances.
Standards for Safety and Soundness. The FDI Act, as amended by FDICIA and the Riegle Community Development and Regulatory Improvement Act of 1994 ("Community Development Act"), requires the OTS, together with the other federal bank regulatory agencies, to prescribe standards, by regulations or guidelines, relating to internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, stock valuation, and compensation, fees and benefits and such other operational and managerial standards as the agencies deem appropriate. The OTS and the federal bank regulatory agencies have adopted, effective August 9, 1995, a set of guidelines prescribing safety and soundness standards pursuant to FDICIA, as amended. The guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal shareholder. The OTS and the other agencies determined that stock valuation standards were not appropriate. In addition, the OTS adopted regulations pursuant that authorize, but do not require, the OTS to order an institution that has been given notice by the OTS that it is not satisfying any of such safety and soundness standards to submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance plan or fails in any material respect to implement an accepted compliance plan, the OTS must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized association is subject under the "prompt corrective action" provisions of FDICIA. If an institution fails to comply with such an order, the OTS may seek to enforce such order in judicial proceedings and to impose civil money penalties. The OTS and the federal bank regulatory agencies also proposed guidelines for asset quality and earnings standards.
Real Estate Lending Standards. The OTS and the other federal banking agencies adopted regulations to prescribe standards for extensions of credit that (a) are secured by real estate or (b) are made for the purpose of financing the construction of improvements on real estate. The OTS regulations require each savings association to establish and maintain written internal real estate lending standards that are consistent with safe and sound banking practices and appropriate to the size of the association and the nature and scope of its real estate lending activities. The standards also must be consistent with accompanying OTS guidelines,
which include loan-to-value ratios for the different types of real estate loans. Banks are also permitted to make a limited amount of loans that do not conform to the proposed loan-to-value limitations so long as such exceptions are reviewed and justified appropriately. The guidelines also list a number of lending situations in which exceptions to the loan-to-value standards are justified.
Prompt Corrective Regulatory Action. Under the OTS prompt corrective action regulations, the OTS is required to take certain, and is authorized to take other, supervisory actions against undercapitalized savings associations. For this purpose, a savings association would be placed in one of five categories based on the association's capital. Generally, a savings association is treated as "well capitalized" if its ratio of total capital to risk-weighted assets is at least 10.0%, its ratio of core capital to risk-weighted assets is at least 6.0%, its ratio of core capital to total assets is at least 5.0%, and it is not subject to any order or directive by the OTS to meet a specific capital level. A savings association will be treated as "adequately capitalized" if its ratio of total capital to risk-weighted assets is at least 8.0%, its ratio of core capital to risk-weighted assets is at least 4.0%, and its ratio of core capital to total assets is at least 4.0% (3.0% if the association receives the highest rating on the CAMEL financial institutions rating system). A savings association that has a total risk-based capital of less than 8.0% or a leverage ratio or a Tier 1 capital ratio that is less than 4.0% (3.0% leverage ratio if the association receives the highest rating on the CAMEL financial institutions rating system) is considered to be "undercapitalized." A savings association that has a total risk-based capital of less than 6.0% or a Tier 1 risk-based capital ratio or a leverage ratio of less than 3.0% is considered to be "significantly undercapitalized." A savings association that has a tangible capital to assets ratio equal to or less than 2% is deemed to be "critically undercapitalized." The elements of an association's capital for purposes of the prompt corrective action regulations are defined generally as they are under the regulations for minimum capital requirements. See "--Capital Requirements."
The severity of the action authorized or required to be taken under the prompt corrective action regulations increases as an association's capital deteriorates within the three undercapitalized categories. All associations are prohibited from paying dividends or other capital distributions or paying management fees to any controlling person if, following such distribution, the association would be undercapitalized. An undercapitalized association is required to file a capital restoration plan within 45 days of the date the association receives notice that it is within any of the three undercapitalized categories. The OTS is required to monitor closely the condition of an undercapitalized association and to restrict the asset growth, acquisitions, branching, and new lines of business of such an association. Significantly undercapitalized associations are subject to restrictions on compensation of senior executive officers; such an association may not, without OTS consent, pay any bonus or provide compensation to any senior executive officer at a rate exceeding the officer's average rate of compensation (excluding bonuses, stock options and profit-sharing) during the 12 months preceding the month when the association became undercapitalized. A significantly undercapitalized association may also be subject, among other things, to forced changes in the composition of its board of directors or senior management, additional restrictions on transactions with affiliates, restrictions on acceptance of deposits from correspondent associations, further restrictions on asset growth, restrictions on rates paid on deposits, forced termination or reduction of activities deemed risky, and any further operational restrictions deemed necessary by the OTS.
If one or more grounds exist for appointing a conservator or receiver for an association, the OTS may require the association to issue additional debt or stock, sell assets, be acquired by a depository association holding company or combine with another depository association. The OTS and the FDIC have a broad range of grounds under which they may appoint a receiver or conservator for an insured depositary association. Under FDICIA, the OTS is required to appoint a receiver (or with the concurrence of the FDIC, a conservator) for a critically undercapitalized association within 90 days after the association becomes critically undercapitalized or, with the concurrence of the FDIC, to take such other action that would better achieve the purposes of the prompt corrective action provisions. Such alternative action can be renewed for successive 90-day periods. However, if the association continues to be critically undercapitalized on average during the quarter that begins 270 days after it first became critically undercapitalized, a receiver must be appointed, unless the OTS makes certain findings with which the FDIC concurs and the Director of the OTS and the
Chairman of the FDIC certify that the association is viable. In addition, an association that is critically undercapitalized is subject to more severe restrictions on its activities, and is prohibited, without prior approval of the FDIC from, among other things, entering into certain material transactions or paying interest on new or renewed liabilities at a rate that would significantly increase the association's weighted average cost of funds.
When appropriate, the OTS can require corrective action by a savings association holding company under the "prompt corrective action" provisions of FDICIA.
Insurance of Deposit Accounts. The Bank is a member of the SAIF of the FDIC, and the Bank pays its deposit insurance assessments to the SAIF of the FDIC. The FDIC also maintains another insurance fund, the Bank Insurance Fund ("BIF"), which primarily insures the deposits of banks and state chartered savings banks.
Pursuant to FDICIA, the FDIC established a new risk-based assessment system for determining the deposit insurance assessments to be paid by insured depositary institutions. Under the new assessment system, which began in 1993, the FDIC assigns an institution to one of three capital categories based on the institution's financial information as of the reporting period ending seven months before the assessment period. The three capital categories consist of (a) well capitalized, (b) adequately capitalized, or (c) undercapitalized. The FDIC also assigns an institution to one of three supervisory subcategories within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation provided to the FDIC by the institution's primary federal regulator and information that the FDIC determines to be relevant to the institution's financial condition and the risk posed to the deposit insurance funds. An institution's assessment rate depends on the capital category and supervisory category to which it is assigned. Under the regulation, there are nine assessment risk classifications (i.e., combinations of capital groups and supervisory subgroups) to which different assessment rates are applied. Beginning in 1993, the assessment rates for both the BIF and the SAIF had ranged from 0.23% of deposits for an institution in the highest category (i.e., well-capitalized and financially sound, with no more than a few minor weaknesses) to 0.31% of deposits for an institution in the lowest category (i.e., undercapitalized and substantial supervisory concern).
The FDI Act requires that the BIF and the SAIF funds each be recapitalized until reserves are at least 1.25% of the deposits insured by that fund. After a fund reached the 1.25% reserve ratio, the assessment rates for that fund could be reduced. The FDIC has reported that the BIF reached the required reserve ratio during May 1995. As a result of the recapitalization of the BIF, the FDIC reduced BIF-assessment rates. The FDIC initially reduced the BIF assessment rates, effective June 1, 1995, to a range of 0.04% to 0.27% of deposits. Having subsequently determined that the BIF had sufficient reserves in excess of the required 1.25% ratio, the FDIC reduced the BIF- assessment rate for "well capitalized" institutions without any significant supervisory concerns to the statutory minimum of $2,000 annually beginning with the first half of 1996, and the rates for other BIF-insured institutions will range from 0.03% to 0.27% of deposits.
The FDIC has reported that, under current law and reasonably optimistic financial projections, the SAIF is not expected to be recapitalized until 2001. SAIF reserves have not grown as quickly as the BIF reserves due to a number of factors, including the fact that a significant portion of SAIF assessments have been and are currently being used to make payments on bonds ("FICO bonds") issued in the late 1980s by the Financing Corporation to recapitalize the now defunct Federal Savings and Loan Insurance Corporation. Accordingly, the FDIC has determined that SAIF-insured institutions should continue to pay assessments at the current SAIF assessment rates, which range from 0.23% of deposits to 0.31% of deposits. The Bank's assessment rate for the first half of 1996 is 0.23% of deposits.
The resulting disparity in deposit insurance assessments rates between the SAIF members and the BIF members is likely to provide institutions paying only the BIF assessments with certain competitive advantages in the pricing of loans and deposits, and in lowered operating costs, pending any legislative action to remedy the disparity. Congress has considered proposed legislation to address these issues.
The proposed Balanced Budget Act of 1995 ("Budget Act"), which was approved by the Congress but vetoed by the President, included provisions that focused on a recapitalization of the SAIF. Under the provisions of the Budget Act, all SAIF-member institutions would have paid a special assessment to recapitalize the SAIF, and the assessment base for the payments on the FICO bonds would have been expanded to include the deposits of both BIF- and SAIF-insured institutions. The amount of the special assessment required to recapitalize the SAIF was then estimated to be approximately 80 basis points of the SAIF-assessable deposits. This estimate of the special assessment was less than the special assessment of 85 to 90 basis points that had been previously estimated. The special assessment would have been imposed as of the first business day of January 1996 or on such other date prescribed by the FDIC not later than 60 days after enactment of the Budget Act, based on the amount of SAIF deposits on March 31, 1995.
The Budget Act also provided for the merger of the BIF and SAIF on January 1, 1998, with such merger being conditioned upon the prior elimination of the thrift charter. Congressional leaders had also agreed that Congress should consider and act upon separate legislation to eliminate the thrift charter as early as possible in 1996. If adopted, such legislation would require that the Bank, as a federal savings bank, convert to a bank charter.
The veto of the Budget Act by the President was not based on the above described provisions of the Budget Act, and the federal banking regulators continue to seek a legislative solution for the recapitalization of the SAIF. In February 1996, representatives of the FDIC, the OTS and the Treasury Department stated to Congress that, unless Congress adopts legislation to strengthen the SAIF, SAIF's current problems could result in an erosion of the SAIF deposit base, could cause a default on the FICO bonds, and could leave the SAIF unable to meet its obligations to insured depositors.
If enacted by Congress, legislation to recapitalize the SAIF as proposed in the Budget Act would have the effect of reducing the capital of SAIF member institutions by the after-tax cost of the special SAIF assessment, plus any related additional tax liabilities. The legislation would also have the effect of reducing any differential that may otherwise be required in the assessment rates for the BIF and SAIF.
Management cannot predict whether the above legislation or any other legislative proposal will be enacted as described above or, if enacted, the amount of any special SAIF assessment, whether ongoing SAIF premiums will be reduced to a level equal to that of BIF premiums or whether, if thrifts are required to convert to a bank charter, there will be any relief from the additional tax liabilities that would be incurred upon the recapture of their bad debt reserves. It also cannot be predicted whether some other legislative action will be taken to address the BIF/SAIF disparity and what consequences such action could have for SAIF members. A significant increase in SAIF insurance premiums, either absolutely or relative to BIF premiums or a significant one-time fee to recapitalize the SAIF could have an adverse effect on the operating expenses and results of operations of the Bank.
Under the FDI Act, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OTS. The management of the Bank does not know of any practice, condition or violation that might lead to termination of deposit insurance.
Federal Home Loan Bank System. The Bank is a member of the FHLB of New York, which is one of the regional FHLBs composing the FHLB System. Each FHLB provides a central credit facility primarily for its member institutions. The Bank, as a member of the FHLB of New York, is required to acquire and hold shares of capital stock in the FHLB of New York in an amount at least equal to the greater of 1% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year or 1/20 of its advances (borrowings) from the FHLB of New York. The Bank was in compliance with this requirement with an investment in the capital stock of the FHLB of New York at December 31,
1995, of $3.1 million. Any advances from a FHLB must be secured by specified types of collateral, and all long-term advances may be obtained only for the purpose of providing funds for residential housing finance.
The FHLBs are required to provide funds for the resolution of insolvent thrifts and to contribute funds for affordable housing programs. These requirements could reduce the amount of earnings that the FHLBs can pay as dividends to their members and could also result in the FHLBs imposing a higher rate of interest on advances to their members. The FHLB of New York paid dividends on the capital stock of $115,600 and $74,000 for the six months ended December 31, 1995 and 1994 and $200,000, $204,000 and $281,000 during the years ended June 30, 1995, 1994 and 1993, respectively. If dividends were reduced, or interest on future FHLB advances increased, the Bank's net interest income would likely also be reduced. Further, there can be no assurance that the impact of FDICIA and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") on the FHLBs will not also cause a decrease in the value of the FHLB stock held by the Bank.
Federal Reserve System. The Bank is subject to provisions of the FRA and the FRB's regulations pursuant to which depositary institutions may be required to maintain non-interest-earning reserves against their deposit accounts and certain other liabilities. Currently, reserves must be maintained against transaction accounts (primarily NOW and regular checking accounts). The FRB regulations generally require that reserves be maintained in the amount of 3% of the aggregate of transaction accounts up to $52.0 million. The amount of aggregate transaction accounts in excess of $52.0 million are currently subject to a reserve ratio of 10%, which ratio the FRB may adjust between 8% and 12%. The FRB regulations currently exempt $4.3 million of otherwise reservable balances from the reserve requirements, which exemption is adjusted by the FRB at the end of each year. The Bank is in compliance with the foregoing reserve requirements. Because required reserves must be maintained in the form of either vault cash, a non-interest-bearing account at a Federal Reserve Bank, or a pass-through account as defined by the FRB, the effect of this reserve requirement is to reduce the Bank's interest-earning assets. The balances maintained to meet the reserve requirements imposed by the FRB may be used to satisfy liquidity requirements imposed by the OTS. FHLB System members are also authorized to borrow from the Federal Reserve "discount window," but FRB regulations require such institutions to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.
REGULATION OF HOLDING COMPANY
The Company, if utilized, will be a non-diversified unitary savings association holding company within the meaning of HOLA, as amended. As such, the Company will be required to register with the OTS and will be subject to OTS regulations, examinations, supervision and reporting requirements. In addition, the OTS has enforcement authority over the Company and its non-savings association subsidiaries, if any. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness, or stability of a subsidiary savings association.
HOLA prohibits a savings association holding company, directly or indirectly, or through one or more subsidiaries, from acquiring another savings association or holding company thereof, without prior written approval of the OTS; acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by HOLA; or acquiring or retaining control of a depository institution that is not insured by the FDIC. In evaluating an application by a holding company to acquire a savings association, the OTS must consider the financial and managerial resources and future prospects of the company and savings association involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community, and competitive factors.
As a unitary savings association holding company, the Company generally will not be restricted under existing laws as to the types of business activities in which it may engage, provided that the Bank continues to satisfy the QTL test. See "--Regulation of Federal Savings Associations--QTL Test" for a discussion of the QTL requirements. Upon any non-supervisory acquisition by the Company of another savings association
or savings bank that meets the QTL test and is deemed to be a savings association by the OTS and that will be held as a separate subsidiary, the Company would become a multiple savings association holding company and would be subject to limitations on the types of business activities in which it could engage. HOLA limits the activities of a multiple savings association holding company and its non-insured association subsidiaries primarily to activities permissible for bank holding companies under Section 4(c)(8) of the BHC Act, subject to the prior approval of the OTS, and to other activities authorized by OTS regulation.
The OTS is prohibited from approving any acquisition that would result in a multiple savings association holding company controlling savings associations in more than one state, subject to two exceptions: an acquisition of a savings association in another state (a) in a supervisory transaction, and (b) pursuant to authority under the laws of the state of the association to be acquired that specifically permit such acquisitions. The conditions imposed upon interstate acquisitions by those states that have enacted authorizing legislation vary. Some states impose conditions of reciprocity, which have the effect of requiring that the laws of both the state in which the acquiring holding company is located (as determined by the location of its subsidiary savings association) and the state in which the association to be acquired is located, have each enacted legislation allowing its savings associations to be acquired by out-of-state holding companies on the condition that the laws of the other state authorize such transactions on terms no more restrictive than those imposed on the acquiror by the state of the target association. Some of these states also impose regional limitations, which restrict such acquisitions to states within a defined geographic region. Other states allow full nationwide banking without any condition of reciprocity. Some states do not authorize interstate acquisitions of savings associations.
Transactions between the Bank and the Company and its other subsidiaries would be subject to various conditions and limitations. See "--Regulation of Federal Savings Associations--Transactions with Related Parties." The Bank would have to give 30-days written notice to the OTS prior to any declaration of the payment of any dividends or other capital distributions to the Company. See "--Regulation of Federal Savings Associations--Limitation on Capital Distributions."
FEDERAL SECURITIES LAWS
The Company has filed with the SEC a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), for the registration of the Common Stock to be issued pursuant to the Conversion. Upon completion of the Conversion, the Company's Common Stock will be registered with the SEC under the Exchange Act. The Company will then be subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.
The registration under the Securities Act of shares of the Common Stock to be issued in the Conversion does not cover the resale of such shares. Shares of the Common Stock purchased by persons who are not affiliates of the Company may be resold without registration. Shares purchased by an affiliate of the Company will be subject to the resale restrictions of Rule 144 under the Securities Act. If the Company meets the current public information requirements of Rule 144 under the Securities Act, each affiliate of the Company who complies with the other conditions of Rule 144 (including those that require the affiliate's sale to be aggregated with those of certain other persons) would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of (a) 1% of the outstanding shares of the Company or (b) the average weekly volume of trading in such shares during the preceding four calendar weeks. Provision may be made in the future by the Company to permit affiliates to have their shares registered for sale under the Securities Act under certain circumstances.
In the event that the holding company form of organization is not utilized, the shares of the Bank's common stock to be issued and sold in the Conversion are exempt from registration under Section 3(a)(5) of the Securities Act. Prior to the sale of all shares of its common stock, the Bank will register its capital stock under Section 12(g) of the Exchange Act. Upon such registration, the proxy rules, tender offer rules, insider trading restrictions, annual and periodic reporting and other requirements of the Exchange Act will also be
applicable to the Bank but under the jurisdiction of the OTS. The Bank is required by the OTS to maintain said registration for a period of at least three years following Conversion. The Bank will, however, register with and report to the OTS and not to the SEC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Bank's net income is dependent primarily on its net interest income, which is the difference between interest income earned on its loan and investment and mortgage-backed securities portfolios and the interest paid on its interest-bearing liabilities, such as deposits and borrowings. The Bank has undertaken a restructuring of its balance sheet and is now placing primary emphasis on its whole loan portfolio through direct lending, as well as the purchase of whole loans. As a result of this effort, the loan portfolio is expected to substantially increase as a percentage of total assets. Therefore, future earnings for the Bank will be derived more from direct lending and loan purchase activities than from investing in securities. The Bank's net income is also affected by the generation of non-interest income, such as loan fees and service charges, as well as gains on sales of securities held for sale. In addition, net income is affected by the level of the provision for loan losses, as well as operating expenses. The Bank is also continuing its strategy of growth by leveraging its strong capital position through increased average borrowings to fund increases in average interest-earning assets.
The operations of the Bank and the entire thrift industry are significantly affected by prevailing economic conditions, competition and the monetary and fiscal policies of governmental agencies. Lending activities are influenced by the demand for and supply of housing, competition among lenders, the level of interest rates and the availability of funds. Deposit flow and costs of funds are influenced by prevailing market rates of interest, primarily on competing investments, account maturities, and the levels of personal income and savings nationwide.
ASSET/LIABILITY MANAGEMENT
Net interest income, the primary component of Carver's net income, is determined by the difference or "spread" between the yield earned on the Bank's interest-earning assets and the rates paid on its interest-bearing liabilities and the relative amounts of such assets and liabilities. Because Carver's interest-bearing liabilities consist primarily of shorter term deposit accounts, the Bank's interest rate spread can be adversely affected by changes in general interest rates if its interest-earning assets are not sufficiently sensitive to changes in interest rates. Management has sought to reduce the Bank's exposure to changes in interest rates by more closely matching the effective maturities and repricing periods of its interest-earning assets and interest-bearing liabilities through a variety of strategies, including the origination and purchase of adjustable-rate loans for its portfolio, investment in adjustable-rate and shorter-term mortgage-backed securities, and the sale of substantially all long-term fixed-rate loans originated into the secondary market.
Carver has also managed interest rate risk through the origination and purchase of loans, primarily with adjustable interest rates, and management of its investment and mortgage-backed securities portfolios. During fiscal year 1995, the Bank substantially increased its portfolio of adjustable-rate and short duration mortgage-backed securities. Funding for these purchases came from the proceeds from the Bank's initial public offering of its common stock and from additional borrowings in the form of reverse repurchase agreements and short-term advances from the Federal Home Loan Bank ("FHLB") of New York. During fiscal year 1996, the Bank's loan portfolio increased by $34.1 million, or 70.47%. The growth in the mortgage portfolio was funded by internal deposit growth and funding from FHLB advances. Under SFAS 115, in connection with a one time opportunity permitted by the Financial Accounting Standards Board and regulatory agencies, the Bank reclassified $25.2 million of mortgage-backed securities from held-to-maturity
to available-for-sale in December 1995 in order to increase the flexibility of the Bank's balance sheet to meet increased need for future loan originations and purchases.
INTEREST RATE SENSITIVITY ANALYSIS
The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are "interest rate sensitive" and by monitoring an institution's interest rate sensitivity "gap." An asset or liability is said to be interest rate-sensitive within a specific period if it will mature or reprice within that period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific period of time and the amount of interest-bearing liabilities repricing within that same time period. A gap is considered positive when the amount of rate-sensitive assets exceeds the amount of rate-sensitive liabilities and is considered negative when the amount of interest rate sensitive liabilities exceed the amount of rate-sensitive assets. Generally, during a period of falling interest rates a negative gap could result in an increase in net interest income, while a positive gap could adversely affect net interest income, and during a period of rising interest rates a negative gap could adversely affect net interest income, while a positive gap could result in an increase in net interest income. As illustrated below, Carver had a positive one-year gap equal to 28.41% of total rate-sensitive assets at March 31, 1996, as a result of which its net interest income could be adversely affected by falling interest rates, and positively affected by rising interest rates.
The following table sets forth information regarding the projected maturities, prepayments and repricing of the major rate-sensitive asset and liability categories of Carver as of March 31, 1996. Maturity and repricing dates have been projected by applying the assumptions set forth below to contractual maturity and repricing dates. The information presented in the following table is derived from data incorporated in "Schedule CMR: Consolidated Maturity and Rate," which is part of the Bank's quarterly reports filed with the Office of Thrift Supervision ("OTS"). The repricing and other assumptions are not necessarily representative of the Bank's actual results. Classifications of items in the table below are different from those presented in other tables and the financial statements and accompanying notes included herein and do not reflect non-performing Loans.
THREE FOUR TO OVER ONE OVER THREE OVER FIVE
MONTHS TWELVE THROUGH THROUGH THROUGH OVER TEN
OR LESS MONTHS THREE YEARS FIVE YEARS TEN YEARS YEARS TOTAL
-------- -------- ----------- ---------- --------- -------- --------
(DOLLARS IN THOUSANDS)
Rate-sensitive assets:
Loans ...................... $ 24,438 $ 23,095 $ 20,619 $ 3,669 $ 5,789 $ 4,998 $ 82,608
Federal funds sold ......... 6,800 -- -- -- -- -- 6,800
Investment securities (1)... 82,718 -- 1,937 -- -- -- 84,655
Mortgage-backed securities.. 96,113 21,883 21,530 11,382 14,488 8,439 172,8352
-------- -------- -------- -------- -------- -------- --------
Total .................... 209,069 44,978 44,086 15,050 20,277 13,437 346,898
-------- -------- -------- -------- -------- -------- --------
Rate-sensitive liabilities:
Deposits ................... 39,285 59,154 65,923 35,026 35,389 22,175 256,952
Borrowings ................. 20,000 38,000 14,000 -- 1,948 -- 73,948
Total .................... 59,285 97,154 79,923 35,026 37,337 22,175 330,900
Interest sensitivity gap ... 149,784 (52,176) (35,837) (19,976) (17,060) (8,738) 15,997
-------- -------- -------- -------- -------- --------
Cumulative interest
sensitivity gap .......... 149,784 97,608 61,771 41,795 24,735 15,997
-------- -------- -------- -------- -------- --------
Ratio of cumulative gap
to total rate-sensitive
assets ................... 43.18% 28.14% 17.81% 12.05% 7.13% 4.61%
-------- -------- -------- -------- -------- --------
|
The preceding table was prepared utilizing certain assumptions regarding prepayment and decay rates as determined by the OTS for savings associations nationwide as of March 31, 1995. While management does
not believe that these assumptions will be materially different from Carver's
actual experience, the actual interest rate sensitivity of the Bank's assets and
liabilities could vary significantly from the information set forth in the table
due to market and other factors. The following assumptions were used: (i)
adjustable-rate first mortgage loans will prepay at the rate of 6% per year and
(ii) fixed-rate first mortgage will prepay annually as follows:
ANNUAL PREPAYMENT RATE
-----------------------------------------
30-YEAR 15-YEAR 5-YEAR BALLOON
------- ------- --------------
6.50% . . . . . 9.00% 8.00% 13.00%
7.00 . . . . . 9.00 9.00 16.00
7.50 . . . . . 11.00 11.00 19.00
8.00 . . . . . 13.00 14.00 25.00
8.50 . . . . . 16.00 -- --
9.00 . . . . . 20.00 -- --
9.50 . . . . . 25.00 -- --
10.00 . . . . . 28.00 -- --
|
In addition, it is assumed that fixed maturity deposits are not withdrawn prior to maturity, transaction accounts will decay at a rate of 37% in the first year and passbook accounts will decay at a rate of 17% in the first year, and money market accounts will reflect a 79% decay rate in year one.
Certain shortcomings are inherent in the method of analysis presented in the table above. Although certain assets and liabilities may have similar maturity or periods of repricing, they may react in different degrees to changes in the market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such as adjustable-rate mortgages, generally have features which restrict changes in interest rates on a short-term basis and over the life of the asset. In the event of a change in interest rates, prepayments and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Additionally, an increased credit risk may result as the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. Virtually all of the adjustable-rate loans in the Bank's portfolio contain conditions which restrict the periodic change in interest rate.
The ratio of cumulative gap to total rate sensitive assets for the first year increased from positive 25.76% at March 31, 1995 to positive 28.41% at the end of March 31, 1996. The adjustable-rate assets accounts for 67% of the Bank's total interest-sensitive assets as at March 31, 1996.
AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES
The following table sets forth certain information relating to the Bank's average interest-earning assets and average interest-bearing liabilities and reflects the average yield on assets and the average cost of liabilities for the years indicated. Such yields and costs are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods shown. Average balances are derived from average month-end balances, except for federal funds which are derived from daily balances. Management does not believe that the use of average monthly balances instead of average daily balances on all other accounts has caused any material difference in the information presented.
The table also presents information for the years indicated with respect to the difference between the weighted average yield earned on interest-earning assets and the weighted average rate paid on interest-bearing liabilities, or "interest rate spread," which savings institutions have traditionally used as an indicator of profitability. Another indicator of an institution's net interest income is its "net interest margin," which is its net interest income divided by the average balance of interest-earning assets. Net interest income is affected by the interest rate spread and by the relative amounts of interest-earning assets and interest-bearing liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.
AT MARCH 31, YEAR ENDED MARCH 31,
---------------------- ------------------------------------
1996 1996
---------------------- ------------------------------------
AVERAGE AVERAGE
YIELD/ AVERAGE YIELD/
BALANCE COST BALANCE INTEREST COST
------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS)
ASSETS:
Interest-earning assets:
Loans (1) $ 82,608 8.25% $ 58,136 $ 4,800 8.26%
Investment securities (2) 88,116 6.50 91,639 5,807 6.34
Mortgage-backed securities (3) 172,599 6.80 188,136 12,217 6.49
Federal funds sold 6,800 5.00 11,949 705 5.90
-------- -------- -------
Total interest-earning assets 350,123 7.03 349,860 23,529 6.73
Non-interest earning assets 17,509 13,977
-------- --------
Total assets $367,632 $363,837
======== ========
LIABILITIES:
Interest-bearing liabilities:
Deposits:
DDA(4) $ 6,046 0 $ 4,761 0 0
NOW 16,916 1.86 15,539 314 2.02
Savings and Clubs 141,873 2.50 140,204 3,507 2.50
Money market accounts 19,444 3.17 18,770 599 3.19
Certificate of deposits 72,673 5.27 74,060 3,970 5.36
-------- ---- -------- ------- ----
Total deposits $256,952 3.23 $253,334 8,390 3.31
Borrowed money 73,948 5.18 73,253 5,204 7.10
-------- ---- -------- ------- ----
Total interest-bearing liabilities 330,900 3.67 326,587 13,594 4.16
Non-interest bearing liabilities 1,992 2,230 -------
-------- --------
Total liabilities 332,892 328,817
Stockholders' equity 34,740 35,020
-------- --------
Total liabilities and
stockholders' equity $367,632 $363,837
======== ========
Net interest income $ 9,935
=======
Interest rate spread 3.36% 2.57%
==== ====
Net interest margin 2.85%
Ratio of average interest- ====
earning assets to average
interest-bearing liabilities 1.07x
====
YEAR ENDED MARCH 31,
---------------------------------------------------------------------------
1995 1994
------------------------------------ -----------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------- -------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS)
ASSETS:
Interest-earning assets:
Loans (1) $ 49,609 $ 4,092 8.25% $ 53,744 $ 4,558 8.48%
Investment securities (2) 81,466 5,230 6.42 44,678 2,272 5.09
Mortgage-backed securities (3) 179,963 10,159 5.65 195,040 10,452 5.36
Federal funds sold 5,738 269 4.69 6,314 182 2.88
-------- -------- -------- --------
Total interest-earning assets 316,776 19,750 6.23 299,776 17,464 5.83
Non-interest earning assets 15,369 -------- 12,572 --------
-------- --------
Total assets $332,145 $312,348
======== ========
LIABILITIES:
Interest-bearing liabilities:
Deposits:
DDA(4) $ 3,814 0 0 $ 918 0 0
NOW 13,904 226 1.62 12,792 257 2.01
Savings and Clubs 144,092 3,591 2.49 142,048 3,722 2.62
Money market accounts 19,135 541 2.83 21,111 579 2.74
Certificate of deposits 66,870 3,115 4.66 73,476 3,365 4.58
-------- -------- ---- -------- -------- ----
Total deposits $247,815 7,473 3.02 $250,345 7,923 3.16
Borrowed money 54,226 3,059 5.64 44,676 2,244 5.02
-------- -------- ---- -------- -------- ----
Total interest-bearing liabilities 302,041 10,532 3.49 295,021 10,167 3.45
Non-interest bearing liabilities 6,710 -------- 3,583 --------
-------- --------
Total liabilities 308,751 298,604
Stockholders' equity 23,394 13,744
-------- --------
Total liabilities and
stockholders' equity $332,145 $312,348
======== ========
Net interest income $ 9,218 $ 7,297
======= =======
Interest rate spread 2.74% 2.38%
==== ====
Net interest margin 2.91% 2.43%
Ratio of average interest- ==== ====
earning assets to average
interest-bearing liabilities 1.05x 1.02x
==== ====
|
RATE/VOLUME ANALYSIS
The following table sets forth information regarding the extent to which
changes in interest rates and changes in volume of interest related assets and
liabilities have affected Carver's interest income and expense during the
periods indicated. For each category of interest-earning asset and
interest-bearing liability, information is provided for changes attributable to
(i) changes in volume (changes in volume multiplied by new rate), (ii) changes
in rates (change in rate multiplied by new volume), and (iii) total change.
Changes in rate/volume (changes in rate multiplied by the changes in volume) are
allocated proportionately between changes in rate and changes in volume.
YEAR ENDED MARCH 31,
--------------------------------------------------------------
1996 VS. 1995 1995 VS. 1994
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO DUE TO
--------------------------------------------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
------- ------- ------- ------- ------- -------
Interest earning assets:
Loans $ 704 $ 4 $ 708 $ (345) $ (121) $ (466)
Investment securities(1) 645 (68) 577 2,246 712 2,958
Mortgage-backed securities(1) 531 1,527 2,058 (978) 685 (293)
Federal funds sold 367 69 436 (16) 103 87
------- ------- ------- ------- ------- -------
Total interest-earning assets 2,247 1,532 3,779 907 1,379 2,286
------- ------- ------- ------- ------- -------
Interest-bearing liabilities:
NOWs 33 54 87 18 (50) (32)
Savings and Clubs (97) 14 (83) 51 (182) (131)
Money Market Accounts (11) 71 60 (56) 18 (38)
Certificates of Deposit 385 468 853 (97) (152) (249)
------- ------- ------- ------- ------- -------
Total Deposits 310 607 917 (84) (366) (450)
Borrowed money 1,352 793 2,145 516 299 815
------- ------- ------- ------- ------- -------
Total interest-bearing
liabilities 1,662 1,400 3,062 432 (67) 365
------- ------- ------- ------- ------- -------
Net change in net interest income $ 585 $ 132 $ 717 $ 475 $ 1,446 $ 1,921
======= ======= ======= ======= ======= =======
|
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1996 AND 1995
The Bank's total assets decreased by $305,000, or .09% from $367.9 million at March 31, 1995 to $367.6 million at March 31, 1996. The decrease in assets was not significant. The Bank's portfolio of mortgage-backed securities available-for-sale increased $22.0 million, or 111.1%, to $41.7 million at March 31, 1996 from $19.7 million at March 31, 1994 and its portfolio of mortgage-backed securities held-to-maturity decreased $50.0 million, or 27.6%, to $131.1 million at March 31, 1996 from $181.1 million at March 31, 1995. The reason for change in those two portfolios was mainly due to a transfer of $25.2 million of mortgage-backed securities from the held-to-maturity portfolio to the available-for-sale portfolio as allowed by FASB 115. See "-- Asset Liability Management." Investment securities held-to-maturity decreased $9.1 million, or 50.45%, to $8.9 million at March 31, 1996 from $18.0 million at March 31, 1995. This decrease in investment was due to call back of bonds of $9 million. The Bank's securities available-for-sale and held-to-maturity consisted primarily of U.S. Government and agency securities and mutual funds invested in similar securities. The Bank's mortgage-backed securities consisted entirely of securities which meet the regulatory definition of non-high risk mortgage securities. The Bank's loans receivable increased to $82.6 million at March 31, 1996 as compared to $48.5 million at March 31, 1995. In fiscal year 1996 Carver purchased $25.9 million of single family loans.
The Bank's total liabilities decreased by $268,000, or .08%, from $333.2 million at March 31, 1995 to $332.8 million at March 31, 1996 as the result of decreased borrowings partially offset by increased deposits. At March 31, 1996, the Bank's FHLB of New York advances were $25.4 million, a decrease of $37.0 million, or 59.29%, as compared to advances of $62.4 million at March 31, 1995. Securities sold under agreements to repurchase increased $28.8 million, or 158.41%, to $47.0 million at March 31, 1996 from $18.2 million at March 31, 1995. The Bank used the principal payments of securities to decrease the borrowing in order to reduce the cost of fund.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1995 AND 1994
The Bank's total assets increased by $59.5 million, or 19.3%, from $308.5 million at March 31, 1994 to $368.0 million at March 31, 1995. The increase in assets was principally due to significant increases in the Bank's portfolios of securities available-for-sale and mortgage-backed and investment securities held-to-maturity. The Bank's portfolio of securities available-for-sale increased $21.8 million, or 30.4%, to $93.3 million at March 31, 1995 from $71.6 million at March 31, 1994 and its portfolio of mortgage-backed securities held-to-maturity increased $27.3 million, or 17.7%, to $181.1 million at March 31, 1995 from $153.8 million at March 31, 1994. Investment securities held-to-maturity increased $6.0 million, or 50.1%, to $18.0 million at March 31, 1995 from $12.0 million at March 31, 1994. The Bank's loans receivable decreased to $48.5 million at March 31, 1995 as compared to $51.0 million at March 31, 1994. The Bank increased its portfolios of securities and mortgage-backed securities in order to expand its earning asset base and increase net interest income. The increase in earning assets was funded with the proceeds from the sale of 2,314,375 shares of Common Stock in the Conversion and from the proceeds from additional borrowings. The increase in the securities available-for-sale and held-to-maturity consisted primarily of U.S. Government and agency securities and mutual funds invested in similar securities. The additional mortgage-backed securities consisted entirely of securities which meet the regulatory definition of non high-risk mortgage securities. With the capital received from the Conversion, the Bank has the capacity for additional asset growth funded with borrowings.
The Bank's total liabilities increased by $38.8 million, or 13.2%, from $294.3 million at March 31, 1994 to $333.2 million at March 31, 1995 as the result of increased borrowings in the form of advances from the FHLB of New York and repurchase agreements. At March 31, 1995, the Bank's FHLB of New York advances were $62.4 million, an increase of $32.0 million, or 105.3%, as compared to advances of $30.4 million at March 31, 1994. Securities sold under agreements to repurchase increased $8.7 million, or 90.9%, to $18.2 million at March 31, 1995 from $9.5 million at March 31, 1994. The Bank used these increases in FHLB advances and repurchase agreements to fund its increase in investment and mortgage-backed securities held-to-maturity and securities available-for-sale. The increase in borrowings offset a decline in deposits of $4.0 million, or 1.6%, to $248.5 million at March 31, 1995 from $252.5 million at March 31, 1994. The Bank attributes the decline in deposits to competition from other investment alternatives during a period of generally rising rates and the purchase of Common Stock by depositors in the Conversion.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
NET INCOME
Net income for the year ended March 31, 1996, decreased by $92,000, or
10.88%, to $743,000 from $845,000 for the year ended March 31, 1995. The decline
in net income resulted primarily from an increase in non-interest expense.
During fiscal year 1996, Carver invested substantially in improving the Bank's
infrastructure. These investments encompassed upgrading technology, increasing
lending department staff, expanding marketing efforts, and re-opening the Bank's
headquarters which had been destroyed by fire. The Bank also incurred increased
legal cost in defending the class action suit brought by the shareholders which
was dismissed for lack of subject matter jurisdiction, as well as higher legal
costs associated with operating as a public company. See "Business of the Bank
- -- Legal Proceedings."
NET INTEREST INCOME
Net interest income before provision for loan losses for the year ended March 31, 1996 increased $716,000, or 7.77%, to $9.9 million as compared to $9.2 million for the year ended March 31, 1995. The Bank's interest rate spread narrowed from 2.74% in fiscal year 1995 to 2.57% in fiscal year and its interest margin decreased from 2.91% in fiscal year 1995 to 2.85% in fiscal year 1996. This decrease in interest rate spread and interest margin resulted from increased cost of deposits and borrowed money which was partially offset by an increase in average yield on interest earning assets. The ratio of the Bank's average interest-earning assets to interest-bearing liabilities improved to 1.07x in fiscal year 1996 from 1.05x in fiscal year 1995. The improvement in this ratio primarily reflects an increase in stockholders' equity and non-interest-bearing liabilities.
INTEREST INCOME
The Bank's interest income for the fiscal year ended March 31, 1996 increased $3.8 million, or 19.13%, to $23.5 million as compared to $19.8 million for the fiscal year ended March 31, 1995. The increase in interest income resulted primarily from a 50 basis point increase in the average yield on interest-bearing assets, from 6.23% during fiscal year 1995 to 6.73% during fiscal year 1996. The increase in average yield reflects the higher interest rate environment experienced during fiscal year 1996 and, to a lesser extent, the increased percentage of interest-earning assets represented by higher yielding loans during the year.
The increase in interest income resulted in part from a $2.1 million, or 20.26%, increase in income from mortgage-backed securities due to increases in the Bank's portfolio of securities held-to-maturity and securities available-for-sale during fiscal year 1996. This increase was primarily due to an increase of $8.2 million, or 4.54%, in the average balance of mortgage-backed securities during fiscal year 1996 as compared to fiscal year 1995. The increase in income from these assets was enhanced by an increase of 84 basis points in yields to 6.49% during fiscal year 1996 from 5.65% during fiscal year 1995. The higher average balance and higher yield in mortgage-backed securities portfolio during fiscal year 1996 reflect the investment of funds from deposit growth. Interest income from loans increased $708,000, or 17.30%, to $4.8 million during fiscal year 1996 as compared to $4.1 million during fiscal year 1995. The increase in income from loans was primarily due to an increase in average balance of $8.5 million, or 17.19%, during fiscal year 1996 as compared to fiscal year 1995 reflecting the implementation of the Bank's strategy of increasing loan originations and purchases. Interest income from investment securities increased $577,000, or 11.03%, to $5.8 million during fiscal year 1996 as compared to $5.2 million for the year ended March 31, 1995. This increase in interest income is due to an increase in the average balance of investment securities of $10.2 million during fiscal year 1996 as compared to fiscal year 1995. The average yield on investment securities decreased by 8 basis points during fiscal year 1996 to 6.34% as compared to 6.42% during fiscal year 1995. Interest income from federal funds sold increased $436,000, or 162.08%, to $705,000 during fiscal year 1996 as compared to $269,000 during fiscal year 1995. This increase in interest income reflects an increase in the average balance of federal funds sold of $6.2 million, or 108.24%, to $11.9 million during fiscal year 1996 as compared to $5.7 million during fiscal year 1995. The increase in interest income from federal funds sold is in part due to 121 basis points in average yield during fiscal year 1996 as compared to fiscal year 1995.
INTEREST EXPENSE
Total interest expense increased $3.1 million, or 29.07%, to $13.6 million for fiscal year 1996 as compared to $10.5 million for fiscal year 1995. The increase was attributable to an increase in average interest-bearing liabilities due to an increase in deposits and borrowings. The interest expense on deposits for the year ended March 31, 1996, increased $917,000, or 12.27%, from $7.5 million for the year ended March 31, 1995 to $8.4 million for the year ended March 31, 1996. The increase resulted from a $5.5 million, or 2.23%, increase in the average balance of deposits and a 29 basis point increase in the average cost of deposits, from 3.02% for the year ended March 31, 1995 to 3.31% for fiscal year 1996. The increase in deposit costs is due principally to an increase in higher rate certificate accounts. Interest expense on borrowings for the year ended March 31, 1996, increased $2.1 million, or 70.12%, from $3.1 million for the
year ended March 31, 1995 to $5.2 million for the year ended March 31, 1996. The increase resulted from a $19.0 million, or 35.09%, increase in the average balance of borrowings, reflecting the Bank's leveraging strategy, and a 146 basis point increase in the average cost of borrowings, from 5.64% for fiscal year 1995 to 7.10% for fiscal year 1996, due to the impact of the higher interest rate environment experienced during the fiscal year.
PROVISION FOR LOAN LOSSES
The provision for loan losses decreased by $203,000 from $334,000 for the year ended March 31, 1995, to $131,000 for the year ended March 31, 1996. There were no charge-offs during fiscal year 1996. Recovery of charge-offs amounted to $19,000 during the same period. The charge-offs net of recoveries during fiscal year 1995 amounted to $527,000. The net effect of the provision for loan losses and the net recovery during fiscal year 1996 was an increase of the Bank's total allowance for loan losses from $1.1 million at March 31, 1995 to $1.2 million at March 31, 1996. At March 31, 1996, the allowance for loan losses represented 1.42% of the gross loan portfolio compared to 2.1% at March 31, 1995. In determining its provision for loan losses, management establishes loss allowances on identified problem loans and the remainder of the loan portfolio. See "Business of the Bank -- Asset Quality."
NON-INTEREST INCOME
Non-interest income for fiscal year 1996 increased $32,000, or 5.62%, to $608,000, from $576,000 for fiscal year 1995, due primarily to an increase in loan fees income.
NON-INTEREST EXPENSE
Non-interest expense increased $1.1 million, or 14.00%, to $9.1 million for fiscal year 1996 as compared to $7.9 million for fiscal year 1995. During fiscal year 1996 the Bank invested substantially in improving its infrastructure. These investments encompassed upgrading technology, increasing management and lending department staff, expanding marketing efforts, and re-opening the Bank's headquarters which had been destroyed by fire. These investments increased operating expenses for fiscal year 1996. Salaries and employee benefits for fiscal year 1996 increased $408,000, or 13.26%, to $3.5 million from $3.1 million for fiscal year 1995. This increase was due to increases in management and lending department staff, incentive compensation and ESOP expense. Net occupancy expense for fiscal year 1996 increased $123,000, or 14.39%, to $978,000 from $853,000 in fiscal year 1995. Increases in rent, cleaning expense and depreciation of leasehold expenses account for the increase in occupancy expense. Advertising expense for fiscal year 1996 increased $105,000, or 164.56%, to $168,000 from $64,000 in fiscal year 1995. Carver retained during fiscal year 1996 the services of a marketing company to expand marketing efforts in order to increase origination of loans and deposits for the branches. FDIC insurance premium expense decreased $113,000, or 15.45%, to $618,000 during fiscal year 1996 as compared to $731,000 during fiscal year 1995 due to lower premium rates. Legal expenses during fiscal year 1996 increased $227,000, or 183.35%, to $351,000 from $124,000 during fiscal year 1995. The increase in legal expenses was due mainly to defending the class action law suit brought by certain shareholders as well as higher legal costs associated with operating as a public company. See "Business of the Bank -- Legal Proceedings." Other non-interest expense (not including legal expenses) increased $488,000, or 34.01%, due to increases on a variety of miscellaneous expense categories.
INCOME TAX EXPENSE
Income tax expense for fiscal year 1996 decreased to $606,000, compared to $674,000 for fiscal year 1995, because of lower earnings before extraordinary income and the cumulative effect of changes in accounting principles. The Bank's effective tax rate remains the same as for fiscal year 1995.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1995 AND 1994
NET INCOME
Net income for the year ended March 31, 1995, decreased by $238,000, or 21.9%, to $845,000 from $1.1 million for the year ended March 31, 1994. The decline in net income, however, resulted primarily from certain non-recurring income during the year ended March 31, 1994. Net income for fiscal year 1994 included $323,000 in income related to an insurance settlement in connection with the involuntary conversion of the Bank's main office building as the result of an electrical fire and $252,000 in income attributable to the cumulative effect of a change in accounting principle related to the adoption of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Income before extraordinary income and cumulative effect of change in accounting principle for the year ended March 31, 1995 increased $337,000, or 66.3%, to $845,000 as compared to $508,000 for the year ended March 31, 1994. This increase was attributable to an increase in net interest income which more than offset a decline in non-interest income and increases in non-interest expense and income taxes.
NET INTEREST INCOME
Net interest income before provision for loan losses for the year ended March 31, 1995 increased $1.9 million, or 26.3%, to $9.2 million as compared to $7.3 million for the year ended March 31, 1994. The Bank's interest rate spread widened from 2.38% in fiscal year 1994 to 2.74% in fiscal year 1995 and its net interest margin increased from 2.43% in fiscal year 1994 to 2.91% in fiscal year 1995. This increase in the interest rate spread and net interest margin resulted from deposits repricing upward at a slower rate than interest rates on interest-earning assets. The Bank's net interest income was aided by an improvement in the ratio of the Bank's average interest-earning assets to interest-bearing liabilities to 1.05x in fiscal year 1995 from 1.02x in fiscal year 1994. The improvement in this ratio primarily reflects an increase in stockholders' equity and non-interest-bearing liabilities. Although the Bank's ratio of interest-earning assets to interest-bearing liabilities may be adversely impacted by its planned construction of a new office building which will increase its level of non-earning assets, it is anticipated that this effect will be substantially mitigated by the continued deployment of Conversion proceeds into interest-earning assets.
INTEREST INCOME
The Bank's interest income for the fiscal year ended March 31, 1995 increased $2.3 million, or 13.1%, to $19.8 million as compared to $17.5 million for the fiscal year ended March 31, 1994. The increase in interest income resulted primarily from a 40 basis point increase in the average yield on interest-bearing assets, from 5.83% during fiscal year 1994 to 6.23% during fiscal year 1995. The increase in average yield reflects the higher interest rate environment during fiscal year 1995. The Bank also experienced a $17.0 million, or 5.7%, increase in the average balance of interest-earning assets, principally as a result of the Bank's investment of the proceeds from the Conversion and additional borrowings
The increase in interest income resulted in part from a $3.0 million, or 130.2%, increase in income from investments and other interest-earning assets due to substantial increases in the Bank's portfolio of securities held-to-maturity and securities available-for-sale during fiscal year 1995. This increase was primarily due to an increase of $36.8 million, or 82.3%, in the average balance of investment securities during fiscal year 1995 as compared to fiscal year 1994. The increase in income from these assets was enhanced by an increase of 133 basis points in yields to 6.42% during fiscal year 1995 from 5.09% during fiscal year 1994. The higher average balance and higher yield in the investment securities portfolio during fiscal year 1995 reflect investment of the net proceeds from the Conversion and additional borrowings and the upward adjustment of adjustable-rate securities. Interest income from federal funds sold increased $87,000, or 47.8%, to $269,000 for fiscal year 1995 from $182,000 for fiscal year 1994. This increase resulted from a 181 basis point increase in the average rate earned which offset a $576,000, or 9.1%, decrease in the average balance of federal funds sold during fiscal year 1995. The increases in interest income from these assets offset declines in interest income from loans receivable and mortgage-backed securities. Interest earned on loans declined
$466,000, or 10.2%, to $4.0 million for fiscal year 1995 compared to $4.6 million for fiscal year 1994 due to the repayment of higher yielding adjustable-rate loans including certain loans which had been purchased at a premium and the downward repricing of adjustable-rate loans in portfolio whose rate adjustments tend to lag the market. The declines are reflected in a decrease of $4.1 million, or 7.7%, in the average balance of loans outstanding and a 23 basis point decrease in the average yield on loans from 8.48% for fiscal year 1994 to 8.25% for fiscal year 1995. Interest income from mortgage-backed securities declined $293,000, or 2.8%, to $10.2 million for fiscal year 1995 compared to $10.5 million for fiscal year 1994, primarily due to a $15.1 million, or 7.7%, decrease in the average balance of mortgage-backed securities in fiscal year 1995 as a result of the Bank's sale of certain securities in the latter part of fiscal year 1994 as part of a portfolio restructuring. The decline in average mortgage-backed securities offset an increase of 29 basis points in the average yield of such securities from 5.36% in 1994 to 5.65% in 1995.
INTEREST EXPENSE
The increase was attributable to an increase in average interest-bearing liabilities primarily due to an increase in borrowings. Interest expense on deposits for the year ended March 31, 1995, decreased $450,000, or 5.7%, from $7.9 million for the year ended March 31, 1994 to $7.5 million for the year ended March 31, 1995. The decrease resulted from a $2.5 million, or 1.0%, decrease in the average balance of interest-bearing deposits and a 14 basis point reduction in the average cost of deposits, from 3.16% for the year ended March 31, 1994 to 3.02% for fiscal year 1995. The reduction in deposit costs is due principally to a decline in higher rate certificate and money market deposit accounts. Interest expense on borrowings for the year ended March 31, 1995 increased $815,000, or 36.3%, from $2.2 million for the year ended March 31, 1994 to $3.0 million for the year ended March 31, 1995. The increase resulted from a $9.6 million, or 21.4%, increase in the average balance of borrowings and a 62 basis point increase in the average cost of borrowings, from 5.02% for fiscal year 1994 to 5.64% for fiscal year 1995.
The provision for loan losses increased by $315,000 from $19,000 for the year ended March 31, 1994, to $334,000 for the year ended March 31, 1995. Charge-offs net of recoveries during fiscal year 1995 totaled $527,000 as compared to $348,000 during fiscal year 1994. Charge-offs during fiscal year 1995 related to the write-down of one commercial real estate loan in which the Bank has a participation interest. The Bank's total allowance for loan losses decreased to $1.1 million at March 31, 1995 from $1.3 million at March 31, 1994 and equaled 2.1% of the gross loan portfolio compared to 2.4% at March 31, 1994. In determining its provision for loan losses, management establishes loss allowances on identified problem loans and the remainder of the loan portfolio.
NON-INTEREST INCOME
Non-interest income for fiscal year 1995 decreased $1.1 million, or 66.0%, to $576,000, from $1.7 million for fiscal year 1994. The decrease was due to the $1.1 million in gains on sales of investments which the Bank recognized during fiscal year 1994 compared to no such gains during fiscal year 1995. The Bank realized a $1.1 million gain from the sale of $126.9 million in mortgage-backed and investment securities during fiscal year 1994 to restructure the Bank's portfolio. The sale also helped to reduce interest rate risk by reducing the duration of the investment and mortgage-backed securities portfolios. Non-interest income was further reduced by a $37,000 write-down of investment securities compared to a $5,000 write-down in fiscal year 1994. These write-downs are related to the Bank's investment in a service corporation which is in liquidation. The absence of gains on sale of investments during fiscal year 1995 offset an increase of $58,000, or 13.5%, in other non-interest income due to higher deposit service charges as a result of a change in the Bank's fee structure.
NON-INTEREST EXPENSE
Non-interest expense increased by $92,000, or 1.2%, to $7.9 million for fiscal year 1995 as compared to $7.8 million for fiscal year 1994. The increase was primarily due to a provision for loss on other assets which offset declines in expenses relating to the amortization of intangibles, occupancy and equipment
expenses and losses on foreclosed real estate. The provision for loss on other assets related to the Bank's funds held by Nationar which the New York Banking Department placed in receivership in February 1995. Amortization expense declined $293,000, or 54.8%, due to the amortization during fiscal year 1994 of the goodwill remaining from its 1982 acquisition of another financial institution. Net occupancy and equipment expenses declined $107,000, or 6.4%. Such expenses were higher during fiscal year 1994 due to certain relocation and maintenance costs. The Bank's loss on foreclosed real estate declined $125,000, or 78.6%, due to reduced foreclosure activity. Federal deposit insurance premium expense increased $66,000, or 9.9%, due to a credit given during fiscal year 1994 for the Bank's payments into the FSLIC secondary reserve. Other non-interest expense increased $330,000, or 26.9%, due to increases on a variety of miscellaneous expense categories.
INCOME TAX EXPENSE
Income taxes for fiscal year 1995 increased to $674,000 compared to $613,000 for fiscal year 1994 because of higher earnings before extraordinary income and the cumulative effect of change in accounting principle. The Bank's effective tax rate, however, declined to 44.4% from 54.7% for the prior year period primarily as the result of decline in nondeductible intangible expenses.
EXTRAORDINARY INCOME
During fiscal year 1994, the Bank recognized $322,000 in extraordinary income, net of income taxes of $284,000. The extraordinary income related to an insurance settlement in connection with an electrical fire at its main office that destroyed the building. The Bank received $909,000 of a $1,028,000 settlement which resulted in a gross gain on involuntary disposition of $606,000.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES
During fiscal year 1994, the Bank adopted SFAS No. 109 "Accounting for Income Taxes" which requires the use of the asset and liability method in accounting for income taxes rather than the deferred method used previously. Accordingly, the Bank established deferred tax assets and liabilities for the temporary differences between the financial reporting basis of the Bank's assets and liabilities at enacted tax rates expected to be in effect when such amounts are settled or realized. The cumulative effect of this accounting change resulted in the recognition of $252,000 in additional income during fiscal year 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits, FHLB advances, and proceeds from principal and interest payments on loans and mortgage-backed securities and investment securities. While maturities and scheduled amortization of loans and investments are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by changes in general interest rates, economic conditions and competition.
The Bank is required to maintain an average daily balance of liquid assets and short term liquid assets as a percentage of net withdrawable deposit accounts plus short-term borrowings as defined by OTS regulations. The minimum required liquidity and short-term liquidity ratios are currently 5% and 1%, respectively. The Bank's liquidity ratios were 33.00% and 38.93% at March 31, 1996 and 1995, respectively.
The Bank's most liquid assets are cash and short-term investments including mutual funds. The levels of these assets are dependent on the Bank's operating, financing, lending and investing activities during any given period. At March 31, 1996 and 1995, assets qualifying for short-term liquidity, including cash and short-term investments, totaled $85.8 million and $87.5 million, respectively.
The primary investment activity of the Bank is the origination and purchase of loans and, to a lesser extent, purchase of investment and mortgage-backed securities. During fiscal year 1996 the Bank purchased $26.3 million of whole loan mortgages and originated $13.4 million in mortgage and other loans. During fiscal year 1996 no securities were purchased. During fiscal year 1995 the Bank purchased $50.4 million in
mortgage-backed securities and originated $11.3 million in loans. During fiscal years 1996 and 1995, the Bank received $27.5 million and $22.2 million, respectively, in principal payments. During fiscal year 1996 there was a cash flow of $9 million due to call back of government agency bonds.
At March 31, 1996, the Bank had outstanding loan commitments of $4.9 million. The Bank financed the construction of its new main building, which was destroyed by fire, for $5.4 million with its own funds. Certificates of deposits which are scheduled to mature in one year or less from March 31, 1996 totaled $46.6 million. Management believes that a significant percentage of such deposits will remain with the Bank.
REGULATORY CAPITAL POSITION
The Bank must satisfy three capital standards as set by the OTS. These standards include a ratio of core capital to adjusted total assets of 3.0%, a tangible capital standard expressed as 1.5% of total adjusted assets, and a combination of core and "supplementary" capital equal to 8.0% of risk-weighted assets. The risk-based capital standard currently addresses only the credit risk inherent in the assets in a thrift's portfolio; it does not address other risks that thrifts face, such operating, liquidity and interest-rate risks. The OTS recently finalized regulations that add an interest rate risk component to capital requirements under certain circumstances. The Bank does not expect that this regulation will require it to reduce its capital for purposes of determining compliance with its risk-based capital requirement. In addition, the OTS has recently adopted regulations that impose certain restrictions on savings associations that have a total risk-based capital ratio that is less than 8.0%, a ratio of Tier 1 capital (or core capital) to risk-weighted assets of less than 4.0% or a ratio of Tier 1 capital to adjusted total assets of less than 4.0% (or 3.0% if the institution receives the highest rating under the OTS examination rating system). See "Regulation and Supervision -- Regulation of Federal Savings Associations -- Capital Requirements."
The Bank presently exceeds all capital requirements as currently promulgated. At March 31, 1996, the Bank had tangible, core, Tier 1 to risk-weighted assets, and risk-based capital ratios of 9.13%, 9.46%, 27.82% and 28.06%, respectively.
The following table reconciles the Bank's stockholders' equity at March 31, 1996, under generally accepted accounting principles to regulatory capital requirements:
REGULATORY CAPITAL REQUIREMENTS (UNAUDITED)
-----------------------------------------------------
GAAP TANGIBLE TIER/CORE RISK-BASED
CAPITAL CAPITAL CAPITAL CAPITAL
-------- --------- --------- ----------
(IN THOUSANDS)
Stockholders Equity at March 31, 1996 . . . . . . . . . $ 34,765 $ 34,765 $ 34,765 $ 34,765
========
Add:
Unrealized loss on securities available-for-sale, 1,245 1,245 1,245
net . . . . . . . . . . . . . . . . . . . . . . . . . .
General valuation allowances . . . . . . . . . . . . 0 0 319
Qualifying intangible assets . . . . . . . . . . . . 0 60 60
Deduct:
Goodwill . . . . . . . . . . . . . . . . . . . . . . (1,609) (1,609) (1,609)
Excess of net deferred tax assets . . . . . . . . . . (939) (939) (939)
Assets required to be deducted . . . . . . . . . . . 0 0 (40)
--------- --------- -----------
Regulatory capital . . . . . . . . . . . . . . . . . 33,462 33,522 33,801
Minimum capital 5,495 10,992 9,638
--------- --------- -----------
Regulatory capital excess . . . . . . . . . . . . . . -- $ 27,967 $ 22,530 $ 24,163
========= ========= ===========
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IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and accompanying notes appearing elsewhere herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position
and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Bank's operations. Unlike most industrial companies, nearly all the assets and liabilities of the Bank are monetary in nature. As a result, interest rates have a greater impact on the Bank's performance than do the effects of the general level of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.
IMPACT OF NEW ACCOUNTING STANDARDS
In May 1993, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 114 ("SFAS 114"), "Accounting by Creditors for Impairment of a Loan." SFAS 114 generally would require all creditors to account for impaired loans, except those loans that are accounted for at fair value or at the lower of cost or fair value, at the present value of the expected future cash flows discounted at the loan"s effective interest rate. SFAS 114 also provides that impaired loans should not be included in real estate owned for financial reporting purposes, but rather should be included in the loan portfolio. SFAS 114 is effective for fiscal years beginning after December 15, 1994. In October 1994, the FASB amended certain provisions of SFAS 114 via the issuance of Statement of Financial Accounting Standards No. 118 ("SFAS 118"), "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures." SFAS 118 amends SFAS 114 by eliminating provisions describing how a creditor should report income on an impaired loan and increasing disclosure requirements as to information on recorded investments in certain impaired loans and how a creditor recognizes related interest income. The effective date of SFAS 118 is the same as for SFAS 114. SFAS 114, as amended by SFAS 118, when adopted on April 1, 1995, did not have a material adverse effect on the Bank's financial condition or results of operation.
POSSIBLE IMPACT OF PROPOSED LEGISLATION
Insurance of Deposit Accounts. The FDI Act requires that the BIF and the SAIF funds each be recapitalized until reserves are at least 1.25% of the deposits insured by that fund. After a fund reached the 1.25% reserve ratio, the assessment rates for that fund could be reduced. The FDIC has reported that the BIF reached the required reserve ratio during May 1995. As a result of the recapitalization of the BIF, the FDIC reduced BIF-assessment rates. The FDIC initially reduced the BIF assessment rates, effective June 1, 1995, to a range of 0.04% to 0.27% of deposits. Having subsequently determined that the BIF had sufficient reserves in excess of the required 1.25% ratio, the FDIC reduced the BIF- assessment rate for "well capitalized" institutions without any significant supervisory concerns to the statutory minimum of $2,000 annually beginning with the first half of 1996, and the rates for other BIF-insured institutions will range from 0.03% to 0.27% of deposits.
The FDIC has reported that, under current law and reasonably optimistic financial projections, the SAIF is not expected to be recapitalized until 2001. SAIF reserves have not grown as quickly as the BIF reserves due to a number of factors, including the fact that a significant portion of SAIF assessments have been and are currently being used to make payments on FICO bonds. Accordingly, the FDIC has determined that SAIF-insured institutions should continue to pay assessments at the current SAIF assessment rates, which range from 0.23% of deposits to 0.31% of deposits. The Bank's assessment rate for the first half of 1996 is 0.23% of deposits.
The resulting disparity in deposit insurance assessments rates between the SAIF members and the BIF members is likely to provide institutions paying only the BIF assessments with certain competitive advantages in the pricing of loans and deposits, and in lowered operating costs, pending any legislative action to remedy the disparity. Congress has considered proposed legislation to address these issues.
The proposed Budget Act, which was approved by the Congress but vetoed by the President, included provisions that focused on a recapitalization of the SAIF. Under the provisions of the Budget Act, all SAIF-member institutions would have paid a special assessment to recapitalize the SAIF, and the assessment base for the payments on the FICO bonds would have been expanded to include the deposits of both BIF- and
SAIF-insured institutions. The amount of the special assessment required to recapitalize the SAIF was then estimated to be approximately 80 basis points of the SAIF-assessable deposits. This estimate of the special assessment was less than the special assessment of 85 to 90 basis points that had been previously estimated. The special assessment would have been imposed as of the first business day of January 1996 or on such other date prescribed by the FDIC not later than 60 days after enactment of the Budget Act, based on the amount of SAIF deposits on March 31, 1995.
The Budget Act also provided for the merger of the BIF and SAIF on January 1, 1998, with such merger being conditioned upon the prior elimination of the thrift charter. Congressional leaders had also agreed that Congress should consider and act upon separate legislation to eliminate the thrift charter as early as possible in 1996. If adopted, such legislation would require that the Bank, as a federal savings bank, convert to a bank charter.
The veto of the Budget Act by the President was not based on the above described provisions of the Budget Act, and the federal banking regulators continue to seek a legislative solution for the recapitalization of the SAIF. In February 1996, representatives of the FDIC, the OTS and the Treasury Department stated to Congress that, unless Congress adopts legislation to strengthen the SAIF, SAIF's current problems could result in an erosion of the SAIF deposit base, could cause a default on the FICO bonds, and could leave the SAIF unable to meet its obligations to insured depositors.
If enacted by Congress, legislation to recapitalize the SAIF as proposed in the Budget Act would have the effect of reducing the capital of SAIF member institutions by the after-tax cost of the special SAIF assessment, plus any related additional tax liabilities. The legislation would also have the effect of reducing any differential that may otherwise be required in the assessment rates for the BIF and SAIF.
Management cannot predict whether the above legislation or any other legislative proposal will be enacted as described above or, if enacted, the amount of any special SAIF assessment, whether ongoing SAIF premiums will be reduced to a level equal to that of BIF premiums or whether, if thrifts are required to convert to a bank charter, there will be any relief from the additional tax liabilities that would be incurred upon the recapture of their bad debt reserves. It also cannot be predicted whether some other legislative action will be taken to address the BIF/SAIF disparity and what consequences such action could have for SAIF members. A significant increase in SAIF insurance premiums, either absolutely or relative to BIF premiums or a significant one-time fee to recapitalize the SAIF could have an adverse effect on the operating expenses and results of operations of the Bank.
Under the FDI Act, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OTS. The management of the Bank does not know of any practice, condition or violation that might lead to termination of deposit insurance.
Bad Debt Reserves. Under section 593 of the Code, thrift institutions such as the Bank, which meet certain definitional tests, primarily relating to their assets and the nature of their business, are permitted to establish a tax reserve for bad debts and to make annual additions thereto, which additions may, within specified limitations, be deducted in arriving at their taxable income. The Bank's deduction with respect to "qualifying loans," which are generally loans secured by certain interests in real property, may currently be computed using an amount based on the Bank's actual loss experience (the "Experience Method"), or a percentage equal to 8.0% of the Bank's taxable income (the "PTI Method"), computed without regard to this deduction and with additional modifications and reduced by the amount of any permitted addition to the non-qualifying reserve. Similar deductions for additions to the Bank's bad debt reserve are permitted under the New York State Bank Franchise Tax and the New York City Banking Corporation Tax; however, for purposes of these taxes, the effective allowable percentage under the PTI method is 32% rather than 8%.
Under pending legislative proposals, section 593 of the Code would be amended and the Bank would be unable to make additions to its tax bad debt reserve, would be permitted to deduct bad debts only as they occur and would additionally be required to recapture (that is, take into income) over a six-year period, beginning with the Bank's taxable year beginning on April 1, 1996, the excess of the balance of its bad debt reserves (other than the supplemental reserve) as of March 31, 1996 over the balance of such reserves as of March 31, 1988, or over a lesser amount if the Bank's loan portfolio has decreased since March 31, 1988. However, such recapture requirements would be suspended for each of two successive taxable years beginning April 1, 1996 in which the Bank originates a minimum amount of certain residential loans based upon the average of the principal amounts of such loans made by the Bank during its six taxable years preceding April 1, 1996. In addition, if section 593 of the Code is so amended, the Bank may be required for New York State and New York City tax purposes to include in its entire net income the excess of its New York State and New York City reserves for losses on qualifying real property loans over its reserve for losses on such loans maintained for federal income tax purposes (the "Excess Reserves"). Accordingly, if the pending legislative proposals are enacted in their present form, unless further legislation is adopted in New York, the Bank may be required to take its Excess Reserves into income in computing its New York State and City taxes for its taxable year beginning April 1, 1996. Any such federal and New York State and City tax liability resulting from the Bank's recapture of its bad debt reserves, however, should not adversely affect the Bank's results of operations. Generally Accepted Accounting Principles have not required that the difference resulting from the 1987 New York State and New York City bad debt deduction in excess of the federal bad debt deduction be reflected on the financial statements.
MANAGEMENT OF BANCORP
DIRECTORS
The Board of Directors of Bancorp currently consists of the four Continuing Directors of Carver and the three directors who are nominated for re-election at the Annual Meeting. The directors of Bancorp are divided into three classes, with one class to be elected each year at the annual meeting of stockholders of Bancorp. Directors elected at each annual meeting will serve for a term of three years and until their successors are duly elected and qualified. Approval of the Plan of Reorganization by the holders of Carver Common Stock at the Annual Meeting will be deemed to be approval of such persons as the directors of Bancorp without further action and without changes in classes or terms.
The names of the directors of Bancorp and their terms are set forth below. There are no arrangements or understandings between Bancorp and any person pursuant to which such person was elected as a director.
TERM POSITION CURRENTLY HELD
NAME EXPIRES WITH BANCORP
---- ------- -----------------------
Thomas L. Clark, Jr. 1998 Director, President and
Chief Executive Officer
David N. Dinkins 1999 Director
Linda H. Dunham 1997 Director
Richard T. Greene 1997 Director
Herman Johnson, CPA 1998 Director
David R. Jones 1999 Chairman of the Board,
Director
M. Moran Weston, Ph.D. 1997 Vice Chairman of the
Board, Director
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EXECUTIVE OFFICERS
The executive officers of Bancorp are: Thomas L. Clark, Jr., President and Chief Executive Officer; Biswarup Mukherjee, Executive Vice President and Chief Financial Officer; Howard R. Dabney, Vice President and Chief Lending Officer; Raymond L. Bruce, Vice President and Corporate Counsel; and Margaret R. Lewis, Corporate Secretary and Personnel Officer.
COMPENSATION
It is expected that until such time as the officers and directors of Carver devote significant time to the separate management of Bancorp's affairs, which is not expected to occur until Bancorp becomes actively involved in additional businesses, no separate compensation will be paid for their services to Bancorp. However, Bancorp may determine that such compensation is appropriate in the future and may at such time enter into employment contracts with certain key executive officers. See "Management of Carver -- Compensation and Employee Benefit Plans."
EMPLOYEE BENEFIT PLANS
As the directors, officers and employees of Bancorp will not initially be compensated by Bancorp but will continue to serve and be compensated by Carver, no separate benefit plans for directors, officers and employees of Bancorp are anticipated at this time. Carver will continue to maintain its other benefit programs. See "Proposal 1 -- Election of Directors -- Certain Employee Benefit Plans and Employment Agreements."
MANAGEMENT OF CARVER
DIRECTORS
For information with respect to nominees for election as directors of the Bank at the Annual Meeting and the other directors of the Bank, including their age, business experience, compensation paid by the Bank, stock ownership, and service on committees of the Board of Directors, see "Proposal 1 -- Election of Directors."
EXECUTIVE OFFICERS
The Reorganization will not result in any change of the officers of Carver. The age at April 30, 1996 and position held with the Bank of each person currently serving as an executive officer of Carver is set forth below. In addition, a brief biography of each individual is provided.
Name Age Position
---- --- --------
Thomas L. Clark, Jr. 52 President and Chief Executive
Officer, Director
Biswarup Mukherjee 63 Executive Vice President and
Chief Financial Officer
Howard R. Dabney 53 Vice President and Chief Lending
Officer
Margaret R. Lewis 66 Corporate Secretary and
Personnel Officer
Raymond L. Bruce 44 Vice President and Corporate
Counsel
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THOMAS L. CLARK, Jr., is currently President and Chief Executive Officer, a position he assumed on February 1, 1995. Mr. Clark is also a member of the Bank's Board of Directors. Prior to assuming his current position, Mr. Clark was employed by the New York State Banking Department from 1976 until 1995 and, from 1987 until 1995, served as Deputy Superintendent of Banks for New York State and as secretary of the New York State Banking Board. From 1970 until 1976, Mr. Clark was employed by Buffalo Savings Bank in various capacities. Mr. Clark is the founder and president of African-American Men of Westchester, Inc. In addition, Mr. Clark was recently elected Vice Chairman of the American League of Financial Institutions, the national trade association representing minority savings institutions, serves as Vice Chairman of the Community Bankers Association of New York State's Community Reinvestment Committee and is a member of the Advisory Board of Small Business Development Centers of New York State.
BISWARUP MUKHERJEE is the Executive Vice President and Chief Financial Officer. Presently, he also performs the function of Chief Operating Officer. Mr. Mukherjee joined the Bank in March 1987 as Vice President and Chief Financial officer and was promoted to Executive Vice President in September 1992. Mr. Mukherjee worked for other savings and loan associations as vice president and Controller. He has 24 years experience in the thrift industry. He holds masters degrees in Accounting and Finance. He is also an Associate Member of the Chartered Institute of Management Accountants in England.
HOWARD R. DABNEY is Vice President and Chief Lending Officer of the Bank, positions he has held since joining the Bank in 1982. Mr. Dabney currently serves on the board of directors of the Jamaica Service Program for Older Adults, on the advisory board of Bridge Street Community Development Center and on the board of directors of the Counseling Center for Human Development. He also serves on committees for the Brooklyn Navy Yard Development Corporation and the Consortium for Community Development.
MARGARET R. LEWIS joined the Bank in 1960 and is presently Corporate Secretary and Personnel Officer. She formerly served on the board of directors of the Institute of Financial Education and the Women's Association of Savings Institutions, formerly the Women's Association of Savings and Loan Institutions. Ms. Lewis currently serves as a member of the Job Services Employment Committee of the New York State Department of Labor for the Harlem Area, and on the Committee on Human Resources Management of the Community Bankers Association of New York State.
RAYMOND L. BRUCE, ESQ. is Vice President and General Counsel and oversees the bank's litigation, contracts, compliance and other legal concerns. Prior to joining Carver in April of 1995, Mr. Bruce was an Assistant Counsel at the New York State Banking Department (from 1992 to 1993), which is responsible for regulating New York State-chartered banking organizations. From 1988 to 1992, Mr. Bruce served as Counsel both to Assemblyman Herman D. Farrell, Jr. (then Chairman to the Assembly Banks Committee) and to the New York State Assembly Banks Committee. There, he was responsible for the planning, development and management of New York State legislation which addressed an assortment of critical issues in the banking industry.
COMPENSATION AND EMPLOYEE BENEFIT PLANS
For a discussion of the compensation paid to certain executive officers of Carver, employment agreements entered into with certain of Carver's officers and a description of the material benefit plans and programs with respect to Carver's executive officers, see "Proposal 1 -- Election of Directors -- Compensation Committee Report on Executive Compensation," "-- Summary Compensation Table," "-- Certain Employee Benefit Plans and Employment Agreements."
OTHER MATTERS
As of the date of this Proxy-Statement Prospectus, the Board of Directors knows of no business which will be presented for consideration at the Annual Meeting other than as stated in the Notice of Annual Meeting of Stockholders. If, however, other matters are properly brought before the Annual Meeting, it is the intention of the Board of Directors to direct the vote of the shares represented by proxy on such matters in accordance with their best judgment.
PROPOSALS FOR 1997 ANNUAL MEETING
Any stockholder wishing to have a proposal considered for inclusion in Bancorp's proxy statement and form of proxy relating to the 1997 Annual Meeting of stockholders must, in addition to other applicable requirements, set forth such proposal in writing and file it with the Corporate Secretary of Bancorp on or before March 31, 1997. In the event the Reorganization is not consummated, any such proposal must be set forth in writing and filed with the Corporate Secretary of Carver on or before March 31, 1997.
FINANCIAL STATEMENTS
A copy of the Annual Report containing financial statements at March 31, 1996 and March 31, 1995, prepared in conformity with generally accepted accounting principles, accompanies this Proxy Statement-Prospectus. The consolidated financial statements have been audited by Mitchell & Titus, LLP Co. whose report thereon appears in the Annual Report. An additional copy of the Annual Report will be furnished without charge to stockholders upon request.
The Bank is required to file an annual report on Form 10-K for its fiscal year ended March 31, 1996 with the OTS. Stockholders may obtain, free of charge, a copy of such annual report (excluding exhibits) by writing to Raymond L. Bruce, Carver Federal Savings Bank, 75 West 125th Street, New York, New York 10027-4512.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.
By Order of the Board of Directors
Margaret R. Lewis
Corporate Secretary
New York, New York
June ___, 1996
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY Independent Auditors' Report of Mitchell & Titus, LLP . . . . . . . . . . . . . . . . . . . . . . . . F-2 Independent Auditors' Report of Radics & Co., LLC . . . . . . . . . . . . . . . . . . . . . . . . . . F-3 Consolidated Statements of Financial Condition at March 31, 1996 and 1995 . . . . . . . . . . . . . . F-4 Consolidated Statements of Income for the Years Ended March 31, 1996, 1995 and 1994 . . . . . . . . . F-5 Consolidated Statements of Changes in Stockholders' Equity at March 31, 1996, 1995, 1994 and 1993 . . F-6 Consolidated Statements of Cash Flows for the Years Ended March 31, 1996, 1995 and 1994 . . . . . . . F-7 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9 |
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
AT OR FOR THE YEAR ENDED MARCH 31,
-----------------------------------------------------------
KEY OPERATING RATIOS: 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
Return on average assets (1) ....................... 0.21% 0.25% 0.35% 0.06% 0.86%
Return on average equity (2) ....................... 2.16 3.61 7.88 1.48 20.54
Interest rate spread (3) ........................... 2.63 2.74 2.38 2.50 2.48
Net interest margin (4) ............................ 2.85 2.91 2.43 2.56 2.57
Operating expenses to average assets (5) ........... 2.48 2.38 2.46 2.07 2.40
Equity-to-assets (6) ............................... 9.45 9.46 4.59 4.06 4.08
Net interest income to operating expenses (7) . 1.10x 1.17x 0.95x 1.19x 1.03x
Average interest-earning assets to average
interest-bearing liabilities .................. 1.07x 1.05x 1.02x 1.01x 1.01x
ASSET QUALITY RATIOS:
Non-performing assets to total assets (8) .......... 0.97% 0.56% 1.24% 1.53% 1.30%
Non-accrual loans and accruing loans 90 days or more
past due to total loans ............................ 3.85 3.39 6.73 8.17 8.14
Allowance for loan losses to total loans ........... 1.42 2.10 2.35 2.74 1.58
Allowance for loan losses to non-performing loans .. 37.05 61.79 34.95 33.53 20.38
Allowance for loan losses to non-accrual loans ..... 59.29 70.17 57.56 41.62 21.22
Net loan charge-offs to average loans .............. 0.00 1.06 0.65 1.63 0.43
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MITCHELL & TITUS, LLP
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders Carver Federal Savings Bank
We have audited the accompanying consolidated statements of financial condition of Carver Federal Savings Bank (the "Bank") and subsidiaries as of March 31, 1996, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the year ended March 31, 1996. These consolidated financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Carver Federal Savings Bank and Subsidiaries as of March 31, 1996, and the results of their operations and cash flows for the year ended March 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 1 to consolidated financial statements, the Bank's method of accounting for income taxes, as of March 31, 1994, conform with Statement of Financial Accounting Standards No. 109 and its method of accounting for certain debt and equity investments, as of March 31, 1994, conform with Statement of Financial Accounting Standards No. 115.
May 31, 1996
New York, New York.
To The Board of Directors and Stockholders Carver Federal Savings Bank
We have audited the accompanying consolidated statement of financial condition of Carver Federal Savings Bank (the "Bank") and subsidiary as of March 31, 1995 and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the two-year period ended March 31, 1995. These consolidated financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to in the second preceding paragraph present fairly, in all material respects, the financial position of Carver Federal Savings Bank and Subsidiary as of March 31, 1995 and the results of their operations and cash flows for each of the years in the two-year period ended March 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 1 to consolidated financial statements, the Bank changed its method of accounting for income taxes, as of April 1, 1993, to conform with Statement of Financial Accounting Standards No. 109 and its method of accounting for certain debt and equity investments, at March 31, 1994, to conform to Statement of Financial Accounting Standards No. 115.
/s/ Radics & Co., LLC
---------------------------------------
Radics & Co., LLC
(formerly Stephen P. Radics & Co.)
May 12, 1995
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CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
NOTES MARCH
------------------- -----------------------------------
1996 1995
--------------- ----------------
ASSETS
Cash and amounts due from depository institutions.................. $ 3,225,950 $ 4,817,805
Federal funds sold................................................. 6,800,000 7,000,000
--------------- ----------------
Total cash and cash equivalents............................... 1 and 19 10,025,950 11,817,805
Securities available for sale...................................... 1, 3, 13 and 19 114,328,245 93,327,730
Investment securities held to maturity, net
(estimated fair value of $8,814,000 in 1996 and
$17,732,000 in 1995)............................................... 1, 4, 13 and 19 8,937,075 18,034,662
Mortgage-backed securities held to maturity, net
(estimated fair value of $129,813,000 in 1996 and
$175,305,000 in 1995).............................................. 1, 5, 12, 13 and 19 131,105,405 181,133,663
Loans receivable, net.............................................. 1, 6, 13 and 19 82,608,065 48,459,389
Real estate owned, net............................................. 1 314,261 302,392
Property and equipment, net........................................ 1 and 8 9,956,981 4,328,381
Federal Home Loan Bank of New York stock, at cost.................. 13 3,120,000 3,120,000
Accrued interest receivable, net................................... 1, 9 and 19 2,688,199 2,707,509
Excess of cost over net assets acquired, net....................... 1 and 10 1,669,082 1,898,970
Other assets....................................................... 14 and 16 2,904,078 2,831,623
---------------- ----------------
Total assets....................................................... $ 367,657,341 $ 367,962,124
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits........................................................... 11 and 19 $ 256,951,883 $ 248,445,964
Securities sold under agreements to repurchase..................... 12 and 19 47,000,000 18,188,000
Advances from Federal Home Loan Bank of New York................... 13 and 19 25,400,000 62,400,000
Other borrowed money............................................... 17 and 19 1,548,122 1,730,254
Advance payments by borrowers for taxes and insurance.............. 483,055 822,742
Other liabilities.................................................. 14 and 16 1,509,500 1,574,003
---------------- ----------------
Total liabilities.................................................. 332,892,560 333,160,963
---------------- ----------------
Commitments and contingencies...................................... 18 and 19 - -
STOCKHOLDERS' EQUITY............................................... 15
Preferred stock, $0.01 par value per share; 1,000,000 authorized;
none issued........................................................ - -
Common stock; $0.01 par value per share;
5,000,000 authorized; 2,314,375 issued and outstanding............. 2 23,144 23,144
Additional paid-in capital......................................... 2 21,436,235 21,465,072
Retained earnings - substantially restricted....................... 2 and 14 16,098,728 15,345,644
Common stock acquired by Employee Stock Ownership Plan ("ESOP").... 2 and 17 (1,548,122) (1,730,254)
Unrealized (loss) on securities available for sale, net............ (1,245,204) (302,445)
---------------- ----------------
Total stockholders' equity......................................... 34,764,781 34,801,161
---------------- ----------------
Total liabilities and stockholders' equity......................... $ 367,657,341 $ 367,962,124
================ ================
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CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
NOTES MARCH
----------- -----------------------------------------------
1996 1995 1994
--------------- ------------- -------------
Interest income:
Loans ........................................................ 1 $ 4,800,482 $ 4,092,330 $ 4,557,729
Mortgage-backed securities...................................... 12,217,281 10,158,697 10,451,970
Debt and equity securities...................................... 5,415,806 4,983,129 1,979,773
Other interest-earning assets................................... 1,095,336 516,045 474,755
--------------- ------------- -------------
Total interest income........................................... 23,528,905 19,750,201 17,464,227
--------------- ------------- -------------
Interest expense:
Deposits........................................................ 11 8,390,201 7,472,812 7,923,818
Advances and other borrowed money............................... 5,204,068 3,058,828 2,243,394
--------------- ------------- -------------
Total interest expense.......................................... 13,594,269 10,531,640 10,167,212
--------------- ------------- -------------
Net interest income............................................. 9,934,636 9,218,561 7,297,015
Provision for loan losses....................................... 1 and 6 130,892 333,697 19,061
--------------- ------------- -------------
Net interest income after provision for loan losses............. 9,803,744 8,884,864 7,277,954
--------------- ------------- -------------
Non-interest income:
Loan fees and service charges................................... 78,084 121,569 132,906
Write-down of investment securities............................. - (37,139) (5,352)
Gain on sale of securities held for sale........................ 4 and 5 - - 1,132,082
Other ........................................................ 529,873 491,157 432,646
--------------- ------------- -------------
Total non-interest income..................................... 607,957 575,587 1,692,282
--------------- ------------- -------------
Non-interest expenses:
Salaries and employee benefits................................ 16 and 17 3,482,928 3,075,041 2,995,351
Net occupancy expense......................................... 1 and 18 975,795 853,025 916,981
Equipment..................................................... 1 685,657 707,057 750,313
Loss on foreclosed real estate................................ 1 76,582 34,008 158,894
Advertising................................................... 168,084 63,534 95,979
Federal insurance premium..................................... 618,169 731,141 665,045
Amortization of intangibles................................... 1 229,898 241,915 534,827
Bank charges.................................................. 308,391 239,207 276,079
Security service.............................................. 234,856 182,907 227,837
Provision for loss on other assets............................ 18 - 0 - 255,580 -
Other......................................................... 2,272,383 1,557,687 1,227,386
--------------- ------------- -------------
Total non-interest expenses................................ 9,052,743 7,941,102 7,848,692
--------------- ------------- -------------
Income before income taxes, extraordinary income and
cumulative effect of change in accounting principle........... 1,358,958 1,519,349 1,121,544
Income taxes.................................................. 1 and 14 605,874 674,297 613,377
--------------- ------------- -------------
Income before extraordinary income and cumulative
effect of change in accounting principle.................. - 753,084 845,052 508,167
Extraordinary income, net of income taxes of $283,666........... 8 - - 322,396
--------------- ------------- -------------
Income before cumulative effect of change in accounting principle 753,084 845,052 830,563
Cumulative effect, as of April 1, 1993, of change
in accounting principle......................................... 1 - - 252,082
--------------- ------------- -------------
Net income...................................................... $ 753,084 $ 845,052 $ 1,082,645
=============== ============= =============
Net income per common share - pro forma......................... $ 0.35 (2) (1)
Weighted average number of shares outstanding................... 1 2,156,346 2,136,615 (1)
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(2) Historical net income per common share from October 24, 1994 (date of conversion) to March 31, 1995 was $0.17. See notes to consolidated financial statements.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
RETAINED COMMON (LOSS) ON
ADDITIONAL EARNINGS- STOCK SECURITIES
COMMON PAID-IN SUBSTANTIALLY ACQUIRED AVAILABLE
STOCK CAPITAL RESTRICTED BY ESOP FOR SALE NET TOTAL
------------ ------------ ------------ ------------ ------------ ------------
Balance - April 1, 1992 ........ $ - $ - $ 13,223,337 $ - $ - $ 13,223,337
Net income for the year ended
March 31, 1993 ............... - - 194,610 - - 194,610
------------ ------------ ------------ ------------ ------------ ------------
Balance - March 31, 1993 ....... - - 13,417,947 - - 13,417,947
Net income for the year ended
March 31, 1994 ............... - - 1,082,645 - - 1,082,645
Unrealized (loss) on securities
available for sale, net ...... - - - - (330,765) (330,765)
------------ ------------ ------------ ------------ ------------ ------------
Balance - March 31, 1994 ....... - - 14,500,592 - (330,765) 14,169,827
Net income for the year ended
March 31, 1995 ............... - - 845,052 - - 845,052
Net proceeds from common
stock issued in stock
conversion ................... 23,144 21,495,847 - - - 21,518,991
Acquisition of common stock
by ESOP ...................... - - - (1,821,320) - (1,821,320)
Allocation of ESOP stock ....... - (30,775) - 91,066 - 60,291
Decrease in unrealized
(loss) on securities available - - - - - -
for sale, net ................ - - - - 28,320 28,320
------------ ------------ ------------ ------------ ------------ ------------
Balance - March 31, 1995 ....... $ 23,144 $ 21,465,072 $ 15,345,644 $ (1,730,254) $ (302,445) $ 34,801,161
Net Income for the year ended
March 31, 1996 ............... - - 753,084 - - 753,084
Allocation of ESOP stock ....... - (28,837) - 182,132 - 153,295
Decrease in unrealized
(Loss) in securities available
for sale, net ................ - - - - (942,759) (942,759)
- -----------------------------------------------------------------------------------------------------------------------------
Balance - March 31, 1996 ....... $ 23,144 $ 21,436,235 $ 16,098,728 $ (1,548,122) $ (1,245,204) $ 34,764,781
============ ============ ============ ============ ============ ============
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See notes to consolidated financial statements.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31,
-----------------------------------------------
1996 1995 1994
------------- ------------- -------------
Cash flows from operating activities:
Net income.................................................... $ 753,084 $ 845,052 $ 1,082,645
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of premises and equipment ... 301,918 222,699 240,311
Amortization of intangibles ............................... 229,888 241,915 534,827
Other amortization and accretion, net ..................... 651,014 1,130,807 2,044,799
Allocation of ESOP stock .................................. 153,295 60,291 --
Purchases of securities held for sale ..................... -- -- (111,863,247)
Proceeds from sales of securities held for sale ........... -- -- 126,859,009
Proceeds from sale of loans ............................... 1,948,143 3,940,215 1,665,792
Gain on sales of securities held for sale ................. -- -- (1,132,082)
Gain on involuntary conversion of property ................ -- -- (606,062)
Write-down of equity security ............................. -- 37,139 5,352
Provision for loan losses ................................. 130,892 333,697 19,061
Provision for real estate owned losses .................... -- -- 136,888
Provision for losses on other assets ...................... -- 255,580 --
Deferred income taxes ..................................... (380,541) (75,869) (43,471)
(Increase) decrease in accrued interest receivable ........ 19,310 (549,524) 469,949
Decrease (increase) in refundable income taxes ............ 238,157 651,369 336,433
(Increase) decrease in other assets ....................... 72,455 (1,606,419) (165,040)
Increase (decrease) in other liabilities .................. 731,894 234,420 139,908
------------- ------------- -------------
Net cash provided by operating activities ......... 4,704,489 5,721,372 19,725,072
------------- ------------- -------------
Cash flows from investing activities:
Principal repayments on securities held to maturity ........... 96,335 -- --
Principal repayments on securities available for sale ......... 2,965,441 1,133,751 818,066
Purchase of securities available for sale ..................... -- (23,022,923) --
Proceeds from calls of investment securities .................. 9,000,000 2,971,005 --
Purchase of investment securities ............................. -- (9,011,875) (14,989)
Principal repayments on mortgage-backed securities ............ 23,663,432 22,254,234 80,549,321
Purchase of mortgage-backed securities ........................ -- (50,436,456) (84,879,827)
Loans purchased ............................................... (26,911,379) -- --
Net change in loans receivable ................................ (9,357,887) (2,031,338) 3,807,240
Proceeds from sale of real estate owned ....................... -- 139,614 --
Proceeds from fire insurance claims, net ........................ -- -- 574,304
Additions to premises and equipment ............................. (5,930,518) (1,594,145) (305,010)
(Purchase) redemption of Federal Home Loan Bank of New York stock -- (1,287,100) 1,117,100
------------- ------------- -------------
Net cash (used in) provided by investing activities (6,474,576) (60,885,233) 1,666,205
------------- ------------- -------------
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See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
YEAR ENDED MARCH 31
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
Cash flows from financing activities:
Net (decrease) increase in deposits ................. $ 8,505,919 $ (4,027,784) $ (3,594,086)
Net increase (decrease) in short-term borrowings ....... (19,188,000) 41,658,000 9,530,000
Proceeds of long-term borrowings ....................... 11,000,000 20,821,320 10,400,000
Repayment of long-term borrowings ...................... -- (20,091,066) (39,000,000)
(Decrease) in advance payments by borrowers
for taxes and insurance ................................ (339,687) (129,938) (109,179)
Net proceeds from issuance of common stock ............. -- 21,518,991 --
Acquisition of common stock by ESOP .................... -- (1,821,320) --
------------ ------------ ------------
Net cash provided by (used in) financing activities .... (21,768) 57,928,203 (22,773,265)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents ... (1,791,855) 2,764,342 (1,381,988)
Cash and cash equivalents - beginning .................. 11,817,805 9,053,463 10,435,451
------------ ------------ ------------
Cash and cash equivalents - ending ..................... $ 10,025,950 $ 11,817,805 $ 9,053,463
============ ============ ============
Supplemental schedule of noncash activities:
Transfers to securities available
for sale from:
Securities held for sale ............................... $ -- $ -- $ 52,418,586
Investment securities .................................. -- -- 2,071,364
Mortgage-backed securities ............................. 25,891,771 -- 17,711,833
------------ ------------ ------------
$ 25,891,771 $ -- $ 72,201,783
============ ============ ============
Transfers to securities held for sale from:
Investment securities .................................. $ -- $ -- $ 701,036
Mortgage-backed securities ............................. -- -- 66,421,888
------------ ------------ ------------
$ -- $ -- $ 67,122,924
============ ============ ============
Unrealized gain (loss) on securities available for sale:
Unrealized gain (loss) ................................. $ 2,349,442 $ 53,435 $ (624,085)
Deferred income tax .................................... (1,104,238) (25,115) 293,320
------------ ------------ ------------
$ 1,245,204 $ 28,320 $ (330,765)
------------ ------------ ------------
Loans receivable transferred to real estate owned ...... $ -- $ 252,292 $ 33,509
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid for:
Interest ............................................... $ 8,372,411 $ 10,342,385 $ 10,227,228
============ ============ ============
Federal, state and city income taxes ................... $ 449,197 $ 98,795 $ 352,000
============ ============ ============
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See notes to consolidated financial statements.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATED FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements include the accounts of the Bank and its wholly owned subsidiaries, C.F.S.B. Realty Corp. and C.F.S.B. Credit Corp. All significant intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the period then ended. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes in the near-term relate to prepayment assumptions on mortgage-backed securities, the determination of the allowance for loan losses and the valuation of real estate owned. Management believes that prepayment assumptions on mortgage-backed securities are appropriate, the allowance for loan losses is adequate and real estate owned is properly valued. While management uses available information to recognize losses on loans and real estate owned, future additions to the allowance for loan losses or future write downs of real estate owned may be necessary based on changes in economic conditions in the Bank's market area.
In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses and real estate owned valuations. Such agencies may require the Bank to recognize additions to the allowance for loan losses or additional write downs of real estate owned based on their judgments about information available to them at the time of their examination.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and amounts due from depository institutions and federal funds sold. Generally, federal funds sold are sold for one-day periods.
INVESTMENT AND MORTGAGE-BACKED SECURITIES
In May 1993, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments in Debt and Equity Securities." SFAS 115 generally requires that debt and equity securities that have readily determinable fair values be carried at fair value unless they are classified as held to maturity. Securities can be classified as held to maturity and carried at amortized cost only if the reporting entity has a positive intent and ability to hold those securities to maturity. If not classified as held to maturity, such securities must be classified as trading securities or securities available for sale. Unrealized holding gains or losses for securities available for sale are to be excluded from earnings and reported net of deferred income taxes as a separate component of retained earnings. Unrealized holding gains and losses for trading securities are to be included in earnings. The Bank, as permitted, adopted SFAS 115 as of March 31, 1994. Upon adoption, the Bank reclassified $52,419,000 of securities held for sale, $2,071,000 of investment securities and $17,712,000 of mortgage-backed securities as available for sale and, accordingly, recorded an unrealized gain, net of deferred income taxes, of $330,765 as a separate component of retained earnings. At December 30, 1995, the Bank reclassified $25,892,000 of investment securities held to maturity, to securities available for sale , as permitted under a one time relaxation of SFAS No. 115.
On February 17, 1994, the Bank entered into a four year interest rate protection agreement for a notional amount of $20,000,000 as a hedge against possible losses in the securities available for sale portfolio. The interest rate protection agreement, which is in effect until January 10, 1998, is indexed to the three-month London Inter-Bank Offered Rate ("LIBOR") with a strike rate of 5.5%. The $410,000 paid for the contract is treated as a premium and is included in the investment securities available for sale portfolio. The premium is amortized over the term of the contract on the straight-line basis. Contractual payments earned, which totalled $102,500 for the year ended March 31, 1996, are treated as yield adjustments on the hedged securities. At March 31, 1996, the three-month LIBOR stood at 5.4727%.
Investment and mortgage-backed securities held to maturity are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity.
Gains or losses on sales of securities of all classifications are recognized on the specific identification method.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LOANS RECEIVABLE
Loans receivable are carried at unpaid principal balances plus unamortized premiums, less the allowance for loan losses and deferred loan fees and discounts.
The Bank defers loan origination fees and certain direct loan origination costs and accretes such amounts as an adjustment of yield over the contractual lives of the related loans by use of the interest method.
Premiums and discounts on loans purchased are amortized and accreted, respectively, as an adjustment of yield over the contractual lives of the related loans by use of the interest method.
Loans are placed on non-accrual status when they are past due three months or more as to contractual obligations. When a loan is placed on non-accrual status, any interest accrued but not received is reversed against interest income. A non-accrual loan is restored to accrual status when principal and interest payments become less than three months past due.
ALLOWANCE FOR LOAN LOSSES
An allowance for loan losses is maintained at a level considered adequate to absorb future loan losses. Management of the Bank, in determining the allowance for loan losses, considers the risks inherent in its loan portfolio and changes in the nature and volume of its loan activities, along with the general economic and real estate market conditions.
The Bank maintains a loan review system which allows for a periodic review of its loan portfolio and the early identification of potential problem loans. Such system takes into consideration, among other things, delinquency status, size of loans, type of collateral and financial condition of the borrowers. Loan loss allowances are established for problem loans based on a review of such information and/or appraisals of the underlying collateral. On the remainder of its loan portfolio, loan loss allowances are based upon a combination of factors including, but not limited to, actual loan loss experience, composition of loan portfolio, current economic conditions and management's judgment. Although management believes that adequate loan loss allowances have been established, actual losses are dependent upon future events and, as such, further additions to the level of the loan loss allowance may be necessary in the future.
CONCENTRATION OF RISK
The Bank's real estate and lending activities are concentrated in real estate and loans secured by real estate located in the State of New York.
PREMISES AND EQUIPMENT
Premises and equipment are comprised of land and construction in progress, at cost, and buildings, building improvements, furnishings and equipment and leasehold improvements, at cost, less accumulated depreciation and amortization. Depreciation and amortization charges are computed using the straight-line method over the following estimated useful lives:
Buildings and improvements........................ 10 to 50 years Furnishings and equipment......................... 3 to 10 years Leasehold improvements ........................... The lesser of useful life or term of lease |
Significant renewals and betterments are charged to the property and equipment account. Maintenance and repairs are charged to expense in the year incurred.
REAL ESTATE OWNED
Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at the lower of cost or fair value at the date of acquisition and thereafter carried at the lower of cost or fair value less estimated selling costs. The amounts ultimately recoverable from real estate owned could differ from the net carrying value of these properties because of economic conditions and the current softness in the local real estate market.
Costs incurred to improve properties or get them ready for sale are capitalized. Revenues and expenses related to the holding and operating of properties are recognized in operations as earned or incurred. Gain or loss on sale of properties is recognized as incurred.
EXCESS OF COST OVER NET ASSETS ACQUIRED
In connection with the acquisition of two branches, core deposit premiums paid and other capitalized acquisition costs are being amortized to expense over periods from five to fifteen years using the straight-line method.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTEREST-RATE RISK
The Bank is principally engaged in the business of attracting deposits from the general public and using these deposits, together with borrowings and other funds, to originate loans secured by real estate and purchase investment and mortgage-backed securities. The potential for interest-rate risk exists as a result of the shorter duration of the Bank's interest-sensitive liabilities compared to the generally longer duration of interest-sensitive assets. In a rising rate environment, liabilities will reprice faster than assets, thereby reducing the market value of long-term assets and net interest income. For this reason, management regularly monitors the maturity structure of the Bank's assets and liabilities in order to measure its level of interest-rate risk and plan for future volatility.
INCOME TAXES
Federal, state and city income taxes have been provided on the basis of reported income. The amounts reflected on the tax returns differ from these provisions due principally to temporary differences in the treatment of certain items of income and expense for financial statement and income tax reporting purposes.
The FASB issued Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes", which required that the Bank compute income tax expense and deferred income taxes differently beginning on April 1, 1993. Specifically, SFAS 109 specifies the "liability method" of accounting for income taxes and thus requires that deferred income taxes in the consolidated statement of condition be adjusted each year to reflect the cumulative taxable and deductible temporary differences and net operating loss and tax credit carryforwards at the then existing income tax rates. The new rules also provide that qualified thrift lenders recognize the future tax consequences related to the allowance for loan losses recorded for book purposes and any increase in the bad debt reserve for income tax reporting purposes above that existing at December 31, 1987. The effect of the adoption of SFAS 109, effective April 1, 1993, was to increase retained earnings, net income, and deferred income tax assets by $252,082. The effect on net income is presented separately in the consolidated statement of income as a change in accounting principle.
NET INCOME PER COMMON SHARE
Net income per common share for the year ended March 31, 1996 is based on net income for the entire year. However, the pro forma net income per common share for the year ended March 31, 1995 is based on net income for the entire year, as if the Bank had converted to stock form (see Note 2) on the first day of the fiscal year, and the weighted average number of common shares outstanding during the period. For the purpose of these calculations, unreleased ESOP shares are not considered to be outstanding. Historical net income per share is calculated based on prorated earnings from October 24, 1994 (the date of conversion) to March 31, 1995. Net income per common share for the year ended March 31, 1994 is not presented as the Bank was a mutual savings Bank and no common stock was outstanding.
IMPACT OF NEW ACCOUNTING STANDARDS
In May 1993, the FASB issued Statement of Financial Accounting Standards No. 114 ("SFAS 114"), "Accounting by Creditors for Impairment of a Loan." SFAS 114 generally would require all creditors to account for impaired loans, except those loans that are accounted for at fair value or at the lower of cost or fair value, at the present value of the expected future cash flows discounted at the loan's effective interest rate. SFAS 114 also provides that in-substance foreclosed loans should not be included in real estate owned for financial reporting purposes, but rather should be included in the loan portfolio. SFAS 114 is effective for fiscal years beginning after December 15, 1994. In October 1994, the FASB amended certain provisions of SFAS 114 via the issuance of Statement of Financial Accounting Standards No. 118 ("SFAS 118"), "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures." SFAS 118 amends SFAS 114 by eliminating provisions describing how a creditor should report income on an impaired loan and increasing disclosure requirements as to information on recorded investments in certain impaired loans and how a creditor recognizes related interest income. The effective date of SFAS 118 is the same as for SFAS 114. SFAS 114, as amended by SFAS 118, when adopted on April 1, 1995, did not have a material adverse effect on the Bank's consolidated financial condition or results of operations.
RECLASSIFICATION
Certain amounts for the years ended March 31, 1994 have been reclassified to conform to the current period's presentation.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. CONVERSION TO STOCK FORM OF OWNERSHIP
On October 24, 1994, the Bank issued an initial offering of 2,314,375 shares of common stock (par value $0.01) at a price of $10 per share resulting in net proceeds of $21,519,000. As part of the initial public offering and in order to grant priority to eligible depositors, the Bank established a liquidation account at the time of conversion, in an amount equal to the surplus and reserves of the Bank at September 30, 1994. In the unlikely event of a complete liquidation of the Bank (and only in such event), eligible depositors who continue to maintain accounts shall be entitled to receive a distribution from the liquidation account. The total amount of the liquidation account may be decreased if the balances of eligible deposits decreased as measured on the annual determination dates. The balance of the liquidation account was approximately $6,800,000 and $7,769,000 at March 31, 1996 and 1995, respectively. The Bank may not declare or pay a cash dividend on, or repurchase any of its conversion stock, if the effect thereof would be to cause its net worth to be reduced below either: (i) the amount required for the liquidation account; or (ii) the amount of applicable regulatory capital requirements.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
3. SECURITIES AVAILABLE FOR SALE
MARCH 31,1996
-------------------------------------------------------------
AMORTIZED GROSS UNREALIZED CARRYING
----------------------------------
COST GAINS LOSSES VALUE
-------------------------------------------------------------
Mortgage-backed securities.................................... $ 42,520,115 $ 0 $ 612,117 $ 41,907,998
Equity securities: 0
Mutual funds.............................................. 71,935,268 1,427,439 70,507,829
Common and preferred stock................................ 2,039,898 50,400 2,090,298
Interest rate agreement for a notional amount of $20,000,000.. 182,406 360,286 (177,880)
-------------------------------------------------------------
$ 116,677,687 $ 50,400 $ 2,399,842 $ 114,328,245
=============================================================
|
MARCH 31,1995
----------------------------------------------------------
AMORTIZED GROSS UNREALIZED CARRYING
----------------------------------
COST GAINS LOSSES VALUE
----------------------------------------------------------
Mortgage-backed securities..................................... $19,646,759 $ 0 $ 699,476 $18,947,283
Equity securities: 0
Mutual funds............................................... 71,935,268 414,268 71,521,000
Common and preferred stock................................. 2,031,447 40,000 2,071,447
Interest rate agreement for a notional amount of $20,000,000... 284,906 503,094 788,000
----------------------------------------------------------
$93,898,380 $ 543,094 $ 1,113,744 $93,327,730
==========================================================
|
Securities in the available for sale portfolio were transferred thereto as of March 31,1994 and 1996 upon the initial adoption of and subsequent relaxation of SFAS 115. There have been no sales from the available for sale portfolio.
4. INVESTMENT SECURITIES HELD TO MATURITY, NET
MARCH 31,1996
--------------------------------------------------------------
CARRYING GROSS UNREALIZED ESTIMATED
-----------------------------------
VALUE GAINS LOSSES FAIR VALUE
--------------------------------------------------------------
U.S.Government (including agencies):
After one year through five years................... $8,937,075 123,277 $8,813,798
==============================================================
|
MARCH 31,1995
--------------------------------------------------------------
CARRYING GROSS UNREALIZED ESTIMATED
-----------------------------------
VALUE GAINS LOSSES FAIR VALUE
--------------------------------------------------------------
U.S.Government (including agencies):
After one year through five years.................... $18,034,662 302,226 $17,732,436
==============================================================
|
There were no sales of securities held to maturity during the years ended March 31,1996,1995 and 1994. Proceeds from calls of investment securities held to maturity during the years ended March 31, 1996 and 1995 were $9,000,000 and $2,971,000, respectively. No gains or losses were realized on these calls.
There were no sales of investment securities held for sale during the year ended March 31, 1996 and 1995.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
5. MORTGAGE-BACKED SECURITIES HELD TO MATURITY, NET
MARCH 31,1996
---------------------------------------------------------------------
PRINCIPAL UNAMORTIZED UNEARNED CARRYING
BALANCE PREMIUMS DISCOUNTS VALUE
---------------------------------------------------------------------
Goverment National Mortgage Association................. $ 13,427,764 $ 266 $ 131,405 $ 13,296,625
Federal Home Loan Mortgage Corporation.................. 54,138,973 1,486,330 204,821 55,420,482
Federal National Mortgage Association................... 45,768,352 667,099 189,472 46,245,979
Small Business Administration........................... 2,621,569 18569 2,603,000
Collateralized mortgage obligations:
Resolution Trust Corporation....................... 10,948,712 188,362 11,137,074
Federal Home Loan Mortgage Corporation............. 1,703,274 1,703,274
Others............................................. 697,539 1,432 698,971
---------------------------------------------------------------------
$129,306,183 $ 2,343,489 $ 544,267 $131,105,405
=====================================================================
|
MARCH 31,1995
---------------------------------------------------------------------
PRINCIPAL UNAMORTIZED UNEARNED CARRYING
------------
BALANCE PREMIUMS DISCOUNTS VALUE
---------------------------------------------------------------------
Goverment National Mortgage Association.................. $ 22,337,205 $ 663 $ 230,179 $ 22,107,689
Federal Home Loan Mortgage Corporation................... 75,876,235 2,020,855 269,987 77,627,103
Federal National Mortgage Association.................... 62,945,515 733,597 290,205 63,388,907
Small Business Administration............................ 2,983,008 22,163 2,960,845
Collateralized mortgage obligations:
Resolution Trust Corporation........................ 12,216,035 223,965 12,440,000
Federal Home Loan Mortgage Corporation.............. 1,703,274 1,703,274
Others.............................................. 886,504 19,341 905,845
--------------------------------------------------
$178,947,776 $ 2,998,421 $ 812,534 $181,133,663
=====================================================================
|
A summary of gross unrealized gains and losses and estimated fair value follows:
MARCH 31,1996
---------------------------------------------------------------------
CARRYING GROSS UNREALIZED ESTIMATED
-------------------------------
VALUE GAINS LOSSES FAIR VALUE
---------------------------------------------------------------------
Goverment National Mortgage Association ................ $ 13,296,625 $ 176,200 $ 390,909 $ 13,081,916
Federal Home Loan Mortgage Corporation ................. 55,420,482 699,524 513,067 55,606,939
Federal National Mortgage Association .................. 46,245,979 98,910 1,127,575 45,217,314
Small Business Administration .......................... 2,603,000 66,086 2,669,086
Collateralized mortgage obligations:
Resolution Trust Corporation ...................... 11,137,074 273,031 10,864,043
Federal Home Loan Mortgage Corporation ............ 1,703,274 17,032 1,686,242
Others ............................................ 698,971 11,825 687,146
---------------------------------------------------------------------
$131,105,405 $ 1,040,720 $ 2,333,439 $129,812,686
=====================================================================
|
MARCH 31,1995
---------------------------------------------------------------------
CARRYING GROSS UNREALIZED ESTIMATED
-------------------------------
VALUE GAINS LOSSES FAIR VALUE
---------------------------------------------------------------------
Goverment National Mortgage Association ................ $ 22,107,689 $ 329,503 $ 725,557 $ 21,711,635
Federal Home Loan Mortgage Corporation ................. 77,627,103 471,099 1,921,284 76,176,918
Federal National Mortgage Association .................. 63,388,907 62,406 2,993,581 60,457,732
Small Business Administration .......................... 2,960,845 544,608 2,416,237
Collateralized mortgage obligations:
Resolution Trust Corporation ...................... 12,440,000 423,165 12,016,835
Federal Home Loan Mortgage Corporation ............ 1,703,274 55,356 1,647,918
Others ............................................ 905,845 28,206 877,639
---------------------------------------------------------------------
$181,133,663 $ 863,008 $ 6,691,757 $175,304,914
=====================================================================
|
The following is a schedule of final maturities as of March 31,1996:
CARRYING ESTIMATE
VALUE FAIR VALUE
-------------------------------------
(In Thousands)
After one through five years ............................................. $ 4,059 $ 4,076
After five through ten years ............................................. 3,877 3,883
After ten years .......................................................... 123,169 121,854
-------------------------------------
$131,105 $129,813
=====================================
|
There were no sales of mortgage-backed securities held to maturity during the years ended March 31,1996,1995 and 1994.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
6. LOANS RECEIVABLE, NET
MARCH 31,
---------------------------
1996 1995
---------------------------
Real estate mortgage:
One-to four family ....................... $59,466,442 $31,538,744
Multi-family ............................. 2,490,355 2,165,300
Non-residential .......................... 11,138,426 8,660,363
Equity and second mortgages .............. 364,085 1,655,898
---------------------------
73,459,308 44,020,305
---------------------------
Agency for International Development ........... 9,441 13,634
---------------------------
Real estate construction ....................... 6,965,301 3,179,452
---------------------------
Commerical loans ............................... 1,090,941 931,500
---------------------------
Consumer:
Passbook or certificate .................. 1,011,371 1,098,739
Student education ........................ 1,094,351 1,345,801
Other .................................... 931,319 640,354
---------------------------
3,037,041 3,084,894
---------------------------
Total loans ........................... 84,562,032 51,229,785
Add: Premium on loans .......................... 882,138 365,716
---------------------------
Less: Loans in process ......................... 1,406,150 1,853,484
Allowance for loan losses ................ 1,205,496 1,074,604
Deferred loan fees and discounts ......... 224,459 208,024
---------------------------
2,836,105 3,136,112
---------------------------
$82,608,065 $48,459,389
===========================
|
The following is an analysis of the allowance for loan losses:
YEAR ENDED MARCH 31,
----------------------------------------
1996 1995 1994
----------------------------------------
Balance-beginning .......................... $ 1,074,605 $ 1,267,676 $ 1,597,136
Provision charged to operations ............ 130,892 333,697 19,061
Recoveries of amounts previously charged off 1,420
Loans charged off .......................... 0 (526,769) (349,941)
----------------------------------------
Balance-ending ............................. $ 1,205,497 $ 1,074,604 $ 1,267,676
========================================
|
Non-accrual loans consist of loans for which the accrual of interest has been discounted as a result of such loans becoming three months or more delinquent as to principal and/or interest payments. Interest income on non-accrual loans is recorded as received. Restructured loans consist of loans where borrowers have been granted concessions in regards to the terms of their loans due to financial or other difficulties which rendered them unable to service their loans under the original contractual terms. Such loans are performing in accordance with their restructured terms. The balances of non-accrual and restructured loans and their impact in interest income are as follows:
MARCH 31,
------------------------------------
1996 1995 1994
------------------------------------
(In Thousands)
Non-accrual loans ................. $2,034 $1,532 $2,203
Restructured loans ................ 0 1,468 1,758
------------------------------------
$2,034 $3,000 $3,961
====================================
|
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
YEAR ENDED MARCH 31,
------------------
1996 1995 1994
------------------
(In Thousands)
Interest income which would have been recorded had loans performed
in accordance with original contracts ......................... $138 $298 $328
Interest income received ......................................... 26 77 52
------------------
Interest income lost ............................................. $112 $221 $276
==================
|
The following is a summary of loans to the Bank's directors and officers (and to any associates of such persons), exclusive of loans to any such person which in aggregate did not exceed $60,000:
YEAR ENDED MARCH 31,
------------------------------
1996 1995
------------------------------
Balance-beginning .................... $ 451,567 $ 468,567
Loans originated ..................... 0 175,900
Repayments ........................... (23,138) (192,900)
------------------------------
Balance-ending ....................... $ 428,429 $ 451,567
==============================
|
7. LOANS SERVICING
The mortgage loan portfolios serviced for the Federal Home Loan Mortgage Corporation and Federal National Mortgage Association are not included in the accompanying financial statements. The unpaid principal balances of these loans aggregated $4,317,000, $3,911,000 and $1,295,000 at March 31, 1996, 1995 and 1994, respectively.
Custodial escrow balances, maintained un connection with the foregoing loan servicing, were approximately $89,000, $136,000 and $138,000 at March 31, 1996, 1995 and 1994, respectively.
8. PREMISES AND EQUIPMENT, NET
MARCH 31,
--------------------------
1996 1995
--------------------------
Land ............................................. $ 450,952 $ 450,952
Buildings and improvements ....................... 7,812,333 2,231,649
Leasehold improvements ........................... 1,122,768 582,516
Furnishings and equipment ........................ 2,251,129 826,051
Construction in process .......................... 0 1,621,546
--------------------------
11,637,182 5,712,714
Less accumulated depreciation and amortization ... 1,680,201 1,384,333
--------------------------
$ 9,956,981 $ 4,328,381
==========================
|
In March 1995, the Bank's main office building under construction, was completed and officially opened for business. At this time, construction in progress cost was reclassified to respective line item under premises and equipment.
There were no sales held to maturity during the years ended March 31, 1995, 1994 and 1993. Proceeds from calss of investment securities held to maturity during the years ended March 31, 1995 and 1993 were $2,971,000 and $3,142,000, respectively. No gains or losses were realized on these calls.
Proceeds from sales of investment securities held for sale during the year ended March 31, 1994 were $34,527,000, resulting in gross gain of $31,000 and gross losses of $83,000.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
9. ACCRUED INTEREST RECEIVABLE, NET
MARCH 31,
--------------------------
1996 1995
--------------------------
Loans ............................................ $ 1,076,014 $ 698,234
Mortgage-backed securities ....................... 1,258,479 1,511,786
Investments and other interest-bearing assets .... 557,775 690,516
2,892,268 2,900,536
Less allowance for uncollected interest .......... (204,069) (193,027)
--------------------------
$ 2,688,199 $ 2,707,509
==========================
|
10. EXCESS OF COST OVER ASSETS ACQUIRED, NET
MARCH 31,
------------------------------
1996 1995
------------------------------
Core deposit premium ................... $1,609,284 $1,828,247
Acquisition costs ...................... 59,798 70,723
------------------------------
$1,669,082 $1,898,970
==============================
|
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
11. DEPOSITS
MARCH 31,
----------------------------------------------------------------------------------------
1996 1995
----------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
RATE AMOUNT PERCENT RATE AMOUNT PERCENT
----------------------------------------------------------------------------------------
DEMAND:
Interest-bearing ............... 1.86% $ 16,970,517 6.61% 1.95% $ 14,913,365 6.00%
Non-interest-bearing ........... 0.00% 6,015,986 2.33% 3,731,633 1.50%
----------------------------------------------------------------------------------------
1.37% 22,986,503 8.94% 1.56% 18,644,998 7.50%
----------------------------------------------------------------------------------------
Savings and club ................. 2.50% 141,847,681 55.20% 2.50% 140,920,470 56.72%
Money Management ................. 3.17% 19,443,771 7.57% 3.17% 17,897,789 7.21%
Certificate of deposit ........... 5.27% 72,673,928 28.29% 5.03% 70,982,707 28.57%
----------------------------------------------------------------------------------------
3.42% 233,965,380 91.06% 3.33% 229,800,966 92.50%
----------------------------------------------------------------------------------------
3.24% 256,951,883 100.00% 3.20% 248,445,964 100.00%
========================================================================================
|
The scheduled maturities of certificates of deposits are as follows:
MARCH 31,
------------------------------
1996 1995
------------------------------
(In Thousands)
One year or less........................................ $30,961 $44,388
After one year to three years........................... 29,680 18,727
After three years to five years......................... 11,962 7,373
After five years........................................ 70 495
------------------------------
$72,673 $70,983
==============================
|
The aggregate amount of certificates of deposit with minimum denominations of $100,000 or more was approximately $9,163,000 and $10,318,000 at March 31, 1996 and 1995, respectively.
Interest expense on deposit consists of the following:
YEAR ENDED MARCH 31,
-----------------------------------------------------------
1996 1995 1994
-----------------------------------------------------------
Demand................................................ $ 330,562 $ 226,102 $ 257,131
Savings and clubs..................................... 3,507,068 3,591,611 3,722,037
Money Management...................................... 599,280 540,545 579,460
Certificates of deposit............................... 3,965,252 3,130,616 3,377,235
--------------------------------- -----------
8,402,162 7,488,874 7,935,863
Penalty for early withdrawals of certificate of deposit (11,961) (16,062) (12,045)
--------------------------------- -----------
$8,390,201 $7,472,812 $ 7,923,818
================================= ===========
|
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
12. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
INTEREST MARCH 31,
---------------------------------------
LENDER MATURITY RATE 1996 1995
---------------------------------------------------------- ---------------------------------------
Securities broker-dealer November 20,1995 7.00% $11,188,000
Securities broker-dealer November 30,1995 7.57% 7,000,000
Federal Home Loan Bank April 11,1996 5.70% 7,000,000
Securities broker-dealer May 17,1996 5.75% 6,000,000
Federal Home Loan Bank June 13,1996 5.65% 7,000,000
Federal Home Loan Bank July 1,1996 5.28% 3,000,000
Federal Home Loan Bank July 31,1996 5.15% 5,000,000
Securities broker-dealer August 16,1996 5.69% 6,000,000
Securities broker-dealer September 9,1996 5.64% 7,000,000
Securities broker-dealer November 27,1996 5.64% 6,000,000
---------------------------------------
$47,000,000 $18,188,000
=======================================
|
Information concerning borrowings collateralized by securities sold under agreements to repurchase are summarized as follows:
FOR YEAR ENDED MARCH 31,
----------------------------
1996 1995
----------------------------
(Dollars In Thousands)
Average balance during the year .......................................................... $25,654 $ 9,177
Average interest rate during the year .................................................... 5.60% 6.02%
Maximum month-end balance during the year ................................................ 47,000 18,188
Mortgage-backed securities underlying the agreements at year end:
Carrying value ...................................................................... $53,544 $18,893
Estimated fair value ................................................................ 53,384 18,650
|
13. ADVANCES FROM FEDERAL HOME LOAN BANK OF NEW YORK
MARCH 31,
--------------------------------------------------------------------------------------
MATURING 1996 1995
------------------------------------ ----------------------------------
YEAR ENDED WEIGHTED WEIGHTED
MARCH 31, AVERAGE RATE AMOUNT AVERAGE RATE AMOUNT
------------------------------------------------------ ----------------------------------
1996 0.00% $ 0 6.97% $48,000,000
1997 5.36% 11,000,000 0.00% 0
1998 8.10% 14,000,000 8.10% 14,000,000
2004 3.58% 400,000 3.58% 400,000
----------- -----------
6.84% $25,400,000 7.20% $62,400,000
=========== ===========
|
At March 31,1996 and 1995, the advances were secured by pledges of the Bank's investment in the capital stock of the Federal Home Loan Bank of New York totalling $3,120,000 and a blanket assignment of the Bank's unpledged qualifying mortgage, motgage-backed securities and investment portifolios.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
14. INCOME TAXES
The Bank qualifies as a thrift institution under the provisions of the Internal Revenue Code and is therefore permitted to deduct from taxable income an allowance for bad debts based on the greater of: (1) actual loan losses (the "experience method"); or (2) eight percent of taxable income before such bad debt deduction less certain adjustments (the "percentage of taxable income method"). For the tax years ended December 31,1995 and 1994, the deduction for bad debts was computed using the experience method. For the year ended March 31, 1996, the deductions for bad debt was computed using the percentage method. retained earnings at March 31, 1996, includes approximately $ 4,183,000 of such bad debts, for which federal income taxes have not been provided. If such amount is used for purpose other than bad debts losses, includings distributions in liquidation, it will be subject to federal income tax at the current rate.
The components of income taxes are summarized as follows:
YEAR ENDED MARCH 31,
-----------------------------------------------------------------
1996 1995 1994
-----------------------------------------------------------------
Current ........................................ $ 785,816 $ 750,166 $ 688,432
Deferred ....................................... (179,942) (75,869) (75,055)
-----------------------------------------------------------------
$ 605,874 $ 674,297 $ 613,377
=================================================================
|
The following table presents a reconciliation between the reported income taxes and the federal income taxes which would be computed by applying the normal federal income tax rate of 34% to income before income taxes:
YEAR ENDED MARCH 31,
1996 PERCENT 1995 PERCENT 1994 PERCENT
----------------------------------------------------------------------------
Income taxes ..................................... $ 462,046 34.00 $ 516,579 34.00 $ 381,325 34.00
Increases (reductions) in income taxes
resulting from:
Statutory bad debts deduction ............... (36,000) (2.65)
Accretion of purchase accounting
discount ................................. (29,277) (1.93) (70,310) (6.27)
Amortization of intangibles ................. 99,848 8.90
Dividend exclusion .......................... (37,600) (2.77)
write down of real estate owned
State and city income taxes, net of
federal income tax effect
Other items, net ............................ 190,845 14.04 156,032 10.27 153,691 13.70
Effective income taxes ........................... 26,583 1.96 30,963 2.04 48,823 4.35
----------------------------------------------------------------------------
605,874 44.58 674,297 44.38 613,377 54.68
============================================================================
|
At March 31, 1996, income taxes payable of $379,076 are included in other liabilities. At March 31, 1995, income taxes payable of $79,038 are included in other liabilities. The tax effects of existing temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows:
MARCH 31,
-------------------------------
DEFERRED TAX ASSETS 1996 1995
-------------------------------
Reserve for uncollected interest ........................................................ $ 95,912 $ 90,078
Loan and real estate owned losses in excess of bad debts deduction ...................... 300,627 154,633
Deferred loan fees ...................................................................... 105,496 46,766
Accrued pension ......................................................................... 55,643 111,174
Writedown of common stock ............................................................... 19,829 19,829
Reserve for losses on other assets ...................................................... 119,269 119,269
Unrealized loss on security available for sale .......................................... 1,104,237 268,205
Other ................................................................................... 0 6,841
-------------------------------
1,801,013 816,795
-------------------------------
Deferred tax liabilities
Gain on involuntary conversion .......................................................... 282,685 282,685
Savings premium ......................................................................... 554,820 582,900
Depreciation ............................................................................ 24,204 27,878
-------------------------------
Sub total ........................................................................... 861,709 893,463
-------------------------------
Net deferred tax assets (liabilities) included in other
assets or (liabilities) .............................................................. $ 939,304 ($ 76,668)
===============================
|
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
15. REGULATORY CAPITAL
The operations and profitability of the Bank are significantly affected by legislation and the policies of the various regulatory agencies. The Financial Institution Reform, Recovery and Enforcement Act 1989 ("FIRREA"), among other things, increase the capital requirements of all savings institutions and their affilliates and generally expanded the regulatory oversight of savings institutions Deposit Insurance Corpation Improvement Act of 1991 ("FDICIA") imposes increased requirements on the operations of financial institutions that fall below certain capital standards. As required by the FIRREA, the OTS promulgated capital requirements for financial institutions consisting of minimum tangible and core capital ratios of 1.50% and 3.00%, respectively, of the institution's adjusted total assets and a minimum risk-based capital ratio of 8.00% of the institution's risk weighted assets. Although the minimum core capital ratio is 3.00%, the FDICIA stipulates that an institution with less than 4.00% core capital is deemed undercapitalized. At March 31,1996 and 1995, the Bank exceeded all the current capital requirements.
The following table sets out the Bank's various regulatory capital catagorized at March 31, 1996 and 1995:
1996 1996
------------------------------ ----------------------------
Dollars Percentage Dollars Percentage
----------- ---------- ------- ----------
(thousands) (thousands)
Tangible capital $34,401 9.37% 33,204 9.06%
Tangible equity $28,889 7.87% 27,709 7.06%
Core/leverage capital $34,461 9.38% 33,284 9.08%
Tier 1 risk-based capital $34,461 9.38% 33,284 9.08%
Total risk-based capital $34,740 28.90% 33,531 32.76%
|
The following table reconciles the Bank's stockholders' equity at March 31, 1996, under generally accepted accounting principles to regulatory capital requirements:
REGULATORY CAPITAL REQUIREMENTS
----------------------------------------------------------
GAAP TANGIBLE TIER/CORE RISK-BASED
CAPITAL CAPITAL CAPITAL CAPITAL
-----------------------------------------
(IN THOUSANDS)
Stockholders' Equity at March 31,1996 $ 34,765 $ 34,765 $ 34,765 $ 34,765
========
Add:
Unrealized loss on securities available for sale, net 1,245 1,245 1,245
General valuation allowances 0 0 319
Qualifying intangible assets 60 60
Deduct:
Goodwill (1,609) (1,609) (1,609)
Asset required to be deducted 0 0 (40)
-------- -------- --------
Regulatory capital 34,401 34,461 34,740
Minimum capital requirement 5,512 11,027 9,636
-------- -------- --------
Regulatory capital excess 28,889 23,434 25,104
======== ======== ========
|
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
16. BENEFIT PLANS
PENSION PLAN
The Bank has a non-contributory defined benefit pension plan covering all eligible employees. The benefits are based on each employee's term of service. The Bank's policy is to fund the plan with contributions which equal the maximum amount deductible for federal income tax purposes. The following table sets forth the plan's funded status:
MARCH 31,
----------------------------------
1996 1995
----------------------------------
Actuarial present value of benefit obligation including
vested benefits of $1,690,000 and $1,296,000, respectively.................... $ 1,776,395 $ 1,414,900
==================================
Projected benefit obligation..................................................... $ 2,101,224 $ 1,920,100
Plan assets at fair value........................................................ 2,510,985 2,257,200
----------------------------------
Plan assets in excess of projected benefit boligation............................ 409,761 337,100
Unrecognized net obligation being amortized over 19.75 years..................... 393,075 437,700
Unrecognized prior service cost.................................................. 22,375 1,900
Unrecognized net (gain).......................................................... (926,811) (889,200)
Accrual for three months......................................................... 0 (25,400)
----------------------------------
(Accrued) pension cost included in other liabilities............................. (101,600) (137,900)
==================================
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Net periodic pension cost included the following components:
MARCH 31,
----------------------------------------------------------
1996 1995 1994
----------------------------------------------------------
Service cost ............................................ $ 95,323 $ 122,675 $ 173,320
Interest cost ........................................... 137,100 137,813 180,099
Return on plan assets ................................... (174,058) (182,798) (188,722)
Net periodic pension cost ............................... (94,665) (1,803) 27,152
==========================================================
$ (36,300) $ 75,887 $ 191,849
==========================================================
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Significant actuarial assumptions used in determining plan benefits are:
YEAR ENDED MARCH 31,
----------------------------------------
1996 1995 1994
----------------------------------------
Annual salary increase .............................................. 5.00% 6.00% 5.50%
Long-term return on assets .......................................... 8.00% 8.00% 8.00%
Discount rate used in measurement of benefit obligations ............ 7.00% 8.25% 7.25%
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Savings incentive plan
The Bank has a savings incentive plan, pursuant to Section 401(k) of Internal Revenue Code, for all eligible employees of the Bank. Employees may elect to save up to 15% of their compensation and may receive a percentage matching contribution from the Bank with respect to 50% of the eliglble employee's contributions up to the maximum allowed by law. Total incentive plan expenses for the years ended March 31, 1996, 1995 and 1994 were $52,700, $51,900, and $62,600, respectively.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
16. BENEFIT PLANS CONTD.
DIRECTORS' RETIREMENT PLAN
Concurrent with the conversion to the stock form of ownership, the Bank adopted a retirement plan for non-employee directors. The benefits are payable based on the term of service as a director.
1996 1995
----------------------
Actuarial present value of benefit obligation including vested benefits of $318,829 and
$303,112 for the year ended March 31, 1996 and 1995 respectively ................... $ 348,896 $ 327,624
======================
Projected benefit obligation .......................................................... $ 378,355 $ 353,835
Plan assets at fair value .............................................................
----------------------
Projected benefit obligation in excess of plan assets ................................. 378,355 353,835
Unrecognized past service cost ........................................................ (331,779) (330,525)
Additional minimum liability .......................................................... 302,320 304,314
----------------------
Accrued liability included in other liabilities ....................................... $ 348,896 $ 327,624
======================
Net periodic pension cost for the year ended March 31,1995 included the following
1996 1995
----------------------
Service cost .......................................................................... $ 18,267 $ 2,424
Interest cost ......................................................................... 28,417 7,077
Net deferral and amortization ......................................................... 55,236 13,809
----------------------
Net pension cost ...................................................................... $ 101,920 $ 23,310
======================
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The actuarial assumptions used in determining plan benefits include annual fee at 2.80% for both years,and a discount rate of 7.50%, and 8.00%, for the years ended March 31, 1996 and 1995 respectively. The additional minimum liability included as an intangible asset in other assets are $302,320 and $304,314 for the years ended March 31, 1996 and 1995, respectively.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
17. EMPLOYEE STOCK OWNERSHIP PLAN
Effective upon conversion, an ESOP was established for all eligible employees. The ESOP used $1,821,320 in proceeds from a term loan obtained from a third-party institution to purchase 182,132 shares of Bank common stock in the initial public offering. The term loan principal is payable over forty equal quarterly installments through September 2004. Interest on the term loan is payable quarterly, at a rate of 3.00% over the average federal funds rate. Each year, the Bank intends to make discretionary contribtions to the ESOP which will be equal to principal and interest payments required on the term loan less any dividends received by the ESOP on unallocated shares.
Shares purchased with the loan proceeds were initially pledged as collateral for the term loan and are held in a suspense account for future allocation among the participants on the basis of compensation, as described by the Plan, in the year of allocation.
The activities of the ESOP is accounted for in accordance with Statement of Position 93-6, "Accounting for Employee Stock Ownership Plan", which was issued by the American Institute of Certified Public Accountants in November 1993.
Accordingly, the ESOP shares pledged as collateral are reported as unearned ESOP shares in the consolidated statements of financial condition. As shares are committed to be released from collateral, the Bank reports compensation expense equal to the current market price of the shares, and the share become outstanding for net income per common share computations. ESOP compsation expense was $153,295 and 60,291 for the years ended March 31, 1996 and 1995, respectively.
The ESOP shares at March 31,1996 were as follows:
1996 1995
---------------------------
Allocated shares...........................
Shares committed to be released ........... 27,320 9,106
Unreleased shares ......................... 154,812 173,026
---------------------------
Total ESOP shares ......................... 182,132 182,132
===========================
Fair value of unreleased shares .............. $1,593,655 $1,189,554
===========================
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CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
18. COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing need of its customers.
These financial instruments primarily include commitments to exend credit and to sell loans. Those instruments involve, to varying degrees, elements of credit and interest rate in excess of the amount recognized in the statement of financial condition. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies making commitments as it does for on-balance-sheet instruments.
The Bank has outstanding various loan commitments as follows:
MARCH 31,
----------------------------
COMMITMENTS TO ORIGINATE LOANS 1996 1995
----------------------------
Mortgage ................................... $4,905,316 $4,586,459
Consumer loans ............................. 0 2,200
----------------------------
Total ................................. $4,905,316 $4,588,659
============================
COMMITMENTS TO SELL LOANS
Mortgage ................................... $1,948,000 $3,919,000
Consumer loans ............................. 1,000,000
----------------------------
Total ................................. $1,948,000 $4,919,000
============================
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At March 31,1996, of the $4,905,000 in outstanding commitments to originate mortgage loans, $1,252,000 are at fixed rates within a range of 5.00% to 8.75%, $2,830,000 are for balloon loans, ranging from 5-7 years, whose rates will be set at 1.50%-2.00% above the prime rate at the date of closing and $823,000 are adjustable rate with initial rates ranging from 5.25% to 7.50%.
At March 31,1996, undisbursed from approved commerical lines of credit totalled $2,600,000. All such lines are secured, including $2,000,000 in warehouse lines of credit secured by the underlying warehoused mortgages, expired within one year, and carry interest rates that float at from 1.50% to 2.00% above the prime rate.
At March 31, 1996, undisbursed funds from approved lines of credit under a homeowners' equity lending program with an interest rate of 1.25% over the prime rate adjusted on a monthly basis amounted to approximately $48,000. Unless they are specifically cancelled by notice from the Bank, these funds represent firm commitments available to the respective borrowers on demand.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition estalbished in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's credit-worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on management's credit evaluation of the counterparty. Collateral held consists primarily of residential real estate, but may include income-producing commercial properties.
Rentals, including real estate taxes, under long-term operating leases for certain branch offices aggregated approximately $302,000, $269,000 and $299,000 for the years ended March 31, 1996, 1995, and 1994, respectively. As of March 31, 1996, minimum rental commitments under all noncancellable leases with initial or remaining terms of more than one year and expiring through 2011 are as follows:
YEAR ENDED MINIMUM RENTAL
--------------
MARCH 31 (In Thousands)
--------
1997 .................... $ 232
1998 .................... 220
1999 .................... 226
2000 .................... 228
Thereafter .................... 1799
------
$2,705
======
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The Bank also has, in the normal course of business, commitments for services and supplies. Management does not anticipate losses on any of these transactions.
18. COMMITMENTS AND CONTINGENCIES CONTD.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
On February 6, 1995, the New York State Banking Department (the "Department") took possession of Nationar Trust Company ("Nationar"), a trust company owned by sixty-seven New York savings banks. The Department will manage the business of Nationar untill a suitable buyer is found. As of February 6, 1995, the Bank had invested $1,366,000 in federal funds and $600,000 in certificates of deposit with Nationar. The $1,966,000 of investments with Nationar have been reclassified, net of a $255,580 allowance for estimated losses, to other assets, pending the final resolution of this matter. In addition to such investments, Nationar has made a loan to the ESOP in the amount of $1,821,320, which has been paid down to $1,548,122 at March 31, 1996, and holds as collateral $182,132 shares owned by the ESOP.
On September 19, 1995, Carver Federal Savings Bank filed an action for declaratory judgment, for damages for breach of contract, and for breach of contractural trust, against Nationar and Neil Levin, the Superitendent of Banks, in the Supreme Court of New York State, County of New York. When the Superintendent sold Carver Federal Savings Bank's ESOP loan to a third party purchaser, it did not transfer the $1,966,000 in collateral along with the loan. When Nationar failed, the New York State Banking Department did not return $600,000 which was another sum of collateral that Carver placed on deposit with Nationar. The purpose of the lawsuit was to secure the entire return of both $1,366,000 in collateral, and $600,000 deposited with Nationar rather than a portion of it. The Bank believes that it has adequate reserve at 13.0% of the claims, against possible loss of these claims.
At a hearing on April 10, 1996, pursuant to the recommendation of the superintendent, the judge in the instant case entered an order directing the return of the $600,000 that had been deposited with Nationar. Since it is expected that the sum of $1,366,000, which is a general creditor claim, will be discounted at 10.0 %, the Board resolved to discontinue the lawsuit.
On April 5, 1995, a class action suit was filed against the Bank in federal court alleging that the Offering Circular used in the Bank's conversion to stock form was materially false and misleading. The suit seeks rescission, restitution or unspecified money damages. Bank management believes that the lawsuit is without merit and intends to vigorously defend against the suit.
On January 2, 1996, the United States District Court for the Southern District of New York dimsissed the class action encaptioned Dougherty vs. Carver Federal Savings Bank for lack of subject matter jurisdiction. By seperate order on the same date, the court made its ruling applicable to Gomberg vs. Carver Federal Savings Bank and Uminer vs. Carver Federal Savings Bank, two other class actions filed in the Southern District of New York which asserted claims essentially indential to those asserted in the Dougherty suit. The plaintiffs in Dougerty have filed notice in the United States Court of Appeals for the second circuit of their intent to appeal. The case(s) are now pending appeal in the United States Court of Appeal for the Second circuit.
In the conduct of the Bank's business, it is also involved in normal litigation matters. In the opinion of management, the ultimate dispoistion of such litigation should not have a material adverse effect on the financial position or results of operations of the Bank.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
19. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is defined as the amount at which the instrument could be exchange in a current transaction between willing parties, other than a forced or liquidation sale. Significant estimations were used by the Bank for the purpose of this disclosure. Estimated fair values have been determined by the Bank using the best available data and estimation methodology suitable for each category of financial instrument. For those loans and deposits with floating interest rates, it is presumed that estimated fair values generally approximate their recorded book balances. The estimation methodologies used and the estimated fair values and carrying values of the Bank's financial instruments are set forth below:
Cash and cash equivalents and accrued interest receivable.
The carrying amounts for cash and cash equivalents and accrued receivable approximate fair value because they mature in three months or less.
Securities
The fair values for securities available for sale, mortgage-backed securities held to maturity and investment securities held to maturity are based on quoted market or dealer prices, if available. If quoted market or dealer prices are not available, fair value is estimated using quoted market or dealer prices for similar securities.
Loans receivable
The fair value of loans receivable is estimated by discounting future cash flows, using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities of such loans.
Deposits
The fair value of demand, savings and club accounts is equal to the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated using rates currently offered for deposits of similar remaining maturties. The fair value estimates do not include the benefit that results from the low-cost funding provided by deposit liabilities compared to the cost of borrowing funds in the market.
Advances from Federal Home Loan Bank of New York, Securities sold under agreement to repurchase and Other borrowed money
The fair values of advances from Federal Home Loan Bank of New York, securities sold under agreement to repurchase and other borrowed money are estimated using the rates currently available to the Bank for debt with similar terms and remaining maturities.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
19. FAIR VALUE OF FINANCIAL INSTRUMENTS CONTD.
Commitments
The fair value of commitments to originate loans is equal to amount of commitment. The carrying amounts and estimated fair values of the Bank's financial instruments at March 31, 1996 and 1995 are as follows:
AT MARCH 31,
--------------------------------------------------
1996 1995
----------------------- ----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
FINANCIAL ASSETS ----------------------- ----------------------
Cash and cash equivalents ........................... $ 10,026 $ 10,026 $ 11,818 $ 11,818
Securities available fro sale ....................... 114,328 111,991 93,328 93,328
Investment securities ............................... 8,937 8,814 18,035 17,732
Mortgage-backed securities .......................... 131,105 129,813 181,134 175,305
Loans receivable .................................... 82,608 48,459 48,570
Accrued interest receivable ......................... 2,688 2,688 2,708 2,708
FINANCIAL LIABILITIES
Deposits ............................................ 256,952 249,386 $248,446 $246,309
Securities sold under agreements to repurchase ...... 47,000 47,101 18,188 18,295
Advances from Federal Home Loan Bank of New York..... 25,400 25,452 62,400 62,766
Other borrowed money ................................ 1,548 1,548 1,730 1,730
COMMITMENTS
To originate loans .................................. $ 4,905 $ 4,905 $ 4,589 $ 4,589
To sell loans ....................................... 1,948 1,948 4,919 4,919
To fund line of credit .............................. 5,200 5,200 2,142 2,142
To purchase motgage-backed securities ............... 0 0
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Limitations
The fair value estimates are made at a discrete point in time based on relevant market information about the financial instruments. These estimates do not reflect any premium or discout that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no quoted market value exists for a significant portion of the Bank's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
In addition, the fair value estimates are based on exisiting on-an-off balance sheet financial istruments without attempting to value anticipatd future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment and advances from borrowers for taxes and insurance. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.
Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation metodologies introduces a greater degree of subjectively to these estimated fair values.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. QUARTERLY FINANCIAL DATA (UNAUDITED)
YEAR ENDED MARCH 31, 1996
-----------------------------------------
FIRST SECOND THIRD FOURTH
QTR. QTR. QTR. QTR.
-----------------------------------------
(IN THOUSANDS)
Interest income .......................4, $5,914 $5,936 $5,883 $5,796
Interest expense ...................... 3,457 3,554 3,347 3,236
-----------------------------------------
Net interest income ................ 2,457 2,382 2,536 2,560
Provision for loan losses ............. (19) 5 75 70
Non-interest income (loss) ............ 131 153 143 181
Non-interest expense .................. 2,144 2,401 2,194 2,313
Income taxes .......................... 197 53 270 86
Extraordinary Income
-----------------------------------------
Net income ............................ $ 266 $ 76 $ 140 $ 271
=========================================
Net income per common shares........... $ 0.12 $ 0.36 $ 0.07 $ 0.12
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YEAR ENDED MARCH 31, 1995
-----------------------------------------
FIRST SECOND THIRD FOURTH
QTR. QTR. QTR. QTR.
-----------------------------------------
(IN THOUSANDS)
Interest income .......................4, $4,506 $4,483 $ 4,612 $6,149
Interest expense ...................... 2,259 2,390 2,611 3,271
----------------------------------------
Net interest income ................ 2,247 2,093 2,001 2,878
Provision for loan losses ............. 95 19 (27) 247
Non-interest income (loss) ............ 177 124 196 78
Non-interest expense .................. 1,807 1,928 1,865 2,341
Income taxes .......................... 225 127 192 130
----------------------------------------
Net income ............................ $ 297 $ 143 $ 167 $ 238
========================================
N/A N/A $ 0.08 $ 0.11
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Net income per common share for the quarter ended December 31, 1994 was calculated using the net income for the full quarter.
CARVER FEDERAL SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. SUBSEQUENT EVENT
On March 19, 1996, the Board of Directors of Carver Federal Savings Bank ("Bank") resolved to reorganize the Bank into a savings association holding company structure (the "Reorganization") pursuant to an Agreement and Plan of Reorganization ("Plan of Reorganization"). On May 9, 1996, Carver Bancorp, Inc. was incorporated under the General Corporation Law of the State of Delware for the purpose of becoming the holding company for the Bank.
The Reorganization will provide greater flexibility to meet the future competitive and financial needs of the Bank. It will also increase flexibility with respect to potential expansion through mergers and acquisitions, which may be funded by the additional equity offerings. A holding company structure will also allow the Board of Directors of Bancorp to repurchase shares of Bancorp common stock and declare dividends in the future.
Pursuant to the Plan of Reorganization, as Carver Interim Federal Savings Bank ("Interim"), will be formed in order to facilitate the Reorganization. Interim will be a stock-form savings bank formed under the Rules and Regulations of the Office of Thrift Supervision ("OTS").
Under the Plan of Reorganization, Interim will merge with the Bank, with the Bank as the surviving institution, and all of the outstanding common stock of the Bank (other than shares held by stockholders exercising dissenters' rights, if any) will be converted on a one-to-one basis, for Bancorp's common stock. Thereafter, Interim will cease to exist as a separate entity and the Bank will become a wholly owned subsidiary of Bancorp and will continue its current business and operations as a federally chartered stock savings bank using its current name.
The Plan of Reorganization is subject to the approval of the OTS and the Bank's stockholders at the July 29, 1996 Annual Stockholders Meeting.
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CARVER FEDERAL SAVINGS BANK,
CARVER BANCORP, INC.
AND
CARVER INTERIM FEDERAL SAVINGS BANK
DATED AS OF MAY 21, 1996
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of May 21, 1996, is made by and among CARVER FEDERAL SAVINGS BANK, a stock savings bank organized and existing under the laws of the United States of America and having an office at 75 West 125th Street, New York, New York 10027 ("Carver"), CARVER BANCORP, INC., a corporation organized and existing under the laws of the State of Delaware and having an office at 75 West 125th Street, New York, New York 10027 ("Bancorp") and the incorporator of CARVER INTERIM FEDERAL SAVINGS BANK, Raymond L. Bruce, Esq., having an office at 75 West 125th Street, New York, New York 10027 ("Interim").
W I T N E S S E T H:
WHEREAS, as of the date of this Agreement, the authorized capital stock of Carver consists of 6,000,000 shares, of which (i) 5,000,000 shares are common stock of par value of $0.01 per share, of which 2,314,375 shares are issued and outstanding and (ii) 1,000,000 shares are serial preferred stock, of par value $0.01 per share, issuable in classes and series, none of which shares are issued and outstanding.
WHEREAS, Bancorp is a business corporation, having been
incorporated on May 9, 1996 pursuant to a Certificate of Incorporation filed
with the Secretary of State of the State of Delaware and recorded in the Office
of the Recorder of Deeds in the County of New Castle on that date. The
registered office of Bancorp is located at 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of the registered agent at such
office is The Corporation Trust Company. As of the date of this Agreement, the
authorized capital stock of Bancorp consists of 12,000,000 shares, as follows:
(a) 10,000,000 shares are common stock, par value $0.01 per share, of which 100
shares are issued and outstanding to Carver; and (b) 2,000,000 shares are
preferred stock, par value $0.01 per share, issuable in classes and series,
none of which shares are issued and outstanding.
WHEREAS, Interim is a stock savings bank in formation under the Rules and Regulations of the Office of Thrift Supervision, and, upon formation, the authorized capital stock of Interim will consist of 1,000 shares of common stock, par value $0.01 per share, all of which shall be issued to and owned by Bancorp;
WHEREAS, the parties are entering into this Agreement in order to set forth the terms and conditions pursuant to which Interim will merge with and into Carver (the "Merger") and, simultaneously therewith, Bancorp will exchange one share of Bancorp common stock for each outstanding share of Carver common stock, and thereby become the holding company for
Carver (the "Exchange"). Hereinafter, the Merger and Exchange may be referred to as the "Reorganization;" and
WHEREAS, the Reorganization is to be accomplished through the following steps: (a) the formation of Bancorp, incorporated at the direction of Carver for the primary purpose of becoming the sole stockholder of Interim and subsequently becoming the sole stockholder of Carver; (b) the formation of Interim, which shall be wholly owned by Bancorp; (c) the merger of Interim with and into Carver with Carver as the surviving institution; and (d) pursuant to the Merger, (i) all of the issued and outstanding shares of Bancorp Common Stock held by Carver shall be contributed to Bancorp and canceled, (ii) all of the issued and outstanding shares of Carver common stock, subject to the exercise of dissenters' rights as set forth in Section 1.10 below, shall be converted, by operation of law, on a one-for-one basis, into an equal number of issued and outstanding shares of Bancorp common stock; and (iii) all of the issued and outstanding shares of Interim common stock shall be converted, by operation of law, on a one-for-one basis, into an equal number of issued and outstanding shares of Carver common stock (and shall not be further converted into shares of Bancorp common stock), which shall be all of the issued and outstanding shares of Carver common stock, and shall be owned by Bancorp. Subsequent to the Reorganization, all of the issued and outstanding shares of Carver common stock shall be owned by Bancorp, and all of the issued and outstanding shares of Bancorp common stock shall be owned by those non-dissenting stockholders who, prior to the Reorganization, owned shares of Carver common stock.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants, agreements, representations and warranties herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
TERMS
1.1 MERGER.
(a) Interim shall be merged with and into Carver under this Agreement, and the separate existence of Interim shall cease. The name of Carver shall be retained by the surviving bank, and the Federal Stock Charter of Carver, as amended, shall be the charter of the surviving bank, except that immediately after the Merger, Carver and Bancorp shall cause the first paragraph of Section 5 of Carver's Federal Stock Charter to be amended in its entirety to read as follows:
Section 5. Capital stock. The total number of shares of all classes of the capital stock which the savings bank has authority to issue is 1,000, all of which shall be common stock, par value $0.01 per share. The shares may be issued from time to time as authorized by the board of directors without the approval of its stockholders except as otherwise provided in this Section 5 or to the extent that such approval is required by governing law, rule, or regulation. The consideration for the issuance
of the shares shall be paid in full before their issuance and shall not be less than the par value. Neither promissory notes nor future services shall constitute payment or part payment for the issuance of shares of the savings bank. The consideration for the shares shall be cash, tangible or intangible property (to the extent direct investment in such property would be permitted), labor or services actually performed for the savings bank, or any combination of the foregoing. In the absence of actual fraud in the transaction, the value of such property, labor, or services, as determined by the board of directors of the savings bank, shall be conclusive. Upon payment of such consideration, such shares shall be deemed to be fully paid and nonassessable. In the case of a stock dividend, that part of the surplus of the savings bank which is transferred to stated capital upon the issuance of shares as a share dividend shall be deemed to be the consideration for their issuance.
(b) On the Effective Date (as defined in Article II below), the corporate existence of Carver shall continue and all of the rights, privileges, powers and franchises of Carver and Interim shall be possessed by Carver. All property and assets belonging to each prior to the Merger shall be vested in Carver and shall be thereafter as effectually the property of Carver as they were of the separate and respective Carver and Interim; provided that if at any time any further assignments, assurances in law, instruments of assumption, or any other actions are necessary or desirable to vest or to perfect or confirm of record in Carver the title to and possession of any property, rights, privileges, powers, immunities, franchises and interests of either Carver or Interim, or otherwise to carry out the provisions of this Agreement, the proper officers and directors of the respective Carver and Interim as of the Effective Date shall execute and deliver the same.
(c) On the Effective Date, except as otherwise provided by this Agreement or effected by the Merger contemplated hereby, all corporate acts, plans, policies, approvals, and authorizations of Carver, its stockholders, Board of Directors, committees elected or appointed by the Board of Directors, officers and agents, that were valid and effective immediately before the Effective Date, shall be deemed for all purposes to be the acts, plans, policies, approvals and authorizations of the surviving Carver and shall be effective and binding on the surviving Carver as the same were with respect to Carver prior to the Merger.
(d) On the Effective Date, the assets, liabilities, reserves and accounts of Carver and Interim shall be taken up on the books of the surviving Carver at the amounts at which they, respectively, shall be carried on the books of said corporations, subject to such adjustments or eliminations of intercompany items as may be applicable in giving effect to the Merger.
(f) On the Effective Date, each depositor having a savings account with Carver shall thereafter have a savings account of an equal amount with the surviving Carver.
1.2 CONVERSION OF CARVER COMMON STOCK. Simultaneously with the Merger, all of the issued and outstanding shares of Carver common stock, subject to the exercise of dissenters' rights as set forth in Section 1.10 below, shall be converted, by operation of law, on
a one-for-one basis, into an equal number of issued and outstanding shares of Bancorp common stock, in accordance with the terms of this Agreement. On the Effective Date, certificates representing shares of Carver common stock shall be deemed to be certificates representing shares of Bancorp common stock, and the holders thereof shall have no further rights in Carver, except in the case of dissenting stockholders, whose certificates of shares of Carver common stock shall represent only the right to receive payment for their shares in cash as set forth in Section 1.10 below.
1.3 MANNER OF EXCHANGING STOCK CERTIFICATES. In connection with the exchange of the issued and outstanding shares of Carver common stock for shares of Bancorp common stock, it shall not be necessary for non-dissenting holders of Carver common stock to exchange their existing certificates of Carver common stock for certificates of Bancorp common stock. On the Effective Date, non-dissenting holders of Carver common stock shall automatically become holders of Bancorp common stock, and their stock certificates shall automatically represent the same number and type of shares of Bancorp common stock. After the Effective Date, as outstanding certificates of Carver common stock are presented for transfer or, upon the request of any holder of certificates of Carver common stock, new certificates of Bancorp shall be issued by the registrar and transfer agent for Carver common stock. Any stock certificate presented for transfer to a name other than that in which the surrendered certificate is registered must be properly endorsed and otherwise in proper form for transfer and accompanied by evidence of payment of any applicable stock transfer or other taxes.
1.4 CONVERSION OF INTERIM COMMON STOCK. On the Effective Date, each share of Interim common stock issued and outstanding immediately prior to the Effective Date shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into, and shall become, one share of Carver common stock so that, from and after the Effective Date, all of the issued and outstanding shares of Carver common stock shall be held by Bancorp. Shares of Carver common stock that were originally Interim common stock shall not be further converted into or exchanged for Bancorp common stock.
1.5 BOARD OF DIRECTORS. Each person serving as a director of Carver on the Effective Date shall continue to serve as such following the Effective Date and until the completion of his term, subject to and in accordance with the provisions of the Bylaws of Carver as in effect on the Effective Date or as thereafter amended. Thereafter, Bancorp, as sole stockholder of Carver, shall elect Carver's Board of Directors. Each person serving as a director of Bancorp on the Effective Date shall continue to serve as such following the Effective Date and until completion of his or her term. Thereafter, the members of Bancorp's Board of Directors shall be elected in accordance with the Bylaws and Certificate of Incorporation of Bancorp. The names, residential addresses and the terms of the seven (7) directors of Carver and of Bancorp are:
CLASS I, EXPIRING IN 1996
David R. Jones
297 Prospect Place
Brooklyn, New York 11238
David N. Dinkins 215 East 68th Street - #13D New York, New York 10021
CLASS II, EXPIRING IN 1997
Linda Dunham(1)
117 Kensington Drive
Fort Lee, New Jersey 07024
Richard T. Greene
175-40 Murdock Avenue
St. Albans, New York 11434
M. Moran Weston, Ph. D.
228 Promenade Circle
Heathrow, Florida 32746
CLASS III, EXPIRING IN 1998
Thomas L. Clark, Jr.
65 Kent Road
White Plains, New York 10603-3105
Herman Johnson, CPA
33 Westbrook Lane
Roosevelt, New York 11575
1.6 OFFICERS AND EMPLOYEES. On the Effective Date, the persons serving as officers and employees of Carver shall, subject to and in accordance with the provisions of the Bylaws of Carver as in effect on the Effective Date or as thereafter amended, continue to hold the same offices and positions in Carver, and the persons serving as officers and employees of Bancorp on the Effective Date shall, subject to and in accordance with the provisions of the Bylaws of Bancorp as in effect on the Effective Date or as thereafter amended, continue to hold the same offices and positions in Bancorp.
1.7 CHARTERS AND BYLAWS. On the Effective Date, and until thereafter amended pursuant to Section l.l(a) above or otherwise, Bancorp shall operate under its Certificate of Incorporation and Bylaws then in effect and Carver shall operate under its Federal Stock Charter and Bylaws then in effect.
(1) Pursuant to the Bylaws of Carver Federal Savings Bank (the "Bank"), if the Board of Directors expands its size by appointing an additional director, such director must be put up for election at the next annual meeting of stockholders. To remain consistent with the Bylaws of the Bank, Ms. Dunham will serve as a director until the 1996 Annual Meeting of Stockholders of Bancorp, at which point she will be nominated to serve for a one-year term as a director, expiring in 1997.
1.8 OFFICES. On the Effective Date, the principal office of Bancorp shall be the same as the principal office of Carver. All of the existing offices of Carver shall initially be continued as offices of the surviving Carver, but may later be eliminated or expanded as the Board of Directors of Carver shall determine. The principal and branch offices of Carver, all located in New York, are:
MANHATTAN:
75 West 125th Street (main office)
261 8th Avenue
BROOKLYN:
2815 Atlantic Avenue
1281 Fulton Street
1009-1015 Nostrand Avenue
QUEENS:
117-02 Guy Brewer Boulevard, Jamaica
115-02 Merrick Boulevard, Jamaica
LONG ISLAND:
302 Nassau Road, Roosevelt
1.9 STOCKHOLDER APPROVAL. Carver shall submit this Agreement to its stockholders for approval, in accordance with section 552.13(h) of the Rules and Regulations of the Office of Thrift Supervision (the "OTS"); provided, however, that if necessary or desirable in the judgment of the parties hereto, this Agreement may be substantively amended or terminated by the parties hereto, as a result of comments from regulatory authorities or otherwise, at any time in accordance with the provisions of Section 4.1 of this Agreement.
1.10 DISSENTERS' RIGHTS. Any stockholder of Carver entitled to vote on this Agreement who does not vote in favor of it shall have the right to receive payment from Carver of the fair value of his or her shares of Carver common stock as defined in, and upon compliance with, the conditions set forth herein and in Section 552.14 of the Rules and Regulations of the OTS. Carver shall, not less than 20 days prior to the meeting of Carver stockholders at which this Agreement shall be submitted for approval, give notice to each stockholder of Carver of the right to demand payment of the appraised value of the stockholder's shares. A stockholder intending to enforce such right shall file with Carver, before or at the meeting of Carver stockholders at which this Agreement shall be submitted for approval (but before the stockholders vote on such approval), a writing identifying himself or herself and stating his or her intention to demand appraisal of and payment for his or her shares. Upon
filing such a notice of a demand of appraisal rights, the stockholder shall thereafter neither be entitled to vote such stock for any purpose nor be entitled to the payment of dividends or other distributions on the stock (except dividends or other distributions payable to, or a vote to be taken by, stockholders of record at a date that is on or prior to the Effective Date), except the right to be paid the fair value of the stockholder's shares. If this Agreement is approved by Carver's stockholders, Carver shall, within 10 days of the Effective Date, give a notice to each stockholder who has filed such a writing. The notice shall (a) state the Effective Date, (b) make a written offer to each such stockholder to pay for the stockholder's shares at a specified price that Carver deems to be the fair value of the shares and (c) inform each such stockholder (i) that, if the stockholder disagrees with the fair value of the shares, the stockholder must petition the OTS within 60 days of the Effective Date and demand that the OTS determine the fair market value of the stockholder's shares, (ii) inform each such stockholder that he or she must submit, within 60 days of the Effective Date, his or her shares of Carver common stock to the transfer agent for Carver for notation thereon that an appraisal and payment has been demanded with respect to such shares and that appraisal proceedings are pending, and (iii) inform each such stockholder that if the stockholder does not, within 60 days of the Effective Date, file such a petition or does not submit his or her stock certificates for such notation, the stockholder will be deemed to have accepted the terms offered under the Reorganization and shall no longer be entitled to appraisal rights. A stockholder may not dissent as to less than all of the shares of Carver common stock, held by the stockholder of record, that the stockholder beneficially owns. All shares acquired by Carver pursuant to this Section 1.10 shall be canceled upon receipt.
1.11 STOCK BASED COMPENSATION PLANS. On the Effective Date, Bancorp shall adopt and assume sponsorship of the Carver Federal Savings Bank Employee Stock Ownership Plan ("ESOP"), the Carver Federal Savings Bank 1996 Stock Option Plan ("Option Plan"), the Carver Federal Savings Bank Management Recognition Plan ("MRP") and the Carver Federal Savings Bank Incentive Compensation Plan ("Incentive Plan"), including all of Carver's obligations with respect to any outstanding options, stock appreciation rights or restricted stock granted pursuant to such plans. All outstanding options to purchase Carver common stock granted pursuant to the Option Plan or the Incentive Plan prior to the Reorganization will become options to purchase the same number of shares of Bancorp common stock with the same terms, conditions and exercise price as the original options granted, all stock appreciation rights with respect to shares of Carver common stock granted pursuant to the Option Plan prior to the Reorganization will become stock appreciation rights with respect to the same number of shares of Bancorp common stock, and all grants of restricted shares of Carver common stock granted pursuant to the MRP or the Incentive Plan prior to the Reorganization will become grants of restricted shares of Bancorp common stock. In addition, all shares of Carver common stock held by the trust established for the ESOP shall be exchanged on a one-for-one basis for Bancorp common stock in accordance with the terms of section 1.2 of this Agreement.
ARTICLE II
EFFECTIVE DATE
The effective date of the Reorganization ("Effective Date")
shall be the later of the date of (a) the consummation of the Reorganization or
(b) the date specified on the
endorsement by the Secretary of the OTS of the articles of reorganization with respect to the Reorganization in accordance with section 552.13(j) of the Rules and Regulations of the OTS.
ARTICLE III
CONDITIONS
The obligations of Carver, Interim and Bancorp to consummate the transactions contemplated by this Agreement are expressly subject to the satisfaction of each of the following conditions:
(a) The due authorization and delivery of this Agreement by the respective Boards of Directors of Carver and Bancorp, and by the incorporator of Interim at or prior to the Effective Date, which authorizations shall not have been revoked or modified as of the Effective Date;
(b) The approval of this Agreement and the transactions contemplated hereby by the OTS in accordance with the OTS Regulations;
(c) The approval of the Merger by the OTS in accordance with applicable laws and regulations;
(d) The receipt of either: (i) a ruling from the Internal Revenue Service acceptable in form and substance to Carver and its counsel, or (ii) an opinion of Carver's counsel, in either case to the effect that, for federal income tax purposes:
(A) No gain or loss will be recognized by stockholders of Carver upon the transfer of their shares of Carver common stock to Bancorp solely in exchange for shares of Bancorp common stock;
(B) No gain or loss will be recognized by Bancorp upon its receipt of shares of Carver common stock in exchange for shares of Bancorp common stock;
(C) The aggregate basis of the shares of Bancorp common stock to be received by each stockholder of Carver will be the same as the aggregate basis of the shares of Carver common stock exchanged therefor;
(D) The holding period of the shares of Bancorp common stock to be received by each stockholder of Carver in the transaction will include the holding period of the shares of Carver common stock exchanged therefor; provided, that
each such stockholder held such shares of Carver common stock as a capital asset on the Effective Date; and
(e) The approval of this Agreement by the holders of at least 50% plus one share of the outstanding shares of Carver common stock entitled to vote thereon; and
(f) The procurement of all other consents and approvals and the satisfaction of all other requirements necessary for the consummation of the Reorganization.
ARTICLE IV
TERMINATION; EXPENSES; AMENDMENT
4.1 AMENDMENT AND TERMINATION. Any term or condition of this Agreement may be amended in whole or in part at any time prior to the Effective Date, whether before or after approval by the stockholders of Carver, to the extent authorized by applicable law, rules and regulations, by an agreement in writing among the parties hereto, executed in the same manner as this Agreement except that, after approval by the stockholders of Carver, this Agreement may not be amended in any respect deemed by the Board of Directors of Carver to be materially adverse to the stockholders of Carver without the approval of such stockholders. This Agreement may be terminated at any time prior to the Effective Date, whether before or after approval by the stockholders of Carver, (a) at the option of the Board of Directors of Carver or Bancorp or the incorporator of Interim if any one or more of the conditions to the obligations of any of them under this Agreement shall not have been satisfied and shall not have been waived at or prior to the Effective Date, (b) at the option of the Board of Directors of Carver for any reason, or (c) by the mutual consent of each of the parties hereto.
4.2 WAIVER. Any of the terms or conditions of this Agreement may be waived at any time by any party that is, or the stockholders of which are, entitled to the benefit of such terms or conditions, except that after approval of this Agreement by the stockholders of Carver, no term or condition shall be waived without the approval of the stockholders of Carver if the Board of Directors of Carver determines that such a waiver would be materially adverse to the stockholders of Carver.
4.3 LIABILITY. In the event of the termination of this Agreement pursuant to this Article IV, this Agreement shall be void and of no further force or effect, and there shall be no liability or obligation of any nature on the part of any of the parties hereto or their respective directors, incorporators, officers, employees or stockholders by reason of this Agreement.
4.4 COSTS AND EXPENSES. Each party shall pay all costs and expenses incurred by it in connection with this Agreement and the transactions contemplated hereby.
ARTICLE V
MISCELLANEOUS
5.1 NOTICES. Any notice, direction, request, demand, waiver or other communication required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally or by telecopy, telex or similar mode of transmission or, if mailed, by certified mail, return receipt requested with first class postage prepaid, to the parties at the addresses listed below, or to such other address as any party may, by written notice, specify to the other parties:
If to Carver:
Carver Federal Savings Bank
75 West 125th Street
New York, New York 10027
Attention: Raymond L. Bruce, Vice President and
Corporate Counsel
If to Bancorp:
Carver Bancorp, Inc.
c/o Carver Federal Savings Bank
75 West 125th Street
New York, New York 10027
Attention: Raymond L. Bruce, Vice President and
Corporate Counsel
If to Interim:
Carver Interim Federal Savings Bank
c/o Carver Federal Savings Bank
75 West 125th Street
New York, New York 10027
Attention: Raymond L. Bruce, Vice President and
Corporate Counsel
With a copy to:
Kofi Appenteng, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
5.2 GOVERNING LAW. This Agreement shall be construed under and governed by the laws of the State of New York without giving effect to the principles of conflict of laws thereof.
5.3 NO THIRD PARTY BENEFICIARIES. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective stockholders, or any of them, any rights, remedies, obligations or licenses under or by reason of this Agreement or the Reorganization contemplated thereby.
5.4 HEADINGS. The headings of articles and sections contained herein are included solely for convenience of reference. If there is any conflict between such headings and the text of the Agreement, the text shall control.
5.5 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which when duly executed shall be deemed an original, and such counterparts shall together constitute one and the same instrument.
5.6 SEVERABILITY. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.
5.7 GENERAL INTERPRETIVE PRINCIPLES. For purposes of
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires: (a) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as well as the
singular, and the words of any gender shall include each other gender where
appropriate; (b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; (c) references herein to an "Article" or "Section" or other
subdivision without reference to a document are to designated an Article,
Section or other subdivision of this Agreement; (d) the words "herein,"
"hereof," "hereto" and other words of similar import refer to this Agreement as
a whole and not to any particular provision; and (f) the term "include" or
"including" shall mean without limitation by reason of enumeration.
5.8 ENTIRE AGREEMENT AND PARTIES IN INTEREST. This Agreement, including the documents and other writings referred to herein or delivered pursuant hereto, contains the entire agreement and understanding of the parties with respect to their subject matter. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Carver, Bancorp and Interim have each caused this Agreement to be executed on their behalf.
Attest: CARVER FEDERAL SAVINGS BANK
By /s/ Margaret R. Lewis By /s/ Thomas L. Clark, Jr.
------------------------------ -------------------------------------
Margaret R. Lewis Thomas L. Clark, Jr.
Corporate Secretary President and Chief Executive Officer
Attest: CARVER BANCORP, INC.
By /s/ Margaret R. Lewis By /s/ Thomas L. Clark, Jr.
------------------------------ -------------------------------------
Margaret R. Lewis Thomas L. Clark, Jr.
Corporate Secretary President and Chief Executive Officer
Attest: CARVER INTERIM FEDERAL SAVINGS BANK
(stock-form savings bank in formation)
By /s/ Margaret R. Lewis By /s/ Raymond L. Bruce, Esq.
------------------------------ -------------------------------------
Margaret R. Lewis Raymond L. Bruce, Esq.
Corporate Secretary Vice President and Corporate Counsel
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APPENDIX B
Section 552.14 DISSENTER AND APPRAISAL RIGHTS.
(a) Right to demand payment of fair or appraised value. Except as
provided in paragraph (b) of this section, any stockholder of a Federal stock
association combining in accordance with Section 552.13 of this part shall have
the right to demand payment of the fair or appraised value of his stock:
Provided, That such stockholder has not voted in favor of the combination and
complies with the provisions of paragraph (c) of this section.
(b) Exceptions. No stockholder required to accept only qualified consideration for his or stock shall have the right under this section to demand payment of the stock's fair or appraised value, is such stock was listed on a national securities exchange or quoted on the National Association of Securities Dealers' Automated Quotation System ("NASDAQ") on the date of the meeting at which the combination was acted upon or stockholder action is not required for a combination made pursuant to Section 552.13(h)(2) of this part. "Qualified consideration" means cash, shares of stock of any association or corporation which at the effective date of the combination will be listed on a national securities exchange or quoted on NASDAQ, or any combination of such shares of stock and cash.
(c) Procedure
(1) Notice. Each constituent Federal stock association shall notify all stockholders entitled to rights under this section, not less than twenty days prior to the meeting at which the combination agreement is to be submitted for stockholder approval, of the right to demand payment of appraised value of shares, and shall include in such notice a copy of this section. Such written notice shall be mailed to stockholders of record and may be part of management's proxy solicitation for such meeting.
(2) Demand for appraisal and payment. Each stockholder electing to make a demand under this section shall deliver to the Federal stock association, before voting on the combination, a writing identifying himself or herself and stating his or her intention thereby to demand appraisal of and payment for his or her shares. Such demand must be in addition to and separate from any proxy or vote against the combination by the stockholder.
(3) Notification of effective date and written offer. Within ten days after the effective date of the combination, the resulting association shall:
(i) Give written notice by mail to stockholders of constituent Federal stock associations who have complied with the provisions of paragraph (c)(2) of this section and have not voted in favor of the combination, of the effective date of the combination;
(ii) Make a written offer to each stockholder to pay for dissenting shares at a specified price deemed by the resulting association to be the fair value thereof; and
(iii) Inform them that, within sixty days of such date, the respective requirements of paragraphs (c)(5) and (c)(6) of this section (set out in the notice) must be satisfied.
The notice and offer shall be accompanied by a balance sheet and statement of income of the association the shares of which the dissenting stockholder holds, for a fiscal year ending not more than sixteen months before the date of notice and offer, together with the latest available interim financial statements.
(4) Acceptance of offer. If within sixty days of the effective date of the combination the fair value is agreed upon between the resulting association and any stockholder who has complied with the provisions of paragraph (c)(2) of this section, payment therefor shall be made within ninety days of the effective date of the combination.
(5) Petition to be filed if offer not accepted. If within sixty
days of the effective date of the combination the resulting association
and any stockholder who has complied with the provisions of paragraph
(c)(2) of this section do not agree as to the fair value, then any such
stockholder may file a petition with the Office, with a copy by
registered or certified mail to the resulting association, demanding a
determination of the fair market value of the stock of all such
stockholders. A stockholder entitled to file a petition under this
section who fails to file such petition within sixty days of the
effective date of the combination shall be deemed to have accepted the
terms offered under the combination.
(6) Stock certificates to be noted. Within sixty days of the effective date of the combination, each stockholder demanding appraisal and payment under this section shall submit to the transfer agent his certificates of stock for notation thereon that an appraisal and payment have been demanded with respect to such stock and that appraisal proceedings are pending. Any stockholder who fails to submit his or her stock certificates for such notation shall no longer be entitled to appraisal rights under this section and shall be deemed to have accepted the terms offered under the combination.
(7) Withdrawal of demand. Notwithstanding the foregoing, at any time within sixty days after the effective date of the combination, any stockholder shall have the right to withdraw his or her demand for appraisal and to accept the terms offered upon the combination.
(8) Valuation and payment. The Director shall, as he or she may elect, either appoint one or more independent persons or direct appropriate staff of the Office to appraise the shares to determine their fair market value, as of the effective date of the combination, exclusive of any element of value arising from the accomplishment or expectation of the combination. Appropriate staff of the Office shall review and provide an opinion on appraisals prepared by independent persons as to the suitability of the appraisal methodology and the adequacy of the analysis and supportive data. The Director after consideration of the appraisal report and the advice of the appropriate staff
(9) Costs and expenses. The costs and expenses of any proceeding under this section may be apportioned and assessed by the Director as he or she may deem equitable against all or some of the parties. In making this determination the Director shall consider whether any party has acted arbitrarily, vexatiously, or not in good faith in respect to the rights provided by this section.
(10) Voting and distribution. Any stockholder who has demanded appraisal rights as provided in paragraph c(2) of this section shall thereafter neither be entitled to vote such stock for any purpose nor be entitled to the payment of dividends or other distributions on the stock (except dividends or other distribution payable to, or a vote to be taken by stockholders of record at a date which is on or prior to, the effective date of the combination): Provided, That if any stockholder becomes unentitled to appraisal and payment of appraised value with respect to such stock and accepts or is deemed to have accepted the terms offered upon the combination, such stockholder shall thereupon be entitled to vote and receive the distributions described above.
(11) Status. Shares of the resulting association into which shares of the stockholders demanding appraisal rights would have been converted or exchanged, had they assented to the combination, shall have the status of authorized and unissued shares of the resulting association.
CERTIFICATE OF INCORPORATION
OF
CARVER BANCORP, INC.
UNDER SECTION 102 OF
THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
TABLE OF CONTENTS
Page
ARTICLE I
NAME
ARTICLE II
REGISTERED OFFICE AND AGENT
ARTICLE III
PURPOSE
ARTICLE IV
CAPITAL STOCK
Section 1. Shares, Classes and Series Authorized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Designations, Powers, Preferences, Rights, Qualifications, Limitations and Restrictions Relating
to the Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE V
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
Section 1. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. Prohibitions Relating to Beneficial Ownership of Voting Stock . . . . . . . . . . . . . . . . . . . 4
Section 3. Excess Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Powers of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 6. Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VI
BOARD OF DIRECTORS
Section 1. Number of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Classification of Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4. Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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Section 5. Directors Elected by Preferred Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6. Evaluation of Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 7. Power to Call Special Meeting of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VII
ACTION BY STOCKHOLDERS WITHOUT A MEETING
ARTICLE VIII
CERTAIN BUSINESS COMBINATIONS
Section 1. Higher Vote Required for Certain Business Combinations . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. When Higher Vote is Not Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Powers of the Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5. Effect on Fiduciary Obligations of Interested Stockholders . . . . . . . . . . . . . . . . . . . . 16
Section 6. Amendment, Repeal, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IX
LIMITATION OF DIRECTOR LIABILITY
ARTICLE X
INDEMNIFICATION
Section 1. Actions, Suits or Proceedings Other than by or in the Right of the Corporation . . . . . . . . . . 17
Section 2. Actions or Suits by or in the Right of the Corporation . . . . . . . . . . . . . . . . . . . . . . 17
Section 3. Indemnification for Costs, Charges and Expenses of a Successful Party . . . . . . . . . . . . . . . 18
Section 4. Indemnification for Expenses of a Witness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5. Determination of Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6. Advancement of Costs, Charges and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7. Procedure for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8. Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9. Other Rights; Continuation of Right to Indemnification; Individual Contracts . . . . . . . . . . . 20
Section 10. Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 12. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 13. Subsequent Amendment and Subsequent Legislation . . . . . . . . . . . . . . . . . . . . . . . . . 22
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ARTICLE XI
AMENDMENTS
Section 1. Amendments of Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2. Amendments of Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XII
NOTICES
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CERTIFICATE OF INCORPORATION
OF
CARVER BANCORP, INC.
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to Section 102 of the General Corporation Law of the State of Delaware, does hereby certify that this Certificate of Incorporation of Carver Bancorp, Inc. was duly adopted in accordance with the provisions of Section 102 of the General Corporation Law of the State of Delaware, and further certifies as follows:
ARTICLE I
NAME
The name of the corporation is Carver Bancorp, Inc. (the "Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
CAPITAL STOCK
SECTION 1. SHARES, CLASSES AND SERIES AUTHORIZED. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is twelve million (12,000,000) shares, of which two million (2,000,000) shares shall be preferred stock,
par value one cent ($.01) per share (the "Preferred Stock"), and ten million (10,000,000) shares shall be common stock, par value one cent ($.01) per share (the "Common Stock"). The Preferred Stock and Common Stock are sometimes hereinafter collectively referred to as the "Capital Stock."
SECTION 2. DESIGNATIONS, POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS RELATING TO THE CAPITAL STOCK. The following is a statement of the designations, powers, preferences and rights in respect of the classes of the Capital Stock, and the qualifications, limitations or restrictions thereof, and of the authority with respect thereto expressly vested in the Board of Directors of the Corporation (the "Board of Directors"):
(a) Preferred Stock. The Preferred Stock may be issued from time to time in one or more series, the number of shares and any designation of each series and the powers, preferences and rights of the shares of each series, and the qualifications, limitations or restrictions thereof, to be as stated and expressed in a resolution or resolutions providing for the issue of such series adopted by the Board of Directors, subject to the limitations prescribed by law. The Board of Directors in any such resolution or resolutions is expressly authorized to state for each such series:
(i) the voting powers, if any, of the holders of stock of such series in addition to any voting rights affirmatively required by law;
(ii) the rights of stockholders in respect of dividends, including, without limitation, the rate or rates per annum and the time or times at which (or the formula or other method pursuant to which such rate or rates and such time or times may be determined) and conditions upon which the holders of stock of such series shall be entitled to receive dividends and other distributions, and whether any such dividends shall be cumulative or non-cumulative and, if cumulative, the terms upon which such dividends shall be cumulative;
(iii) whether the stock of each such series shall be redeemable by the Corporation at the option of the Corporation or the holder thereof, and, if redeemable, the terms and conditions upon which the stock of such series may be redeemed;
(iv) the amount payable and the rights or preferences to which the holders of the stock of such series shall be entitled upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;
(v) the terms, if any, upon which shares of stock of such series shall be convertible into, or exchangeable for, shares of stock of any other class or classes or of any other series of the same or any other class or classes, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any; and
(vi) any other designations, preferences, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, so far as they are not inconsistent with the provisions of this Certificate of Incorporation and to the full extent now or hereafter permitted by the laws of the State of Delaware.
All shares of the Preferred Stock of any one series shall be identical to each other in all respects, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon, if cumulative, shall be cumulative.
Subject to any limitations or restrictions stated in the resolution or resolutions of the Board of Directors originally fixing the number of shares constituting a series, the Board of Directors may by resolution or resolutions likewise adopted increase (but not above the total number of authorized shares of Preferred Stock) or decrease (but not below the number of shares of the series then outstanding) the number of shares of the series subsequent to the issue of shares of that series; and in case the number of shares of any series shall be so decreased, the shares constituting the decrease shall resume that status that they had prior to the adoption of the resolution originally fixing the number of shares constituting such series.
(b) Common Stock. All shares of Common Stock shall be identical to each other in every respect. The shares of Common Stock shall entitle the holders thereof to one vote for each share on all matters on which stockholders have the right to vote. The holders of Common Stock shall not be permitted to cumulate their votes for the election of directors.
Subject to the preferences, privileges and powers with respect to each class or series of Preferred Stock having any priority over the Common Stock, and the qualifications, limitations or restrictions thereof, the holders of the Common Stock shall have and possess all rights pertaining to the Capital Stock.
ARTICLE V
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK
SECTION 1. APPLICABILITY OF ARTICLE. The provisions of this Article V shall become effective upon the consummation of the reorganization whereby Carver Bancorp, Inc. will become the holding company for Carver Federal Savings Bank, a savings bank organized under the laws of the United States (the "Bank"). All terms used in this Article V and not otherwise defined herein shall have the meanings ascribed to such terms in Section 3 of Article VIII, below.
SECTION 2. PROHIBITIONS RELATING TO BENEFICIAL OWNERSHIP OF VOTING STOCK. No Person (other than the Corporation, any Subsidiary, or any pension, profit-sharing, stock bonus or other compensation plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the Corporation is a member for the benefit of the employees of the Corporation and/or any Subsidiary, or any trust or custodial arrangement established in connection with any such plan) shall directly or indirectly acquire or hold the beneficial ownership of more than ten percent (10%) of the issued and outstanding Voting Stock of the Corporation. Any Person so prohibited who directly or indirectly acquires or holds the beneficial ownership of more than ten percent (10%) of the issued and outstanding Voting Stock in violation of this Section 2 shall be subject to the provisions of Sections 3 and 4 of this Article V, below. The Corporation is authorized to refuse to recognize a transfer or attempted transfer of any Voting Stock to any Person who beneficially owns, or who the Corporation believes would become by virtue of such transfer the beneficial owner of, more than ten percent (10%) of the Voting Stock.
SECTION 3. EXCESS SHARES. If, notwithstanding the foregoing prohibition, a Person shall, voluntarily or involuntarily, become or attempt to become the purported beneficial owner (the "Purported Owner") of shares of Voting Stock in excess of ten percent (10%) of the issued and outstanding shares of Voting Stock, the number of shares in excess of ten percent (10%) shall be deemed to be "Excess Shares," and the holder thereof shall be entitled to cast one hundredth (1/100) of one vote per share for each Excess Share.
The restrictions set forth in this Article V shall be noted conspicuously on all certificates evidencing ownership of Voting Stock.
SECTION 4. POWERS OF THE BOARD OF DIRECTORS.
(a) The Board of Directors may, to the extent permitted by law, from time to time establish, modify, amend or rescind, by Bylaw or otherwise, regulations and procedures not inconsistent with the express provisions of this Article V for the orderly application, administration and implementation of the provisions of this Article V. Such procedures and regulations shall be kept on file with the Secretary of the Corporation and with the Transfer Agent, shall be made available for inspection by the public and, upon request, shall be mailed to any holder of Voting Stock of the Corporation.
(b) When it appears that a particular Person has become a
Purported Owner of Excess Shares in violation of Section 2 of this Article V,
or of the rules and regulations of the Board of Directors with respect to this
Article V, and that the provisions of this Article V require application,
interpretation, or construction, then a majority of the directors of the
Corporation shall have the power and duty to interpret all of the terms and
provisions of this Article V, and to determine on the basis of information
known to them after reasonable inquiry all facts necessary to ascertain
compliance with this Article V, including, without limitation, (i) the number
of shares of Voting Stock beneficially owned by any Person or Purported Owner,
(ii) whether a Person or Purported Owner is an Affiliate or Associate of, or is
acting in concert
with, any other Person or Purported Owner, (iii) whether a Person or Purported Owner has an agreement, arrangement or understanding with any other Person or Purported Owner as to the voting or disposition of any shares of the Voting Stock, (iv) the application of any other definition or operative provision of this Article V to the given facts, or (v) any other matter relating to the applicability or effect of this Article V.
The Board of Directors shall have the right to demand that any
Person who is reasonably believed to be a Purported Owner of Excess Shares (or
who holds of record Voting Stock beneficially owned by any Person reasonably
believed to be a Purported Owner in excess of such limit) supply the
Corporation with complete information as to (i) the record owner(s) of all
shares of Voting Stock beneficially owned by such Person or Purported Owner and
(ii) any other factual matter relating to the applicability or effect of this
Article V as may reasonably be requested of such Person or Purported Owner.
Any applications, interpretations, constructions or any other determinations made by the Board of Directors pursuant to this Article V, in good faith and on the basis of such information and assistance as was then reasonably available for such purpose, shall be conclusive and binding upon the Corporation and its stockholders and neither the Corporation nor any of its stockholders shall have the right to challenge any such construction, application or determination.
SECTION 5. SEVERABILITY. In the event any provision (or portion thereof) of this Article V shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions (or portions thereof) of this Article V shall remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of this Corporation and its stockholders that each such remaining provision (or portion thereof) of this Article V remain, to the fullest extent permitted by law, applicable and enforceable as to all stockholders, including Purported Owners, if any, notwithstanding any such finding.
SECTION 6. EXCLUSIONS. This Article V shall not apply to (a) any offer or sale with a view towards public resale made exclusively by the Corporation to any underwriter or underwriters acting on behalf of the Corporation, or to the selling group acting on such underwriter's or underwriters' behalf, in connection with a public offering of the Common Stock; or (b) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction or reorganization that does not have the effect, directly or indirectly, of changing the beneficial ownership interests of the Corporation's stockholders, other than pursuant to the exercise of any dissenters' appraisal rights, except as a result of immaterial changes due to fractional share adjustments, which changes do not exceed, in the aggregate, one percent (1%) of the issued and outstanding shares of such class of equity or convertible securities.
ARTICLE VI
BOARD OF DIRECTORS
SECTION 1. NUMBER OF DIRECTORS. The number of directors of the Corporation shall be as determined only by resolution of the Board of Directors, but shall not be less than five (5) nor more than fifteen (15).
SECTION 2. CLASSIFICATION OF BOARD. Subject to the rights of any holders of any series of Preferred Stock that may be issued by the Corporation pursuant to a resolution or resolutions of the Board of Directors providing for such issuance and subject to the provisions hereof, the directors of the Corporation shall be divided into three classes with respect to term of office, each class to contain, as near as may be possible, one-third of the entire number of the Board, with the terms of office of one class expiring each successive year. One class of directors shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 1996, another class shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 1997, and another class shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 1998. At each annual meeting of stockholders, the successors to the class of directors (other than directors elected by holders of shares of one or more series of Preferred Stock) whose term expires at that time shall be elected by the stockholders to serve until the annual meeting of stockholders held three years next following and until their successors shall be elected and qualified.
In the event of any intervening changes in the authorized number of directors (other than directors elected by holders of shares of one or more series of Preferred Stock), only the Board of Directors shall designate the class or classes to which the increases or decreases in directorships shall be apportioned in order more nearly to achieve equality of number of directors among the classes; provided, however, that no such apportionment or redesignation shall shorten the term of any incumbent director.
Unless and to the extent that the Bylaws so provide, elections of directors need not be by written ballot.
SECTION 3. VACANCIES. Subject to the limitations prescribed by law and this Certificate of Incorporation, all vacancies in the office of director, including vacancies created by newly created directorships resulting from an increase in the number of directors (subject to the provisions of Article VI, Section 5 hereof relating to directors elected by holders of one or more series of Preferred Stock), shall be filled only by a vote of a majority of the directors then holding office, whether or not a quorum, and any director so elected shall serve for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until his successor shall be elected and qualified.
SECTION 4. REMOVAL OF DIRECTORS. Any or all of the directors (subject to the provisions of Article VI, Section 5 hereof relating to directors elected by holders of shares of
one or more series of Preferred Stock) may be removed at any time, but only for cause, and any such removal shall require the vote, in addition to any vote required by law, of not less than eighty percent (80%) of the total votes eligible to be cast by the holders of all outstanding shares of Capital Stock entitled to vote generally in the election of directors at a meeting of stockholders expressly called for that purpose. For purposes of this Section 4, conduct worthy of removal for "cause" shall include (a) conduct as a director of the Corporation or any subsidiary of the Corporation, which conduct involves willful material misconduct, breach of fiduciary duty involving personal pecuniary gain or gross negligence in the performance of duties, (b) conduct, whether or not as a director of the Corporation or a subsidiary of the Corporation, which conduct involves dishonesty or breach of fiduciary duty and is punishable by imprisonment for a term exceeding one year under state or federal law or (c) removal of such person from the Board of Directors of the Bank, if such person is so serving, in accordance with the Federal Stock Charter and Bylaws of the Bank.
SECTION 5. DIRECTORS ELECTED BY PREFERRED STOCKHOLDERS.
Notwithstanding anything set forth in the Bylaws to the contrary, the
qualifications, term of office and provisions governing vacancies, removal and
other matters pertaining to directors elected by holders of one or more series
of Preferred Stock shall be as set forth in a resolution or resolutions adopted
by the Board of Directors setting forth the designations, preferences and
rights relating to any such series of Preferred Stock pursuant to Article IV,
Section 2 hereof.
SECTION 6. EVALUATION OF ACQUISITION PROPOSALS. The Board of Directors of the Corporation, when evaluating any offer to the Corporation or to the stockholders of the Corporation from another party to (a) purchase for cash, or exchange any securities or property for, any outstanding equity securities of the Corporation, (b) merge or consolidate the Corporation with another corporation or (c) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, shall, in connection with the exercise of its judgment in determining what is in the best interest of the Corporation and its stockholders, give due consideration to the extent permitted by law not only to the price or other consideration being offered, but also to all other relevant factors including, without limitation, the financial and managerial resources and future prospects of the other party, the possible effects on the business of the Corporation and its subsidiaries and on the employees, customers, suppliers and creditors of the Corporation and its subsidiaries, the effects on the communities in which the Corporation's and its subsidiaries' facilities are located and the commitment and ability of the other party to remain faithful to the special mission of the Corporation and its subsidiaries in the communities in which the Corporation and its subsidiaries are located in the tradition begun by Carver Federal Savings Bank.
SECTION 7. POWER TO CALL SPECIAL MEETING OF STOCKHOLDERS. Special meetings of stockholders, for any purpose, may be called at any time only by resolution of at least three-fourths of the Directors of the Corporation then in office, by the Chairman of the Board or by the President and Chief Executive Officer. At a special meeting, no business shall be transacted and no corporate action shall be taken other than that stated in the notice of meeting prescribed by the Bylaws of the Corporation.
ARTICLE VII
ACTION BY STOCKHOLDERS WITHOUT A MEETING
Except as otherwise provided for or fixed pursuant to the provisions of Article IV of this Certificate of Incorporation relating to the rights of holders of any series of Preferred Stock, no action that is required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders may be effected by written consent of stockholders in lieu of a meeting of stockholders.
ARTICLE VIII
CERTAIN BUSINESS COMBINATIONS
SECTION 1. HIGHER VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS. In addition to any affirmative vote required by law, by this Certificate of Incorporation, or by the provisions of any series of Preferred Stock that may at the time be outstanding, and except as otherwise expressly provided for in Section 2 of this Article VIII, any Business Combination, as hereinafter defined, shall require the affirmative vote of not less than eighty percent (80%) (to the extent permitted by law, but in no event less than two-thirds) of the total number of votes eligible to be cast by the holders of all outstanding shares of Voting Stock, voting together as a single class (it being understood that for purposes of this Article VIII each share of the Voting Stock shall have the number of votes granted to it pursuant to Article IV and Article V of this Certificate of Incorporation or in any resolution or resolutions of the Board of Directors for issuance of shares of Preferred Stock), together (to the extent permitted by law) with the affirmative vote of at least fifty percent (50%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the Voting Stock not beneficially owned by the Interested Stockholder involved or any Affiliate or Associate thereof, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise.
SECTION 2. WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of Section 1 of this Article VIII shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law or any other provision of this Certificate of Incorporation, if the Business Combination shall have been approved by a majority of the Disinterested Directors then in office or if all of the conditions specified in the following subsections (a) through (g) are met:
(a) The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received per share by holders of
Common Stock in such Business Combination shall be at least equal to the higher of the following:
(i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes, soliciting dealers' fees, dealer-management compensation, and other expenses, including, but not limited to, costs of newspaper advertisements, printing expenses and attorneys' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it (A) within the two year period immediately prior to the Announcement Date, or (B) in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank, N.A. (or other major bank headquartered in New York City selected by a majority of the Disinterested Directors then in office) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid and the Fair Market Value of any dividends paid, other than in cash, per share of Common Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of Common Stock; or
(ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher.
(b) The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received per share by holders of shares of any class or series of outstanding Voting Stock, other than Common Stock, in such Business Combination shall be at least equal to the highest of the following (such requirement being applicable to each such class or series of outstanding Voting Stock, whether or not the Interested Stockholder has previously acquired any shares of such class or series of Voting Stock):
(i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes, soliciting dealers' fees, dealer-management compensation, and other expenses, including, but not limited to, costs of newspaper advertisements, printing expenses and attorneys' fees) paid by the Interested Stockholder for any shares of such class or series of Voting Stock acquired by it (A) within the two year period immediately prior to the Announcement Date, or (B) in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank, N.A. (or other major bank headquartered in New York City selected by a majority of the Disinterested Directors then in office) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid other than in cash, per share of such class or series of Voting Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of such class or series of Voting Stock;
(ii) (if applicable) the highest preferential amount per share to which the holders of shares of such class or series of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; or
(iii) the Fair Market Value per share of such class or series of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher.
(c) The consideration to be received by holders of any particular class or series of outstanding Voting Stock (including Common Stock) in such Business Combination shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class or series of Voting Stock. If the Interested Stockholder has paid for shares of any class or series of Voting Stock with varying forms of consideration, the form of consideration for such class or series of Voting Stock in such Business Combination shall be either cash or the form used to acquire the largest number of shares of such class or series of Voting Stock previously acquired by it.
(d) The holders of all outstanding shares of Voting Stock
not beneficially owned by the Interested Stockholder immediately prior to the
Consummation Date shall be entitled to receive in such Business Combination
cash or other consideration for their shares in compliance with subsections
(a), (b) and (c) of this Section 2.
(e) After the Determination Date and prior to the Consummation Date:
(i) except as approved by a majority of the Disinterested Directors then in office, there shall have been no failure to declare and pay, or set aside for payment, at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock;
(ii) there shall have been (A) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors then in office, and (B) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors then in office; and
(iii) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Voting Stock except (a) as part of the transaction that results in such Interested Stockholder becoming an Interested Stockholder, (b) as the result of a stock dividend paid by the Corporation or (c) upon the exercise or conversion of securities of the Corporation issued pro rata to all holders of Common Stock which are exercisable for or convertible into shares of Voting Stock.
(f) After the Determination Date, the Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by or through the Corporation or an Affiliate of the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.
(g) A proxy or information statement describing the proposed Business Combination in accordance with the requirements of the Securities Exchange Act of 1934, as amended, whether or not the Corporation is then subject to such requirements, and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to stockholders of the Corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The first page of such proxy or information statement shall prominently display the recommendation, if any, that a majority of the Disinterested Directors then in office may choose to make to the holders of Voting Stock regarding the proposed Business Combination. Such proxy or information statement shall also contain, if a majority of the Disinterested Directors then in office so requests, an opinion of a reputable investment banking firm (which firm shall be engaged solely on behalf of the stockholders of the Corporation other than the Interested Stockholder and shall be selected by a majority of the Disinterested Directors then in office, furnished with all information it reasonably requests, and paid a reasonable fee for its services by the Corporation upon the Corporation's receipt of such opinion) as to the fairness (or lack of fairness) of the terms of the proposed Business Combination from the point of view of the holders of Voting Stock other than the Interested Stockholder.
SECTION 3. DEFINITIONS. For purposes of this Article VIII, the following terms shall have the following meanings:
(a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the date of filing by the Secretary of State of the State of Delaware of this Certificate of Incorporation, whether or not the Corporation was then subject to such rule.
(b) "Announcement Date" shall mean the date of the first public announcement of the proposal of the Business Combination.
(c) A Person shall be deemed the "beneficial owner," or to have "beneficial ownership," of any shares of Voting Stock that:
(i) such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or
(ii) such Person or any or its Affiliates or Associates, directly or indirectly, has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (but a Person shall not be deemed to be the beneficial owner of any Voting Stock solely by reason of an agreement, arrangement or understanding with the Corporation to effect a Business Combination) or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote, or to direct the vote of, pursuant to any agreement, arrangement or understanding; or
(iii) is beneficially owned, directly or indirectly, by any other Person with which such first mentioned Person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock;
provided, however, that no director or officer of the Corporation (nor any Affiliate or Associate of any such director or officer) (y) shall, solely by reason of any or all of such directors or officers acting in their capacities as such, be deemed, for any purposes hereof, to beneficially own any Voting Stock of the Corporation beneficially owned by any other such director or officer (or any Affiliate or Associate thereof) or (z) shall be deemed to beneficially own any Voting Stock of the Corporation owned by any pension, profit-sharing, stock bonus or other compensation plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the corporation is a member for the benefit of employees of the Corporation and/or any Subsidiary, or any trust or custodial arrangement established in connection with any such plan, not specifically allocated to such Person's personal account.
(d) The term "Business Combination" shall mean any
transaction that is referred to in any one or more of the following paragraphs
(i) through (vi):
(i) any merger or consolidation of the Corporation or any Subsidiary (other than a merger pursuant to Section 253 of the General Corporation Law of the State of Delaware) with (A) any Interested Stockholder, or (B) any other entity (whether or not such other entity is itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of any Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value equal to five percent (5%) or more of the total assets of the Corporation or the Subsidiary in question, as of the end of its most recent fiscal year ending prior to the time the determination is being made; or
(iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder other than (A) on a pro rata basis to all holders of Voting Stock, (B) in connection with the exercise or conversion of securities issued pro rata that are exercisable for, or convertible into, securities of the Corporation or any Subsidiary of the Corporation or (C) the issuance or transfer of such securities having an aggregate Fair Market Value equal to less than one percent (1%) of the aggregate Fair Market Value of all of the outstanding Capital Stock; or
(iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of equity or convertible securities of the Corporation or any Subsidiary that is directly or indirectly owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder, except as a result of immaterial changes due to fractional share adjustments, which changes do not exceed, in the aggregate, 1% of the issued and outstanding shares of such class or series of equity or convertible securities; or
(vi) the acquisition by the Corporation or a Subsidiary of any securities of an Interested Stockholder or its Affiliates or Associates.
(e) "Consummation Date" shall mean the date of the consummation of the Business Combination.
(f) "Determination Date" shall mean the date on which the Interested Stockholder became an Interested Stockholder.
(g) "Disinterested Director" shall mean any member of the Board of Directors of the Corporation who is not an Affiliate or Associate of, or otherwise affiliated with, the Interested Stockholder and who either was a member of the Board of Directors prior to the Determination Date, or was recommended for election by a majority of the Disinterested Directors in office at the time such director was nominated for election. If there is no Interested Stockholder, each member of the Board of Directors shall be a Disinterested Director.
(h) "Fair Market Value" shall mean (i) in the case of stock, the highest closing price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange listed stocks, or, if such stock is
not quoted on the Composite Tape, the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the Nasdaq Stock Market or any system then in use, or if no such quotation is available, the fair market value on the date in question of a share of such stock as determined in good faith by a majority of the Disinterested Directors then in office, in each case with respect to any class of stock, appropriately adjusted for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Disinterested Directors then in office.
(i) References to "highest per share price" shall in each case with respect to any class of stock reflect an appropriate adjustment for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock.
(j) "Interested Stockholder" shall mean any Person (other than the Corporation, any Subsidiary, or any pension, profit-sharing, stock bonus or other compensation or employee benefit plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the corporation is a member for the benefit of employees of the Corporation and/or any Subsidiary, or any trust or custodial arrangement established in connection with any such plan) who or which:
(i) is the beneficial owner of ten percent (10%) or more of the Voting Stock; or
(ii) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of ten percent (10%) or more of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock that were at any time within the two-year period immediately prior to the date in question beneficially owned by any other Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended, and not executed on any exchange or in the over-the-counter market through a registered broker or dealer.
In determining whether a Person is an Interested Stockholder pursuant to this subsection (j), the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of subsection (c) of this Section 3 but shall not include any other shares of Voting Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
(k) "Person" shall mean any corporation, partnership, trust, unincorporated organization or association, syndicate, any other entity or a natural person, together with any Affiliate or Associate of such person or any other person acting in concert with such person.
(l) "Subsidiary" shall mean any corporation or entity of
which a majority of any class or series of equity securities is owned, directly
or indirectly, by the Corporation; provided, however, that for the purposes of
the definition of Interested Stockholder set forth in subsection (j) of this
Section 3, the term "Subsidiary" shall mean only a corporation or entity of
which a majority of each class or series of outstanding voting securities is
owned, directly or indirectly, by the Corporation.
(m) "Voting Stock" shall mean all of the outstanding shares of Capital Stock entitled to vote generally in the election of directors.
SECTION 4. POWERS OF THE DISINTERESTED DIRECTORS. When it
appears that a particular Person may be an Interested Stockholder and that the
provisions of this Article VIII need to be applied or interpreted, then a
majority of the directors of the Corporation who would qualify as Disinterested
Directors shall have the power and duty to interpret all of the terms and
provisions of this Article VIII, and to determine on the basis of information
known to them after reasonable inquiry of all facts necessary to ascertain
compliance with this Article VIII, including, without limitation, (a) whether a
Person is an Interested Stockholder, (b) the number of shares of Voting Stock
beneficially owned by any Person, (c) whether a Person is an Affiliate or
Associate of another, (d) the Fair Market Value of (i) the assets that are the
subject of any Business Combination, (ii) the securities to be issued or
transferred by the Corporation or any Subsidiary in any Business Combination,
(iii) the consideration other than cash to be received by holders of shares of
any class or series of Common Stock or Voting Stock other than Common Stock in
any Business Combination, (iv) the outstanding Capital Stock, or (v) any other
item the Fair Market Value of which requires determination pursuant to this
Article VIII, and (e) whether all of the applicable conditions set forth in
Section 2 of this Article VIII have been met with respect to any Business
Combination.
Any constructions, applications, or determinations made by the Board of Directors or the Disinterested Directors pursuant to this Article VIII, in good faith and on the basis of such information and assistance as was then reasonably available for such purpose, shall be conclusive and binding upon the Corporation and its stockholders, and neither the Corporation nor any of its stockholders shall have the right to challenge any such construction, application or determination.
SECTION 5. EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED STOCKHOLDERS. Nothing contained in this Article VIII shall be construed to relieve any Interested Stockholder from any fiduciary obligations imposed by law.
SECTION 6. AMENDMENT, REPEAL, ETC. Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the Bylaws of the Corporation), in addition to any affirmative vote required by applicable law and any voting rights granted to or held by holders of Preferred Stock, any amendment, alteration, repeal or rescission of any provision of this Article VIII must also be approved by either (i) a majority of the Disinterested Directors, or (ii) the affirmative vote of not less than eighty percent (80%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the Voting Stock, voting together as a single class, together with the affirmative vote of not less than fifty percent (50%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the Voting Stock not beneficially owned by any Interested Stockholder or Affiliate or Associate thereof, voting together as a single class.
ARTICLE IX
LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is expressly prohibited by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended.
Any amendment, termination or repeal of this Article IX or any provisions hereof shall not adversely affect or diminish in any way any right or protection of a director of the Corporation existing with respect to any act or omission occurring prior to the time of the final adoption of such amendment, termination or repeal.
In addition to any requirements of law or of any other provisions of this Certificate of Incorporation, the affirmative vote of the holders of not less than eighty percent (80%) of the total number of votes eligible to be cast by the holders of all outstanding shares of Capital Stock entitled to vote thereon shall be required to amend, alter, rescind or repeal any provision of this Article IX.
ARTICLE X
INDEMNIFICATION
SECTION 1. ACTIONS, SUITS OR PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. To the fullest extent permitted by the General Corporation Law of the State of Delaware, the Corporation shall indemnify any person who is or was or has agreed to become a director or officer of the Corporation who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was or has agreed to become a director or officer of the Corporation, or by reason of any action alleged to have been taken or omitted in such capacity, and the Corporation may indemnify any other person who is or was or has agreed to become an employee or agent of the Corporation who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. Notwithstanding anything contained in this Article X, but subject to Section 7 hereof, the Corporation shall not be obligated to indemnify any director or officer in connection with an action, suit or proceeding, or part thereof, initiated by such person against the Corporation unless such action, suit or proceeding, or part thereof, was authorized or consented to by the Board of Directors.
SECTION 2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. To the fullest extent permitted by the General Corporation Law of the State of Delaware, the Corporation shall indemnify any person who is or was or has agreed to become a director or officer of the Corporation who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was or has agreed to become a director or officer of the Corporation, or by reason of any action alleged to have been taken or omitted in such capacity, and the Corporation may indemnify any other person who is or was or has agreed to become an employee or agent of the Corporation who was or is made a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, except no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper. Notwithstanding anything contained in this Article X, but subject to Section 7 hereof, the Corporation shall not be obligated to indemnify any director or officer in connection with an action or suit, or part thereof, initiated by such person against the Corporation unless such action or suit, or part thereof, was authorized or consented to by the Board of Directors.
SECTION 3. INDEMNIFICATION FOR COSTS, CHARGES AND EXPENSES OF A SUCCESSFUL PARTY. To the extent that a director, officer, employee or agent of the Corporation has been successful, on the merits or otherwise (including, without limitation, the dismissal of an action without prejudice), in defense of any action, suit or proceeding referred to in Section 1 or 2 of this Article X, or in defense of any claim, issue or matter therein, such person shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by such person or on such person's behalf in connection therewith.
SECTION 4. INDEMNIFICATION FOR EXPENSES OF A WITNESS. To the extent that any person who is or was or has agreed to become a director or officer of the Corporation is made a witness to any action, suit or proceeding to which he or she is not a party by reason of the fact that he or she was, is or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, at the written request of the Corporation, such person shall be indemnified against all costs, charges and expenses actually and reasonably incurred by such person or on such person's behalf in connection therewith.
To the extent that any person who is or was or has agreed to become an employee or agent of the Corporation is made a witness to any action, suit or proceeding to which he or she is not a party by reason of the fact that he or she was, is or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, at the written request of the Corporation, such person may be indemnified against all costs, charges and expenses actually and reasonably incurred by such person or on such person's behalf in connection therewith.
SECTION 5. DETERMINATION OF RIGHT TO INDEMNIFICATION. Any indemnification under Section 1 or 2 of this Article X (unless ordered by a court) shall be made, if at all, by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper under the circumstances because he or she has met the applicable standard of conduct set forth in Section 1 or 2 of this Article X. Any indemnification under Section 4 of this Article X (unless ordered by a court) shall be made, if at all, by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper under the circumstances. Such determinations shall be made by (a) a majority vote of directors who were not parties to such action, suit or proceeding even though less than a quorum of the Board of Directors, or (b) if there are no such directors, or if such directors so direct, by independent counsel in a written opinion or (c) by the stockholders of the Corporation. To obtain indemnification under this Article X, any person referred to in Section 1, 2, 3 or 4 of this Article X shall submit to the Corporation a written request, including therewith such documents as are reasonably available to such person and are reasonably necessary to determine whether and to what extent such person is entitled to indemnification.
SECTION 6. ADVANCEMENT OF COSTS, CHARGES AND EXPENSES. Costs, charges and expenses (including attorneys' fees) incurred by or on behalf of a director or officer in defending a civil or criminal action, suit or proceeding referred to in Section 1 or 2 of this Article X shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by or on behalf of a director or officer in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of a written undertaking by or on behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Corporation as authorized in this Article X or by law. No security shall be required for such undertaking and such undertaking shall be accepted without reference to the recipient's financial ability to make repayment. The majority of the directors who were not parties to such action, suit or proceeding may, upon approval of such director or officer of the Corporation, authorize the Corporation's counsel to represent such person, in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.
SECTION 7. PROCEDURE FOR INDEMNIFICATION. Any indemnification under Section 1, 2, 3 or 4 of this Article X or advancement of costs, charges and expenses under Section 6 of this Article X shall be made promptly, and in any event within sixty (60) days (except indemnification to be determined by stockholders which will be determined at the next annual meeting of stockholders), upon the written request of the director or officer. The right to indemnification or advancement of expenses as granted by this Article X shall be enforceable by the director, officer, employee or agent in any court of competent jurisdiction, if the Corporation denies such request, in whole or in part, or if no disposition of such request is made within sixty (60) days of the request. Such person's costs, charges and expenses incurred in connection with successfully establishing his or her right to indemnification or advancement, to the extent successful, in any such action shall also be indemnified by the Corporation. It shall
be a defense to any such action (other than an action brought to enforce a
claim for the advancement of costs, charges and expenses under Section 6 of
this Article X where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
Section 1 or 2 of this Article X, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Section 1 or 2 of this Article X,
nor the fact that there has been an actual determination by the Corporation
(including its directors, its independent legal counsel and its stockholders)
that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
SECTION 8. SETTLEMENT. The Corporation shall not be obligated to reimburse the costs, charges and expenses of any settlement to which it has not agreed. If in any action, suit or proceeding (including any appeal) within the scope of Section 1 or 2 of this Article X, the person to be indemnified shall have unreasonably failed to enter into a settlement thereof offered or assented to by the opposing party or parties in such action, suit or proceeding, then, notwithstanding any other provision of this Article X, the indemnification obligation of the Corporation to such person in connection with such action, suit or proceeding shall not exceed the total of the amount at which settlement could have been made and the expenses incurred by or on behalf of such person prior to the time such settlement could reasonably have been effected. For purposes of this Section 8, whether a person shall have "unreasonably failed to enter into a settlement" shall be as determined by the Board.
SECTION 9. OTHER RIGHTS; CONTINUATION OF RIGHT TO INDEMNIFICATION; INDIVIDUAL CONTRACTS. The indemnification and advancement of costs, charges and expenses provided by or granted pursuant to this Article X shall not be deemed exclusive of any other rights to which those persons seeking indemnification or advancement of costs, charges and expenses may be entitled under law (common or statutory) or any Bylaw, agreement, policy of indemnification insurance or vote of stockholders or directors or otherwise, both as to action in his or her official capacity and as to action in any other capacity while holding office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the legatees, heirs, distributees, executors and administrators of such person. Nothing contained in this Article X shall be deemed to prohibit the Corporation from entering into, and the Corporation is specifically authorized to enter into, agreements with directors, officers, employees and agents providing indemnification rights and procedures different from those set forth herein. All rights to indemnification under this Article X shall be deemed to be a contract between the Corporation and each director, officer, employee or agent of the Corporation who serves or served in such capacity at any time while this Article X is in effect.
SECTION 10. SAVINGS CLAUSE. If this Article X or any portion shall be invalidated on any ground by any court of competent jurisdiction, the Corporation shall nevertheless indemnify each director or officer, and may indemnify each employee or agent, of the Corpo-
ration as to any costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of the Corporation), to the full extent permitted by any applicable portion of this Article X that shall not have been invalidated and to the full extent permitted by applicable law.
SECTION 11. INSURANCE. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the Corporation against any costs, charges or expenses, liability or loss incurred by such person in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such costs, charges or expenses, liability or loss under the Certificate of Incorporation or applicable law; provided, however, that such insurance is available on acceptable terms as determined by the Board. To the extent that any director, officer, employee or agent is reimbursed by an insurance company under an indemnification insurance policy for any costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement to the fullest extent permitted by any applicable portion of this Article X, the Bylaws, any agreement, the policy of indemnification insurance or otherwise, the Corporation shall not be obligated to reimburse the person to be indemnified in connection with such proceeding.
SECTION 12. DEFINITIONS. For purposes of this Article X, the following terms shall have the following meanings:
(a) "The Corporation" shall include, in addition to the resulting corporation, any constituent corporation or entity (including any constituent of a constituent) absorbed by way of an acquisition, consolidation, merger or otherwise, which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employee or agent so that any person who is or was a director, officer, employee or agent of such constituent corporation or entity, or is or was serving at the written request of such constituent corporation or entity as a director or officer of another corporation, entity, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article X with respect to the resulting or surviving corporation or entity as he would have with respect to such constituent corporation or entity if its separate existence had continued;
(b) "Other enterprises" shall include employee benefit plans, including, but not limited to, any employee benefit plan of the Corporation;
(c) "Director or officer" of the Corporation shall include any director, officer, partner or trustee who is or was or has agreed to serve at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust or other enterprise;
(d) "Serving at the request of the Corporation" shall include any service that imposes duties on, or involves services by a director, officer, employee or agent of the
Corporation with respect to an employee benefit plan, its participants or beneficiaries, including acting as a fiduciary thereof;
(e) "Fines" shall include any penalties and any excise or similar taxes assessed on a person with respect to an employee benefit plan;
(f) To the fullest extent permitted by law, a person shall be deemed to have acted in "good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful," if his or her action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him or her by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise; and
(g) A person shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation," as referred to in Sections 1 and 2 of this Article X if such person acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan.
SECTION 13. SUBSEQUENT AMENDMENT AND SUBSEQUENT LEGISLATION. Neither the amendment, termination or repeal of this Article X or of relevant provisions of the General Corporation Law of the State of Delaware or any other applicable laws, nor the adoption of any provision of this Certificate of Incorporation or the Bylaws of the Corporation or of any statute inconsistent with this Article X shall eliminate, affect or diminish in any way the rights of any director, officer, employee or agent of the Corporation to indemnification under the provisions of this Article X with respect to any action, suit or proceeding arising out of, or relating to, any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.
If the General Corporation Law of the State of Delaware is amended to expand further the indemnification permitted to directors and officers of the Corporation, then the Corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.
ARTICLE XI
AMENDMENTS
SECTION 1. AMENDMENTS OF CERTIFICATE OF INCORPORATION. In addition to any affirmative vote required by applicable law and any voting rights granted to or held by holders of any Series of Preferred Stock, any alteration, amendment, repeal or rescission (collectively, any "Change") of any provision of this Certificate of Incorporation must be approved by a majority of the directors of the Corporation then in office and by the affirmative vote of the holders of a majority (or such greater proportion as may otherwise be required pursuant to any specific provision of this Certificate of Incorporation) of the total votes eligible to be cast by the holders of all outstanding shares of Capital Stock entitled to vote thereon; provided, however, that if any such Change relates to Section 13 of Article X or Articles V, VI, VII or XI of this Certificate of Incorporation, such Change must also be approved either (i) by not less than a majority of the authorized number of directors and, if one or more Interested Stockholders (as defined in Article VIII hereof) exist, by not less than a majority of the Disinterested Directors (as defined in Article VIII hereof), or (ii) by the affirmative vote of the holders of not less than two-thirds of the total votes eligible to be cast by the holders of all outstanding shares of Capital Stock entitled to vote thereon and, if the Change is proposed by or on behalf of an Interested Stockholder or a director who is an Affiliate or Associate (as such terms are defined in Article VIII hereof) of an Interested Stockholder, by the affirmative vote of the holders of not less than a majority of the total votes eligible to be cast by holders of all outstanding shares of Capital Stock entitled to vote thereon not beneficially owned by an Interested Stockholder or an Affiliate or Associate thereof. Notwithstanding the foregoing, any provision of the Certificate of Incorporation that contains a supermajority voting requirement shall only be altered, amended, rescinded, or repealed by a vote of the Board or holders of shares of Capital Stock entitled to vote thereon that is not less than the supermajority specified in such provision.Subject to the foregoing, the Corporation reserves the right to amend this Certificate of Incorporation from time to time in any and as many respects as may be desired and as may be lawfully contained in an original certificate of incorporation filed at the time of making such amendment.
Except as may otherwise be provided in this Certificate of Incorporation, the Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and to add or insert herein any other provisions authorized by the laws of the State of Delaware at the time in force, in the manner now or hereafter prescribed by law, and all rights, preferences and privileges of any nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this Section 1.
SECTION 2. AMENDMENTS OF BYLAWS. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to make, alter, amend, rescind or repeal from time to time any of the Bylaws of the Corporation in accordance with the terms thereof; provided, however, that any Bylaw made by the Board
may be altered, amended, rescinded, or repealed in accordance with the terms thereof by the holders of shares of Capital Stock entitled to vote thereon at any annual meeting or at any special meeting called for that purpose. Notwithstanding the foregoing, any provision of the Bylaws that contains a supermajority voting requirement shall only be altered, amended, rescinded, or repealed by a vote of the Board or holders of shares of Capital Stock entitled to vote thereon that is not less than the supermajority specified in such provision.
ARTICLE XII
NOTICES
The name and mailing address of the incorporator of this Corporation is:
Carver Federal Savings Bank 75 West 125th Street New York, New York 10027
Carver Federal Savings Bank caused this Certificate of Incorporation to be signed by Thomas L. Clark, Jr., President and Chief Executive Officer, and attested to by Margaret R. Lewis, Secretary of Carver Federal Savings Bank, this 8th day of May, 1996.
CARVER FEDERAL SAVINGS BANK
By: /s/ Thomas L. Clark, Jr.
----------------------------------
Thomas L. Clark, Jr.
President and Chief Executive
Officer
Attest:
/s/ Margaret R. Lewis
- ------------------------------------
Margaret R. Lewis
Secretary
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") inter alia, empowers a Delaware corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of another corporation or other enterprise, against 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 or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Similar indemnity is authorized for such person against expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of any such threatened, pending or completed action or suit if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and provided further that (unless a court of competent jurisdiction otherwise provides) such person shall not have been adjudged liable to the corporation. Any such indemnification may be made only as authorized in each specific case upon a determination by the shareholders or disinterested directors or by independent legal counsel in a written opinion that indemnification is proper because the indemnitee has met the applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him, and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would otherwise have the power to indemnify him under Section 145.
Article IX of the Company's Certificate of Incorporation provides that a director shall not be personally liable to the Company or its stockholders for damages for breach of his fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is expressly prohibited by the DGCL. Article X of the Company's Certificate of Incorporation requires the Company, among other things, to indemnify to the fullest extent permitted by the DGCL, any person who is or was or has agreed to become a director or officer of the Company, who was or is made a party to, or is threatened to be made a party to, or has become a witness in, any threatened, pending or completed action, suit or proceeding, including actions or suits by or in the right of the Company, by reason of such agreement or service or the fact that such person is, was or has agreed to serve as a director, officer, employee or agent of another corporation or organization at the written request of the Company.
Article X also empowers the Company to purchase and maintain insurance to protect itself and its directors and officers, and those who were or have agreed to become directors or officers, against any liability, regardless of whether or not the Company would have the power to indemnify those persons against such liability under the law or the provisions set forth in the Certificate of Incorporation. The Company is also authorized by its Certificate of Incorporation to enter into individual indemnification contracts with directors and officers. The Bank currently maintains and the Company expects to purchase directors' and officers' liability insurance consistent with the provisions of the Certificate of Incorporation as soon as practicable.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits and financial statement schedules filed as a part of this Registration Statement are as follows:
(A) LIST OF EXHIBITS. (Filed herewith unless otherwise noted.)
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
2.1 Agreement and Plan of Reorganization by and among Carver Federal Savings
Bank, Carver Bancorp, Inc. and Carver Interim Federal Savings Bank (included
as Appendix A to the Proxy Statement-Prospectus)
3.1 Certificate of Incorporation of Carver Bancorp, Inc. (included as Appendix C
to the Proxy Statement-Prospectus)
3.2 Bylaws of Carver Bancorp, Inc.
3.3 Federal Stock Charter of Carver Federal Savings Bank
3.4 Bylaws of Carver Federal Savings Bank
4.1 Draft Stock Certificate of Carver Federal Savings Bank
5.1 Opinion of Thacher Proffitt & Wood re: legality
8.1 Opinion of Thacher Proffitt & Wood re: tax matters
10.1 Carver Federal Savings Bank 1995 Stock Option Plan, effective as of
September 12, 1995
10.2 Carver Federal Savings Bank Retirement Income Plan, as amended and restated
effective as of January 1, 1989
10.3 Carver Federal Savings Bank 401(k) Savings Plan in RSI
Retirement Trust, as amended and restated effective as of May 1,
1993
10.4 Carver Federal Savings Bank Employee Stock Ownership Plan, effective as of
January 1, 1993
10.5 Carver Federal Savings Bank Deferred Compensation Plan, effective as of
August 10, 1993
10.6 Carver Federal Savings Bank Retirement Plan for Nonemployee Directors,
effective as of October 24, 1994
10.7 Carver Federal Savings Bank Management Recognition Plan, effective as of
September 12, 1995
10.8 Carver Federal Savings Bank Incentive Compensative Plan, effective as of
September 12, 1995
|
II-2
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
10.9 Employment Agreement by and between Carver Federal Savings Bank and
Thomas L. Clark, entered into as of January 3, 1995
10.10 Employment Agreement by and between Carver Federal Savings Bank and
Biswarup Mukherjee, entered into as of April 14, 1995
10.11 Supplemental Executive Retirement Agreement by and between Carver Federal
Savings Bank and Richard T. Greene, entered into as of January 30, 1995
16 Letter re Change in Certifying Accountant
23.1 Consent of Thacher Proffitt & Wood (included in Exhibits 5.1 and 8.1 to this
Registration Statement)
23.2 Consent of Mitchell & Titus, LLP
23.3 Consent of Radics & Co., LLC
27.1 Financial Data Schedule (only filed in EDGAR format)
|
(B) FINANCIAL STATEMENT SCHEDULES.
All schedules have been omitted as not applicable or not required under the rules of Regulation S-X.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the Registration Statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request.
II-3
(4) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on June 7, 1996.
CARVER BANCORP, INC.
By: /s/ Thomas L. Clark, Jr.
-------------------------------------
Thomas L. Clark, Jr.
President and Chief Executive Officer
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Thomas L. Clark, Jr. and Kofi Appenteng as the true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities to sign the Form S-4 Registration Statement and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, and any rules and regulations promulgated thereunder, this Registration Statement, or amendment thereto, has been signed by the following persons in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Thomas L. Clark, Jr. Director, President and Chief June 7, 1996
- ------------------------------------------
Thomas L. Clark, Jr. Executive Officer
(Principal executive officer)
/s/ Biswarup Mukherjee Executive Vice President and June 7, 1996
- ------------------------------------------
Biswarup Mukherjee Chief Financial Officer
/s/ David N. Dinkins Director June 7, 1996
- ------------------------------------------
David N. Dinkins
/s/ Linda. H. Dunham Director June 7, 1996
- ------------------------------------------
Linda H. Dunham
/s/ Richard T. Greene Director June 7, 1996
- ------------------------------------------
Richard T. Greene
/s/ Herman Johnson, CPA Director June 7, 1996
- ------------------------------------------
Herman Johnson, CPA
/s/ David R. Jones Director June 7, 1996
- ------------------------------------------
David R. Jones
/s/ M. Moran Weston, Ph.D. Director June 7, 1996
- ------------------------------------------
M. Moran Weston, Ph.D.
|
EXHIBIT INDEX (Filed herewith unless otherwise noted.)
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
2.1 Agreement and Plan of Reorganization by and among Carver Federal Savings
Bank, Carver Bancorp, Inc. and Carver Interim Federal Savings Bank (included
as Appendix A to the Proxy Statement-Prospectus)
3.1 Certificate of Incorporation of Carver Bancorp, Inc. (included as Appendix C
to the Proxy Statement-Prospectus)
3.2 Bylaws of Carver Bancorp, Inc.
3.3 Federal Stock Charter of Carver Federal Savings Bank
3.4 Bylaws of Carver Federal Savings Bank
4.1 Draft Stock Certificate of Carver Federal Savings Bank
5.1 Opinion of Thacher Proffitt & Wood re: legality
8.1 Opinion of Thacher Proffitt & Wood re: tax matters
10.1 Carver Federal Savings Bank 1995 Stock Option Plan, effective as of
September 12, 1995
10.2 Carver Federal Savings Bank Retirement Income Plan, as amended and restated
effective as of January 1, 1989
10.3 Carver Federal Savings Bank 401(k) Savings Plan in RSI
Retirement Trust, as amended and restated effective as of May 1,
1993
10.4 Carver Federal Savings Bank Employee Stock Ownership Plan, effective as of
January 1, 1993
10.5 Carver Federal Savings Bank Deferred Compensation Plan, effective as of
August 10, 1993
10.6 Carver Federal Savings Bank Retirement Plan for Nonemployee Directors,
effective as of October 24, 1994
10.7 Carver Federal Savings Bank Management Recognition Plan, effective as of
September 12, 1995
10.8 Carver Federal Savings Bank Incentive Compensative Plan, effective as of
September 12, 1995
|
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
10.9 Employment Agreement by and between Carver Federal Savings Bank and
Thomas L. Clark, entered into as of January 3, 1995
10.10 Employment Agreement by and between Carver Federal Savings Bank and
Biswarup Mukherjee, entered into as of April 14, 1995
10.11 Supplemental Executive Retirement Agreement by and between Carver Federal
Savings Bank and Richard T. Greene, entered into as of January 30, 1995
16 Letter re Change in Certifying Accountant
23.1 Consent of Thacher Proffitt & Wood (included in Exhibits 5.1 and 8.1 to this
Registration Statement)
23.2 Consent of Mitchell & Titus, LLP
23.3 Consent of Radics & Co., LLC
27.1 Financial Data Schedule (only filed in EDGAR format)
|
BYLAWS
OF
CARVER BANCORP, INC.
TABLE OF CONTENTS
Page
----
ARTICLE I
OFFICES
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Additional Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
STOCKHOLDERS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 5. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Fixing of Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 7. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Conduct of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 9. Voting; Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 10. Inspectors of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 11. Procedure for Nominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 12. Substitution of Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 13. New Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
CAPITAL STOCK
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1. Certificates of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3. Registration and Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4. Lost, Destroyed and Mutilated Certificates . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5. Holder of Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV
BOARD OF DIRECTORS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Responsibilities; Number of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
|
Page
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Section 3. Regular and Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Notice of Meetings; Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6. Conduct of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7. Quorum and Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8. Informal Action by Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 9. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 10. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 11. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 12. Amendments Concerning the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V
COMMITTEES
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1. Standing Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2. Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3. Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4. Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. Nominating Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6. Other Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI
OFFICERS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1. Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Term of Office and Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3. Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4. President and Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7. Comptroller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. Other Officers and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 98. Compensation of Officers and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII
DIVIDENDS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VIII
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Page
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AMENDMENTS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
|
BYLAWS
OF
CARVER BANCORP, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of Carver Bancorp, Inc. (the "Corporation") in the State of Delaware shall be in the City of Wilmington, County of New Castle.
SECTION 2. ADDITIONAL OFFICES. The Corporation may also have offices and places of business at such other places, within or without the State of Delaware, as the Board of Directors (the "Board") may from time to time designate or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of stockholders of the Corporation shall be held at such place, within or without the State of Delaware, as may be fixed by the Board and designated in the notice of meeting. If no place is so fixed, they shall be held at the principal administrative office of the Corporation.
SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders of the Corporation for the election of directors and the transaction of any other business which may properly come before such meeting shall be held each year on a date and at a time to be designated by the Board.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders, for any purpose, may be called at any time only by the Chairman of the Board, the President and Chief Executive Officer or by resolution of at least three-fourths of the directors then in office. Special meetings shall be held on the date and at the time and place as may be designated by the Board. At a special meeting, no business shall be transacted and no corporate action shall be taken other than that stated in the notice of meeting.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise required by law, written notice stating the place, date and hour of any meeting of stockholders and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered to each stockholder of record entitled to vote at such meeting, either personally or by mail not less than ten (10) nor more than sixty (60) days before the date of such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the U.S. mail, with postage thereon prepaid, addressed to the stockholder at his or her address as it appears on the stock transfer books or records of the Corporation as of the record date prescribed in Section 6 of this Article II, or at such other address as the stockholder shall have furnished in writing to the Secretary. Notice of any special meeting shall indicate that the notice is being issued by or at the direction of the person or persons calling such meeting. When any meeting of stockholders, either annual or special, is adjourned to another time or place, no notice of the adjourned meeting need be given, other than an announcement at the meeting at which such adjournment is taken giving the time and place to which the meeting is adjourned; provided, however, that if the adjournment is for more than thirty (30) days, or if after adjournment, the Board fixes a new record date for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
SECTION 5. WAIVER OF NOTICE. Notice of any annual or special meeting need not be given to any stockholder who submits a signed waiver of notice of any meeting, in person or by proxy or by his or her duly authorized attorney-in-fact, whether before or after the meeting. The attendance of any stockholder at a meeting, in person or by proxy, shall constitute a waiver of notice by such stockholder, except where a stockholder attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.
SECTION 6. FIXING OF RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any dividend or other distribution or the allotment of any rights, or in order to make a determination of stockholders for any other proper purpose, the Board shall fix a date as the record date for any such determination of stockholders, which date shall not precede the date upon which the resolution fixing the record date is adopted by the Board. Such date in any case shall be not more than sixty (60) days and, in the case of a meeting of stockholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of stockholders is to be taken. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section 6, such determination shall, unless otherwise provided by the Board, also apply to any adjournment thereof. If no record date is fixed, (a) the record date for determining stockholders entitled to notice of or vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which the notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and (b) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
SECTION 7. QUORUM. The holders of record of a majority of the total number of votes eligible to be cast in the election of directors generally by the holders of the outstanding shares of the capital stock of the Corporation entitled to vote thereat, represented in person or by proxy, shall constitute a quorum for the transaction of business at a meeting of stockholders, except as otherwise provided by law, these Bylaws or the Certificate of Incorporation. If less than a majority of such total number of votes are represented at a meeting, a majority of the number of votes so represented may adjourn the meeting from time to time without further notice, provided, that if such adjournment is for more than thirty days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally called. When a quorum is once present to organize a meeting of stockholders, such quorum is not broken by the subsequent withdrawal of any stockholders.
SECTION 8. CONDUCT OF MEETINGS. The Chairman of the Board shall serve as chairman at all meetings of the stockholders. If the Chairman of the Board is absent or otherwise unable to so serve, the President and Chief Executive Officer shall serve as chairman at any meeting of stockholders held in such absence. If both the Chairman of the Board and the President and Chief Executive Officer are absent or otherwise unable to serve, such other person as shall be appointed by the Board of Directors shall serve as chairman at any meeting of stockholders held in such absence. The Secretary or, in his or her absence, such other person as the chairman of the meeting shall appoint, shall serve as secretary of the meeting. The chairman of the meeting shall conduct all meetings of the stockholders in accordance with the best interests of the Corporation and shall have the authority and discretion to establish reasonable procedural rules for the conduct of such meetings, including such regulation of the manner of voting and the conduct of discussion as he or she shall deem appropriate.
SECTION 9. VOTING; PROXIES. Each stockholder entitled to vote at any meeting may vote either in person or by proxy. Unless otherwise specified in the Certificate of Incorporation or in a resolution, or resolutions, of the Board providing for the issuance of preferred stock, each stockholder entitled to vote shall be entitled to one vote for each share of capital stock registered in his or her name on the transfer books or records of the Corporation. Each stockholder entitled to vote may authorize another person or persons to act for him or her by proxy. All proxies shall be in writing, signed by the stockholder or by his or her duly authorized attorney-in-fact, and shall be filed with the Secretary before being voted. No proxy shall be valid after three (3) years from the date of its execution unless otherwise provided in the proxy. The attendance at any meeting by a stockholder who shall have previously given a proxy applicable thereto shall not, as such, have the effect of revoking the proxy. The Corporation may treat any duly executed proxy as not revoked and in full force and effect until it receives a duly executed instrument revoking it, or a duly executed proxy bearing a later date. If ownership of a share of voting stock of the Corporation stands in the name of two or more persons, in the absence of written directions to the Corporation to the contrary, any one or more of such stockholders may cast all votes to which such ownership is entitled. If an attempt is made to cast conflicting votes by the several persons in whose names shares of stock stand, the
vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such stock and present at such meeting. If such conflicting votes are evenly split on any particular matter, each faction may vote the securities in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to the Court of Chancery or such other court as may have jurisdiction to appoint an additional person to act with the persons so voting the shares, which shall then be voted as determined by a majority of such persons and the person appointed by the Court. Except for the election of directors or as otherwise provided by law, the Certificate of Incorporation or these Bylaws, at all meetings of stockholders, all matters shall be determined by a vote of the holders of a majority of the number of votes eligible to be cast by the holders of the outstanding shares of capital stock of the Corporation present and entitled to vote thereat. Directors shall, except as otherwise required by law, these Bylaws or the Certificate of Incorporation, be elected by a plurality of the votes cast by each class of shares entitled to vote at a meeting of stockholders, present and entitled to vote in the election.
SECTION 10. INSPECTORS OF ELECTION. In advance of any meeting of stockholders, the Board shall appoint one or more persons, other than officers, directors or nominees for office, as inspectors of election to act at such meeting or any adjournment thereof. Such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the meeting shall make such appointment at the meeting. If any person appointed as inspector fails to appear or fails or refuses to act at the meeting, the vacancy so created may be filled by appointment by the Board in advance of the meeting or at the meeting by the chairman of the meeting. The duties of the inspectors of election shall include determining the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, receiving votes, ballots or consents, hearing and deciding all challenges and questions arising in connection with the right to vote, counting and tabulating all votes, ballots or consents, determining the results, and doing such acts as are proper to the conduct of the election or the vote with fairness to all stockholders. Any report or certificate made by them shall be prima facie evidence of the facts stated and of the vote as certified by them. Each inspector shall be entitled to a reasonable compensation for his or her services, to be paid by the Corporation.
SECTION 11. PROCEDURE FOR NOMINATIONS. Subject to the provisions hereof, the Nominating Committee of the Board shall select nominees for election as directors. Except in the case of a nominee substituted as a result of the death, incapacity, withdrawal or other inability to serve of a nominee, the Nominating Committee shall deliver written nominations to the Secretary at least sixty (60) days prior to the date of the annual meeting. Provided the Nominating Committee makes such nominations, no nominations for directors except those made by the Nominating Committee shall be voted upon at the annual meeting of stockholders unless other nominations by stockholders are made in accordance with the provisions of this Section 11. Nominations of individuals for election to the Board at a meeting of stockholders may be made by any stockholder of record of the Corporation entitled to vote for the election of directors at such meeting who provides timely notice in writing to the Secretary as set forth in this Section 11. To be timely, a stockholder's notice must be delivered to or received by the Secretary not later than the following dates: (i) with respect to an election of directors to be
held at an annual meeting of stockholders, sixty (60) days in advance of such
meeting if such meeting is to be held on a day which is within thirty (30) days
preceding the anniversary of the previous year's annual meeting, or ninety (90)
days in advance of such meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting; and (ii) with respect to an
election to be held at an annual meeting of stockholders held at a time other
than within the time periods set forth in the immediately preceding clause (i),
or at a special meeting of stockholders for the election of directors, the
close of business on the tenth (10th) day following the date on which notice of
such meeting is first given to stockholders. For purposes of this Section 11,
notice shall be deemed to first be given to stockholders when disclosure of
such date of the meeting of stockholders is first made in a press release
reported to Dow Jones News Services, Associated Press or comparable national
news service, or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Securities Exchange Act of 1934, as amended. Such stockholder's notice shall
set forth (a) as to each person whom the stockholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment
of such person, (iii) such person's written consent to serve as a director, if
elected, and (iv) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission (whether
or not the Corporation is then subject to such rules); and (b) as to the
stockholder giving the notice (i) the name and address of such stockholder,
(ii) the class and number of shares of the Corporation which are owned of
record by such stockholder and the dates upon which he or she acquired such
shares, (iii) a description of all arrangements or understandings between the
stockholder and nominee and any other person or persons (naming such person or
persons) pursuant to which the nominations are to be made by the stockholder,
and (iv) the identification of any person employed, retained, or to be
compensated by the stockholder submitting the nomination or by the person
nominated, or any person acting on his or her behalf to make solicitations or
recommendations to stockholders for the purpose of assisting in the election of
such director, and a brief description of the terms of such employment,
retainer or arrangement for compensation. At the request of the Board, any
person nominated by the Board for election as a director shall furnish to the
Secretary that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee together with the required written
consent. No person shall be elected as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 11.
The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not properly brought before the meeting in accordance with the provisions hereof and, if he should so determine, he shall declare to the meeting that such nomination was not properly brought before the meeting and shall not be considered.
SECTION 12. SUBSTITUTION OF NOMINEES. In the event that a person is validly designated as a nominee in accordance with Section 11 of this Article II and shall thereafter become unwilling or unable to stand for election to the Board, the Nominating Committee may designate a substitute nominee upon delivery, not fewer than five (5) days prior to the date of
the meeting for the election of such nominee, of a written notice to the Secretary setting forth such information regarding such substitute nominee as would have been required to be delivered to the Secretary pursuant to Section 11 of this Article II had such substitute nominee been initially proposed as a nominee. Such notice shall include a signed consent to serve as a director of the Corporation, if elected, of each such substituted nominee.
SECTION 13. NEW BUSINESS. Any new business to be taken up at the annual meeting at the request of the Chairman of the Board, the President and Chief Executive Officer or by resolution of at least three-fourths of the directors then in office shall be stated in writing and filed with the Secretary at least fifteen (15) days before the date of the annual meeting, and all business so stated, proposed and filed shall be considered at the annual meeting, but, except as provided in this Section 13, no other proposal shall be acted upon at the annual meeting. Any proposal offered by any stockholder may be made at the annual meeting and the same may be discussed and considered, but unless properly brought before the meeting such proposal shall not be acted upon at the meeting. For a proposal to be properly brought before an annual meeting by a stockholder, the stockholder must be a stockholder of record and have given timely notice thereof in writing to the Secretary. To be timely, a stockholder's notice must be delivered to or received by the Secretary not later than the following dates: (i) with respect to an annual meeting of stockholders, sixty (60) days in advance of such meeting if such meeting is to be held on a day which is within thirty (30) days preceding the anniversary of the previous year's annual meeting, or ninety (90) days in advance of such meeting if such meeting is to be held on or after the anniversary of the previous year's annual meeting; and (ii) with respect to an annual meeting of stockholders held at a time other than within the time periods set forth in the immediately preceding clause (i), the close of business on the tenth (10th) day following the date on which notice of such meeting is first given to stockholders. For purposes of this Section 13, notice shall be deemed to first be given to stockholders when disclosure of such date of the meeting of stockholders is first made in a press release reported to Dow Jones News Services, Associated Press or comparable national news service, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended. A stockholder's notice to the Secretary shall set forth as to the matter the stockholder proposes to bring before the annual meeting (a) a brief description of the proposal desired to be brought before the annual meeting; (b) the name and address of the stockholder proposing such business; (c) the class and number of shares of the Corporation which are owned of record by the stockholder and the dates upon which he or she acquired such shares; (d) the identification of any person employed, retained, or to be compensated by the stockholder submitting the proposal, or any person acting on his or her behalf, to make solicitations or recommendations to stockholders for the purpose of assisting in the passage of such proposal, and a brief description of the terms of such employment, retainer or arrangement for compensation; and (e) such other information regarding such proposal as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission or required to be delivered to the Corporation pursuant to the proxy rules of the Securities and Exchange Commission (whether or not the Corporation is then subject to such rules). This provision shall not prevent the consideration and approval or disapproval at an annual meeting of reports of officers, directors and committees of the Board
or the management of the Corporation, but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided. This provision shall not constitute a waiver of any right of the Corporation under the proxy rules of the Securities and Exchange Commission or any other rule or regulation to omit a stockholder's proposal from the Corporation's proxy materials.
The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that any new business was not properly brought before the meeting in accordance with the provisions hereof and, if he should so determine, he shall declare to the meeting that such new business was not properly brought before the meeting and shall not be considered.
ARTICLE III
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK. Certificates representing shares of stock shall be in such form as shall be determined by the Board. Each certificate shall state that the Corporation will furnish to any stockholder upon request and without charge a statement of the powers, designations, preferences and relative, participating, optional or other special rights of the shares of each class or series of stock and the qualifications or restrictions of such preferences and/or rights, or shall set forth such statement on the certificate itself. The certificates shall be numbered in the order of their issue and entered in the books of the Corporation or its transfer agent or agents as they are issued. Each certificate shall state the registered holder's name and the number and class of shares, and shall be signed by the Chairman of the Board or the President and Chief Executive Officer, and the Secretary or any Assistant Secretary, and may, but need not, bear the seal of the Corporation or a facsimile thereof. Any or all of the signatures on the certificates may be facsimiles. In case any officer who shall have signed any such certificate shall cease to be such officer of the Corporation, whether because of death, resignation or otherwise, before such certificate shall have been delivered by the Corporation, such certificate may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates had not ceased to be such officer or officers of the Corporation.
SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board shall have the power to appoint one or more Transfer Agents and Registrars for the transfer and registration of certificates of stock of any class, and may require that stock certificates be countersigned and registered by one or more of such Transfer Agents and Registrars.
SECTION 3. REGISTRATION AND TRANSFER OF SHARES. Subject to the provisions of the Certificate of Incorporation of the Corporation, the name of each person owning a share of the capital stock of the Corporation shall be entered on the books of the Corporation together with the number of shares held by him or her, the numbers of the certificates covering such
shares and the dates of issue of such certificates. Subject to the provisions of the Certificate of Incorporation of the Corporation, the shares of stock of the Corporation shall be transferable on the books of the Corporation by the holders thereof in person, or by their duly authorized attorneys or legal representatives, on surrender and cancellation of certificates for a like number of shares, accompanied by an assignment or power of transfer endorsed thereon or attached thereto, duly executed, with such guarantee or proof of the authenticity of the signature as the Corporation or its agents may reasonably require and with proper evidence of payment of any applicable transfer taxes. Subject to the provisions of the Certificate of Incorporation of the Corporation, a record shall be made of each transfer.
SECTION 4. LOST, DESTROYED AND MUTILATED CERTIFICATES. The holder of any shares of stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of the certificates therefor. The Corporation may issue, or cause to be issued, a new certificate of stock in the place of any certificate theretofore issued by it alleged to have been lost, stolen or destroyed upon evidence satisfactory to the Corporation of the loss, theft or destruction of the certificate, and in the case of mutilation, the surrender of the mutilated certificate. The Corporation may, in its discretion, require the owner of the lost, stolen or destroyed certificate, or his or her legal representatives, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft, destruction or mutilation of any such certificate and the issuance of such new certificate, or may refer such owner to such remedy or remedies as he or she may have under the laws of the State of Delaware.
SECTION 5. HOLDER OF RECORD. Subject to the provisions of the Certificate of Incorporation of the Corporation, the Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder thereof in fact and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. RESPONSIBILITIES; NUMBER OF DIRECTORS. The
business and affairs of the Corporation shall be under the direction of the
Board. The Board shall consist of not less than five (5) nor more than fifteen
(15) directors. Within the foregoing limits, the number of directors shall be
determined only by resolution of the Board. A minimum of three (3) directors
shall be persons other than officers or employees of the Corporation or its
subsidiaries and shall not have a relationship which, in the opinion of the
Board (exclusive of such persons), could interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. No
more than two directors shall be officers or employees of the Corporation or
its subsidiaries.
SECTION 2. QUALIFICATIONS. Each director shall be at least eighteen (18) years of age.
SECTION 3. REGULAR AND ANNUAL MEETINGS. An annual meeting of the Board for the election of officers shall be held, without notice other than these Bylaws, immediately after, and at the same place as, the annual meeting of the stockholders, or, with notice, at such other time or place as the Board may fix by resolution. The Board may provide, by resolution, the time and place, within or without the State of Delaware, for the holding of regular meetings of the Board without notice other than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board may be called for any purpose at any time by or at the request of the Chairman of the Board or the President and Chief Executive Officer. Special meetings of the Board shall also be called by the Secretary upon the written request, stating the purpose or purposes of the meeting, of at least sixty percent (60%) of the directors then in office, but in any event not less than five (5) directors. The persons authorized to call special meetings of the Board shall give notice of such meetings in the manner prescribed by these Bylaws and may fix any place, within or without the Corporation's regular business area, as the place for holding any special meeting of the Board called by such persons. No business shall be conducted at a special meeting other than that specified in the notice of meeting.
SECTION 5. NOTICE OF MEETINGS; WAIVER OF NOTICE. Except
as otherwise provided in Section 4 of this Article IV, at least twenty-four
(24) hours notice of meetings shall be given to each director if given in
person, by same-day courier or by telephone, telegraph, telex, facsimile or
other electronic transmission and at least five (5) days notice of meetings
shall be given if given in writing and delivered by courier (other than
same-day) or by postage prepaid mail. The purpose of any special meeting shall
be stated in the notice. Such notice shall be deemed given when sent or given
to any mail or courier service (other than same-day) or company providing
electronic transmission service. Any director may waive notice of any meeting
by submitting a signed waiver of notice with the Secretary, whether before or
after the meeting. The attendance of a director at a meeting shall constitute
a waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 6. CONDUCT OF MEETINGS. Meetings of the Board shall be presided over by the Chairman of the Board or such other director or officer as the Chairman of the Board shall designate, and in the absence or incapacity of the Chairman of the Board, the presiding officer shall be the President and Chief Executive Officer. In the absence or disability of both the Chairman of the Board and the President and Chief Executive Officer, a majority of the entire Board shall designate a director or officer who shall preside over meetings of the Board. The Secretary or, in his absence, a person appointed by the Chairman of the Board (or other presiding person), shall act as secretary of the meeting. The Chairman of the Board (or other
person presiding) shall conduct all meetings of the Board in accordance with the best interests of the Corporation and shall have the authority and discretion to establish reasonable procedural rules for the conduct of Board meetings. At the discretion of the Chairman of the Board, any one or more directors may participate in a meeting of the Board or a committee of the Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at any such meeting.
SECTION 7. QUORUM AND VOTING REQUIREMENTS. A quorum at any meeting of the Board shall consist of not less than a majority of the directors then in office or such greater number as shall be required by law, these Bylaws or the Certificate of Incorporation, but not less than one-third (1/3) of the total number. If less than a required quorum is present, the majority of those directors present shall adjourn the meeting to another time and place without further notice. At such adjourned meeting at which a quorum shall be represented, any business may be transacted that might have been transacted at the meeting as originally noticed. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, a majority vote of the directors present at a meeting, if a quorum is present, shall constitute an act of the Board.
SECTION 8. INFORMAL ACTION BY DIRECTORS. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee.
SECTION 9. RESIGNATION. Any director may resign at any time by sending a written notice of such resignation to the principal office of the Corporation addressed to the Chairman of the Board or the President and Chief Executive Officer. Unless otherwise specified therein, such resignation shall take effect upon receipt thereof.
SECTION 10. VACANCIES. To the extent not inconsistent with the Certificate of Incorporation and subject to the limitations prescribed by law and the rights of holders of Preferred Stock, vacancies in the office of director, including vacancies created by newly created directorships resulting from an increase in the number of directors, shall be filled only by a vote of a majority of the directors then holding office, whether or not a quorum, at any regular or special meeting of the Board called for that purpose. Subject to the rights of holders of Preferred Stock, no person shall be so elected a director unless nominated by the Nominating Committee. Subject to the rights of holders of Preferred Stock, any director so elected shall serve for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until his or her successor shall be elected and qualified.
SECTION 11. COMPENSATION. From time to time, as the Board deems necessary, the Board shall fix the compensation of directors, and officers of the Corporation in such one or more forms as the Board may determine.
SECTION 12. AMENDMENTS CONCERNING THE BOARD. The number of directors and other restrictions and qualifications for directors of the Corporation as set forth in these Bylaws may be altered only by a vote, in addition to any vote required by law, of two-thirds of the entire Board or by the affirmative vote of the holders of record of not less than eighty percent (80%) of the total votes eligible to be cast by holders of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors at a meeting of the stockholders called for that purpose.
ARTICLE V
COMMITTEES
SECTION 1. STANDING COMMITTEES. At each annual meeting of the Board, upon recommendation by the Chairman of the Board, the directors shall designate from their own number, by resolution, the following committees:
(a) Executive Committee
(b) Audit Committee
(c) Compensation Committee
(d) Nominating Committee
which shall be standing committees of the Board. The Chairman of the Board shall appoint a director to fill any vacancy on any committee of the Board. The members of the committees shall serve at the pleasure of the Board.
SECTION 2. EXECUTIVE COMMITTEE. There shall be an Executive Committee of the Board, consisting of at least four (4) members, as shall be appointed by Board resolution or these Bylaws. The President and Chief Executive Officer and the Secretary shall be ex-officio members of the Executive Committee, with power to vote on all matters so long as they are also directors of the Corporation. Three (3) members of the Executive Committee, at least two (2) of whom must be non-officer directors, or such other number of members as the Board of Directors may establish by resolution, shall constitute a quorum for the transaction of business. The vote of a majority of members present at any meeting including the presiding member, who shall be eligible to vote, shall constitute the action of the Executive Committee.
The President and Chief Executive Officer shall serve as chairman of the Executive Committee, so long as he is a director. In the absence of the chairman of the
Executive Committee, the committee shall designate, from among its membership present, a person to preside at any meeting held in such absence. The Executive Committee shall designate, from its membership or otherwise, a secretary who shall report to the Board at its next regular meeting all proceedings and actions taken by the Executive Committee. The Executive Committee shall meet as necessary at the call of the Chairman of the Board, the President and Chief Executive Officer or at the call of a majority of the members of the Executive Committee.
The Executive Committee shall, to the extent not inconsistent with law, these Bylaws, the Certificate of Incorporation, and resolutions adopted by the Board, exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation in the intervals between the meetings of the Board.
SECTION 3. AUDIT COMMITTEE. The Audit Committee shall consist of at least two (2) members whose background and experience are financial and/or business management related, none of whom shall be an officer or salaried employee of the Corporation or its subsidiaries, an attorney who receives a fee or other compensation for legal services rendered to the Corporation or any other individual having a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. At any regular meeting of the Board, any director who is otherwise eligible to serve on the Audit Committee may be elected to fill a vacancy that has occurred on the Audit Committee. The Chairman of the Board shall designate one member of the committee to serve as chairman of the committee. The Audit Committee shall meet annually, at the call of the chairman of the committee and may hold such additional meetings as the chairman of the committee may deem necessary, to examine, or cause to be examined, the records and affairs of the Corporation to determine its true financial condition, and shall present a report of examination to the Board at the Board's next regular meeting following the meeting of the Audit Committee. The committee shall appoint, from its membership or otherwise, a secretary who shall cause to be kept written minutes of all meetings of the committee. The Audit Committee shall make, or cause to be made, such other examinations as it may deem advisable or whenever so directed by the Board and shall report thereon in writing at a regular meeting of the Board. The Audit Committee shall make recommendations to the Board in relation to the employment of accountants and independent auditors and arrange for such other assistance as it may deem necessary or desirable. The Audit Committee shall review and evaluate the procedures and performance of the Corporation's internal auditing staff. A quorum shall consist of at least one-third of the members of the committee, and in no event less than two (2) members of the committee.
SECTION 4. COMPENSATION COMMITTEE. The Compensation Committee shall consist of at least two (2) members, none of whom shall be an officer or salaried employee of the Corporation or its subsidiaries as shall be appointed by Board resolution or these Bylaws. In addition, the President and Chief Executive Officer and the Secretary (so long as the Secretary is also a director of the Corporation) shall be ex-officio members of the Compensation Committee without any power to vote. The Chairman of the Board shall designate one member
of the committee to serve as chairman of the Compensation Committee, who shall have the authority to adopt and establish procedural rules for the conduct of all meetings of the committee.
The committee shall meet annually at the call of the chairman of the committee, and may hold such additional meetings as the Chairman of the Board may deem necessary. A quorum shall consist of at least one-third of the voting members of the Committee, and in no event less than two (2) voting members of the committee. The vote of a majority of the voting members present at any meeting, including the chairman of the committee who shall be eligible to vote, shall constitute the action of the Compensation Committee. The committee shall appoint, from its membership or otherwise, a secretary who shall cause to be kept written minutes of all meetings of the committee.
The Compensation Committee shall be responsible for overseeing the development, implementation and conduct of the Corporation's employment and personnel policies, notices and procedures, including the administration of the Corporation's compensation and benefit programs.
SECTION 5. NOMINATING COMMITTEE. The Nominating Committee shall consist of at least two (2) members, as shall be appointed by Board resolutions or these Bylaws. The President and Chief Executive Officer and the Secretary shall be ex-officio members of the Nominating Committee, with power to vote on all matters so long as they are also directors of the Corporation. Notwithstanding the foregoing, no director shall serve on the Nominating Committee in any capacity in any year during which such director's term as a director is scheduled to expire. The Nominating Committee shall review qualifications of and interview candidates for the Board and shall make nominations for election of board members in accordance with the provisions of these Bylaws in relation to those suggestions to the Board. The Chairman of the Board shall designate one member of the Committee to serve as chairman of the Nominating Committee. A quorum shall consist of at least one-third of the members of the Committee, and in no event less than two (2) members of the committee.
SECTION 6. OTHER COMMITTEES. The Board may by resolution authorize such other committees as from time to time it may deem necessary or appropriate for the conduct of the business of the Corporation. The members of each committee so authorized shall be appointed by the Board from members of the Board and/or employees of the Corporation. In addition, the President and Chief Executive Officer and the Secretary shall be ex-officio members of each such committee. Each such committee shall exercise such powers as may be assigned by the Board to the extent not inconsistent with law, these Bylaws, the Certificate of Incorporation, or resolutions of the Board.
ARTICLE VI
OFFICERS
SECTION 1. NUMBER. The Board shall, at each annual meeting, elect a Chairman of the Board, a President and Chief Executive Officer, a Secretary and may elect a Vice Chairman and such other officers as the Board from time to time may deem necessary or the business of the Corporation may require. Any number of offices may be held by the same person except that no person may simultaneously hold the offices of President and Chief Executive Officer and Secretary.
The election of all officers shall be by a majority of the directors then in office. If such election is not held at the meeting held annually for the election of officers, such officers may be so elected at any subsequent regular meeting or at a special meeting called for that purpose, in the same manner above provided. Each person elected shall have such authority, bear such title and perform such duties as provided in these Bylaws and as the Board may prescribe from time to time. All officers elected or appointed by the Board shall assume their duties immediately upon their election and shall hold office at the pleasure of the Board. Whenever a vacancy occurs among the officers, it may be filled at any regular or special meeting called for that purpose, in the same manner as above provided.
SECTION 2. TERM OF OFFICE AND REMOVAL. Each officer shall serve until his or her successor is elected and duly qualified, the office is abolished, or he or she is removed. Except for the Chairman of the Board, the President and Chief Executive Officer, any officer may be removed at any regular meeting of the Board with or without cause by an affirmative vote of a majority of the directors then in office. The Board may remove the Chairman of the Board or the President and Chief Executive Officer at any time, with or without cause, only by a vote of two-thirds of the non-officer directors then holding office at any regular or special meeting of the Board called for that purpose.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all meetings of the stockholders; preside at all meetings of the Board; make recommendations to the Board regarding appointments to all committees, including chairmanships; and sign instruments in the name of the Corporation.
In the absence or disability of the Chairman of the Board, the President and Chief Executive Officer shall exercise the powers and perform the duties which otherwise would fall upon the Chairman of the Board. In the absence or disability of both the Chairman of the Board and the President and Chief Executive Officer, a majority of the Board shall designate a person who shall exercise the powers and perform the duties which otherwise would fall upon the Chairman of the Board.
SECTION 4. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President shall be the Chief Executive Officer of the Corporation and shall, subject to the direction of the Board,
oversee all the major activities of the Corporation and its subsidiaries and be responsible for assuring that the policy decisions of the Board are implemented as formulated. The President and Chief Executive Officer shall be responsible, in consultation with such Officers and members of the Board as he deems appropriate, for planning the growth of the Corporation. The President and Chief Executive Officer shall be responsible for stockholder relations and relations with investment bankers or other similar financial institutions, and shall be empowered to designate officers of the Corporation and its subsidiaries to assist in such activities. The President and Chief Executive Officer shall be principally responsible for exploring and reporting to the Board all opportunities for mergers, acquisitions and new business. The President and Chief Executive Officer, under authority given to him, shall have the authority to sign instruments in the name of the Corporation. The President and Chief Executive Officer shall have general supervision and direction of all of the Corporation's officers and personnel, subject to and consistent with policies enunciated by the Board. The President and Chief Executive Officer shall have such other powers as may be assigned to him by the Board or its committees.
SECTION 5. VICE PRESIDENTS. Executive Vice Presidents, Senior Vice Presidents and Vice Presidents may be appointed by the Board of Directors to perform such duties as may be prescribed by these Bylaws, the Board or the President and Chief Executive Officer as permitted by the Board.
SECTION 6. SECRETARY. The Secretary shall attend all meetings of the Board and of the stockholders, and shall record, or cause to be recorded, all votes and minutes of all proceedings of the Board and of the stockholders in a book or books to be kept for that purpose. The Secretary shall perform such executive and administrative duties as may be assigned by the Board, the Chairman of the Board or the President and Chief Executive Officer. The Secretary shall have charge of the seal of the Corporation, shall submit such reports and statements as may be required by law or by the Board, shall conduct all correspondence relating to the Board and its proceedings and shall have such other powers and duties as are generally incident to the office of Secretary and as may be assigned to him or her by the Board, the Chairman of the Board or the President and Chief Executive Officer.
SECTION 7. COMPTROLLER. The Comptroller shall be the chief accounting officer of the Corporation and shall be responsible for the maintenance of adequate systems and records. The Comptroller shall also be treasurer of the Corporation and shall keep a record of all assets, liabilities, receipts, disbursements, and other financial transactions, and shall see that all expenditures are made in accordance with procedures duly established from time to time by the Board. The Comptroller shall make such reports as may be required by the Board or as are required by law.
SECTION 8. OTHER OFFICERS AND EMPLOYEES. Other officers and employees appointed by the Board shall have such authority and shall perform such duties as may be assigned to them, from time to time, by the Board or the President and Chief Executive Officer.
SECTION 9. COMPENSATION OF OFFICERS AND OTHERS. The compensation of all officers and employees shall be fixed from time to time by the Board, or by any committee or officer authorized by the Board to do so, upon the recommendation and report by the Compensation Committee. The compensation of agents shall be fixed by the Board, or by any committee or officer authorized by the Board to do so, upon the recommendation and report of the Compensation Committee.
ARTICLE VII
DIVIDENDS
The Board shall have the power, subject to the provisions of law and the requirements of the Certificate of Incorporation, to declare and pay dividends out of surplus (or, if no surplus exists, out of net profits of the Corporation, for the fiscal year in which the dividend is declared and/or the preceding fiscal year, except where there is an impairment of capital stock), to pay such dividends to the stockholders in cash, in property, or in shares of the capital stock of the Corporation, and to fix the date or dates for the payment of such dividends.
ARTICLE VIII
AMENDMENTS
These Bylaws, except as provided by applicable law or the Certificate of Incorporation, or as otherwise set forth in these Bylaws, may be amended or repealed at any regular meeting of the entire Board by the vote of two- thirds of the Board; provided, however, that (a) a notice specifying the change or amendment shall have been given at a previous regular meeting and entered in the minutes of the Board; (b) a written statement describing the change or amendment shall be made in the notice mailed to the directors of the meeting at which the change or amendment shall be acted upon; and (c) any Bylaw made by the Board may be altered, amended, rescinded, or repealed by the holders of shares of capital stock entitled to vote thereon at any annual meeting or at any special meeting called for that purpose in accordance with the percentage requirements set forth in the Certificate of Incorporation and/or these Bylaws. Notwithstanding the foregoing, any provision of these Bylaws that contains a supermajority voting requirement shall only be altered, amended, rescinded, or repealed by a vote of the Board or holders of capital stock entitled to vote thereon that is not less than the supermajority
specified in such provision.
Charter No. 6075
CARVER FEDERAL SAVINGS BANK
FEDERAL STOCK CHARTER
SECTION 1. CORPORATE TITLE. The full corporate title of the savings bank is Carver Federal Savings Bank (the "savings bank").
SECTION 2. OFFICE. The home office shall be located in the City of New York, County of New York, State of New York.
SECTION 3. DURATION. The duration of the savings bank is perpetual.
SECTION 4. PURPOSE AND POWERS. The purpose of the savings bank is to pursue any or all of the lawful objectives of a Federal savings bank chartered under section 5 of the Home Owners' Loan Act and to exercise all of the express, implied and incidental powers conferred thereby and by all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Office of Thrift Supervision ("Office").
SECTION 5. CAPITAL STOCK. The total number of shares of all classes of the capital stock which the savings bank has authority to issue is 6,000,000, of which 5,000,000 shares shall be common stock, par value $0.01 per share, and of which 1,000,000 shares shall be serial preferred stock, par value $0.01 per share. The shares may be issued from time to time as authorized by the board of directors without the approval of its stockholders except as otherwise provided in this section 5 or to the extent that such approval is required by governing law, rule, or regulation. The consideration for the issuance of the shares shall be paid in full before their issuance or part payment for the issuance of shares of the savings bank. The consideration for the shares shall be cash, tangible or intangible property (to the extent direct investment in such property would be permitted), labor or services actually performed for the savings bank, or any combination of the foregoing. In the absence of actual fraud in the transaction, the value of such property, labor, or services, as determined by the board of directors of the savings bank, shall be conclusive. Upon payment of such consideration, such shares shall be deemed to be fully paid and nonassessable. In the case of a stock dividend, that part of the surplus of the savings bank which is transferred to stated capital upon the issuance of shares as a share dividend shall be deemed to be the consideration for their issuance.
Except for shares issuable in connection with the conversion of the savings bank from the mutual to the stock form of capitalization, no shares of capital stock (including shares issuable upon conversion, exchange or exercise of other securities) shall be issued, directly or indirectly, to officers, directors, or controlling persons of the savings bank other than as part of a general public offering or as qualifying shares to a director, unless the issuance or the plan under which they would be issued have been approved by a majority of the total votes eligible to be cast at a legal meeting.
Nothing contained in this section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share, except as to the cumulation of votes for the election of directors, provided, that this restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the holders of preferred stock, voting as a class or series, to elect some members of the board of directors, less than a majority thereof, in the event of default in the payment of dividends on any class or series of preferred stock;
(ii) To any provision which would require the holders of preferred stock, voting as a class or series, to approve the merger or consolidation of the savings bank with another corporation or the sale, lease, or conveyance (other than by mortgage or pledge) of properties or business in exchange for securities of a corporation other than the savings bank if the preferred stock is exchanged for securities of such other corporation, provided, that no provision may require such approval for transactions undertaken with the assistance or pursuant to the direction of the Office, the Federal Deposit Insurance Corporation, or the Resolution Trust Corporation;
(iii) To any amendment which would adversely change the specific terms of any class or series of capital stock as set forth in this section 5 (or in any supplementary sections hereto), including any amendment which would create or enlarge any class or series ranking prior thereto in rights and preferences. An amendment which increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving savings bank in a merger or consolidation for the savings bank, shall not be considered to be such an adverse change.
A description of the different classes and series (if any) of the savings bank's capital stock and a statement of the designations, and the relative rights, preferences and limitations of the shares of each class of and series (if any) of capital stock are as follows:
A. COMMON STOCK. Except as provided in this section 5 (or in any supplementary sections thereto), the holders of common stock shall exclusively possess all voting power. Each holder of shares of common stock shall be entitled to one vote for each share held by such holder, except as to the cumulation of votes for the election of directors.
Whenever there shall have been paid, or declared and set aside for payment, to the holders of the outstanding shares of any class of stock having preference over the common stock as to the payment of dividends, the full amount of dividends and of sinking fund, retirement fund or other retirement payments, if any, to which such holders are respectively entitled in preference to the common stock, then dividends may be paid on the common stock and on any class or series of stock entitled to participate therewith as to dividends out of any assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
savings bank, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the savings bank available for distribution remaining after: (i)
payment or provision for payment of the savings bank's debts and liabilities;
(ii) distributions or provision for distributions in settlement of its
liquidation account; and (iii) distributions or provisions for distributions to
holders of any class or series of stock having preference over the
common stock in the liquidation, dissolution, or winding up of the savings bank. Each share of common stock shall have the same relative rights as and be identical in all respects with all the other shares of common stock.
B. PREFERRED STOCK. The savings bank may provide in supplementary sections to its charter for one or more classes of preferred stock, which shall be separately identified. The shares of any class may be divided into and issued in series, with each series separately designated so as to distinguish the shares thereof from the shares of all other series and classes. The terms of each series shall be set forth in supplementary section to the charter. All shares of the same class shall be identical except as to the following relative rights and preferences, as to which there may be variations between different series;
(a) The distinctive serial designation and the number of shares constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and, if so, from which date(s) the payment date(s) for dividends, and the participating or other special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such series;
(d) Whether the shares of such series shall be redeemable and, if so, the price(s) at which, and the terms and conditions on which, such shares may be redeemed;
(e) The amounts(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the savings bank;
(f) Whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price(s) at which such shares may be redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the savings bank and, if so, the conversion price(s) or the rate(s) of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of serial preferred stock and whether such shares may be reissued as shares of the same or any other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same relative rights as and be identical in all respects with all the other shares of the same series.
The board of directors shall have authority to divide, by the adoption of supplementary charter sections, any authorized class of preferred stock into series, and, within the limitations
set forth in this section and the charter, fix and determine the relative rights and preferences of the shares of any series so established.
Prior to the issuance of any preferred shares of a series established by a supplementary charter section adopted by the board of directors, the savings bank shall file with the Secretary to the Office a dated copy of the supplementary section of this charter establishing and designating the series and fixing and determining the relative rights and preferences thereof.
SECTION 6. PREEMPTIVE RIGHTS. Holders of the capital stock of the savings bank shall not be entitled to preemptive rights with respect to any shares of the savings bank which may be issued.
SECTION 7. LIQUIDATION ACCOUNT. Pursuant to the requirements of the Office's regulations (12 C.F.R. Subchapter D), the savings bank shall establish and maintain a liquidation account for the benefit of its savings account holders as of March 31, 1993 and June 30, 1994 ("eligible savers"). In the event of a complete liquidation of the savings bank, it shall comply with such regulations with respect to the amount and the priorities on liquidation of each of the savings bank's eligible saver's inchoate interest in the liquidation account, to the extent it is still in existence; provided, that an eligible saver's inchoate interest in the liquidation account shall not entitle such eligible saver to any voting rights at meetings of the savings bank's stockholders.
SECTION 8. CERTAIN PROVISION APPLICABLE FOR FIVE YEARS. Notwithstanding anything contained in the savings bank's charter or bylaws to the contrary, for a period of five years from the date of completion of the conversion of the savings bank form mutual to stock form, the following provisions shall apply:
A. Beneficial Ownership Limitation. No person shall directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10 percent of any class of an equity security of the savings bank. This limitation shall not apply to a transaction in which the savings bank forms a holding company without change in the respective beneficial ownership interest of its stockholders other than pursuant to the exercise of any dissenter and appraisal rights, the purchase of shares by underwriters in connection with a public offering, or the purchase of shares by a tax-qualified employee stock benefit plan which is exempt from the approval requirements under Section 574.3(c)(1)(vi) of the Office's regulations.
In the event shares are acquired in violation of this Section 8, all shares beneficially owned by any person in excess of 10% shall be considered "excess shares" and shall not be counted as shares entitled to vote and shall not be voted by any person or counted as voting shares in connection with any matters submitted to the stockholders for a vote.
For purposes of this Section 8, the following definitions apply:
(1) The term "person" includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of the equity securities of the savings bank.
(2) The term "offer" includes every offer to buy or otherwise acquire, solicitation of an offer to sell, tender offer for, or request, or invitation for tenders of, a security or interest in a security for value.
(3) The term "acquire" includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise.
(4) The term "acting in concert" means (a) knowing participation in a joint activity or conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (b) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangements, whether written or otherwise.
B. Cumulative Voting Limitation. Stockholders shall not be permitted to cumulate their votes for election of directors.
C. Call for Special Meetings. Special meetings of stockholders relating to changes in control of the savings bank or amendments to its charter shall be called only upon direction of the board of directors.
SECTION 9. DIRECTORS. The savings bank shall be under the direction of a board of directors. The authorized number of directors, as stated in the savings bank's bylaws, shall not be fewer than five or more than fifteen except when a greater number is approved by the Director of the Office.
SECTION 10. AMENDMENT OF CHARTER. Except as provided in section 5, no amendment, addition, alteration, change, or repeal of this charter shall be made, unless such is first proposed by the board of directors of the savings bank, then preliminarily approved by the Office, which preliminary approval by be granted by the Office pursuant to regulations specifying preapproved charter amendments, and thereafter approved by the stockholders by a majority of the total votes eligible to be cast at a legal meeting. Any amendment, addition, alteration, change, or repeal so acted upon shall be effective upon filing with the Office in accordance with regulatory procedures or on such other date as the Office may specify in its preliminary approval.
Attest: /s/ Margaret R. Lewis By: /s/ Richard T. Greene
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Margaret R. Lewis Richard T. Greene
Secretary President and Chief Executive Officer
Carver Federal Savings Bank Carver Federal Savings Bank
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Declared effective as of October 24, 1994
Director of the Office of Thrift Supervision
Attest: /s/ Nadine Y. Washington By: /s/ Diana L. Darmud
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Nadine Y. Washington Diana L. Darmud
Corporate Secretary Deputy Assistant Director for CAD
Office of Thrift Supervision
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BYLAWS
OF
CARVER FEDERAL SAVINGS BANK
ARTICLE I - HOME OFFICE
The home office of Carver Federal Savings Bank (the "savings bank") shall be located in the City of New York, in the County of New York, in the State of New York.
ARTICLE II - STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All annual and special meetings of stockholders shall be held at the home office of the savings bank or at such other place in the State of New York as the board of directors may determine.
SECTION 2. ANNUAL MEETING. A meeting of stockholders of the savings bank for the election of directors and for the transaction of any other business of the savings bank shall be held annually within 120 days after the end of the savings bank's fiscal year.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Office of Thrift Supervision ("Office"), may be called at any time by the chairman of the board, the president, or a majority of the board of directors, and shall be called by the chairman of the board, the president, or the secretary upon the written request of the holders of not less than one-tenth of all of the outstanding capital stock of the savings bank entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered to the home office of the savings bank addressed to the chairman of the board, the president, or the secretary.
SECTION 4. CONDUCT OF MEETINGS. Annual and special meetings shall be conducted in accordance with rules and procedures adopted by the board of directors. The board of directors shall designate, when present, either the chairman of the board or president to preside at such meetings.
SECTION 5. NOTICE OF MEETINGS. Written notice stating the place, day, and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than 20 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, or the secretary, or the directors calling the meeting, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the mail, addressed to the stockholder at the address as it appears on the stock transfer books or records of the savings bank as of the record date prescribed in Section 6 of this Article II with postage prepaid. When any stockholders' meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30
days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken.
SECTION 6. FIXING OF RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the board of directors shall fix in advance a date as the record date for any such determination of stockholders. Such date in any case shall be not more than 60 days and, in case of a meeting of stockholders, not fewer than 10 days prior to the date on which the particular action, requiring such determination of stockholders, is to be taken. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof.
SECTION 7. VOTING LISTS. At least 10 days before each meeting of the stockholders, the officer or agent having charge of the stock transfer books for shares of the savings bank shall make a complete list of the stockholders entitled to vote at such meeting, or any adjournments thereof, arranged in alphabetical order, with the address and the number of shares held by each. This list of stockholders shall be kept on file at the home office of the savings bank and shall be subject to inspection by any stockholder at any time during usual business hours for a period of 20 days prior to such meeting. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any stockholder during the entire time of the meeting. The original stock transfer book shall constitute prima facie evidence of the stockholders entitled to examine such list or transfer books or to vote at any meeting of stockholders.
In lieu of making the stockholder list available for inspection by stockholders as provided in the preceding paragraph, the board of directors may perform such acts as required by paragraphs (a) and (b) of Rule 14a-7 of the General Rules and Regulations under the Securities Exchange Act of 1934, as may be duly requested in writing, with respect to any matter which may be properly considered at a meeting of stockholders, by any stockholder who is entitled to vote on such matter and who shall defray the reasonable expenses to be incurred by the savings bank in performance of the act or acts required.
SECTION 8. QUORUM. A majority of the outstanding shares of the savings bank entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to constitute less than a quorum.
SECTION 9. PROXIES. At all meetings of stockholders, a stockholder may vote in person or by proxy executed in writing by the stockholder or by his duly authorized attorney in fact. Proxies solicited on behalf of the management shall be voted as directed by the stockholder
or, in the absence of such direction, as determined by a majority of the board of directors. No proxy shall be valid more than eleven months from the date of its execution except for a proxy coupled with an interest.
SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS. When ownership stands in the name of two or more persons, in the absence of written directions to the savings bank to the contrary, at any meeting of the stockholders of the savings bank, any one or more of such stockholders may cast, in person or by proxy, all votes to which such ownership is entitled. In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such shares and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree.
SECTION 11. VOTING OF SHARES OF CERTAIN HOLDERS. Shares standing in the name of another corporation may be voted by any officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian, or conservator may be voted by him, either in person or by proxy, without at transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer into his name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter, the pledgee shall be entitled to vote the shares so transferred.
Neither the treasury shares of its own stock held by the savings bank nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the savings bank, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting.
SECTION 12. CUMULATIVE VOTING. Unless otherwise provided in the savings bank's charter, every stockholder entitled to vote at an election for directors shall have the right to vote, in person or by proxy, the number of shares owned by the stockholder for as many persons as there are directors to be elected and for whose election the stockholder has a right to vote, or to cumulate the votes by giving one candidate as many votes as the number of such directors to be elected multiplied by the number of shares shall equal or by distributing such votes on the same principle among any number of candidates.
SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of stockholders, the board of directors may appoint any persons other than nominees for office as inspectors of election to act at such a meeting or any adjournment. The number of inspectors shall be either
one or three. Any such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the board or the president may, or on the request of not fewer than 10 percent of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors in advance of the meeting or at the meeting by the chairman of the board or the president.
Unless otherwise prescribed by applicable regulations, the duties of such inspectors shall include: determining the number of shares and the voting power of each share, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the rights to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all stockholders.
SECTION 14. NOMINATING COMMITTEE. The board of directors shall act as a nominating committee for selecting the management nominees for election as directors. Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver written nominations to the secretary at least 20 days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the savings bank. No nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by stockholders are made in writing and delivered to the secretary of the savings bank at least five days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the savings bank. Ballots bearing the names of all persons nominated by the nominating committee and by stockholders shall be provided for use at the annual meeting. However, if the nominating committee shall fail or refuse to act at least 20 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any stockholder entitled to vote and shall be voted upon.
SECTION 15. NEW BUSINESS. Any new business to be taken up at the annual meeting shall be stated in writing and filed with the secretary of the savings bank at least five days before the date of the annual meeting, and all other business so stated, proposed, and filed shall be considered at the annual meeting; but no other proposal shall be acted upon at the annual meeting. Any stockholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the secretary at least five days before the meeting, such proposal shall be laid over for action at an adjourned, special, or annual meeting of stockholders taking place 30 days or more thereafter. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors, and committees; but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided.
SECTION 16. INFORMAL ACTION BY STOCKHOLDERS. Any action required to be taken at a meeting of the stockholders, or any other action which may be taken at a meeting of
stockholders, may be taken without a meeting if consent in writing, setting forth the action so taken, shall be given by all of the stockholders entitled to vote with respect to the subject matter.
ARTICLE III - BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the savings bank shall be under the direction of its board of directors. The board of directors shall annually elect a chairman of the board from among its members and shall designate, when present, the chairman of the board to preside at its meetings.
SECTION 2. NUMBER AND TERM. The board of directors shall consist of five members and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected and qualified. One class shall be elected by ballot annually. Directors shall be elected by a plurality of the votes cast.
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors shall be held without other notice than this bylaw immediately after, and at the same place as, the annual meeting of stockholders. The board of directors may provide, by resolution, the time and place, within the savings bank's normal lending territory, for the holding of additional regular meetings without other notice than such resolution.
SECTION 4. QUALIFICATION. Each director shall at all times be the beneficial owner of not less than 100 shares of capital stock of the savings bank unless the savings bank is a wholly owned subsidiary of a holding company.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of directors may be called by or at the request of the chairman of the board, the president, or one-third of the directors. The persons authorized to call special meetings of the board of directors may fix any place, within the savings bank's normal lending territory, as the place for holding any special meeting of the board of directors called by such persons.
Members of the board of directors may participate in special meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person but shall not constitute attendance for the purpose of compensation pursuant to Section 12 of this Article.
SECTION 6. NOTICE OF SPECIAL MEETINGS. Written notice of any special meeting of the board of directors or of any committee designated thereby shall be given to each director at least 24 hours prior thereto when delivered personally or by telegram or at least five days prior thereto when delivered by mail at the address at which the director is most likely to be reached. Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid if mailed or delivered to the telegraph company if sent by telegram. Any director may waive notice of any meeting by a writing filed with the secretary. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the board of directors; but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time. Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 6 of this Article III.
SECTION 8. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless a greater number is prescribed by regulation of the Office or by these bylaws.
SECTION 9. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors.
SECTION 10. RESIGNATION. Any director may resign at any time by sending a written notice of such resignation to the home office of the savings bank addressed to the chairman of the board or the president. Unless otherwise specified, such resignation shall take effect upon receipt by the chairman of the board or the president. More than three consecutive absences from regular meetings of the board of directors, unless excused by resolution of the board of directors, shall automatically constitute a resignation, effective when such resignation is accepted by the board of directors.
SECTION 11. VACANCIES. Any vacancy occurring on the board of directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected to serve until the next election of directors by the stockholders. Any directorship to be filled by reason of an increase in number of directors may be filled by election by the board of directors for a term of office continuing only until the next election of directors by the stockholders.
SECTION 12. COMPENSATION. Directors, as such, may receive a stated salary for their services. By resolution of the board of directors, a reasonable fixed sum, and reasonable expenses of attendance, if any, may be allowed for actual attendance at each regular or special meeting of the board of directors. Members of either standing or special committees may be allowed such compensation for actual attendance at committee meetings as the board of directors may determine.
SECTION 13. PRESUMPTION OF ASSENT. A director of the savings bank who is present at a meeting of the board of directors at which action on any savings bank matter is taken shall be presumed to have assented to the action taken unless his dissent or abstention shall be entered in the minutes of the meeting or unless he shall file a written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the savings bank within five
days after the date a copy of the minutes of the meeting is received. Such right to dissent shall not apply to a director who voted in favor of such action.
SECTION 14. REMOVAL OF DIRECTORS. At a meeting of stockholders called expressly for that purpose, any director may be removed for cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. If less than the entire board is to be removed, no one of the directors may be removed if the votes cast against the removal would be sufficient to elect a director if then cumulatively voted at an election of the class of directors of which such director is a part. Whenever the holders of the shares of any class are entitled to elect one or more directors by the provisions of the charter or supplemental sections thereto, the provisions of this section shall apply, in respect to the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
SECTION 1. APPOINTMENT. The board of directors, by resolution adopted by a majority of the full board, may designate from among its members an executive committee. The designation of any committee pursuant to this Article IV and the delegation of authority shall not operate to relieve the board of directors, or any director, of any responsibility imposed by law or regulation.
SECTION 2. AUTHORITY. The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee; and except also that the executive committee shall not have the authority of the board of directors with reference to: the declaration of dividends; the amendment of the charter or bylaws of the savings bank, or recommending to the stockholders a plan of merger, consolidation, or conversion; the sale, lease, or other disposition of all or substantially all of the property and assets of the savings bank otherwise than in the usual and regular course of its business; a voluntary dissolution of the savings bank; a revocation of any of the foregoing; or the approval of a transaction in which any member of the executive committee, directly or indirectly, has any material beneficial interest.
SECTION 3. TENURE. Subject to the provisions of Section 8 of this Article IV, each member of the executive committee shall hold office until the next regular annual meeting of the board of directors following his or her designation and until a successor is designated as a member of the executive committee.
SECTION 4. MEETINGS. Regular meetings of the executive committee may be held without notice at such times and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon not less than one day's notice stating the place, date, and hour of the meeting, which notice may be written or oral. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends
in person. The notice of the meeting of the executive need not state the business proposed to be transacted at the meeting.
SECTION 5. QUORUM. A majority of the member of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at the meeting at which a quorum is present.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the executive committee.
SECTION 7. VACANCIES. Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full board of directors.
SECTION 9. PROCEDURE. The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these bylaws. It shall keep regular minutes of its proceedings and report the same to the board of directors for its information at the meeting held next after the proceedings shall have occurred.
SECTION 10. OTHER COMMITTEES. The board of directors may by resolution establish an audit, loan, or other committee composed of directors as it may determine to be necessary or appropriate for the conduct of the business of the savings bank and may prescribe the duties, constitution, and procedures thereof.
ARTICLE V - OFFICERS
SECTION 1. POSITIONS. The officers of the savings bank shall be a president, one or more vice presidents, a secretary, and a treasurer, each of whom shall be elected by the board of directors. The board of directors may also designate the chairman of the board as an officer. The president shall be the chief executive officer, unless the board of directors designates the chairman of the board as chief executive officer. The president shall be a director of the savings bank. The offices of the secretary and treasurer may be held by the same person and a vice president may also be either the secretary, or the treasurer. The board of directors may designate one or more vice presidents as executive vice president or senior vice president. The board of directors may designate one or more vice presidents as executive vice president or senior vice president. The board of directors may also elect or authorize the appointment of such other officers as the business of the savings bank may require. The officers shall have such authority and perform such duties as the board of directors may from time to time authorize or determine. In the absence of action by the board of directors, the officers shall have such powers and duties as generally pertain to their respective offices.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the savings bank shall be elected annually at the first meeting of the board of directors held after each annual meeting of the stockholders. If the election of officers is not held at such meeting, such election shall
be held as soon thereafter as possible. Each officer shall hold office until a successor has been duly elected and qualified or until the officer's death, resignation, or removal in the manner hereinafter provided. Election or appointment of an officer, employee, or agent shall not of itself create contractual rights. The board of directors may authorize the savings bank to enter into an employment contract with any officer in accordance with regulations of the Office; but no such contract shall impair the right of the board of directors to remove at any time in accordance with Section 3 of this Article V.
SECTION 3. REMOVAL. Any officer may be removed by the board of directors whenever in its judgment the best interests of the savings bank will be served thereby, but such removal, other than for cause, shall be without prejudice to any contractual rights of the person so removed.
SECTION 4. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise may be filled by the board of directors for the unexpired portion of the term.
SECTION 5. REMUNERATION. The remuneration of the officers shall be fixed from time to time by the board of directors by employment contracts or otherwise.
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
SECTION 1. CONTRACTS. To the extent permitted by applicable regulations, and except as otherwise prescribed by these bylaws with respect to certificates for shares, the board of directors may authorize any officer, employee, or agent of the savings bank to enter into any contract or execute and deliver any instrument in the name of and on behalf of the savings bank. Such authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the savings bank and no evidence of indebtedness shall be issued in its name unless authorized by the board of directors. Such authority may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the savings bank shall be signed by one or more officers, employees, or agents of the savings bank in such manner as shall from time to time be determined by the board of directors.
SECTION 4. DEPOSITS. All funds of the savings bank not otherwise employed shall be deposited from time to time to the credit of the savings bank in any duly authorized depositories as the board of directors may select.
ARTICLE VII - CERTIFIED FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of capital stock of the savings bank shall be in such form as shall be determined by the board of directors and approved by the Office. Such certificates shall be signed by the chief executive officer or by any other officer of the savings bank authorized by the board of directors, attested by the
secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the savings bank itself or one of its employees. Each certificate for shares of capital stock shall be consecutively numbered of otherwise identified. The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the savings bank. All certificates surrendered to the savings bank for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares has been surrendered and cancelled, except that in the case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the savings bank as the board of directors prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock of the savings bank shall be made only on its stock transfer books. Authority for such transfer shall be given by the holder of record or by his legal representative, who shall furnish proper evidence of such authority, or by his attorney authorized by a duly executed power of attorney and filed with the savings bank. Such transfer shall be made only on surrender for cancellation of the certificate for such shares. The person in whose name shares of capital stock stand on the books of the savings bank shall be deemed by the savings bank to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the savings bank shall end on the 31st day of March of each year. The savings bank shall be subject to an annual audit as of the end of its fiscal year by independent public accountants appointed by and responsible to the board of directors. The appointment of such accountants shall be subject to annual ratification by the stockholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the savings bank's charter and the regulations and orders of the Office, the board of directors may, from time to time, declare, and the savings bank may pay, dividends on its outstanding classes of capital stock.
ARTICLE X - CORPORATE SEAL
The board of directors shall provide a savings bank seal which shall be two concentric circles between which shall be the name of the savings bank. The year of incorporation or an emblem may appear in the center.
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with applicable regulations at any time by a majority vote of the full board of directors or by a majority vote of the votes eligible to be cast by the stockholders of the savings bank at any legal meeting.
CARVER BANCORP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF
COMMON STOCK, $.01 PAR VALUE PER SHARE, OF
CARVER BANCORP, INC.
(the "Corporation"), a corporation formed under the laws of the State of Delaware. The shares represented by this certificate are transferrable only on the stock transfer books of the Corporation by the holder of record hereof, or by his duly authorized attorney or legal representative, upon the surrender of this certificate properly endorsed. This certificate is not valid until countersigned and registered by the Corporation's transfer agent and registrar. The shares represented by this certificate are not insured by the Federal Deposit Insurance Corporation or any other government agency.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be executed by the facsimile signature of its duly authorized officers and has caused a facsimile of its corporate seal to be hereunto affixed.
By: By:
------------------------------ -------------------------------
Corporate Secretary President and Chief
Executive Officer
|
CARVER BANCORP, INC.
The shares represented by this certificate are issued subject to all the provisions of the Certificate of Incorporation and Bylaws of Carver Bancorp, Inc. (the "Corporation") as from time to time amended (copies of which are on file at the principal office of the Corporation), to all of which the holder by acceptance hereof assents. The following description constitutes a summary of certain provisions of, and is qualified in its entirety by reference to, the Certificate of Incorporation.
The Certificate of Incorporation of the Corporation contains certain provisions, applicable upon the consummation of the reorganization whereby the Corporation will become the holding company for Carver Federal Savings Bank, a savings bank organized under the laws of the United States, that restrict persons from directly or indirectly acquiring or holding, or attempting to acquire or hold, the beneficial ownership of, in excess of 10% of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors ("Voting Stock"). The Certificate of Incorporation contains a provision pursuant to which the holders of shares in excess of 10% of the Voting Stock of the Corporation are limited to one hundredth (1/100) of one vote per share with respect to such shares in excess of the 10% limitation. In addition, the Corporation is authorized to refuse to recognize a transfer or attempted transfer of any shares of Voting Stock to any person who beneficially owns, or who the Corporation believes would become by virtue of such transfer the beneficial owner of, in excess of 10% of the Voting Stock. These restrictions are not applicable to underwriters in connection with a public offering of the common stock, certain reorganization transactions described in the Certificate of Incorporation or to acquisitions of Voting Stock by the Corporation, any majority-owned subsidiary of the Corporation, or any pension, profit-sharing, stock bonus or other compensation plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the Corporation is a member for the benefit of the employees of the Corporation and for any subsidiary, or any trust or custodial arrangement established in connection with any such plan.
The Certificate of Incorporation of the Corporation contains provisions providing that the affirmative vote of the holders of at least 80% of the Voting Stock of the Corporation may be required to approve certain business combinations and other transactions with persons who directly or indirectly acquire or hold the beneficial ownership of in excess of 10% of the Voting Stock of the Corporation.
The Corporation will furnish to any stockholder upon written request and without charge, a statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Such request may be made to the Corporation or to its transfer agent and registrar.
Exhibit 5.1
June 7, 1996
(212) 912-7815
Carver Bancorp, Inc.
c/o Carver Federal Savings Bank
75 West 125th Street
New York, New York 10027
Ladies and Gentlemen:
We have acted as special counsel to Carver Bancorp, Inc., a Delaware corporation (the "Company"), in connection with the proposed registration under the Securities Act of 1933, as amended, by the Company of an aggregate of 2,314,375 shares of Common Stock, par value $.01 per share (the "Shares"), of the Company, and the related preparation and filing by the Company with the Securities and Exchange Commission of a Registration Statement on Form S-4 (the "Registration Statement"). The Shares are to be issued by the Company and exchanged for, on a one-for-one basis, the outstanding shares of the common stock of Carver Federal Savings Bank, a federally chartered stock-form savings bank (the "Bank"), pursuant to an Agreement and Plan of Reorganization among the Company, the Bank and Carver Interim Federal Savings Bank, a federally chartered stock-form interim savings bank, dated as of May 21, 1996 (the "Plan"). In rendering the opinion set forth below, we do not express any opinion concerning law other than the federal law of the United States and the corporate law of the State of Delaware.
We have examined originals or copies, certified or otherwise identified, of such documents, corporate records and other instruments, and have examined such matters of law, as we have deemed necessary or advisable for purposes of rendering the opinion set forth below. As to matters of fact, we have examined and relied upon the representations of the Company contained in the Registration Statement and, where we have deemed appropriate, representations or certificates of officers of the Company or public officials. We have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures, the legal capacity of natural persons and the conformity to the originals of all documents submitted to us as copies. In making our examination of any documents, we have assumed that all parties, other than the Company, had the corporate power and authority to enter into and perform all obligations thereunder, and, as to such parties, we have also assumed the due
Carver Bancorp, Inc.
June 7, 1996 Page 2.
authorization by all requisite action, the due execution and delivery of such documents, and the validity and binding effect and enforceability thereof.
Based on the foregoing, we are of the opinion that the Shares, to be issued and sold by the Company, have been duly authorized and, when issued and sold as contemplated in the Registration Statement and the Plan, will be validly issued and outstanding, fully paid and non-assessable.
In rendering the opinion set forth above, we have not passed upon and do not purport to pass upon the application of securities or "blue-sky" laws of any jurisdiction (except federal securities laws).
This opinion is given solely for the benefit of the Company and investors who exchange shares of Carver Federal Savings Bank for shares of the Company pursuant to the Registration Statement, and may not be relied upon by any other person or entity, nor quoted in whole or in part, or otherwise referred to in any document without our express written consent.
We consent to the filing of this opinion as an Exhibit to the Registration Statement and to the use of our name in the Proxy Statement-Prospectus contained in the Registration Statement under the heading "Tax Consequences of the Reorganization."
Very truly yours,
THACHER PROFFITT & WOOD
By /s/ Robert C. Azarow -------------------- |
(212) 912-7633
June 7, 1996
Carver Federal Savings Bank
75 West 125th Street
New York, New York 10027-4512
Carver Bancorp, Inc.
c/o Carver Federal Savings Bank
75 West 125th Street
New York, New York 10027-4512
Dear Sirs:
You have requested our opinion regarding certain Federal income tax and New York State and New York City personal income and franchise tax consequences of the proposed merger of Carver Interim Federal Savings Bank ("Interim") with and into Carver Federal Savings Bank ("Carver") and the simultaneous exchange of common stock of Carver Bancorp, Inc. ("Bancorp") for common stock of Carver pursuant to the Agreement and Plan of Reorganization dated as of May 21, 1996 by and among Carver, Bancorp and Interim (the "Plan"). These and related transactions are described in the Plan. We are rendering this opinion pursuant to Article III of the Plan. All capitalized terms used but not defined in this letter shall have the meanings set forth in the Plan.
In connection with the opinions expressed below, we have examined and relied on originals, or copies certified or otherwise identified to our satisfaction, of the Plan and of such corporate records of Carver, Bancorp and Interim as we have deemed appropriate. We have also relied, without independent verification, upon the June 7, 1996 letter of Carver and Bancorp to Thacher Proffitt & Wood containing certain tax representations. We have assumed that Carver, Bancorp and Interim will act, and the Reorganization will be effected, in accordance with the Plan, and that the representations made by Carver and Bancorp in the foregoing letter are true. In addition, we have made such investigations of law as we have deemed appropriate to form a basis for the opinions expressed below.
Based on and subject to the foregoing, it is our opinion that for Federal income tax purposes, under current law:
Carver Federal Savings Bank
Carver Bancorp, Inc.
c/o Carver Federal Savings Bank
June 7, 1996 Page 2.
1. The Reorganization will constitute a reorganization under section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and Carver, Bancorp and Interim will each be "a party to the reorganization" within the meaning of section 368(b) of the Code.
2. No gain or loss will be recognized by the shareholders of Carver on the transfer of their shares of Carver common stock to Bancorp solely in exchange for shares of Bancorp common stock pursuant to the Reorganization.
3. No gain or loss will be recognized by Bancorp upon its receipt of shares of Carver common stock in exchange for shares of Bancorp common stock pursuant to the Reorganization.
4. The aggregate basis of the shares of Bancorp common stock to be received by Carver's shareholders pursuant to the Reorganization will be the same as the aggregate basis of the shares of Carver common stock exchanged therefor.
5. The holding period of the shares of Bancorp common stock to be received by Carver's shareholders pursuant to the Reorganization will include the holding period of the shares of Carver common stock exchanged therefor that are held as a capital assets on the Effective Date.
Based on and subject to the foregoing, it is also our opinion that, under current law.
1. For purposes of the New York State Franchise Tax on Banking Corporations and the New York City Banking Corporation tax, Carver, Bancorp and Interim will not recognize any gain or loss as a result of the Reorganization.
2. For purposes of the New York State and New York City personal income taxes and corporate franchise taxes, gain or loss will not be recognized as a result of the Reorganization by Carver's shareholders who do not elect to exercise dissenter's rights.
Although the matter is not free from doubt, it is likely that the Reorganization will not cause Carver to incur the New York State Real Estate Transfer Tax, the New York State Real Property Transfer Gains Tax or the New York City Real Property Transfer Tax as a result of the Reorganization.
We express no opinion as to (a) whether and to what extent payments to Carver's shareholders who exercise dissenters' rights, or payments by Carver that exceed its current and accumulated earnings and profits, will cause Carver to realize income, (b) the tax consequences to shareholders of the exercise of their dissenters' rights or (c) as to any other matter not expressly set forth herein.
On September 22, 1994, the Internal Revenue Service (the "Service") issued Notice 94-93 in which it expressed its concern with transactions that invert the positions of related corporations ("Inversions"), including transactions that involve the transfer of stock of a corporation by its
Carver Federal Savings Bank
Carver Bancorp, Inc.
c/o Carver Federal Savings Bank
June 7, 1996 Page 3.
shareholders to a wholly-owned subsidiary of that corporation in exchange for newly issued shares of the subsidiary. In Notice 94-93, the Service stated that it would issue guidance, including regulations requiring either the recognition of income or gain or a reduction in the basis of the stock of one or more of the corporations involved in an Inversion. Because the Reorganization would involve the transfer of Carver common stock by its shareholders to Bancorp, a wholly owned subsidiary of Carver, in exchange for newly issued shares of Bancorp, the Reorganization could constitute an Inversion within the meaning of Notice 94-93. However, the Service's concern in Notice 94-93 pertains to potential tax abuse that does not exist in such holding company formations as the Reorganization, in which the assets of Bancorp will consist solely of cash contributed to it by Carver in an amount that is minimal in relation to Carver's total assets and net worth and in which the shares of Bancorp originally owned by Carver will be cancelled. Accordingly, we do not believe that, applying the reasoning of the Service set forth in Notice 94-93, realization of income or gain by, or a reduction in the basis of the stock of, either Carver or Bancorp would be required.
This opinion is given solely for the benefit of the parties to the Reorganization and Carver's shareholders, and may not be relied upon by any other party or entity or otherwise referred to in any document without our express written consent. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the heading "Tax Consequences of the Reorganization" under "Proposal 3 -- Formation of Holding Company."
Very truly yours,
THACHER PROFFITT & WOOD
by: /s/ Albert J. Cardinali |
CARVER FEDERAL SAVINGS BANK
1995 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Carver Federal Savings Bank 1995 Stock Option Plan (the "Plan") is to advance the interests of the Bank through providing select key Employees and Directors of the Bank and its Affiliates with the opportunity to acquire Shares. By encouraging such stock ownership, the Bank seeks to attract, retain and motivate the best available personnel for positions of substantial responsibility and to provide additional incentive to Directors and key Employees of the Bank or any Affiliate to promote the success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary corporation" of the Bank, as such terms are defined in Section 424(e) and (f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in accordance with Paragraph 5(c).
(c) "Awards" shall mean, collectively, Options and SARs, and unless the context clearly indicates a different meaning.
(d) "Bank" shall mean Carver Federal Savings Bank.
(e) "Board" shall mean the Board of Directors of the Bank.
(f) "Code" shall mean the Internal Revenue Code of 1986. as amended.
(g) "Committee" shall mean the Stock Option Committee appointed by the Board in accordance with Paragraph 5(a) hereof.
(h) "Common Stock" shall mean the common stock, par value $.01 per share, of the Bank.
(i) "Continuous Service" shall mean the absence of any interruption or termination of service as an Employee or Director of the Bank or an Affiliate. Continuous Service shall not be considered interrupted in the case of sick leave, military leave or any other leave of absence approved by the Bank or in the case of transfers between payroll locations of the Bank or between the Bank, an Affiliate or a successor.
(j) "Director" shall mean any member of the Board, and any member of the board of directors of any Affiliate that the Board has by resolution designated as being eligible for participation in this Plan.
(k) "Disability" shall mean a physical or mental condition, which in the sole and absolute discretion of the Committee, is reasonably expected to be of indefinite duration and to substantially prevent a Participant from fulfilling his or her duties or responsibilitieS to the Bank or an Affiliate.
(l) "Disinterested Person" shall mean any member of the Board who, at the time discretion under the Plan is exercised, is a 'disinterested person" within the meaning of Rule 16b-3.
(m) "Effective Date" shall mean the date specified in Paragraph 14 hereof.
(n) "Employee" shall mean any person employed by the Bank or an Affiliate.
(o) "Exercise Price" shall mean the price per Optioned Share at which an Option or SAR may be exercised.
(p) "ISO" means an option to purchase Common Stock which meets the requirements set forth in the Plan, and which is intended to be and is identified as an "incentive stock option" within the meaning of Section 422 of the Code.
(q) "Market Value" shall mean the fair market value of the Common Stock, as determined under Paragraph 7(b) hereof.
(r) "Non-ISO" means an option to purchase Common Stock which meets the requirements set forth in the Plan but which is not intended to be and is not identified as an ISO.
(s) "Option" means an ISO and/or a Non-ISO.
(t) "Optioned Shares" shall mean Shares subject to an Award granted pursuant to this Plan.
(u) "Participant" shall mean any person who receives an Award pursuant to the Plan.
(v) "Plan" shall mean this Carver Federal Savings Bank 1995 Stock Option Plan.
(w) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended.
(x) "Share" shall mean one share of Common Stock.
(y) "SAR" (or "Stock Appreciation Right") means a right to receive the appreciation in value, or a portion of the appreciation in value, of a specified number of shares of Common Stock.
(z) "Year of Service" shall mean a full twelve-month period, measured from the date of an Award and each annual anniversary of that-date, during which a Participant has continuously been an Employee or Director of the Bank or an Affiliate.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect for a term of ten years from the Effective Date, unless sooner terminated pursuant to Paragraph 16 hereof. No Award shall be granted under the Plan after ten years from the Effective Date.
(b) Term of Awards. The term of each Award granted under the Plan shall be established by the Committee, but shall not exceed 10 years; provided, however, that in the case of an Employee who owns Shares representing more than 10% of the outstanding Common Stock at the time an ISO is granted, the term of such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. Except as otherwise required by the provisions of Paragraph 11 hereof, the aggregate number of Shares deliverable pursuant to Awards shall not exceed 138,862 Shares, which equals 6% of the Shares issued in the Bank's conversion from mutual-to-stock form. Such Shares may either be authorized but unissued Shares or Shares held in treasury. If any Awards should expire, become unexercisable, or be forfeited for any reason without having been exercised, the Optioned Shares shall, unless the Plan shall have been terminated, be available for the grant of additional Awards under the Plan.
(b) Special Rule for SARs. The number of Shares with respect to which an SAR is granted, but not the number of Shares which the Bank delivers or could deliver to an Employee or individual upon exercise of an SAR, shall be charged against the aggregate number of Shares remaining available under the Plan; provided, however, that in the case of an SAR granted in conjunction with an Option, under circumstances in which the exercise of the SAR results in termination of the Option and vice versa, only the number of Shares subject to the Option shall be charged against the aggregate number of Shares remaining available under the Plan. The Shares involved in an Option as to which option rights have terminated by reason of the exercise of a related SAR, as provided in Paragraph 10 hereof, shall not be available for the grant of further Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be administered by the Committee, which shall consist of not less than three (3) members of the Board who are Disinterested Persons. Members of the Committee shall serve at the pleasure of the Board. In the absence at any time of a duly appointed Committee, the Plan shall be administered by those members of the Board who are Disinterested Persons.
(b) Powers of the Committee. Except as limited by the express provisions of the Plan or by resolutions adopted by the Board, the Committee shall have sole and complete authority and discretion (i) to select Participants and grant Awards, (ii) to determine the form
and content of Awards to be issued in the form of Agreements under the Plan,
(iii) to interpret the Plan, (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan, and (v) to make other determinations
necessary or advisable for the administration of the Plan. The Committee shall
have and may exercise such other power and authority as may be delegated to it
by the Board from time to time. A majority of the entire Committee shall
constitute a quorum and the action of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by a majority
of the Committee without a meeting, shall be deemed the action of the
Committee.
(c) Agreement. Each Award shall be evidenced by a written agreement containing such provisions as may be approved by the Committee. Each such Agreement shall constitute a binding contract between the Bank and the Participant, and every Participant, upon acceptance of such Agreement, shall be bound by the terms and restrictions of the Plan and of such Agreement. The terms of each such Agreement shall be in accordance with the Plan, but each Agreement may include such additional provisions and restrictions determined by the Committee, in its discretion, provided that such additional provisions and restrictions are not inconsistent with the terms of the Plan. In particular, the Committee shall set forth in each Agreement (i) the Exercise Price of an Option or SAR, (ii) the number of Shares subject to, and the expiration date of, the Award, (iii) the manner, time and rate (cumulative or otherwise) of exercise or vesting of such Award, and (iv) the restrictions, if any, to be placed upon such Award, or upon Shares which may be issued upon exercise of such Award.
The Chairman of the Committee and such other Directors and officers as shall be designated by the Committee are hereby authorized to execute Agreements on behalf of the Bank and to cause them to be delivered to the recipients of Awards.
(d) Effect of the Committee's Decisions. All decisions, determinations and interpretations of the Committee shall be final and conclusive on all persons affected thereby.
(e) Indemnification. In addition to such other rights of indemnification as they may have, the members of the Committee shall be indemnified by the Bank in connection with any claim, action, suit or proceeding relating to any action taken or failure to act under or in connection with the Plan or any Award, granted hereunder to the full extent provided for under the Bank's governing instruments with respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. Only Employees shall be eligible to receive Awards. In selecting those Employees to whom Awards will be granted and the number of shares covered by such Awards, the Committee shall consider the position, duties and responsibilities of the eligible Employees, the value of their services-to the Bank and its Affiliates, and any other factors the Committee may deem relevant. Notwithstanding the foregoing, the Committee shall automatically make the Awards specified in Sections 6(b) and 9 hereof, and (ii) no Employee.shall receive Options to purchase more than 25 % of the Shares reserved under
Paragraph 4(a), and no non-Employee Director, other than Directors Richard Greene and M. Moran Weston, shall receive Options to purchase more than 5% of the Shares reserved under Paragraph 4(a), with all non-Employee Directors as a group receiving Options to purchase no more than 30% of the Shares reserved under Paragraph 4(a).
(b) Automatic Grants to Employees. On the Effective Date, each of the following Employees shall receive an Option (in the form of an ISO, to the extent permissible under the Code) to purchase the number of Shares listed below, at an Exercise Price per Share equal to the Market Value of a Share on the Effective Date; provided that such grant shall not be made to an Employee whose Continuous Service terminates on or before the Effective Date:
Number of Shares
Participant Reserved under Paragraph 4(a)
----------- -----------------------------
T. Clark 34,715
B. Mukherjee 13,886
M. Lewis 10,500
R. Bruce 6,943
S. Harmon 5,200
R. St. Rose 5,000
G. Brea 3,800
H. Dabney 3,800
H. Gay 3,500
A. Kabia 3,500
E. Jackson 2,777
O. Harris 2,777
------------- ---------
Total 96,398
|
With respect to each of the above-named Participants, the Option granted to the Participant hereunder (i) shall vest in accordance with the general rule set forth in Paragraph 8(a) of the Plan, (ii) shall have a term of ten years from the Effective Date, and (iii) shall be subject to the general rule set forth in Paragraph 8(c) with respect to the effect of a Participant's termination of Continuous Service on the Participant's right to exercise his Options.
(c) Special Rules for ISOs. The aggregate Market Value, as of the date the Option is granted, of the Shares with respect to which ISOs are exercisable for the first time by an Employee during any calendar year (under all incentive stock option plans, as defined in Section 422 of the Code, of the Bank or any present or future Affiliate of the Bank) shall not exceed $100,000. Notwithstanding the foregoing, the Committee may grant Options in excess of the foregoing limitations, in which case such Options granted in excess of such limitation shall be Options which are Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any particular Option shall not be less than 100!` of the Market Value of the Optioned Shares on the date of grant. In the case of an Employee who owns Shares representing more than 10% of the Bank's outstanding Shares of Common Stock at the time an ISO is granted, the Exercise Price shall not be less than 110% of the Market Value of the Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is listed on a national securities exchange (including the NASDAQ National Market System) on the date in question, then the Market Value per Share shall be the average of the highest and lowest selling price on such exchange on such date, or if there were no sales on such date, then the Exercise Price shall be the mean between the bid and asked price on such date. If the Common Stock is traded otherwise than on a national securities.exchange on the date in question, then the Market Value per Share shall be the mean between the bid and asked price on such date, or, if there is no bid and asked price on such date, then on the next prior business day on which there was a bid and asked price. If no such bid and asked price is available, then the Market Value per Share shall be its fair market value as determined by the Committee, in its sole and absolute discretion. Notwithstanding the foregoing, in the event that either (i) the Committee exercises its discretion to impose transfer (or other) restrictions on the Shares subject to an Option, or (ii) the Plan requires specified transfer restrictions, the Committee shall make an appropriate adjustment in determining the Market Value of the Shares subject to such an Option (in order to take into account that their fair market value may- be less than the fair market value of unrestricted Shares).
8. EXERCISE OF OPTIONS.
(a) Generally. Each Option shall become exercisable with respect to twenty percent (20%) of the Optioned Shares upon the Participant's completion of each of five Years of Service, provided that an Option shall become I fully (100%) exercisable immediately upon termination of a Participant's Continuous Service due to the Participant's Disability or death. An Option may not be exercised for a fractional Share.
(b) Procedure for Exercise. A Participant may exercise Options, subject to provisions relative to its termination and limitations on its exercise, only by (1) written notice of intent to exercise the Option with respect to a specified number of Shares, and (2) payment to the Bank (contemporaneously with delivery of such notice) in cash, in Common Stock, or a combination of cash and Common Stock, of the amount of the Exercise Price for the number of Shares with respect to which the Option is then being exercised. Each such notice (and payment where required) shall be delivered, or mailed by prepaid registered or certified mail, addressed to the Treasurer of the Bank at the Bank's executive offices. Common Stock utilized in full or partial payment of the Exercise Price for Options shall be valued at its Market Value at the date of exercise, and may consist of Shares subject to the Option being exercised.
(c) Period of Exercisability. Except to the extent otherwise provided in the terms of an Agreement, an Option may be exercised by a Participant only while he is an Employee and has maintained Continuous Service from the date of the grant of the Option, or within three months after termination of such Continuous Service (but not later than the date on which the Option would otherwise expire), except if the Employee's Continuous Service terminates by reason of --
(1) "Just Cause" which for purposes hereof shall have the meaning set forth in any unexpired employment or severance agreement between the Participant and the Bank (and, in the absence of any such agreement, 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), then the Participant's rights to exercise such Option shall expire on the date of notice of termination;
(2) death, then to the extent that the Participant would have been entitled to exercise the Option immediately prior to his death, such Option of the deceased Participant may be exercised within two years from the date of his death (but not later than the date on which the Option would otherwise expire) by the personal representatives of his estate or person or persons to whom his rights under such Option shall have passed by will or by laws of descent and distribution;
(3) Disability, then to the extent that the Participant would have been entitled to exercise the Option immediately prior to his or her Disability, such Option may be exercised within one year from the date of termination of employment due to Disability, but not later than the date on which the Option would otherwise expire.
(d) Effect of the Committee's Decisions. The Committee's determination whether a Participant's Continuous Service has ceased, and the effective date thereof, shall be final and conclusive on all persons affected thereby.
9. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS
(a) Automatic Grants. Notwithstanding any other provisions of this Plan, each Director who is not an Employee but is a Director on the Effective Date shall receive, on said date, Non-ISOs to purchase 6,943 Shares, except that Directors Richard Greene and M. Moran Weston shall receive non-ISOs to purchase 10,415 Shares. Such Non-ISOs-shall have an Exercise Price per Share equal to the Market Value of a Share on the date of grant.
Each Director who joins the Board after the Effective Date and who is not then an Employee shall receive, on the date of joining the Board, Non-ISOs to purchase 1,000 Shares, at an Exercise Price per Share equal to its Market Value on the date of grant.
(b) Terms of Exercise. Options received under the provisions of this Paragraph will become exercisable in accordance with the general in Paragraph 8(a) hereof, and may be exercised from time to time by (a) written notice of intent to exercise the Option with respect to all or a specified number of the Optioned Shares, and (b) payment to the Bank (contemporaneously with the delivery of such notice), in cash, in Common Stock, or a combination of cash and Common Stock, of the amount of the Exercise Price for the number of the Optioned Shares with respect to which the Option is then being exercised. Each such notice and payment shall be delivered, or mailed by prepaid registered or certified mail, addressed to the Treasurer of the Bank at the Bank's executive offices. A Director who exercises Options pursuant to this Paragraph may satisfy all applicable federal, state and local income and employment tax withholding obligations, in whole or in part, by irrevocably electing to have the Bank withhold shares of Common Stock, or to deliver to the Bank shares of Common Stock that he already owns, having a value equal to the amount required to be withheld; provided that to
the extent not inconsistent herewith, such election otherwise complies with those requirements of Paragraphs 8 and 20 hereof.
Options granted under this Paragraph shall have a term of ten years; provided that Options granted under this Paragraph shall expire one year after the date on which a Director terminates Continuous Service on the Board, but in no event later than the date on which such Options would otherwise expire. In the event of such Director's death during the term of his directorship, Options granted under this Paragraph may be exercised within two years from the date of his death by the personal representatives of his estate or person or persons to whom his rights under such Option shall have passed by will or by laws of descent and distribution, but in no event later than the date on which such Options would otherwise expire. In the event of such Director's Disability during his or her directorship, then to the extent that the director would have been entitled to exercise the Option immediately prior to his or her Disability, such Option may be exercised within one year of the termination of directorship due to Disability, but not later than the date that the Option would otherwise expire. Unless otherwise inapplicable or inconsistent with the provisions of this Paragraph, the Options to be granted to Directors hereunder shall be subject to all other provisions of this Plan.
(c) Effect of the Committee's Decisions. The Committee's determination whether a Participant's Continuous Service has ceased, and the effective date thereof, shall be final and conclusive on all persons affected thereby.
10. SARS (STOCK APPRECIATION RIGHTS)
(a) Granting of SARs. In its sole discretion, the Committee may from time to time grant SARs to Employees either in conjunction with, or independently of, any Options granted under the Plan. An SAR granted in conjunction with an Option may be an alternative right wherein the exercise of the Option terminates the SAR to the extent of the number of shares purchased upon exercise of the Option and, correspondingly, the exercise of the SAR terminates the Option to the extent of the number of Shares with respect to which the SAR is exercised. Alternatively, an SAR granted in conjunction with an Option may be an additional right wherein both the SAR and the Option may be exercised. In no event, however, shall the total number of shares issued or reserved for issuance pursuant to Options and SARs exceed the total number of shares reserved for issuance under the Option Plan. An SAR may not be granted in conjunction with an ISO under circumstances in which the exercise of the SAR affects the right to exercise the ISO or vice versa, unless the SAR, by its terms, meets all of the following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference between the Exercise Price of the ISO and the Market Value of the Shares subject to the ISO at the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is transferable, and under the same conditions;
(4) The SAR may be exercised only when the ISO may be exercised; and
(5) The SAR may be exercised only when the Market Value of the Shares subject to the ISO exceeds the Exercise Price of the ISO.
(b) Exercise Price. The Exercise Price as to any particular SAR shall not be less than the Market Value of the Optioned Shares on the date of grant.
(c) Timing of Exercise. Any election by a Participant to exercise SARs shall be made during the period beginning on the 3rd business day following the release for publication of quarterly or annual financial information and ending on the 12th business day following such date. This condition shall be deemed to be satisfied when the specified financial data is first made publicly available. In no event, however, may an SAR be exercised within the six-month period following the date of its grant.
The provisions of Paragraph 8 regarding the exercisability of Options are incorporated by reference herein, and shall determine the period of exercisability of SARs.
(d) Exercise of SARs. An SAR granted hereunder shall be exercisable at such times and under such conditions as shall be permissible under the terms of the Plan and of the Agreement granted to a Participant, provided that an SAR may not be exercised for a fractional Share. Upon exercise of an SAR, the Participant shall be entitled to receive, without payment to the Bank except for applicable withholding taxes, an amount equal to the excess of (or, in the discretion of the Committee if provided in the Agreement, a portion of) the excess of the then aggregate Market Value of the number of Optioned Shares with respect to which the Participant exercises the SAR, over the aggregate Exercise Price of such number of Optioned Shares. This amount shall be payable by the Bank, in the discretion of the Committee, in cash or in Shares valued at the then Market Value thereof, or any combination thereof.
(e) Procedure for Exercising SARs. To the extent not inconsistent herewith, the provisions of Paragraph 8(b) as to the procedure for exercising Options are incorporated by reference, and shall determine the procedure for exercising SARs.
11. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of shares reserved for issuance under the Plan, and the number and kind of shares subject to outstanding Awards, and the Exercise Price thereof, shall be proportionately adjusted for any increase, decrease, change or exchange of Shares for a different number or kind of shares or other securities of the Bank which results from a merger, consolidation, recapitalization, reorganization, reclassification, stock dividend, split-up, combination of shares, or similar event in which the number or kind of shares is changed without the receipt or payment of consideration by the Bank.
(b) Transactions in which the Bank is Not the Surviving Entity. In the event of (i) the liquidation or dissolution of the Bank, (ii) a merger or consolidation in which the Bank is not the surviving entity, or (iii) the sale or disposition of all or substantially all of the Bank's
assets (any of the foregoing to be referred to herein as a "Transaction"), all outstanding Awards, together with the Exercise Prices thereof, shall be equitably adjusted for any change or exchange of Shares for a different number or kind of shares or other securities which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant to subparagraphs (a) or (b)(l) hereof shall be made in such a manner as not to constitute a modification, within the meaning of Section 424(h) of the Code, of outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or Different Shares or Securities. If, by reason of any adjustment made pursuant to this Paragraph, a Participant becomes entitled to new, additional, or different shares of stock or securities, such new, additional, or different shares of stock or securities shall thereupon be subject to all of the conditions and restrictions which were applicable to the Shares pursuant to the Award before the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph, the issuance by the Bank or an Affiliate of shares of stock of any class, or of securities convertible into Shares or stock of another class, for cash or property or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, shall not affect, and no adjustment shall be made with respect to, the number, class, or Exercise Price of Shares then subject to Awards or reserved for issuance under the Plan.
12. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution, or pursuant to the terms of a "qualified domestic relations order. (within the meaning of Section 414(p) of the Code and the regulations and rulings thereunder).
13. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the later of the date on which the Committee makes the determination of granting such Award, and the Effective Date. Notice of the determination shall be given to each Participant to whom an Award is so granted within a reasonable time after the date of such grant.
14. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval by a favorable vote of stockholders owning at least a majority of the total votes eligible to be cast at a duly called meeting of the Bank's stockholders held in accordance with applicable laws, provided that the Plan shall not be submitted for such approval within the six- month period after the Bank completes its mutual-to-stock conversion and provided further that the Plan's effectiveness shall be contingent on its approval by the Office of Thrift Supervision ("OTS"). No Awards may be made prior to approval of the Plan by the stockholders of the Bank, and any Awards made before the Plan receives OTS approval shall be subject thereto.
15. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize the Committee to direct execution of an instrument providing for the modification of any outstanding Award, provided no such modification shall confer on the holder of said Award any right or benefit which could not be conferred on him by the grant of a new Award at such time' or impair the Award without the consent of the holder of the Award.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with respect to any Shares at the time not subject to Awards, suspend or terminate the Plan; provided that the provisions of Paragraph 9 may not be amended more than once every six months (other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder); and provided further that to the extent permitted under federal banking law and regulations (as determined by the Committee after soliciting the advice of counsel), the Board may amend the Plan without stockholder approval to provide that any or all Awards (including previously-granted Awards and Awards to non-employee Directors under Paragraph 9 hereof shall become fully vested and immediately exercisable in the event of either a change of control of the Bank or the termination of the Participant's Continuous Service as a result of his or her retirement to the extent permitted by federal banking law and regulation.
No amendment, suspension or termination of the Plan shall, without the consent of any affected holders of an Award, alter or impair any rights or obligations under any Award theretofore granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be issued with respect to any Award unless the issuance and delivery of such Shares shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the rules- and regulations promulgated thereunder, any applicable state securities law, and the requirements of any stock exchange upon which the Shares may then be listed. The Plan is intended to comply with Rule 16b-3, and any provision of the Plan which the Committee determines in its sole and absolute discretion to be inconsistent with said Rule shall, to the extent of such inconsistency, be inoperative and null and void, and shall not affect the validity of the remaining provisions of the Plan.
(b) Special Circumstances. The inability of the Bank to obtain approval from any regulatory body or authority deemed by the Bank's counsel to be necessary to the lawful issuance and sale of any Shares hereunder shall relieve the Bank of any liability in respect of the non-issuance or sale of such Shares. As a condition to the exercise of an Option or SAR, the Bank may require the person exercising the Option or SAR to make such representations and warranties as may be necessary to assure the availability of an exemption from the registration requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the discretionary authority to impose in Agreements such restrictions on Shares as it may deem appropriate or desirable; including but not limited to the authority to impose a right of first refusal or to establish repurchase rights or both of these restrictions.
18. RESERVATION OF SHARES.
The Bank, during the term of the Plan, will reserve and keep available a number of Shares sufficient to satisfy the requirements of the Plan.
19. WITHHOLDING TAX.
The Bank's obligation to deliver Shares upon exercise of Options and/or SARs (or such earlier time that the Participant makes an election under Section 83(b) of the Code) shall be subject to the Participant's satisfaction of all applicable federal, state and local income and employment tax withholding obligations.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to participate or participation in the Plan create or be deemed to create any legal or equitable right of the Employee, Director, or any other party to continue service with the Bank or any Affiliate. Except to the extent provided in Paragraphs 6(b) and 9(a), no Employee or Director shall have a right to be granted an Award or, having received an Award, the right to again be granted an Award. However, an Employee or Director who has been granted an Award may, if otherwise eligible, be granted an additional Award or Awards.
21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with the laws of the State of New York, except to the extent that federal law shall be deemed to apply.
CARVER FEDERAL SAVINGS BANK
RETIREMENT INCOME PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1989
October 8, 1991
TABLE OF CONTENTS
Page
FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION II PARTICIPATION
2.1 Date of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Reemployment After A Termination of Employment Accompanied By A Break-in-Service . . . . . . . . . . 12
2.3 Repayment of Prior Distribution Upon Reemployment . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION III NORMAL RETIREMENT INCOME
3.1 Accrued Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Eligibility and Commencement - Normal Retirement Income . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Amount of Normal Retirement Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION IV LATE AND EARLY RETIREMENT INCOME
4.1 Eligibility and Commencement - Late Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Amount of Late Retirement Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Eligibility and Commencement - Early Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4 Amount of Early Retirement Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION V TERMINATION OF EMPLOYMENT AND VESTED RETIREMENT INCOME
5.1 Eligibility and Commencement - Vested Retirement Date . . . . . . . . . . . . . . . . . . . . . . . 19
5.2 Amount of Vested Retirement Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION VI MAXIMUM RETIREMENT INCOME
6.1 Maximum Retirement Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Top-Heavy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION VII NORMAL FORM OF PAYMENT
7.1 Normal Form of Payment - Joint and Survivor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Normal Form of Payment - Life-No Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Optional Forms of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.4 Notice to Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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7.5 Election of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.6 Qualified Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.7 Transition Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.8 Payment of Retirement Income to Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.9 Limits of Payment Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.10 Minimum Amounts to be Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.11 TEFRA Transition Rule Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION VIII OPTIONAL FORMS OF PAYMENT
8.1 Contingent Pensioner Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2 Years Certain and Life Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.3 Social Security Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION IX PRERETIREMENT SPOUSE BENEFIT
9.1 Eligibility for Preretirement Spouse Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2 Amount of Preretirement Spouse Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 Payments of Preretirement Spouse Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.4 Written Notice of Preretirement Spouse Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5 Election to Waive Preretirement Spouse Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION X DEATH BENEFITS
10.1 Death Before Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.2 Death on or After Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION XI FUNDING OF BENEFITS
11.1 Contributions to the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.2 Fund for Exclusive Benefit of Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3 Disposition of Credits and Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION XII FIDUCIARY RESPONSIBILITY PROVISIONS
12.1 Fiduciary Responsibility Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION XIII PLAN ADMINISTRATOR
13.1 Appointment and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.2 Duties and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.3 Expenses of the Plan and Assistance to Plan Administrator . . . . . . . . . . . . . . . . . . . . . 49
13.4 Participants and Other Payees - Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.5 Resignation and Removal of Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.6 Appointment of Successor Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.7 Plan Administration - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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SECTION XIV AMENDMENT AND TERMINATION OF PLAN
14.1 Amendment - General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.2 Amendment - Merger or Consolidation of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.3 Partial Termination of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.4 Termination of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION XV RESTRICTION OF BENEFITS UPON EARLY TERMINATION OF THE PLAN
15.1 Restriction of Benefits Upon Early Termination of the Plan . . . . . . . . . . . . . . . . . . . . . 56
TABLE A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60, 61
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CARVER FEDERAL SAVINGS BANK
RETIREMENT INCOME PLAN
FOREWORD
Effective November 1, 1953, the Employer (or its predecessor) established the Prior Plan for the benefit of its eligible employees. Effective January 1, 1976, the Prior Plan was amended and restated in its entirety and is now known as Carver Federal Savings Bank Retirement Income Plan ("Plan").
The Plan has been amended from time to time to comply with legislative requirements and to reflect changing Plan provisions.
Effective January 1, 1989, the Plan is further amended and restated in its entirety as set forth herein. This amended and restated Plan contains the changes required by the Tax Reform Act of 1986 and subsequent legislation and regulations, and also incorporates certain amendments to the Plan as in effect on December 31, 1988.
Each Participant under the Plan who is in the active employ of the Employer on December 31, 1988 shall continue to be a Participant under this amended and restated Plan on and after January 1, 1989 in accordance with its terms.
Except as may be specifically provided in any subsequent amendments adopted by the Employer, the provisions of this amended and restated Plan apply to any Employee who is in the active employ of the Employer on or after January 1, 1989.
Except as may be specifically provided herein, each former employee who is receiving retirement income payments under the Plan as in effect prior to January 1, 1989 will continue to receive such payments on and after January 1, 1989 in accordance with the terms of the Plan as constituted on the date the former employee terminated employment.
Except as may be specifically provided herein, each former employee who terminated employment prior to January 1, 1989 with a vested retirement income benefit under the Plan and who had not commenced receiving retirement income payments on such date, will be eligible to receive retirement income on his retirement date, as determined in accordance with the terms of the Plan as constituted on the date the former employee terminated employment.
The Employer has amended and restated the Plan with the intention that
(A) the Plan shall at all times be qualified under Section 401(a) of the Code,
(B) the corresponding trust agreement shall be tax-exempt under Section 501(a)
of the Code, and (C) Employer contributions under the Plan shall be tax
deductible under Section 404 of the Code. The terms of the Plan shall be
construed in accordance with such intention.
SECTION I
DEFINITIONS
1.1 DEFINITIONS
(A) Accrued Benefit - A Participant's benefit attributable to
Employer contributions determined as of a date specified by
the Employer by applying the benefit formula set forth in
Section 3.1 and expressed in the form of an annual benefit
commencing at Normal Retirement Date.
(B) Adjustment Factor - The appropriate adjustment factor(s), as shown in Table A attached to this Plan, which may be applicable to a Participant's retirement income in accordance with the further terms of the Plan. In no event will a Participant's Accrued Benefit as of the date of change of factors contained in said table be reduced by such change.
(C) Affiliated Employer - A member of an affiliated service group (as defined under Section 414(m) of the Code), a controlled group of corporations (as defined under Section 414(b) of the Code), a group of trades or businesses under common control (as defined under Section 414(c) of the Code) of which the Employer is a member, any leasing organization (as defined under Section 414(n) of the Code) providing the services of Leased Employees to the Employer, or any other group provided for under any and all Income Tax Regulations promulgated by the Secretary of the Treasury under Section 414(o) of the Code.
(D) Affiliated Service - Employment with an employer during the period that such employer is an Affiliated Employer.
(E) Beneficiary - Any person who is receiving or eligible to receive a benefit under the Plan upon the death of a Participant. In the case of a married Participant, the Spouse (as defined under Section 1.1(KK) or 9.1(A)) shall be the designated Beneficiary unless the Participant elects otherwise pursuant to Section 7.5.
(F) Code - The Internal Revenue Code of 1986, as it may be amended from time to time, and any regulations, rulings or notices issued pursuant thereto.
(G) Contingent Pensioner - A Beneficiary other than the
Participant's Spouse, who is receiving or eligible to receive
a benefit under the Plan in accordance with the terms of
Section 8.1.
(H) Credited Service - That portion of a Participant's Service which is included for purposes of determining the amount of his Accrued Benefit. With respect to any employment period, a Participant's Credited Service shall (1) include all years and full months of employment with the Employer corresponding with Service allowed but without regard to the number of Hours of Service and (2) exclude (a) a fractional month of Service, (b) periods of employment with an Affiliated
Employer, and (c) periods of employment prior to January 1,
1988 for an Employee who (i) was in the employment of the
Employer on January 1, 1988, (ii) was not enrolled as a
Participant under the provisions of the Plan as in effect on
December 31, 1987 solely because he had attained age sixty
(60) at the time of his employment with the Employer, and
(iii) became a Participant in the Plan on January 1, 1988.
A Participant's Credited Service shall not include Credited Service which is not restored under Section 2.3.
(I) Early Retirement Date - The date described in Section 4.3.
(J) Earnings - Total annual compensation, including all compensation shown on any and all federal source reporting forms completed by the Employer for the Plan Year for federal income tax purposes (including W-2 Forms).
Effective January 1, 1989, Earnings for a Plan Year consisting of twelve (12) months (including Plan Years prior to January 1, 1989) shall not exceed $200,000 annually (or such higher dollar limit as in effect for such year in accordance with the adjustment factor prescribed under Section 415(d) of the Code). If the Plan Year in which an Employee's Earnings are being determined is less than twelve (12) calendar months, the amount of Earnings taken into account for such Plan Year shall be $200,000 (or such higher dollar limit as in effect for such Plan Year) multiplied by a fraction, the numerator of which is the number of months taken into account for such Plan Year and the denominator of which is twelve (12). In determining the Earnings of an Employee for purposes of the $200,000 limit, earnings received from any Affiliated Employer shall be recognized as Earnings, and the rules of Section 414(q)(6) of the Code shall apply, except that in applying such rules, the term "family" shall include only the Spouse of the Employee and any lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year. If, as a result of the application of such rules the adjusted $200,000 limit is exceeded, then the limit shall be prorated among the affected Employees in proportion to each such Employee's Earnings as determined under this Section l.l(J) prior to the application of this limit.
(K) Effective Date - November 1, 1953.
(L) Employee - Any individual in the employ of the Employer. Leased Employees shall be included as Employees only for purposes of determining the number of or identity of Highly Compensated Employees or for purposes of the pension requirements of Section 414(n)(3) of the Code. Notwithstanding the foregoing, if such Leased Employees constitute twenty percent (20%) or less of the Employer's nonhighly compensated work force within the meaning of Section 414(n)(5)(C)(ii) of the Code, the term Employee shall exclude those Leased Employees covered by a plan described in Section 414(n)(5)(B) of the Code.
(M) Employer - Carver Federal Savings Bank.
(N) Entry Date - January 1 and July 1 of each Plan Year.
(O) ERISA - The Employee Retirement Income Security Act of 1974, as it may be amended from time to time, and any regulations, rulings or notices issued pursuant thereto.
(P) Final Earnings - The average of a Participant's Earnings received in any three (3) consecutive calendar years during the last ten (10) consecutive full calendar years before the earliest to occur of the Participant's Termination of Employment, retirement or death, which produces the highest such average. If a Participant has less than three (3) years of Service, Earnings are averaged over the Participant's total period of Service.
(Q) Fund - The fund or funds established by separate written agreement between the Employer and an insurance company and/or trustee or trustees for the purpose of accumulating contributions made in accordance with Section XI, Funding of Benefits, and paying the benefits described in certain other sections of this Plan.
(R) Highly Compensated Employee - An individual described in
Section 414(q) of the Code.
(S) Hour of Service -
(1) Each hour for which the Employee is either directly or indirectly paid by the Employer, or entitled to payment,
(a) for duties performed for the Employer during the Plan Year (the "computation period"); and
(b) for reasons other than the performance of duties (irrespective of whether the employment relationship has terminated) including paid sick leave, paid vacation time, etc. No more than 501 Hours of Service will be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Hours under this paragraph will be calculated and credited pursuant to Department of Labor Regulations Section 2530.200b-2 which is incorporated herein by reference; and
(2) Any additional hours as normally would have been credited to the Employee had he worked on a non overtime basis during the following periods:
(a) temporary layoff,
(b) leave of absence of up to two (2) years, as authorized by the Employer pursuant to the Employer's established leave policy, and
(c) military leave while the Employee's reemployment rights are protected by law, provided that any such periods qualify as Service in accordance with the terms of the Service definition; and
(3) Each other hour for which back pay is either awarded
or agreed to by the Employer, irrespective of
mitigation of damages. The same Hours of Service will
not be credited both under paragraph (1) or paragraph
(2), as the case may be, and under this paragraph
(3). These Hours of Service will be credited to the
Employee for the computation period or periods to
which the award or agreement pertains rather than the
computation period in which the award, agreement or
payment is made.
Hours of Service will be credited to any individual
considered an Employee for purposes of the Plan under
Section 414(n) of the Code.
Hours of Service will be credited to an individual for Affiliated Service.
In no event will Hours of Service be allowed and
computed in a manner less liberal than the manner
described in the Department of Labor Regulations
Section 2530.200b-2.
(T) Joint and Survivor - The form of payment described in Section 7.1.
(U) Late Retirement Date - The date described in Section 4.1.
(V) Leased Employee - Any individual (other than an Employee of the Employer or an Employee of an Affiliated Employer) who, pursuant to an agreement between the Employer or any Affiliated Employer and any other person ("leasing organization"), has performed services for the Employer or any Affiliated Employer on a substantially full-time basis for a period of at least one (1) year, and such services are of a type historically performed by employees in the business field of the Employer or any Affiliated Employer. A determination as to whether a Leased Employee shall be treated as an Employee of the Employer or an Affiliated Employer shall be made in accordance with Section 414(n) of the Code.
(W) Normal Retirement Date -
(1) For purposes of determining a Participant's eligibility for retirement income and vesting status, the day on which the Participant attains age sixty-five (65); provided, however, that with respect to an Employee whose Participation in the Plan commences on or after January 1, 1992, Normal Retirement Date is the later of the day on which the Participant
attains age sixty-five (65) and the fifth (5th) anniversary of his participation in the Plan.
(2) For all other purposes, a Participant's Normal Retirement Date is the first day of the month coincident with or next following the applicable day set forth in paragraph (1).
(X) Participant - Any Employee or former Employee covered under this Plan who has neither received nor has commenced receiving his retirement income under this Plan.
(Y) PBGC - Pension Benefit Guaranty Corporation.
(Z) Plan - Carver Federal Savings Bank Retirement Income Plan, as amended from time to time.
(AA) Plan Administrator - The individual or individuals selected by the Employer in accordance with Section 13.1.
(BB) Plan Year - The period of twelve (12) consecutive months commencing on January 1, 1976 and on each January 1 thereafter.
(CC) Prior Plan - The program established by the Employer for providing retirement income and other benefits for certain of its employees and their beneficiaries as in effect prior to January 1, 1976.
(DD) Prior Plan Accrued Benefit - With respect to each Prior Plan Participant, the annual amount of retirement income accrued by the Prior Plan Participant as of December 31, 1970 as determined in accordance with the terms of the Prior Plan as constituted on such date.
(EE) Prior Plan Participant - A Participant covered under the Plan on January 1, 1981 who, as of December 31, 1970 was a Participant under the Prior Plan.
(FF) Restatement Date - January 1, 1989.
(GG) Retirement Date - The date on which the payment of a Participant's retirement income is to commence, as determined in accordance with the further terms of the Plan.
(HH) Service - Employment with the Employer commencing on the Employee's earliest employment date and ending on the earliest of his Termination of Employment date accompanied by a break-in-service (as defined below), Retirement Date or date of death. Service is subject to the following rules for the purposes of determining an Employee's participation and vesting status:
(1) With respect to any employment period prior to January 1, 1976, an Employee's Service will be determined in accordance with the terms of the Prior Plan as of December 31, 1975, provided that any such accrual involving a fractional year of Service will be rounded up to the next full year.
(2) With respect to any employment periods on and after January 1, 1976, an Employee will be credited with one (1) year of Service for each Plan Year during which he has at least 1,000 Hours of Service.
Solely for the purpose of determining an Employee's vesting status, with respect to an Employee whose employment date commences after January 1, 1976 and who does not have at least 1,000 Hours of Service during the Plan Year which includes his employment date, such Employee will be credited with one (1) year of Service if such Employee has at least 1,000 Hours of Service during the twelve (12) month period commencing with his employment date.
Solely for the purpose of determining an Employee's participation status, with respect to an Employee whose employment date commences after January 1, 1976, such Employee will be credited with one (1) year of Service if such Employee has at least 1,000 Hours of Service during the twelve (12) month period commencing with his employment date.
If in any Plan Year an Employee has less than 1,000 Hours of Service but more than 500 Hours of Service, no Service will be credited for such Plan Year, but a "break-in-service" will not be deemed to have occurred.
If in any Plan Year an Employee does not complete more than 500 Hours of Service, no Service will be credited for such Plan Year and a "break-in-service" will be deemed to have occurred, as of the beginning of such Plan Year.
Solely for the purpose of determining whether a one year break-in-service has occurred in a Plan Year, an Employee who is absent from work for maternity or paternity reasons shall receive credit for up to 501 Hours of Service which would otherwise have been credited to such Employee but for such absence, or in any case in which such hours cannot be determined eight (8) Hours of Service per day of such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the Employee, (b) by reason of the birth of a child of the Employee, (c) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service credited under this paragraph shall be credited (i) in the Plan Year in which the absence begins if the crediting is necessary to prevent a break-in-service in that period, or (ii) in all other cases, in the following Plan Year.
(3) Service prior to a break-in-service which occurs before January 1, 1985 will be determined in accordance with the terms of the Plan as of the date the break-in-service occurred.
(4) If an Employee who has a break-in-service which occurs after January 1, 1985 is later reemployed by the Employer, the following special rule shall apply:
Service prior to his most recent break-in-service shall be counted along with any Service earned on or after the Employee's reemployment date if:
(a) he was entitled to any vested retirement income attributable to Employer contributions in accordance with Section V, Termination of Employment and Vested Retirement Income, prior to his most recent break-in-service, or
(b) he was not entitled to any vested retirement income attributable to Employer contributions and the length of his latest break-in-service did not equal or exceed the greater of:
(i) the Employee's aggregate number of years of prebreak Service; or
(ii) five (5) years.
If a reemployed Employee fails to meet any of the tests described in (a) or (b) above, any Service earned prior to his most recent break-in-service will be disregarded.
(5) Absence from employment shall be counted as Service if the following circumstances apply:
(a) temporary layoff,
(b) leave of absence of up to two (2) years, as authorized by the Employer pursuant to the Employer's established leave policy,
(c) military leave while the Employee's reemployment rights are protected by law,
provided that the Employee returns to active employment with the Employer when recalled (if temporary layoff), within two (2) years (if leave of absence), or within ninety (90) days after he becomes eligible for release from active duty (if military leave). If the Employee does not return to active employment with the Employer, his Service will be deemed to have ceased on the date his absence commenced.
The Employer's leave policy shall be applied in a uniform and nondiscriminatory manner to all Employees under similar circumstances.
Notwithstanding any of the above provisions of the Plan to the contrary, if an Employee becomes a Participant on or after January 1, 1985, any employment before his attainment of age eighteen (18) (age twenty-two (22) on and after January 1, 1976 but before January 1, 1985) will not be counted as Service.
(6) Employment with a predecessor company shall be counted as Service to the extent required by ERISA.
(7) With respect to an Employee who, as of July 30, 1982, was in the employ of Allied Federal Savings and Loan Association, such Employee will be credited with Service for any employment period prior to July 31, 1982 with Allied Federal Savings and Loan Association. Such Service will be deemed as Service with the Employer and the provisions of this Section 1.1(HH) will apply to such Service as though such Employee's employment with Allied Federal Savings and Loan Association had been employment with the Employer.
(8) Service shall be credited to an Employee for periods of employment with an Affiliated Employer. Employment with an Affiliated Employer shall be credited pursuant to this paragraph (8) while such employer is an Affiliated Employer.
(II) Social Security Amount - The estimated initial annual amount of the primary benefit that may become payable to a Participant, commencing at age sixty-five (65), under the provisions of Title II of the Federal Social Security Act as in effect on the date of any determination of a Participant's Accrued Benefit hereunder. Such amount shall be estimated by assuming the Earnings for any Participant who terminates employment prior to age sixty-five (65) will continue until age sixty-five (65) at the same rate as in effect on the date he terminated employment. Wages prior to a Participant's date of employment will be estimated by projecting the actual change in the average wage from year to year as determined by the Social Security Administration backwards to his date of employment. In lieu of this estimated salary history, the actual salary history, or the actual Social Security award, if available, will be utilized, provided the Participant provides such history or award within six (6) months of his Termination of Employment or retirement. Once determined, the Primary Social Security Benefit will not be changed after the earliest of the Participant's Normal Retirement Date, or his date of death, retirement, or Termination of Employment.
(JJ) Social Security Retirement Age - The age used as the
retirement age for the Participant under Section 216(1) of the
Social Security Act, except that such section shall be applied
(1) without regard to the age increase factor and (2) as
if the early retirement age under Section 216(1)(2) of such Act were sixty-two (62).
(KK) Spouse - The lawful wife of a male Participant or the lawful husband of a female Participant, on the earlier of the Participant's Retirement Date or his date of death; provided that a former spouse will be treated as the Spouse or surviving Spouse, and a current spouse will not be treated as the Spouse or surviving Spouse to the extent provided under a qualified domestic relations order as described in Section 414(p) of the Code.
(LL) Termination of Employment - A Participant's cessation of employment for reasons other than retirement or death.
(MM) Trustee - The trustee as set forth in a trust agreement agreed on by both the Employer and such trustee.
(NN) Vesting Percentage - The percentage applied to a Participant's Accrued Benefit in accordance with the further terms of the Plan, as determined below:
With respect to an Employee who does not have an Hour of Service after December 31, 1988:
Service for Vesting Purposes Percentage ---------------------------- ---------- If he has 10 years: 100% If he has less than 10 years: 0% |
With respect to an Employee who has at least one (1) Hour of Service after December 31, 1988:
Service for Vesting Purposes Percentage ---------------------------- ---------- If he has 5 years: 100% If he has less than 5 years: 0% |
Notwithstanding the foregoing, if a Participant's Service ceases on or after his Normal Retirement Date, his Vesting Percentage will be 100%, and further provided that the Vesting Percentage of a Prior Plan Participant whose Service ceases on or after he attains age sixty (60) will be 100%.
(OO) Year of Eligibility Service - The earliest to occur of the following twelve (12) consecutive month periods during which an Employee has at least 1,000 Hours of Service:
(a) the twelve (12) consecutive month period beginning on the Employee's employment date,
(b) the Plan Year which includes the last day of the twelve (12) consecutive month period commencing with the Employee's employment date,
(c) any Plan Year beginning after the last day of the twelve (12) consecutive month period commencing with the Employee's employment date.
SECTION II
PARTICIPATION
2.1 DATE OF PARTICIPATION
Each Employee who was in the employment of the Employer on January 1, 1988 and who was not enrolled as a Participant under the provisions of the Plan as in effect on December 31, 1987 because he had attained age sixty (60) at the time of his employment with the Employer shall become a Participant in the Plan on the later of: (A) January 1, 1988 or (B) the Entry Date coincident with or next following the date he completes one (1) Year of Eligibility Service.
Each Employee who was covered under the Plan on December 31, 1988 and who is in the employment of the Employer on the Restatement Date, will continue to be a Participant under this Plan on the Restatement Date.
Each other Employee who has attained age eighteen (18) will become a Participant under this Plan on the Entry Date coincident with or next following the date on which the Employee has completed at least one (1) Year of Eligibility Service.
2.2 REEMPLOYMENT AFTER A TERMINATION OF EMPLOYMENT ACCOMPANIED BY A BREAK-IN-SERVICE
An Employee who satisfied the requirements of Section 2.1 and
subsequently (A) incurs a Termination of Employment, (B) incurs a
break-in-service (as defined in Section l.l(HH)) and (C) is reemployed after
such break-in-service, will become a Participant under this Plan on the first
day on which he has an Hour of Service. Any reemployed Employee who was not a
Participant in the Plan but who had completed one (1) Year of Eligibility
Service prior to his break-in-service will become a Participant in the Plan on
the later of the first day of the month coincident with or next following (A)
the date on which he attains age eighteen (18) and (B) the date on which he
completes an Hour of Service after his reemployment. Any other reemployed
Employee will become a Participant on the first day of the month coincident
with or next following the date on which he meets all the requirements of
Section 2.1.
For the purposes of determining a covered Employee's postbreak Service, Service shall be counted from such first day of reemployment.
2.3 REPAYMENT OF PRIOR DISTRIBUTION UPON REEMPLOYMENT
If a former Participant received his vested accrued retirement income at the time of his latest break-in-service in the form of a lump sum payment in accordance with the terms of Section 13.7(G) and is subsequently reemployed by the Employer, his previous Credited Service shall be disregarded when determining his retirement income upon his subsequent retirement or break-in-service.
However, he may restore the Credited Service he lost when he received the lump sum payment by repaying the amount he received plus interest. The interest on such amount will be computed for the number of full calendar months from the date of payment to the date of repayment at the rate of 120% of the Federal mid-term rate (as in effect under Section 1274 of the Code for the first month of the Plan Year). Such repayment must be made before five (5) years after the first date on which such Participant is subsequently reemployed. Upon a Participant's subsequent retirement or break-in-service, that portion of his vested accrued retirement income attributable to Credited Service before his latest retirement or break-in-service shall not be less than his previous vested accrued retirement income modified, if applicable, to reflect any change in the form of payment of his retirement income.
SECTION III
NORMAL RETIREMENT INCOME
3.1 ACCRUED BENEFIT
A Participant's Accrued Benefit shall be the greatest of (A), (B) or
(C) below:
(A) (1) 50% of Final Earnings reduced by 50% of the Social
Security Amount;
(2) the amount described in (A)(1) shall be multiplied by
(a) or (b), below, whichever applies:
(a) if the Participant's employment did not cease
prior to his Normal Retirement Date:
the ratio that the number of his years of
Credited Service up to a maximum of fifteen
(15), on his Retirement Date bears to fifteen
(15), or
(b) if the Participant's employment ceased prior
to his Normal Retirement Date:
the ratio that the number of his years of
Credited Service bears to the greater of (i)
fifteen (15), and (ii) the number of years of
Credited Service he would have had on his
Normal Retirement Date had his Service not
ceased;
or
|
(B) the Participant's Prior Plan Accrued Benefit;
or
(C) the Participant's Accrued Benefit determined as of December 31, 1988.
In no event will a reduction in Final Earnings cause the retirement income determined for a Participant on his Normal Retirement Date to be less than the highest amount of retirement income the Participant would have received in the same form of payment had his Service ceased at any time prior to his Normal Retirement Date when he was eligible to receive an immediate retirement income.
Moreover, in no event will the total annual amount of retirement income to be provided for a reemployed Participant on account of all periods of employment be greater than the annual
amount of retirement income which would have been provided for him if his prior cessation of Service had not occurred.
3.2 ELIGIBILITY AND COMMENCEMENT - NORMAL RETIREMENT INCOME
Each Participant who retires from the employ of the Employer on his Normal Retirement Date will receive a normal retirement income commencing on such date.
3.3 AMOUNT OF NORMAL RETIREMENT INCOME
The annual amount of normal retirement income payable to such
Participant will be equal to the amount described in paragraphs (A), (B), or
(C) below, whichever applies:
(A) If the Participant has a Spouse as of his Retirement Date and does not elect pursuant to Section 7.5 to receive his normal retirement income on the basis of any other form of payment provided under this Plan:
The Participant's annual normal retirement income shall be paid on the basis of the Joint and Survivor form and shall be determined by multiplying (1) and (2) below, where:
(1) equals the amount determined in Section 3.1, and
(2) equals the AdJustment Factor appropriate for the Joint and Survivor form.
(B) If the Participant does not have a Spouse as of his Retirement
Date or if the Participant has a Spouse and elects pursuant to
Section 7.5 to receive his normal retirement income under the
Life-No Death Benefit form of payment as described in Section
VII, Normal Form of Payments:
The Participant's annual normal retirement income shall be the amount determined in Section 3.1.
(C) If, in lieu of the alternatives specified in paragraph (A) or (B) above, the Participant elects pursuant to Section 7.5 to receive his normal retirement income on the basis of one of the optional forms of payment described in Section VIII, Optional Forms of Payment:
The Participant's annual normal retirement income shall be determined by adjusting the amount determined in Section 3.1 in the manner described in Section VIII, Optional Forms of Payment, for the optional form of payment elected by the Participant.
SECTION IV
LATE AND EARLY RETIREMENT INCOME
4.1 ELIGIBILITY AND COMMENCEMENT - LATE RETIREMENT DATE
Subject to the provisions of Section 7.8, each Participant whose employment with the Employer continues after his Normal Retirement Date will receive a late retirement income commencing on the first day of the month coincident with or next following the date he retires.
4.2 AMOUNT OF LATE RETIREMENT INCOME
Subject to the provisions of Section 7.10, the annual amount of late retirement income payable to such Participant will be determined based upon the number of years and months that his actual Late Retirement Date exceeds his Normal Retirement Date as set forth below:
(A) If the Participant's Late Retirement Date occurs in the same Plan Year as his or her Normal Retirement Date, the annual amount of late retirement income payable to such Participant will be equal to the greater of the amounts described in paragraphs (1) or (2) below:
(1) the annual amount described in the applicable paragraph of Section 3.3, based on the terms of the Plan as constituted on the date the Participant retired and Final Earnings and Credited Service to the Participant's Normal Retirement Date, adjusted by multiplying such amount by the late retirement Adjustment Factor ("LRF"), or
(2) the annual amount described in the applicable paragraph of Section 3.3, based on the terms of the Plan as constituted on the date the Participant retired and Final Earnings and Credited Service to the date the Participant retired.
(B) If the Participant's Late Retirement Date occurs in the Plan Year following his or her Normal Retirement Date, the annual amount of late retirement income payable to such Participant will be equal to the greatest of the amounts described in paragraphs (1), (2) or (3) below:
(1) the annual amount described in the applicable paragraph of Section 3.3, based on the terms of the Plan as constituted on the date the Participant retired and Final Earnings and Credited Service to the Participant's Normal Retirement Date, adjusted by multiplying such amount by the LRF, or
(2) the annual amount described in the applicable paragraph of Section 3.3, based on the terms of the Plan as constituted on the date the Participant
retired and Final Earnings and Credited Service to the date the Participant retired, or
(3) the annual amount described under (1) or (2) above, whichever produces the greater amount, determined as of the last day of the Plan Year coincident with or preceding the Late Retirement Date multiplied by the ratio that the LRF bears to the late retirement Adjustment Factor as of the last day of the Plan Year coincident with or preceding the Late Retirement Date ("Prior LRF").
(C) If the Participant's Late Retirement Date occurs in the second
Plan Year subsequent to his or her Normal Retirement Date, or
at any time thereafter, the annual amount of late retirement
income payable to such Participant will be equal to the
greatest of the amounts described in paragraphs (1), (2) or
(3) below:
(1) the annual amount described in the applicable paragraph of Section 3.3, based on the terms of the Plan as constituted on the date the Participant retired and Final Earnings and Credited Service to the Participant's Normal Retirement Date, adjusted by multiplying such amount by the LRF, or
(2) the annual amount described in the applicable paragraph of Section 3.3, based on the terms of the Plan as constituted on the date the Participant retired and Final Earnings and Credited Service to the date the Participant retired, or
(3) the annual amount, determined as of the last day of the Plan Year coincident with or preceding the Late Retirement Date multiplied by the ratio that the LRF bears to the Prior LRF where the annual amount for the purpose of this paragraph equals the greatest of:
(a) (1) above, or
(b) (2) above, or
(c) the result of the prior year's last day of the Plan Year calculations determining the greatest of all annual amounts.
4.3 ELIGIBILITY AND COMMENCEMENT - EARLY RETIREMENT DATE
Each Participant who retires from the employ of the Employer after attaining age fifty-five (55) will be eligible to receive an early retirement income provided his Vesting Percentage is other than zero percent (0%). The early retirement income will be a deferred benefit commencing upon the Participant's Normal Retirement Date.
However, a Participant who is eligible to receive an early retirement income may elect to have such benefit commence prior to his Normal Retirement Date. Payment of this retirement
income will commence on the first day of any month between the date the election is made and the Participant's Normal Retirement Date, as specified by the Participant in his election.
4.4 AMOUNT OF EARLY RETIREMENT INCOME
(A) The annual amount of early retirement income payable to such a Participant at his Normal Retirement Date will be equal to the amount described in the applicable paragraph of Section 3.3, based on (1) the terms of the Plan as constituted on the date the Participant retired and (2) Credited Service to the date the Participant retired.
(B) If payments commence prior to a Participant's Normal Retirement Date, the annual amount of early retirement income payable to such Participant will be equal to the amount described in paragraph (A) above, multiplied by the appropriate Adjustment Factor.
SECTION V
TERMINATION OF EMPLOYMENT AND VESTED RETIREMENT INCOME
5.1 ELIGIBILITY AND COMMENCEMENT - VESTED RETIREMENT DATE
Each Participant who incurs a Termination of Employment, and who will not receive early, normal or late retirement income in accordance with the preceding Sections, will be eligible to receive a vested retirement income commencing upon his Normal Retirement Date, provided his Vesting Percentage is other than zero percent (0%).
Subject to the provisions of Section 4.3, a Participant may instead elect in writing to receive retirement income commencing on the first day of any month following the date the election is made and after he has attained age fifty-five (55), as specified by the Participant in his election.
5.2 AMOUNT OF VESTED RETIREMENT INCOME
(A) The annual amount of vested retirement income payable to such Participant at his Normal Retirement Date will be equal to the amount described in the applicable paragraph of Section 3.3, based on (1) the terms of the Plan as constituted on the date the Participant terminated employment and (2) Credited Service to the date the Participant terminated employment multiplied by the Participant's Vesting Percentage.
(B) If payments commence prior to a Participant's Normal Retirement Date, the annual amount of vested retirement income payable to such Participant will be equal to the amount described in paragraph (A) above multiplied by the appropriate Early Commencement Adjustment Factor.
(C) Notwithstanding any other provisions of this Plan to the
contrary, if the Participant's Termination of Employment
occurred prior to January 1, 1976, he will receive his
retirement income in the Normal Form of Payment described in
Section 7.2 unless he has elected to receive his retirement
income in (1) an optional form of payment described in Section
VIII, Optional Forms of Payment, or (2) the Joint and Survivor
form of payment.
SECTION VI
MAXIMUM RETIREMENT INCOME
6.1 MAXIMUM RETIREMENT INCOME
(A) For purposes of this Section 6.1, the words and phrases below will have the following meanings:
(1) Annual Additions - The sum of the following amounts credited to a Participant's account or accounts for the Limitation Year:
(a) Employer contributions,
(b) Employee contributions,
(c) forfeitures, and
(d) contributions to a pension or annuity plan maintained by the Employer which are attributable to medical benefits as described in Sections 415(1)(1) and 419A(d)(2) of the Code.
The Annual Additions for a Limitation Year commencing prior to January 1, 1987 shall be determined in accordance with the provisions of the Plan as in effect on such date.
(2) Current Accrued Benefit - A Participant's annual Accrued Benefit under the Plan, determined in accordance with Section 415(b)(2) of the Code, as if the Participant had separated from service as of the close of the last Limitation Year beginning before January 1, 1987. In determining the amount of a Participant's Current Accrued Benefit, the following shall be disregarded:
(a) any change in the terms and conditions of the Plan after May 5, 1986; and
(b) any cost-of-living adjustment occurring after May 5, 1986.
(3) Defined benefit plan and defined contribution plan - The meanings set forth in Section 415(k) of the Code.
(4) Defined Benefit Plan Fraction - For a Limitation Year, a fraction, (a) the numerator of which is the aggregate Projected Annual Benefit (determined as of the last day of the Limitation Year) of the Participant under all defined benefit plans (whether or not terminated) maintained by the
Employer, and (b) the denominator of which is the
lesser of (i) the product of 1.25 (or such adjustment
as required under Section 6.2(D)) and the dollar
limitation in effect under Section 415(b)(1)(A) of
the Code for such Limitation Year adjusted as
prescribed by the Secretary of the Treasury under
Section 415(d) of the Code, or (ii) the product of
1.4 and the amount which may be taken into account
with respect to such Participant under Section
415(b)(1)(B) of the Code for such Limitation Year.
Notwithstanding the above, if the Participant was a
participant in one or more defined benefit plans of
the Employer in existence on May 6, 1986, the dollar
limitation used to determine the denominator of this
fraction will not be less than the Participant's
Current Accrued Benefit.
(5) Defined Contribution Plan Fraction - For a Limitation
Year, a fraction, (a) the numerator of which is the
sum of the Participant's Annual Additions under all
defined contribution plans (whether or not
terminated) maintained by the Employer for the
current year and all prior Limitation Years
(including annual additions attributable to the
Participant's nondeductible employee contributions to
all defined benefit plans (whether or not terminated)
maintained by the Employer), and (b) the denominator
of which is the sum of the maximum aggregate amounts
for the current year and all prior Limitation Years
with the Employer (regardless of whether a defined
contribution plan was maintained by the Employer).
"Maximum aggregate amounts" shall mean the lesser of
(i) the product of 1.25 (or such adjustment as
required under Section 6.2(D)) and the dollar
limitation in effect under Section 415(c)(1)(A) of
the Code, adjusted as prescribed by the Secretary of
the Treasury under Section 415(d) of the Code or (ii)
the product of 1.4 and the amount that may be taken
into account under Section 415(c)(1)(B) of the Code;
provided, however, the Plan Administrator may elect,
on a uniform and nondiscriminatory basis, to apply
the special transition rule of Section 415(e)(6) of
the Code applicable to Limitation Years ending before
January 1, 1983 in determining the denominator of the
Defined Contribution Plan Fraction.
(6) Highest Average Compensation - The average Section 415 Compensation of a Participant for the three (3) consecutive calendar years during which he was a Participant in the Plan that produces the highest such average. If an Employee was a Participant for less than three (3) consecutive years, the number of his consecutively completed calendar years during which he was a Participant shall be used to compute such average.
(7) Limitation Year - The Plan Year.
(8) Maximum Permissible Dollar Amount - $90,000.
(9) Projected Annual Benefit - Under a defined benefit plan, the annual retirement income to which a Participant would be entitled under such plan if (a) he were to continue in employment until his normal retirement
age under such plan (or until his current age, if later), (b) his Section 415 Compensation for the Limitation Year under consideration remains the same until the date he attains such age, and (c) all other relevant factors used to determine benefits under the plan were to remain the same as in the current Limitation Year for all future Limitation Years.
(10) Section 415 Compensation - A Participant's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan, as provided in Income Tax Regulations Section 1.415-2(d). For the purpose of determining Section 415 Compensation for any Limitation Year, amounts shall be includible in the Limitation Year in which they are actually paid or includible in the Participant's gross income.
(B) For purposes of applying the Section 415 limitations, the Employer and all members of a controlled group of corporations, as defined under Section 414(b) of the Code as modified by Section 415(h) of the Code, all commonly controlled trades or businesses, as defined under Section 414(c) of the Code, as modified by Section 415(h) of the Code, all affiliated service groups, as defined under Section 414(m) of the Code, of which the Employer is a member, any leasing organization, as defined under Section 414(n) of the Code that employs any person who is considered an Employee under Section 414(n) of the Code, and any other entity required to be aggregated with the Employer in accordance with regulations prescribed by the Secretary of the Treasury under Section 414(o) of the Code, shall be treated as a single employer.
(C) The maximum amount of annual retirement income payable under this Plan during any Limitation Year shall be subject to all of the following limitations:
(1) The annual retirement income payable as a Life-No Death Benefit, or as a Joint and Survivor form of payment shall be the lesser of (a) the Maximum Permissible Dollar Amount or (b) one hundred percent (100%) of the Participant's Highest Average Compensation.
(2) A Participant's retirement income which does not exceed a maximum of $10,000 for any Plan Year shall be deemed not to exceed the foregoing limitations if the Participant did not at any time participate in a defined contribution plan, a welfare benefit plan as defined under Section 419A(d)(2) of the Code or an individual medical account as defined under Section 415(1)(1) of the Code maintained by the Employer. The aforementioned $10,000 maximum shall be subject to the provisions of Section 6.1(C)(4).
(3) A Participant's retirement income payable in any form of payment other than a Life-No Death Benefit form of payment or a Joint and Survivor form of payment will be adjusted to the actuarial equivalent of the Life-No
Death Benefit form of payment before applying the
limitations of this Section 6.1(C). The interest rate
assumption used to determine actuarial equivalence
will be five percent (5%) and based on the UP-1984
Mortality Table.
(4) (a) If a Participant has completed less than ten
(10) years of participation in the defined
benefit plan of the Employer, the Maximum
Permissible Dollar Amount set forth in
Section 6.1(C)(l)(a) above will be reduced by
multiplying such limitation by a fraction,
the numerator of which is the number of years
and fraction thereof of such Participant's
participation and the denominator of which is
ten (10).
(b) If a Participant has completed less than ten
(10) years of employment with the Employer,
the limitation set forth in Section
6.1(C)(l)(b) and the $10,000 maximum set
forth in Section 6.1(C)(2) above will be
reduced by multiplying such amount by a
fraction, the numerator of which is the
number of years and fraction thereof of such
Participant's employment and the denominator
of which is ten (10).
(c) In no event will the reduction set forth in
Section 6.1(C)(4)(a) or (b) reduce the
limitations set forth in Section 6.1(C)(1) or
the maximum set forth in Section 6.1(C)(2) to
an amount less than one-tenth (1/10th) of
such limitation or maximum, whichever is
applicable, determined without regard to this
Section 6.1(C)(4).
(d) To the extent provided in regulations
prescribed by the Secretary of the Treasury,
this Section 6.1(C)(4) will be applied
separately with respect to each change in the
benefit structure of the Plan.
(5) (a) The Maximum Permissible Dollar Amount, and in
the case of a Participant who has incurred a
Termination of Employment, the Participant's
Highest Average Compensation, will be
adjusted for increases in the cost-of-living
in accordance with regulations prescribed by
the Secretary of the Treasury in accordance
with Section 415(d) of the Code. Each annual
adjustment shall be limited to the scheduled
annual increase, as determined by the
Secretary of the Treasury, and shall be
effective for the Limitation Year within
which such increase has become effective.
(b) In the event that the annual retirement
income otherwise payable to a Participant who
has retired or terminated employment has been
limited by the Maximum Permissible Dollar
Amount, such limited annual retirement income
shall be increased in accordance with any
automatic cost-of-living adjustments in such
dollar amount made pursuant to Section
6.1(C)(5)(a).
|
(6) A Participant's retirement income which commences after his Social Security Retirement Age may exceed the Maximum Permissible Dollar Amount provided the actuarial equivalent of such annual retirement income commencing at his Social Security Retirement Age satisfies such dollar limitation. In determining actuarial equivalence of a retirement income commencing after his Social Security Retirement Age, the interest rate assumption will be five percent (5%) and based on the UP-1984 Mortality Table.
(7) If a Participant's retirement income commences prior to his Social Security Retirement Age, the Maximum Permissible Dollar Amount will be determined as follows:
(a) If a Participant's Social Security Retirement
Age is sixty-five (65), the Maximum
Permissible Dollar Amount of retirement
income commencing on or after age sixty-two
(62) is determined by reducing the Maximum
Permissible Dollar Amount by five-ninths of
one percent (5/9ths of 1%) for each month by
which such benefit commences before the month
in which the Participant attains age
sixty-five (65).
(b) If a Participant's Social Security Retirement Age is greater than sixty-five (65), the Maximum Permissible Dollar Amount of retirement income commencing on or after age sixty-two (62) is determined by reducing the Maximum Permissible Dollar Amount by five-ninths of one percent (5/9ths of 1%) for each of the first thirty-six (36) months and five-twelfths of one percent (5/12ths of 1%) for each of the additional months (up to twenty-four (24) months) by which such retirement income commences before the month in which the Participant attains his Social Security Retirement Age.
(c) If a Participant's retirement income commences prior to age sixty-two (62), the Maximum Permissible Dollar Amount shall be equal to retirement income commencing at age sixty-two (62) reduced in accordance with paragraph (a) or (b) above, whichever is applicable, and further reduced to the actuarial equivalent of such retirement income determined as of the benefit commencement date. In determining the actuarial equivalent of retirement income commencing prior to age sixty-two (62), the interest rate assumption shall be five percent (5%) and based on the UP-1984 Mortality Table.
(8) If any retirement benefits shall be payable to or on account of any Participant in this Plan under any other defined benefit plan(s) (whether or not terminated) maintained by the Employer, the limitation applicable to such Participant for the purposes of this Section 6.1 shall be determined
by combining the retirement income payable under this Plan and the retirement benefits of all other such defined benefit plan(s). To the extent necessary, the retirement income under this Plan shall be reduced to insure that such combined benefits shall not exceed the limitation applicable to such Participant. Notwithstanding the foregoing, in the case of a Participant who was a participant in one or more defined benefit plans of the Employer in existence on May 6, 1986, the limitations of this Section 6.1 shall not be less than the participant's Current Accrued Benefits under all such defined benefit plans as of the end of the last Limitation Year beginning before January 1, 1987. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Section 415 of the Code, as in effect at the end of the 1986 Limitation Year.
(9) Notwithstanding the limitations of Section 6.1(C), if a Participant is also a participant in any defined contribution plan of the Employer, the retirement income payable under this Plan shall be reduced to the extent necessary so as not to exceed the overall limitations on benefits and contributions of Section 415(e) of the Code. For this purpose, the Plan Administrator will compute the Participant's Defined Benefit Plan Fraction and Defined Contribution Plan Fraction and will make any necessary adjustments so that the sum of the fractions, for any Limitation Year, will not exceed 1.0. If the Plan satisfied the applicable requirements of Section 415 of the Code as in effect for all Limitation Years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the Defined Contribution Plan Fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the Defined Benefit Plan Fraction and Defined Contribution Plan Fraction computed under Section 415(e)(1) of the Code does not exceed 1.0 for such Limitation Year.
6.2 TOP-HEAVY PROVISIONS
The following provisions will become effective in any Plan Year after December 31, 1983 in which the Plan is determined to be a Top-Heavy Plan.
(A) For purposes of this Section 6.2, the words and phrases below will have the following meanings:
(1) Determination Date - With respect to a Plan Year, the last day of the preceding Plan Year. With respect to the first Plan Year, the last day of the first Plan Year.
(2) Employer - For purposes of this Section 6.2, the Employer who adopts this Plan and any Affiliated Employer. An entity other than the Employer will be treated as an Employer only while it is an Affiliated Employer.
(3) Five-Percent Owner - If the Employer is a corporation, any Employee who owns (or is considered as owning within the meaning of Section 318 of the Code) more than five percent (5%) of the value of the outstanding stock, or stock possessing more than five percent (5%) of the total combined voting power of all the stock, of the Employer. If the Employer is not a corporation, a Five-Percent Owner means any Employee who owns more than five percent (5%) of the capital or profits interest in the Employer.
(4) Key Employee - Any Employee or former Employee (or,
where applicable, such person's Beneficiary) in the
Plan who, at any time during the Plan Year containing
the Determination Date or any of the preceding four
(4) Plan Years, is: (a) an Officer having Top-Heavy
Earnings from the Employer of greater than fifty
percent (50%) of the dollar limitation in effect
under Section 415(b)(1)(A) of the Code; (b) one of
the ten (10) Employees having Top-Heavy Earnings from
the Employer of more than the dollar limitation in
effect under Section 415(c)(1)(A) of the Code and
owning (or considered as owning within the meaning of
Section 318 of the Code modified by Section
416(i)(1)(B)(iii) of the Code) both more than a
one-half of one percent (1/2 of 1%) interest in value
and the largest interests in the value of the
Employer; (c) a Five-Percent Owner of the Employer;
or (d) a One-Percent Owner of the Employer having
Top-Heavy Earnings from the Employer greater than
$150,000.
(5) Non-Key Employee - Any Employee or former Employee (or, where applicable, such person's Beneficiary) who is not a Key Employee.
(6) Officer - An Employee who is an administrative executive in the regular and continued service of his Employer; any Employee who has the title but not the authority of an officer shall not be considered an Officer for purposes of this paragraph. Similarly, an Employee who does not have the title of an officer but has the authority of an officer shall be considered an Officer. For purposes of this paragraph, the maximum number of Officers that must be taken into consideration shall be determined as follows: (a) three (3), if the number of Employees is less than thirty (30); (b) ten percent (10%) of the number of Employees, if the number of Employees is between thirty (30) and five hundred (500); or (c) fifty (50), if the number of Employees is greater than five hundred (500).
(7) One-Percent Owner - If the Employer is a corporation, any Employee who owns (or is considered as owning within the meaning of Section 318 of the Code modified by Section 416(i)(1)(B)(iii) of the Code) more than one percent (1%) of the value of the outstanding stock, or stock possessing more than one percent (1%) of the total combined voting power of all the stock, of the Employer. If the Employer is not a corporation, a One-Percent Owner means any Employee who owns more than one percent (1%) of the capital or profits interest in the Employer.
(8) Permissive Aggregation Group - All the plans of the
Employer which are included in the Required
Aggregation Group plus any plans of the Employer
which are not part of a Required Aggregation Group,
but which satisfy the requirements of Sections
401(a)(4) and 410 of the Code when considered
together with the Required Aggregation Group. If two
(2) or more defined benefit plans are included in the
aggregation group, the same actuarial assumptions
must be used with respect to all such plans in
determining the Present Value of Accrued Benefits.
(9) Present Value of Accrued Benefits - The Present Value of Accrued Benefits will be determined as of the Valuation Date and will be based on the UP-1984 Mortality Table and a five percent (5%) interest rate and the assumed benefit commencement date shall be determined taking into account any nonproportional subsidy. Solely for the purpose of determining if this Plan, or any other plan included in a Required Aggregation Group of which this Plan is a part, is a Top-Heavy Plan, the Present Value of Accrued Benefits of a Non-Key Employee will be determined under (a) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Affiliated Employers, or (b) if there is no single uniform method used by all plans, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code.
(10) Required Aggregation Group - All the plans of the Employer (whether or not terminated) in which a Key Employee participates or participated at any time during the Plan Year containing the Determination Date or any of the four (4) preceding Plan Years and each other plan of the Employer (whether or not terminated) which enables any plan in which a Key Employee participates or participated to meet the requirements of Section 401(a)(4) or 410 of the Code. If two (2) or more defined benefit plans are included in the aggregation group, the same actuarial assumptions must be used with respect to all such plans in determining the Present Value of Accrued Benefits.
(11) Super Top-Heavy Plan - This Plan will be a Super Top-Heavy Plan for a given Plan Year in which:
(a) the Top-Heavy Ratio for the Plan exceeds
ninety percent (90%) and the Plan is not part
of any Required Aggregation Group or
Permissive Aggregation Group; or
(b) the Plan is part of a Required Aggregation
Group (but is not part of a Permissive
Aggregation Group) and the Top-Heavy Ratio
for the group of plans exceeds ninety percent
(90%); or
(c) the Plan is part of a Required Aggregation Group and part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds ninety percent (90%).
(12) Top-Heavy Earnings - For any year, an individual's annual compensation as stated on such individual's federal tax Form W-2 for the calendar year that ends with or within the Plan Year. Commencing January 1, 1989, Top-Heavy Earnings means for any year, compensation as defined under Section 414(q)(7) of the Code. For any year, Top-Heavy Earnings shall not exceed $200,000, adjusted as prescribed by the Secretary of the Treasury under Section 401(a)(17) of the Code. In determining Top-Heavy Earnings, the rules of Section 414(q)(6) of the Code shall apply except that the term "family" shall include only the Spouse and those lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year.
(13) Top-Heavy Plan - This Plan will be a Top-Heavy Plan for a given Plan Year if:
(a) the Top-Heavy Ratio for the Plan exceeds sixty percent (60%) and the Plan is not part of any Required Aggregation Group or Permissive Aggregation Group; or
(b) the Plan is part of a Required Aggregation Group (but is not part of a Permissive Aggregation Group) and the Top-Heavy Ratio for the group of plans exceeds sixty percent (60%); or
(c) the Plan is part of a Required Aggregation Group and part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds sixty percent (60%).
(14) Top-Heavy Ratio -
(a) If the Employer maintains one (1) or more qualified defined benefit plans and the Employer has not maintained any qualified defined contribution plans which during the five (5) year period ending on the Determination Date have or have had account balances, the Top-Heavy Ratio for the Plan alone or for the Required Aggregation Group or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the Present Value of Accrued Benefits under the aggregated qualified defined benefit plan or plans for all Key Employees as of the Determination Date (including any part of any accrued benefit distributed in the five (5) year period ending on the Determination Date) and the denominator of which is the sum of the Present Value of Accrued Benefits under the aggregated qualified defined benefit plan or plans for all participants as of the Determination Date (including any part of any accrued benefit distributed in the five (5) year period ending on the Determination Date), determined in accordance with Section 416 of the Code.
(b) If the Employer maintains one (1) or more qualified defined benefit plans and the Employer maintains or has maintained one (1) or more qualified defined contribution plans which during the five (5) year period ending on the Determination Date have or have had any account balances, the Top-Heavy Ratio for any Required Aggregation Group or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the Present Value of Accrued Benefits under the aggregated qualified defined benefit plan or plans for all Key Employees, determined in accordance with paragraph (a) above, and the sum of the account balances under the aggregated qualified defined contribution plan or plans for all Key Employees as of the Determination Date, and the denominator of which is the sum of the Present Value of Accrued Benefits under the aggregated qualified defined benefit plan or plans for all participants, determined in accordance with paragraph (a) above, for all Participants and the sum of the account balances under the aggregated qualified defined contribution plan or plans for all Participants as of the Determination Date, all determined in accordance with Section 416 of the Code. The account balances under a qualified defined contribution plan in both the numerator and denominator of the Top-Heavy Ratio are adjusted for any distribution of an account balance made in the five (5) year period ending on the Determination Date.
(c) For purposes of paragraphs (a) and (b) above,
the value of account balances and the Present
Value of Accrued Benefits will be determined
as of the most recent Valuation Date that
falls within the twelve (12) month period
ending on the Determination Date, except as
provided in Section 416 of the Code for the
first and second Plan Years of a qualified
defined benefit plan. The account balances
and Present Value of Accrued Benefits of a
Participant (i) who is a Non-Key Employee but
who was a Key Employee in a prior year, or
(ii) who has not been credited with at least
an Hour of Service with any employer
maintaining the Plan at any time during the
five (5) year period ending on the
Determination Date, will be disregarded. The
calculation of the Top-Heavy Ratio and the
extent to which distributions are taken into
account will be made in accordance with
Section 416 of the Code. When aggregating
plans, the value of account balances and the
Present Value of Accrued Benefits will be
calculated with reference to the
Determination Dates that fall within the same
calendar year.
(15) Valuation Date - For the purpose of computing the Top-Heavy Ratio and Super Top-Heavy Ratio, the last date of the Plan Year.
(B) Minimum Retirement Income - If the Plan becomes a Top-Heavy
Plan, then, notwithstanding other Sections of the Plan, each
Non-Key Employee Participant will be entitled to a Minimum
Retirement Income, expressed in the form of a Life-No Death
Benefit form of payment commencing at his Normal Retirement
Date, which will accrue at the rate of (1) two percent (2%) of
such Participant's Section 415 Compensation (modified by
Section 401(a)(17) of the Code) during the five (5)
consecutive Plan Years in which he received the highest such
Section 415 Compensation, multiplied by (2) that portion of
his Service used to determine his Vesting Percentage (up to a
maximum of ten (10) years) that is completed during Plan Years
ending after December 31, 1983 in which the Plan is a
Top-Heavy Plan. For purposes of (1) above, Plan Years ending
before January 1, 1984 and Plan Years beginning after the
close of the last Plan Year in which the Plan is a Top-Heavy
Plan will be excluded.
A Non-Key Employee may not fail to accrue a Minimum Retirement Income merely because such Employee was not employed on a specified date; neither may such Employee be excluded from participation (or a failure to accrue a benefit) because (a) his Earnings are less than a stated amount, nor because (b) he fails to make mandatory Employee contributions, if any.
If a Non-Key Employee is concurrently a Participant under this Plan and a defined contribution plan maintained by the Employer, the annual amount of retirement income for such Participant as determined in the preceding paragraphs shall be reduced by the annual amount of retirement income, commencing on his Normal Retirement Date, that can be provided under such defined contribution plan on a Life-No Death Benefit basis by contributions made to such defined contribution plan on the Participant's behalf during the year in which this Plan is Top-Heavy.
If a Non-Key Employee is a Participant under this Plan and a defined contribution plan maintained by the Employer, the annual amount of retirement income for such Participant as determined in the preceding paragraphs shall not be provided hereunder if the retirement income provided under such defined contribution plan together with the retirement income provided under Section III, Normal Retirement Income, or Section IV, Late and Early Retirement Income, are at least equal in value to such annual retirement income.
If the Minimum Retirement Income is payable in a form other than a Life-No Death Benefit or on a date other than Normal Retirement Date, it will be adjusted to be the actuarial equivalent of the Life-No Death Benefit form payable at Normal Retirement Date based on the appropriate Adjustment Factor.
(C) Minimum Vesting Percentage - Notwithstanding any other Vesting Percentage provision of this Plan to the contrary, the Vesting Percentage that is applied to the accrued retirement income of a Participant who has at least one (1) Hour of Service with the Employer on and after the date this Plan becomes a Top-Heavy Plan, in accordance with the further terms of this Plan, and to the extent that with
respect to a Participant this is a faster vesting schedule, shall be as determined as follows:
Service for Vesting Purposes Percentage ---------------------------- ---------- If he has less than 2 years: 0% If he has 2 years: 20% If he has 3 years: 40% If he has 4 years: 60% If he has 5 years: 80% If he has 6 years: 100% |
For those Plan Years in which the Plan ceases to be a Top-Heavy Plan, the vesting schedule shall be determined in accordance with the provisions of Section 1.1 (NN), subject to the following conditions:
(1) The Vesting Percentage of a Participant's retirement income before the Plan ceased to be a Top-Heavy Plan shall not be reduced; and
(2) After the Plan ceases to be a Top-Heavy Plan, each
Participant with at least three (3) years of Service
with the Employer shall have his Vesting Percentage
computed under the greater of the provisions of this
Section 6.2(C) or the provisions of Section 1.1 (NN).
(D) Modification to Section 6.1 when a Plan is a Top-Heavy Plan - For any Limitation Year in which the Plan is determined to be a Top-Heavy Plan, the definitions of the "Defined Benefit Fraction", and "Defined Contribution Fraction" will be changed by substituting in the denominator of each Fraction "1.0" for "1.25"; provided, however, that for any Plan Year in which the Plan is a Top-Heavy Plan but not a Super Top-Heavy Plan, the Plan will be treated as a Super Top-Heavy Plan hereunder unless paragraph (B)(1) is applied by substituting "three percent (3%)" for "two percent (2%)".
SECTION VII
NORMAL FORM OF PAYMENT
7.1 NORMAL FORM OF PAYMENT - JOINT AND SURVIVOR
If the Participant has a Spouse on his Retirement Date, the normal form of payment is the Joint and Survivor form. This form provides that, upon the Participant's death on or after his Retirement Date, fifty percent (50%) of the retirement income payable to the Participant will be paid to such Spouse, if surviving the Participant, for the balance of the Spouse's life.
As an alternative to the fifty percent (50%) continuation described above, a Participant may elect that sixty-six and two-thirds percent (66-2/3%) or one hundred percent (100%) of the benefit payable to him be continued to his Spouse upon his death. Such election will not require spousal consent.
7.2 NORMAL FORM OF PAYMENT - LIFE-NO DEATH BENEFIT
If the Participant does not have a Spouse on his Retirement Date, the normal form of payment is the Life-No Death Benefit form. This form provides that payments will be made to the Participant in a level amount during his lifetime and that, after his death, no further payment will be made.
7.3 OPTIONAL FORMS OF PAYMENT
Subject to the provisions of Section 7.5, in lieu of receiving his
retirement income in the normal form applicable to him, a Participant may elect
to receive a benefit of equal value in one of the optional forms of payment
described in Section VIII, Optional Forms of Payment. Moreover, if the
Participant's normal form of payment is that described in Section 7.1, such
Participant may also elect to receive, in lieu thereof, retirement income in
the form of a Life-No Death Benefit as described in the second sentence of
Section 7.2.
7.4 NOTICE TO PARTICIPANTS
Within a reasonable time before his Retirement Date the Employer will provide each Participant who had an Hour of Service on or after August 23, 1984 with a written explanation of:
(A) the terms and conditions of the Joint and Survivor form of payment,
(B) the Participant's right to make, and the effect of, an election to waive the Joint and Survivor form of payment,
(C) the rights of the Participant's Spouse under the Plan,
(D) the right to make, and the effect of, a revocation of an election to waive the Joint and Survivor form of payment, and
(E) the relative values of the various optional forms of payment under the Plan.
7.5 ELECTION OF OPTION
The Participant may elect or revoke an option during the ninety (90) day period before his Retirement Date by filing a written election with the Employer. However, a Participant may not elect more than one (1) option to be effective at the same time. No such election or revocation can be made after the Participant's Retirement Date.
To elect an option, a married Participant must make a Qualified Election in accordance with Section 7.6. If a Participant elects an optional form of payment, the amount of retirement income payable to him must be more than fifty percent (50%) of the present value of the retirement income payable to the Participant had the option not been elected, unless the alternate recipient is the Participant's Spouse; otherwise, such election will be deemed null and void.
7.6 QUALIFIED ELECTION
Notwithstanding any other provisions in the Plan to the contrary, for purposes of this Section 7.6 and Section 9.5, a Qualified Election to waive the Joint and Survivor form of payment or Preretirement Spouse Benefit shall not be effective unless: (A) the Participant's Spouse consents in writing to the election; (B) such election designates a Beneficiary or form of payment which may not be changed without spousal consent (or the consent of the Spouse expressly permits designations by the Participant without any requirement of further consent by the Spouse), (C) the Spouse's consent acknowledges understanding of the effect of such election, and (D) the consent is witnessed by a Plan representative or a notary public. Notwithstanding this spousal consent requirement, if the Participant establishes to the satisfaction of a Plan representative that such written consent cannot be obtained because:
(1) there is no Spouse;
(2) the Spouse cannot be located;
(3) there are other circumstances as the Secretary of the Treasury may prescribe by regulations, then
the Participant's election to waive coverage will be considered valid.
Any consent necessary under this provision will be valid only with respect to the Spouse who signs the consent. A Participant is allowed to revoke his Qualified Election without the consent of his Spouse. The number of his Qualified Elections and revocations is not limited.
7.7 TRANSITION RULE
Each vested Participant who:
(A) had not commenced retirement income payments as of August 23, 1984; and
(B) had at least one Hour of Service in the period prior to the beginning of the Plan Year beginning in 1976 and after September 2, 1974 and did not have an Hour of Service after the beginning of the 1976 Plan Year;
must be given notice that he has the right to elect, at any time prior to his commencement of payments, to receive his retirement income in the Joint and Survivor form of payment. The notice shall be given at such time or times and in such manner as prescribed by the Secretary of the Treasury.
7.8 PAYMENT OF RETIREMENT INCOME TO PARTICIPANT
All payment of retirement income under the Plan shall be made in
accordance with Section 401(a)(9) of the Code. Subject to the Joint and
Survivor form of payment requirement of Section 7.1 and the Preretirement
Spouse Benefit requirement of Section IX, the distribution requirements of
Section 401(a)(9) of the Code as set forth in this Section 7.8 and in Sections
7.9 and 7.10, shall take precedence over any inconsistent provisions of this
Plan.
Retirement income will be payable to the Participant monthly with each payment equal to one twelfth (1/12) of the annual amount. The first of such monthly payments will be made to the Participant as of his Retirement Date, with subsequent monthly payments being made as of the first day of each month thereafter until the Participant's death occurs.
Unless the Participant elects otherwise, the payment of retirement income will commence no later than the sixtieth (60th) day after the end of the Plan Year in which the latest of the following occurs:
(A) the Participant attains the earlier of (1) age sixty-five
(65), or (2) his Normal Retirement Date as defined in Section
l.l(W)(l), or
(B) the tenth (10th) anniversary of the year in which the Participant commenced participation in the Plan, or
(C) the Participant's Termination of Employment with the Employer.
Prior to January 1, 1989, with respect to an Employee who is other than a Five-Percent Owner (as defined in Section 6.2(A)(3)), payments must have commenced no later than April 1 following the calendar year containing the later of the Employee's termination of employment or his attainment of age seventy and one-half (70-1/2). With respect to an Employee who is a Five-Percent Owner, payments must have commenced no later than April 1 following the calendar year in which the Employee attained age seventy and one-half (70-1/2).
On and after January 1, 1989, payments to any Employee under the Plan will commence no later than the April 1 following the calendar year in which the Employee attains age seventy and one-half (70-1/2), regardless of whether he has retired. Notwithstanding the foregoing, any Employee who attained age seventy and one-half (70-1/2) on or before January 1, 1988 and who was not a Five-Percent Owner in the Plan Year in which he attained age sixty-six and one-half (66-1/2) or in any succeeding Plan Year, may defer payments until he terminates his employment.
7.9 LIMITS OF PAYMENT OPTIONS
Payments, if not made in a lump sum, may only be made over one of the following periods (or a combination thereof):
(A) the life of the Participant,
(B) the life of the Participant and a designated Beneficiary,
(C) a period certain not extending beyond the life expectancy of
the Participant, or
(D) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and his designated
Beneficiary.
7.10 MINIMUM AMOUNTS TO BE PAID
The amount to be paid each year must be at least an amount equal to
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the quotient obtained by dividing the Participant's entire retirement income by the life expectancy of the Participant or joint and last survivor expectancy of the Participant and designated Beneficiary. Life expectancy and joint and last survivor expectancy are computed by the use of the return multiples contained in Income Tax Regulations Section 1.72-9. For purposes of this computation, a Participant's life expectancy may be recalculated no more frequently than annually, however, the life expectancy of a nonspouse Beneficiary may not be recalculated. If the Participant's Spouse is not the designated Beneficiary, the method of payment selected must assure that at least fifty percent (50%) of the present value of the amount available for payment would be payable within the life expectancy of the Participant.
If the Participant dies after payment of his retirement income has commenced, the remaining portion of such retirement income will be paid at least as rapidly as under the method of payment being used prior to the Participant's death.
If the Participant dies before payment of his retirement income commences, the Participant's entire retirement income must be paid no later than December 31 of the calendar year containing the fifth anniversary of the Participant's death except to the extent that an election is made to receive payment in accordance with (A) or (B) below:
(A) If any portion of the Participant's retirement income is payable to a designated Beneficiary other than the Participant's Spouse, such payments will be made in substantially equal installments over the life or life expectancy of the designated
Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which
the Participant died;
(B) If, however, the designated Beneficiary is the Participant's
surviving Spouse, the date on which payments are required to
begin in accordance with (A) above is not required to be
earlier than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the
Participant died, and (2) December 31 of the calendar year in
which the Participant would have attained age seventy and
one-half (70-1/2).
7.11 TEFRA TRANSITION RULE ELECTIONS
Notwithstanding the other requirements of this Section VII and subject
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to the Joint and Survivor form of payment requirement of Section 7.1, payment
on behalf of any Participant, including a Five-Percent Owner (as defined in
Section 6.2(A)(3)) of the Employer, may be made in accordance with all of the
following requirements (regardless of when such payment commences):
(A) the payment is one which would not have disqualified the Plan under Section 401(a)(9) of the Code as in effect prior to amendment by the Deficit Reduction Act of 1984.
(B) the payment is in accordance with a method designated by the Participant whose retirement income is being distributed or, if the Participant is deceased, designated by his Beneficiary.
(C) such designation was in writing, was signed by the Participant or his Beneficiary, and was made before January 1, 1984.
(D) the Participant had accrued a benefit under the Plan as of December 31, 1983.
(E) the method of payment designated by the Participant or the Beneficiary specifies the time at which payments will commence, the period over which payments will commence, the period over which payments will be made, and in the case of any payment upon the Participant's death, the Beneficiaries of the Participant listed in order of priority. The method of payment selected must assure that at least fifty percent (50%) of the present value of the amount available for distribution would be payable within the life expectancy of the Participant.
A payment upon death will not be covered by this transition rule unless the information in the designation contains the required information described above with respect to payments to be made upon the death of the Participant.
For any payment which commences before January 1, 1984 but continues after December 31, 1983, the Participant or the Beneficiary, to whom such payment is being made, will be presumed to have designated the method of distribution under which the distribution is being
made if the method of distribution was specified in writing and the distribution satisfies the requirements in paragraphs (A) and (E) above.
If a designation is revoked, any subsequent payment must satisfy the requirements of Section 401(a)(9) of the Code. Any changes in the designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another Beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as such substitution or addition does not alter the period over which payments are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life).
SECTION VIII
OPTIONAL FORMS OF PAYMENT
8.1 CONTINGENT PENSIONER OPTION
A Participant who elects this option will receive a reduced amount of retirement income during his lifetime, so that after his death retirement income in the same amount, or sixty-six and two-thirds percent (66-2/3%) or fifty percent (50%) thereof (as specified in the election) will be paid for the life of the Contingent Pensioner designated by the Participant, if surviving the Participant.
If the option is in effect on the Participant's Retirement Date, the amount of retirement income payable to the Participant will be determined by multiplying the amount which would otherwise be payable to him, assuming the normal form described in Section 7.2 is effective, by the appropriate Adjustment Factor.
If a Participant who has elected this option dies on or after his Normal Retirement Date but before his Retirement Date, his Contingent Pensioner will receive retirement income payments beginning on the first day of the month next following the Participant's death and continuing for the balance of his life.
These retirement income payments will be equal to the amount which would have been payable to the Participant had he retired hereunder on such first day of the month with the option in effect, as adjusted by the continuation percentage (100%, 66-2/3% or 50%) elected by the Participant.
This option will be deemed null and void if (A) the Contingent Pensioner dies before the Participant's Retirement Date or (B) the Participant dies before the earlier of his Retirement Date and his Normal Retirement Date.
8.2 YEARS CERTAIN AND LIFE OPTION
Subject to the provisions of Section 7.9, a Participant who elects this option will receive a reduced amount of retirement income during his lifetime, so that if his death occurs within the year certain period commencing upon his Retirement Date as specified in the election (5, 10, 15 or 20 years), retirement income in the same amount will be paid to the Beneficiary designated by the Participant for the balance of the years certain period specified by the Participant.
If the option is in effect on the Participant's Retirement Date, the amount of retirement income payable to the Participant will be determined by multiplying the amount which would otherwise be payable to him, assuming the normal form described in Section 7.2 is effective, by the appropriate Adjustment Factor.
If a Participant who has elected this option dies on or after his Normal Retirement Date, but before his Retirement Date, his designated Beneficiary will receive retirement income payments beginning on the first day of the month next following the Participant's death and continuing until the end of the years certain period specified by the Participant. These retirement income payments will be in the same amount as would have been payable had the Participant retired hereunder on such first day of the month with the option in effect.
If this option is in effect on the Participant's Retirement Date and neither the Participant nor his designated Beneficiary survives to the end of the years certain period, a final lump sum payment equal to the commuted value of any unpaid payments shall be made as follows: to the Participant's Spouse, if living; otherwise, in equal shares to surviving children of the Participant; and in the event none of the above-named individuals survives the Participant, to the executor or administrator of the estate of the last to die of (A) the Participant or (B) the last to survive of his designated Beneficiaries.
This option will be deemed null and void if the Participant dies before the earlier of his Retirement Date and Normal Retirement Date.
8.3 SOCIAL SECURITY OPTION
(A) For the purposes of this Section 8.3, the words and phrases below will have the following meanings:
(1) Social Security Amount means the annual Primary Insurance Amount, or portion thereof, which the Participant is expected to receive under the Social Security Act.
(2) Social Security Commencement Date means the first day of the month coincident with or next following the date the Participant's Social Security Amount is expected to commence.
(B) A Participant may elect this option if his Retirement Date precedes his Social Security Commencement Date. Upon such election, the Employer will determine the Participant's Social Security Amount and Social Security Commencement Date on the basis of the Social Security Act then constituted.
(C) The Participant who elects this option will receive increased retirement income before his Social Security Commencement Date and reduced retirement income thereafter, so that the Participant's total benefit under this Plan and the Social Security Act will be paid in a generally level amount throughout his retirement.
(D) The amount of increased retirement income will be equal to the amount of retirement income which would have been payable to the Participant if this option had not been elected, assuming the normal form described in Section 7.2 is effective, plus his Social Security Amount multiplied by the appropriate Adjustment Factor. The amount of reduced retirement income will be equal to the
increased amount of retirement income payable to the Participant before his Social Security Commencement Date minus his Social Security Amount.
SECTION IX
PRERETIREMENT SPOUSE BENEFIT
9.1 ELIGIBILITY FOR PRERETIREMENT SPOUSE BENEFIT
Upon the death of a Participant before his Retirement Date, his Spouse will receive a Preretirement Spouse Benefit as described in this Section IX if all the following requirements were met when the Participant died:
(A) the Participant had a Spouse as defined in Section l.l(KK) to whom the Participant had been married at least one (1) full year prior to his death;
(B) the Participant was credited with at least one (1) Hour of Service on or after August 23, 1984;
(C) the Participant had not made a Qualified Election pursuant to
Section 7.5 to waive the Preretirement Spouse Benefit as
described below;
(D) the Participant had a vested right to Employer funded benefits.
9.2 AMOUNT OF PRERETIREMENT SPOUSE BENEFIT
(A) For purposes of this Section 9.2, earliest retirement age means the earliest date on which a Participant could elect to receive his retirement income under the Plan.
(B) The Preretirement Spouse Benefit will be payable in the form of retirement income. The annual amount of such benefit will be as follows:
(1) With respect to a Participant who, on his date of
death, has attained age fifty (50) and completed ten
(10) years of Service, and who dies while actively
employed with the Employer, the Preretirement Spouse
Benefit will be payable as retirement income,
deferred to the Participant's Normal Retirement Date.
The annual amount of such benefit will be equal to
fifty percent (50%) of the retirement income which
the Participant would have received in accordance
with Section 3.1 assuming that his Credited Service
remained uninterrupted and that his Earnings remained
unchanged until his Normal Retirement Date. However,
if the surviving Spouse of such a Participant is more
than ten (10) years younger than the Participant, the
annual retirement income will be reduced in
accordance with the following schedule:
Number of Full Years By
Which the Participant's
Spouse is Younger than
the Participant Percentage
------------------------ ----------------
11 98%
12 96%
13 94%
etc., decreasing in steps etc., decreasing
of one year in steps of 2%
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If the Participant's Spouse elects to receive the first initial monthly payment prior to the date the Participant would have reached his Normal Retirement Date, the annual amount of such retirement income will be the same amount which the surviving Spouse would receive in accordance with the previous paragraph of this Section 9.2, as adjusted in accordance with the appropriate terms of Section IV, Late and Early Retirement Income.
(2) With respect to a Participant who is not described in paragraph (1) above, the Preretirement Spouse Benefit will be payable in the form of retirement income. The annual amount of such retirement income will be as follows:
(a) (i) If a Participant dies after his earliest retirement age and on or after his Normal Retirement Date, fifty percent (50%) of the retirement income which the Participant would have received had he retired on the day before his death, with his retirement income payable as an immediate 50% Joint and Survivor form of payment, adjusted in accordance with the appropriate terms of Section IV, Late and Early Retirement Income.
(ii) If the Participant dies on or after his earliest retirement age but prior to his Normal Retirement Date, fifty percent (50%) of the retirement income which the Participant would have received had he retired on the day before his death, with his retirement income payable as a 50% Joint and Survivor form of payment deferred to the Participant's Normal Retirement Date. If the Participant's Spouse elects to receive the first initial monthly payment prior to the date the Participant would have reached his Normal Retirement Date, the annual amount of such retirement income will be fifty percent (50%) of the reduced retirement income which
the Participant would have received had he retired on the day before his death, with his retirement income payable as a 50% Joint and Survivor form of payment and as adjusted in accordance with the appropriate terms of Section IV, Late and Early Retirement Income.
(b) If a Participant dies before his earliest retirement age, his Spouse will receive the same reduced retirement income, deferred to the Participant's Normal Retirement Date, that would have been payable if the Participant had:
(i) terminated employment on the earlier of his actual Termination of Employment and his date of death;
(ii) survived to his Normal Retirement Date;
(iii) elected to receive an immediate 50% Joint and Survivor form of payment at his Normal Retirement Date; and
(iv) died on the day immediately after his Normal Retirement Date.
Notwithstanding the preceding sentence, the
Spouse of a Participant may elect that the
retirement income commence on the
Participant's earliest retirement age
following the Participant's death. Such
benefit shall be equal to the same benefit
that would have been payable to the Spouse if
the Participant (I) terminated employment on
the earlier of his actual Termination of
Employment and his date of death, (II)
survived to his earliest retirement age,
(III) retired at his earliest retirement age
with an immediate 50% Joint and Survivor form
of payment, and (IV) died on the day after
his earliest retirement age.
9.3 PAYMENTS OF PRERETIREMENT SPOUSE BENEFIT
The retirement income will be payable monthly with each payment equivalent to one twelfth (1/12) of the annual amount. The initial monthly payment will be made as of the first day of the month coincident with or next following the later of the date the Participant would have attained his Normal Retirement Date if he had lived and his date of death. Notwithstanding the foregoing sentence,
(A) a Participant's Spouse may, pursuant to Section 9.2, elect that the initial monthly payment will be made as of the first day of the month coincident with or next following the later of the Participant's death or earliest retirement age (as defined in Section 9.2), or
(B) a Participant's Spouse may elect to defer the commencement of payments to the first day of any month up to and including the month in which the Participant would have attained age seventy and one-half (70-1/2) if he had lived. The amount of such deferred payment will be adjusted in accordance with the appropriate terms of Section IV, Late and Early Retirement Income, to reflect such later commencement.
Subsequent monthly payments will be made as of the first day of each month thereafter until the Spouse's death occurs.
9.4 WRITTEN NOTICE OF PRERETIREMENT SPOUSE BENEFIT
The Plan Administrator shall provide written notice to a Participant of the Preretirement Spouse Benefit. Such notice shall provide an explanation of the Preretirement Spouse Benefit in a comparable manner to the notice described under Section 7.4. The Plan Administrator shall provide the notice in whichever of the following periods ends last:
(A) the period beginning with the first day of the Plan Year in which the Participant attains age thirty-two (32) and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age thirty-five (35).
(B) a reasonable period ending after the Employee becomes a Participant.
(C) a reasonable period ending after Section 401(a)(11) of the Code applies to the Participant.
(D) with respect to a Participant who terminates employment with the Employer before attaining age thirty-five (35), a reasonable period after his termination of employment.
(E) a reasonable period ending after the provisions of this
Section 9.4 no longer apply to the Participant.
For purposes of this Section 9.4, a reasonable period is the end of the two (2) year period beginning one (1) year prior to the date the event occurs and ending one (1) year after such date.
9.5 ELECTION TO WAIVE PRERETIREMENT SPOUSE BENEFIT
At any time after the beginning of the Plan Year in which the Participant attains age thirty-five (35) or after his Service ceases, the Participant may choose to waive the Preretirement Spouse Benefit by completing a Qualified Election as described in Section 7.6 and returning it to the Employer. A Participant who will not yet attain age thirty-five (35) as of the end of any current Plan Year may make a special qualified election to waive the Preretirement Survivor Benefit for the period beginning on the date of such election and ending on the first day of the Plan Year in which the Participant will attain age thirty-five (35). The Preretirement Survivor Benefit will be automatically reinstated as of the first day of the Plan Year in which the Participant attains age thirty-five (35). If a Qualified Election is not submitted by the Participant
prior to his death, the Preretirement Spouse Benefit will become payable. A Participant may revoke his Qualified Election to waive the Preretirement Spouse Benefit at any time by filing a written notice to this effect with the Employer. The Participant may revoke his election to waive the Preretirement Spouse Benefit as many times as he chooses. No spousal consent will be required for such revocations. If not previously revoked, a Participant's election will be deemed to be revoked on the Participant's Retirement Date.
SECTION X
DEATH BENEFITS
10.1 DEATH BEFORE RETIREMENT DATE
If a Participant dies before the earlier of his Normal Retirement Date or his Retirement Date, his Spouse will be eligible to receive retirement income in accordance with Section IX, Preretirement Spouse Benefit, if the Preretirement Spouse Benefit is effective. Otherwise, no benefit will become payable.
If a Participant dies on or after his Normal Retirement Date and before his Late Retirement Date and had a Spouse on the date of his death, retirement income as described in Section 9.2 will be paid to the Participant's Spouse, provided an optional form of payment was not then in effect. If an optional form of payment was in effect on such Participant's death, any retirement income payable will be paid in accordance with such form. If on such Participant's death the Participant did not have a Spouse and no optional form was in effect, no retirement income will become payable.
10.2 DEATH ON OR AFTER RETIREMENT DATE
If a Participant dies after his Retirement Date and had a Spouse on the date of his death, retirement income as described in Section 7.1 will be paid to the Participant's Spouse provided another form of payment is not in effect.
If a Participant dies after his Retirement Date and has no Spouse, no retirement income will be payable unless an optional form of payment providing for such payment is then in effect.
SECTION XI
FUNDING OF BENEFITS
11.1 CONTRIBUTIONS TO THE FUND
From time to time and in such frequency as required by law, the Employer will make such contributions to the Fund as required to maintain the Plan on a sound actuarial basis. In determining the amounts and incidence of such contributions, the Employer will take into account such actuarial recommendations as may be provided by an enrolled actuary as defined by ERISA. Additional amounts may be contributed only to the extent permitted by law.
11.2 FUND FOR EXCLUSIVE BENEFIT OF PARTICIPANTS
The Fund is for the exclusive benefit of Participants and other persons who may become entitled to benefits hereunder, and may also be used to pay any reasonable expenses arising from the operation of the Plan. Prior to the satisfaction of all liabilities for benefits provided hereunder, no contribution made to the Fund will be refunded to the Employer unless a contribution was made:
(A) by reason of a mistake of fact,
(B) conditionally upon an initial favorable Internal Revenue Service determination and such a determination is not received, or
(C) conditionally upon being allowed as a tax deduction and such deduction is disallowed.
For purposes of this Section 11.2, all contributions to the Plan made by the Employer shall be deemed to be conditioned on the deductibility by the Employer of such contributions under Section 404 of the Code unless such contributions are made for the purpose of satisfying the minimum funding standards of Section 412 of the Code.
Such refund must be made within one year, under (A) from the date the contribution was made and, under (B) and (C) from the date of disallowance of tax qualification or tax deduction. All such refunds will be limited in amount, circumstances and timing to the provisions of Section 403(c) of ERISA and no such refund shall be made if, solely on account of such refund, the Plan would cease to be qualified pursuant to Section 401(a) of the Code.
11.3 DISPOSITION OF CREDITS AND FORFEITURES
No credit or forfeitures arising from the operation of the Plan may be used to increase the benefit of any Participant or group of Participants, but will instead be taken into account to reduce contributions to be made by the Employer.
SECTION XII
FIDUCIARY RESPONSIBILITY PROVISIONS
12.1 FIDUCIARY RESPONSIBILITY PROVISIONS
As required by ERISA, the Employer, by action of its governing board, shall appoint certain named fiduciaries of the Plan.
The named fiduciary or fiduciaries, as the case may be, shall have the authority to control and manage the operation of the Plan, and shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of the Plan and the requirements of ERISA. If more than one fiduciary has been named, this authority and responsibility shall be jointly and severally shared.
Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. A named fiduciary (or a fiduciary designated by a named fiduciary) may employ one or more persons to render advice with regard to any responsibilities such fiduciary has under the Plan. A person who is a named fiduciary with respect to control and management of the assets of the Plan may appoint an investment manager or managers to manage any assets of the Plan. Unless it shall agree to accept additional fiduciary responsibility, the investment manager's liability as a fiduciary is limited to that arising from its management of any assets of the Plan held by the investment manager in one or more of its separate accounts.
The Employer may allocate fiduciary responsibilities (other than trustee responsibilities) among named fiduciaries if there are more than one. Provision may be made for named fiduciaries to designate persons other than named fiduciaries to carry out fiduciary responsibilities under the Plan. If any fiduciary responsibility of a named fiduciary is allocated to any persons or a person is designated to carry out such responsibility, then such named fiduciary shall not be liable for any act or omission of such person in carrying out such responsibility except as provided by ERISA.
No fiduciary guarantees the Fund in any manner against investment loss or depreciation of asset value.
SECTION XIII
PLAN ADMINISTRATOR
13.1 APPOINTMENT AND ACCEPTANCE
As required by ERISA, the Employer will appoint a Plan Administrator of the Plan by designating either the Employer or an individual or group of individuals to act in this capacity. The person designated as Plan Administrator shall signify acceptance of this position in writing.
The Plan Administrator is a fiduciary within the meaning of ERISA.
13.2 DUTIES AND AUTHORITY
The Plan Administrator will administer the Plan on behalf of the
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Employer in a nondiscriminatory manner for the exclusive benefit of Participants and their Beneficiaries.
The Plan Administrator will perform all such duties as are necessary to operate, administer and manage the Plan in accordance with the terms thereof, including but not limited to the following:
(A) to determine all questions relating to a Participant's coverage under the Plan,
(B) to maintain all necessary records for the administration of the Plan,
(C) to compute and authorize the payment of retirement income and other benefit payments to eligible Participants and Beneficiaries,
(D) to interpret and construe the provisions of the Plan and to make regulations which are not inconsistent with the terms thereof,
(E) to advise or assist Participants regarding any rights, benefits or elections available under the Plan.
The Plan Administrator will take such actions as are necessary to establish and maintain the Plan as a retirement program which is at all times in full and timely compliance with any law or regulation having pertinence to this Plan.
The Plan Administrator is granted by the Employer all reasonable powers necessary or appropriate to accomplish his duties as Plan Administrator.
13.3 EXPENSES OF THE PLAN AND ASSISTANCE TO PLAN ADMINISTRATOR
All reasonable expenses necessary to operate and administer the Plan shall be borne by the Employer except to the extent the Employer has elected to pay such expenses from the Fund.
The Employer shall furnish the Plan Administrator with such clerical and other assistance as is required in the performance of his duties.
13.4 PARTICIPANTS AND OTHER PAYEES - DATA
Participants and other persons affected by the Plan will furnish the Plan Administrator upon request such documents, evidence or information which the Plan Administrator considers necessary or desirable for the purpose of administering the Plan. The Plan Administrator may cause to be withheld any payment otherwise due the Participant or other person, until the required document, evidence or other information is so furnished.
13.5 RESIGNATION AND REMOVAL OF PLAN ADMINISTRATOR
The Plan Administrator may resign at any time by delivering to the Employer a written notice of resignation, to take effect at a date specified therein. Such date should not be less than thirty (30) days after the delivery of the resignation, unless waived by the Employer.
The Plan Administrator may be removed with or without cause by the Employer through delivery to him of written notice of removal, to take effect at a date specified therein.
13.6 APPOINTMENT OF SUCCESSOR PLAN ADMINISTRATOR
In the event the office of Plan Administrator is vacant, the Employer will promptly designate a successor Plan Administrator who must signify acceptance of this position in writing. In the event no successor is appointed, the board or other governing body of the Employer shall function as the Plan Administrator until a new Plan Administrator has been appointed and has accepted such appointment.
13.7 PLAN ADMINISTRATION - MISCELLANEOUS
(A) Filing a Claim for Benefits - A Participant or Beneficiary shall notify the Plan Administrator of a claim for benefits under the Plan. Such request may be in any form adequate to give reasonable notice to the Plan Administrator and shall set forth the basis of such claim and shall authorize the Plan Administrator to conduct such examinations as may be necessary to determine the validity of the claim and to take such steps as may be necessary to facilitate the payment of any benefits to which the Participant or Beneficiary may be entitled under the Plan.
(B) Denial of Claim - Whenever a claim for benefits by any Participant or Beneficiary has been denied, written notice prepared in a manner calculated to be understood by the Participant or Beneficiary will be provided, setting forth the specific reasons for the denial and explaining the procedure for an appeal and review of the decision by the Plan Administrator.
(C) Governing Law - The Plan shall be governed and construed in accordance with the laws of the State of New York, except to the extent that such laws are preempted by the federal laws of the United States of America.
(D) Masculine and Feminine, Singular and Plural - In construing the text of the Plan, the masculine shall include the feminine and the singular shall include the plural, and the plural the singular wherever the context shall plainly so require.
(E) Reference to Laws and Sections - Any reference herein to any
section of the Code, ERISA or any other statute or law shall
be deemed to include any successor statute or law of similar
import. Any reference to a section number shall refer to a
Section of this Plan, unless otherwise indicated.
(F) Nonassignment - All retirement income payments and other payments are provided for the Participant, Beneficiary or other person to whom a payment is due ("Payee") for the support and benefit of such Payee, and such retirement income shall not be assigned or anticipated and shall be free from the claims of all creditors, to the fullest extent permitted by law.
(G) Small Benefits - Notwithstanding any other provision in the Plan to the contrary, if the Value of a Participant's nonforfeitable retirement income at his Termination of Employment, retirement or death prior to the commencement of payments is $3,500 or less, the Plan Administrator shall authorize a lump sum payment of such Value in lieu of all future payments. If the Value of a Participant's nonforfeitable retirement income at his Termination of Employment, retirement or death prior to commencement of payments is $0, the Participant or, if applicable, his Beneficiary, shall be deemed to have received a lump sum payment of the vested nonforfeitable retirement income.
For purposes of this paragraph (G), Value means the actuarially equivalent value of the normal form of retirement income payable in the form of a lump sum. The value shall be based upon the PBGC immediate annuity interest rate in effect three (3) months prior to the Participant's Termination of Employment, retirement or death (or, if lesser, the interest rate which would be used as of the date of the distribution by the PBGC for purposes of determining the present value of a lump sum distribution on plan termination) and the UP-1984 Mortality Table.
(H) Limitation - Participation in the Plan shall not grant any Participant the right to be retained in the employ of the Employer or any other rights than those to which he is entitled under law or regulations.
(I) Divestment of Benefits for Cause Precluded - In no event may a Participant be divested for cause of retirement income or other benefits which he is eligible to receive under the Plan.
(J) Clerical Error - If any fact pertaining to eligibility for or amounts of benefits payable under the Plan to a Participant, Beneficiary or other person to whom a payment is due has been misstated, or in the event of clerical error, the benefits will be adjusted on the basis of the correct facts in a manner precluding individual selection.
(K) Qualified Domestic Relations Orders - Notwithstanding any other provisions of the Plan to the contrary, all or part of the Participant's Accrued Benefit may be distributed to an alternate payee pursuant to a Qualified Domestic Relations Order within the meaning of Section 414(p) of the Code. The Plan Administrator shall establish procedures for determining if a Domestic Relations Order is qualified within the meaning of Section 414(p) of the Code.
(L) Missing Payee - Commencing January 1, 1992 and notwithstanding any other provision in the Plan to the contrary, if payment is not able to be made to any Employee, Participant, Beneficiary or other person to whom a payment is due ("Payee") under the Plan because the identity or whereabouts of such Payee cannot be ascertained after reasonable efforts have been made to identify or locate such person (including mailing a certified notice of the payment due to the last known address of such Payee as shown on the records of the Employer), such payment and all subsequent payments otherwise due to such Payee shall be forfeited twenty-four (24) months after the date such payment first became due. However, such payment and any subsequent payments shall be reinstated retroactively, without interest, no later than sixty (60) days after the date on which the Payee is identified and located.
(M) Headings - The headings of sections are included solely for convenience of reference, and if there be any conflict between such headings and the text of the Plan, the text shall control.
SECTION XIV
AMENDMENT AND TERMINATION OF PLAN
14.1 AMENDMENT - GENERAL
The Employer reserves the right to amend or modify the Plan in whole or in part from time to time. No such action shall adversely affect the Accrued Benefits of Participants; provided, however, that the Employer may make any amendment or modification (of retroactive effect, if necessary) to establish and maintain the Plan's qualification under Section 401(a) of the Code and to bring the Plan into full compliance with ERISA.
If any amendment changes the Vesting Percentage of this Plan, any Participant with three (3) or more years of Service may, by filing a written request with the Employer, elect to have his Vested Percentage computed under the vesting schedule in effect prior to the amendment.
The period during which the Participant may elect to have his Vested Percentage computed under the prior vesting schedule shall commence with the date the amendment is adopted and shall end on the latest of:
(A) sixty (60) days after the amendment is adopted;
(B) sixty (60) days after the amendment becomes effective; or
(C) sixty (60) days after the Participant is issued written notice
of the amendment from the Employer.
14.2 AMENDMENT - MERGER OR CONSOLIDATION OF PLAN
This Plan may be amended by the Employer to provide for the merger or
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consolidation of the Plan with another retirement plan or for the transfer of assets and liabilities hereunder to another retirement plan. Such an event, however, may not occur unless such Participant would receive a retirement benefit under such other retirement plan after the merger, consolidation or transfer (assuming the surviving plan had then terminated) which is at least as great as the benefit he would have received under this Plan immediately prior to the merger, consolidation or transfer (assuming the plan had then terminated).
14.3 PARTIAL TERMINATION OF PLAN
In the event a partial termination of the Plan occurs with respect to a specified group of Participants, the Employer shall cause to be allocated and segregated for the benefit of such Participants a proportionate interest in the Fund. Such proportionate interest shall be determined by an enrolled actuary as defined by ERISA and applied by the Employer to provide retirement income to such Participants in accordance with the following terms of this Section XIV. Any retirement income so provided shall be nonforfeitable. However, no Participant or other
individual shall have recourse towards the satisfaction of any benefit accrued under the Plan other than from the Fund or the PBGC.
14.4 TERMINATION OF PLAN
The Employer intends to continue the Plan indefinitely but reserves the right to terminate it at any time. The date when the Plan is terminated, completely or partially, shall be referred to in this Section 14.4 as the Plan Termination Date.
As of the Plan Termination Date, retirement income accrued on account of a Participant shall be nonforfeitable. However, no Participant or other individual shall have recourse towards the satisfaction of any benefit accrued under the Plan other than from the Fund or the PBGC.
After any final expenses have been withdrawn from the Fund, the Employer shall cause the amount remaining in the Fund to be allocated according to the following categories, in the order given:
(A) first, there shall be allocated an amount necessary to provide retirement income for Participants and other individuals who, three (3) years prior to the Plan Termination Date, were either receiving retirement income or would have been eligible to receive retirement income had they then retired.
(For this purpose "retirement income" means retirement income determined for the Participant or other individual in accordance with provisions of the Plan in effect five (5) years prior to the Plan Termination Date.)
(B) second, there shall be allocated an amount necessary to provide all other retirement income guaranteed under Title IV of ERISA, as determined in accordance with Section 4044 thereof.
(C) third, there shall be allocated an amount necessary to provide all other retirement income not guaranteed by ERISA which vests in each Participant in accordance with Section V, Termination of Employment and Vested Retirement Income, assuming that the Plan Termination Date is his Termination of Employment date.
(D) fourth, there shall be allocated an amount necessary to provide all other retirement income accrued by Participants as of the Plan Termination Date but not then vested in accordance with Section V, Termination of Employment and Vested Retirement Income.
The amount necessary to provide the retirement income specified in each of the above categories shall be determined in accordance with annuity purchase rate assumptions selected by the Employer in accordance with such governmental regulations as may apply.
Amounts allocated on a Participant's behalf under any category above shall be appropriately adjusted if:
(1) an amount has been allocated on such Participant's behalf under a prior category, and/or
(2) all or a portion of a Participant's retirement income has been guaranteed under an insurance company contract prior to the Plan Termination Date.
If the amount available for allocation under any category is not sufficient to fully provide retirement income specified for such category, a pro rata allocation of the amount available will be made, and reduced retirement income will be provided to the extent possible.
As provided by ERISA, the Internal Revenue Service may require that the Fund be allocated in a manner different than that specified above in order to meet nondiscrimination requirements.
After the assets of the Fund have been withdrawn and allocated in accordance with the preceding terms of this Section 14.4, any amount remaining in the Fund will be returned to the Employer.
Notwithstanding the foregoing provisions, the amount of any retirement income otherwise to be provided in accordance with this Section 14.4 will be restricted in accordance with Section XV, Restriction of Benefits Upon Early Termination, to any extent required.
SECTION XV
RESTRICTION OF BENEFITS UPON EARLY TERMINATION OF THE PLAN
15.1 RESTRICTION OF BENEFITS UPON EARLY TERMINATION OF THE PLAN
This Section XV is included in the Plan to conform to the requirements of Income Tax Regulations Section 1.401-4(c).
(A) For the purpose of this Section 15.1, the words and phrases below will have the following meanings:
(1) Plan Date - The date the Plan is established and each later date when the Employer's Plan is changed so as to increase substantially the extent of possible discrimination as to contributions and benefits actually payable in the event of subsequent termination of the Plan or the subsequent discontinuance of contributions to the Plan.
(2) Restricted Participant - With respect to each Plan Date of an Employer, any of the Participants whose anticipated annual amount of retirement income provided by Employer contributions (or funds attributable to the Employer) exceeds $1,500, and who is among the twenty-five (25) highest-paid Employees on such Plan Date (including any such high-paid Employees who are not Participants at such time but may become Participants).
(B) When the restriction on benefits is being determined for more than one Plan Date, the Employer contributions which may be used for the benefit of a Restricted Participant will be the greatest of the amounts determined for each Plan Date.
(C) If the Plan is terminated within ten (10) years after its establishment or a benefit becomes payable to a Restricted Participant within ten (10) years after the date of the establishment of the Plan but before the date the Plan terminates, the Employer contributions (or funds attributable to the Employer) used to provide benefits for the Restricted Participant shall not exceed the greater of.
(1) $20,000, or
(2) twenty percent (20%) of the first $50,000 of such Restricted Participant's average regular annual compensation during his last five (5) years of Service multiplied by the number of years between the date of the establishment of the Plan and (a) the date on which the Plan terminates or (b) in the case of a Restricted Participant whose benefits become payable within ten (10) years after the date of the establishment of the Plan but before the date the Plan terminates, the date the Participant's benefit becomes payable.
(D) If a benefit becomes payable to a Restricted Participant within ten (10) years after the establishment of the Plan but before the Plan terminates, such restrictions shall remain applicable until the expiration of such ten (10) year period.
(E) If the Plan is amended so as to increase the benefit actually payable in the event of the subsequent termination of the Plan or the subsequent discontinuance of contributions thereunder, then the above provisions shall be applied to the amended Plan as if it were a new plan established on the date of the amendment. The Restricted Participants at the time the Plan was established shall continue to be subject to the restrictions as if the Plan had not been amended.
(F) For the amended Plan, the restrictions will apply to the twenty-five (25) highest paid Employees on the effective date of such amendment, except that such restrictions need not apply with respect to any Employee in this group for whom the retirement income provided by Employer contributions prior to that date and during the ensuing ten (10) years, based on his rate of Compensation on that date, could not exceed $1,500.
(G) Employer contributions used to provide benefits for the twenty-five (25) highest paid employees in the amended Plan shall be limited to the greatest of:
(1) the Employer contributions (or funds attributable to the Employer) which would have been applied to provide a benefit for the Employee if the previous plan had been continued without amendment; or
(2) $20,000; or
(3) the sum of (a) the Employer contributions (or funds
attributable to the Employer) which would have been
applied to provide benefits for the Employee under
the previous plan if it had been terminated the day
before the effective date of the amendment, and (b)
an amount computed by multiplying the number of years
for which the full current costs of the Plan after
the amendment date are met by the lesser of (i)
twenty percent (20%) of his annual compensation, or
(ii) $10,000.
(H) Notwithstanding the above limitations, the following limitations shall apply if they would result in a greater amount of Employer contributions being used for the benefit of the Restricted Participant:
(1) in the case of a substantial owner (as defined under
Section 4022(b) of ERISA), a dollar amount which
equals the present value of the benefit guaranteed
for such Employee under Section 4022 of ERISA, or if
the Plan has not been terminated, the present value
of the benefit that would be guaranteed if the Plan
terminated on the date the benefit commences,
determined in accordance with regulations of the
PBGC; and
(2) in the case of a Restricted Participant who is not a
substantial owner, a dollar amount which equals the
present value of the maximum benefit described in
Section 4022(b)(3)(B) of ERISA (determined on the
earlier of the date the Plan terminates or the date
benefits commence, and determined in accordance with
regulations of PBGC) without regard to any other
limitations in Section 4022 of ERISA.
(I) The limitations described above may be exceeded for the purpose of making current benefit payments to the Plan's retired participants (or Beneficiaries thereof) who would otherwise be subject to such restrictions, provided that (1) the Employer's contributions (or funds attributable to the Employer) which may be used for any such retired participant in accordance with the restrictions in this Section 15.1 are applied to provide a benefit in the form of (a) a Life-No Death Benefit or (b) an optional form of benefit that is determined by multiplying the Life-No Death Benefit by the applicable Adjustment Factor and (2) the benefit thus provided is supplemented by monthly payments to the extent necessary to provide the full Life-No Death Benefit and (3) such supplemental payments are made only if the full current costs of the Plan have been met or if the aggregate of such supplemental payments for all such retired participants (or any Beneficiaries thereof) does not exceed the aggregate Employer contributions already made under the Plan in the Plan Year then current.
(J) The foregoing conditions shall not restrict the current payment of the full benefits called for by the Plan with respect to a Restricted Participant while the Plan remains in effect and the funding standard account has a balance of at least zero.
(K) Commencing January 1, 1991, the following provisions relating to restrictions on benefits payable to certain highly compensated employees may be applied in lieu of the preceding paragraphs (A) through (J) of this Section 15.1:
(1) For purposes of this Section 15.1, "Restricted Employee" shall mean any one of the twenty-five (25) highest paid Employees from the group comprised of Highly Compensated Employees and Highly Compensated Former Employees (as defined under Section 414(q) of the Code).
(2) If the Plan is terminated, the benefit which becomes payable to a Restricted Employee must satisfy the nondiscrimination requirements of Section 401(a)(4) of the Code.
(3) If a benefit becomes payable to a Restricted Employee before the Plan terminates, the maximum annual benefit payable to such Restricted Employee shall be an amount equal to the annual payments which would be payable to him assuming his benefit is payable in the form of a Life-No Death Benefit.
(4) Notwithstanding the foregoing, the restrictions set forth in paragraph (3) above shall not apply if:
(a) after payment to a Restricted Employee of his
benefit, the value of Plan assets equals or
exceeds one hundred ten percent (110%) of the
value of current liabilities as defined under
Section 412(1)(7) of the Code; or
(b) the value of the benefit payable to the Restricted Employee is less than one percent (1%) of the value of current liabilities as defined under Section 412(1)(7) of the Code.
(L) The terms of this Section 15.1 shall prevail over any other terms of the Plan that may be inconsistent herewith.
(M) The limitation described in this Section 15.1 shall automatically become null and void and of no effect upon a ruling by the Internal Revenue Service that they are not required.
Carver Federal Savings Bank herewith causes the Carver Federal Savings Bank Retirement Income Plan, as amended and restated effective January 1, 1989, to be executed on the 19th day of February, 1992 by its duly authorized officer.
CARVER FEDERAL SAVINGS BANK
- -------------------------------- ---------------------------------------
Witness Authorized Officer
Plan Administrator
---------------------------------------
Title
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TABLE A
Late Retirement Adjustment Factor
Years After Years After
Normal Normal
Retirement Date Factor Retirement Date Factor
--------------- ------ --------------- ------
1 1.08 6 1.63
2 1.17 7 1.77
3 1.27 8 1.92
4 1.38 9 2.08
5 1.50 10 2.25
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Early Commencement Adjustment Factor
Years Prior to Years Prior to
Normal Normal
Retirement Date Factor Retirement Date Factor
--------------- ------ --------------- ------
1 .93 6 .62
2 .86 7 .59
3 .79 8 .56
4 .72 9 .53
5 .65 10 .50
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Social Security Option Adjustment Factor
Years Prior to Years Prior to
Normal Normal
Retirement Date Factor Retirement Date Factor
--------------- ------ --------------- ------
1 .93 6 .62
2 .86 7 .59
3 .79 8 .56
4 .72 9 .53
5 .65 10 .50
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TABLE A (CONTINUED)
Years Certain and Life Option Adjustment Factor
Age of Benefit
Commencement Number of Years Certain
------------ -----------------------------------
5 10 15 20
--- --- --- ---
Less than 55 .99 .98 .95 .92
55-59 .98 .97 .93 .89
60-64 .97 .96 .90 .85
65 and Over .96 .95 .87 .79
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Joint and Survivor Adjustment Factor and Contingent Pensioner Option Adjustment Factor
Joint and Survivor and
Contingent Annuitant
Continuation Percentage *
-------------------------
Age of Participant 50% 66-2/3% 100%
------------------ --- ------- ----
Less than 55 .92 .89 .85
55-59 .91 .88 .84
60-64 .90 .87 .82
65 and Over .89 .86 .81
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* Rates shall be reduced (increased) by .01 for each full year by which the joint annuitant is younger (older) than the participant by more than three years. Maximum factor is .98.
Factors for other than integral years shall be interpolated from the above table and rounded to nearest .01.
AMENDMENT NUMBER ONE
TO
CARVER FEDERAL SAVINGS BANK
RETIREMENT INCOME PLAN
Pursuant to Section 14.1 of Carver Federal Savings Bank Retirement Income Plan as amended and restated effective January 1, 1989 ("Plan"), the Plan is amended effective as follows:
1. Section I - Effective January 1, 1994, the definition of Earnings, Section
1.1 (J) shall be amended by adding the following paragraphs at the end thereof:
Effective January 1, 1994, Earnings for a Plan Year consisting of twelve months (12) (including Plan Years prior to January 1, 1994) shall not exceed $150,000, adjusted in multiples of $10,000 for increases in the cost-of-living as prescribed by the Secretary of the Treasury under Section 401(a)(17)(B) of the Code. Any cost-of-living increases described in this paragraph shall be applicable solely with respect to the amount of Earnings taken into account under the Plan during the twelve (12) month period or periods to which such increase applies. For purposes of this Section 1.1(J), if the Plan Year in which an Employee's Earnings is paid is less than twelve (12) calendar months, the amount of Earnings taken into account for such Plan Year shall be the applicable limit hereunder for such Plan Year, multiplied by a fraction, the numerator of which is the number of months taken into account for such Plan Year and the denominator of which is twelve (12).
In determining the dollar limitation hereunder, earnings received from any
Affiliated Employer shall be recognized as Earnings, and the rules of
Section 414(q)(6) of the Code shall apply, except that in applying such
rules the term "family" shall include only the Spouse of the Employee and
those lineal descendants of the Employee who have not attained age nineteen
(19) before the close of the Plan Year. If, as a result of the application
of such rules the adjusted limitation is exceeded, then the limitation
shall be prorated among the affected Employees in proportion to each such
Employee's Earnings as determined under this Section 1.1(J) prior to the
application of this limitation.
In no event shall an Employee who was a Participant under the Plan as in effect on December 31, 1993 and whose Accrued Benefit on or after January 1,1994 is based on Earnings in excess of $150,000 during a Plan Year prior to January 1, 1994, receive an Accrued Benefit under the Plan which is less than the greater of: (i) the Participant's Accrued Benefit as determined pursuant to the provisions of the Plan for Plan Years on or after January 1, 1994, based on all of the Participant's Credited Service, or (ii) the sum of: (A) the Accrued Benefit that would have been payable assuming the Plan provisions immediately preceding January 1, 1994 had remained in effect until the Participant's Termination of Employment with the Participant having terminated service on December 31, 1993, and (B) the Participant's Accrued Benefit as determined pursuant
to the provisions of the Plan for Plan Years on or after January 1, 1994, based on the Participant's Credited Service commencing on January 1, 1994.
2. Section VI - Effective January 1, 1994, Section 6.2(A)(12) shall be amended by adding the following as the fourth sentence thereof and the former fourth sentence shall follow accordingly:
Commencing January 1, 1994, Top-Heavy Earnings shall not exceed $150,000, adjusted in multiples of $10,000 for increases in the cost-of-living, as prescribed by the Secretary of the Treasury under Section 401(a)(17)(B) of the Code.
3. Section VIII - Effective January 1, 1993, Section VIII shall be amended by adding the following as the new Section 8.4 and the Table of Contents shall be revised accordingly:
8.4 DIRECT ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS
For purposes of this Section 8.4, the following definitions shall apply:
(A) "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
(B) "Distributee" means an Employee or former Employee. In
addition, the Employee's or former Employee's surviving Spouse
and the Employee's or former Employee's Spouse or former
spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are
Distributees with regard to the interest of the Spouse or
former spouse.
(C) "Eligible Retirement Plan" means an individual retirement
account described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that
accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to
the surviving Spouse, an Eligible Retirement Plan is an
individual retirement account or individual retirement
annuity.
(D) "Eligible Rollover Distribution" means any distribution of all
or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution
does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of
the Distributee and the Distributee's designated Beneficiary,
or for a specified period of ten (10) years or more; any
distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
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This Section 8.4 applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
AMENDMENT NUMBER TWO
TO
CARVER FEDERAL SAVINGS BANK
RETIREMENT INCOME PLAN
Pursuant to Section 14.1 of Carver Federal Savings Bank Retirement Income Plan as amended and restated effective January 1, 1989 ("Plan"), the Plan is amended effective as of January 1, 1994 to read as follows:
1. Section III - The portion of Section 3.1 which precedes the colon shall be amended in its entirety to read as follows:
A Participant's Accrued Benefit shall be the greatest of (A), (B), (C), or (D) below
2. Section III - Section 3.1 shall be further amended by substituting the following as subsection (B), and the former subsections (B) and (C) shall be renamed subsections (C) and (D), and any cross-references in the plan shall be renamed accordingly:
(B) $25 multiplied by each month for which the Participant is granted Credited Service; or
Carver Federal Savings Bank
401(k) Savings Plan
In
RSI Retirement Trust
(As Amended And Restated Effective May 1, 1993 and including provisions effective January 1, 1994 and October 24, 1994)
TABLE OF CONTENTS
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2 Ineligible Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.4 Termination of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.5 Eligibility upon Reemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.6 Eligibility Upon Reemployment of Employees Subject to Section 16(b) of the Securities Exchange Act
of 1934 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III - CONTRIBUTIONS AND LIMITATIONS ON CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1 Before-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2 Limitation on Before-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.3 Changes in Before-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.4 Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.5 Special Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.6 Discretionary Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.7 Limitation on Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.8 Aggregate Limit; Multiple Use of Alternative Limitation . . . . . . . . . . . . . . . . . . . . . . 23
3.9 Interest on Excess Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.10 Payment of Contributions to the Trust and Separate Agency . . . . . . . . . . . . . . . . . . . . . 26
3.11 Rollover Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.12 Section 415 Limits on Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV - VESTING AND FORFEITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.1 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.2 Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.3 Vesting upon Reemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE V - TRUST FUND, INVESTMENT ACCOUNTS AND
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.1 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.2 Interim Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.3 Account Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.4 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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787 -i- CARVER FEDERAL SAVINGS BANK
5.5 Tender Offers and Other Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.6 Separate Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.7 Power to Invest in Employer Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VI - INVESTMENT DIRECTIONS, CHANGES OF INVESTMENT DIRECTIONS AND TRANSFERS BETWEEN INVESTMENT
ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.1 Investment Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.2 Change of Investment Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.3 Transfers Between Investment Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.4 Employees Other than Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.5 Restrictions on Investments in the Employer Stock Fund for Certain Participants . . . . . . . . . . 40
ARTICLE VII - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.2 Spousal Consent Requirements - Optional Forms of Benefit Payments, Loans, Withdrawals,
Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.3 Non-Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.4 Hardship Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.5 Distribution of Benefits Following Retirement, Disability or Termination of Service . . . . . . . . 49
7.6 Optional Forms of Benefit Payment upon Retirement, Disability or Termination of Service . . . . . . 52
7.7 Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.8 Preretirement Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.9 Direct Rollover of Eligible Rollover Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.10 Latest Commencement of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.11 Manner of Payment of Distributions from the Employer Stock Fund . . . . . . . . . . . . . . . . . . 60
ARTICLE VIII - LOANS TO PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.1 Definitions and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.2 Loan Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.3 Term of Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.4 Operational Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.5 Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.6 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.7 Coordination of Outstanding Account and Payment of Benefits . . . . . . . . . . . . . . . . . . . . 65
ARTICLE IX - ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.1 General Administration of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.2 Designation of Named Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.3 Responsibilities of Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.4 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
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787 -ii- CARVER FEDERAL SAVINGS BANK
9.5 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.6 Powers and Duties of the Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.7 Certification of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.8 Authorization of Benefit Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.9 Payment of Benefits to Legal Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.10 Service in More Than One Fiduciary Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.11 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.12 Administration of Separate Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE X - BENEFIT CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.1 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.2 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.3 Disposition of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.4 Denial of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.5 Inaction by Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.6 Right to Full and Fair Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.7 Time of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.8 Final Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE XI - AMENDMENT, TERMINATION, AND WITHDRAWAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.1 Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.2 Withdrawal from the Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE XII - TOP-HEAVY PLAN PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.3 Minimum Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
12.4 Impact on Section 415 Maximum Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
12.5 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE XIII - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
13.1 No Right to Continued Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
13.2 Merger, Consolidation, or Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
13.3 Nonalienation of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
13.4 Missing Payee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
13.5 Affiliated Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
13.6 Successor Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
13.7 Return of Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
13.8 Adoption of Plan by Affiliated Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
13.9 Construction of Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
13.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
13.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
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INTRODUCTION
Effective as of October 1, 1989, Carver Federal Savings Bank ("Employer") adopted the Carver Federal Savings Bank 401(k) Savings Plan and Trust ("Prior Plan").
Effective as of May 1, 1993, the Employer adopted resolutions wherein RSI Retirement Trust was named successor trustee and the RSI Retirement Trust Agreement and Declaration of Trust ("Agreement") was adopted.
Effective as of May 1, 1993, the Prior Plan was amended and restated in its entirety. The amended and restated plan shall be known as Carver Federal Savings Bank 401(k) Savings Plan in RSI Retirement Trust ("Plan"), shall contain the terms and conditions set forth herein, and shall in all respects be subject to the provisions of the Agreement which are incorporated herein and made a part hereof.
The Plan as amended and restated hereunder incorporates a cash or deferred arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended ("Code").
The Plan shall constitute a profit-sharing plan within the meaning of Section 401(a) of the Code, without regard to current or accumulated profits of the Employer, as provided in Section 401 (a)(27) of the Code.
Subject to any amendments that may subsequently be adopted by the Employer prior to his Termination of Service, the provisions set forth in this Plan shall apply to an Employee who is in the employment of the Employer on or after May 1, 1993. Except to the extent specifically required to the contrary under the terms of this Plan, for terminations of employment prior to May 1, 1993, the rights and benefits of a former participant shall be determined in accordance with the provisions of the Prior Plan as in effect on the date of the former participant's termination of employment.
Effective as of October 24, 1994, the Employer (a) added an investment fund to the Plan consisting of common stock of the Employer, (b) established the Plan as a Plan of Partial Participation as defined under the Agreement and (c) adopted a Separate Agreement establishing a separate trust to hold the common stock of the Employer and designated a Separate Agency to serve as trustee.
The Employer has herein restated the Plan with the intention that (i) the Plan shall at all times be qualified under Section 401(a) of the Code, (ii) the Agreement and any trust created under any Separate Agreement shall be tax-exempt under Section 501(a) of the Code, and (iii) Employer contributions under the Plan shall be tax deductible under Section 404 of the Code. The provisions of the Plan and the Agreement, as well as any Separate Agreement shall be construed to effectuate such intentions.
787 -1- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
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ARTICLE I -
DEFINITIONS
The following words and phrases shall have the meanings hereinafter ascribed to them. Those words and phrases which have limited application are defined in the respective Articles in which such terms appear.
1.1 Accounts means the Before-Tax Contribution Account (including Special Contributions, if any), Matching Contribution Account, Rollover Contribution Account and Discretionary Employer Contribution Account, established under the Plan on behalf of an Employee.
1.2 Actual Contribution Percentage means the ratio (expressed as a percentage) of the Matching Contributions under the Plan which are made on behalf of an Eligible Employee for the Plan Year to such Eligible Employee's compensation (as defined under Section 414(s) of the Code) for the Plan Year. An Eligible Employee's compensation hereunder shall include compensation receivable from the Employer for that portion of the Plan Year during which the Employee is an Eligible Employee, up to a maximum of $200,000, adjusted as prescribed by the Secretary of the Treasury under Section 401(a)(17) of the Code. Commencing January 1, 1994, the amount of compensation taken into account for a Plan Year shall not exceed $150,000, adjusted in multiples of $10,000 for increases in the cost-of-living as prescribed by the Secretary of the Treasury under Section 401(a)(17)(B) of the Code. In determining compensation, the rules of Section 414(q)(6) of the Code shall apply except that the term "family" shall include only the Spouse and those lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year.
1.3 Actual Deferral Percentage means the ratio (expressed as a percentage) of the sum of Before-Tax Contributions, and those Qualified Nonelective Contributions taken into account under the Plan for the purpose of determining the Actual Deferral Percentage, which are made on behalf of an Eligible Employee for the Plan Year to such Eligible Employee's compensation (as defined under Section 414(s) of the Code) for the Plan Year. An Eligible Employee's compensation hereunder shall include compensation receivable from the Employer for that portion of the Plan Year during which the Employee is an Eligible Employee, up to a maximum of $200,000, adjusted as prescribed by the Secretary of the Treasury under Section 401(a)(17) of the Code. Commencing January 1, 1994, the amount of compensation taken into account for a Plan Year shall not exceed $150,000, adjusted in multiples of $10,000 for increases in the cost-of-living as prescribed by the Secretary of the Treasury under Section 401(a)(17)(B) of the Code. In determining compensation, the rules of Section 414(q)(6) of the Code shall apply except that the term "family" shall include only the Spouse and those lineal descendants
787 -2- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
of the Employee who have not attained age nineteen (19) before the
close of the Plan Year.
1.4 Affiliated Employer means a member of an affiliated service group (as
defined under Section 414(m) of the Code), a controlled group of
corporations (as defined under Section 414(b) of the Code), a group of
trades or businesses under common control (as defined under Section
414(c) of the Code) of which the Employer is a member, any leasing
organization (as defined under Section 414(n) of the Code) providing
the services of Leased Employees to the Employer, or any other group
provided for under any and all Income Tax Regulations promulgated by
the Secretary of the Treasury under Section 414(o) of the Code.
1.5 Affiliated Service means employment with an employer during the period
that such employer is an Affiliated Employer.
1.6 Agreement means the RSI Retirement Trust Agreement and Declaration of
Trust as amended and restated August 1, 1990, as amended from time to
time. The Agreement shall be incorporated herein and constitute a part
of the Plan.
1.7 Average Actual Contribution Percentage means the average of the Actual
Contribution Percentages of (a) the group comprised of Eligible
Employees who are Highly Compensated Employees or (b) the group
comprised of Eligible Employees who are Non-Highly Compensated
Employees, whichever is applicable.
1.8 Average Actual Deferral Percentage means the average of the Actual
Deferral Percentages of (a) the group comprised of Eligible Employees
who are Highly Compensated Employees or (b) the group comprised of
Eligible Employees who are Non-Highly Compensated Employees, whichever
is applicable.
1.9 Before-Tax Contribution Account means the separate, individual account
established on behalf of a Participant to which Before-Tax
Contributions and Special Contributions made on his behalf are
credited, together with all earnings and appreciation thereon, and
against which are charged any withdrawals, loans and other
distributions made from such account and any losses, depreciation or
expenses allocable to amounts credited to such account.
1.10 Before-Tax Contributions means the contributions of the Employer made
in accordance with the Compensation Reduction Agreements of
Participants pursuant to Section 3.1
1.11 Beneficiary means any person who is receiving or is eligible to
receive a benefit under Section 7.8 of the Plan upon the death of an
Employee or former Employee.
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787 -3- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
1.12 Board means the board of trustees, directors or other governing body
of the Employer.
1.13 Code means the Internal Revenue Code of 1986, as amended from time to
time.
1.14 Committee means the person or persons appointed by the Employer in
accordance with Section 9.2(b).
1.15 Compensation means an Employee's wages, salary, fees and other amounts
defined as compensation in Section 415(c)(3) of the Code and Income
Tax Regulations Sections 1.415-2(d)(2),(3) and (6), received for
personal services actually rendered in the course of employment with
the Employer for the calendar year, prior to any reduction pursuant to
a Compensation Reduction Agreement. Compensation shall include
commissions, overtime, bonuses, wage continuation payments to an
Employee absent due to illness or disability of a short-term nature,
amounts paid or reimbursed by the Employer for Employee moving
expenses (to the extent not deductible by the Employee), and the value
of any nonqualified stock option granted to an Employee by the
Employer (to the extent includable in gross income for the year
granted).
Compensation does not include contributions made by the Employer to
any other pension, deferred compensation, welfare or other employee
benefit plan, amounts realized from the exercise of a nonqualified
stock option or the sale of a qualified stock option, and other
amounts which receive special tax benefits.
Compensation shall not exceed $200,000, adjusted as prescribed by the
Secretary of the Treasury under Section 401(a)(17) of the Code.
Commencing January 1, 1994, the amount of Compensation taken into
account for a Plan Year shall not exceed $150,000, adjusted in
multiples of $10,000 for increases in the cost-of-living as prescribed
by the Secretary of the Treasury under Section 401(a)(17)(B) of the
Code. For purposes of this Section 1.15, if the Plan Year in which a
Participant's Compensation is being made is less than twelve (12)
calendar months, the amount of Compensation taken into account for
such Plan Year shall be the applicable limitation hereunder for such
Plan Year, multiplied by a fraction, the numerator of which is the
number of months taken into account for such Plan Year and the
denominator of which is twelve (12). In determining the dollar
limitation hereunder, compensation received from any Affiliated
Employer shall be recognized as Compensation and the rules of Section
414(q)(6) of the Code shall apply except that the term "family" shall
include only the Spouse and those lineal descendants of the Employee
who have not attained age nineteen (19) before the close of the Plan
Year.
1.16 Compensation Reduction Agreement means an agreement between the
Employer and an Eligible Employee whereby the Eligible Employee agrees
to reduce his Compensation during the applicable payroll period by an
amount equal to any whole percentage thereof
|
787 -4- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
and the Employer agrees to contribute to the Trust, on behalf of such
Eligible Employee, an amount equal to the specified reduction in
Compensation.
1.17 Conversion Date means October 24, 1994, the date of conversion of the
Employer from mutual to stock ownership.
1.18 Disability means a physical or mental condition, determined after
review of those medical reports deemed satisfactory for this purpose,
which renders the Participant totally and permanently incapable of
engaging in any substantial gainful employment based on his education,
training and experience.
1.19 Discretionary Employer Contribution Account means the separate,
individual account established on behalf of a Participant to which
Discretionary Employer Contributions, if any, are credited, together
with all earnings and appreciation thereon, and against which are
charged any withdrawals, loans and other distributions made from such
account, as well as any losses, depreciation, or expenses allocable to
amounts credited to such account.
1.20 Discretionary Employer Contributions means the amounts, if any,
contributed by the Employer on behalf of an Eligible Employee,
pursuant to Section 3.6.
1.21 Early Retirement Date means the first day of any month coincident with
or following the Participant's attainment of age sixty (60) and the
completion of a five (5) year Period of Service.
Notwithstanding any provisions of the plan to the contrary, if a
Participant incurs a Termination of Service after having completed a
five (5) year Period of Service but before attaining age sixty (60),
the Participant's Early Retirement Date shall be the date as of which
the Participant attains age sixty (60).
1.22 Effective Date means October 1, 1989.
1.23 Eligibility Computation Period means the twelve (12) consecutive month
period commencing with the Employee's Employment Commencement Date
during which an Employee completes one thousand (1,000) or more Hours
of Service. If an Employee fails to complete one thousand (1,000)
Hours of Service, then each Plan Year commencing subsequent to the
Employee's Employment Commencement Date in which he completes one
thousand (1,000) or more Hours of Service.
1.24 Eligible Employee means an Employee who is eligible to participate in
the Plan pursuant to the provisions of Article II.
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787 -5- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
1.25 Employee means any person employed by the Employer.
1.26 Employer means Carver Federal Savings Bank and any Participating
Affiliate or any successor organization which shall continue to
maintain the Plan set forth herein.
1.27 Employer Resolutions means resolutions adopted by the Board.
1.28 Employer Stock Fund means commencing upon the Conversion Date, the
Separate Assets consisting of common stock of the Employer which shall
be maintained in an Investment Account established for such purpose.
1.29 Employment Commencement Date means the date on which an Employee first
performs an Hour of Service for the Employer upon initial employment
or, if applicable, upon reemployment.
1.30 ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.31 Forfeitures means any amounts forfeited pursuant to Section 4.2 by a
Participant whose Termination of Service occurs prior to such
Participant's being fully vested in the Net Value of his Accounts.
1.32 Hardship means the condition described in Section 7.4.
1.33 Highly Compensated Employee means, with respect to a Plan Year, an
Employee or an employee of an Affiliated Employer who is such an
Employee or employee during the Plan Year for which a determination is
being made and who:
(a) during the Plan Year immediately preceding the Plan Year for
which a determination is being made:
(i) received compensation as defined under Section
414(q)(7) of the Code ("Section 414(q) Compensation")
from the Employer of greater than $75,000, adjusted
as prescribed by the Secretary of the Treasury under
Section 415(d) of the Code, or
(ii) received Section 414(q) Compensation from the
Employer of greater than $50,000, adjusted as
prescribed by the Secretary of the Treasury under
Section 415(d) of the Code, and was a member of the
top-paid group of Employees (as defined under Section
414(q)(4) of the Code) ("Top-Paid Group"), or
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787 -6- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
|
(iii) was an officer (as determined in accordance with
Section 414(q)(5) of the Code) of the Employer who
received Section 414(q) Compensation from the
Employer of greater than fifty percent (50%) of the
dollar limitation in effect under Section
415(b)(1)(A) of the Code, or if no such officer of
the Employer satisfied such compensation requirement,
was the highest paid officer for such year, or
(b) during the Plan Year for which a determination is being made,
satisfies the requirements of subsection (a)(i), (ii) or
(iii), determined without regard to "during the Plan Year
immediately preceding the Plan Year for which a determination
is made", and is a member of the group consisting of the one
hundred (100) Employees receiving the highest Section 414(q)
Compensation from the Employer during such Plan Year ("Top 100
Employees"), or
(c) at any time during the Plan Year for which a determination is being made or at any time during the Plan Year immediately preceding the Plan Year for which a determination is being made, was a five-percent owner as described under Section 414(q)(3) of the Code.
Highly Compensated Employee also means a former Employee who (A) incurred a Termination of Service prior to the Plan Year of the determination, (B) is not credited with an Hour of Service during the Plan Year of the determination and (C) satisfied the requirements of subsection (a), (b) or (c) during either the Plan Year of his Termination of Service or any Plan Year ending coincident with or subsequent to the Employee's attainment of age fifty-five (55).
If, during either the Plan Year of the determination or the preceding
Plan Year, an Employee is a Family Member of either (1) a five-percent
owner (as defined under Section 414(q)(3) of the Code), or (2) a
Highly Compensated Employee who is among the ten (10) highly
compensated Employees receiving the highest Section 414(q)
Compensation from the Employer during such Plan Year, the Section
414(q) Compensation and the Accounts of the Family Member shall be
aggregated with the Section 414(q) Compensation and the Accounts of
such Highly Compensated Employee and the Family Member and the Highly
Compensated Employee shall be treated as a single Employee. For
purposes of this Section 1.33, Family Member includes the Spouse,
lineal ascendants and descendants of the Employee or former Employee
and the spouse of a lineal ascendant or descendant.
The determination of the number and identity of Employees in the Top-Paid Group, the Top 100 Employees, and the number of Employees treated as officers shall be made in accordance with Section 414(q) of the Code and regulations promulgated thereunder by the Secretary of the Treasury.
787 -7- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
1.34 Hour of Service means the following:
(a) each hour for which an Employee is directly or indirectly
paid, or entitled to payment, by the Employer for the
performance of duties. These hours shall be credited to the
Employee for the computation period or periods in which the
duties are performed; and
(b) each hour, for which an Employee is directly or indirectly
paid or entitled to payment by the Employer for reasons (such
as but not limited to vacation, sickness or disability) other
than for the performance of duties (irrespective of whether
the employment relationship has terminated). These hours shall
be credited to the Employee for the computation period or
periods in which the nonperformance of duties occur; and
(c) each hour for which back pay, irrespective of mitigation of
damage, has been either awarded or agreed to by the Employer.
These hours shall be credited to the Employee for the
computation period or periods to which the award or agreement
pertains rather than the computation period in which the
award, agreement, or payment was made. These same Hours of
Service shall not be credited under both paragraph (a) or
paragraph (b) of this Section, and under this paragraph (c).
(d) Hours of Service shall be computed and credited in accordance
with Section 2530.200b-2 of the Department of Labor
Regulations which are incorporated herein by reference.
(e) Hours of Service shall include Affiliated Service.
Hours of Service for whom records are not maintained shall be
determined on the assumption that each Employee has completed
forty-five (45) Hours of Service per week for each week in which he
would be required to be credited with at least one (1) Hour of
Service.
1.35 Investment Accounts means any and all of the investment accounts
established by a separate written agreement between the Employer and
the Trustees for the purpose of investing contributions made to the
Trust Fund in accordance with the provisions of the Agreement. The
securities and other property in which contributions to the Investment
Accounts of the Trust Fund may be invested shall be specified in the
Agreement and the rights of the Trustees shall be established in
accordance with the provisions of such Agreement. Commencing on the
Conversion Date, Investment Accounts shall also include any investment
account established and governed pursuant to the provisions of the
Separate Agreement entered into in connection with such account
between the Employer and the Separate Agency elected as trustee for
such investment account.
|
787 -8- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
1.36 Leased Employee means any individual (other than an Employee of the
Employer or an employee of an Affiliated Employer) who, pursuant to an
agreement between the Employer or any Affiliated Employer and any
other person ("leasing organization"), has performed services for the
Employer or any Affiliated Employer on a substantially fulltime basis
for a period of at least one (1) year, and such services are of a type
historically performed by employees in the business field of the
Employer or any Affiliated Employer. A determination as to whether a
Leased Employee shall be treated as an Employee of the Employer or an
Affiliated Employer shall be made in accordance with Section 414(n) of
the Code and any and all Income Tax Regulations promulgated
thereunder.
1.37 Matching Contribution Account means the separate, individual account
established on behalf of a Participant to which the Matching
Contributions made on such Participant's behalf under the Prior Plan
or the Plan are credited, together with all earnings and appreciation
thereon, and against which are charged any withdrawals, loans and
other distributions made from such account and any losses,
depreciation or expenses allocable to amounts credited to such
account.
1.38 Matching Contributions means the contributions made by the Employer
pursuant to Section 3.4.
1.39 Named Fiduciaries means the Trustees, the Committee and such other
parties who are designated by the Employer to control and manage the
operation and administration of the Plan.
1.40 Net Value means the value of an Employee's Accounts as determined as
of the Valuation Date coincident with or next following the event
requiring such determination.
1.41 Non-Highly Compensated Employee means, with respect to a Plan Year, an
Employee who is neither a Highly Compensated Employee nor a family
member as provided in Section 414(q)(6) of the Code.
1.42 Normal Retirement Ace means the date an Employee attains age
sixty-five (65).
1.43 Normal Retirement Date means the first day of the month coincident
with or next following the Participant's Normal Retirement Age.
1.44 One Year Period of Severance means, a twelve (12) consecutive month
period following an Employee's Termination of Service with the
Employer during which the Employee did not perform an Hour of Service.
Notwithstanding the foregoing, if an Employee's Employment
Commencement Date occurred prior to the Restatement Date, such
Employee incurs a termination of service (as defined in the Prior
Plan) during the
|
787 -9- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
Eligibility Computation Period commencing immediately prior to the
Restatement Date, such Employee's One Year Period of Severance shall
be deemed to have commenced as of the first day following the last day
of such Computation Period.
Prior to the Restatement Date, a One Year Period of Severance means a
Plan Year during which the Employee did not complete at least five
hundred and one (501) Hours of Service.
Notwithstanding the foregoing, if an Employee is absent from
employment for maternity or paternity reasons, such absence during the
twenty-four (24) month period commencing on the first date of such
absence shall not constitute a One Year Period of Severance. An
absence from employment for maternity or paternity reasons means an
absence (a) by reason of pregnancy of the Employee, or (b) by reason
of a birth of a child of the Employee, or (c) by reason of the
placement of a child with the Employee in connection with the adoption
of such child by such Employee, or (d) for purposes of caring for such
child for a period beginning immediately following such birth or
placement.
1.45 Participant means an Eligible Employee who, in accordance with the
provisions of Section 2.3, has elected to participate in the Plan and
whose participation in the Plan has not been terminated in accordance
with the provisions of Section 2.4.
1.46 Participating Affiliate means any corporation that is a member of a
controlled group of corporations (within the meaning of Section 414(b)
of the Code) of which the Sponsoring Employer is a member and any
unincorporated trade or business that is a member of a group of trades
or businesses under common control (within the meaning of Section
414(c) of the Code) of which the Sponsoring Employer is a member,
which, with the prior approval of the Sponsoring Employer and subject
to such terms and conditions as may be imposed by such Sponsoring
Employer and the Trustees, shall adopt this Plan in accordance with
the provisions of Section 13.8 and the Agreement. Such entity shall
continue to be a Participating Affiliate until such entity terminates
its participation in the Plan in accordance with Section 13.8.
1.47 Period of Service means a period commencing with an Employee's
Employment Commencement Date and ending on the date such Employee
first incurs a Termination of Service.
Notwithstanding the foregoing, if an Employee's Employment
Commencement Date occurred prior to May 1, 1993, such Employee's
Period of Service shall not be less than the sum of:
(a) the number of completed years of service credited to such
Employee as of April 30, 1993 under the provisions of the
Prior Plan; and
|
787 -10- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
(b) an additional year of service for the Vesting Computation
Period beginning immediately prior to the Restatement Date
provided the Employee completes at least one thousand (1,000)
Hours of Service during such Vesting Computation Period; and
c) the period commencing with the Restatement Date and ending on
the date such Employee first incurs a Termination of Service.
Notwithstanding the foregoing, the period between the first and second
anniversary of the first date of a maternity or paternity absence
described under Section 1.44 shall not be included in determining a
Period of Service.
A period after the Restatement Date during which an individual was not
employed by the Employer shall nevertheless be deemed to be a Period
of Service if such individual incurred a Termination of Service and:
(a) such Termination of Service was the result of resignation,
discharge or retirement and such individual is reemployed by
the Employer within one (1) year after such Termination of
Service; or
(b) such Termination of Service occurred when the individual was
otherwise absent for less than one (1) year and he was
reemployed by the Employer within one (1) year after the date
such absence began.
All Periods of Service not disregarded under Sections 2.5 and 4.3
shall be aggregated.
Wherever used in the Plan, a Period of Service means the quotient
obtained by dividing the days in all Periods of Service not
disregarded hereunder by three hundred sixty-five (365) and
disregarding any fractional remainder.
1.48 Plan means the Carver Federal Savings Bank 401(k) Savings Plan in RSI
Retirement Trust, as herein restated and as it may be amended from
time to time. Commencing on the Conversion Date, the Plan shall be a
Plan of Partial Participation as defined under the Agreement.
1.49 Plan Administrator means the person or persons who have been
designated as such by the Employer in accordance with the provisions
of Section 9.4.
1.50 Plan Funds means the assets of the Plan held in the Trust Fund and
Separate Assets held under any Separate Agreement.
1.51 Plan Year means the calendar year.
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787 -11- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
1.52 Postponed Retirement Date means the first day of the month coincident
with or next following a Participant's date of actual retirement which
occurs after his Normal Retirement Date.
1.53 Prior Plan means the Carver Federal Savings Bank 401(k) Savings Plan
and Trust as in effect on the date immediately preceding the
Restatement Date.
1.54 Qualified Nonelective Contributions means contributions, other than
Matching Contributions and Discretionary Employer Contributions, made
by the Employer, which (a) Participants may not elect to receive in
cash in lieu of their being contributed to the Plan; (b) are one
hundred percent ( 100%) nonforfeitable when made; and (c) are not
distributable under the terms of the Plan to Participants or their
Beneficiaries until the earliest of:
(i) the Participant's death, Disability or separation from service
for other reasons;
(ii) the Participant's attainment of age fifty-nine and one-half
(59-1/2); or
(iii) termination of the Plan.
Special Contributions defined under Section 1.62 are Qualified
Nonelective Contributions.
1.55 Restatement Date means May 1, 1993.
1.56 Retirement Date means the Participant's Normal Retirement Date, Early
Retirement Date or Postponed Retirement Date, whichever is applicable.
1.57 Rollover Contribution means (a) a contribution to the Plan of money
received by an Employee from a qualified plan or (b) a contribution to
the Plan of money transferred directly from another qualified plan on
behalf of the Employee, which the Code permits to be rolled over into
the Plan.
1.58 Rollover Contribution Account means the separate, individual account
established on behalf of an Employee to which his Rollover
Contributions are credited together with all earnings and appreciation
thereon, and against which are charged any withdrawals, loans and
other distributions made from such account and any losses,
depreciation or expenses allocable to amounts credited to such
account.
1.59 Separate Agency means any trustee holding Plan Funds under a Separate
Agreement.
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787 -12- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
1.60 Separate Agreement means the trust agreement governing the investment
and administration of any Separate Assets.
1.61 Separate Assets means assets of the Plan as described in Section 5.6
which are held in a trust other than the Trust and which assets are
not administered by the Trustees.
1.62 Special Contributions means the contributions made by the Employer
pursuant to Section 3.5. Special Contributions are Qualified
Nonelective Contributions as defined under Section 1.54.
1.63 Sponsoring Employer means Carver Federal Savings Bank or any successor
organization which shall continue to maintain the Plan set forth
herein.
1.64 Spouse means a person to whom the Employee was legally married and
which marriage had not been dissolved by formal divorce proceedings
that had been completed prior to the date on which payments to the
Employee are scheduled to commence.
1.65 Termination of Service means the earlier of (a) the date on which an
Employee's service is terminated by reason of his resignation,
retirement, discharge, death or Disability or (b) the first
anniversary of the date on which such Employee's active service ceases
for any other reason.
Service in the Armed Forces of the United States of America shall not
constitute a Termination of Service but shall be considered to be a
period of employment by the Employer provided that (i) such military
service is caused by war or other emergency or the Employee is
required to serve under the laws of conscription in time of peace,
(ii) the Employee returns to employment with the Employer within six
(6) months following discharge from such military service and (iii)
such Employee is reemployed by the Employer at a time when the
Employee had a right to reemployment at his former position or
substantially similar position upon separation from such military duty
in accordance with seniority rights as protected under the laws of the
United States of America.
A leave of absence granted to an Employee by the Employer shall not
constitute a Termination of Service provided that the Participant
returns to the active service of the Employer at the expiration of any
such period for which leave has been granted.
Notwithstanding the foregoing, an Employee who is absent from service
with the Employer beyond the first anniversary of the first date of
his absence for maternity or paternity reasons set forth in Section
1.44 shall incur a Termination of Service for purposes of the Plan on
the second anniversary of the date of such absence.
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787 -13- CARVER FEDERAL SAVINGS BANK
ARTICLE I -
DEFINITIONS
- --------------------------------------------------------------------------------
1.66 Trust means the trust established or maintained under the Agreement
with respect to the Plan.
1.67 Trust Fund means the assets held in accordance with the Agreement.
1.68 Trustees means the Trustees of the RSI Retirement Trust.
1.69 Units means the units of measure of an Employee's proportionate
undivided beneficial interest in one or more of the Investment
Accounts, valued as of the close of business.
1.70 Valuation Date means each business day.
1.71 Vesting Computation Period means each Plan Year in which an Employee
completes one thousand (1,000) Hours of Service.
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787 -14- CARVER FEDERAL SAVINGS BANK
ARTICLE II -
ELIGIBILITY AND PARTICIPATION
- --------------------------------------------------------------------------------
|
ARTICLE II -
ELIGIBILITY AND PARTICIPATION
2.1 ELIGIBILITY
(a) Every Employee who was a Participant in the Prior Plan immediately prior to the Restatement Date shall continue to be a Participant on the Restatement Date.
(b) Every other Employee who is not excluded under the provisions of Section 2.2 shall become an Eligible Employee upon satisfying all of the following conditions:
(i) completion of a Period of Service of one (1) year;
(ii) attainment of age twenty-one (21); and
(iii) classification as a salaried Employee.
(c) For purposes of determining (i) if an Employee completed a Period of Service of one (1) year and (ii) Periods of Service pursuant to Section 2.5, employment with (A) an Affiliated Employer and (B) effective October 1, 1989 and November 19, 1990 respectively, prior employment with either Crossland Savings, FSB or Nassau Federal Savings and Loan Association, shall be deemed employment with the Employer.
(d) An Employee who otherwise satisfies the requirements of this
Section 2.1 but who is excluded under the provisions of
Section 2.2 shall become an Eligible Employee immediately upon
classification as an Employee under the provisions of
subsection (b)(iii).
2.2 INELIGIBLE EMPLOYEES
The following classes of Employees are ineligible to participate in the Plan:
(a) Employees compensated on an hourly, daily, fee, or retainer basis;
(b) Leased Employees;
(c) Employees in a unit of Employees covered by a collective bargaining agreement with the Employer pursuant to which employee benefits were the subject of good faith bargaining and which agreement does not expressly provide that Employees of such unit be covered under the Plan; and
(d) Owner-Employees. For purposes of this Section 2.2(d), Owner-Employee means an individual who is a sole proprietor or who is a partner owning more than ten
787 -15- CARVER FEDERAL SAVINGS BANK
ARTICLE II -
ELIGIBILITY AND PARTICIPATION
- --------------------------------------------------------------------------------
|
percent (10%) of either the capital or profits interest of a partnership which adopted the Plan.
2.3 PARTICIPATION
An Employee who was a Participant in the Prior Plan immediately prior to the Restatement Date shall continue to be a Participant in the Plan on the Restatement Date. Commencing as of the Restatement Date, an Eligible Employee shall automatically participate in the first full payroll period of any calendar month with or next following satisfaction of the eligibility requirements set forth in Section 2.1 and either: (a) an election for Before-Tax Contributions in accordance with Section 3.1 or (b) eligibility for Special Contributions in accordance with Section 3.5 or Discretionary Employer Contributions in accordance with Section 3.9. An election for Before-Tax Contributions shall be evidenced by completing and filing the form prescribed by the Committee not less than ten (10) days prior to the date payroll deductions are to commence. Such form shall include, but not be limited to, a Compensation Reduction Agreement, a designation of Beneficiary, and an investment direction as described in Section 6.1. By completing and filing such form, the Eligible Employee authorizes the Employer to make the applicable payroll deductions from Compensation, commencing on the first applicable payday coincident with or next following the effective date of the Eligible Employee's election to participate. In the case of Special Contributions or Discretionary Employer Contributions, a Participant shall complete a form prescribed by the Committee, designating a Beneficiary and an investment direction as described in Section 6.1.
2.4 TERMINATION OF PARTICIPATION
Participation in the Plan shall terminate on the earlier of the date a Participant dies or the entire vested interest in the Net Value of such Participant's Accounts has been distributed.
2.5 ELIGIBILITY UPON REEMPLOYMENT
If an Employee incurs a One Year Period of Severance prior to satisfying the eligibility requirements of Section 2.1, service prior to such One Year Period of Severance shall be disregarded and such Employee must satisfy the eligibility requirements of Section 2.1 as a new Employee.
If an Employee incurs a One Year Period of Severance after satisfying the eligibility requirements of Section 2.1 and:
(a) if such Employee is not vested in any Matching Contributions and/or Discretionary Employer Contributions, incurs a One Year Period of Severance and again performs an Hour of Service, the Employee shall receive credit for Periods of Service prior to a One Year Period of Severance only if the number
787 -16- CARVER FEDERAL SAVINGS BANK
ARTICLE II -
ELIGIBILITY AND PARTICIPATION
- --------------------------------------------------------------------------------
|
of consecutive One Year Periods of Severance is less than the greater of: (i) five (5) years or (ii) the aggregate number of such Employee's Periods of Service credited before his One Year Period of Severance. If such former Employee's Periods of Service prior to his One Year Period of Severance are recredited under this Section 2.5, such former Employee shall be eligible to participate immediately upon reemployment, provided such Employee is not excluded from participating under the provisions of Section 2.2. If such former Employee's Periods of Service prior to his One Year Period of Severance are not recredited under this Section 2.5, such Employee must satisfy the eligibility requirements of Section 2.1 as a new Employee;
(b) if such Employee is vested in any Matching Contributions and/or Discretionary Employer Contributions, incurs a One Year Period of Severance and again performs an Hour of Service, the Employee shall receive credit for Periods of Service prior to his One Year Period of Severance and shall be eligible to participate in the Plan immediately upon reemployment, provided such Employee is not excluded from participating under the provisions of Section 2.2.
2.6 ELIGIBILITY UPON REEMPLOYMENT OF EMPLOYEES SUBJECT TO SECTION 16(B) OF THE SECURITIES EXCHANGE ACT OF 1934
Notwithstanding anything contained in the Plan to the contrary, if an
Employee subject to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 incurs a Termination of Service and again
performs an Hour of Service, such Employee shall not be eligible to
participate in the Plan until the later of: (a) the date which is six
(6) months from the date such Employee incurred a Termination of
Service or (b) the date such Employee again performs an Hour of
Service with the Employer; provided such Employee is not excluded from
participating under the provisions of Section 2.2.
ARTICLE III -
CONTRIBUTIONS AND LIMITATIONS ON CONTRIBUTIONS
3.1 BEFORE-TAX CONTRIBUTIONS
The Employer shall make Before-Tax Contributions for each payroll period in an amount equal to the amount by which a Participant's Compensation has been reduced with respect to such period under his Compensation Reduction Agreement. Subject to the limitations set forth in Sections 3.2 and 3.12, the amount of reduction authorized by the Eligible Employee shall be limited to whole percentages of Compensation and shall not be less than one percent (1%) nor greater than fifteen percent (15%). The Before-Tax Contributions made on behalf of a Participant shall be credited to such Participant's Before-Tax Contribution Account and shall be invested in accordance with Article VI of the Plan.
3.2 LIMITATION ON BEFORE-TAX CONTRIBUTIONS
(a) The percentage of Before-Tax Contributions made on behalf of a Participant who is a Highly Compensated Employee shall be limited so that the Average Actual Deferral Percentage for the group of such Highly Compensated Employees for the Plan Year does not exceed the greater of:
(i) the Average Actual Deferral Percentage for the group of Eligible Employees who are Non-Highly Compensated Employees for the Plan Year multiplied by 1.25; or
(ii) the Average Actual Deferral Percentage for the group of Eligible Employees who are Non-Highly Compensated Employees for the Plan Year, multiplied by two (2); provided that the difference in the Average Actual Deferral Percentage for eligible Highly Compensated Employees and eligible Non-Highly Compensated Employees does not exceed two percent (2%). Use of this alternative limitation shall be subject to the provisions of Income Tax Regulations Section 1.401(m)-2 regarding the multiple use of the alternative deferral tests set forth in Sections 401(k) and 401(m) of the Code.
If the Average Actual Deferral Percentage for the group of eligible Highly Compensated Employees exceeds the limitations set forth in the preceding paragraph, the amount of excess Before-Tax Contributions for a Highly Compensated Employee shall be determined by "leveling" the highest Actual Deferral Percentage until the Average Actual Deferral Percentage for the group of eligible Highly Compensated Employees complies with such limitations. For purposes of this paragraph, "leveling" means reducing the Actual Deferral
Percentage of the Highly Compensated Employee with the highest Actual Deferral Percentage to the extent required to:
(A) enable the Average Actual Deferral Percentage limitations to be met, or
(B) cause such Highly Compensated Employee's Actual Deferral Percentage to equal the Actual Deferral Percentage of the Highly Compensated Employee with the next highest Actual Deferral Percentage
and repeating such process until the Average Actual Deferral Percentage for the group of eligible Highly Compensated Employees complies with the Average Actual Deferral Percentage limitations.
If Before-Tax Contributions made on behalf of a Participant during any Plan Year exceed the maximum amount applicable to a Participant as set forth above, any such contributions, including any earnings thereon as determined under Section 3.9, shall be characterized as Compensation payable to the Participant and shall be paid to the Participant from his Before-Tax Contribution Account no later than two and one-half (2-1/2) months after the close of such Plan Year.
In the event that the Plan satisfies the requirements of
Section 410(b) of the Code only if aggregated with one or more
other plans, or if one or more other plans satisfy the
requirements of Section 410(b) of the Code only if aggregated
with the Plan, then this Section 3.2 shall be applied by
determining the Actual Deferral Percentages of Eligible
Employees as if all such plans were a single plan.
(b) Before-Tax Contributions and elective deferrals (as defined under Section 402(g) of the Code) under all other plans, contracts or arrangements of the Employer made on behalf of any Participant during the 1993 Plan Year shall not exceed $8,994. During the 1994 Plan Year, such amount shall be increased to $9,240. For Plan Years commencing after December 31, 1994, Before-Tax Contributions and elective deferrals (as defined under Section 402(g) of the Code) under all other plans, contracts or arrangements of the Employer shall be further adjusted as prescribed by the Secretary of the Treasury under Section 415(d) of the Code.
(c) If Before-Tax Contributions made on behalf of a Participant during any Plan Year exceed the dollar limitation set forth in subsection (b), such contributions, including any earnings thereon as determined under Section 3.9, shall be characterized as Compensation payable to the Participant and shall be paid to the Participant from his Before-Tax Contribution Account no later than April 15th of the calendar year following the close of such Plan Year.
(d) Subject to the requirements of Sections 401(a) and 401(k) of the Code, the maximum amounts under subsections (a) and (b) may differ in amount or percentage
as between individual Participants or classes of Participants, and any Compensation Reduction Agreement may be terminated, amended, or suspended without the consent of any such Participant or Participants in order to comply with the provisions of such subsections (a) and (b).
3.3 CHANGES IN BEFORE-TAX CONTRIBUTIONS
Unless (a) an election is made to the contrary, or (b) a Participant receives a Hardship distribution pursuant to Section 7.4(c)(iii), the percentage of Before-Tax Contributions made under Section 3.1 shall continue in effect so long as the Participant has a Compensation Reduction Agreement in force. A Participant may, by completing the applicable form, prospectively increase or decrease the rate of Before-Tax Contributions made on his behalf to any of the percentages authorized under Section 3.1 or suspend Before-Tax Contributions without withdrawing from participation in the Plan. Such form must be filed at least ten (10) days prior to the first day of the payroll period with respect to which such change is to become effective. A Participant who has Before-Tax Contributions made on his behalf suspended may resume such contributions by completing and filing the applicable form. Not more often than once in any calendar quarter may an election be made which would prospectively increase, decrease, suspend or resume Before-Tax Contributions made on behalf of a Participant.
Notwithstanding the foregoing, a Participant who receives a Hardship
distribution pursuant to Section 7.4(c)(iii) shall have his
Compensation Reduction Agreement deemed null and void and all
Before-Tax Contributions made on behalf of such Participant shall be
suspended until the later to occur of: (i) twelve (12) months after
receipt of the Hardship distribution and (ii) the first payroll period
which occurs ten (10) days following the completion and filing of a
Compensation Reduction Agreement authorizing the resumption of
Before-Tax Contributions to be made on his behalf. Before-Tax
Contributions following a Hardship distribution made pursuant to
Section 7.4(c)(iii) shall be subject to the following limitations:
(A) Before-Tax Contributions for the Participant's taxable year
immediately following the taxable year of the Hardship
distribution shall not exceed the applicable limit under
Section 402(g) of the Code for such next taxable year less the
amount of such Participant's Before-Tax Contributions for the
taxable year of the Hardship distribution, and
(B) the percentage of Before-Tax Contributions for the twelve (12)
month period following the mandatory twelve (12) month suspension period shall not exceed the percentage of Before-Tax Contributions made on behalf of the Participant as set forth in the last Compensation Reduction Agreement in effect prior to the Hardship distribution.
Before-Tax Contributions based on Compensation for the period during which such contributions had been suspended or decreased may not be made up at a later date.
3.4 MATCHING CONTRIBUTIONS
(a) The Employer shall make contributions on behalf of each Participant in an amount equal to fifty percent (50%) of such Participant's Before-Tax Contribution.
(b) Matching Contributions shall be credited to the Participant's Matching Contribution Account and shall be invested in accordance with Article VI of the Plan.
(c) If a Participant terminates his Before-Tax Contributions, Matching Contributions attributable to such contributions will also cease. If Before-Tax Contributions are suspended, the Matching Contributions attributable to such contributions will be suspended for the same period. Subject to the limitations set forth in subsection (a), if Before-Tax Contributions are increased or decreased, Matching Contributions attributable to such contributions will be increased or decreased during the same period. Matching Contributions for the period during which Before-Tax Contributions had been suspended or decreased may not be made up at a later date.
(d) Matching Contributions will be reviewed from time to time and may be modified by the Employer's Board.
3.5 SPECIAL CONTRIBUTIONS
In addition to any other contributions, the Employer may, in its discretion, make Special Contributions for a Plan Year to the Before-Tax Contribution Account of any Eligible Employees. Such Special Contributions may be limited to the amount necessary to insure that the Plan complies with the requirements of Section 401(k) of the Code. The Special Contributions made on behalf of a Participant shall be invested in accordance with Article VI of the Plan.
The Employer may provide that Special Contributions be made only on behalf of each Eligible Employee who is a Non-Highly Compensated Employee on the last day of the Plan Year. Such Special Contributions shall be allocated in proportion to each such Eligible Employee's Compensation for the Plan Year.
Any other provision of the Plan to the contrary notwithstanding, no Matching Contributions shall be made with respect to any Special Contributions.
3.6 DISCRETIONARY EMPLOYER CONTRIBUTIONS
Subject to the limitations of Section 3.12, the Employer may, in its sole and absolute discretion, make Discretionary Employer Contributions to the Plan for a Plan Year. Discretionary Employer Contributions shall be allocated on an annual basis in an amount up to fifteen percent (15%) determined by the Board, as a percentage of the Compensation of each Eligible Employee who is in the employ of the Employer on the last day of the Plan Year.
Notwithstanding the foregoing, an Eligible Employee who incurs a Termination of Service prior to the last day of the Plan Year for reasons. of death, Disability or retirement on a Retirement Date shall receive a Discretionary Employer Contribution pursuant to the foregoing paragraph, for the Plan Year up to the date of his Termination of Service.
The Discretionary Employer Contributions allocated to each Eligible Employee shall be credited to such Participant's Discretionary Employer Contribution Account and shall be invested in accordance with Article VI of the Plan. Any and all withdrawals, distributions or payments from a Participant's Discretionary Employer Contribution Account shall be made in accordance with Article VII, or Article VIII of the Plan, whichever is applicable.
3.7 LIMITATION ON MATCHING CONTRIBUTIONS
The Actual Contribution Percentage made on behalf of a Participant who is a Highly Compensated Employee shall be limited so that the Average Actual Contribution Percentage for the group of such Highly Compensated Employees for the Plan Year shall not exceed the greater of:
(a) the Average Actual Contribution Percentage for the group of Eligible Employees who are Non-Highly Compensated Employees for the Plan Year multiplied by 1.25; or
(b) the Average Actual Contribution Percentage for the group of Eligible Employees who are Non-Highly Compensated Employees for the Plan Year, multiplied by two (2), provided that the difference in the Average Actual Contribution Percentage for Highly Compensated Employees and Non-Highly Compensated Employees does not exceed two percent (2%). Use of this alternative limitation shall be subject to the provisions of Income Tax Regulations Section 1.401(m)-2 regarding the multiple use of the alternative deferral tests set forth in Sections 401 (k) and 401 (m) of the Code.
If the Average Actual Contribution Percentage for the group of eligible Highly Compensated Employees exceeds the limitations set forth in the preceding paragraph, the
amount of excess Matching Contributions for a Highly Compensated Employee shall be determined by "leveling" the highest Actual Contribution Percentage until the Average Actual Contribution Percentage for the group of eligible Highly Compensated Employees complies with such limitations. For purposes of this paragraph, "leveling" means reducing the Actual Contribution Percentage of the Highly Compensated Employee with the highest Actual Contribution Percentage to the extent required to:
(i) enable the Average Actual Contribution Percentage limitations to be met, or
(ii) cause such Highly Compensated Employee's Actual Contribution Percentage to equal the Actual Contribution Percentage of the Highly Compensated Employee with the next highest Actual Contribution Percentage
and repeating such process until the Average Actual Contribution Percentage for the group of eligible Highly Compensated Employees complies with the Average Actual Contribution Percentage limitations.
If Matching Contributions during any Plan Year exceed the maximum
amount applicable to a Participant as set forth above, any such
contributions, including any earnings thereon as determined under
Section 3.9, shall, to the extent vested, be characterized as
Compensation payable to the Participant and any such vested Matching
Contribution, including earnings thereon as determined under Section
3.9, shall be paid to the Participant from the applicable Account no
later than two and one-half (2-1/2) months after the close of such
Plan Year.
In the event that the Plan satisfies the requirements of Section 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Section 410(b) of the Code only if aggregated with the Plan, then this Section 3.7 shall be applied by determining the Actual Contribution Percentages of Eligible Employees as if all such plans were a single plan.
3.8 AGGREGATE LIMIT; MULTIPLE USE OF ALTERNATIVE LIMITATION
Multiple use of the alternative limitation in determining the Average Actual Deferral Percentage and Average Actual Contribution Percentage shall not be permitted.
Multiple use of the alternative limitation occurs if, for the group of Eligible Employees who are Highly Compensated Employees, the sum of the Average Actual Deferral Percentage and the Average Actual Contribution Percentage exceeds the Aggregate Limit.
For purposes of this Section 3.8, Aggregate Limit shall mean the greater of (a) or (b), where (a) and (b) are as follows:
(a) the sum of:
(i) one hundred twenty-five percent (125%) of the greater of:
(A) the Average Actual Deferral Percentage for the group of Eligible Employees who are Non-Highly Compensated Employees for the Plan Year; or
(B) the Average Actual Contribution Percentage for the group of Eligible Employees who are Non-Highly Compensated Employees for the Plan Year; and
(ii) two (2) plus the lesser of subsection (a)(i)(A) or
(a)(i)(B). In no event shall this amount exceed two
hundred percent (200%) of the lesser of subsection
(a)(i)(A) or (a)(i)(B).
(b) the sum of:
(i) one hundred twenty-five percent (125%) of the lesser of:
(A) the Average Actual Deferral Percentage for the group of Eligible Employees who are Non-Highly Compensated Employees for the Plan Year; or
(B) the Average Actual Contribution Percentage for the group of Eligible Employees who are Non-Highly Compensated Employees for the Plan Year; and
(ii) two (2) plus the greater of subsection (b)(i)(A) or
(b)(i)(B). In no event shall this amount exceed two
hundred percent (200%) of the greater of subsection
(b)(i)(A) or (b)(i)(B).
If multiple use of the alternative limitation occurs, the Average Actual Deferral Percentage for all Highly Compensated Employees under the Plan shall be reduced in accordance with the provisions of Income Tax Regulations Section 1.401(m)-2(c).
3.9 INTEREST ON EXCESS CONTRIBUTIONS
In the event Before-Tax Contributions and/or Matching Contributions made on behalf of a Participant during a Plan Year exceed the maximum allowable amount as described in Section 3.2(a), 3.2(b) or 3.7 ("Excess Contributions") and such Excess Contributions and earnings thereon are payable to the Participant under the applicable provisions of the Plan, earnings on such Excess Contributions for the period commencing with the first day of the Plan Year in which the Excess Contributions were made and ending with the
date of payment to the Participant ("Allocation Period") shall be determined in accordance with the provisions of this Section 3.9.
The earnings allocable to excess Before-Tax Contributions for an Allocation Period shall be equal to the sum of (a) plus (b) where (a) and (b) are determined as follows:
(a) The amount of earnings attributable to the Participant's Before-Tax Contribution Account for the Plan Year multiplied by a fraction, the numerator of which is the excess Before-Tax Contributions and Special Contributions for the Plan Year, and the denominator of which is the sum of (i) the Net Value of the Participant's Before-Tax Contribution Account as of the last day of the immediately preceding Plan Year and (ii) the contributions (including the Excess Contributions) made to the Before-Tax Contribution Account on the Participant's behalf during such Plan Year.
(b) The amount of earnings attributable to the Participants Before-Tax Contribution Account for the period commencing with the first day of the Plan Year in which payment is made to the Participant and ending with the date of payment to the Participant multiplied by a fraction, the numerator of which is the excess BeforeTax Contributions and Special Contributions made to the Before-Tax Contribution Account on the Participant's behalf during the Plan Year immediately preceding the Plan Year in which the payment is made to the Participant, and the denominator of which is the Net Value of the Participant's Before-Tax Contribution Account on the first day of the Plan Year in which the payment is made to the Participant.
The earnings allocable to excess Matching Contributions for an Allocation Period shall be equal to the sum of (A) and (B) where (A) and (B) are determined as follows:
(A) The amount of earnings attributable to the Participants Matching Contribution Account for the Plan Year multiplied by a fraction, the numerator of which is the excess Matching Contributions for the Plan Year, and the denominator of which is the sum of (I) the Net Value of the Participant's Matching Contribution Account as of the last day of the immediately preceding Plan Year and (II) the contributions (including the Excess Contributions) made to the Matching Contribution Account on the Participant's behalf during such Plan Year.
(B) The amount of earnings attributable to the Participants Matching Contribution Account for the period commencing with the first day of the Plan Year in which payment is made to the Participant and ending with the date of payment to the Participant multiplied by a fraction, the numerator of which is the excess Matching Contributions made to the Matching Contribution Account on the Participant's behalf during the Plan Year immediately preceding the Plan Year in which the payment is made to the Participant, and the denominator of which is
787 -25- CARVER FEDERAL SAVINGS BANK
ARTICLE III -
CONTRIBUTIONS AND LIMITATIONS ON CONTRIBUTIONS
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the Net Value of the Participant's Matching Contribution
Account on the first day of the Plan Year in which the payment
is made to the Participant.
3.10 PAYMENT OF CONTRIBUTIONS TO THE TRUST AND SEPARATE AGENCY
As soon as possible after each payroll period, but not less often than
once a month, the Employer shall deliver (a) to the Trustees: (i) the
Before-Tax Contributions required to be made to the Trust during such
payroll period under the applicable Compensation Reduction Agreements
and (ii) the amount of all Matching Contributions required to be made
to the Trust for such payroll period and (b) to the Separate Agency:
(i) the BeforeTax Contributions required to be made to the Separate
Agency during such payroll period under the applicable Compensation
Reduction Agreement, and (ii) the amount of all Matching Contributions
required to be made to the Separate Agency during such payroll period.
Special Contributions and Discretionary Employer Contributions to the
Trust and to the Separate Agency shall be forwarded by the Employer to
the Trustees and Separate Agency no later than the time for filing the
Employer's federal income tax return, plus any extensions thereon, for
the Plan Year to which they are attributable.
3.11 ROLLOVER CONTRIBUTIONS
Subject to such terms and conditions as may from time to time be
established by the Committee and the Trustees, an Employee, whether or
not a Participant, may contribute a Rollover Contribution to the Plan
Fund; provided, however, that such Employee shall submit a written
certification, in form and substance satisfactory to the Committee,
that the contribution qualifies as a Rollover Contribution. The
Committee shall be entitled to rely on such certification and shall
accept the contribution on behalf of the Trustees. Rollover
Contributions shall be credited to an Employee's Rollover Contribution
Account and shall be invested in accordance with Article VI of the
Plan.
3.12 SECTION 415 LIMITS ON CONTRIBUTIONS
(a) For purposes of this Section 3.12, the following terms and
phrases shall have the meanings hereafter ascribed to them:
(i) "Annual Additions" shall mean the sum of the
following amounts credited to a Participant's
Accounts for the Limitation Year: (A) Employer
contributions, including Before-Tax Contributions,
Matching Contributions and Discretionary Employer
Contributions; (B) any Employee contributions; (C)
forfeitures; and (D) contributions attributable to
medical benefits as described in Sections 415(1)(1)
and 419A(d)(2) of the Code. Annual Additions include
the following contributions credited to a
|
Participant's Accounts for the Limitation Year, regardless of whether such contributions have been distributed to the Participant:
(I) Before-Tax Contributions which exceed the limitations set forth in Section 3.2(a);
(II) Before-Tax Contributions made on behalf of a Highly Compensated Employee which exceed the limitations set forth in Section 3.2(b); and
(III) Matching Contributions made on behalf of a Highly Compensated Employee which exceed the limitations set forth in Section 3.7.
(ii) "Current Accrued Benefit" shall mean a Participant's annual accrued benefit under a defined benefit plan, determined in accordance with the meaning of Section 415(b)(2) of the Code, as if the Participant had separated from service as of the close of the last Limitation Year beginning before January 1, 1987. In determining the amount of a Participant's Current Accrued Benefit, the following shall be disregarded:
(A) any change in the terms and conditions of the defined benefit plan after May 5, 1986; and
(B) any cost of living adjustment occurring after May 5, 1986.
(iii) "Defined Benefit Plan" and "Defined Contribution Plan" shall have the meanings set forth in Section 415(k) of the Code.
(iv) "Defined Benefit Plan Fraction" for a Limitation Year
shall mean a fraction, (A) the numerator of which is
the aggregate projected annual benefit (determined as
of the last day of the Limitation Year) of the
Participant under all defined benefit plans (whether
or not terminated) maintained by the Employer, and
(B) the denominator of which is the lesser of: (I)
the product of 1.25 (or such adjustment as required
under Section 12.5) and the dollar limitation in
effect under Section 415(b)(1)(A) of the Code,
adjusted as prescribed by the Secretary of the
Treasury under Section 415(d) of the Code, or (II)
the product of 1.4 and the amount which may be taken
into account with respect to such Participant under
Section 415(b)(1)(B) of the Code for such Limitation
Year. Notwithstanding the above, if the Participant
was a participant in one or more defined benefit
plans of the Employer in existence on May 6, 1986,
the dollar limitation of the denominator of this
fraction will not be less than the Participant's
Current Accrued Benefit.
(v) "Defined Contribution Plan Fraction" for a Limitation
Year shall mean a fraction, (A) the numerator of
which is the sum of the Participant's Annual
Additions under all defined contribution plans
(whether or not terminated) maintained by the
Employer for the current year and all prior
Limitation Years (including annual additions
attributable to the Participant's nondeductible
employee contributions to all defined benefit plans
(whether or not terminated) maintained by the
Employer), and (B) the denominator of which is the
sum of the maximum aggregate amounts for the current
year and all prior Limitation Years with the Employer
(regardless of whether a defined contribution plan
was maintained by the Employer). "Maximum aggregate
amounts" shall mean the lesser of (I) the product of
1.25 (or such adjustment as required under Section
12.5) and the dollar limitation in effect under
Section 415(c)(1)(A) of the Code, adjusted as
prescribed by the Secretary of the Treasury under
Section 415(d) of the Code, or (II) the product of
1.4 and the amount that may be taken into account
under Section 415(c)(1)(B) of the Code; provided,
however, that the Committee may elect, on a uniform
and nondiscriminatory basis, to apply the special
transition rule of Section 415(e)(6) of the Code
applicable to Limitation Years ending before January
1, 1983 in determining the denominator of the Defined
Contribution Plan Fraction.
(vi) "Limitation Year" shall mean the calendar year.
(vii) "Section 415 Compensation" shall be a Participant's remuneration as defined in Income Tax Regulations Sections 1.415-2(d)(2), (3) and (6).
(b) For purposes of applying the Section 415 limitations, the
Employer and all members of a controlled group of corporations
(as defined under Section 414(b) of the Code as modified by
Section 415(h) of the Code), all commonly controlled trades or
businesses (as defined under Section 414(c) of the Code as
modified by Section 415(h) of the Code), all affiliated
service groups (as defined under Section 414(m) of the Code)
of which the Employer is a member, any leasing organization
(as defined under Section 414(n) of the Code) that employs any
person who is considered an Employee under Section 414(n) of
the Code and any other group provided for under any and all
Income Tax Regulations promulgated by the Secretary of the
Treasury under Section 414(o) of the Code, shall be treated as
a single employer.
(c) If the Employer maintains more than one qualified Defined Contribution Plan on behalf of its Employees, such plans shall be treated as one Defined Contribution Plan for purposes of applying the Section 415 limitations of the Code.
(d) Notwithstanding anything contained in the Plan to the contrary, in no event shall the Annual Additions to a Participant's Accounts for a Limitation Year exceed the lesser of:
(i) $30,000 or, if greater, one-fourth (1/4th) of the
defined benefit dollar limitation set forth in
Section 415(b)(1)(A) of the Code as in effect for the
Limitation Year; or
(ii) twenty-five percent (25%) of the Participants Section 415 Compensation for such Limitation Year. For purposes of this subsection (d)(ii), Section 415 Compensation shall not include (A) any contribution for medical benefits within the meaning of Section 419A(f)(2) of the Code after separation from service, which is otherwise treated as an Annual Addition, and (B) any amount otherwise treated as an Annual Addition under Section 415(1)(1) of the Code.
(e) If the Annual Additions to a Participant's Accounts for a
Limitation Year exceed the limitation set forth in subsection
(d) above during the Limitation Year, any or all of the
following contributions on behalf of such Participant shall be
immediately adjusted to that amount which will result in such
Annual Additions not exceeding the limitation set forth in
subsection (d):
(i) Discretionary Employer Contributions;
(ii) Before-Tax Contributions;
(iii) Special Contributions; and
(iv) Matching Contributions.
(f) If the Annual Additions to a Participant's Accounts for a
Limitation Year exceed the limitations set forth in subsection
(d) above at the end of a Limitation Year, such excess amounts
shall not be treated as Annual Additions in such Limitation
Year but shall instead be used to reduce the Before-Tax
Contributions, Matching Contributions and/or Special
Contributions to be made on behalf of such Participant in the
succeeding Limitation Year, provided that such Participant is
an Eligible Employee during such succeeding Limitation Year.
If such Participant is not an Eligible Employee or ceases to
be an Eligible Employee during such succeeding Limitation
Year, any remaining excess amounts from the preceding
Limitation Year shall be allocated during such succeeding
Limitation Year to each Participant then actively
participating in the Plan. Such allocation shall be in
proportion to the Before-Tax Contributions made to date on his
behalf for such Limitation Year, or the prior Limitation Year
with respect to an allocation as of
the beginning of a Limitation Year, before any other contributions are made in such succeeding Limitation Year.
(g) If a Participant participates in both (i) the Plan and/or any
other defined contribution plan maintained by the Employer and
(ii) any defined benefit plan or plans maintained by the
Employer, the sum of the Defined Contribution Plan Fraction
and the Defined Benefit Plan Fraction shall not exceed the sum
of 1.0.
(h) If the sum determined under subsection (g) for any Participant exceeds 1.0, the Defined Benefit Plan Fraction of such Participant as provided in the defined benefit plan or plans maintained by the Employer shall be reduced in order that such sum shall not exceed 1.0.
787 -30- CARVER FEDERAL SAVINGS BANK
ARTICLE IV -
VESTING AND FORFEITURES
- --------------------------------------------------------------------------------
|
ARTICLE IV-
VESTING AND FORFEITURES
4.1 VESTING
(a) An Employee shall always be fully vested in the Net Value of his Before-Tax Contribution Account and the Net Value of his Rollover Contribution Account.
(b) A Participant shall become fully vested in the Net Value of his Matching Contribution Account and the Net Value of his Discretionary Employer Contribution Account upon the earlier of such Participant's (i) Normal Retirement Age or (ii) termination of employment by reason of death, Disability or reaching his Retirement Date.
(c) A Participant who is not fully vested under subsection (b) shall be vested in the Net Value of his Matching Contribution Account and the Net Value of his Matching Contribution Account in accordance with the following schedule:
Period of Service Vested Percentage ----------------- ----------------- Less than 3 years 0% 3 years but less than 4 years 20% 4 years but less than 5 years 40% 5 years but less than 6 years 60% 6 years but less than 7 years 80% 7 or more years 100% |
For purposes of determining a Participant's Period of Service under this subsection (c) and under Section 4.3, employment with an Affiliated Employer shall be deemed employment with the Employer.
For purposes of determining a Participant's vested percentage of the Net Value of his Matching Contribution Account and the Net Value of his Discretionary Employer Contribution Account, all Periods of Service shall be recognized, including, effective October 1, 1989 and November 19, 1990 respectively, employment with CrossLand Savings, FSB and Nassau Federal Savings and Loan Association which preceded employment with the Employer.
(d) The vested Net Value of a Participant's Matching Contribution Account and Discretionary Employer Contribution Account shall be determined as follows:
(i) the Participant's Matching Contribution Account and Discretionary Employer Contribution Account shall first be increased to include (A) that
787 -31- CARVER FEDERAL SAVINGS BANK
ARTICLE IV -
VESTING AND FORFEITURES
- --------------------------------------------------------------------------------
|
portion of such Account which had been previously withdrawn in accordance with Sections 7.3 and 7.4 and (B) that portion of such Account which had been borrowed in accordance with Article VIII and is outstanding on the date of this determination;
(ii) the applicable vested percentage determined in accordance with subsection (c) shall then be applied to such Account as determined in accordance with clause (i);
(iii) the amount determined in accordance with clause (ii) shall then be reduced by (A) that portion of such Account which had been previously withdrawn in accordance with Sections 7.2 and 7.3 and (B) that portion of such Account which had been borrowed in accordance with Article VIII and is outstanding on the date of this determination.
4.2 FORFEITURES
If a Participant who is not fully vested in the Net Value of his Accounts terminates employment, the Units representing the nonvested portion of his Accounts shall constitute Forfeitures. Forfeitures shall be treated as Matching Contributions and Discretionary Employer Contributions and shall be applied to reduce the amount of subsequent Matching Contributions and Discretionary Employer Contributions otherwise required to be made.
If a former Participant who is not fully vested in the Net Value of his Accounts receives a distribution of his vested interest in the Net Value of his Accounts and is subsequently reemployed by the Employer prior to incurring five (5) consecutive One Year Periods of Severance, he shall have the Net Value of his Accounts as of the date he previously terminated employment reinstated provided he repays the full amount of his distribution in cash or cash equivalents before the end of the five (5) consecutive One Year Periods of Severance commencing with the date of distribution. The reinstated amount shall be unadjusted by any gains or losses occurring subsequent to the Participant's termination of employment and prior to repayment of such distribution. Any forfeited amounts required to be reinstated hereunder shall be made by an additional Employer contribution for such Plan Year. If such former Participant does not repay the full amount of his distribution in cash or cash equivalents before the end of the five (5) consecutive One Year Periods of Severance commencing with the date of distribution, the Net Value of his Accounts as of the date he previously terminated employment shall not be reinstated.
If a former Participant who is not fully vested in the Net Value of his Accounts elects to defer distribution of his vested account interest or elects to receive installment payments pursuant to Section 7.6(e), the nonvested portion of such former Participant's Account shall be forfeited as of the date of his Termination of Service; provided,
787 -32- CARVER FEDERAL SAVINGS BANK
ARTICLE IV -
VESTING AND FORFEITURES
- --------------------------------------------------------------------------------
|
however, that if such former Participant is reemployed before incurring five (5) consecutive One Year Periods of Severance, the nonvested portion of his Accounts shall be reinstated in its entirety, unadjusted by any gains or losses occurring subsequent to the distribution.
4.3 VESTING UPON REEMPLOYMENT
(a) For purposes of this Section 4.3, "Period of Service" means an
Employee's Period of Service determined in accordance with
Section 4.1(c).
(b) For the purpose of determining a Participant's vested interest in the Net Value of his Matching Contribution Account and Discretionary Employer Contribution Account:
(i) if an Employee is not vested in any Matching Contributions and/or Discretionary Employer Contributions, incurs a One Year Period of Severance and again performs an Hour of Service, such Employee shall receive credit for his Periods of Service prior to his One Year Period of Severance only if the number of consecutive One Year Periods of Severance is less than the greater of: (A) five (5) years or (B) the aggregate number of his Periods of Service credited before his One Year Period of Severance.
(ii) if a Participant is partially vested in any Matching Contributions and/or Discretionary Employer Contributions, incurs a One Year Period of Severance and again performs an Hour of Service, such Participant shall receive credit for his Periods of Service prior to his One Year Period of Severance; provided, however, that after five (5) consecutive One Year Periods of Severance, a former Participant's vested interest in the Net Value of the Matching Contribution Account and/or Discretionary Employer Contribution Account attributable to Periods of Service prior to his One Year Period of Severance shall not be increased as a result of his Periods of Service following his reemployment date.
(iii) if a Participant is fully vested in any Matching Contributions and/or Discretionary Employer Contributions, incurs a One Year Period of Severance and again performs an Hour of Service, such Participant shall receive credit for all his Periods of Service prior to his One Year Period of Severance.
ARTICLE V -
TRUST FUND, INVESTMENT ACCOUNTS AND VOTING RIGHTS
5.1 TRUST FUND
The Employer has adopted the Agreement as the funding vehicle with respect to the Investment Accounts. Commencing on the Conversion Date, the Employer has adopted the Separate Agreement as the funding vehicle with respect to the Employer Stock Fund.
All contributions forwarded by the Employer to the Trustees pursuant to the Agreement shall be held by them in trust and shall be used to purchase Units on behalf of the Plan in accordance with the terms and provisions of the Agreement. Contributions designated for investment in any Investment Account of the Trust Fund shall be allocated proportionately to and among the classes of Units so selected for such Investment Account.
All contributions forwarded by the Employer to the Separate Agency pursuant to the Separate Agreement shall be held by them in trust in accordance with the terms and provisions of the Separate Agreement.
All assets of the Plan shall be held for the exclusive benefit of Participants, Beneficiaries or other persons entitled to benefits. No part of the corpus or income of the Plan Funds shall be used for, or diverted to, purposes other than for the exclusive benefit of Participants, Beneficiaries or other persons entitled to benefits and for defraying reasonable administrative expenses of the Plan, Trust and Separate Agency. No person shall have any interest in or right to any part of the earnings of the Plan Funds, or any rights in, to or under the Plan Funds or any part of its assets, except to the extent expressly provided in the Plan.
The Trustees shall invest and reinvest the Trust Fund, and the income therefrom, without distinction between principal and income, in accordance with the terms and provisions of the Agreement. The Trustees may maintain such part of the Trust Fund in cash uninvested as they shall deem necessary or desirable. The Trustees shall be the owner of and have title to all the assets of the Trust Fund and shall have full power to manage the same, except as otherwise specifically provided in the Agreement.
The Separate Agency shall invest the Separate Assets in accordance with, and shall be governed by, the terms and provisions of the Plan and the Separate Agreement.
5.2 INTERIM INVESTMENTS
The Trustees may temporarily invest any amounts designated for investment in any of the Investment Accounts of the Trust Fund identified herein in the Investment Account which provides for short-term investments and retain the value of such contributions therein pending the allocation of such values to the Investment Accounts designated for investment.
5.3 ACCOUNT VALUES
The Net Value of the Accounts of an Employee means the sum of the total Net Value of each Account maintained on behalf of the Employee in the Trust and Separate Agency as determined as of the Valuation Date coincident with or next following the event requiring the determination of such Net Value. The assets of any Account shall consist of the Units credited to such Account. The applicable Units shall be valued from time to time by the Trustees and Separate Agency, respectively, in accordance with the Agreement and Separate Agreement, but not less often than monthly. On the basis of such valuations, each Employee's Accounts shall be adjusted to reflect the effect of income collected and accrued, realized and unrealized profits and losses, expenses and all other transactions during the period ending on the applicable Valuation Date.
Upon receipt by the Trustees of Before-Tax Contributions, Matching
Contributions, and, if applicable, Discretionary Employer
Contributions, Rollover Contributions and Special Contributions, and
upon receipt by a Separate Agency of any Before-Tax Contributions,
Matching Contributions, and, if applicable, Discretionary Employer
Contributions, Rollover Contributions and Special Contributions, such
contributions shall be applied to purchase for such Employee's Account
(a) Units other than Units of the Employer Stock Fund, using the value
of such Units as of the close of business on the date received and (b)
Units of the Employer Stock Fund using the value of such Units as of
the preceding Valuation Date. Whenever a distribution is made to a
Participant, Beneficiary or other person entitled to benefits, the
appropriate number of Units credited to such Employee shall be reduced
accordingly and each such distribution shall be charged against the
Units of the Investment Accounts of such Employee pro rata according
to their respective values.
For the purposes of this Section 5.3, fractions of Units computed to four (4) decimal places as well as whole Units may be purchased or redeemed for the Account of an Employee.
5.4 VOTING RIGHTS
Each Participant with Units in the Employer Stock Fund shall have the right to participate confidentially in the exercise of voting rights appurtenant to shares held in such Investment Account, provided that such person had Units in such Account as of the most recent Valuation Date coincident with or preceding the applicable record date for
which records are available. Such participation shall be achieved by completing and filing with the inspector of elections, or such other person who shall be independent of the issuer of shares as the Committee shall designate, at least ten (10) days prior to the date of the meeting of holders of shares at which such voting rights will be exercised, a written direction in the form and manner prescribed by the Committee. The inspector of elections, or other such person designated by the Committee shall tabulate the directions given on a strictly confidential basis, and shall provide the Committee with only the final results of the tabulation. The final results of the tabulation shall be followed by the Committee in the direction as to the manner in which such voting rights shall be exercised. As to each matter in which the holders of shares are entitled to vote:
(a) a number of affirmative votes shall be cast equal to the product of:
(i) the total number of shares held in the Employer Stock Fund as of the applicable record date; and
(ii) a fraction, the numerator of which is the aggregate value (as of the Valuation Date coincident with or immediately preceding the applicable record date) of the Units in the Employer Stock Fund of all persons directing that an affirmative vote be cast, and the denominator of which is the aggregate value (as of the Valuation Date coincident with or immediately preceding the applicable record date) of the Units in the Employer Stock Fund of all persons directing that an affirmative or negative vote be cast; and
(b) a number of negative votes shall be cast equal to the product of:
(i) the total number of shares held in the Employer Stock Fund as of the applicable record date; and
(ii) a fraction, the numerator of which is the aggregate value (as of the Valuation Date coincident with or immediately preceding the applicable record date) of the Units in the Employer Stock Fund of all persons directing that a negative vote be cast, and the denominator of which is the aggregate value (as of the Valuation Date coincident with or immediately preceding the applicable record date) of the Units in the Employer Stock Fund of all persons directing that an affIrmative or negative vote be cast.
The Committee shall furnish, or cause to be furnished, to each person with Units in the Employer Stock Fund, all annual reports, proxy materials and other information known to have been furnished by the issuer of the shares or by any proxy solicitor, to the holders of shares.
5.5 TENDER OFFERS AND OTHER OFFERS
Each Participant with Units in the Employer Stock Fund shall have the right to participate confidentially in the response to a tender offer, or any other offer, made to the holders of shares generally, to purchase, exchange, redeem or otherwise transfer shares; provided that such person has Units in the Employer Stock Fund as of the Valuation Date coincident with or immediately preceding the first day for delivering shares or otherwise responding to such tender or other offer. Such participation shall be achieved by completing and filing with the inspector of elections, or such other person who shall be independent of the issuer of shares as the Committee shall designate, at least ten (10) days prior to the last day for delivering shares or otherwise responding to such tender or other offer, a written direction in the form and manner prescribed by the Committee. The inspector of elections, or other such person designated by the Committee shall tabulate the directions given on a strictly confidential basis, and shall provide the Committee with only the final results of the tabulation. The final results of the tabulation shall be followed by the Committee in the direction as to the number of shares to be delivered. On the last day for delivering shares or otherwise responding to such tender or other offer, a number of shares equal to the product of:
(a) the total number of shares held in the Employer Stock Fund; and
(b) a fraction, the numerator of which is the aggregate value (as of the Valuation Date coincident with or immediately preceding the first day for delivering shares or otherwise responding to such tender or other offer) of the Units in the Employer Stock Fund of all persons directing that shares be delivered in response to such tender or other offer, and the denominator of which is the aggregate value (as of the Valuation Date coincident with or immediately preceding the first day for delivering shares or otherwise responding to such tender or other offer) of the Units in the Employer Stock Fund of all persons directing that shares be delivered or that the delivery of shares be withheld;
shall be delivered in response to such tender or other offer. Delivery of the remaining shares then held in the Employer Stock Fund shall be withheld. The Committee shall furnish, or cause to be furnished, to each person whose Account is invested in whole or in part in the Employer Stock Fund, all information concerning such tender offer furnished by the issuer of shares, or information furnished by or on behalf of the person making the tender or such other offer.
5.6 SEPARATE ASSETS
Subject to the terms and conditions of the Agreement and upon approval by the Trustees, a designated portion of the assets of the Plan may be held as Separate Assets under the Separate Agreement pursuant to investment elections made by Plan Participants from time
to time. The Trustees shall have no responsibility or liability with respect to the management and control of any Separate Assets and shall have only those administrative duties with respect to such Separate Assets as are set forth in the Plan and the Agreement.
5.7 POWER TO INVEST IN EMPLOYER SECURITIES
The Committee may direct the Separate Agency to acquire or hold any security issued by the Employer or any Affiliated Employer which is a "qualifying employer security" as such term is defined under ERISA and to invest that portion of the assets of the Plan Funds in such securities.
ARTICLE VI -
INVESTMENT DIRECTIONS, CHANGES OF INVESTMENT DIRECTIONS
AND TRANSFERS BETWEEN INVESTMENT ACCOUNTS
6.1 INVESTMENT DIRECTIONS
Upon electing to participate, each Participant shall direct that the contributions made to his Accounts shall be applied to purchase Units in any one or more of the Investment Accounts of the Trust Fund, and commencing on the Conversion Date, to purchase Units in the Employer Stock Fund. Such direction shall indicate the percentage, in multiples of ten percent (10%), in which Before-Tax Contributions, Matching Contributions, Special Contributions, Discretionary Employer Contributions and Rollover Contributions shall be made to the designated Investment Accounts.
To the extent a Participant shall fail to make an investment direction, contributions made on his behalf shall be applied to purchase Units in the Investment Account which provides for short-term investments.
6.2 CHANGE OF INVESTMENT DIRECTIONS
A Participant may change any investment direction not more often than once in any calendar quarter by completing and filing a notice in the form and manner prescribed by the Committee at least ten (10) days prior to the effective date of such direction. Participants in the Plan on the Conversion Date shall be permitted to make one (1) additional change in investment direction in order to invest in the Employer Stock Fund within sixty (60) days of such date and such additional election shall not count as one (1) of the changes in investment direction that are otherwise permitted to be made in any Plan Year. Any such change shall be subject to the same conditions as if it were an initial direction and shall be applied only to any contributions to be invested on or after the effective date of such direction.
6.3 TRANSFERS BETWEEN INVESTMENT ACCOUNTS
By filing a notice in the form and manner prescribed by the Committee
at least ten (10) days prior to the effective date of such change, a
Participant or Beneficiary may, not more often than once in any
calendar quarter, direct that multiples of ten percent (10%) of the
Net Value of any one or more Investment Accounts be transferred to any
one or more of the other Investment Accounts. Participants in the Plan
on the Conversion Date, shall be permitted to make one (1) additional
transfer in order to invest in the Employer Stock Fund within sixty
(60) days of such date and such additional transfer shall not count as
one (1) of the transfers that are otherwise permitted to be made in
any Plan
Year. The requisite transfers shall be valued as of the Valuation Date on which the direction is received by the Trustees and shall be affected within seven (7) days of the Trustees' receipt of such direction.
6.4 EMPLOYEES OTHER THAN PARTICIPANTS
(a) Investment Direction
An Employee who is not a Participant but who has made a
Rollover Contribution in accordance with the provisions of
Section 3.11, shall direct, in the form and manner prescribed
by the Committee, that such contribution be applied to the
purchase of Units in any one or more of the Investment
Accounts, and commencing on the Conversion Date, to purchase
Units in the Employer Stock Fund. Such direction shall
indicate the percentage, in multiples of ten percent (10%), in
which contributions shall be made to the designated Investment
Accounts. Commencing on the Conversion Date, an Employee who
is not a Participant shall be permitted to make one (1)
additional transfer in order to invest in the Employer Stock
Fund within sixty (60) days of such date and such additional
transfer shall not count as one (1) of the transfers that are
otherwise permitted to be made in any Plan Year. To the extent
any Employee shall fail to make an investment direction, the
Rollover Contributions shall be applied to the purchase of
Units in the Investment Account which provides for short-term
investments.
(b) Transfers Between Investment Accounts
An Employee who is not a Participant may, subject to the provisions of Section 6.3, not more often than once in any calendar quarter, direct that multiples of ten percent (10%) of the Net Value of any one or more Investment Accounts be transferred to any one or more of the other Investment Accounts. Commencing on the Conversion Date, an Employee who is not a Participant in the Plan shall be permitted to make one (1) additional transfer in order to invest in the Employer Stock Fund within sixty (60) days of such date and such additional transfer shall not count as one (1) of the transfers that are otherwise permitted to be made in any Plan Year. The requisite transfers shall be valued as of the Valuation Date on which the direction is received by the Trustees and shall be affected within seven (7) days of the Trustees' receipt of such direction.
6.5 RESTRICTIONS ON INVESTMENTS IN THE EMPLOYER STOCK FUND FOR CERTAIN PARTICIPANTS
Notwithstanding anything in the Plan to the contrary, any Participant subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934: (a) may direct that
his Accounts be transferred into or out of the Employer Stock Fund,
subject to the provisions of Section 6.3, only once during each
quarter, during the period beginning on the third (3rd) business day
following the date of release of the quarterly and annual statements
of sales and earnings by the issuer of the shares, and ending on the
twelfth (12th) business day following such date; and (b) may not make
a transfer in accordance with the provisions of Section 6.3 within six
(6) months of the next preceding transfer into or out of the Employer
Stock Fund. In addition, any Participant subject to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 who elects to
receive a distribution of shares from the Plan in accordance with
Section 7.11 hereof, including withdrawals under Sections 7.3 and 7.4
and loans under Article VIII, or who substantially decreases his rate
of Before-Tax Contributions pursuant to Section 3.3 with respect to
the amounts to be invested in the Employer Stock Fund, or his
investment direction with respect to the Employer Stock Fund pursuant
to Section 6.2, must either (i) in the case of a distribution, hold
such shares for a period of six (6) months commencing with the date of
distribution, or (ii) refrain from directing the purchase of
additional Units in the Employer Stock Fund for a period of six (6)
months beginning with the date of a decrease in rate or a change in
investment direction. However, unless otherwise required by rules and
regulations of the Securities and Exchange Commission, the
restrictions under this Section 6.5 shall not apply to distributions
of shares made in connection with a Participant's death, Disability,
termination of employment or reaching his Retirement Date; pursuant to
a qualified domestic relations order described under Section 414(p) of
the Code; as a result of the minimum distribution requirements
described under Section 401(a)(9) of the Code; or as a result of the
limitations described under-Section 401(k), 401(m), 402(g) and 415 of
the Code.
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ARTICLE VII -
PAYMENT OF BENEFITS
7.1 GENERAL
(a) For purposes of this Article VII, the following terms and phrases shall have the meanings hereinafter ascribed to them:
(i) "Beneficiary" shall mean (A) in the case of a married Participant, the Spouse. Notwithstanding the foregoing, such Participant may, subject to the spousal consent requirements of Section 7.2(a), effectively elect to designate a person or persons other than the Spouse as Beneficiary; (B) in the case of a single Participant, a person or persons who have been designated under the Plan by such Participant or who are otherwise entitled to a benefit under the Plan.
(ii) "Straight Life Annuity" shall mean a benefit payable in equal monthly installments to the Participant for his life with no benefits payable after his death.
(iii) "100% Joint and Survivor Annuity" shall mean a benefit payable in equal monthly installments to the Participant for his life with the same benefit continuing after his death to and for the life of a surviving Beneficiary.
(iv) "75% Joint and Survivor Annuity" shall mean a benefit payable in equal monthly installments to the Participant for his life with a benefit equal to three-quarters (3/4) of the benefit paid to the Participant continuing after his death to and for the life of a surviving Beneficiary.
(v) "50% Joint and Survivor Annuity" shall mean a benefit payable in equal monthly installments to the Participant for his life with a benefit equal to one-half (l/2) of the benefit paid to the Participant continuing after his death to and for the life of a surviving Beneficiary.
(vi) "Period Certain and Life Annuity" shall mean a benefit payable in equal monthly installments to the Participant for his lifetime. If the Participant's death occurs on or after the expiration of the period certain, no further benefits will be payable. If, however, the Participant's death occurs before the expiration of the period certain, equal monthly installments in the same amount as paid to the Participant prior to his death will be paid to his designated Beneficiary. In the event neither the Participant nor the designated Beneficiary survive to the end of said period certain, a final
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lump sum distribution equal to the commuted value of any installments shall be made to the estate of the last to die of (A) the Participant and (B) his Beneficiary.
(b) The vested interest in the Net Value of any one or more of the Accounts of a Participant, Beneficiary or any other person entitled to benefits under the Plan shall be paid only at the times, to the extent, in the manner, and to the persons provided in this Article VII.
(c) Notwithstanding the foregoing, if installment payments are to be made on a monthly basis and if, in the judgment of the Committee, payments are too small to warrant monthly payments, the Committee, in its sole discretion, may determine to make such payments in quarterly, semi-annual, or annual installments.
(d) Any distribution of the vested interest in the Net Value of a Participant's Accounts which is made by the purchase of any annuity shall be made by the purchase of a nontransferable annuity contract from a legal reserve life insurance company licensed to do business in the state of New York. Such annuity contract shall comply with the provisions of this Plan.
(e) The Net Value of any one or more of the Accounts of a Participant shall be subject to the provisions of Section 8.7.
(f) Notwithstanding any provisions of the Plan to the contrary, any and all withdrawals, distributions or payments made under the provisions of this Article VII shall be made in accordance with Section 401(a)(9) of the Code and any and all Income Tax Regulations promulgated thereunder.
(g) Notwithstanding any provisions of the Plan to the contrary, the provisions of this Article VII shall also apply to a person who is not a Participant but who has made a contribution to and maintains a Rollover Contribution Account under the Plan.
7.2 SPOUSAL CONSENT REQUIREMENTS - OPTIONAL FORMS OF BENEFIT PAYMENTS, LOANS, WITHDRAWALS, BENEFICIARIES
(a) An election by the Participant (i) to receive benefit payments
in a form other than the normal form of benefit payment set
forth in Section 7.5(a), (ii) to receive a loan in accordance
with the provisions of Article VIII or to revise, renegotiate,
renew or extend an existing loan, (iii) to receive a
withdrawal in accordance with the provisions of Section 7.3 or
Section 7.4, (iv) to designate a Beneficiary who is other than
his Spouse, or (v) under any other provision of the Plan which
is subject to spousal consent, shall not be effective unless:
(A) the Participant's
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Spouse irrevocably consents to such election in writing, (B) such election designates a Beneficiary or form of benefit payment, which may not be changed without spousal consent unless the consent of the Spouse expressly permits designation by the Participant without any requirement of further consent by the Spouse, (C) the Spouse's consent acknowledges understanding of the effect of such election, and (D) the consent is witnessed by a Plan representative or a notary public. Notwithstanding this consent requirement, if the Participant establishes to the satisfaction of the Plan representative that such written consent cannot be obtained because there is no Spouse or the Spouse cannot be located, such election shall be deemed a qualified election.
Any consent necessary under this provision shall be valid only
with respect to the Spouse who signs the consent.
Notwithstanding the foregoing sentence, a consent to receive a
loan or withdrawal which had been executed by a Spouse shall
be binding with respect to such loan or withdrawal on any
subsequent Spouse.
(b) (i) A married Participant who has submitted to the Committee an election form in accordance with the provisions of subsection (a)(i) may, without the consent of his Spouse, revoke such prior election by submitting written notification of such revocation to the Committee before the date benefit payments are scheduled to commence. Upon revocation, the 50% Joint and Survivor Annuity, with the Participant's Spouse as Beneficiary, shall be reinstated unless the Participant files another election form in accordance with the provisions of subsection (a). The number of election forms and revocations shall not be limited.
(ii) A married Participant who has submitted to the
Committee an election form in accordance with the
provisions of subsection (a)(iv), may, without the
consent of his Spouse, revoke such prior election by
submitting written notification of such revocation to
the Committee before the date benefit payments are
scheduled to commence. Such revocation shall result
in the reinstatement of the Spouse as the designated
Beneficiary unless the Participant effectively
designates another person as Beneficiary in
accordance with the provisions of subsection (a) and
Section 7.7. The number of election forms and
revocations shall not be limited.
(c) The terms and conditions of any election form shall, unless otherwise indicated, become effective on the date benefit payments are scheduled to commence, or, if applicable, the date of distribution.
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7.3 NON-HARDSHIP WITHDRAWALS
(a) Subject to the spousal consent requirements of Section 7.2(a)
|
and the terms and conditions contained in this Section 7.3, upon ten (10) days prior written notice to the Committee each Participant who has attained age fifty-nine and one-half (59-1/2) shall be entitled to withdraw not more often than once during any Plan Year all or any portion of his vested interest in the Net Value of his Accounts in the following order of priority:
(i) the Before-Tax Contribution Account;
(ii) the Net Value of the Participant's Rollover Contribution Account provided that such Participant shall have satisfied such additional terms and conditions as the Committee may deem necessary;
(iii) the vested interest in the Net Value of his Matching Contribution Account, and
(iv) the vested interest in the Net Value of his Discretionary Employer Contribution Account.
(b) Withdrawals under this Section 7.3 shall be made in the following order of priority:
(i) by the redemption of Units from each of the Participant's Accounts in the Trust Fund in the order set forth in Section 7.3(a), on a pro rata basis from the Investment Accounts thereunder, as were selected by the Participant pursuant to Article VI; and
(ii) by the redemption of Units invested in the Employer Stock Fund from each of the Participant's Accounts invested under the Separate Agreement, in the order set forth in Section 7.3(a), if selected by the Participant pursuant to Article VI.
(c) Any withdrawals under this Section 7.3 shall be subject to the restrictions of Section 6.5.
7.4 HARDSHIP DISTRIBUTIONS
(a) For purposes of this Section 7.4, a "Hardship" distribution shall mean a distribution that is (i) made on account of a condition which has given rise to immediate and heavy financial need of a Participant and (ii) necessary to satisfy such financial need. A determination of the existence of an immediate and heavy
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financial need and the amount necessary to meet the need shall be made by the Committee in accordance with uniform nondiscriminatory standards with respect to similarly situated persons.
(b) Immediate and Heavy Financial Need:
A Hardship distribution shall be deemed to be made on account of an immediate and heavy financial need if the distribution is on account of:
(i) expenses for medical care described under Section 213(d) of the Code which were previously incurred by the Participant, the Participant's Spouse or any of the Participant's dependents as defined under Section 152 of the Code or expenses which are necessary to obtain medical care described under Section 213(d) of the Code for the Participant, the Participant's Spouse or any of the Participant's dependents as defined under Section 152 of the Code; or
(ii) purchase (excluding mortgage payments) of a principal residence of the Participant; or
(iii) payment of tuition and related educational fees for the next twelve (12) months of post-secondary education for the Participant, the Participant's Spouse, children or any of the Participant's dependents as defined under Section 152 of the Code; or
(iv) the need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; or
(v) any other condition which the Commissioner of Internal Revenue, through the publication of revenue rulings, notices and other documents of general applicability, deems to be an immediate and heavy financial need.
(c) Necessary to Satisfy Such Financial Need:
(i) A distribution will be treated as necessary to satisfy an immediate and heavy financial need of a Participant if: (A) the amount of the distribution is not in excess of (1) the amount required to relieve the financial need of the Participant and (2) if elected by the Participant, an amount necessary to pay any federal, state or local income taxes, or penalties reasonably anticipated to result from such distribution, and (B) such need may not be satisfied from other resources that are reasonably available to the Participant.
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(ii) A distribution will be treated as necessary to satisfy a financial need if the Committee reasonably relies upon the Participant's representation that the need cannot be relieved:
(A) through reimbursement or compensation by insurance or otherwise,
(B) by reasonable liquidation of the Participant's assets, to the extent such liquidation would not itself cause an immediate and heavy financial need,
(C) by cessation of Before-Tax Contributions or Employee contributions, if any, under the Plan, or
(D) by other distributions or nontaxable loans from plans maintained by the Employer or by any other employer, or by borrowing from commercial sources on reasonable commercial terms.
For purposes of this subsection (c)(ii), the Participant's resources shall be deemed to include those assets of his Spouse and minor children that are reasonably available to the Participant.
(iii) Alternatively, a Hardship distribution will be deemed to be necessary to satisfy an immediate and heavy financial need of a Participant if (A) or (B) are met:
(A) all of the following requirements are satisfied:
(I) the distribution is not in excess of
(1) the amount of the immediate and
heavy financial need of the
Participant and (2) if elected by
the Participant, an amount necessary
to pay any federal, state or local
income taxes or penalties reasonably
anticipated to result from such
distribution,
(II) the Participant has obtained all distributions, other than Hardship distributions, and all nontaxable loans currently available under all plans maintained by the Employer;
(III) the Plan, and all other plans maintained by the Employer, provide that the Participant's elective contributions and Employee contributions, if any, will be suspended for twelve (12) months after receipt of the Hardship distribution; and
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(IV) the Plan, and all other plans
maintained by the Employer, provide
that the Participant may not make
elective contributions for the
Participant's taxable year
immediately following the taxable
year of the Hardship distribution in
excess of the applicable limit under
Section 402(g) of the Code for such
next taxable year, less the amount
of such Participant's elective
contributions for the taxable year
of the Hardship distribution; or
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(B) the requirements set forth in additional methods, if any, prescribed by the Commissioner of Internal Revenue (through the publication of revenue rulings, notices and other documents of general applicability) are satisfied.
(d) A Participant who has withdrawn the maximum amounts available to such Participant under Section 7.3 or a Participant who is not eligible for a withdrawal thereunder, may, in case of Hardship (as defined under this Section 7.4), apply not more often than once in any Plan Year to the Committee for a Hardship distribution. Any application for a Hardship distribution shall be subject to the spousal consent requirements of Section 7.2(a) and be made in writing to the Committee at least ten (10) days prior to the requested date of payment. Hardship distributions may be made by a distribution of all or a portion of a Participant's (i) Before-Tax Contributions, (ii) Net Value of his Rollover Contribution Account, (iii) vested interest in the Net Value of his Matching Contribution Account and (iv) the vested interest in the Net Value of his Discretionary Employer Contribution Account.
(e) Distributions under this Section 7.4 shall be made in the following order of prior-ity:
(i) Participant's Before-Tax Contributions;
(ii) the Net Value of the Participant's Rollover Contribution Account;
(iii) the vested interest in the Net Value of the Participant's Matching Contribution Account; and
(iv) the vested interest in the Net Value of the Participant's Discretionary Employer Contribution Account.
(f) Withdrawals under this Section 7.4 shall be made in the following order of priority:
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(i) by the redemption of Units from each of the Participant's Accounts in the Trust Fund in the order set forth in Section 7.4(e), on a pro rata basis from the Investment Accounts thereunder, as were selected by the Participant pursuant to Article VI; and
(ii) by the redemption of Units invested in the Employer Stock Fund from each of the Participant's Accounts invested under the Separate Agreement, in the order set forth in Section 7.4(e), if selected by the Participant pursuant to Article VI.
(g) A Participant who receives a Hardship distribution under this
Section 7.4 may have his Before-Tax Contributions suspended in
accordance with Section 3.3.
(h) Any withdrawals under this Section 7.4 shall be subject to the restrictions of Section 6.5.
7.5 DISTRIBUTION OF BENEFITS FOLLOWING RETIREMENT, DISABILITY OR TERMINATION OF SERVICE
(a) If a Participant incurs a Termination of Service for any reason other than death, a distribution of the vested interest in the Net Value of his Accounts shall be made by the purchase of (i) a 50% Joint and Survivor Annuity with his Spouse as the designated Beneficiary or (ii) a Straight Life Annuity if the Participant does not have a Spouse. Payment of benefits to the Participant shall commence as of the later of the Participant's Normal Retirement Date or his Postponed Retirement Date.
(b) The Committee shall make every reasonable effort to furnish each Participant, by personal delivery or first class mail, the following information not less than thirty (30) days nor more than ninety (90) days prior to the date benefit payments are scheduled to commence:
(i) the terms and conditions of the 50% Joint and Survivor Annuity,
(ii) the Participant's right to make, and the effect of, an election to waive the 50% Joint and Survivor Annuity,
(iii) the rights of the Participant's Spouse under the Plan,
(iv) the right to make, and the effect of, a revocation of a previous election to waive the 50% Joint and Survivor Annuity, and
(v) the relative values of the various optional forms of benefit payments under the Plan.
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The Employer may also permanently post in the Employers office or offices the information described in (i) through (v) above in a manner that is reasonably calculated to reach the attention of each Participant.
(c) In lieu of the normal form of benefit payment set forth in
Section 7.5(a), the Participant may file an election form to
receive his vested interest in the Net Value of his Accounts
in any one of the optional forms of benefit payment set forth
in Section 7.6. Such form must be filed with the Committee
during the ninety (90) day election period ending on the date
benefit payments are scheduled to commence.
(d) If a Participant who incurs a Termination of Service for any reason other than death, files an election with the Committee to receive an optional form of benefit payment in accordance with the provisions of Section 7.6, and dies before the entire vested interest in the Net Value of his Accounts has been distributed:
(i) if the Net Value of a Participant's Accounts was distributed by the purchase of an annuity contract, the remainder, if any, of such vested interest shall be paid in accordance with the provisions of such annuity contract;
(ii) if the Participant had elected to receive and had begun receiving a distribution in the form of installments, the Beneficiary shall receive distributions over the remaining installment period, at the times set forth in such election. If the Beneficiary designated to receive payments under the installment form of benefit payments dies after the commencement of payments to the Participant but prior to the earlier of the end of the installment period or the date of the Participant's death, the Participant shall, subject to the spousal consent requirements of Section 7.2(a), have the right to designate another Beneficiary, provided such designation is executed and filed with the Committee prior to the Participant's death. If there is no Beneficiary, the remaining vested interest in the Net Value of his Accounts shall be payable in a lump sum to the executor or administrator of his estate, or, if no such executor or administrator is appointed and qualifies within a time which the Committee shall, in its sole and absolute discretion, deem to be reasonable, then to such one or more of the descendants and blood relatives of such deceased Participant as the Committee, in its sole and absolute discretion, may select;
(iii) if the Participant had elected to receive a deferred lump sum distribution, the Participant's Beneficiary shall receive a lump sum distribution as of the earlier of: (A) the Valuation Date set forth in the Participant's election
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or (B) the last Valuation Date which occurs within one (1) year of the Participant's death;
(iv) if the Participant had elected to receive an immediate lump sum distribution, the Participant's Beneficiary shall receive a lump sum distribution as of the Valuation Date set forth in the Participant's election;
(v) if the Participant had elected to receive an annuity and the annuity contract had not yet been purchased, the Participant's Beneficiary shall, by completing and filing the election form prescribed by the Committee, elect to receive the distribution as a Straight Life Annuity or one of the optional forms of benefit payment set forth in Section 7.8(f));
(vi) if the Participant had elected that a lump sum distribution be made payable to the trustee of another qualified pension or profit-sharing plan and such distribution had not yet been made, the Participant's Beneficiary shall, by completing and filing the election form prescribed by the Committee, elect to receive the distribution as a Straight Life Annuity or in one of the optional forms of benefit payment set forth in Section 7.8(f));
(vii) Notwithstanding the foregoing, if the Beneficiary is the Participant's Spouse and if benefits are payable to such Beneficiary as an immediate or deferred lump sum distribution, such Spouse may defer the distribution up to the date on which the Participant would have attained age seventy and one-half (70-1/2).
(e) If a Participant who incurs a Termination of Service is reemployed by the Employer, upon such Participant's subsequent Termination of Service his prior election to receive a distribution in a form other than the normal form of benefit payment set forth in subsection (a) shall be null and void and the vested interest in the Net Value of his Accounts shall be distributed to him in accordance with the provisions of subsection (a).
(f) An Employee who incurs a Termination of Service, has elected to receive a distribution in the form of installments and is reemployed by the Employer prior to the distribution of the entire vested interest in the Net Value of his Accounts in accordance with the provisions of Section 7.6(e), shall not be eligible to receive or to continue to receive such distribution during his period of reemployment with the Employer. Upon such Employee's subsequent Termination of Service, his prior election to receive a distribution in the form of installments shall be null and void and the vested interest in the Net Value of his Accounts shall be distributed to him in accordance with the provisions of subsection (a).
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(g) If a Participant incurs a Termination of Service for any reason and the vested interest in the Net Value of the Participant's Accounts is equal to or less than $3,500, a lump sum distribution of the vested interest in the Net Value of his Accounts shall be made to the Participant within seven (7) days of the Valuation Date coincident with the date of receipt by the Trustees of the proper documentation that such Participant incurred a Termination of Service.
(d) A Participant's vested interest in the Net Value of his Accounts in the Employer Stock Fund shall be distributed to the Participant by the Separate Agency as soon as administratively possible following the date the Employer is informed by the Trustees of the Participant's vested interest in such Investment Accounts. The distribution shall be made in accordance with Section 7.11 and the terms and provisions of the Separate Agreement.
7.6 OPTIONAL FORMS OF BENEFIT PAYMENT UPON RETIREMENT, DISABILITY OR TERMINATION OF SERVICE
(a) In lieu of the normal form of benefit payment set forth in
Section 7.5(a), a Participant who incurs a Termination of
Service as of his Retirement Date or incurs a Termination of
Service due to Disability or incurs a Termination of Service
for any other reason may file an election form to receive a
distribution of the vested interest in the Net Value of his
Accounts by the purchase of a 100% Joint and Survivor Annuity,
a 75% Joint and Survivor Annuity or a 50% Joint and Survivor
Annuity or a Period Certain and Life Annuity. Such form may,
subject to the spousal consent requirements of Section 7.2(a),
include an election to designate a Beneficiary who is other
than his Spouse. Payment of benefits to the Participant shall
commence as of the later of the Participant's Normal
Retirement Date or his Postponed Retirement Date.
Notwithstanding the foregoing sentence, such form may include
an election to receive a distribution commencing on any date
coincident with or next following his Early Retirement Date
or, if applicable, the date of his Disability.
(b) In lieu of the normal form of benefit payment set forth in
Section 7.5(a), a Participant who incurs a Termination of
Service as of his Retirement Date or incurs a Termination of
Service due to Disability or incurs a Termination of Service
for any other reason may, subject to the spousal consent
requirements of Section 7.2(a), file an election form to
receive a distribution of the vested interest in the Net Value
of his Accounts by the purchase of a Straight Life Annuity.
Payment of benefits to the Participant shall commence as of
the later of the Participant's Normal Retirement Date or his
Postponed Retirement Date. Notwithstanding the foregoing
sentence, such form may include an election to receive a
distribution commencing on any date coincident with or next
following his Early Retirement Date or, if applicable, the
date of his Disability.
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(c) In lieu of the normal form of benefit payment set forth in
Section 7.5(a), a Participant who incurs a Termination of
Service as of his Retirement Date or incurs a Termination of
Service due to Disability or incurs a Termination of Service
for any other reason may, subject to the spousal consent
requirements of Section 7.2(a) and the required minimum
distribution provisions of Sections 7.10(b) and 7.10(c), file
an election form to receive the vested interest in the Net
Value of his Accounts as a lump sum distribution as of any
Valuation Date following his Termination of Service and prior
to his Normal Retirement Date; provided, however, that the
Valuation Date may not be later than thirteen (13) months
following his Termination of Service. The vested interest in
the Net Value of his Accounts shall be distributed to such
Participant as a lump sum distribution within seven (7) days
of the Valuation Date coincident with the date of receipt by
the Trustees of the proper documentation indicating the
Participant's distribution date.
(d) In lieu of the normal form of benefit payment set forth in
Section 7.5(a), a Participant who incurs a Termination of
Service as of his Retirement Date or incurs a Termination of
Service due to Disability or incurs a Termination of Service
for any other reason may, subject to the spousal consent
requirements of Section 7.2(a), elect to defer receipt of the
vested interest in the Net Value of his Accounts beyond his
Normal Retirement Date or Postponed Retirement Date. If such
an election is made, the vested interest in the Net Value of
his Accounts shall continue to be held in the Trust Fund.
Subject to the required minimum distribution provisions of
Sections 7.10(b) and 7.10(c), the vested interest in the Net
Value of his Accounts shall be distributed to such Participant
as a lump sum distribution within seven (7) days of the
Valuation Date coincident with the date of receipt by the
Trustees of the proper documentation indicating the Employee's
deferred distribution date.
(e) In lieu of the normal form of benefit payment set forth in
Section 7.5(a), a Participant who incurs a Termination of
Service as of his Retirement Date or incurs a Termination of
Service due to Disability or incurs a Termination of Service
for any other reason may, subject to the spousal consent
requirements of Section 7.2(a) and the required minimum
distribution provisions of Sections 7.10(b) and 7.10(c), file
an election form to receive the vested interest in the Net
Value of his Accounts in the form of equal monthly, quarterly
or annual installments over a period not to exceed ten (10)
years. If a Participant elects to receive his benefit pursuant
to this subsection (e), the installment period may not extend
beyond the life expectancy of such Participant or the life
expectancy of such Participant and his Beneficiary. The vested
interest in the Net Value of his Accounts shall be determined
as of such Valuation Date or Valuation Dates in each such Plan
Year as may be elected by such Participant and shall be based
on the respective values of the Participant's Units in each
Investment Account as of
787 -53- CARVER FEDERAL SAVINGS BANK
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such Valuation Date or Valuation Dates. The amount of the installment payment shall be distributed by the redemption of Units from the Participant's Accounts on a pro rata basis among such Participant's Investment Accounts. Any portion of the vested interest in the Net Value of the Accounts of such Participant which shall not have been so paid shall continue to be held for his benefit or for the benefit of his Beneficiary in the Participant's Investment Accounts.
(f) In lieu of the normal form of benefit payment set forth in
Section 7.5(a), a Participant who incurs a Termination of
Service as of his Retirement Date or incurs a Termination of
Service due to Disability or incurs a Termination of Service
for any other reason may, subject to the spousal consent
requirements of Section 7.2(a), file an election form that a
lump sum distribution equal to the vested interest in the Net
Value of his Accounts be made payable to the trustee of
another qualified pension or profit-sharing plan designated by
the Participant. Such lump sum distribution shall be made
within seven (7) days of the Valuation Date coincident with
the date of receipt by the Trustees of the proper
documentation.
(g) In lieu of the normal form of benefit payment set forth in
Section 7.5(a), a Participant who incurs a Termination of
Service as of his Retirement Date or incurs a Termination of
Service due to Disability or incurs a Termination of Service
for any other reason may, subject to the spousal consent
requirements of Section 7.2(a), file an election form to
receive the vested interest in the Net Value of his Accounts
in the form of a partial lump sum distribution as of some
Valuation Date following his Termination of Service. Subject
to the required minimum distribution provisions of Sections
7.10(b) and 7.10(c), the partial lump sum distribution shall
be distributed to such Employee within seven (7) days of the
Valuation Date coincident with the date of receipt by the
Trustees of the proper documentation indicating the Employee's
distribution date; and the balance of the vested interest in
the Net Value of his Accounts shall be payable in the form of
one (1) of the following:
(i) monthly, quarterly or annual installments over a period not to exceed ten (10) years, as set forth in subsection (e); or
(ii) the purchase of an annuity, as set forth in Section 7.1(a)(ii), (iii), (iv), (v) or (vi).
7.7 DESIGNATION OF BENEFICIARY
(a) Subject to the spousal consent requirements of Section 7.2(a), a Participant may, from time to time, designate any person or persons as Beneficiary or contingent Beneficiary to receive a benefit under Section 7.5 or Section 7.8 upon the death
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of the Participant. For purposes of this Section 7.7, "person" includes an individual, a trust, an estate or any other entity designated as a Beneficiary.
(b) The designation of a Beneficiary or contingent Beneficiary shall be made in writing by the Participant in the form and manner prescribed by the Committee and shall not be effective unless such form is (i) filed prior to the death of such person and (ii) complies with the spousal consent requirements of Section 7.2(a). If more than one (1) person is designated as a Beneficiary, each designated Beneficiary in such Beneficiary classification shall have an equal share, unless the Participant directs otherwise.
(c) The designation of a Beneficiary or contingent Beneficiary which is filed with the Committee will revoke all prior Beneficiary designations filed with the Committee. The number of Beneficiary designations and revocations shall not be limited.
(d) If the Beneficiary or contingent Beneficiary designated to receive payments under an optional form of benefit set forth in Section 7.6 dies prior to the commencement of benefit payments to the Participant, the terms and conditions of such election shall be deemed null and void and the normal form of benefit set forth in Section 7.5(a) shall be reinstated. Subject to the spousal consent requirements of Section 7.2(a), the Participant shall have the right to elect another optional form of benefit payment and another Beneficiary, provided such election is completed and filed with the Committee prior to the earlier of: (i) the Participant's death, or (ii) the date the Participant's benefit payments are scheduled to commence. Such election shall become effective on the date the Participant's benefit payments are scheduled to commence.
(e) If the Spouse or other Beneficiary designated to receive payments under Section 7.8(b) or Section 7.8(e), dies prior to the death of the Participant, the terms and conditions of such election shall be null and void. If the Participant is married, the normal form of benefit set forth in Section 7.8(b)(ii) shall be reinstated. Subject to the spousal consent requirements of Section 7.2(a), the Participant shall have the right to elect another Beneficiary, provided such election is completed and filed with the Committee prior to the earlier of: (i) the Participant's death, or (ii) the date the Participant's benefit payments are scheduled to commence. Such election shall become effective on the date the Participant's benefit payments are scheduled to commence.
(f) If a Participant fails to designate a Beneficiary other than a
Spouse to receive the Preretirement Death Benefit set forth in
Section 7.8, or if the Beneficiary and contingent Beneficiary
designated by a Participant die prior to such Participant's
death and before the entire vested interest in the Net Value
of the Participant's
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Accounts has been distributed, such Participant's benefits shall be paid as a lump sum to the executor or administrator of his estate.
7.8 PRERETIREMENT DEATH BENEFITS
(a) If a Participant dies prior to the date benefits are to commence and the vested interest in the Net Value of the Participant's Accounts is equal to or less than $3,500, a lump sum distribution of the vested interest in the Net Value of his Accounts shall be made to the Participant's Beneficiary within seven (7) days of the Valuation Date coincident with the date of receipt by the Trustees of the proper documentation indicating the date of the Participant's death.
(b) If a Participant dies prior to the date benefits are to commence and the vested interest in the Net Value of the Participant's Accounts exceeds $3,500, the Preretirement Death Benefit for a Participant shall be as follows:
(i) if a Participant had a vested interest in the Net Value of his Accounts and died (A) prior to the date benefit payments are scheduled to commence and (B) with no surviving Spouse, the vested interest in the Net Value of his Accounts shall be made to the Participant's designated Beneficiary by the purchase of a Straight Life Annuity. Payment of benefits shall commence within one (1) year of the Participant's death;
(ii) if a Participant had a vested interest in the Net Value of his Accounts and died (A) prior to the date benefits payments are scheduled to commence and (B) with a surviving Spouse, the vested interest in the Net Value of his Accounts shall be made to the surviving Spouse by the purchase of a Straight Life Annuity. Payment of benefits to the Participant's Spouse shall commence as of the later of the date the Participant would have attained his Normal Retirement Date or the date of the Participant's death.
(c) Notwithstanding the provisions of subsection (b)(ii), the surviving Spouse of a Participant may elect that the Straight Life Annuity be purchased with benefits to commence on a date selected by the Spouse which occurs on any date commencing with the Participant's date of death and ending on the date the Participant would have attained age seventy and one-half (70-1/2).
(d) In lieu of the normal form of benefit payment set forth in subsection (b)(ii), a Participant may, subject to the spousal consent requirements of Section 7.2(a), elect to waive the Preretirement Death Benefit. Such waiver shall designate a Beneficiary who is other than the Participant's Spouse.
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(e) Consent by a Spouse to waive the Preretirement Death Benefit is not binding on a subsequent Spouse. If a Participant has elected, with spousal consent, to waive the Preretirement Death Benefit and is subsequently widowed or divorced and thereafter remarried, the Preretirement Death Benefit is automatically reinstated upon remarriage, subject to any subsequent election by the Participant, with the consent of his new Spouse, to waive such coverage.
(f) In lieu of the normal form of Preretirement Death Benefit set forth in subsection (b), upon the Participant's death the Beneficiary of a Participant may, by completing and filing the election form prescribed by the Committee, elect to receive the vested interest in the Net Value of a Participant's Accounts in one of the following optional forms of benefit payment:
(i) as a lump sum distribution as of any Valuation Date following the Participant's death; provided, however, that the Valuation Date may not be later than one (1) year following the Participant's death. The vested interest in the Net value of the Participant's Accounts shall be distributed to such person as a lump sum distribution within seven (7) days of the Valuation Date coincident with the date of receipt by the Trustees of the proper documentation indicating the distribution date.
(ii) in the form of equal monthly, quarterly or annual installments over a period not to exceed ten (10) years. The vested interest in the Net value of the Participant's Accounts shall be determined as of such Valuation Date or Valuation Dates in each such Plan Year as may be elected by such person and shall be based on the respective values of the deceased Participant's Units in each Investment Account as of such Valuation Date or Valuation Dates. The amount of the installment payment shall be distributed by the redemption of Units from the deceased Participant's Accounts on a pro rata basis among such deceased Participant's Investment Accounts. Any portion of the vested interest in the Net Value of the Accounts of such deceased Participant which shall not have been so paid shall continue to be held for the benefit of the surviving Spouse or other Beneficiary or for the benefit of the beneficiary designated by such person. If the surviving Spouse or other Beneficiary elects to receive his benefit pursuant to this subsection (f)(ii), installment payments shall begin to such person within one (1) year of the Participant's death and the installment period may not extend beyond the life expectancy of such person.
(iii) as a lump sum distribution equal to the vested interest in the Net Value of the Participant's Accounts made payable to the trustee of another qualified pension or profit-sharing plan designated by such person. Such lump sum
787 -57- CARVER FEDERAL SAVINGS BANK
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distribution shall be made within seven (7) days of the Valuation Date coincident with the date of receipt by the Trustees of the proper documentation.
(iv) in the form of a partial distribution as of some Valuation Date following his Termination of Service. Subject to the required minimum distribution provisions of Sections 7.10(b) and 7.10(c), the partial distribution shall be distributed to such Employee within seven (7) days of the Valuation Date coincident with the date of receipt by the Trustees of the proper documentation indicating the Employee's distribution date; and the balance of the vested interest in the Net Value of his Accounts shall be payable in the form of one of the following:
(I) installments over a period not to exceed ten
(10) years, as set forth in subsection
(f)(ii);
(II) the purchase of a Straight Life Annuity, as set forth in subsections (b) and (c), if applicable; or
(III) a lump sum distribution made payable to the trustee of another qualified pension or profit-sharing plan, as set forth in subsection (iii).
Notwithstanding the foregoing provisions to the contrary, if the surviving Spouse of a deceased Participant elects one of these optional forms of benefit payment set forth above, such Spouse may elect to have benefits commence on a date selected by such Spouse which occurs on any date commencing with the Participant's date of death and ending on the date the Participant would have attained age seventy and one-half (70-1/2).
7.9 DIRECT ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS
For purposes of this Section 7.9, the following definitions shall apply:
(a) "Direct Rollover" means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.
(b) "Distributee" means an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's Spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the Spouse or former spouse.
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(c) "Eligible Retirement Plan" means an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity.
(d) "Eligible Rollover Distribution" means any distribution of all
or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution
does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) or
the Distributee and the Distributee's designated Beneficiary,
or for a specified period of ten (10) years or more; any
distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
This Section 7.9 applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
7.10 LATEST COMMENCEMENT OF BENEFITS
(a) Unless the Participant elects otherwise in accordance with the Plan, in no event shall the payment of benefits commence later than the sixtieth (60th) day after the close of the Plan Year in which the latest of the following events occur: (i) the attainment by the Participant of age sixty-five (65), (ii) the tenth (10th) anniversary of the year in which the Participant commenced participation in the Plan or Prior Plan, or (iii) the termination of the Participant's employment with the Employer; provided, however, that if the amount of the payment required to commence on the date determined under this sentence cannot be ascertained by such date, a payment retroactive to such date may be made no later than sixty (60) days after the earliest date on which the amount of such payment can be ascertained under the Plan.
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(b) Distributions to five-percent owners:
The vested interest in the Net Value of the Accounts of a
five-percent owner (as described in Section 416(i) of the Code
and determined with respect to the Plan Year ending in the
calendar year in which such individual attains age seventy and
one-half (70-1/2)) must be distributed or commence to be
distributed no later than the first day of April following the
calendar year in which such individual attains age seventy and
one-half (70-1/2). The vested interest in the Net Value of the
Accounts of a Participant who is not a five-percent owner (as
described in Section 416(i) of the Code) for the Plan Year
ending in the calendar year in which such person attains age
seventy and one-half (70-1/2) but who becomes a five-percent
owner (as described in Section 416(i) of the Code) for a later
Plan Year must be distributed or commence to be distributed no
later than the first day of April following the last day of
the calendar year that includes the last day of the first Plan
Year for which such individual is a five-percent owner (as
described in Section 416(i) of the Code).
(c) Distributions to other than five-percent owners:
The vested interest in the Net Value of the Accounts of a
Participant who is not a five-percent owner and who attained
age seventy and one-half (70-1/2) prior to January 1, 1988,
must be distributed or commence to be distributed no later
than the first day of April following the calendar year in
which occurs the later of: (i) his termination of employment
or (ii) his attainment of age seventy and one-half (70-1/2).
The vested interest in the Net Value of the Accounts of any
Participant who attains age seventy and one-half (70-1/2)
after December 31, 1987, must be distributed or commence to be
distributed no later than the first day of April following the
calendar year in which such individual attains age seventy and
onehalf (70-1/2).
7.11 MANNER OF PAYMENT OF DISTRIBUTIONS FROM THE EMPLOYER STOCK FUND
Distributions from the Employer Stock Fund shall be made to
Participants and Beneficiaries in cash, unless the Participant or
Beneficiary elects that such distributions may be made wholly or
partially in shares. If the Participant or Beneficiary elects that
such distributions may be made wholly or partially in shares, subject
to such terms and conditions as may be established from time to time
by the Committee, the maximum number of shares to be distributed shall
be equal to the number of whole shares that could be purchased on the
date of distribution based on the fair market value of shares
determined as of the date of payment and on the fair market value of
the Participant's Units in the Employer Stock Fund on the valuation
date preceding the distribution. An amount of money equal to any
remaining
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amount of the payment that is less than the fair market value of a
whole share shall be distributed in cash. For purposes of this
Section 7.11, the fair market value of a share shall be determined on
a uniform and nondiscriminatory basis in such manner as the Separate
Agency may, in its discretion, prescribe.
787 -61- CARVER FEDERAL SAVINGS BANK
ARTICLE VIII -
LOANS TO PARTICIPANTS
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ARTICLE VIII -LOANS TO PARTICIPANTS
8.1 DEFINITIONS AND CONDITIONS
(a) For purposes of this Article VIII, the following terms and phrases shall have the meanings hereafter ascribed to them:
(i) "Borrower" means a Participant or a "Party in Interest" (as defined under Section 3(14) of ERISA) who maintains an Account, provided such Participant or Party in Interest is not receiving a benefit payment in the form of installment or annuity payments in accordance with the provisions of Article VII, or a preretirement death benefit in accordance with the provisions of Section 7.8.
(ii) "Loan Account" means the separate, individual account established on behalf of a Borrower in accordance with the provisions of Section 8.4(d).
(b) To the extent permitted under the provisions of this Article VIII and subject to the terms and conditions set forth herein and in Section 7.2, a Borrower may request a loan from his Accounts. Any loans made in accordance with this Article VIII shall not be subject to the provisions of Article VI.
8.2 LOAN AMOUNT
Upon a finding by the Committee that all requirements hereunder have been met, a Borrower may request a loan from his Accounts, in an amount up to the lesser of: (a) fifty percent (50%) of the Net Value as of the close of business on the date the loan is processed of the Before-Tax Contribution Account, vested Matching Contribution Account, vested Discretionary Employer Contribution Account and Rollover Contribution Account, or (b) $50,000, reduced by the highest outstanding loan balance during the preceding twelve (12) months. The minimum loan permitted shall be $1,000.
8.3 TERM OF LOAN
All loans shall be for a fixed term of not more than five (5) years, except that a loan which shall be used to acquire any dwelling which within a reasonable time is to be used as the principal residence of the Participant, may, in the discretion of the Committee, be made for a term of not more than fifteen (15) years. Interest on a loan shall be based on a reasonable rate of interest. Such rate shall be the "prime rate" as set forth in the first publication of The Wall Street Journal issued during the month in which the Borrower requests the loan, increased by one (1) percentage point and rounded to the nearest
787 -62- CARVER FEDERAL SAVINGS BANK
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quarter of one percent (1/4 of 1%). Such rate shall remain in effect until the Loan Account is closed.
8.4 OPERATIONAL PROVISIONS
(a) An application for a loan shall be filed in the form and manner prescribed by the Committee ten (10) days prior to the Valuation Date as of which such loan is requested. If the Committee shall approve such application, the Committee shall establish the amount of such loan and such loan shall be effected as of such Valuation Date.
(b) The amount of the loan shall be distributed from the Investment Accounts in which the Borrower's Accounts are invested, in the following order of priority:
(i) Before-Tax Contribution Account;
(ii) Rollover Contribution Account;
(iii) vested Matching Contribution Account; and
(iv) vested Discretionary Employer Contribution Account.
Distributions from each of the foregoing Accounts shall be made in the following order of priority:
(A) by the redemption of Units from each of the Borrower's Accounts in the Trust Fund in the order set forth above, on a pro rata basis from the Investment Accounts thereunder, as were selected by the Participant pursuant to Article VI; and
(B) by the redemption of Units invested in the Employer Stock Fund from each of the Borrower's Accounts invested under the Separate Agreement, in the order set forth above, if selected by the Borrower pursuant to Article VI.
(c) The proceeds of a loan shall be distributed to the Borrower as soon as practicable after the Valuation Date as of which the loan is processed; provided, however, that the Borrower shall have satisfied such reasonable conditions as the Committee shall deem necessary, including, without limitation: (i) the delivery of an executed promissory note for the amount of the loan, including interest, payable to the order of the Trustees; (ii) an assignment to the Plan of such Borrower's interest in his Accounts to the extent of such loan; and (iii) if the Borrower is actively employed by the Employer, an authorization to the Employer
787 -63- CARVER FEDERAL SAVINGS BANK
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to make payroll deductions in order to repay his loan to the Plan. The aforementioned promissory note shall be duly acknowledged and executed by the Borrower and shall be held by the Trustees, or the Committee as agent for the Trustees, as an asset of the Borrower's Loan Account pursuant to subsection (d).
(d) A Loan Account shall be established for each Borrower with an outstanding loan pursuant to this Article VIII. Each Loan Account shall be comprised of a Borrower's (i) executed promissory note and (ii) installment payments of principal and interest made pursuant to Section 8.5(a). Upon full payment and satisfaction of the outstanding Loan Account balance, a Borrower's promissory note shall be marked paid in full, returned to the Borrower, and his Loan Account thereupon closed.
(e) As of each Valuation Date coincident with or next succeeding
each payment of principal and interest on a loan, the then
current balance of each Borrower's Loan Account shall be
debited by the amount of such payment and such amount shall be
transferred for investment in accordance with Section 8.5(c)
to the appropriate Borrower's Account. If the Committee
established a lien against the Borrower's Accounts pursuant to
Section 8.6(c), and foreclosure of such lien is deferred until
the Borrower's Termination of Service pursuant to Section
8.6(c)(i), for each month that foreclosure of the lien is
deferred, the then current balance of the Borrower's Loan
Account shall be charged with interest on the unpaid principal
and interest thereon.
(f) Only one (1) loan shall be outstanding to any Borrower under this Article VIII at any time.
(g) Any loans under this Article VIII shall be subject to the restrictions of Section 6.5.
8.5 REPAYMENTS
(a) If the Borrower is on the payroll of the Employer and unless otherwise agreed to by the Committee, repayments of loan principal, or the unpaid balance thereof, and interest thereon shall be made through payroll deductions. The first repayment shall be deducted as of the first payroll date occurring no later than three (3) weeks after the Committee submits the loan form for processing.
If the Borrower is not on the payroll of the Employer and unless otherwise agreed to by the Committee, repayments of loan principal, or the unpaid balance thereof, and interest thereon, shall be made in cash or cash equivalencies to the Employer in equal monthly installments for payment to his Loan Account.
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(b) Any amount repaid to the Plan by a Borrower with respect to a
loan, including interest thereon, shall be invested as if such
amount were a contribution to be invested in accordance with
Section 6.1.
(c) With respect to each Borrower's Loan Account, any repayment of principal and interest made by a Borrower shall be credited, as of the Valuation Date coincident with or next succeeding such payment, to the Borrower's Accounts in the order of priority established under Section 8.4(b). No Account having a lesser degree of priority shall be credited until the Account having the immediately preceding degree of priority has been restored by an amount equal to that which had been borrowed from such Account.
(d) A Borrower may prepay his entire loan, plus all interest accrued and unpaid thereon, as of any Valuation Date. Alternatively and subject to such other terms and conditions as may be established from time to time by the Committee, a Borrower may prepay a portion of his loan on any Valuation Date. Such prepayment shall be applied first to all accrued and unpaid interest on the outstanding balance of the loan. After any partial prepayment of principal, interest will only be charged on the remaining outstanding balance of the loan.
(e) In the event the Plan is terminated, the entire unpaid principal amount of the loan hereunder, together with any accrued and unpaid interest thereon, shall become immediately due and payable.
8.6 DEFAULT
(a) If a Borrower fails to make any payment on any loan when due under this Article VIII, the entire unpaid principal amount of such loan, together with any accrued and unpaid interest thereon, shall be deemed in default and become due and payable ninety (90) days after the initial date of payment delinquency.
(b) If a Borrower fails to make any payment on a loan and is deemed to be in default pursuant to subsection (a), the Committee shall establish a lien against the Borrower's Accounts in an amount equal to any unpaid principal and interest. The lien shall be foreclosed by applying the value of the Borrower's Loan Account (determined as of the next Valuation Date immediately following foreclosure) in satisfaction of said unpaid principal and interest as follows:
(i) if the Borrower is in the employment of the Employer, upon the Borrower's Termination of Service; or
(ii) if the Borrower is not in the employment of the Employer, immediately upon default.
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Thereupon, the vested interest in the balance of the Borrower's Accounts shall be distributed in accordance with the applicable provisions of the Plan.
(c) The Committee may, in accordance with uniform rules
established by it, restrict the right of any Borrower who has
defaulted on a loan from the Plan to: (i) make withdrawals
and/or loans from his Matching Contribution Account,
Before-Tax Contribution Account, Discretionary Employer
Contribution Account and/or Rollover Contribution Account for
a period not exceeding twelve (12) months or (ii) if the
Borrower is an Eligible Employee, authorize Before-Tax
Contributions to be made on his behalf or make any other
contributions to the Plan for a period not exceeding twelve
(12) months.
8.7 COORDINATION OF OUTSTANDING ACCOUNT AND PAYMENT OF BENEFITS
(a) If the Borrower has an outstanding Loan Account and is either
(i) scheduled to receive or elects to receive a lump sum
distribution in accordance with the provisions of Article VII,
or (ii) scheduled to receive the last installment payment
under a previous election made in accordance with the
provisions of Article VII to receive payments in a form other
than the normal form of benefit payments, then, at the time of
the distribution or payment under clause (i) or (ii) above,
the entire unpaid principal amount of the loan together with
any accrued and unpaid interest thereon, shall become
immediately due and payable. No Plan distribution, except as
permitted under Section 7.3 or Section 7.4, shall be made to
any Borrower unless and until such Borrower's Loan Account,
including accrued interest thereunder, has been liquidated and
closed. If a Borrower fails to pay the outstanding balance of
his Loan Account hereunder, such loan shall be satisfied as if
a default had occurred pursuant to Section 8.6.
(b) Any reference in the Plan to the Net Value of Units in a Borrower's Accounts available for distribution to any Borrower, shall mean the value after the satisfaction of the entire unpaid principal loan amount and any accrued, unpaid interest thereon, as provided in this Article VIII.
787 -66- CARVER FEDERAL SAVINGS BANK
ARTICLE IX -
ADMINISTRATION
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ARTICLE IX -
ADMINISTRATION
9.1 GENERAL ADMINISTRATION OF THE PLAN
The operation and administration of the Plan shall be subject to the management and control of the Named Fiduciaries and Plan Administrator designated by the Employer. The designation of such Named Fiduciaries and Plan Administrator, the terms of their appointment, and their duties and responsibilities allocated among them shall be as set forth in this Article IX.
9.2 DESIGNATION OF NAMED FIDUCIARIES
The management and control of the operation and administration of the Plan shall be allocated in the following manner:
(a) The Employer shall designate the Trustees as a Named Fiduciary to perform those functions set forth in the Plan or the Agreement which are applicable to a Plan of Partial Participation.
(b) The Employer shall designate one or more individuals to serve as member(s) of an employee benefits Committee to perform those functions set forth in the Agreement, Separate Agreement or the Plan that are assigned to such Committee.
(c) A Trust Participant (as defined under the Agreement) may delegate to a person or persons the duties and responsibilities for voting Units set forth under the Agreement and Separate Agreement.
9.3 RESPONSIBILITIES OF FIDUCIARIES
The Named Fiduciaries and Plan Administrator shall have only those powers, duties, responsibilities and obligations that are specifically allocated to them under the Plan, the Agreement or the Separate Agreement.
To the extent permitted by ERISA, each Named Fiduciary and Plan Administrator may rely upon any direction, information or action of another Named Fiduciary, Plan Administrator or the Employer as being proper under the Plan, the Agreement or the Separate Agreement and is not required to inquire into the propriety of any such direction, information or action and no Named Fiduciary or Plan Administrator shall be responsible for any act or failure to act of another Named Fiduciary, Plan Administrator or the Employer.
787 -67- CARVER FEDERAL SAVINGS BANK
ARTICLE IX -
ADMINISTRATION
- --------------------------------------------------------------------------------
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No Named Fiduciary, Plan Administrator or the Employer guarantees the Trust Fund or Separate Assets in any manner against investment loss or depreciation in asset value. The allocation of responsibility between the Trustees and the Employer or between the Separate Agency and the Employer may be changed by written agreement. Such reallocation shall be evidenced by Employer Resolutions and shall not be deemed an amendment to the Plan.
To the extent permitted by ERISA, the Trustees shall have no liability or responsibility with respect to the administration of any Separate Assets held outside the Trust except as specifically set forth in the Agreement. The authority and responsibility of the Trustees extend only to those Plan assets held in accordance with the Agreement.
9.4 PLAN ADMINISTRATOR
The Employer shall designate the Trustees as the Trustee Administrator to perform those functions applicable to Plans of Partial Participation as set forth in the Agreement. The Employer shall also designate one or more persons to act as Plan Administrator and to perform those functions set forth in the Agreement, the Plan or the Separate Agreement that are assigned to the Plan Administrator.
The duties and responsibilities of a plan administrator under ERISA shall be allocated between the Plan Administrator and the Trustee Administrator as set forth herein or in the Agreement. Such allocation may be changed only by written agreement between the parties and shall not be deemed an amendment to the Plan.
The Plan Administrator shall be solely responsible for monitoring and notifying the Trustees of an Employee's age for all purposes under the Plan.
The Plan Administrator is designated as the Plan's agent for the service of legal process.
9.5 COMMITTEE
The members of the Committee designated by the Employer under Section 9.2(b) shall serve for such term(s) as the Employer shall determine and until their successors are designated and qualified. The term of any member of the Committee may be renewed from time to time without limitation as to the number of renewals. Any member of the Committee may (a) resign upon at least sixty (60) days written notice to the Employer or (b) be removed from office but only for his failure or inability, in the opinion of the Employer, to carry out his responsibilities in an effective manner. Termination of employment with the Employer shall be deemed to give rise to such failure or inability.
The powers and duties allocated to the Committee shall be vested jointly and severally in its members. Notwithstanding specific instructions to the contrary, any instrument or
787 -68- CARVER FEDERAL SAVINGS BANK
ARTICLE IX -
ADMINISTRATION
- --------------------------------------------------------------------------------
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document signed on behalf of the Committee by any member of the Committee may be accepted and relied upon by the Trustees and Separate Agency as the act of the Committee. The Trustees and Separate Agency shall not be required to inquire into the propriety of any such action taken by the Committee nor shall they be held liable for any actions taken by them in reliance thereon.
The Employer may, pursuant to Employer Resolutions and upon notice to the Trustees, change the number of individuals comprising the Committee, their terms of office or other conditions of their incumbency provided that there shall be at all times at least one individual member of the Committee. Any such change shall not be deemed an amendment to the Plan.
9.6 POWERS AND DUTIES OF THE COMMITTEE
The Committee shall have authority to perform all acts it may deem necessary or appropriate in order to exercise the duties and powers imposed or granted by ERISA, the Plan, the Agreement or any Employer Resolutions. Such duties and powers shall include, but not be limited to, the following:
(a) Power to Construe - Except as otherwise provided in the Agreement, the Committee shall have the power to construe the provisions of the Plan and to determine any questions of fact which may arise thereunder.
(b) Power to Make Rules and Regulations - The Committee shall have
the power to make such reasonable rules and regulations as it
may deem necessary or appropriate to perform its duties and
exercise its powers. Such rules and regulations shall
include, but not be limited to, those governing (i) the manner
in which the Committee shall act and manage its own affairs,
(ii) the procedures to be followed in order for Employees or
Beneficiaries to claim benefits, and (iii) the procedures to
be followed by Participants, Beneficiaries or other persons
entitled to benefits with respect to notifications, elections,
designations or other actions required by the Plan or ERISA.
All such rules and regulations shall be applied in a uniform
and nondiscriminatory manner.
(c) Powers and Duties with Respect to Information - The Committee shall have the power and responsibility:
(i) to obtain such information as shall be necessary for the proper discharge of its duties;
(ii) to furnish to the Employer, upon request, such reports as are reasonable and appropriate;
787 -69- CARVER FEDERAL SAVINGS BANK
ARTICLE IX -
ADMINISTRATION
- --------------------------------------------------------------------------------
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(iii) to receive, review and retain periodic reports of the financial condition of the Plan Funds; and
(iv) to receive, collect and transmit to the Trustees all information required by the Trustees in the administration of the Accounts of the Employee as contemplated in Section 9.7.
(d) Power of Delegation - The Committee shall have the power to delegate fiduciary responsibilities (other than trustee responsibilities defined under Section 405(c)(3) of ERISA) to one or more persons who are not members of the Committee. Unless otherwise expressly indicated by the Employer, the Committee must reserve the right to terminate such delegation upon reasonable notice.
(e) Power of Allocation - Subject to the written approval of the Employer, the Committee shall have the power to allocate among its members specified fiduciary responsibilities (other than trustee responsibilities defined under Section 405(c)(3) of ERISA). Any such allocation shall be in writing and shall specify the persons to whom such allocation is made and the terms and conditions thereof.
(f) Duty to Report - Any member of the Committee to whom specified fiduciary responsibilities have been allocated under subsection (e) shall report to the Committee at least annually. The Committee shall report to the Employer at least annually regarding the performance of its responsibilities as well as the performance of any persons to whom any powers and responsibilities have been further delegated.
(g) Power to Employ Advisors and Retain Services - The Committee may employ such legal counsel, enrolled actuaries, accountants, pension specialists, clerical help and other persons as it may deem necessary or desirable in order to fulfill its responsibilities under the Plan.
9.7 CERTIFICATION OF INFORMATION
The Committee shall certify to the Trustees on such periodic or other basis as may be agreed upon, but in no event later than ten (10) days before any Valuation Date as of which the Trustees must effect any action with respect to any Accounts held under the provisions of the Plan, relevant facts regarding the establishment of the Accounts of an Employee, periodic contributions with respect to such Accounts, investment elections and modifications thereof and withdrawals and distributions therefrom. The Trustees shall be fully protected in maintaining individual Account records and in administering the Accounts of the Employee on the basis of such certifications and shall have no duty of inquiry or otherwise with respect to any transactions or communications between the Committee and Employees relating to the information contained in such certifications.
787 -70- CARVER FEDERAL SAVINGS BANK
ARTICLE IX -
ADMINISTRATION
- --------------------------------------------------------------------------------
9.8 AUTHORIZATION OF BENEFIT PAYMENTS
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The Committee shall forward to the Trustees and, if applicable, any Separate Agency, any application for payment of benefits within a reasonable time after it has approved such application. The Trustees and Separate Agency may rely on any such information set forth in the approved application for the payment of benefits to the Participant, Beneficiary or any other person entitled to benefits.
9.9 PAYMENT OF BENEFITS TO LEGAL CUSTODIAN
Whenever, in the Committee's opinion, a person entitled to receive any
benefit payment is a minor or deemed to be physically, mentally or
legally incompetent to receive such benefit, the Committee may direct
the Trustees and Separate Agency to make payment for his benefit to
such individual or institution having legal custody of such person or
to his legal representative. Any benefit payment made in accordance
with the provisions of this Section 9.9 shall operate as a valid and
complete discharge of any liability for payment of such benefit under
the provisions of the Plan.
9.10 SERVICE IN MORE THAN ONE FIDUCIARY CAPACITY
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan, regardless of whether any such
person is an officer, employee, agent or other representative of a
party in interest.
9.11 PAYMENT OF EXPENSES
The Employer will pay the ordinary administrative expenses of the Plan
and compensation of the Trustees to the extent required, except that
any expenses directly related to the Trust Fund, such as transfer
taxes, brokers' commissions, registration charges, or administrative
expenses of the Trustees (including expenses of counsel retained by it
in accordance with the Agreement), shall be paid from the Trust Fund
or from such Investment Account to which such expenses directly
relate.
The Employer may charge Employees all or part of the reasonable
expenses associated with withdrawals and other distributions or
Account transfers. The Employer will charge Employees loan origination
fees and all annual maintenance fees associated with loans.
Brokerage commissions incurred in connection with the Employer Stock
Fund shall be paid by the Employer.
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787 -71- CARVER FEDERAL SAVINGS BANK
ARTICLE IX -
ADMINISTRATION
- --------------------------------------------------------------------------------
9.12 ADMINISTRATION OF SEPARATE ASSETS
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The Committee and the Separate Agency shall be solely responsible for the administration of the Separate Assets, including the administration, collection and enforcement of any loans held therein. All contributions to and withdrawals or disbursements from the Separate Assets shall be made directly to or by the Separate Agency.
The Trustees may, as agreed upon with the Committee, provide such combined or coordinated Plan records and reports, which include the Separate Assets. The Trustees shall be fully protected in relying upon any information provided to them by the Committee or Separate Agency with respect to such Separate Assets. The inclusion of any information pertaining to Separate Assets in such combined or coordinated Plan records and reports shall not increase the responsibility or liability of the Trustees with respect to the Separate Assets. If Plan Funds may be transferred between the Separate Assets and the other Investment Accounts, the manner in which such transfers may be made must be agreed to in a written instrument entered into among the Committee, the Trustees and the Separate Agency.
787 -72- CARVER FEDERAL SAVINGS BANK
ARTICLE X -
BENEFIT CLAIMS PROCEDURE
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ARTICLE X -
BENEFIT CLAIMS PROCEDURE
10.1 DEFINITION
For purposes of this Article X, "Claimant" shall mean any Participant,
Beneficiary or any other person entitled to benefits under the Plan or
his duly authorized representative.
10.2 CLAIMS
A Claimant may file a written claim for a Plan benefit with the Plan
Administrator on the appropriate form to be supplied by the Plan
Administrator. The Plan Administrator shall, in its sole and absolute
discretion, review the Claimant's application for benefits and
determine the disposition of such claim.
10.3 DISPOSITION OF CLAIM
The Plan Administrator shall notify the Claimant as to the disposition
of the claim for benefits under this Plan within ninety (90) days
after the appropriate form has been filed unless special circumstances
require an extension of time for processing. If such an extension of
time is required, the Plan Administrator shall furnish written notice
of the extension to the Claimant prior to the termination of the
initial ninety (90) day period. The extension notice shall indicate
the special circumstances requiring the extension of time and the date
the Plan Administrator expects to render a decision. In no event shall
such extension exceed a period of one hundred-eighty (180) days from
the receipt of the claim.
10.4 DENIAL OF CLAIM
If a claim for benefits under this Plan is denied in whole or in part
by the Plan Administrator, a notice written in a manner calculated to
be understood by the Claimant shall be provided by the Plan
Administrator to the Claimant and such notice shall include the
following:
(a) a statement that the claim for the benefits under this Plan
has been denied;
(b) the specific reasons for the denial of the claim for benefits,
citing the specific provisions of the Plan which set forth the
reason or reasons for the denial;
(c) a description of any additional material or information
necessary for the Claimant to perfect the claim for benefits
under this Plan and an explanation of why such material or
information is necessary; and
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787 -73- CARVER FEDERAL SAVINGS BANK
ARTICLE X -
BENEFIT CLAIMS PROCEDURE
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(d) appropriate information as to the steps to be taken if the
Claimant wishes to appeal such decision.
10.5 INACTION BY PLAN ADMINISTRATOR
A claim for benefits shall be deemed to be denied if the Plan
Administrator shall not take any action on such claim within ninety
(90) days after receipt of the application for benefits by the
Claimant or, if later, within the extended processing period
established by the Plan Administrator by written notice to the
Claimant, in accordance with Section 10.3.
10.6 RIGHT TO FULL AND FAIR REVIEW
A Claimant who is denied, in whole or in part, a claim for benefits
under the Plan may file an appeal of such denial. Such appeal must be
made in writing by the Claimant or his duly authorized representative
and must be filed with the Committee within sixty (60) days after
receipt of the notification under Section 10.4 or the date his claim
is deemed to be denied under Section 10.5. The Claimant or his
representative may review pertinent documents and submit issues and
comments in writing.
10.7 TIME OF REVIEW
The Committee, independent of the Plan Administrator, shall conduct a
full and fair review of the denial of claim for benefits under this
Plan to a Claimant within sixty (60) days after receipt of the written
request for review described in Section 10.6; provided, however, that
an extension, not to exceed sixty (60) days, may apply in special
circumstances. Written notice shall be furnished to the Claimant prior
to the commencement of the extension period.
10.8 FINAL DECISION
The Claimant shall be notified in writing of the final decision of
such full and fair review by such Committee. Such decision shall be
written in a manner calculated to be understood by the Claimant, shall
state the specific reasons for the decision and shall include specific
references to the pertinent Plan provisions upon which the decision is
based. In no event shall the decision be furnished to the Claimant
later than sixty (60) days after the receipt of a request for review,
unless special circumstances require an extension of time for
processing, in which case a decision shall be rendered within one
hundred-twenty (120) days after receipt of such request for review.
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787 -74- CARVER FEDERAL SAVINGS BANK
ARTICLE XI -
AMENDMENT, TERMINATION, AND WITHDRAWAL
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ARTICLE XI -
AMENDMENT, TERMINATION, AND WITHDRAWAL
11.1 AMENDMENT AND TERMINATION
The Employer expects to continue the Plan indefinitely, but
specifically reserves the right, in its sole and absolute discretion,
at any time, by appropriate action of the Board, to terminate its Plan
or to amend (subject to the approval of the Trustees), in whole or in
part, any or all of the provisions of the Plan. Subject to the
provisions of Section 13.7, no such amendment or termination shall
permit any part of the Plan Funds to be used for or diverted to
purposes other than for exclusive benefit of Participants,
Beneficiaries or other persons entitled to benefits, and no such
amendment or termination shall reduce the interest of any Participant,
Beneficiary or other person who may be entitled to benefits, without
his consent. In the event of a partial termination of the Plan, or
upon complete discontinuance of contributions under the Plan, the
Accounts of each affected Participant shall become fully vested and
shall be distributable in accordance with the provisions of Article
VII. In the event of a complete termination of the Plan, the Accounts
of each affected Participant shall become fully vested and shall be
distributable as a lump sum distribution within seven (7) days of the
Valuation Date coincident with the date of receipt by the Trustees of
the proper documentation indicating the Participant's distribution
date.
If any amendment changes the vesting schedule, any Participant who has
a Period of Service of three (3) or more years may, by filing a
written request with the Employer, elect to have his vested percentage
computed under the vesting schedule in effect prior to the amendment.
The period during which the Participant may elect to have his vested
percentage computed under the prior vesting schedule shall commence
with the date the amendment is adopted and shall end on the latest of:
(a) sixty (60) days after the amendment is adopted;
(b) sixty (60) days after the amendment becomes effective; or
(c) sixty (60) days after the Participant is issued written notice
of the amendment from the Employer.
11.2 WITHDRAWAL FROM THE TRUST FUND
An Employer may withdraw its Plan from the Trust Fund in accordance
with and subject to the provisions of the Agreement.
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787 -75- CARVER FEDERAL SAVINGS BANK
ARTICLE XII -
TOP-HEAVY PLAN PROVISIONS
- --------------------------------------------------------------------------------
ARTICLE XII -
TOP-HEAVY PLAN PROVISIONS
12.1 INTRODUCTION
Any other provisions of the Plan to the contrary notwithstanding, the
provisions contained in this Article XII shall be effective with
respect to any Plan Year in which this Plan is a Top-Heavy Plan, as
hereinafter defined.
12.2 DEFINITIONS
For purposes of this Article XII, the following words and phrases
shall have the meanings stated herein unless a different meaning is
plainly required by the context.
(a) "Account," for the purpose of determining the Top-Heavy Ratio,
means the sum of (i) a Participant's Accounts as of the most
recent Valuation Date and (ii) an adjustment for contributions
due as of the Determination Date.
(b) "Determination Date" means, with respect to any Plan Year, the
last day of the preceding Plan Year. With respect to the
first Plan Year, "Determination Date" means the last day of
such Plan Year.
(c) "Five-Percent Owner" means, if the Employer is a corporation,
any Employee who owns (or is considered as owning within the
meaning of Section 318 of the Code modified by Section
416(i)(1)(B)(iii) of the Code) more than five percent (5%) of
the value of the outstanding stock of, or more than five
percent (5%) of the total combined voting power of all the
stock of, the Employer. If the Employer is not a corporation,
a Five-Percent Owner means any Employee who owns more than
five percent (5%) of the capital or profits interest in the
Employer.
(d) "Key Employee" means any Employee or former Employee (or,
where applicable, such person's Beneficiary) in the Plan who,
at any time during the Plan Year containing the Determination
Date or any of the preceding four (4) Plan Years, is: (i) an
Officer having Top-Heavy Earnings from the Employer of greater
than fifty percent (50%) of the dollar limitation in effect
under Section 415(b)(1)(A) of the Code; (ii) one of the ten
(10) Employees having Top-Heavy Earnings from the Employer of
more than the dollar limitation in effect under Section
415(c)(1)(A) of the Code and owning (or considered as owning
within the meaning of Section 318 of the Code modified by
Section 416(i)(1)(B)(iii) of the Code) both more than a
one-half of one percent (1/2%) interest in value and the
largest interests in the value of the Employer; (iii) a
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787 -76- CARVER FEDERAL SAVINGS BANK
ARTICLE XII -
TOP-HEAVY PLAN PROVISIONS
- --------------------------------------------------------------------------------
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Five-Percent Owner of the Employer; or (iv) a One-Percent Owner of the Employer having Top-Heavy Earnings from the Employer greater than $150,000. For purposes of computing the Top-Heavy Earnings in subsections (d)(i), (d)(ii) and (d)(iv), the aggregation rules of Sections 414(b), (c), (m) and (o) of the Code shall apply.
(e) "Non-Key Employee" means an Employee or former Employee (or, where applicable, such person's Beneficiary) who is not a Key Employee.
(f) "Officer" means an Employee who is an administrative executive
in the regular and continued service of his Employer; any
Employee who has the title but not the authority of an officer
shall not be considered an Officer for purposes of this
Article XII. Similarly, an Employee who does not have the
title of an officer but has the authority of an officer shall
be considered an Officer. For purposes of this Article XII,
the maximum number of Officers that must be taken into
consideration shall be determined as follows: (i) three (3),
if the number of Employees is less than thirty (30); (ii) ten
percent (10%) of the number of Employees, if the number of
Employees is between thirty (30) and five hundred (500); or
(iii) fifty (50), if the number of Employees is greater than
five hundred (500). In determining such limit, the term
"Employer" shall be determined in accordance with Sections
414(b), (c), (m) and (o) of the Code and "Employee" shall
include Leased Employees and exclude employees described in
Section 414(q)(8) of the Code.
(g) "One-Percent Owner" means, if the Employer is a corporation, any Employee who owns (or is considered as owning within the meaning of Section 318 of the Code modified by Section 416(i)(1)(B)(iii) of the Code) more than one percent (1%) of the value of the outstanding stock of, or more than one percent (1%) of the total combined voting power of all the stock of, the Employer. If the Employer is not a corporation, a One-Percent Owner means any Employee who owns more than one percent (1%) of the capital or profits interest in the Employer.
(h) A "Permissive Aggregation Group" consists of one or more plans of the Employer that are part of a Required Aggregation Group, plus one or more plans that are not part of a Required Aggregation Group but that satisfy the requirements of Sections 401(a)(4) and 410 of the Code when considered together with the Required Aggregation Group. If two (2) or more defined benefit plans are included in the aggregation group, the same actuarial assumptions must be used with respect to all such plans in determining the Present Value of Accrued Benefits.
787 -77- CARVER FEDERAL SAVINGS BANK
ARTICLE XII -
TOP-HEAVY PLAN PROVISIONS
- --------------------------------------------------------------------------------
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(i) "Present Value of Accrued Benefits" shall be determined in accordance with the actuarial assumptions set forth in the defined benefit plan and the assumed benefit commencement date shall be determined taking into account any nonproportional subsidy.
(j) "Related Rollover Contributions" means rollover contributions received by the Plan that are not initiated by the Employee nor made from another plan maintained by the Employer.
(k) A "Required Aggregation Group" consists of each plan of the
Employer (whether or not terminated) in which a Key Employee
participates or participated at any time during the Plan Year
containing the Determination Date or any of the four (4)
preceding Plan Years and each other plan of the Employer
(whether or not terminated) which enables any plan in which a
Key Employee participates or participated to meet the
requirements of Section 401(a)(4) or 410 of the Code. If two
(2) or more defined benefit plans are included in the
aggregation group, the same actuarial assumptions must be used
with respect to all such plans in determining the Present
Value of Accrued Benefits.
(l) A "Super Top-Heavy Plan" means a Plan in which, for any Plan Year:
(i) the Top-Heavy Ratio (as defined under subsection (o)) for the Plan exceeds ninety percent (90%) and the Plan is not part of any Required Aggregation Group (as defined under subsection (k)) or Permissive Aggregation Group (as defined under subsection (h)); or
(ii) the Plan is a part of a Required Aggregation Group
(but is not part of a Permissive Aggregation Group)
and the Top-Heavy Ratio for the group of plans
exceeds ninety percent (90%); or
(iii) the Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds ninety percent (90%).
(m) "Top-Heavy Earnings" means, for any year, compensation as
defined under Section 414(q)(7) of the Code, up to a maximum
of $200,000 adjusted as prescribed by the Secretary of the
Treasury under Section 401(a)(17) of the Code. Commencing
January 1, 1994, the maximum compensation taken into account
for any year shall be $150,000 adjusted in multiples of
$10,000 for increases in the cost-of-living, as prescribed by
the Secretary of the Treasury under Section 401(a)(17)(B) of
the Code. In determining Top-Heavy Earnings, the rules of
Section 414(q)(6) of the Code shall apply except that the term
"family" shall
787 -78- CARVER FEDERAL SAVINGS BANK
ARTICLE XII -
TOP-HEAVY PLAN PROVISIONS
- --------------------------------------------------------------------------------
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include only the Spouse and those lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year.
(n) A "Top-Heavy Plan" means a Plan in which, for any Plan Year:
(i) the Top-Heavy Ratio (as defined under subsection (o)) for the Plan exceeds sixty percent (60%) and the Plan is not part of any Required Aggregation Group (as defined under subsection (k)) or Permissive Aggregation Group (as defined under subsection (h)); or
(ii) the Plan is a part of a Required Aggregation Group but is not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of plans exceeds sixty percent (60%); or
(iii) the Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds sixty percent (60%).
(o) "Top-Heavy Ratio" means:
(i) if the Employer maintains one or more qualified defined contribution plans and the Employer has not maintained any qualified defined benefit plans which during the five (5) year period ending on the Determination Date have or have had accrued benefits, the Top-Heavy Ratio for the Plan alone or for the Required Aggregation Group or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the Account balances under the aggregated defined contribution plan or plans for all Key Employees as of the Determination Date, including any part of any Account balance distributed in the five (5) year period ending on the Determination Date but excluding distributions attributable to Related Rollover Contributions, if any, and the denominator of which is the sum of all Account balances under the aggregated qualified defined contribution plan or plans for all Participants as of the Determination Date, including any part of any Account balance distributed in the five (5) year period ending on the Determination Date but excluding distributions attributable to Related Rollover Contributions, if any, determined in accordance with Section 416 of the Code and the regulations thereunder.
(ii) if the Employer maintains one or more qualified defined contribution plans and the Employer maintains or has maintained one or more qualified defined benefit plans which during the five (5) year period ending on the Determination Date have or have had any accrued benefits, the Top-Heavy Ratio for any Required Aggregation Group or Permissive Aggregation
787 -79- CARVER FEDERAL SAVINGS BANK
ARTICLE XII -
TOP-HEAVY PLAN PROVISIONS
- --------------------------------------------------------------------------------
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Group, as appropriate, is a fraction, the numerator of which is the sum of the Account balances under the aggregated qualified defined contribution plan or plans for all Key Employees, determined in accordance with (i) above, and the sum of the Present Value of Accrued Benefits under the aggregated qualified defined benefit plan or plans for all Key Employees as of the Determination Date, and the denominator of which is the sum of the Account balances under the aggregated qualified defined contribution plan or plans determined in accordance with (i) above, for all Participants and the sum of the Present Value of Accrued Benefits under the aggregated qualified defined benefit plan or plans for all Participants as of the Determination Date, all determined in accordance with Section 416 of the Code and the regulations thereunder. The accrued benefits under a qualified defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are adjusted for any distribution of an accrued benefit made in the five (5) year period ending on the Determination Date.
(iii) For purposes of (i) and (ii) above, the value of
Account balances and the Present Value of Accrued
Benefits will be determined as of the most recent
Valuation Date that falls within the twelve (12)
month period ending on the Determination Date, except
as provided in Section 416 of the Code and the
regulations thereunder for the first and second Plan
Years of a qualified defined benefit plan. The
Account balances and Present Value of Accrued
Benefits of a Participant (A) who is a Non-Key
Employee but who was a Key Employee in a prior year,
or (B) who has not been credited with at least an
Hour of Service with any employer maintaining the
Plan at any time during the five (5) year period
ending on the Determination Date will be disregarded.
The calculation of the TopHeavy Ratio, and the extent
to which distributions, rollovers, and transfers are
taken into account will be made in accordance with
Section 416 of the Code and the regulations
thereunder. When aggregating plans, the value of
Account balances and the Present Value of Accrued
Benefits will be calculated with reference to the
Determination Date that falls within the same
calendar year.
(p) "Valuation Date", for the purpose of computing the Top-Heavy Ratio (as defined under subsection (o)) under subsections (1) and (n) means the last date of the Plan Year.
For purposes of subsections (h), (j) and (k), the rules of Sections
414(b), (c), (m) and (o) of the Code shall be applied in determining
the meaning of the term "Employer."
787 -80- CARVER FEDERAL SAVINGS BANK
ARTICLE XII -
TOP-HEAVY PLAN PROVISIONS
- --------------------------------------------------------------------------------
12.3 MINIMUM CONTRIBUTIONS
|
If the Plan becomes a Top-Heavy Plan, then any provision of Article III to the contrary notwithstanding, the following provisions shall apply:
(a) Subject to subsection (b), the Employer shall contribute on behalf of each Participant who is employed by the Employer on the last day of the Plan Year and who is a Non-Key Employee an amount with respect to each Top-Heavy year which, when added to the amount of Matching Contributions, Special Contributions and Discretionary Employer Contributions made on behalf of such Participant, shall not be less than the lesser of: (i) three percent (3%) of such Participant's Section 415 Compensation (as defined under Section 3.12(a)(vii) of the Plan and modified by Section 401(a)(17) of the Code), or (ii) if the Employer has no defined benefit plan which is designated to satisfy Section 416 of the Code, the largest of Matching Contributions, Special Contributions and Discretionary Employer Contributions, as a percentage of the Key Employees' Top-Heavy Earnings; provided, however, that in no event shall any contributions be made under this Section 12.4 in an amount which will cause the percentage of contributions made by the Employer on behalf of any Participant who is a NonKey Employee to exceed the percentage at which contributions are made by the Employer on behalf of the Key Employee for whom the percentage of Matching Contributions is highest in such Top-Heavy year. Any such contribution shall be allocated to the Matching Contribution Account of each such Participant and, for purposes of vesting and withdrawals only, shall be deemed to be a Matching Contribution.
(b) Notwithstanding the foregoing, this Section 12.4 shall not
apply to any Participant to the extent that such Participant
is covered under any other plan or plans of the Employer
(determined in accordance with Sections 414(b), (c), (m) and
(o) of the Code) and such other plan provides that the minimum
allocation or benefit requirement will be met by such other
plan should this Plan become Top Heavy.
(c) For purposes of this Article XII, the following shall be considered as a contribution made by the Employer:
(i) Qualified Nonelective Contributions;
(ii) Matching Contributions made by the Employer on behalf of Key Employees; and
(iii) Before-Tax Contributions made by the Employer on behalf of Key Employees.
787 -81- CARVER FEDERAL SAVINGS BANK
ARTICLE XII -
TOP-HEAVY PLAN PROVISIONS
- --------------------------------------------------------------------------------
(d) Subject to the provisions of subsection (b), all Non-Key
Employee Participants who are employed by the Employer on the
last day of the Plan Year shall receive the defined
contribution minimum provided under subsection (a). A Non-Key
Employee may not fail to accrue a defined contribution minimum
merely because such Employee was excluded from participation
or failed to accrue a benefit because (i) his Compensation is
less than a stated amount, or (ii) he failed to make
Before-Tax Contributions.
12.4 IMPACT ON SECTION 415 MAXIMUM BENEFITS
For any Plan Year in which the Plan is a Super Top-Heavy Plan,
Sections 3.12(a)(iv) and (v) shall be read by substituting the number
1.0 for the number 1.25 wherever it appears therein. For any Plan Year
in which the Plan is a Top-Heavy Plan but not a Super TopHeavy Plan,
the Plan shall be treated as a Super Top-Heavy Plan under this Section
12.5, unless each Non-Key Employee who is entitled to a minimum
contribution or benefit receives an additional minimum contribution or
benefit. If the Non-Key Employee is entitled to a minimum contribution
under Section 12.4(a), the Plan shall not be treated as a Super
Top-Heavy Plan under this Section 12.5 if the minimum contribution
satisfies Section 12.4(a) when four percent (4%) is substituted for
three percent (3%) in Section 12.4(a)(i).
12.5 VESTING
If the Plan becomes a Top-Heavy Plan, then, notwithstanding Section
4.1(c), the Vested Percentage of a Participant who has at least one
(1) Hour of Service with the Employer after the Plan becomes Top-Heavy
shall be equal to the following Vested Percentage of his accrued
|
benefit, determined in accordance with the following table:
Period of Service Vested Percentage ----------------- ----------------- Less than 2 years 0% 2 years but less than 3 years 20% 3 years but less than 4 years 40% 4 years but less than 5 years 60% 5 years but less than 6 years 80% 6 years or more 100% |
Notwithstanding the foregoing provision, each Participant with at least three (3) years of Vested Service with the Employer shall have his vested percentage computed under the greater of the provisions of this Section 12.6 or the provisions of Section 4.1 (c).
787 -82- CARVER FEDERAL SAVINGS BANK
ARTICLE XII -
TOP-HEAVY PLAN PROVISIONS
- --------------------------------------------------------------------------------
|
For those Plan Years in which the Plan ceases to be a Top-Heavy Plan, the vesting schedule shall be determined in accordance with the provisions of Section 4.1(c), except that the vested percentage of a Participant's accrued benefit before the Plan ceased to be a Top-Heavy Plan shall not be reduced.
787 -83- CARVER FEDERAL SAVINGS BANK
ARTICLE XIII -
MISCELLANEOUS PROVISIONS
- --------------------------------------------------------------------------------
ARTICLE XIII -
MISCELLANEOUS PROVISIONS
13.1 NO RIGHT TO CONTINUED EMPLOYMENT
Neither the establishment of the Plan, nor any provisions establishing
the Trust, or of any Separate Agreement nor any action of any Named
Fiduciary, Plan Administrator or the Employer, shall be held or
construed to confer upon any Employee any right to a continuation of
his employment by the Employer. The Employer reserves the right to
dismiss any Employee or otherwise deal with any Employee to the same
extent and in the same manner that it would if the Plan had not been
adopted.
13.2 MERGER, CONSOLIDATION, OR TRANSFER
The Plan shall not be merged or consolidated with, nor transfer its
assets or liabilities to, any other plan unless each Employee,
Participant, Beneficiary and other person entitled to benefits under
the Plan, would (if such other plan then terminated) receive a benefit
immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he would have been entitled to receive
if the Plan had terminated immediately before the merger,
consolidation or transfer.
13.3 NONALIENATION OF BENEFITS
Benefits payable under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind,
either voluntary or involuntary and any attempt to so anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge, garnish,
execute, levy or otherwise affect any right to benefits payable
hereunder, shall be void. Notwithstanding the foregoing, the Plan
shall permit the payment of benefits in accordance with a qualified
domestic relations order as defined under Section 414(p) of the Code.
13.4 MISSING PAYEE
Any other provision in the Plan or Agreement to the contrary
notwithstanding, if the Trustees and, if appropriate, any Separate
Agency are unable to make payment to any Employee, Participant,
Beneficiary or other person to whom a payment is due ("Payee") under
the Plan because the identity or whereabouts of such Payee cannot be
ascertained after reasonable efforts have been made to identify or
locate such person (including mailing a certified notice of the
payment due to the last known address of such Payee as shown on the
records of the Employer), such payment and all subsequent payments
otherwise due to such Payee shall be forfeited twenty-four (24) months
after the date such payment first became due. However,
|
787 -84- CARVER FEDERAL SAVINGS BANK
ARTICLE XIII -
MISCELLANEOUS PROVISIONS
- --------------------------------------------------------------------------------
such payment and any subsequent payments shall be reinstated
retroactively, without interest, no later than sixty (60) days after
the date on which the Payee is identified and located.
13.5 AFFILIATED EMPLOYERS
All employees of all Affiliated Employers shall, for purposes of the
limitations in Article XII and for measuring Hours of Service and
Periods of Service, be treated as employed by a single employer. No
employee of an Affiliated Employer shall become a Participant of this
Plan unless employed by the Employer or an Affiliated Employer which
has adopted the Plan.
13.6 SUCCESSOR EMPLOYER
In the event of the dissolution, merger, consolidation or
reorganization of the Employer, the successor organization may, upon
satisfying the provisions of the Agreement and the Plan, adopt and
continue this Plan. Upon adoption, the successor organization shall
be deemed the Employer with all its powers, duties and
responsibilities and shall assume all Plan liabilities.
13.7 RETURN OF EMPLOYER CONTRIBUTIONS
Any other provision of the Plan or Agreement to the contrary
notwithstanding, upon the Employer's request and with the consent of
the Trustees and, if appropriate, any Separate Agency, a contribution
to the Plan by the Employer which was (a) made by mistake of fact, or
(b) conditioned upon initial qualification of the Plan with the
Internal Revenue Service, or (c) conditioned upon the deductibility by
the Employer of such contributions under Section 404 of the Code,
shall be returned to the Employer within one (1) year after: (i) the
payment of a contribution made by mistake of fact, or (ii) the denial
of such qualification or (iii) the disallowance of the deduction (to
the extent disallowed), as the case may be.
Any such return shall not exceed the lesser of (A) the amount of such
contributions (or, if applicable, the amount of such contribution with
respect to which a deduction is denied or disallowed) or (B) the
amount of such contributions net of a proportionate share of losses
incurred by the Plan during the period commencing on the Valuation
Date as of which such contributions are made and ending on the
Valuation Date as of which such contributions are returned. All such
refunds shall be limited in amount, circumstances and timing to the
provisions of Section 403(c) of ERISA.
|
787 -85- CARVER FEDERAL SAVINGS BANK
ARTICLE XIII -
MISCELLANEOUS PROVISIONS
- --------------------------------------------------------------------------------
13.8 ADOPTION OF PLAN BY AFFILIATED EMPLOYER
An Affiliated Employer of the Sponsoring Employer may adopt the Plan
and Agreement upon satisfying the requirements set forth in the
Agreement. Upon such adoption, such Affiliated Employer shall become a
Participating Affiliate in the Plan, which Plan shall be deemed a
"single plan" within the meaning of Income Tax Regulations Section
1.414(1)-1(b)(l)
For purposes of Article IX, Employer shall mean only the Sponsoring
Employer and each Participating Affiliate shall be deemed to accept
and designate the Named Fiduciaries, Committee, Plan Administrator,
Trustee Administrator and voter of Units designated by the Sponsoring
Employer to act on its behalf in accordance with the provisions of the
Plan and Agreement.
The Sponsoring Employer shall solely exercise for and on behalf of
such Participating Affiliate the powers reserved to the Employer under
Articles IX and XI. However, such Participating Affiliate may at
anytime terminate its future participation in the Plan for the
purposes and in the manner set forth in the Agreement.
13.9 CONSTRUCTION OF LANGUAGE
Wherever appropriate in the Plan, words used in the singular may be
read in the plural; words used in the plural may be read in the
singular; and words importing the masculine gender shall be deemed
|
equally to refer to the female gender. Any reference to a section number shall refer to a section of this Plan, unless otherwise indicated.
13.10 HEADINGS
The headings of articles and sections are included solely for
convenience of reference, and if there be any conflict between such
headings and the text of the Plan, the text shall control.
13.11 GOVERNING LAW
The Plan shall be governed by and construed and enforced in accordance
with the laws of the State of New York, except to the extent that such
laws are preempted by the Federal laws of the United States of
America.
|
787 -86- CARVER FEDERAL SAVINGS BANK
CARVER FEDERAL SAVINGS BANK
EMPLOYEE STOCK OWNERSHIP PLAN
UNDER SECTIONS 401(a) AND 4975(e)(7) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED
EFFECTIVE DATE: JANUARY 1, 1993
Part I
Table of Contents
Section Number Page
- -------------- ----
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. Participants Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Allocation of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Allocation to Participant's Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7. Retirement and Distribution of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8. In Event of Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. In Event of Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10. In the Event of Termination of Employment
or Change in Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11. Top Heavy Rules and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12. Administration of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13. Management and Investment of Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14. Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
16. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17. Suspension, Discontinuance and Plan Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
18. Inclusion of Other Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
|
SECTION 1
Definitions
The following words and phrases used herein have the following meanings, unless a different meaning is plainly required by the context:
The masculine pronoun wherever used shall include the feminine pronoun and the singular shall include the plural.
1.1 "Account" means the record of the Participant's interest in the Trust
Fund, maintained by the Committee pursuant to Section 5.
1.2 "Acquisition Loan" means an Exempt Loan (or other extension of credit)
used by the Trust to finance the acquisition of Qualifying Employer
Securities which loan may constitute an extension of credit to the
Trust from a party in interest.
1.3 "Adjustment Factor" means the cost of living adjustment factor
prescribed by the Secretary of the Treasury under Section 415(d) of
the Code for years beginning after December 31, 1988, as applied to
such items and in such manner as the Secretary shall provide.
1.4 "Affiliate" means any employer aggregated with the Company under
Section 414(b), (c), (m), or (o) of the Code.
1.5 "Anniversary Date" shall mean the last day of the Plan Year.
1.6 "Board of Directors" means the Board of Directors of the Company.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended,
together with regulations promulgated pursuant thereto.
1.8 "Committee" or "Administrative Committee" means the committee
appointed to manage and administer the Plan as provided in Section 12.
1.9 "Company" means Carver Federal Savings Bank, its successors and
assigns.
1.10 "Compensation" means the amount of W-2 earnings paid to an Employee by
the Employer (plus any amounts withheld from the Employee under a
401(k) Plan or cafeteria plan sponsored by the Employer) within a Plan
Year. Only the first $200,000 (or such larger amount as determined by
regulations under Sections 415(d) and 416 of the Code) of a
Participant's annual compensation shall be treated as compensation for
purposes of the Plan. Company contributions for pensions,
profit-sharing or insurance benefits are also excluded.
Notwithstanding the foregoing, for purposes of determining the
$200,000 Compensation limit for purposes of Section 1.10 in defining a
Key Employee, and for the purposes of
|
determining minimum contributions or benefits, should the Plan be
Top-Heavy as provided in Section 11, Compensation shall be defined as
an Employee's W-2 earnings from the Company for the Plan Year.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only
the spouse of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the close of the Plan
Year. If, as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, then the limitation shall be prorated
among the affected individuals in proportion to each such individual's
compensation as determined under this Section prior to the application
of this limitation. ~
1.11 "Early Retirement Age" shall mean the date a Plan Participant, if
still an Employee, attains age 60 and completes five Years of Service
for vesting purposes.
1.12 "Early Retirement Date" shall mean the first day of the month
coincident with, or next following, the date upon which a Participant
attains his Early Retirement Age.
1.13 "Effective Date" of the Plan means January 1, 1993 subject to the
condition subsequent that it be approved and qualified under the
Internal Revenue Code.
1.14 "Employee" shall mean any person who (a) is in the employment of the
Employer, and (b) whose wages from the Employer are subject to
withholding for the purposes of Federal Income Taxes and the Federal
Insurance Contribution Act. "Employee" shall not include any person
who is paid by an Employer as an independent contractor.
1.15 "Employer" means the Company, Carver Federal Savings Bank, and any
other company which, with the Company's consent, adopts the Plan and
joins in the Trust Agreement.
1.16 "Entry Date" means the Effective Date and the first day of the first
and seventh months of the Plan Year. Additionally, the Committee may,
on a uniform and nondiscriminatory basis, at any time and from time to
time authorize a special entry date for eligible participants, but
prior to the next regularly scheduled Entry Date.
1.17 "ESOP" means an Employee Stock Ownership Plan as defined in Section
4975(e)(7) of the Code.
1.18 "Exempt Loan" means a loan made to the Plan which satisfies the
requirements of Section 2550.408b-3 of the Department of Labor
Regulations, Section 54.4975-7(b) of the Treasury Regulations, and the
Trust Agreement.
1.19 "Family Member" means an Employee who is the Employee's spouse, lineal
ascendant or descendant, or spouse of such lineal ascendant or
descendant, of an Employee who is a five percent owner of the Company,
or if not a five-percent owner is a Highly Compensated Employee as
defined in 1.43 of the Plan and is also in the group consisting
|
of the ten (10) Highly Compensated Employees paid the greatest
Compensation during the Year.
1.20 "Financed Shares" means shares of Qualifying Employer Securities
acquired by the Trust with the proceeds of an Acquisition Loan,
whether or not pledged as collateral to secure the repayment of such
Acquisition Loan.
1.21 "Forfeiture" shall mean that portion of a Participant's Account that
is not vested, and occurs on the earlier of (1) the Participant's
termination of employment with the Company and the distribution of the
entire vested portion of a Participant's Account, or (2) the last day
of the Plan Year in which the Participant incurs five (5) consecutive
one year Breaks in Service (as defined in Section 1.24(b) hereof).
1.22 "Highly Compensated Employee" means highly compensated active
employees and highly compensated former employees.
A highly compensated active employee includes any Employee who
performs service for the Company or an Affiliate during the
determination year and who, during the look-back year: (i) received
Compensation in excess of $75,000 (as adjusted pursuant to Section
415(d) of the Code); (ii) received Compensation in excess of $50,000
(as adjusted pursuant to Section 415(d) of the Code) and was a member
of the top-paid group for such year; or (iii) was an officer of the
Company or an Affiliate and received Compensation during such year
that is greater than 50 percent of the dollar limitation in effect
under Section 415(b)(1)(A) of the Code.
The term highly compensated employee also includes: (i) an Employee
who is both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and
who is one of the 100 Employees who received the most Compensation
from the Company or an Affiliate during the determination year; and
(ii) employees who are 5 percent owners at any time during the
look-back year or determination year.
If no officer has satisfied the compensation requirement of (iii)
above during either a determination year or look-back year, the
highest paid officer for such year shall be treated as a Highly
Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the twelve-month period immediately preceding
the determination year.
A highly compensated former employee includes any employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Company during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or
after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a 5 percent owner who is an active or former
Employee or a Highly Compensated
|
Employee who is one of the 10 most highly compensated employees ranked
on the basis of Compensation paid by the Company or an Affiliate
during such year, then the family member and the 5 percent owner or
top-ten highly compensated employee shall be aggregated. In such case,
the family member and 5 percent owner or top-ten highly compensated
employee shall be treated as a single employee receiving compensation
and plan contributions equal to the sum of such compensation and
contributions of the family member and 5 percent owner or top-ten
highly compensated employee. For purposes of this section, family
member includes the spouse, lineal ascendants and descendants of the
Employee or former Employee and the spouses of such lineal ascendants
and descendants.
The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of Employees in the
top-paid group, the top 100 Employees, the number of Employees treated
as officers and the Compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations
thereunder.
1.23 "Late Retirement Date" means the Anniversary Date coinciding with or
next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.24 "Leased Employee" means any person (other than an Employee) who
pursuant to an agreement between the Employer and any other person
("Leasing Organization") has performed services for the Employer (or
for the Employer and related persons determined in accordance with
section 414(n)(6) of the Code) on a substantially full time basis for
a period of at least one year, and such services are of a type
historically performed by employees in the business field of the
Employer. Contributions or benefits provided a Leased Employee by the
Leasing Organization which are attributable to services performed for
the Employer shall be treated as provided by the Employer.
A Leased Employee shall not be considered an Employee of the Employer
if: (i) such employee is covered by a money purchase pension plan
providing: (1) a nonintegrated employer contribution rate of at least
10 percent of compensation, as defined in section 415(c)(3) of the
Code, but including amounts contributed pursuant to a salary reduction
agreement which are excludable from the employee's gross income under
section 125, section 402(a)(8), section 402(h) or section 403(b) of
the Code, (2) immediate participation, and (3) full and immediate
vesting; and (ii) leased employees do not constitute more than 20
percent of the Employer's nonhighly compensated workforce.
1.25 "Limitation Year" means the Plan Year.
1.26 "Loan Suspense Account" shall mean an account in which Qualifying
Employer Securities are held and which has not been allocated to
Participant's Accounts because they were purchased with borrowed funds
pursuant to the provisions of Section 13.4 hereof or transferred to
such account pursuant to the terms hereof.
1.27 "Non Highly Compensated Employee" means an Employee who is neither a
Highly Compensated Employee nor a Family Member.
|
1.28 "Non-Key Employee" is an Employee who is not a Key Employee. Non-Key
Employees shall include Employees who are former Key Employees.
1.29 "Normal Retirement Age'' shall mean the date a Plan Participant, if
still an Employee, attains age 65.
1.30 "Normal Retirement Date" shall mean the first day of the month
coincident with, or next following, the date upon which a Participant
attains his Normal Retirement Age.
1.31 "Other Investments Account" means the Account of a Participant which
reflects his interest in the Plan attributable to Trust assets other
than Qualifying Employer Securities.
1.32 "Participant" means an Employee who is included in the Plan as
provided in Section 2.1.
1.33 "Participant's Account" means a separate account, maintained in the
aggregate by the Committee, for each Participant with respect to his
total interest in the Plan and Trust.
1.34 "Participant's Company Stock Account" means the Participant's Account
credited with Qualifying Employer Securities.
1.35 "Plan" means the Carver Federal Savings Bank Employee Stock Ownership
Plan as set forth herein.
1.36 "Plan Year" means the 12 month period ending on [Plan Year End] of
each year. The initial Plan Year shall begin on the Effective Date and
end on [Plan Year End].
1.37 "Pregnancy or Child Care Leave of Absence" shall mean, with respect to
a Plan Year commencing on or after July 1, 1984, a compensated or
uncompensated leave of absence of fixed or indefinite duration granted
to an Employee by the Company or an Affiliate pursuant to a written
request which is submitted to the Company or Affiliate by the Employee
no later than thirty (30) days prior to the first day of the proposed
leave of absence that is sought (i) because of the pregnancy of the
Employee, (ii) because of the birth of a child of the Employee, (iii)
because of the placement of a child with the Employee in connection
with the adoption of such child by such Employee or for the purpose of
enabling the Employee to care for a child for a period beginning
immediately after the birth of such child to the Employee, or (iv)
because of the placement of such child with the Employee, or (v)
because of an absence of not more than two (2) consecutive calendar
years in duration which, upon his return to the employ of an Company
or an Affiliate, the Employee demonstrates to the satisfaction of the
Company to have been for one of the four aforementioned purposes.
1.38 "Qualified Domestic Relations Order" shall mean a judgment, decree or
order (including an approval of a property settlement agreement) that
relates to the provision of child support and/or alimony payments or
marital property rights to a Spouse, former Spouse, child or other
dependent of a Participant, that is made pursuant to a domestic
relations law (including a community property law) of a State, that
creates or recognizes the right of an alternative payee, or assigns to
an alternative payee the right, to receive all or a
|
portion of the benefit payable to the Participant under the Plan, that
sets forth the specific information required by Section 414(p)(2) of
the Code to be included therein and that does not alter the amount or
form of the benefit otherwise payable to the Participant.
1.39 "Qualified Election Period" means the six Plan Year period beginning
with the Plan Year after the Plan Year in which the Participant first
becomes a Qualified Participant.
1.40 "Qualified Participant" means a Participant who has attained age 55
and who has completed at least 10 years of participation in the Plan.
1.41 "Qualifying Employer Securities" or "Company Stock" means the shares
of common stock of the Company as described in Section 4975(e)(8) of
the Code (or of a corporation which is a member of a controlled group
with the Company) which is readily tradeable on an established
securities market; or if not readily tradeable, meets the following
criteria:
(a) is a common stock issued by the Company (or by a corporation
which is a member of the same controlled group) having a
combination of voting power and dividend rights equal to or in
excess of that class of common stock having the greatest
voting power, and
(b) that class of common stock having the greatest dividend
rights.
Noncallable preferred stock shall be deemed to be "Qualifying Employer
Securities" if such stock is convertible at any time into stock which
constitutes "Qualifying Employer Securities" hereunder and if such
conversion is at a conversion price which (as of the date of the
acquisition by the Trust) is reasonable.
1.42 "Service" means any computation period during which an Employee was in
the employment of the Employer or an Affiliate including service
before the Effective Date of this Plan. It shall include any period
during which an Employee is on leave of absence authorized by his
Company. All leaves of absence shall be granted in a uniform and
nondiscriminatory manner to all Employees in similar circumstances.
(a) Any Participant who leaves the active Service of the Company
or an affiliated Company to enter the Armed Forces of the
United States of America during a period of national emergency
or compulsory military Service law of the United States of
America shall be deemed to be on leave of absence during the
period of his Service in such Armed Forces and during any
period after his discharge from such Armed Forces in which his
reemployment rights are guaranteed by law.
(b) "Year of Service" shall mean any computation period during
which an Employee completes one thousand (1,000) or more Hours
of Service. A Year of Service for purposes of determining an
Employee's eligibility to participate in the Plan shall be
defined as a twelve consecutive month period during which the
Employee remains in the Service of the Employer or Crossland
Savings FSB (regardless of his Hours of Service). The initial
eligibility computation period is the twelve-
|
consecutive month period beginning on the date the Employee first performs an Hour of Service for the Company. Succeeding eligibility computation periods shall commence with the first Plan Year which commences prior to the first anniversary of the Employee's initial eligibility computation period regardless of whether the Employee remains in the Service of the Employer during his initial eligibility computation period. For vesting purposes, a Year of Service shall be any Plan Year, or calendar year prior to the Effective Date, in which an Employee completes 1,000 Hours of Service after attainment of age 18; provided that no more than Five Years of Service shall be credited for employment before the Effective Date.
(c) "Hour of Service" shall mean each hour for which an Employee is directly or indirectly paid or entitled to payment by the Company for the performance of duties. These hours shall be credited to the Employee for the computation period or periods in which the duties are performed.
Each hour for which an Employee is paid, or entitled to payment, by the Company on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service shall be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Hours under this paragraph shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by this reference.
Each hour for which back pay, irrespective of mitigation of damage, has been either awarded or agreed to by the Company. These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement, or payment was made.
For purposes of hours of Service credited for periods during which no duties were performed, the method of determining the number of hours to be credited and the method of crediting such hours to computation periods shall conform to the requirements set forth in Sections 2530.200(b)-2(b) and (c) of the Department of Labor Regulations.
The Company and its Affiliates. Hours of Service will also be
credited for any individual considered an Employee under
Section 414(n).
Solely for purposes of determining whether a Break in Service for participation and vesting purposes has occurred in a computation period, an individual who is absent from work for maternity or paternity reasons shall receive credit for the hours of Service which would otherwise have been credited to such individual, but for such absence, or in any case in which such hours cannot be determined, 8 hours of Service per day of such absence. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an
absence (1) by reason of the pregnancy of the individual, (2)
by reason of a birth of a child of the individual, (3) by
reason of the placement of a child with the individual in
connection with the adoption of such child by such individual,
or (4) for purposes of caring for such child for a period
beginning immediately following such birth or placement. The
hours of Service credited under this paragraph shall be
credited (1) in the computation period in which the absence
begins if the crediting is necessary to prevent a break in
Service in that period, or (2) in all other cases, in the
following computation period.
(d) "Benefit Accrual Computation Period" shall be defined as the
Plan Year.
(e) "Vesting Computation Period" shall be the Plan Year.
(f) "Break in Service" shall mean any computation period in which
an Employee works five hundred (500) Hours of Service or less.
Except as otherwise provided above, any year in which an
Employee works more than five hundred (500) Hours of Service,
but less than one thousand (1,000) Hours of Service shall not
be recognized as Service, but this shall not be a Break in
Service.
(g) In the event that an Employee who incurred a Break in Service
is subsequently re-employed, his Years of Service shall be
cumulative for vesting purposes, except that if the Employee,
at the time of his Break in Service, had no vested interest
and the number of consecutive one-year Breaks in Service
equals or exceeds the greater of five or the number of
pre-break Years of Service, Years of Service prior to such
Breaks in Service shall be disregarded. The same provision
shall apply in the case of an Employee whose Service has been
broken because he worked less than five hundred (500) Hours of
Service in a given Plan Year when he resumes working at least
one thousand (1,000) Hours of Service per Plan Year.
1.43 "Spouse" shall mean the lawful husband or wife of a Participant on the
date specified.
1.44 "Suspense Account" means the total forfeitable portion of all Former
Participants' Accounts which has not yet become a Forfeiture during
any Plan Year.
1.45 "Taxable Year" means, with respect to each Employer, the fiscal year
adopted by such company from time to time for Federal income tax
purposes.
1.46 "Total Disability" or "Disability" means a physical or mental
condition of a Participant resulting from bodily injury, disease, or
mental disorder which renders him incapable of continuing any gainful
occupation and which condition constitutes total disability under the
Federal Social Security Acts.
1.47 "Trust Agreement" means the trust agreement set forth in Part II of
this Plan.
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1.48 "Trust Fund" means the fund described in Section 13, and maintained in
accordance with the terms of the Trust Agreement.
1.49 "Trustee(s)" shall mean the person(s), or corporation(s), accepting
the appointment of Trustee(s) and acting as such, including any
successor Trustee(s), pursuant to the Trust Agreement.
1.50 "Valuation Date" means the last day of the Plan Year of the Trust
Fund. The fair market value of the assets in the Trust Fund as of any
valuation date shall be determined as the close of business on such
date, or, if such date is not a business day, as of the close of
business on the next preceding business day. On the Valuation Date the
Account balances are valued to determine if the plan is top-heavy. The
Valuation Date shall also be the Determination Date for Top-Heavy Plan
calculations.
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SECTION 2
Eligibility
2.1 Participation. Each Employee shall become a Participant on the later
of the Effective Date and the Entry Date next following the later of
(i) his attainment of age 21, and (ii) his completion of one (1) Year
of Service for eligibility purposes; provided that anyone who is an
Employee on the date of the conversion of Carver Federal Savings Bank
from mutual to stock form shall become a Participant as of the
Effective Date. Service with Crossland Savings, FSB shall be taken
into consideration in computing eligibility for participation in this
Plan.
An Employee meeting the above-stated service requirement, but who terminates employment prior to becoming a Participant, shall become a Participant as of the date of rehire, if a Break in Service has not occurred prior to such rehire. A rehired Employee who was a former Participant, shall become a Participant upon his date of rehire.
2.2 Annual Allocations. A Participant shall be entitled to share in any allocation of the Company's contribution for a particular Plan Year if and only if the Participant completes 500 or more Hours of Service during the Plan Year.
2.3 Annual Company Report to Committee. Within sixty (60) days after the last day of the Fiscal Year, the Company shall certify to the Committee in writing such information from its records with respect to Employees as the Committee may require in order to determine the identity and interests of the Participants and otherwise to perform its duties hereunder.
Any certification by the Company of information to the Committee pursuant to this Plan shall, for all purposes of this Plan, be binding on all parties in interest, provided that whenever any Employee proves to the satisfaction of the Company that his period of Service or his Compensation as so certified is incorrect, the Company shall correct such certification. The Service of any Employee shall be determined solely by reference to the data certified to the Committee by the Company.
The determination of the Committee as to the identity of the respective Participants and as to their respective interests shall be binding upon the Company, the Trustees, the Employees, the Participants and all beneficiaries.
2.4 Transfers. Whenever any Participant is transferred from one Employer who is a party to the Plan to another Employer who is a party to the Plan, the Participant may continue on as a Participant in the Plan without any interruption as if the Participant had at all times been an Employee of the new Company; and in the event an affiliated company ceases to be an Affiliate for any reason whatsoever, this event shall not affect the continued participation in this Plan of any Participant who becomes an Employee of the Company or any other Affiliate under this Plan, and the Committee shall transfer the
Participant's Account from the account of the withdrawing Affiliate to the Company or new Affiliate.
2.5 Breaks-in-Service. A Participant who terminates employment with an Employer or suffers a Break-in-Service shall cease to be an active Participant in this Plan and his Company contribution account shall be placed on inactive status. Except as provided in Section 2.2, the inactive Participant shall not share in the Company's contribution for that Plan year, but his accounts shall continue to receive income allocations. Thus, he shall remain a Participant until his account balances have been distributed to him. Termination of employment may have resulted from voluntary or involuntary termination of employment, unauthorized absence, or by failure to return to active employment with the Company by the date on which an Authorized Leave of Absence expired.
2.6 Excluded Employees. An Employee shall not participate in the Plan if he is either (i) Leased Employee, or (ii) is included in a unit of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between Employee representatives and the Company or one or more Affiliates, including the Company, if there is evidence that retirement benefits were the subject of good faith bargaining between such Employee representatives and the Company or such Affiliates. For this purpose, "Employee Representatives" will not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Company or an Affiliate.
SECTION 3
Employer Contributions
3.1 Amount of Employer Contributions.
(a) The amount to be contributed by an Employer shall be determined annually by resolution of its Board of Directors, but shall not exceed the maximum amount deductible under the applicable provisions of Section 404 of the Code.
(b) The Committee shall maintain a separate Account for each Participant, to which it shall credit the Participants share of all contributions, in accordance with Section 5, and which shall be revalued in accordance with Section 6.
(c) The fact that the Company or another Employer may make no contribution hereunder for any Taxable Year shall not be deemed to terminate the Plan or the Trust created hereunder.
3.2 Payment of Employer Contributions.
(a) The Employer's contributions for each Taxable Year shall be paid directly to the Trustees. At the time of each such payment, the Employer shall notify the Committee of the amount of such contribution. The amount of each such contribution shall be certified to be true and correct and in accordance with the terms of the Plan by the Employer or by the independent accounting firm regularly employed by the Employer, and such certification shall be final and conclusive upon all persons interested in the Plan. No adjustment affecting the Employer's net profit for any taxable year, made subsequent to the payment of the Employer's contribution to the Trustees and resulting from audit of the Employer's Federal income tax return or otherwise, shall change the amount of such contributions. The Company's contribution for any Plan Year shall be paid in full as soon as practicable after the close of such year, but not later than the time prescribed by law for filing the Employer's Federal income tax return for such year (including extensions thereof).
(b) Employer contributions will be paid in cash or Qualifying Employer Securities as the Employer's Board of Directors may from time to time determine. Shares of Qualifying Employer Securities will be valued at their then fair market value. However, to the extent that the Trust has current obligations, including amounts necessary to provide sufficient cash to pay any currently maturing obligations under an Acquisition Loan, the Employer contributions will be paid to the Trust in cash subject to the discretion of the Employer's Board of Directors. The Employer contribution will be paid to the Trust on or before the date required to make such contribution qualify as a deduction on the Employer's Federal income tax return for the year.
(c) The Employer may make contributions to the Plan in whole or in part in the form of Qualifying Employer Securities, provided the Employer uses the fair market value of the securities as of the date such contribution is made, as determined by an independent appraiser, if required under Section 401(a)(28)(C) of the Code, engaged by the Committee. Such stock may be obtained from its own reserve or treasury stock, or it may be obtained from open market purchases.
3.3 Payment of Administrative Expenses. The Company intends to provide all funds required for the administrative expenses of the Plan. Funds not so provided by the Company may be paid first from any other Employer, next from the Trust's earnings, and then from its principal.
3.4 Mistake in Fact. If, due to a mistake in fact, the Employer contributions to the Trust for any Plan Year exceeds the amount to be contributed by it, notwithstanding any provision to the contrary, the Committee shall direct the Trustee, as soon as such a mistake in fact is discovered, to either segregate such amount and return such amount to the Employer within one year after the payment of the contribution or apply it towards the contribution of the Company for the next Plan Year(s).
3.5 Failure of Initial Plan Qualification. In the event that the Commissioner of Internal Revenue determines that the Plan is not initially qualified under the Code, any contribution made incident to that initial qualification by the Employer shall be returned to the Employer within one year after the date the initial qualification is denied, but only if the application for the qualification is made by the time prescribed by law for filing the Employer's return for the taxable year in which the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe.
SECTION 4
Participants Contributions
4.1 No Employee Contributions. No Employee Contributions shall be permitted under this Plan.
4.2 No Rollovers. The Trustee shall not accept "Rollover Contributions" from any Participant.
SECTION 5
Allocation of Contributions
5.1 Allocations Generally. The Employer contribution, as determined under
Section 3.1, and Forfeitures for each Plan Year shall be allocated by
the Committee, as of the close of such Plan Year, between the Accounts
of all Participants entitled under Section 2.2 to share in the
allocation, as follows:
The Employer contribution and Forfeitures shall be allocated to each such Participant's Account in proportion to the ratio which his Compensation for the Plan Year bears to the total Compensation of all such Participants eligible to share in Employer contributions for the Plan Year.
5.2 Maximum Limitations on Allocations of Contributions. Compensation for
purposes of Sections 5.2 and 5.3 shall include all of the following:
the Participant's wages, salaries, fees for professional services, and
other amounts received (without regard to whether or not an amount is
paid in cash) for personal services actually rendered in the course of
employment with the Employer to the extent that the amounts are
includible in gross income (including but not limited to, commissions
paid salesmen, compensation for services on the basis of a percentage
of profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, and reimbursements or other expense allowances under an
accountable plan (as described in Section 1.62-2(c)), earned income
in the case of an Employee described in Section 401(c)(1) of the Code,
earned income from sources outside the United States (whether or not
excludable or deductible) certain fringe benefits described in
Sections 104(a)(3), 105(a) and 105(h) of the Code to the extent
includible in gross income, amounts described in Section 1065(d) of
the Code, certain moving expense reimbursements to the extent not
deductible by the Participant, and the value of a non-qualified stock
option or the amount described in Section 83(b) of the Code to the
extent includible in gross income.
Compensation shall not include contributions to a qualified plan, or to a SEP to the extent excludable by the Employee, nor amounts distributed from a qualified plan of deferred compensation, nor amounts realized from the exercise of a non-qualified stock option. In addition, certain other amounts which receive special tax benefits (such as premiums for group term life insurance not includible in the gross income of the Employee) shall not be considered compensation.
Compensation for the purposes of this Section 5.2 and 5.3 for any Plan Year which shall consist of less than 12 months shall be reduced proportionately by that percentage that the Plan Year is reduced.
(a) Contributions and other additions to a Participant's Account cannot exceed the lesser of $30,000 or 25% of Compensation. Annual additions to a Participant's Account for purposes of this limitation include in addition to the Company contribution, any forfeitures allocated to Participant Accounts, and the amount of a Participant's total voluntary elective Contributions, plus any contributions to a
similar Company defined contribution plan, or any amounts described in Sections 415(1)(1) and 419(a)(d)(2) of the Code. The maximum amount of $30,000 shall be increased where allowed under ERISA and Treasury regulations issued pursuant thereto, to reflect 25% of the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code as in effect for the limitation year. In determining the above limitations, all defined contribution plans of the Company shall be considered as one plan.
(b) Should not more than one-third of the Company Contributions for a year which are deductible be allocated to Highly Compensated Employees, the above annual addition limits shall not include forfeitures of Qualifying Employer Securities if such securities were acquired with the proceeds of an Acquisition Loan or acquired with deductible Company Contributions used to pay interest on such Acquisition Loan and charged to such Participant's Account.
(c) If as a result of the allocation of forfeitures, a reasonable error in estimating a Participant's annual compensation, or under other limited facts and circumstances which the Commissioner of the Internal Revenue Service finds justifiable there should be an excessive annual addition for any Participant's account, the excess shall be held in a suspense account and allocated in the subsequent Plan Year pursuant to the following:
(i) Any nondeductible voluntary Employee contributions, to the extent they would reduce the excessive annual addition, will be returned to the Participant;
(ii) If after the application of paragraph (a) an excessive annual addition still exists, and the Participant is covered by the Plan at the end of the Limitation Year, the excessive annual addition in the Participant's Account will be used to reduce Company Contributions (including any allocation of forfeitures) for such Participant in the next Limitation Year, and each succeeding Limitation Year if necessary.
(iii) If after the application of paragraph (a) an excessive annual addition still exists, and the Participant is not covered by the Plan at the end of the Limitation Year, the excessive annual addition will be held unallocated in a suspense account. The suspense account will be applied to reduce future Company Contributions (including allocation of any forfeitures) for all remaining Participants in the next Limitation Year, and each succeeding Limitation Year if necessary;
(iv) If a suspense account is in existence at any time during the Limitation Year pursuant to this section, it will not participate in the allocation of the trust's investment gains and losses.
(a) Multiple Plan Reduction: If an Employee is a Participant in one or more defined benefit plans and one or more defined contribution plans maintained by the
Company, the sum of the defined benefit plan fraction and the
defined contribution plan fraction for any year may not exceed
1.0. The defined benefit plan fraction for any year is a
fraction (1) the numerator of which is the projected "annual
benefit" of the Participant under the Plan (determined as of
the close of the Plan Year), and (b) the denominator of which
is the lesser of: (1) the product of 1.25 multiplied by the
maximum dollar limitation in effect under Section 415(b)(1)(A)
of the Code for such year, or (2) the product of 1.4
multiplied by the amount which may be taken into account under
Section 415(b)(1)(B) of the Code for such year.
The defined contribution plan fraction for any year is a
fraction (a) the numerator of which is the sum of the "annual
additions" to the Participant's Account as of the close of the
Plan Year and (b) the denominator of which is the sum of the
lesser of the following amounts determined for such year and
each prior year of service with the Company: (1) the product
of 1.25 multiplied by the dollar limitation in effect under
Section 415(c)(1)(A) of the Code for such year (determined
without regard to Section 415(c)(6) of the Code), or (2) the
product of 1.4 multiplied by the amount which may be taken
into account under Section 415(c)(1)(B) of the Code for such
year.
(b) Top-Heavy Plans. Notwithstanding the foregoing, for any Top-Heavy Plan Year, 1.0 shall be substituted for 1.25 unless the extra minimum allocation pursuant to Section 11.5 is being made. However, for any Plan Year in which this Plan is a Super Top-Heavy Plan, 1.0 shall be substituted for 1.25 in any event.
(i) Special Rule for Defined Contribution Fraction: At
the election of the Administrator, in applying the
provisions of Section 5.4 with respect to the defined
contribution plan fraction for any Plan Year ending
after December 31, 1982, the amount taken into
account for the denominator for each Participant for
all Plan Years ending before January 1, 1983 shall be
an amount equal to the product of (a) the amount of
the denominator determined under Section 5.2 for Plan
Years ending before January 1, 1982, multiplied by
(b) the "transition fraction".
For purposes of the preceding paragraph, the term
"transition fraction" shall mean a fraction (a) the
numerator of which is the lesser of (1) $51,875 or
(2) 1.4 multiplied by twenty-five percent (25%) of
the Participant's compensation for the Plan Year
ending in 1981, and (b) the denominator of which is
the lesser of (1) $41,500 or (2) twenty-five percent
(25%) of the Participant's compensation for the Plan
Year ending in 1981.
(ii) Excessive Benefit: If the sum of the defined benefit plan fraction and the defined contribution plan fraction shall exceed 1.0 in any year for any Participant in this Plan, the Company shall adjust the numerator of the defined contribution plan fraction so that the sum of both fractions shall not exceed 1.0 in any year for such Participant.
(iii) Limitation Year: For purposes of determining "annual additions", the limitation year shall be the Plan Year.
(iv) In the case of a group of Companies which constitutes
either a controlled group of corporations, trades or
businesses under a common control (as defined in
Section 1563(a) or Section 414(b) or (c) as modified
by Section 415(h) of the Code), or an affiliated
service group (as defined by Section 414(m) of the
Code), all such Companies shall be considered as a
single Company for purposes of applying the
limitation of Section 415 of the Code.
(v) Notwithstanding the foregoing or Section 5.2, the annual addition for any Limitation Year beginning before January 1, 1988 shall not be recomputed to treat all Employee Contributions as an Annual Addition.
SECTION 6
Allocation to Participant's Accounts
6.1 General Rules.
(a) The Company Stock Account maintained for each Participant will be credited annually with his allocable share of Qualifying Employer Securities (including fractional shares) purchased and paid for by the Trust or contributed in kind to the Trust.
Financed Shares shall initially be credited to a "Loan Suspense Account" and shall be allocated to the Company Stock Accounts of Participants only as payments on the Acquisition Loan are made by the Trustee. The number of Financed Shares to be released from the Loan Suspense Account for allocation to Participant's Company Stock Accounts for each Plan Year shall be determined by the Plan Committee in the Exempt Loan documents under either method (1) or (2) below, as follows:
(1) General Method - The number of Financed Shares held in the Loan Suspense Account immediately before the release for the current Plan Year shall be multiplied by a fraction. The numerator of the fraction shall be the amount of principal and interest paid on the Acquisition Loan for that Plan Year. The denominator of the fraction shall be the sum of the numerator plus the total payments of principal and interest on that Acquisition Loan projected to be paid for all future Plan Years. For this purpose, the interest to be paid in future years is to be computed by using the interest rate in effect as of the current allocation date.
(2) Alternative Method - The Plan Committee may elect at
the time an Acquisition Loan is incurred (or the
provisions of the Acquisition Loan may provide) for
the release of Financed Shares from the Loan Suspense
Account based solely on the ratio that the payments
of principal for each Plan Year bear to the total
principal amount of the Acquisition Loan. This method
may be used only to the extent that: (a) the
Acquisition Loan provides for annual payments of
principal and interest at a cumulative rate that is
not less rapid at any time than level annual payments
of such amounts for ten years; (b) interest included
in any payment on the Acquisition Loan is disregarded
only to the extent that it would be determined to be
interest under standard loan amortization tables; and
(c) the entire duration of the Acquisition Loan
repayment period does not exceed ten years, even in
the event of a renewal, extension or refinancing of
the Acquisition Loan.
The Other Investments Account maintained for each Participant will be credited (or debited) annually with his share of any net income (or loss) of the Trust, and with his share of Company Contributions in cash. It will
be debited for its proportionate share of any cash payments made by the Trust for the purchase of Qualifying Employer Securities or the repayment of principal and interest on any Acquisition Loan.
(b) The Trustee shall, as of each Valuation Date, adjust each Participant's Company Stock Account and Other Investments Account for transactions since the date of the preceding adjustment. Separate adjustments shall be made for each Participant's Account as follows:
(i) The number of shares of Qualifying Employer Securities in each Participant's Company Stock Account shall be the number of shares as of the date of the preceding adjustment, but increased by (A) Qualifying Employer Securities allocated to it pursuant to Section 5.1, (B) stock dividends on Qualifying Employer Securities previously allocated to said Account, and (C) Qualifying Employer Securities acquired with funds from the corresponding Other Investments Account, and shall be decreased by distributions from said Account.
(ii) The fair market value of each Other Investments Account shall be the fair market value of assets in such Account as of the date of the preceding adjustment, but increased by (A) money allocated to it pursuant to Section 5.1, (B) dividends (other than Qualifying Employer Securities' dividends) on Qualifying Employer Securities previously allocated to the corresponding Participant's Company Stock Account, and (C) investment gains; and shall be decreased by (1) distributions from said Account, (2) amounts used to acquire Qualifying Employer Securities for the corresponding Participant's Company Stock Account, and (3) investment losses.
For the purposes of the foregoing paragraph, the investment gain or loss in each Other Investments Account since the last adjustment shall be its pro rata share of the investment gain or loss of all assets in the Other Investments Account based on the change in fair market value of assets therein since the last adjustment and computed in accordance with uniform valuation procedures established by the Trustee.
Shares of Qualifying Employer Securities held in the Loan Suspense Account and dividends paid thereon, funds borrowed for the purchase of Qualifying Employer Securities, and interest and all other costs attributable to the Loan Suspense Account shall be excluded for all purposes under this Section, except to the limited extent provided in Section 13.7(b).
6.2 Reports to Participants. As soon as practicable after each annual Valuation Date, the Committee shall advise each Participant of the amount then credited to his Account.
6.3 Diversification -- Elections. Each Qualified Participant shall be permitted to direct the Plan as to the investment of twenty-five percent (25%) of the value of the Participant's Account Balance attributable to Qualifying Employer Securities. Such direction shall be made within the Qualified Election Period and shall be made no later than 90 days after the close of each Plan Year which occurs within the Qualified Election Period. In the case of the last Plan Year in which such direction may be made, the amount of permitted investment shall be increased to fifty percent (50%) of the Participant's Account.
6.4 Diversification -- Distributions. The portion of a Qualified Participant's Account Balance with respect to which a diversification election is made under Section 6.3 shall be distributed (without regard to the distribution limitations of Section 409(d) of the Code) to the Qualified Participant within 90 days after the last day of the period during which the election may be made.
6.5 Diversification -- Required Consents. Notwithstanding the foregoing,
any election under this Section by a Qualified Participant which
results in a distribution to such Participant shall be subject to the
consent provisions of Section 9.4 and 10.5 of the Plan. If the consent
is not secured, then amounts otherwise distributable under this
Section will remain in the Plan.
SECTION 7
Retirement and Distribution of Benefits
7.1 Vesting. At Normal Retirement Age, or Early Retirement Age, the Participant shall have a 100% nonforfeitable interest in his account. If a Participant defers his retirement beyond his Normal or Early Retirement Date, he shall continue as a Participant until his actual retirement, but no distributions shall be made from his Accounts until his actual retirement (other than distributions required under Section 7.6), unless the Participant elects to withdraw all or part of his Company Contribution Account pursuant to this Section.
7.2 Distribution -- Timing. If a Participant's employment terminates by reason of his retirement pursuant to Section 7.1, the total balance of his Account (including his NonCompany Stock Account), as of the Valuation Date which coincides with or next follows the date of his retirement, shall be distributed to him as soon as practicable thereafter, in whole shares of Qualifying Employer Securities and any cash credited to his accounts. Any fractional share value shall be distributed to him in cash.
7.3 Distribution -- Method. At such time that distributions are permissible under the Plan, the Participant's Company Stock Account and Other Investment Account shall be distributed as the Participant may elect, (i) a lump sum or (ii) equal monthly, quarterly or annual payment.
Unless otherwise elected by a Participant, the distribution of his
Account attributable to Qualifying Employer Securities as well as
other (diversified) investment shall commence not later than sixty
(60) days after the Anniversary Date coinciding with or next following
his Normal Retirement Age (or his termination of Service, if later).
However, if the amount of a Participant's Account attributable to both
Qualifying Employer Securities as well as other (diversified)
investments cannot be ascertained by the Committee by the date on
which such distribution should commence, or if the Participant cannot
be located, distribution of his account shall commence within sixty
(60) days after the date on which his Company Stock Account Value can
be determined or after the date on which the Committee locates the
Participant.
In the event that Qualifying Employer Securities held in a
Participant's Account are subject to a "put option" as provided under
Section 7.5(b) herein, distributions of the Qualifying Employer
Securities otherwise required under this Section shall not include any
Qualifying Employer Securities acquired with the proceeds of any
Acquisition Loan until the close of the Plan Year in which such loan
is repaid in full.
7.4 Distribution -- Form. Distribution of a Participant's Company Stock Account will be made as the Participant elects, either (i) entirely in cash, (ii) entirely in whole shares of Qualifying Employer Securities with cash paid in lieu of fractional shares or (iii) in a combination of cash and whole shares of Company Stock. Any balance in a Participant's Other Investments Account and any fractional shares of Company Stock will be paid in cash. If Qualifying Employer Securities are not available for purchase by the Trustee,
then the Trustee shall hold such balance until Qualifying Employer Securities are acquired and then make such distribution. If the Trustee is unable to purchase Qualifying Employer Securities required for distribution, he shall make distribution in cash within one year after the date the distribution was to be made; except in the case of a retirement, distribution shall be made within sixty (60) days after the close of the Plan Year in which a Participant's retirement occurs.
Notwithstanding the foregoing, in the case of a Plan established and maintained by a company, as described in Section 409(h)(2) of the Code, which is prohibited by law or the company's charter or bylaws from redeeming or purchasing its own securities, Qualifying Employer Securities will not be required to be distributed if the Participant is permitted to receive a distribution in cash.
7.5 (a) Right of First Refusal
Shares of the Qualifying Employer Securities distributed by
the Trustee shall be subject to a "right of first refusal".
The right of first refusal shall provide that, prior to any
subsequent transfer, such Qualifying Employer Securities must
first be offered in writing to the Company, and then, if
refused by the Company, to the Trust, at the then fair market
value. The Company and the Committee (on behalf of the Trust)
shall have a total of fourteen (14) days (from the date the
Participant or Beneficiary gives written notice to the
Company) to exercise the right of first refusal on the same
terms offered by a prospective buyer. A Participant (or
Beneficiary) entitled to a distribution of Qualifying Employer
Securities may be required to execute an appropriate stock
transfer agreement (evidencing the right of first refusal)
prior to receiving a certificate for such Securities.
Notwithstanding the foregoing, a "right of first refusal"
shall not be permitted in the case of Qualifying Employer
Securities which are publicly traded on an established
securities market.
(b) Put Option
In the case of a distribution of Qualifying Employer
Securities which are not readily tradeable on an established
securities market, the Plan shall provide the Participant with
a put option that complies with the requirements of Section
409(h) of the Code.
The Company shall issue such a "put option" to each
Participant receiving a distribution of Qualifying Employer
Securities from the Trust subject to the availability of
retained earnings in such amount that complying with the "put
option" shall not be ultravires. The put option shall permit
the Participant to sell such Qualifying Employer Securities to
the Company, at any time during two option periods, at the
then fair market value as determined as of the most recent
valuation date (prior to the exercise of such right) by an
independent appraiser meeting requirements similar to the
requirements of the regulations prescribed
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under Sections 170(a)(1) and 401(a)(28)(C) of the Code engaged by the Committee. The first put option period shall be a period of sixty (60) days beginning on the date of distribution of Qualifying Employer Securities to the Participant. The second put option period shall be a period of sixty (60) days beginning after the new determination of the fair market value of such Qualifying Employer Securities by the Committee in the next following Plan Year provided that if such determination is made before the 13-month anniversary date of distribution of Qualifying Employer Securities to the Participant, then the second put option period shall be a period of sixty (60) days beginning after the new determination of the fair market value of such Qualifying Employer Securities by the Committee in the next following Plan Year.
The Trust shall have the option to assume the rights and obligations of the Company at the time the Participant requires the purchase by the Company. The Committee may be permitted by the Company to direct the Trustee to purchase Qualifying Employer Securities tendered to the Company under a put option.
Such put option shall provide that if an Employee exercises the put option, the Company (or the Plan if the Trustee so elects), shall repurchase the Qualifying Employer Securities by paying the fair market value of a Participant's Account balance in cash, in five substantially equal annual payments. The first installment shall be paid no later than 30 days after the Participant exercises the put option. The payor under the put option will pay a reasonable rate of interest and provide adequate security on amounts not paid after 30 days.
(c) Placement of Restrictions on Stock Certificates
Shares of Qualifying Employer Securities held or distributed by the Trustee may include such legend restrictions on transferability as a Company may reasonably require in order to assure compliance with applicable Federal and State securities law and with the provisions of this paragraph. Except as otherwise provided in this Section, no shares of Qualifying Employer Securities held or distributed by the Trustee may be subject to a put, call or other option or buy-sell similar arrangement. The provisions of this Section shall continue to be applicable to shares of such Securities, even if the Plan ceases to be an Employee stock ownership plan under Section 4975(e)(7) of the Code.
7.6 Distribution -- Age 70 1/2 Rule. Notwithstanding anything to the contrary, payment of a Participant's benefit will commence not later than April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2. Each Participant shall thereupon receive his or her benefits in a lump sum in accordance with Section 7.3.
SECTION 8
In Event of Disability
8.1 Vesting; Timing. In the event a Participant suffers a Total Disability, the total balance of his Participant Account, as of the Valuation Date which coincides with or next follows the determination of disability, shall become 100% vested and distributed to him in a lump sum as soon as administratively practicable after such Valuation Date. All such distributions shall be made in accordance with Sections 7.3 and 7.4, except as specifically noted to the contrary herein.
SECTION 9
In Event of Death
9.1 Vesting; Timing. In the event of the death of a Participant prior to the distribution of the total balance of his Participant Account, the total balance of his Accounts, as of the Valuation Date which coincides with or next follows the date of his death, shall be immediately 100% vested and distributed in one lump sum to his primary beneficiary or, if the primary beneficiary does not survive the Participant, then to his secondary beneficiary, or if no beneficiary has been designated or survives, then to the Participant's estate. All such distributions shall be made in accordance with Sections 7.3 and 7.4, except as specifically noted to the contrary herein.
9.2 Beneficiary. At any time during his life, a Participant shall be entitled to designate a beneficiary (including a secondary beneficiary, if the Participant so desires), to whom in the event of death the distribution provided herein shall be paid, by signing and filing with the Committee a written designation of beneficiary in such form as shall be required by the Committee. Any beneficiary so designated may be changed by the Participant at any time or from time to time during his life, by signing and filing with the Committee a written notification of change of beneficiary in such form as shall be required by the Committee. If the Participant is married, the designated beneficiary shall be the Participant's spouse unless an election was made under Section 9.4.
9.3 Beneficiary of Married Participants. In the event a married Participant dies while still employed by the Company or before the Participant's Account is paid to the Participant, the Participant's Account must be paid to the Participant's surviving spouse in a lump sum within five years. If a Participant dies before distributions have commenced and is not survived by a spouse, the Participant's entire remaining interest must be distributed within five years after the Participant's death to the Participant's beneficiary or beneficiaries (or, in the absence of a properly appointed beneficiary or beneficiaries, pursuant to Section 9.5).
9.4 Designation of Beneficiary. The designated beneficiary of all benefits payable under this Plan shall be the Spouse of such Participant on the date of death, unless a waiver to such designation has been completed and received by the Committee in the form acceptable to the Committee. The waiver must be in writing and must be consented to by the Participant's spouse with such waiver specifically acknowledging the non-spouse beneficiary or any subsequent change in a non-spouse beneficiary. The spouse's consent to a waiver must be witnessed by a plan representative or notary public. Notwithstanding this consent requirement, if the Participant establishes to the satisfaction of a plan representative that such written consent may not be obtained because there is no spouse or the spouse cannot be located, a waiver will be deemed a qualified election. Any consent necessary under this provision will be valid only with respect to the spouse who signs the consent. Additionally, a revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the commencement of benefits. The number of revocations shall not be limited.
9.5 Absence of Beneficiary Designation. If a Participant files no designation of beneficiary or revokes a designation previously filed without filing a new designation of beneficiary, or if all persons so designated as beneficiary shall predecease the Participant or die prior to complete distribution to them, the Trustee, pursuant to Company instructions, shall distribute such death benefit or balance thereof to the following who shall be deemed beneficiaries: to such Participant's surviving spouse, or if none, to such Participant's surviving issue per stirpes and not per capita, or if none, to the Participant's estate.
SECTION 10
In the Event of Termination of Employment
or Change in Status
10.1 General Rule. Subject to the provisions of Section 7.6 "Late
Retirement", there shall be no distributions made to a Participant
except on account of termination of employment, death, disability as
provided for in Section 8, or termination of the Plan. All such
distributions shall be made in accordance with Sections 7.3 and 7.4,
except as specifically noted to the contrary herein.
10.2 Distribution -- Timing. If a Participant's employment terminates
otherwise than by his death, retirement or disability and the
Participant is not reemployed by the Company or an Affiliate at the
end of a period of five (5) consecutive one-year Breaks in Service,
distribution of such portion of the Participant's vested Account
Balance attributable to Qualifying Employer Securities will be made
not later than one year after the close of a period of five (5)
consecutive one-year Breaks in Service unless the Participant
otherwise elects under the provisions of this Plan. If the fair market
value of a Participant's Account attributable to Company Securities is
in excess of $500,000 (multiplied by the Adjustment Factor as
prescribed by the Secretary of the Treasury) as of the date
distribution is required to begin under this Section, distributions
shall be made in substantially equal annual payments over a period not
longer than five years plus an additional one year (up to an
additional five years) for each $100,000 increment, or fraction of
such increment, by which the value or the Participant's Account
exceeds $500,000, unless the Participant otherwise elects under the
provisions of the Plan. In no event shall such distribution period
exceed the period permitted under Section 401(a)(9) of the Code. If
the fair market value of a Participant's Account attributable to
Qualifying Employer Securities is not in excess of $500,000
(multiplied by the Adjustment Factor as prescribed by the Secretary of
the Treasury) as of the date distribution is required to begin under
this Section, distributions shall be made in substantially equal
annual installments over a period not longer than five years, unless
the Participant otherwise elects under the provisions of the Plan.
If the Participant separates from service for a reason other than
those described above and is re-employed by the Company prior to the
end of a period of five (5) consecutive one-year Breaks in Service,
distribution to the Participant, prior to any subsequent termination
of service, shall be in accordance with terms of the Plan other than
this Section.
For purposes of this Section, in the event that Qualifying Employer
Securities held in a Participant's Account are subject to a "put
option" as provided under Section 7.5(b) herein, such Qualifying
Employer Securities shall not include any Qualifying Employer
Securities acquired with the proceeds of an Acquisition Loan until the
close of the Plan Year in which such loan is repaid in full.
10.3 Vesting. The non-forfeitable portion of the account balance of a
Participant's Account shall be a percentage of such Account based upon
the number of Years of Service that
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such Participant has credited from his date of employment after attainment of age 18 according to the following schedule:
Years of Service Percent Vested ---------------- -------------- Less than 3 0% 3 but less than 4 20% 4 but less than 5 40% 5 but less than 6 60% 6 but less than 7 80% 7 or more years 100% |
10.4 Forfeitures. As of each Anniversary Date, any amounts which became
Forfeitures since the last Anniversary Date shall first be made
available to reinstate previously forfeited account balances of Former
Participants, if any, in accordance with Section 10.5. The remaining
Forfeitures, if any, shall be added to the Company's contribution made
pursuant to Section 5.1 and allocated among the Participant's Accounts
in the same manner as the Company's contribution for the current year.
In the event the allocation of Forfeitures provided herein shall cause
the "annual addition" (as defined in Section 5.2) to any Participant's
Account to exceed the amount allowable by the Code, the excess shall
be reallocated in accordance with Section 5.2(b). However, a
Participant who performs less than a Year of Service during any Plan
Year shall not share in Forfeitures for that year, unless required
pursuant to Section 11.3. If a portion of a Participant's Account is
forfeited, Company Stock allocated to the Participant's Company Stock
Account must be forfeited only after the Participant's Other
Investments Account has depleted. If interest in more than one class
of Company Stock has been allocated to a Participant's Account, the
Participant must be treated as forfeiting the same proportion of each
such class.
10.5 Restoration of a Participant's Account Upon Reemployment. If a former
Participant is reemployed by the Company before incurring five (5)
consecutive one-year Breaks in Service, and such Participant had
received a distribution of his entire vested interest in his Account
pursuant to Section 10.1 prior to being reemployed, the full amount in
such Participant's Company contribution account on the date of the
prior distribution (including vested and nonvested portions) will be
restored if:
(a) The Participant repays to the Plan the full amount of the
prior distribution, other than his voluntary contribution,
before the Participant incurs five (5) consecutive one-year
Breaks in Service commencing after such withdrawal; and
(b) The Participant was not fully vested in his Company
contribution account at the time of the distribution.
10.6 Voluntary and Involuntary Cash-outs. If the vested portion of a
Participant's Account does not exceed $3,500 in value upon a
Participant's termination of employment with the Company, the
Participant shall be paid such vested portion in cash (unless the
Participant elects to receive such payment in shares of Qualifying
Employer Securities) without regard to the Participant's election
related to the timing of such payments. If the
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Participant, upon termination of service for any reason other than
retirement, death, or Total Disability, does not consent to the
payment of the vested portion of the Participant's Account, and if the
then value of such Account exceeds $3,500, the Committee shall direct
the Trustee to place the then value of such Account in one (1) or more
investment accounts permitted under the Plan in trust for the named
Employee. The Account and all accumulated interest shall be paid to
the Employee at the time he attains his Normal Retirement Age. In the
event the Employee dies before reaching retirement age, the Account
balance shall be paid to any beneficiary the Employee has named in a
written designation filed with the Committee or, in the absence of
such designation, to the Employee's estate subject to the terms of
Section 9 of the Plan. The Trustee shall have no other
responsibilities with respect to such accounts except that, if the
balance of any such account shall approach the amount of federal
insurance, the Trustee shall split the account into two (2) or more
accounts.
10.7 Changes in Address. It shall be the responsibility of the terminating
Participant to keep the Committee informed as to his address, and the
Trustee and the Committee shall not be required to do anything further
than sending all papers, notices, payments, or the like to the last
address given them by such Participant unless they can be shown to
have acted in bad faith, having had knowledge of the Participant's
actual whereabouts.
10.8 Latest Time for Distribution. Except as limited by Sections 7, 8, 9
and 10, whenever the Trustee is to make a distribution or to commence
a series of payments on or before an Anniversary Date, the
distribution or series of payments may be made or begun on such date
or as soon thereafter as is practicable, but in no event later than
180 days after the Anniversary Date. Except, however, unless a Former
Participant elects in writing to defer the receipt of benefits (such
election may not result in a death benefit that is more than
incidental), the payment of benefits shall begin not later than the
60th day after the close of the Plan Year in which the latest of the
following events occurs:
(a) the date on which the Participant attains the earlier of age
65 or the Normal Retirement Date specified herein,
(b) the 5th anniversary of the year in which the Participant
commenced participation in the Plan, or
(c) the date the Participant terminates his service with the
Company.
10.9 Age 70 1/2 Rule. Notwithstanding any provisions of the Plan, in no
event shall a distribution schedule or form of distribution exceed the
period permitted under Section 401(a)(9) of the Code or Treasury
Regulations Section 1.401(a)(9)-1 or Section 1.401(a)(9)-2.
10.10 Deemed Cash-outs if 0% Vesting. Notwithstanding anything to the
contrary, if the value of a Participant's vested portion of the
Participant's Account is zero on the date of termination of
employment, then the Participant shall be deemed to have received a
total distribution of the vested portion of such Participant's Account
on such date.
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10.11 This Section applies to distributions made from the Plan to
Distributees on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a
Distributee's election under this Section, a Distributee may elect at
the time and in the manner prescribed by the Plan Administrator, to
have any portion of an Eligible Rollover Distribution paid directly to
an Eligible Retirement Plan specified by the Distributee in a Direct
Rollover. For purposes of this Section __
"Distributee" means the Employee or former Employee, the Employee's or
former Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee under a
Qualified Domestic Relations Order, as defined in Section 414(p) of
the Code, are Distributees with regard to the interest of the spouse
or former spouse.
"Eligible Retirement Plan" means an individual retirement account
described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an Eligible
Rollover Distribution to the surviving spouse of a Participant, an
Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
"Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
"Eligible Rollover Distribution" means any distribution of all or any
portion of the balance to the credit of the Distributee, except that
an Eligible Rollover Distribution does not include: any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy)
of the Distributee or the joint lives (or joint life expectancies) of
the Distributee and the Distributee's designated Beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
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SECTION 11
Top-Heavy Rules and Definitions
11.1 Effective Date of Top-Heavy Provisions. If the Plan is or becomes
Top-Heavy in any Plan Year beginning after December 31, 1983, the
provisions of Sections 11 will supersede any conflicting provision in
the Plan.
11.2 Top-Heavy Vesting Schedule. If the Plan is determined to be Top-Heavy
for any Plan Year, a Participant's vested percentage interest in his
Company contribution account shall be determined in accordance with
the Top-Heavy Vesting Schedule set forth in 11.2(d) of this Plan,
subject to the following additional requirements:
(a) Years of Service for purposes of vesting under a Top-Heavy
Vesting Schedule shall include Years of Service when the Plan
was not Top-Heavy;
(b) If any Participant in the Plan is not credited with an Hour of
Service after the Plan becomes Top-Heavy, that Participant
shall not be subject to the Top-Heavy Vesting Schedule, but
shall remain subject to the vesting schedule set forth in
Section 10.2 and the rules in effect prior to the date the
Plan becomes Top-Heavy; and
(c) If the Plan ceases to be Top-Heavy, an Employee's vested
percentage interest in the contributions allocated to his
Company contribution account for Plan Years after the Plan
Year in which the Plan ceases to be Top-Heavy shall be
determined in accordance with the vesting schedule set forth
in Section 10.2 of the Plan, unless otherwise set forth in
Section 11.2 of this Plan.
(d) If the Plan is a Top-Heavy Plan in a Plan Year, a Participant
who is credited with an Hour of Service in such Plan Year
shall have the nonforfeitable interest in his Accrued Benefit
for such Plan Year determined in accordance with the following
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schedule:
Non-forfeitable
(Vested)
Years of Service Percentage
---------------- ---------------
Less than 2 0%
2 25%
3 50%
4 75%
5 years or more 100%
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(e) Notwithstanding any provision to the contrary, the vested benefit derived from Company contributions of a Participant may not be reduced below what it was before the Plan ceased to be Top-Heavy and the vesting schedule was changed.
In addition, each Participant with three (3) or more Years of
Service shall be given the option of remaining under the
Top-Heavy Vesting Schedule within the same period as set forth
in Section 16.3.
11.3 Minimum Contributions. If this Plan is Top-Heavy during any Plan Year,
the Company must make a Minimum Contribution consisting of Company
contributions and forfeitures on behalf of each Plan Participant who
is a Non-Key Employee equal to an amount which is not less than three
(3%) percent of such Participant's Compensation. A Minimum
Contribution shall be made on behalf of such Participant even though,
under other Plan provisions, the Participant would not otherwise be
entitled to receive an allocation, or would have received a lesser
allocation for the Plan Year due to (i) the Participant's failure to
complete one thousand (1000) Hours of Service, or (ii) the
Participant's failure to make mandatory contributions to the Plan, if
required; or (iii) the Participant's Compensation is less than a
stated amount.
Notwithstanding the preceding paragraph, if the Company's Minimum
Contribution on behalf of each Plan Participant who is a Key Employee
equals an amount which is less than three (3%) percent of such
Participant's Compensation, then the Minimum Contribution required to
be made for each Non-Key Employee is limited to not more than the
highest contribution rate under the Plan for each Key Employee.
Therefore, if no Company Contribution is made on behalf of a Key
Employee, then no Minimum Contribution is required to be made on
behalf of each Non-Key Employee. However, if the Plan is included in a
Required Aggregation Group and it enables a defined benefit plan of
the Company to meet the requirements of Sections 401(a)(4) or 410 of
the Internal Revenue Code, then the Minimum Contribution for Non-Key
Employees cannot be less than three (3%) percent, regardless of the
contribution rate for Key Employees. For purposes of this
subparagraph, all defined contribution plans included in a Required
Aggregation Group shall be treated as one Plan.
A Minimum Contribution shall not be made on behalf of any Participant
who is not employed by the Company on the last day of the Plan Year.
For purposes of computing the Minimum Contribution for any Plan
Participant, amounts paid by the Company to Social Security shall be
disregarded. Also, for all Plan years, except those beginning before
January 1, 1985, any Company contribution attributable on behalf of
any Key Employee to a salary reduction or similar plan shall be taken
into account.
11.4 Minimum Contributions or Minimum Benefits in Two or More Plans. If the
Company maintains more than one qualified plan and more than one such
plan is determined to be Top-Heavy, a Minimum Contribution or a
Minimum Benefit, as described in the following paragraph, shall be
provided in one of such Plans. If the Company has both a Top-Heavy
defined benefit pension plan and a Top-Heavy defined contribution plan
and a Minimum Contribution is to be provided only in the defined
contribution plan, then this Minimum Contribution shall not be less
than five (5%) percent of a Participant's Compensation.
Notwithstanding that set forth in Section 3.1, if the Minimum
Contribution is to be provided in this Plan, then the Company must
provide such Minimum Contribution even if the Company has no current
or accumulated profits for the Plan Year.
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If a defined benefit plan of the Company is Top-Heavy during any Plan
Year, each Plan Participant who is a Non-Key Employee and who has
completed 1000 Hours of Service in the Plan Year must accrue a Minimum
Benefit derived from Company contributions which, at any time, when
expressed as an Annual Retirement Benefit equals or exceeds the
product of such Non-Key Employee's average annual Compensation for his
Testing Period under such defined benefit plan and the applicable
percentage, which is the lesser of two (2%) percent multiplied by the
number of Years of Service with the Company or twenty (20%) percent.
In addition, the following rules shall also apply:
(a) Such Non-Key Employee must accrue a Minimum Benefit even if
such Employee is not employed by the Company on the last day
of the Plan Year, or if, under other Plan provisions, the
Participant would not otherwise be entitled to receive an
accrual or would have received a lesser accrual for the Plan
Year due to (i) the Participants failure to make mandatory
contributions to the Plan, if required, or (ii) the
Participant's Compensation is less than a stated amount; or
(iii) the Plan is integrated with Social Security.
(b) A Year of Service shall not be taken into account in
determining the Minimum Benefit if such Year of Service either
ends in a Plan Year beginning before January 1, 1984 or if the
Plan was not Top-Heavy for any Plan Year ending during such
Year of Service.
(c) Compensation of the Employee in years ending in a Plan Year
beginning before January 1, 1984 or beginning after the close
of the last Plan Year in which the Plan is Top-Heavy shall be
disregarded.
(d) For purposes of computing the Minimum Benefit for any Non-Key
Employee, Company contributions to Social Security or
attributable to a salary reduction or similar plan shall not
be taken into account. Notwithstanding the preceding
sentence, any Company contribution attributable to a salary
reduction or similar plan shall be taken into account for
computing the Minimum Benefit for any Non-Key Employee for
Plan Years beginning before January 1, 1985.
(e) If the Non-Key Employee receives a benefit in a form other
than a single life annuity or a benefit other than at Normal
Retirement Age, the Minimum Benefit must be an amount that is
the actuarial equivalent of the minimum single life annuity
benefit commencing at Normal Retirement Age under such defined
benefit plan.
(f) All accruals derived from Company contributions, whether or
not attributable to years during which the Plan was Top-Heavy,
may be used in determining whether the Minimum Benefit accrual
requirements described in this paragraph are satisfied.
11.5 Aggregate Limit on Contributions and Benefits for Key Employees. If
any Participant is a Key Employee and is, or was, covered under both a
defined benefit plan and a defined contribution plan which are both
included in a Top-Heavy Group of the Company, then
|
for any Plan Year in which the Plans are Top-Heavy, the number "1.0"
shall be substituted for "1.25" in each place where it appears in
Section 5.4, unless the Additional Minimum Contribution is being made
pursuant to this Section 11.5.
Notwithstanding the above paragraph, if the Plan is Top-Heavy, but is
not Super Top-Heavy, Section 5.3 without modification, shall continue
to govern the overall limitations on contributions and benefits for
Key Employees if an Additional Minimum Benefit or an Additional
Minimum Contribution equal to seven and one-half (7 1/2%) percent
shall be received by each Participant who is a Non-Key Employee in any
one qualified plan maintained by the Company. However, for any Plan
Year in which this Plan is a Super Top-Heavy Plan, 1.0 shall be
substituted for 1.25 in any event, where it appears in Section 5.3
11.6 Miscellaneous Compensation Provisions. For any Plan Year in which a
Plan is Top-Heavy, the annual Compensation of each Participant which
may be taken into account for the purpose of determining Company
contributions or benefits under the Plan, including the computation of
the contribution rate for Key Employees in Section 11.3, shall not
exceed $200,000, or such larger amount as may be determined by the
Secretary of the Treasury in accordance with Section 415(d) of the
Internal Revenue Code and the regulations promulgated thereunder, for
Plan Years ending on or after January 1, 1988. Notwithstanding this
limitation, benefits attributable to annual Compensation while the
Plan was not Top-Heavy shall not be reduced.
11.7 Top-Heavy Definitions
11.7.1 "Additional Minimum Benefit" means the Minimum Benefit
described in Section 11.4; however, in determining the
applicable percentage in Section 11.4, "three (3%) percent"
shall be substituted for "two (2%) percent" and "twenty (20%)
percent" shall be increased by 1 percentage point for each
year for which the Plan is Top-Heavy, up to a maximum of
thirty (30%) percent.
11.7.2 "Additional Minimum Contributions" means the Minimum
Contribution described in Section 11.3; however, in
determining the Minimum Contribution four (4%) percent" shall
be substituted for "three (3%) percent" wherever it appears
throughout Section 11.3.
11.7.3 "Aggregation Group" shall mean one of the following:
(a) Required Aggregation Group:
"Required Aggregation Group" means each Plan of the Company or
an Affiliate, including terminated plans, in which a Key
Employee is a Participant and each other Plan of the Company
which enables any Plan in which a Key Employee is a
Participant to meet the requirements of Sections 410 or
401(a)(4) of the Code. Collectively - bargained plans that
include a Key Employee of an Company shall be included in the
Required Aggregation Group of the Company; or
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(b) Permissive Aggregation Group:
"Permissive Aggregation Group" means each Plan in the Required
Aggregation Group and any Plan the Company elects to place
into the Aggregation Group, if this expanded group continues
to satisfy the requirements of Sections 401(a)(4) and 410 of
the Internal Revenue Code.
11.7.4 "Annual Retirement Benefit" means a benefit payable annually
in the form of a single life annuity with no ancillary
benefits and beginning at the Normal Retirement Age under the
Plan.
11.7.5 "Compensation" under Section 11 shall be determined under
Section 5.2 of the Plan, without regard to Sections 125,
402(a)(8), and 402(h)(1)(B) of the Code, and in the case of
employer contributions made pursuant to a salary reduction
agreement, without regard to Section 403(b) of the Code.
11.7.6 "Determination Date" for any Plan Year shall mean either (i)
the last day of the preceding Plan Year, or (ii) in the case
of the first Plan Year of any Plan, the last day of such Plan
Year.
11.7.7 "Key Employee" shall mean any Employee, former Employee, or
the Beneficiary of such Employee, who at any time during the
current Plan Year or during any of the four preceding Plan
Years, is described in one or more of the following three
categories:
(a) An Officer of the Employer who receives during the Plan Year
or any of the four preceding Plan Years an annual Compensation
which exceeds 50% of the maximum dollar limitation under
Section 415(b)(1)(A) of the Code, as in effect for any such
Plan Year. The maximum number of Employees required to be
treated as Key Employees for the Plan Year by reason of being
Officers is the greater of 3 Employees or ten (10%) percent of
the number of Employees of the Company, but such number shall
not exceed 50 Employees. If the number of Employees who are
Officers of the Company exceed the maximum number required to
be counted as Key Employees, the Officers to be considered as
Key Employees are those with the highest annual Compensation
from the Company.
(b) One of the Employees owning or considered as owning within the
meaning of Section 318 of the Internal Revenue Code, as
modified by Section 416(i)(1)(B)(iii) of the Code, the largest
interests in the Company, unless such Employee receives
Compensation from the Company which is less than $30,000 per
year, or the maximum dollar limitation under Section
415(c)(1)(A) of the Code, as in effect for the calendar year
in which the Determination Date falls. An Employee who has
some ownership interest in the Company is considered to be one
of the top ten owners unless at least ten (10) other Employees
own a greater interest than such Employee. If more than one
Employee has the same interest in the Company, the Employee
having the greater annual Compensation from the Company shall
be treated as having a larger interest in the Company.
|
(c) A Percentage Owner of the Company. A "percentage owner" means
any person who owns, or is considered as owning within the
meaning of Section 318, as modified by Section
416(i)(1)(B)(iii) of the Internal Revenue Code, either
(1) more than five (5%) percent of the outstanding stock
of the Company or stock possessing more than five
(5%) percent of the total combined voting power of
all stock of the Company; or
(2) more than one (1%) percent of the outstanding stock
of the Company or stock possessing more than one (1~)
percent of the total combined voting power of all
stock of the Company, if such person has an annual
compensation from the Company of more than $150,000.
If a person is considered during a Plan Year to be a Key
Employee under two or more categories, due to his status other
than as a Beneficiary, the present value of his accrued
benefit or the sum of his account balance is counted only once
during the Plan Year in testing whether the Plan is Top-Heavy.
If a person is considered during the Plan Year to be a Key
Employee because the person is both a Beneficiary and owner of
Company, then the present value of the person's inherited
account balance and the present value of the person's accrued
benefit or the sum of his account balance as an Employee or
owner will be counted as the total accrued benefit or account
balance of the individual as a Key Employee in determining
whether the Plan is Top-Heavy. The determination of an
individual's status as a Key Employee is based on the Plan
Year containing the Determination Date.
11.7.8 "Minimum Benefit" means the benefit described in Section 11.4.
11.7.9 "Minimum Contribution" means the contribution described in
Section 11.3.
11.7.10 "Non-Key Employee" shall mean an Employee who is not a Key
Employee or is the Beneficiary of such Employee.
11.7.11 "Rollover Contributions and Similar Transfers" shall mean the
following:
(a) Related rollover contributions or similar transfers are those
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(i) not initiated by the Employee;
(ii) made on or before December 31, 1983; or
(iii) made to a plan maintained by the same Company, such as in a merger or consolidation of two or more plans or the division of a single plan into two or more plans.
(b) Unrelated rollover contributions or similar transfers are those which are both
(i) initiated by the Employee; and
(ii) made after December 31, 1983; and
(iii) made from a plan maintained by one Company to a plan
maintained by another Company.
11.7.12 "Super Top-Heavy" shall mean a Plan which would be Top-Heavy
if "ninety (90%) percent" were substituted for "sixty (60%)
percent" in each place it appears in Section 11.7.16.
11.7.13 "Top-Heavy" means a qualified Plan which is a Top-Heavy Plan
pursuant to the provisions of Section 11.7.16.
11.7.14 "Top-Heavy Group" means an Aggregation Group in which, as of
the Determination Date, the sum of the present value of the
accumulated accrued benefits for Participants who are Key
Employees under all defined benefit plans included in such
Aggregation Group and the sum of the account balances for
Participants who are Key Employees under all defined
contribution plans included in such Aggregation Group exceeds
sixty (60%) percent of a similar sum determined for all
Employees, including their Beneficiaries, who are
participating under all Plans included in the Aggregation
Group.
11.7.15 "Top-Heavy Vesting Schedule" shall mean the vesting schedule
set forth in Section 11.2(d).
11.7.16 "Top-Heavy Plan" means a Plan for a Plan Year in which, as of
the Determination Date:
(a) The sum of the account balances of Participants in the Plan
who are Key Employees for the Plan Year exceeds sixty (60%)
percent of the sum of the account balances under the Plan for
all Employees, including their Beneficiaries participating
under the Plan, and this Plan is not part of any Aggregation
Group; or
(b) The Plan is part of a Top-Heavy Group and is included in the
Required Aggregation Group. Notwithstanding the preceding
sentence, collectively-bargained plans are not subject to the
rules of Section 11. December 31, 1983 shall not be taken into
account under the Plan for purposes of computing the Top-Heavy
status of the Plan or group of Plans, except to the extent
provided in regulations.
11.7.17 Determination of Top-Heavy Status. In making the determination
of the Top-Heavy status of a Plan or group of Plans, the
accrued benefits or account balances derived from Company and
Employee contributions are taken into account, but accumulated
deductible Employee contributions are disregarded. Also, the
determination of the present value of the accumulated accrued
benefits
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and the account balances of a Key Employee or Non-Key Employee participating in the plans includes such amounts distributed to the Employee or to the Beneficiary of such Employee during the Plan Year that includes the Determination Date and the preceding four Plan Years, even if such distribution occurred before the effective date of Section 416 of the Code. The preceding amount also includes distributions under a plan which has been terminated which, if it had not been terminated, would have been included in a Required Aggregation Group. An Unrelated rollover contribution or similar transfer accepted by the Plan after December 31, 1983 shall not be taken into account under the Plan for purposes of computing the Top-Heavy status of the Plan or group of Plans, except to the extent provided in regulations.
If any individual ceases to be a Key Employee with respect to any Plan for any Plan Year, but such individual was a Key Employee with respect to such Plan for any prior Plan Year, any accrued benefit or account balance of such Employee shall not be taken into account in determining whether the Plan or group of Plans is Top-Heavy for any Plan Year following the last Plan Year in which such Employee was treated as a Key Employee. For Plan Years beginning after December 31, 1984, if any individual has not performed any service during the Plan Year that includes the Determination Date and the preceding four Plan Years for the Company, other than benefits under this Plan, then any accrued benefit or account balance of such individual shall not be taken into account in determining whether the Plan or group of Plans is Top-Heavy for the Plan Year.
When aggregating two or more Plans in accordance with Section 416(g)(2) of the Code, or as it may be amended, the present value of the accrued benefits or account balances will be determined separately for each plan as of such Plan's Determination Date. These Plans will then be aggregated by adding together the results for each Plan as of the Determination Dates that fall within the same calendar year.
The present value of the account balance of any Plan Participant as of the Determination Date is the sum of (a) the Participant's account balance as of the most recent valuation date occurring within a 12-month period ending on the Determination Date, and (b) an adjustment for the amount of any Company contribution actually made on behalf of the Participant after the valuation date, but on or before the Determination Date. Notwithstanding the above, in the first Plan Year, the adjustment set forth in paragraph (b) shall include the amount of any Company contribution made after the Determination Date if such contributions are allocated to a Participant's Company contribution account during the first Plan Year.
SECTION 12
Administration of the Plan
12.1 Administrative Committee. The Plan shall be administered by the
Committee which shall be responsible for carrying out the provisions
of the Plan, and which shall be the Plan Administrator and Named
Fiduciary as these terms are defined under ERISA. The Committee shall
consist of at least two (2) members who shall be appointed from time
to time by the Board of Directors. Vacancies on the Committee shall
be filled in the same manner as appointment. The Company shall act as
the Committee at any time during which no committee is appointed or
duly constituted hereunder.
Each person appointed a member of the Committee shall signify his
acceptance by filing a written acceptance with the Board of Directors.
Any member of the Committee may be removed by his own accord by
delivering his written resignation to the Board of Directors and to
the Secretary of the Committee.
12.2 Chairman; Subcommittees. The members of the Committee shall elect from
their number a Chairman and shall appoint a Secretary, who need not be
a member of the Committee. They may appoint from their number such
subcommittees with such power as they shall determine, may authorize
one or more of their number or any agent to execute or deliver any
instrument or make any payment in their behalf, and may employ such
clerks, counsel, accounts and actuaries as may be required in carrying
out the provisions of the Plan.
12.3 Meetings. The Committee shall hold meetings upon such notice, at such
time, and at such place as it may determine.
12.4 Action. A majority of the members of the Committee at the time in
office shall constitute a quorum for the transaction of business. All
resolutions or other actions taken by the Committee shall be by vote
of a majority of those present at a meeting, but not less than two, or
in writing by all the members at the time in office, if they act
without a meeting.
12.5 Compensation. No member of the Committee, who is also an Employee,
shall receive any compensation for his service as such, but the
Company may reimburse any member for reasonable and necessary expenses
incurred.
12.6 Administrative Rulemaking. The Committee shall from time to time
establish rules for the administration of the Plan and the transaction
of its business. Except as herein otherwise expressly provided, the
Committee shall have the exclusive right to interpret the Plan and to
decide any matters arising thereunder in connection with the
administration of the Plan. It shall endeavor to act by general rules
so as not to discriminate in favor of any person. Its decision and the
records of the Committee shall be conclusive and binding upon the
Company, Participants, and all other persons having any interest under
the Plan.
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12.7 Plan Records. The Committee shall maintain accounts showing the fiscal
transactions of the Plan, and in connection therewith shall require
the Trustees to submit any necessary reports, and shall keep in
convenient form such data as may be necessary for the determination of
the assets and liabilities of the Plan. The Committee shall prepare,
annually, a report showing in reasonable detail the assets and
liabilities of the Plan and giving a brief account of the operation of
the Plan for the past year. Such report shall be submitted to the
Board of Directors and shall be filed in the Office of the Secretary
of the Committee where it shall be open to inspection by any
Participant of the Plan.
12.8 Reliance on Advice From Professionals. The members of the Committee
and the officers and directors of the Company shall be entitled to
rely upon all certificates and reports made by any duly appointed
legal counsel. The members of the Committee and the officers and
directors of the Company shall be fully protected against any action
taken in good faith in reliance upon any such certificates, reports or
opinions. All actions so taken shall be conclusive upon each of them
and upon all persons having any interest under the Plan. Each member
of the Committee shall be indemnified by the Company against any and
all claims, loss, damages, expense and liability to which he may be a
party by reason of his membership in the Committee, except in relation
to matters as to which he shall be adjudged in such action to be
liable for negligence or misconduct in the performance of his duty as
such member. The foregoing right of indemnification shall be in
addition to any other rights to which any such member may be entitled
as a matter of law.
12.9 Claims. Claims for benefits under the Plan shall be filed, on the
forms supplied by the Committee. Written notice of the disposition of
a claim shall be furnished the claimant within thirty (30) days after
the application therefor is filed. In the event the claim is denied,
the reasons for the denial shall be cited and, where appropriate, an
explanation as to how the claimant can perfect the claim will be
provided.
12.10 Appeals. Any Employee, former Employee, or beneficiary of either, who
has been denied a benefit, or feels aggrieved by any other action of
the Company, Committee or the Trustee, shall be entitled, upon request
to the Committee and if he has not already done so, to receive a
written notice of such action, together with a full and clear
statement of the reasons for the action. If the claimant wishes
further consideration of his position, he may obtain a form from the
Committee on which to request a hearing. Such form, together with a
written statement of the claimant's position, shall be filed with the
Committee no later than ninety (90) days after receipt of the written
notification provided for above or in Section 12.10. The Committee
shall schedule an opportunity for a full and fair hearing of the issue
within the next thirty (30) days. The decision following such hearing
shall be made within thirty (30) days and shall be communicated in
writing to the claimant.
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SECTION 13
Management and Investment of Trust Assets
13.1 Exclusive Benefit Rule. All assets for providing the benefits of the
Plan shall be held as a trust for the exclusive benefit of
Participants and beneficiaries under the Plan, and no part of the
corpus or income shall be used for, or diverted to, purposes other
than for the exclusive benefit of Participants and beneficiaries under
the Plan. No Participant or beneficiary under the Plan, nor any other
person, shall have any interest in or right to any part of the
earnings of the Trust, or any rights in, to or under the Trust or any
part of its assets, except to the extent expressly provided in the
Plan.
13.2 Investment Control. All contributions to the Plan by either the
Participants or the Company shall be committed in trust to the
Trustees. The Trustees shall be appointed from time to time by the
Board of Directors by appropriate instrument, with such powers in the
Trustees as to investment, reinvestment control and disbursement of
the funds as the Board of Directors shall approve and as shall be in
accordance with the Plan. The Board of Directors may remove any
Trustee at any time, upon reasonable notice, and upon such removal or
upon the resignation of any Trustee, the Board of Directors shall
designate a successor Trustee.
13.3 Investment in Qualifying Employer Securities. Trust Assets under the
Plan will be invested primarily in Qualifying Employer Securities, as
provided in the Trust Agreement. Trust Assets may be used to purchase
shares of Qualifying Employer Securities from Company shareholders or
from the Company. The Trustee may also invest Trust Assets in savings
accounts, certificates of deposit, high-grade short-term securities,
equity stocks, bonds, or other investments, or Trust Assets may be
held in cash. All investments of Trust Assets shall be made by the
Trustee only upon the direction of the Committee, and all purchases of
Qualified Employer Securities by the Trustee shall be made at prices
which do not exceed the fair market value of such shares, as
determined in good faith by the Committee. The Committee may direct
the Trustee to invest and hold up to 100% of the Trust Assets in
Qualified Employer Securities. Notwithstanding anything in the Plan to
the contrary, all determinations as to the fair market value of
Qualified Employer Securities shall be made (i) in accordance with
Treasury Regulation Section 54.4975-11(d)(5), (ii) by an independent
appraiser, pursuant to Section 401(a)(28) of the Code, in the event
such Qualified Employer Securities are not readily tradable on an
established securities market, and (iii) as of the most recent
Valuation Date, provided that transactions involving Participants who
are "disqualified persons" within the meaning of Section 4975 of the
Code shall be valued as of the transaction date.
13.4 Acquisition Loans. The Committee may direct the Trustee to incur
Acquisition Loans from time to time to finance the acquisition of
Qualified Employer Securities (Financed Shares) for the Trust or to
repay a prior Acquisition Loan. An installment obligation incurred in
connection with the purchase of Qualified Employer Securities shall
constitute an Acquisition Loan. An Acquisition Loan shall be for a
specific term, shall bear a reasonable rate of interest and shall not
be payable on demand except in the event of
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default. An Acquisition Loan may be secured by a collateral pledge of
the Financed Shares so acquired. No other Trust Assets may be pledged
as collateral for an Acquisition Loan, and no lender shall have
recourse against Trust Assets other than any Financed Shares remaining
subject to pledge. Any pledge of Financed Shares must provide for the
release of shares so pledged on pro-rata basis as principal and
interest on the Acquisition Loan are repaid by the Trustee and such
Financed Shares are allocated to Participants' Company Stock Accounts
(as provided in Section 6). Repayments of principal and interest on
any Acquisition Loan shall be made by the Trustee (as directed by the
Committee) only from Company contributions paid in cash to enable the
Trustee to repay such Loan, forfeitures from Participant accounts,
from earnings attributable to such Company Contributions and from cash
dividends received by the trust. The payments made with respect to an
Acquisition Loan by the Trust during a Plan Year shall not exceed an
amount equal to the sum of such contributions and earnings received
during or prior to the Plan Year less such payments in prior years.
Such contributions and earnings must be accounted for separately in
the books of accounts of the Trust until the Acquisition Loan is
repaid. The proceeds of an Acquisition Loan shall be used within a
reasonable time offer receipt by the Trust. Further, all income
earned with respect to Unallocated Company Stock shall be used at the
discretion of the Committee to repay the Acquisition Loan used to
purchase such Company Stock. Any income not so used shall be allocated
as income of the Plan.
Should the Company Contributions, earnings attributable to such
Company Contributions and cash dividends received by the Trust on
Financed Shares be insufficient to meet the obligations created by the
Acquisition Loan, then the Trustee shall so advise the Committee. The
Committee may recommend certain actions including but not limited to,
refinancing the original Loan, amendment of the original Loan
Agreement, or the entering into of an additional Acquisition Loan to
repay a prior Acquisition Loan.
13.5 Disbursements. The Committee shall determine the manner in which the
funds of the Plan shall be disbursed in accordance with the Plan and
provisions of the trust instrument, including the form of voucher or
warrant to be used in making disbursements and the qualifications of
persons authorized to approve and sign the same and any other matters
incident to the disbursements of such funds.
13.6 Voting of Company Stock. Pursuant to Section 409(e) of the Code, all
"Registration-Type" Company Stock allocated to a Participant Account
shall be voted by the Trustee in accordance with the instructions of
the Participant.
If the Company Stock is not a registration-type class of securities
pursuant to Section 409(e) of the Code, then Participants are entitled
to direct the Trustee concerning voting allocated stock with respect
to any corporate matter which involves the approval or disapproval of
any corporate merger, consolidation, recapitalization,
reclassification, liquidation, dissolution, sale of substantially all
assets or similar transaction. The Committee shall direct the voting
of such stock in all other matters.
Company Stock which has not yet been allocated and allocated stock for
which no voting direction has been received by Participants in a
timely manner shall be voted by the
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Trustee in the same proportion as Participants vote allocated stock;
provided that, in the absence of any voting directions as to allocated
stock, (i) the Company shall direct the Trustee as to the voting of
all shares of unallocated stock, (ii) and in the absence of such
direction from the Company, the Trustee shall have sole discretion as
to the voting of such shares.
13.7 Dividends. Dividends paid with respect to Qualifying Employer
Securities held by the Trust shall be applied as follows:
(a) The dividends paid with respect to shares which are both
purchased with the proceeds of an Acquisition Loan and
allocated to the accounts of Participants at the direction of
the Plan Committee shall be either (a) paid in cash directly
to such Participants or their Beneficiaries, or (b) if paid
into the plan, distributed in cash to Participants or their
Beneficiaries not later than 90 days after the close of Plan
Year in which paid, or (c) if permitted by Section 404(k) of
the Code, paid into the plan and used to repay the Acquisition
Loan, with shares released thereby allocated to such
Participants in an amount proportional to such dividends for
the year for which such dividends would have been allocated to
such Participants; provided however that the fair market value
of said shares is not less than the amount of such dividend
that the Participant would have otherwise received; and
(b) The dividends paid with respect to unallocated shares may be
used to repay the Acquisition Loan.
To the extent so applied in either (a) or (b) above, the
dividends so paid shall be deductible to the Company (as
permitted under Section 404(k) of the Code) in the taxable
year of the Company in which the dividend is paid or
distributed to Participants, or applied to repay the
Acquisition Loan.
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SECTION 14
Obligations of the Company
14.1 Limited Liability. The Company shall have no liability in respect to
payments or benefits or otherwise under the Plan, and the Company
shall have no liability in respect to the administration of the Trust
or of the funds, securities or other assets paid over to the Trustees,
and each Participant, each contingent Participant, and each
beneficiary shall look solely to such Trust Fund for any payments or
benefits under the Plan.
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SECTION 15
Miscellaneous
15.1 No Assignment, Etc. No benefit payable under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge and any action by way of
anticipating, alienating, selling, transferring, assigning, pledging,
encumbering, or charging the same shall be void and of no effect; nor
shall any benefit be in any manner liable for or subject to the debts,
contracts, liabilities, engagements, or torts of the person entitled
to such benefit, except as specifically provided in the Plan.
15.2 Non-alienation. No benefits under this Plan shall be in any manner
anticipated, alienated, sold, transferred, assigned, pledged,
encumbered or charged, and any attempt to so anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge the same shall be
void; nor shall any such benefits in any manner be liable for or
subject to the debts, contracts, liabilities or engagements of the
person entitled to such benefits as herein provided for him. The
preceding sentence shall also apply to the creation, assignment or
recognition of right to any benefit payable with respect to a
Participant pursuant to a Domestic Relations Order, unless such order
is determined, by the Committee in its sole and absolute discretion,
to be a Qualified Domestic Relations Order.
15.3 No Employment Rights. The establishment of the Plan shall not be
construed as conferring any rights upon any Employee or any person for
a continuation of employment, and shall not be construed as limiting
in any way the right of the Company to discharge any Employee or to
treat him without regard to the effect which such treatment might have
upon him as a Participant in the Plan.
15.4 Incompetence of Beneficiary. If any person entitled to receive any
benefits from the Trust Fund is, in the judgment of the Committee,
legally, physically, or mentally incapable of personally receiving and
receipting for any distribution, the Committee may instruct the
Trustees to make distribution to such other person, persons or
institutions as, in the judgment of the Committee are then maintaining
or have custody of such distributee.
15.5 Conclusiveness of Committee Decisions. The determination of the
Committee as to the identity of the proper payee of any benefit under
the Plan and the amount of such benefit properly payable shall be
conclusive, and payment in accordance with such determination shall
constitute a complete discharge of all obligations on account of such
benefit.
15.6 Inability to Locate Beneficiary. In the event an amount is payable
from the Trust Fund to a beneficiary or the executor or administrator
of any deceased Participant and if, after written notice from the
Trustees mailed to such person's last known address as certified to
the Trustees by the Committee, such person or such executor or
administrator shall not have presented himself to the Trustees within
six (6) years after the mailing of such notice, the Trustees shall
notify the Committee and the Committee shall instruct the Trustees to
distribute such amount due to such beneficiary or such executor or
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administrator among one or more of the spouse and blood relatives of
such deceased person, designated by the Committee.
15.7 Mergers, Etc. In the case of any merger, consolidation with or
transfer of assets or liabilities to any other plan, each Participant
in the Plan shall (if the plan is terminated), receive a benefit under
this Plan immediately after the merger, consolidation or transfer,
which is equal to or greater than the benefit under this Plan he would
have been entitled to receive immediately before the merger,
consolidation or transfer if the plan had been terminated.
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SECTION 16
Amendments
16.1 Amendments. The Company reserves the right at any time, and from time
to time, by action of the Board of Directors, to modify or amend in
whole or in part any or all of the provisions of the Plan. This right
of the Company is subject to the conditions:
(a) that no modification or amendment may be made which will
adversely affect the existing account balances or optional
forms of benefits of any Participant or beneficiary; and
(b) that no part of the assets of the Plan shall, by reason of any
modification or amendment, be used for or diverted to,
purposes other than for the exclusive benefit of Participants
and beneficiaries under the Plan.
16.2 ESOP Status. If the Company amends this Plan to no longer primarily
invest in Qualifying Employer Securities, thus ceasing to be an ESOP,
Section 17.2 will apply.
16.3 Vesting Rule. In the event that the vesting schedule of this Plan is
amended, any Participant who has completed at least three (3) Years of
Service may elect to have his vested interest determined without
regard to such amendment by notifying the Plan Administrator in
writing during the election period as hereinafter defined. The
election period shall begin on the date such amendment is adopted and
shall end no earlier than the latest of following dates:
(a) The date which is sixty (60) days after the day the amendment
is adopted;
(b) The date which is sixty (60) days after the day the amendment
becomes effective; or
(c) The date which is sixty (60) days after the day the
Participant is issued written notice of the amendment by the
Company or Plan Administrator.
Such election shall be available only to an individual who is
a Participant at the time such election is made and such
election shall be irrevocable.
If the Plan is amended pursuant to this Section and an
Employee is a Participant as of the later of the date the
amendment is adopted or the date the amendment becomes
effective, then the nonforfeitable percentage of the
Participant's Account shall not be less than such percentage
when determined under the Plan without regard to the
amendment.
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SECTION 17
Suspension, Discontinuance and Plan Termination
17.1 Permanence. The Company intends this Plan to be permanent and to
qualify under Section 401 of the Internal Revenue Code of 1986, as
that statute may from time to time be amended or supplemented.
However, the Plan may be discontinued by the Board of Directors, but
only upon condition that such action is taken under the Trust
Agreement established under the Plan and as such shall render it
impossible for any part of the corpus of the Trust or income thereon
to be at any time used for, or diverted to, purposes other than for
the exclusive benefit of Participants and beneficiaries. Upon
termination, partial termination, or upon complete discontinuance of
contributions all affected Participants' Accounts shall be considered
as fully vested and non-forfeitable and all unallocated assets of the
Trust, including but not limited to Company contributions and
unallocated Trust assets and earnings thereon, shall be allocated to
the accounts of all Participants as of the next Valuation Date (or if
the Plan is being terminated immediately, then on the date of such
Plan termination as if it were the next Valuation Date) in accordance
with the provisions of the Plan hereof; and shall be applied for the
benefit of each such Participant either by a lump-sum distribution, or
by the continuance of the Trust and the payments of benefits
thereunder in the manner provided in the Plan. After initial
qualification by the Internal Revenue Service, there will be no
reversion of assets to the Company under any circumstances. All
Participants shall be treated in a uniform and nondiscriminatory
manner.
17.2 Cessation of ESOP Status. If this Plan ceases to be an ESOP, the
proceeds of an Acquisition Loan will be used within a reasonable time
after receipt by the Plan either to acquire Qualifying Employer
Securities or to repay the loan or a prior Acquisition Loan. Even if
the Plan ceases as an ESOP, any Qualifying Employer Security acquired
with the proceeds of an Acquisition Loan will be subject to a put
option if the Company Stock is not publicly traded when distributed,
or if the Company Stock is subject to a trading limitation when
distributed. The put option must be exercisable at least during a
15-month period which begins on the date the Company Stock is subject
to the put option is distributed by the Plan. The price at which the
put option will be exercisable will be the value of the Company Stock
as of the date of exercise or as of the most recent Valuation Date. If
the transaction takes place between the Plan and a disqualified
person, value will be determined as of the date of the transaction.
17.3 Cash Merger or Sale of the Company. Notwithstanding anything herein to
the contrary, in the event that the Company or all of the Company's
outstanding Company Stock shall be acquired for cash through merger or
sale by an unrelated third party, then the Plan shall automatically be
terminated without further action or notice effective on the date of
such sale or merger; all Participant Accounts shall be considered
fully vested and non-forfeitable as of such date of termination; all
Company contributions, dividends on Company Stock and earnings on
Participant Account assets paid to the Trust or earned by the Trust
since the most recent Valuation Date shall be allocated to the
accounts of all Participants as of the date of termination of the Plan
as if it were the next Valuation Date in accordance with the
provisions of the Plan; and all funds realized by the Trust
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with respect to any Financed Shares remaining as collateral on any Acquisition Loans which shall be exchanged for cash in such merger or sale after repayment of all Acquisition Loans shall have been made shall be allocated to the accounts of all Participants pro rata based on the total value of assets allocated to each Participant's Account as a percentage of the total value of assets allocated to all Participant Accounts and held in the Trust as of the date of termination of the Plan. Upon such termination of the Plan and completion of the final accounting and allocation of the Trust assets, all such Participant Accounts which shall account for all Trust assets shall be distributed in a lump sum to each Participant as soon as administratively feasible.
SECTION 18
Inclusion of Other Companies
18.1 Joinder Generally. Any company which is or becomes a subsidiary,
Affiliate or associated company of the Company, may, with the approval
of the Board of Directors of the Company, adopt this Plan with respect
to its Employees.
18.2 Joinder -- Terms and Conditions. With respect to the Employees of any
such subsidiary, Affiliate or associated companies which may become
included in the Plan, the Board of Directors of the Company shall
determine the extent, if any, to which the period of prior employment
therewith or with any predecessors thereof shall be recognized as
service for the purposes of this Plan.
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CARVER FEDERAL SAVINGS BANK
DEFERRED COMPENSATION PLAN
Carver Federal Savings Bank (hereinafter the "Bank") hereby establishes a Deferred Compensation Plan (hereinafter the "Plan") for a determined class (the "Class"), as herein provided, subject to the terms and conditions provided in the Plan, in the trust associated with the Plan (the "Trust"), and in the Deferred Compensation Agreement attached hereto as Exhibit A (the "Agreement"). The terms and conditions of the Trust and the Agreement are incorporated herein by reference and made a part hereof to the extent not inconsistent herewith.
The Bank expects (but shall be under no legal obligation) on a quarterly basis to contribute to the Trust the aggregate amounts deferred pursuant to Agreements with participants in the Plan ("Participants"), which funds would then be used for eventual payment to said Participants under the terms and conditions of the Plan.
ARTICLE I - DESIGNATED CLASS; PARTICIPATION
The Class eligible to participate in the Plan shall be limited to members of the Board of Directors of the Bank (including the Chairman), the Bank's President and Executive Vice President, and such other officers or key employees as the Bank's Board of Directors may by resolution select. However, an individual within the Class shall become a Participant only if the individual first enters into a properly completed Agreement which Agreement may be entered into at any time. No Participant shall have any interest in the funds accumulated under the Plan prior to the date on which he or she becomes a Participant.
ARTICLE II - DEFERRED AMOUNTS
Deferred amounts shall be accumulated by the Bank at the end of each calendar quarter, in accordance with the terms of the Agreements entered into between the Participants and the Bank, as provided for in Article I. hereof. The funds so accumulated quarter-annually shall be credited by the Bank to a bookkeeping account ("Account") in the name of each Participant according to the terms of the Participant's Deferred Compensation Agreement. In addition to the funds accumulated quarter-annually in the Accounts of Participants, the Bank shall adjust each Account at the end of each calendar quarter to reflect any appreciation or depreciation attributable to the investment election which the Participant makes in the Agreement as to his or her Account; provided that where the rate of return is based upon the highest interest rate which the Bank pays, on the effective date of a Participant's election, on certificates of deposit, regardless of their term, such interest rate shall be adjusted on each January 1st following the date of such election.
ARTICLE III - ANTI-ALIENATION; PARTICIPANTS TO BE UNSECURED
CREDITORS
A Participant's interest in the Plan and Trust shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge; and the Bank shall not be obligated to make any payments to persons other than as specifically provided in the Plan. Such payments shall be made in the regular course of business from the general funds of the Bank as they become due, except that such payments may be made from the Trust in accordance with its terms.
Neither the Participants, nor their beneficiaries, nor any other person or persons having or claiming a right to payments hereunder or to any interest in the Plan shall have a secured claim against the assets of the Bank or the assets of the Trust, and such persons shall rely solely on the unsecured promise of the Bank for the payment of any benefits pursuant to the Plan. Nothing herein shall be construed to give any person any right, title, interest, or claim in or to any specific asset, fund, reserve, account, or property of any kind whatsoever owned by them or in which it may have any right, title or interest now or in the future; but such persons shall have the right to enforce his or her claim against the Bank in the same manner as any unsecured creditor.
ARTICLE IV - PAYMENTS TO PARTICIPANTS
A Participant's Account shall be paid in accordance with the terms set forth in the Agreement applicable to the deferred amounts. If a Participant should die before receiving all deferred compensation benefits payable hereunder, then such payment(s) shall be made to the beneficiary designated by the Participant in his or her Agreement. If the beneficiary has predeceased the Participant or survives the Participant but then dies before all benefits payable hereunder have been paid, then the aggregate benefits then unpaid shall be paid over in a lump sum within thirty (30) days of qualification of the beneficiary's personal representative to such personal representative as part of the beneficiary's estate.
ARTICLE V - AMOUNT OF DEFERRED COMPENSATION
A Participant who is a member of the Board of Directors of the Bank may elect to have any portion of his director's fees accumulated under this Plan. A Participant who is an employee of the Bank (whether or not he is a member of its Board of Directors) may elect to accumulate annually under the Plan up to twenty-five percent (25%) of his or her calendar year income otherwise payable in cash from the Bank.
ARTICLE VI - CHANGES TO AGREEMENTS
Agreements made hereunder shall be irrevocable with respect to amounts deferred pursuant to the Agreement, except that a Participant may at any time and from time to time (i) change the beneficiary designated in paragraph 3 of the Agreement, and/or (ii) file an Agreement which supersedes a prior Agreement as to amounts deferred on or after the January 1st which coincides with or next follows execution of the superseding Agreement. In addition, a Participant may at any time file a written notice with the Bank pursuant to which the Participant ceases future accruals as soon as practicable after the Bank receives such notice.
ARTICLE VII - MISCELLANEOUS PROVISIONS
The Board of Directors of the Bank shall be responsible for the management and control of the operation and administration of the Plan, including any and all interpretations and decisions pertaining to the granting or denial of benefits, claims, and any and all interpretations and decisions pertaining to the review or denial of benefit claims. The Plan shall inure to the benefit of the Participants and shall be binding upon the Bank, its successors and assigns. No changes in the Plan which adversely affect any Participant (or beneficiary collecting benefits) shall be made without the consent of the Participant (or beneficiary) so affected.
All references herein to "the Bank" shall be deemed to refer with equal force and effect to any corporate or other successor of the Bank which shall acquire, directly or indirectly, by merger, consolidation, purchase, or otherwise, all or substantially all of the assets of the Bank.
In the event any parts of the Plan are found to be invalid, the remaining provisions of this Plan shall, nevertheless, be binding with the same effect as though the invalid parts were deleted.
The Secretary of the Bank shall maintain a copy of the Plan and any amendments thereto.
ARTICLE VIII - EFFECTIVE DATE
The Plan shall become effective August 10, 1993.
Exhibit A
CARVER FEDERAL SAVINGS BANK
DEFERRED COMPENSATION PLAN
DEFERRED COMPENSATION AGREEMENT
AGREEMENT, made this _____ day of _______________, 199_, by and between ____________________ (the "Participant"), and Carver Federal Savings Bank (the "Bank").
WHEREAS, the Bank has established the Carver Federal Savings Bank Deferred Compensation Plan (the "Plan"), and the Participant is eligible to participate in said Plan;
NOW THEREFORE, it is mutually agreed as follows:
1. This Agreement and the provisions of the Plan constitute the entire agreement between the parties.
2. The Participant, by the execution hereof, agrees to participate in the Plan upon the terms and conditions set forth therein, and, in accordance therewith, makes the following elections:
a. The amount of fees/compensation which the Participant hereby elects to defer is _____ percent (_____%) of the amount otherwise payable from the date of this Agreement forward. This election will continue in force until revoked by the Participant in a written notice to the Bank, or until the Participant ceases service with the Bank, or until the Plan is terminated by appropriate corporate action, whichever shall first occur.
b. Until distributed to the Participant, the amounts deferred pursuant to paragraph 2.a. hereof shall appreciate or depreciate for each calendar quarter as though they were invested as follows:
_____% in a fund invested in savings accounts (the "Savings
Fund") having a return equal to the highest interest
rate which the Bank pays, on the effective date of
the Participant's election and as adjusted on each
subsequent January 1st, on certificates of deposit,
regardless of their term.
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_____% in a fund invested in common stock of Carver Federal
Savings Bank (the "Stock Fund"), provided that
pending completion of the Bank's conversion from
mutual to stock form, 100% of the Participant's
deferred amounts shall be deemed to be invested in
the Savings Fund.
c. The amounts deferred and any related accumulated
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income on such deferrals shall be distributed beginning during the first 15 days of January of:
( ) the calendar year immediately following the year in which the Participant ceases service with the Bank.
( ) the later of the calendar year immediately following the year in which the Participant ceases service with the Bank, and _______________, 19__ (a specific date not later than the year in which the Participant will attain 80 years of age).
( ) the year in which the Participant will attain 80 years of age.
d. The Participant hereby elects to have the amount deferred and any related accumulated earnings distributed as follows:
( ) monthly over a ten-year period.
( ) monthly over a ____________ - year period (must be less than ten (10) years).
( ) in a lump sum.
e. All distributions made pursuant to the Plan and this Agreement will be made in cash.
3. The Participant hereby designates ______________ to be his or her beneficiary and to receive the balance of any unpaid deferred compensation and related earnings.
4. The elections herein made by the Participant will continue in full force and effect until revoked or changed by the Participant in a written notice to the Bank. Any changes to the elections made herein by said Participant will be limited to the range of choices offered herein, shall be prospective only, and shall have no effect whatsoever on either fees or compensation previously deferred or the deemed future investment of such amounts.
5. The Bank agrees to make payment of the amount due the Participant in accordance with the terms of the Plan and the elections by the Participant made herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the day and year first above-written.
Participant
BANK
Carver Federal Savings Bank
TRUST AGREEMENT
UNDER THE CARVER FEDERAL SAVINGS BANK
DEFERRED COMPENSATION PLAN
This Agreement made this _____ day of _______________, 1993, by and between Carver Federal Savings Bank (the "Bank") and ____________________ (the "Trustee").
WHEREAS, the Bank maintains the Carver Federal Savings Bank Deferred Compensation Plan (the "Plan"); and
WHEREAS, the Bank has incurred or expects to incur liability under the terms of the Plan with respect to the individuals participating in the Plan ("Participants"); and
WHEREAS, the Bank wishes to establish a trust (the "Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of the Bank's general creditors in the event of Insolvency, as defined in Section 3(a) hereof, until paid to Participants and their beneficiaries in such manner and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of the Bank to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish this Trust and agree that the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
(a) The Bank hereby deposits, or will shortly hereafter deposit, with the Trustee in trust $___________, which shall become the initial principal of the Trust to be held, administered and disposed of by the Trustee as provided in this Trust Agreement.
(b) The Trust shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which the Bank is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held separate and apart from other funds of the Bank and shall be used exclusively for the uses and purposes of Participants and general creditors as herein set forth. Participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Participants and their beneficiaries against the Bank. Any assets held by the Trust will be subject to the claims of the Bank's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein.
(e) The Bank, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property in trust with the Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Neither the Trustee nor any Participant or beneficiary shall have any right to compel such additional deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
(a) The Bank shall deliver to the Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to the Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan), and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments to Participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Bank.
(b) The entitlement of a Participant or his or her beneficiaries to benefits under the Plan shall be determined by the Bank or such party as it shall designate under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan.
(c) The Bank may make payment of benefits directly to Participants or their beneficiaries as they become due under the terms of the Plan. The Bank shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the
Plan, the Bank shall make the balance of each such payment aa it falls due. The Trustee shall notify the Bank where principal and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When Bank Is Insolvent.
(a) The Trustee shall cease payment of benefits to Participants and their beneficiaries if the Bank is Insolvent. The Bank shall be considered "Insolvent" for purposes of this Trust Agreement if (i) the Bank is unable to pay its debts as they become due, or (ii) the Bank becomes subject to a pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of the Bank under federal and state law as set forth below.
(c) The Board of Directors and the Chief Executive Officer of the Bank shall have the duty to inform the Trustee in writing of the Bank's Insolvency. If a person claiming to be a creditor of the Bank alleges in writing to the Trustee that the Bank has become Insolvent, the Trustee shall determine whether the Bank is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to Participants or their beneficiaries.
(1) Unless the Trustee has actual knowledge of the Bank's Insolvency, or has received notice from the Bank or a person claiming to be a creditor alleging that the Bank is Insolvent, the Trustee shall have no duty to inquire whether the Bank is Insolvent. The Trustee may in all events rely on such evidence concerning the Bank's solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Bank's solvency.
(2) If at any time the Trustee has determined that the Bank is Insolvent, the Trustee shall discontinue payments to Plan participants or their beneficiaries, shall liquidate the Trust's investment in common stock of Kentucky Enterprise Bancorp ("Common Stock"), and shall hold the assets of the Trust for the benefit of the Bank's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Participants or their beneficiaries as general creditors of the Bank with respect to benefits due under the Plan or otherwise.
(3) The Trustee shall resume the payment of benefits to Participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after the Trustee has determined that the Bank is not Insolvent (or is no longer Insolvent).
(d) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Participants
or their beneficiaries by the Bank in lieu of the payments provided for hereunder during any such period of discontinuance.
Section 4. Payments to the Bank.
Except as provided in Section 3 hereof, after the Trust has become irrevocable, the Bank shall have no right or power to direct the Trustee to return to the Bank or to divert to others any of the Trust assets before all payment of benefits have been made to Plan Participants and their beneficiaries pursuant to the terms of the Plan.
Section 5. Investment Authority.
(a) The Trustee shall have sole discretion as to the investment of Trust assets, and shall invest Trust assets in a manner reasonably expected to provide the Trust with assets sufficient to meet the Bank's obligations under the Plan. The Bank shall promptly provide the Trustee with a copy of each and every deferred compensation agreement made by Participants.
(b) All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee, and shall in no event be exercisable by or rest with Participants, except that voting rights with respect to Common Stock will be exercised by the Bank.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between the Bank and the Trustee. Within 60 days following the close of each calendar year and within 20 days after the removal or resignation of the Trustee, the Trustee shall deliver to the Bank a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be.
Section 8. Responsibility of Trustee.
(a) The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Bank which is contemplated by, and in conformity with the terms of the Plan or this Trust and is given in writing by the Bank. In the event of a dispute between the Bank and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising .n connection with this Trust, the Bank agrees to indemnify the Trustee against Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments, except in those cases where the Trustee shall have been found by a court of competent jurisdiction to have acted with gross negligence or willful misconduct. If the Bank does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with respect to any of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor the Trustee, or to loan to any person the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or to applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Code.
Section 9. Compensation and Expenses of Trustee.
The Bank shall pay all administrative expenses and the Trustee's fees and expenses relating to the Plan and this Trust. If not so paid, the fees and expenses shall be paid from the Trust.
Section 10. Resignation and Removal of Trustee.
The Trustee may resign at any time by written notice to the Bank, which resignation shall be effective 30 days after the Bank receives such notice (unless the Bank and the Trustee agree otherwise). The Trustee may be removed by the Bank on 30 days notice or upon shorter notice accepted by the Trustee, but only if each Participant (and beneficiary in pay status) consents in writing to such removal.
If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date or resignation or removal under this section. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. Upon resignation or removal of the Trustee and appointment of a successor trustee, all assets shall subsequently be transferred to the successor trustee. The transfer shall be completed within 60 days after receipt of notice of resignation, removal or transfer, unless the Bank extends the time limit.
Section 11. Appointment of Successor.
If the Trustee resigns or is removed in accordance with Section 10 hereof, the Bank may appoint any other party as a successor to replace the Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new trustee, who shall have all of the rights and powers of the former trustee, including ownership rights in the Trust assets. The former trustee shall execute any instrument necessary or reasonably requested by the Bank or the successor trustee to evidence the transfer.
A successor trustee need not examine the records and acts of any prior trustee and may retain or dispose of existing Trust assets, subject to Sections 7 and 8 hereof. The successor trustee shall not be responsible for, and the Bank shall indemnify and defend the successor trustee from, any claim or liability resulting from any action or inaction of any prior trustee or from any other past event, or any condition existing at the time it becomes successor trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written instrument executed by the Trustee and the Bank, provided that no such amendment shall make the Trust revocable.
(b) The Trust shall not terminate until the date on which the Participant and his beneficiaries are no longer entitled to benefits pursuant to the terms hereof. Upon termination of the Trust, the Trustee shall return any assets remaining in the Trust to the Bank.
(c) Upon written approval of the Participant (or his beneficiaries if they are then entitled to payment of benefits), the Bank may terminate this Trust prior to the time all benefit
payments under the Plan have been made. All assets in the Trust at termination shall be returned to the Bank.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.
(b) Benefits payable to Participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process, except pursuant to the terms of the Plan.
(c) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of New York.
(d) The Trustee agrees to be bound by the terms of the Plan, as in effect from time to time.
IN WITNESS WHEREOF, the Bank, by its duly authorized officer, has caused this Agreement to be executed, and the Trustee has executed this Agreement, this _____ day of __________, 1993.
ATTEST: CARVER FEDERAL SAVINGS BANK
By:
- ------------------------- -------------------------------
Its
---------------------------
ATTEST: TRUSTEE
By:
- ------------------------- -------------------------------
Its
---------------------------
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CARVER FEDERAL SAVINGS BANK
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors of Carver Federal Savings Bank has adopted this Retirement Plan for Non-Employee Directors, effective on the Effective Date.
ARTICLE I
Definitions
The following words and phrases, when used in the Plan with an initial capital letter, shall have the meanings set forth below unless the context clearly indicates otherwise.
"Bank" means Carver Federal Savings Bank.
"Benefits" means collectively, the benefits payable under Articles II and III of the Plan.
"Board" means the Board of Directors of the Bank.
"Change in Control" means any one of the following events: (1)
the acquisition of ownership, holding or power to vote more than 25% of the
Bank's or the Company's voting stock, (2) the acquisition of the ability to
control the election of a majority of the Bank's or the Company's directors,
(3) the acquisition of a controlling influence over the management or policies
of the Bank or the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934)
(except in the case of (1), (2) and (3) hereof, the Bank's mere formation of a
holding company shall not constitute a "Change in Control"), or (4) during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company or the Bank (the
Existing Board") (the "Continuing Directors") cease for any reason to
constitute at least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing Board was
approved by a vote of at least two-thirds of the Continuing Directors then in
office shall be considered a Continuing Director. For purposes of this
subparagraph only, the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Continuing Directors as to
whether a change in control has occurred shall be conclusive and binding.
"Director" means a member of the Board.
"Effective Date" means the date on which the Plan first becomes effective, as determined under Article XIV hereof.
"Employee" means any person who is employed by the Bank.
"Participant" means a Director who is a Director on or after the Effective Date and who either (i) is not an employee of the Bank on or after the Effective Date, or (ii) is an
employee of the Bank on or after the Effective Date, and continues to serve as a Director after terminating such employment.
"Plan" means this Carver Federal Savings Bank Retirement Plan for Non-Employee Directors.
"Surviving Spouse" means the husband or wife of a Director at the time of the Director's death, provided they are not then divorced or legally separated.
"Trust Agreement" means that agreement entered into pursuant to the terms hereof between the Bank and the Trustee, and "Trust" means the trust created thereunder.
"Trustee" means that person(s) or entity appointed by the Board pursuant to the Trust Agreement to hold legal title to the Plan Assets for the purposes set forth herein.
"Vested Percentage" means the number of the Participant's full years of service on the Board as a non- Employee, and shall be determined according to the following schedule:
Full Years of Service Participant's
as a Non-Employee Director Vested Percentage
-------------------------- -----------------
Less than 6 0%
6 to 10 33%
11 to 19 67%
20 or More 100%
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Notwithstanding the foregoing, a Director's Vested Percentage shall accelerate to 100% upon his termination of service on the Board as a result of his disability (as determined by the Board) or death.
ARTICLE II
Retirement Benefits
In the event that a Participant's service on the Board terminates due to his retirement from the Board after having reached his sixty second (62nd) birthday, the Bank shall make annual payments to the Participant for ten years, the amount of each payment being equal to the product of the Participant's Vested Percentage and the total fees that the Participant received for service on the Board during the calendar year preceding the year in which his service on the Board terminated. The payments due under this Article shall begin on the first day of the second month following the date of the Participant's termination of service on the Board, and shall thereafter be made on or before the annual anniversary dates of such first payment date. Except as provided in Article III, no Benefits shall be payable hereunder after the death of the Participant.
Notwithstanding the foregoing, but only to the extent required
under federal banking law, the amount payable hereunder shall be reduced to the
extent that on the date of a Participant's termination of employment, either
(i) the present value of his Benefits exceeds the limitations that are set
forth in Regulatory Bulletin 27a of the Office of Thrift Supervision, as in
effect on the Effective Date, (ii) such reduction is necessary to avoid
subjecting the Bank to liability under Section 280G of the Internal Revenue
Code of 1986, as amended, or (iii) otherwise are subject to and conditioned
upon their compliance with 12 U.S.C. Section 1828(k) and any regulations
promulgated thereunder.
ARTICLE III
Death Benefits
In the event that a Participant dies before collecting any of the Benefits provided under Article II, the Bank shall pay to the Participant's Surviving Spouse (if any) 50% of the annual amounts otherwise payable under Article II, with such payments being made as though the Participant had both terminated service on the Board on the date of his death, then had a Vested Percentage equal to 100%, and survived to collect all Benefits payable under Article II. In this event, such payment of benefits shall commence on the first day of the second month following the date of the Participant's death, and shall thereafter be made on or before the annual anniversary dates of such first payment date. On the other hand, in the event that a Participant dies after commencing to receive the Benefits provided under Article II, the Bank shall pay to the Participant's Surviving Spouse (if any) 50% of the annual payment then being made to the Participant, with the period for such payments being determined as though the Participant had survived to collect all Benefits payable under Article II. No Benefits shall be payable hereunder to anyone other than a Surviving Spouse, and shall terminate on the death of a Surviving Spouse.
ARTICLE IV
Source of Benefits
Benefits shall constitute an unfunded, unsecured promise by the Bank to provide such payments in the future, as and to the extent such Benefits become payable. Benefits shall be paid from the general assets of the Bank, and no person shall, by virtue of this Plan, have any interest in such assets (other than as an unsecured creditor of the Bank).
ARTICLE V
Assignment
Except as otherwise provided by this Plan, it is agreed that neither the Participant nor his Surviving Spouse nor any other person or persons shall have any right to commute, sell, assign, transfer, encumber and pledge or otherwise convey the right to receive any Benefits hereunder, which Benefits and the rights thereto are expressly declared to be nonassignable and nontransferable.
ARTICLE VI
No Retention of Services
The Benefits payable under this Plan shall be independent of, and in addition to, any other compensation payable by the Bank to a Participant, whether fees, bonus, retirement income under employee benefit plans sponsored or maintained by the Bank or otherwise. This Plan shall not be deemed to constitute a contract of employment between the Bank and any Participant.
ARTICLE VII
Rights of Directors:
Termination or Suspension under Federal Law
The rights of the Directors under this Plan and of their Surviving Spouse (if any) shall be solely those of unsecured creditors of the Bank. In the event that the Bank shall establish an irrevocable Trust to be attached as Schedule A hereto ("Trust Plan"), such assets of the Bank may be held by such Trust pursuant to such Trust Plan, subject to claims by general creditors of the Bank by appropriate judicial action as provided by such Trust Plan.
If the Participant is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) or (g)(l)), all obligations of the Bank under this Plan shall terminate, as of the effective date of the order, but vested rights of the parties shall not be affected.
If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations under this Plan shall terminate as of the date of default; however, this Paragraph shall not affect the vested rights of the parties.
All obligations under this Plan shall terminate, except to the extent that continuation of this Plan is necessary for the continued operation of the Bank: (i) by the Director of the Office of Thrift Supervision ("Director of OTS"), or his or her designee, at the time that the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust Corporation enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her designee, at the time that the Director of the OTS, or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director of the OTS to be in an unsafe or unsound condition. Such action shall not affect any vested rights of the parties.
If a notice served under Section 8(e)(3) or (g)(l) of the FDIA (12 U.S.C. 1818(e)(3) or (g)(l)) suspends and/or temporarily prohibits the Participant from participating in the conduct of the Bank's affairs, the Bank's obligations under this Plan shall be suspended as of the date of such service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay the Participant all or part of the
compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended.
ARTICLE VIII
Reorganization
The Bank agrees that it will not merge or consolidate with any other corporation or organization, or permit its business activities to be taken over by any other organization, unless and until the succeeding or continuing corporation or other organization shall expressly assume the rights and obligations of the Bank herein set forth. The Bank further agrees that it will not cease its business activities or terminate its existence, other than as heretofore set forth in this paragraph, without having made adequate provision for the fulfillment of its obligation hereunder.
ARTICLE IX
Amendment and Termination
The Board may amend or terminate the Plan at any time, provided that no such amendment or termination shall, without the written consent of an affected Participant, alter or impair any rights of the Participant under the Plan.
ARTICLE X
State Law
This Plan shall be construed and governed in all respects under and by the laws of the State of New York, except to the extent superseded by Federal law. If any provision of this Plan shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.
ARTICLE Xl
Headings; Gender
Headings and subheadings in this Plan are inserted for convenience and reference only and constitute no part of this Plan. This Plan shall be construed, where required, so that the masculine gender includes the feminine.
ARTICLE XII
Interpretation of the Plan
The Board shall have sole and absolute discretion to administer, construe, and interpret the Plan, and the decisions of the Board shall be conclusive and binding on all affected parties (unless such decisions are arbitrary and capricious).
ARTICLE
Legal Fees
In the event that any dispute arises between a Participant and the Bank as to the terms or interpretation of this Plan, whether instituted by formal legal proceedings or otherwise, including any action that the Participant takes to enforce the terms of this Plan or to defend against any action taken by the Bank, the Participant shall be reimbursed for all costs and expenses, including reasonable attorneys' fees, arising from such dispute, proceedings or actions, provided that the Participant shall obtain a final judgement by a court of competent jurisdiction or obtain a settlement of such dispute, proceedings, or actions substantially in his favor. Such reimbursement shall be paid within ten (10) days of Participant's furnishing to the Bank written evidence, which may be in the form, among other things, of a cancelled check or receipt, of any costs or expenses incurred by the Participant.
ARTICLE
Effective Date
The Plan shall become effective upon the later of (i) the closing of the Bank's conversion from mutual-to-stock form or (ii) nonobjection of the Plan in writing by the Northeast Regional Director of the Office of Thrift Supervision.
CARVER FEDERAL SAVINGS BANK
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Bank hereby establishes this Plan upon the terms and conditions hereinafter stated.
1.02 Through acceptance of their appointment to the Committee, each member of the Committee hereby accepts his or her appointment hereunder upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain personnel of experience and ability in key positions of responsibility by providing Employees and Directors, the Bank, and its Affiliates with a proprietary interest in the Bank, and as compensation for their past contributions to the Bank, and as an incentive to make such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial capital letter, shall have the meanings set forth below unless the context clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or "subsidiary corporation" of the Bank, as such terms are defined in Section 424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended.
3.02 "Bank" means Carver Federal Savings Bank.
3.03 "Beneficiary" means the person or persons designated by a Participant to receive any benefits payable under the Plan in the event of such Participant'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 Participant's surviving spouse, if any or if none, his estate.
3.04 "Board" means the Board of Directors of the Bank.
3.05 "Committee" means the Management Recognition Plan Committee appointed by the Board pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock, $.01 par value per share, of the Bank.
3.07 "Continuous Service" shall mean the absence of any interruption or termination of service as an Employee or Director of the Bank or an Affiliate. Continuous Service shall not be considered interrupted in the case of sick leave, military leave or any other leave of absence approved by the Bank or in the case of transfers between payroll locations of the Bank or between the Bank, an Affiliate or a successor.
3.08 "Date of Conversion" means the date of the conversion of the Bank from mutual to stock form.
3.09 "Director" means a member of the Board.
3.10 "Disability" shall mean a physical or mental condition, which in the sole and absolute discretion of the Committee, is reasonably expected to be of indefinite duration and to substantially prevent a Participant from fulfilling his or her duties or responsibilities to the Bank or an Affiliate.
3.11 "Disinterested Person" means any member of the Board who, at the time discretion under the Plan is exercised, is a "disinterested person" within the meaning of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended.
3.12 "Effective Date" means the date on which the Plan first becomes effective, as determined under Section 8.07 hereof.
3.13 "Employee" means any person who is employed by the Bank.
3.14 "Participant" means an Employee or Director who holds a Plan Share Award.
3.15 "Plan" means this Carver Federal Savings Bank Management Recognition Plan.
3.16 "Plan Shares" means shares of Common Stock held in the Trust which are awarded or issuable to a Participant pursuant to the Plan.
3.17 "Plan Share Award" means a right granted under this Plan to receive Plan Shares.
3.18 "Plan Share Reserve" means the shares of Common Stock held by the Trustee pursuant to Sections 5.02 and 5.03.
3.19 "Trust" and "Trust Agreement" mean that agreement entered into pursuant to the terms hereof between the Bank and the Trustee, and "Trust" means the trust created thereunder.
3.20 "Trustee" means that person(s) or entity appointed by the Board pursuant to the Trust Agreement to hold legal title to the Plan assets for the purposes set forth herein.
3.21 "Year of Service" shall mean a full twelve-month period, measured from the date of an Award and each annual anniversary of that date, during which a Participant has continuously been an Employee or Director of the Bank or an Affiliate.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall be administered and interpreted by the Committee, which shall consist of not less than three non-employee members of the Board who are Disinterested Persons. In the absence at any time of a duly appointed Committee, the Plan shall be administered by those members of the Board who are Disinterested Persons, and by the Board if there are less than three Disinterested Persons.
The Committee shall have all of the powers allocated to it in this and
other Sections of the Plan. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion (i) to make Plan Share Awards to such
Employees as the Committee may select, (ii) to determine the form and content
of Plan Share Awards to be issued under the Plan, (iii) to interpret the Plan,
(iv) to prescribe, amend and rescind rules and regulations relating to the
Plan, and (v) to make other determinations necessary or advisable for the
administration of the Plan. The Committee shall have and may exercise such
other power and authority as may be delegated to it by the Board from time to
time. Subject to Section 4.02, 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. The Committee shall act by vote or
written consent of a majority of its members, and shall report its actions and
decisions with respect to the Plan to the Board at appropriate times, but in no
event less than one time per calendar year. The Committee may recommend to the
Board one or more persons or entity to act as Trustee(s) in accordance with the
provisions of this Plan and the Trust.
4.02 ROLE OF THE BOARD. The members of the Committee shall be appointed or approved by, and will serve at the pleasure of, the Board. The Board may in its discretion from time to time remove members from, or add members to, the Committee. The Board shall have all of the powers allocated to it in this and other Sections of the Plan, may take any action under or with respect to the Plan which the Committee is authorized to take, and may reverse or override any action taken or decision made by the Committee under or with respect to the Plan, provided, however, that the Board may not revoke any Plan Share Award already made or impair a participant's vested rights under a Plan Share
Award, except as provided in Section 7.01(b) herein. Members of the Board who are eligible for or who have been granted Plan Share Awards (other than pursuant to Section 6.04) may not vote on any matters affecting the administration of the Plan or the grant of Plan Shares or Plan Share Awards (although such members may be counted in determining the existence of a quorum at any meeting of the Board during which actions with regard thereto are taken). Further, with respect to all actions taken by the Board in regard to the Plan, such action shall be taken by a majority of the Board where such a majority of the directors acting in the matter are Disinterested Persons.
4.03 LIMITATION ON LIABILITY. No member of the Board or the Committee or the Trustee(s) 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 or any Trustee 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 Bank shall indemnify such member, subject to the indemnification provisions of 12 C.F.R. Section 545.121, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in the best interests of the Bank and its Affiliates and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine the amounts (or the method of computing the amounts) to be contributed by the Bank to the Trust. Such amounts shall be paid to the Trustee at the time of contribution. No contributions to the Trust by Employees shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS. The Trustee shall invest Trust assets only in accordance with the Trust Agreement; provided that the Trust shall not purchase more than 69,431 shares of Common Stock (which is equal to 3% of the Common Stock sold in the Bank's conversion).
5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON PLAN SHARE RESERVES. Upon the allocation of Plan Share Awards under Section 6.02, the Plan Share Reserve shall be reduced by the number of Shares subject to the Awards so allocated. Any Shares subject or attributable to an Award which may not be earned because of a forfeiture by the Participant pursuant to Section 7.01 shall be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Only Employees shall be eligible to receive Plan Share Awards. In selecting those Employees to whom Plan Share Awards will be granted and the number of shares covered by such Awards, the Committee shall consider the position, duties and responsibilities of the eligible Employees, the value of their services to the Bank and its Affiliates, and any other factors the Committee may deem relevant. Notwithstanding the foregoing, (i) the Committee shall automatically make the Plan Share Awards specified in Sections 6.04 and 6.05 hereof; and (ii) no Employee shall receive Plan Share Awards relating to more than 25 % of the number of Plan Shares referenced in Section 5.02, and no non-employee Director, other than Directors Richard Greene and M. Moran Weston, shall receive Plan Share Awards relating to more than 5% of said number of Plan Shares, with all non-employee Directors as a group receiving Plan Share Awards relating to no more than 30% of said number of Plan Shares.
6.02 ALLOCATIONS. The Committee will determine which Employees will be granted discretionary Plan Share Awards, and the number of Shares covered by each Plan Share Award, provided that in no event shall any Awards be made which will violate the governing instruments of the Bank or its Affiliates or any applicable federal or state law or regulation. In the event Plan Shares are forfeited for any reason or additional shares of Common Stock are purchased by the Trustee, the Committee may, from time to time, determine which of the Employees referenced in Section 6.01 above will be granted additional Plan Share Awards to be awarded from the forfeited or acquired Plan Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable after a determination is made pursuant to Section 6.02 that a Plan Share Award is to be made, the Committee shall notify the Participant 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 may be earned. The date on which the Committee so notifies the Participant shall be considered the date of grant of the Plan Share Awards. The Committee shall maintain records as to all grants of Plan Share Awards under the Plan.
6.04 AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS. Notwithstanding any other provisions of this Plan, each Director who is not an Employee but is a Director on the Effective Date shall receive, on said date, a Plan Share Award for 3,471 Plan Shares, except that Directors Richard Greene and M. Moran Weston shall each receive a Plan Share Award for 5,207 Plan Shares.
Each Director who joins the Board after the Effective Date shall
receive, on said date, a Plan Share Award of 1,000 Plan Shares (or such lesser
number as are available hereunder for Plan Share Awards). Plan Share Awards
received under the provisions of this Section shall become vested and
nonforfeitable according to the general rules set forth in subsections (a) and
(b) of Section 7.01, and the Committee shall have no discretion to alter or
accelerate said vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section,
the Plan Share Awards to be granted to hereunder shall be subject to all other provisions of this Plan; provided that the Committee shall approve a Director's request made pursuant to Section 7.03 (b).
6.05 AUTOMATIC GRANTS TO EMPLOYEES. On the Effective Date, each of the following individuals shall receive a Plan Share Award as to the number of Plan Shares listed below, provided that such award shall not be made to an individual who is not an Employee on the Effective Date:
Employee Number of Plan Shares Awarded Percentage of Plan Shares - -------- ----------------------------- ------------------------- T. Clark 17,357 25.0% B. Mukherjee 10,415 15.0% M. Lewis 6,500 9.4% R. Bruce 3,471 5.0% S. Harmon 1,800 2.6% R. St. Rose 1,500 2.2% G. Brea 1,200 1.7% H. Dabney 1,200 1.7% A. Kabia 1,200 1.7% H. Gay 1,100 1.6% O. Harris 1,000 1.4% E. Jackson 1,000 1.4% - ------------------ ------ ----- Total 47,743 68.7% |
Plan Share Awards received under the provisions of this Section shall become vested and nonforfeitable according to the general rules set forth in subsections (a) and (b) of Section 7.01, and the Committee shall have no discretion to alter said vesting requirements. Unless otherwise inapplicable or inconsistent with the provisions of this Section, the Plan Share Awards to be granted hereunder shall be subject to all other provisions of this Plan; provided that the Committee shall approve an Employee's request made pursuant to Section 7.03 (b).
6.06 ALLOCATIONS NOT REQUIRED. Notwithstanding anything to the contrary in Sections 6.01 and 6.02, but subject to Sections 6.04 and 6.05, no Employee or Director shall have any right or entitlement to receive a Plan Share Award hereunder, such Awards being at the total discretion of the Committee, nor shall any Employees or Directors as a group have such a right. The Committee may, with the approval of the Board (or, if so directed by the Board) return all
Common Stock in the Plan Share Reserve to the Bank at any time, and cease issuing Plan Share Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Twenty percent (20%) of the Plan Shares subject to a Plan Share Award shall be earned and become non-forfeitable by a Participant upon his or her completion of each of five Years of Service. For purposes of this paragraph, with respect to each Plan Share Award, "Year of Service" means a full twelve-month period, measured from the date of a Plan Share Award and each annual anniversary of that date, during which the Participant has continuously been an Employee or Director of the Bank or an Affiliate.
(b) EXCEPTION FOR TERMINATIONS DUE TO DEATH OR DISABILITY. Notwithstanding the general rule contained in Section 7.01(a) above, all Plan Shares subject to a Plan Share Award held by a Participant whose service with the Bank or an Affiliate terminates due to the Participant's death or Disability, shall be deemed earned as of the Participant's last day of service with the Bank or an Affiliate and shall be distributed as soon as practicable thereafter.
(c) TERMINATIONS DUE TO JUST CAUSE. Notwithstanding anything herein to the contrary, all Plan Shares subject to a Plan Share Award held by a Participant whose service with the Bank or an Affiliate is terminated for Just Cause shall be unexercisable on the date of notice of such termination and forfeited on the effective date of such termination. For the purposes of this Paragraph, "Just Cause" shall mean termination because of the Participant'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.
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are paid to a Participant or Beneficiary under Section 7.03, such Participant or Beneficiary shall also be entitled to receive, with respect to each Plan Share paid an amount equal to any cash dividends and a number of shares of Common Stock equal to any stock dividends, declared and paid with respect to a share of Common Stock between the date the relevant Plan Share Award was initially granted to such Participant and the date the Plan Shares are being distributed. There shall also be distributed an appropriate amount of net earnings, if any, of the Trust with respect to any cash dividends so paid out.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) Timing of Distributions: General Rule. Except as provided in Subsections (c) and (d) below, the Trustee shall distribute Plan Shares and accumulated cash from dividends
and interest to the Participant or his Beneficiary, as the case may be, as soon as practicable after they have been earned. No fractional shares shall be distributed.
(b) FORM OF DISTRIBUTION. The Trustee shall distribute all Plan Shares, together with any shares representing stock dividends, in the form of Common Stock. One share of Common Stock shall be given for each Plan Share earned. Payments representing cash dividends (and earnings thereon) shall be made in cash.
(c) WITHHOLDING. The Trustee shall 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 not sufficient, the Trustee shall require the Participant 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 Bank or Affiliate which employs or employed such Participant any such amount withheld from or paid by the Participant or Beneficiary.
(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS. Notwithstanding Subsections (a) and (b) above, no Plan Shares may be distributed prior to the date which is five (5) years from the Date of Conversion to the extent the Participant or Beneficiary, as the case may be, would after receipt of such Shares own in excess of ten percent (10%) of the issued and outstanding shares of Common Stock unless such action is approved in advance by a majority vote of disinterested directors of the Board. To the extent this limitation would delay the date on which a Participant receives Plan Shares, the Participant may elect to receive from the Trust, in lieu of such Plan Shares, the cash equivalent thereof. Any Plan Shares remaining undistributed solely by reason of the operation of this Subsection (d) shall be distributed to the Participant or his Beneficiary on the date which is five years from the Date of Conversion.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall be distributed unless and until all of the requirements of all applicable law and regulation shall have been fully complied with, including the receipt of approval of the Plan by the stockholders of the Bank by such vote, if any, as may be required by applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common Stock held by the Trust (whether or not subject to a Plan Share Award) shall be voted by the Trustee in the same proportion as the trustee of the Bank's Employee Stock Ownership Plan votes Common Stock held in the trust associated therewith, and in the absence of any such voting, shall be voted in the manner directed by the Board.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The number and kind of shares which may be purchased under the Plan, and the number and kind of shares subject to outstanding Plan Share Awards, shall be proportionately adjusted for any increase, decrease, change or exchange of shares of Common Stock for a different number or kind of shares or other securities of the Bank which results from a merger, consolidation, recapitalization, reorganization, reclassification, stock dividend, split-up, combination of shares, or similar event in which the number or kind of shares is changed without the receipt or payment of consideration by the Bank.
(b) TRANSACTIONS IN WHICH THE BANK IS NOT THE SURVIVING ENTITY. In the event of (i) the liquidation or dissolution of the Bank, (ii) a merger or consolidation in which the Bank is not the surviving entity, or (iii) the sale or disposition of all or substantially all of the Bank's assets (any of the foregoing to be referred to herein as a "Transaction"), all outstanding Plan Share Awards shall be adjusted for any change or exchange of shares of Common Stock for a different number or kind of shares or other securities which results from the Transaction.
(c) CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL, OR DIFFERENT SHARES OR SECURITIES. If, by reason of any adjustment made pursuant to this Section, a Participant becomes entitled to new, additional, or different shares of stock or securities, such new, additional, or different shares of stock or securities shall thereupon be subject to all of the conditions and restrictions which were applicable to the shares pursuant to the Plan Share Award before the adjustment was made. In addition, the Committee shall have the discretionary authority to impose on the Shares subject to Plan Share Awards such restrictions as the Committee may deem appropriate or desirable, including but not limited to a right of first refusal, or repurchase option, or both of these restrictions.
(d) OTHER ISSUANCES. Except as expressly provided in this Section, the issuance by the Bank or an Affiliate of shares of stock of any class, or of securities convertible into shares of Common Stock or stock of another class, for cash or property or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, shall not affect, and no adjustment shall be made with respect to, the number or class of shares of Common Stock then subject to Plan Share Awards or reserved for issuance under the Plan.
8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by resolution, at any time amend or terminate the Plan; provided that (i) the provisions of Section 6.04 may not be amended more than once every six months (other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder), and (ii) no amendment or termination of the Plan shall, without the written consent of a Participant, impair any rights or obligations under a Plan Share Award theretofore granted to the Participant. To the extent permitted under federal banking law and regulations (as determined by the Committee after soliciting the advice of counsel), the Board may amend the Plan without stockholder approval to provide that all Plan Share Awards (including previously-granted Plan Share Awards and Plan Share Awards made in accordance with Sections 6.04 and 6.05 hereof)
shall become fully vested either in the event of a change in control of the Bank or the termination of the Participant's Continuous Service as a result of his or her retirement.
The power to amend or terminate the Plan in accordance with this
Section 8.02 shall include the power to direct the Trustee to return to the
Bank all or any part of the assets of the Trust, including shares of Common
Stock held in the Plan Share Reserve. However, the termination of the Trust
shall not affect a Participant's right to earn Plan Share Awards and to receive
a distribution of Common Stock relating thereto, including earnings thereon, in
accordance with the terms of this Plan and the grant by the Committee or the
Board.
8.03 NONTRANSFERABILITY. Plan Share Awards and rights to Plan Shares shall not be transferable by a Participant, and during the lifetime of the Participant, Plan Shares may only be earned by and paid to the Participant who was notified in writing of the Award by the Committee pursuant to Section 6.03.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan nor any grant of a Plan 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, either express or implied, on the part of any Employee or Director to continue in the service of the Bank or an Affiliate thereof.
8.05 VOTING AND DIVIDEND RIGHTS. No Participant 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, except as expressly provided in
Section 7.02 above, prior to the time said Plan Shares are actually distributed
to him.
8.06 GOVERNING LAW. The Plan and Trust shall be governed and construed under the laws of the State of New York to the extent not preempted by Federal law.
8.07 EFFECTIVE DATE. The Plan shall become effective immediately upon its approval by a favorable vote of stockholders of the Bank who own at least a majority of the total votes eligible to be cast at a duly called meeting of the Bank's stockholders held in accordance with applicable laws, provided that the Plan shall not be submitted for such approval within the six-month period after the Date of Conversion, and provided further that the Plan's effectiveness shall be contingent on its approval by the Office of Thrift Supervision ("OTS"). In no event shall Plan Share Awards be made prior to the Effective Date, and any Plan Share Awards made before the Plan receives OTS approval shall be subject thereto.
8.08 TERM OF PLAN. This Plan shall remain in effect until the earlier of (i) termination by the Board, or (ii) the distribution of all assets of the Trust. Termination of the Plan shall not affect any Plan Share Awards previously granted, and such Awards shall remain valid and in effect until they have been earned and paid, or by their terms expire or are forfeited.
8.09 TAX STATUS OF TRUST. It is intended that (i) the Trust associated with the Plan be treated as a grantor trust of the Bank under the provisions of Section 671 et seq. of the Internal
Revenue Code, as the same may be amended from time to time, and (ii) that in accordance with Revenue Procedure 92-65, Participants have the status of general unsecured creditors of the Bank, the Plan constitutes a mere unfunded promise to make benefit payments in the future, the Plan is unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended, and the Trust has been and will continue to be maintained in conformity with Revenue Procedure 92-64.
CARVER FEDERAL SAVINGS BANK
INCENTIVE COMPENSATION PLAN
Basic Plan Document
CARVER FEDERAL SAVINGS BANK
INCENTIVE COMPENSATION PLAN
Basic Plan Document
Table of Contents
Page
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ARTICLE I. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III. Eligibility and Participation . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV. Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE V. Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI. Plan Administration . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII. Amendment and Termination . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VIII. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . 10
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EXHIBIT C
CARVER FEDERAL SAVINGS BANK
INCENTIVE COMPENSATION PLAN
Basic Plan Document
ARTICLE I. GENERAL PROVISIONS
1.01 Purpose. This Basic Plan Document and the Adoption Agreement executed by the Employer together establish the Plan, which is being implemented and maintained for the purpose of providing select Key Employees and Employees with incentive compensation in the form of Bonuses, Stock Options, and Restricted Stock in the event the Employer meets certain performance goals indicative of its profitability and stability in comparison to other financial institutions in its Peer Group.
1.02 Construction. The Employer intends that the Plan be an unfunded plan maintained primarily for the purpose of providing Incentive Awards, and that the Plan not constitute an "employee benefit plan" within the meaning of ERISA. Notwithstanding the foregoing, it is intended that Article V of the Plan shall be maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of Section 201(2) of ERISA. The Plan shall be administered, construed, and interpreted in a manner consistent with the purpose and intent set forth in this Section.
1.03 Effective Date. The Plan shall become effective on the date specified in the Adoption Agreement.
ARTICLE II. DEFINITIONS
Unless the context clearly requires otherwise, the terms defined in this Article II shall, for all purposes of this Plan, have the respective meanings specified in this Article II.
2.01 "Adoption Agreement" means the Adoption Agreement executed by the Employer.
2.02 "Basic Plan Document" means this Basic Plan Document associated with the Carver Federal Savings Bank Incentive Compensation Plan.
2.03 "Beneficiary" means the person or persons designated as a Participant's beneficiary or beneficiaries in accordance with Section 4.08 hereof or a Participant's deferred compensation agreement.
2.04 "Board" means the Employer's Board of Directors.
2.05 "Bonuses" mean cash bonuses payable to Participants pursuant to Section 4.01 hereof.
2.06 "CAMEL Rating" means the most recent CAMEL rating given for its safety and soundness.
2.07 "Cause" means 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, or material breach of any provision of the Employee's employment agreement. A determination of "Cause" shall be made by the Committee within its sole discretion.
2.08 "Change in Control" means (i) in the case of a stock institution, the acquisition of beneficial ownership of 25% or more of any Employer's outstanding voting stock, and (ii) in the case of a mutual institution, a change in the Board such that as the result of a merger or other business combination, the persons who were Directors at any time during the one-year period before the transaction cease to constitute a majority of the Board of the Employer or its successor.
2.09 "Code" means the Internal Revenue Code of 1986, as amended from time to time. References to a Code section shall include any comparable section or sections of future legislation that amends, supplements or supersedes such section.
2.10 "Committee" means the committee specified in the Adoption Agreement. In the absence at any time of a duly appointed committee, the Plan shall be administered by those members of the Employer's Board who are "disinterested persons" within the meaning of Rule 16b-3.
2.11 "Common Stock" means the common stock identified in the Adoption Agreement.
2.12 "Compensation" means (i) in the case of an Employee, the Employee's base salary for the Plan Year, as in effect on the last day of the Plan Year, and (ii) in the case of a Director who is not an Employee, the total fees that the Director receives for service on the Board during the Plan Year.
2.13 "CRA" means the rating that the Employer or its primary banking subsidiary receives for compliance with the Community Reinvestment Act, as amended from time to time, and for any particular Plan Year shall mean the most recent CRA Rating as of the last day of the Plan Year.
2.14 "Director" means any member of the Board.
2.15 "Disability" means a physical or mental condition that is expected to be of indefinite duration and to substantially impair the ability of a Participant to fulfill his duties to the Employer.
2.16 "Efficiency Ratio" means the ratio of the Employer's non-interest expense to the sum of its net interest income and non-interest income.
2.17 "Eligible Employee" and "Eligible Key Employee" shall have the meaning set forth in the Adoption Agreement.
2.18 "Employee" means any individual who performs service for any Employer and who is treated as an employee for payroll tax purposes.
2.19 "Employer" has the meaning set forth in the Adoption Agreement.
2.20 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.
2.21 "Factors" mean, collectively, the factors identified in the Adoption Agreement as being determinant of the Multiplier. When used in the singular, Factor means any Factor identified in the Adoption Agreement.
2.22 "Incentive Awards" mean any benefits provided pursuant to Article IV hereof, as modified by the Adoption Agreement.
2.23 "Market Value" means the fair market value of a Share on the date of an Incentive Award, and shall be determined by the Committee in its discretion, provided that --
(i) if the Common Stock is listed on a national securities exchange (including the Nasdaq National Market System or SmallCap Market) Market Value means the average of the highest and lowest selling prices on the exchange on the most recent date on which a sale occurred; and
(ii) if the Common Stock is traded otherwise than on a national securities exchange but bid and asked prices are available, Market Value means the average of its bid and asked price on the most recent date on which there was a bid and asked price.
2.24 "Multiplier" means for any Plan Year the sum of the performance indicators selected in the Adoption Agreement. The Committee shall calculate the Multiplier as soon as practicable after the end of each Plan Year, and shall use such financial reports as are then reasonably available (including Peer Group data for the 9-month or the 12-month period ending one calendar quarter before the Plan Year end). Notwithstanding the foregoing, the Committee may in its discretion adjust the Employer's financial results to take into account (as well as to disregard) extraordinary financial events such as an acquisition of another company.
2.25 "NPL" means nonperforming loans (loans over 90 days delinquent and real estate owned) as a percentage of total assets, as determined by the Committee in accordance with generally accepted accounting principles.
2.26 "Option" means a stock option that is granted pursuant to
Section 4.03 hereof.
2.27 "Participant" means an individual who has received an Incentive Award pursuant to Article IV hereof or has made a deferred compensation election pursuant to Article V hereof.
2.28 "Participant Determination Date" has the meaning set forth in the Adoption Agreement.
2.29 "Peer Group" means the group of publicly-traded financial institutions identified in the Adoption Agreement.
2.30 "Peer Group Adjustment Factor" means with respect to each Factor other than the NPL Factor, the ratio the median Factor for the Peer Group for the current Plan Year to the median Factor for the Peer Group for the immediately preceding Plan Year, and the converse of this ratio for the NPL Factor.
2.31 "Plan" means the Employer's Incentive Compensation Plan, as established by the Employer's execution of the Adoption Agreement.
2.32 "Restricted Stock Award" means an award pursuant to Section 4.02 hereof.
2.33 "ROA" means return-on-assets, as determined by the Committee in accordance with generally accepted accounting principles.
2.34 "ROE" means return-on equity, as determined by the Committee in accordance with generally accepted accounting principles.
2.35 "Share" means one share of Common Stock.
2.36 "Year of Service" means the number of full 12-month periods, measured from the date of an Incentive Award and each anniversary of that date during which a Participant has remained in the service of the Employer.
ARTICLE III. ELIGIBILITY AND PARTICIPATION
The Committee shall make determinations of eligibility and participation in accordance with the Adoption Agreement.
ARTICLE IV. BENEFITS
As soon as practicable after the end of the Plan Year, the Committee shall make the Incentive Awards provided for in this Article IV.
4.01 Bonuses. In accordance with the Adoption Agreement, the Committee shall determine the Bonuses payable to Eligible Employees and Eligible Key Employees, and shall promptly notify the Employer of the Bonuses to be paid to such individuals. Notwithstanding the foregoing, the Committee shall proportionately reduce the Bonuses paid hereunder for the Plan Year to the extent necessary to ensure that the aggregate amount paid as Bonuses does not jeopardize the status of the Employer (or its primary banking subsidiary) as a well-capitalized institution.
4.02 Restricted Stock Award. In accordance with the Adoption Agreement, the Committee shall make Restricted Stock Awards to Eligible Key Employees, and shall promptly provide each recipient of an award with a notice thereof.
(a) General Vesting Rule. The Shares subject to a Restricted Stock Award shall become vested and nonforfeitable according to the schedule set forth in the Adoption Agreement. The Employer shall deliver to the Committee all Shares subject to Restricted Stock Awards, and the Committee shall hold such Shares in escrow until they are transferred to Participants in accordance with this Section. In this regard, the relationship of the Committee to the Employer shall be that of agent to principal.
(b) Exception for Termination Due to Death or Disability. Notwithstanding the vesting schedule set forth in the Adoption Agreement, all Shares subject to a Participant's Restricted Stock Award shall become fully (100%) vested upon the Participant's termination of service with the Employer due to his death or Disability. Such Shares shall be transferred to the Participant (or, in the event of his death, his Beneficiary) as soon as practicable after the event that accelerates vesting hereunder.
(c) Accrual of Dividends. Whenever the Committee transfers Shares to a Participant or Beneficiary under this Section, such Participant or Beneficiary shall also be
entitled to receive, with respect to each Share transferred, both an amount equal to any cash dividends declared and paid between the date the relevant Restricted Stock Award was initially granted to the Participant and the date the Shares are being transferred. The Participant shall also receive the net earnings, if any, that are attributable to any cash dividends so paid out.
(d) Timing of Distributions. The Committee shall
transfer the Shares subject to a Restricted Stock Award to the Participant or
his Beneficiary, as the case may be, as soon as practicable after the later of
(i) the date they have become fully vested and nonforfeitable, or (ii) the date
of distribution that the Participant elects in writing on a form and in a
manner that is both acceptable to the Committee and delivered to the Committee
within the 30-day period after the Participant receives the Restricted Stock
Award covering such Shares. Any election that a Participant makes hereunder
shall be irrevocable.
(e) Form of Distribution. Whenever a Participant becomes entitled to receive Shares in accordance herewith, the Committee shall transfer such Shares, together with any Shares representing stock dividends, in the form of Common Stock. One Share of Common Stock shall be given for each Share earned. Payments representing cash dividends (and earnings thereon) shall be made in cash.
(f) Voting of Shares Held in Escrow. After a Restricted Stock Award has been granted hereunder, the Committee shall vote the Shares subject thereto in the manner directed by the Board, and otherwise in the manner determined by the Committee in its sole discretion.
4.03 Stock Options. In accordance with the Adoption Agreement, the Committee shall grant Options to Eligible Key Employees, and shall promptly provide each recipient of an Option with a stock option agreement specifying the terms and conditions of the Option; provided that each Option shall have an exercise price per Share equal to its Market Value on the date of the grant, shall become exercisable in accordance with the schedule set forth in the Adoption Agreement, and shall expire on the earlier of ten years after the date of its grant, and --
(a) two years after a Participant's service with the Employer terminates due to his death;
(b) immediately upon the Participant's termination of service for Cause;
(c) three months after a Participant's service with the Employer terminates for a reason other than death or Cause.
Notwithstanding the vesting schedule set forth in the Adoption Agreement, each Option shall become fully (100%) vested and exercisable upon the Participant's termination of service with the Employer due to his death or Disability.
4.04 Revocation for Cause. Notwithstanding anything herein to the contrary, if the Participant is given notice of a discharge from service with the Employer for Cause or is discovered after termination of service to have engaged in conduct that would have justified termination for Cause, the Committee may immediately revoke, rescind, and terminate any Incentive Award made under this Plan to the extent a Participant has not collected a Bonus, exercised an Option, or received Shares upon the vesting of a Restricted Stock Award.
4.05 Duty of the Committee. The Committee shall have no responsibility to Participants other than (i) to inform the Employer, as soon as practicable after the end of each Plan Year, in writing, as to the Bonuses to be provided, (ii) to provide Eligible Key Employees with stock option agreements and Restricted Stock Awards, and (iii) to follow such reasonable directions as the Employer shall make as to the provision of such Incentive Awards to Participants.
4.06 Minority, Disability, or Incompetency. If any Incentive Award becomes payable or transferable under this Plan to a minor, to a person under legal disability or to a person not adjudicated incompetent but who the Committee in its discretion determines to be incapable by reason of illness or mental or physical disability of managing his financial affairs, the Committee may direct that such Incentive Award be paid or transferred to the legal representative or custodian of such person or to any relative or friend of such person, or that such amount be paid directly for such person's support and maintenance. Payments so made in good faith shall completely discharge the Committee and the Employer of any and all obligations and liabilities with respect to such Incentive Awards.
4.07 Designation of Beneficiary. A Participant may file with the Committee a written designation of a Beneficiary who is to receive his or her vested benefits in the event of the Participant's death prior to his or her collection of said benefits. Such designation of Beneficiary may be changed at any time by written notice to the Committee. The designation last filed with the Committee shall be controlling. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of the Participant's death, the Participant's estate shall be deemed to be the Beneficiary for purposes of this Plan.
4.08 Source of Benefits. To the extent required under the Adoption Agreement, the Employer shall pay Bonuses out of its general assets, provided that the Board may in its discretion establish and fund a grantor trust meeting the requirements of Revenue Procedure 92-64, as amended or revised from time to time. Nothing contained in the Plan itself shall constitute, or be treated as, a trust or create any fiduciary relationship (other than the Committee's retention of Shares in escrow pursuant to Section 4.02). Except to the extent provided in Section 4.02 the Employer, shall not be under any obligation to segregate any assets for the purpose of providing Incentive Awards, and no person or entity which is entitled to payment under the terms of the Plan shall have any claim, right, security interest, or other interest in any fund, trust, account, insurance contract, or asset of the Employer. To the extent
that a Participant or any other person acquires a right to receive any Benefit under the Plan, such right shall be limited to that of a recipient of an unfunded, unsecured promise to pay amounts in the future and the Participant's (or other person's) position with respect to such amounts shall be that of a general unsecured creditor.
4.09 Shares Subject to the Plan. Except as otherwise required hereunder, the aggregate number of Shares deliverable to Participants pursuant to the Plan shall not exceed 115,718 Shares. Such Shares may either be authorized but unissued Shares or Shares held in treasury. The number and kind of shares which may be purchased or issued under the Plan, and the number and kind of shares subject to outstanding Incentive Awards, shall be equitably adjusted for any increase, decrease, change, or exchange of Shares for a different number or kind of shares or other securities of the Company or another company which results from a merger, consolidation, recapitalization, reorganization, reclassification, stock dividend, split-up, combination of shares, or similar event in which the number or kind of shares is changed (including a transaction in which the Employer is not the surviving entity). In addition, the Committee shall have the discretionary authority to impose on the Shares subject to Incentive Awards such restrictions as the Committee may deem appropriate or desirable, including but not limited to a right of first refusal, or repurchase option, or both of these restrictions.
If an Option should expire, become unexercisable or be forfeited for any reason without having been exercised in full, or if a Restricted Stock Award should be forfeited for any reason, the Shares subject to such Options or Restricted Stock Award shall, unless the Plan shall have been terminated, be available for the grant of additional Options or Restricted Share Awards under the Plan.
ARTICLE V. DEFERRED COMPENSATION
This Article of the Plan establishes a deferred compensation program for Participants, subject to the terms and conditions provided in this Basic Plan Document and in the Adoption Agreement. In addition, the terms and conditions of the Deferred Compensation attached as Exhibit "A" are incorporated herein by reference, and may not be changed except through affirmative Board action in accordance with Article VII hereof.
5.01 General Deferral Procedure. In accordance with this Article, the individuals specified in the Adoption Agreement may elect to defer all or any portion of the fees and/or salary otherwise payable to him from any Employer, in cash, for any Plan Year in which the Plan is in effect. Deferred amounts shall be credited by the Employer at the end of each calendar quarter, in accordance with the terms of the deferred compensation agreement entered into between the Participants and the Employer that would other wise pay the Participant cash compensation.
The funds so credited quarter-annually shall be credited by the Employer to a bookkeeping account ("Deferral Account") in the name of each Participant according to the
terms of the Participant's deferred compensation agreement. In addition to the funds deferred quarter-annually and credited to the Deferral Accounts of Participants, the Employer shall adjust each Account at the end of each Plan Year (i) to credit the Participant's Deferral Account with the appreciation or depreciation that would have occurred if the Deferral Account had been invested in the manner that the Participant selects in the deferred compensation agreement from among the measures selected by the Employer in the Adoption Agreement.
5.02 Distributions to Participants. A Participant's Deferral Account shall be paid, in cash, in accordance with those terms set forth in his deferred compensation agreement which are applicable to the deferred amounts. If a Participant should die before receiving all deferred compensation benefits payable under this Article, then such payment(s) shall be made to the Participant's Beneficiary.
5.03 Agreements. Deferred compensation agreements made hereunder
shall be prospective only and shall be irrevocable with respect to amounts
deferred pursuant thereto, except that a Participant may at any time and from
time to time (i) change the Beneficiary designated therein, (ii) prospectively
change the investment selection applicable to his Deferral Account, and/or
(iii) file a deferred compensation agreement which supersedes a prior deferred
compensation agreement as to amounts deferred on or after the January 1st which
coincides with or next follows execution of the superseding agreement. In
addition, a Participant may at any time file a written notice with the Employer
pursuant to which the Participant ceases future accruals as soon as practicable
after the Employer receives such notice.
ARTICLE VI. PLAN ADMINISTRATION
6.01 The Committee. In its sole and absolute discretion, which discretion when exercised shall be final and binding on all parties affected thereby, the Committee shall have the authority and the responsibility to control the administration and operation of the Plan in accordance with its terms including, without limiting the generality of the foregoing, the powers and duties: (i) to interpret, apply, and administer the Plan, to decide all questions of eligibility, participation, status, benefits, and rights of Participants and Beneficiaries under the Plan; (ii) to establish and amend such rules and procedures as it deems necessary or appropriate to the proper administration of the Plan; (iii) to employ or retain such agents as it deems necessary or advisable to assist in the administration of the Plan, and to delegate to the extent permitted by applicable law such powers and duties as it deems necessary or advisable, (iv) to prepare and file all statements, returns, and reports required to be filed by the Plan with any agency of government; (v) to comply with all requirements of applicable state and federal law including applicable securities, labor, and tax law; and (vi) to perform all functions otherwise assigned to it under the terms of the Plan.
6.02 Claims Procedure. Claims for Benefits under the Plan shall be filed in writing with the Committee. Written notice of the Committee's disposition of a claim generally shall be furnished to the claimant within 60 days after the application therefor is filed. However, if
special circumstances exist of which the Committee notifies the claimant within such 60 day period, the Committee may extend such period to the extent necessary, but in no event beyond 180 days after the claim is filed. In the event the claim is denied, the reasons for the denial shall be specifically set forth in writing, pertinent provisions of the Plan shall be cited and, where appropriate, an explanation as to how the claimant can perfect the claim will be provided. Any claimant who has been denied a Benefit shall be entitled, upon request to the Committee, to appeal the denial of his claim within 60 days following the Committee's determination described in the preceding sentence. Upon such appeal, the claimant, or his representative, shall be entitled to examine pertinent documents, submit issues and comments in writing to the Committee, and meet with the Committee. The Committee shall review its decision and issue a final decision to the claimant in writing, generally within 60 days following such appeal. However, if special circumstances exist of which the Committee notifies the claimant within such 60 day period, the Committee may extend such period to the extent necessary, but in no event beyond 120 days following such appeal.
ARTICLE VII. AMENDMENT AND TERMINATION
The Employer, acting by its Board, reserves the right at any time to terminate or amend the Plan in any manner and for any reason; provided, that no amendment or termination shall, without the consent of the Participant or, if applicable, the Beneficiary, adversely affect such Participant's or Beneficiary's rights with respect to Benefits accrued as of the date of such amendment or termination.
ARTICLE VIII. GENERAL PROVISIONS
8.01 Prohibition Against Alienation. Benefits payable to a Participant or Beneficiary under the terms of this Plan shall not be subject in any manner to alienation, anticipation, sale, transfer, assignment, pledge, hypothecation, attachment, receivership, or encumbrance of any kind, nor shall it pass to any trustee in bankruptcy or be reached or applied by any legal process for the payment of any obligations of the Participant or Beneficiary, except at such times and in such manner as provided in this Plan.
8.02 No Enlargement of Employment Rights. Nothing contained in this Plan shall give or be construed as giving any Employee or Director the right to be retained in the service of any Employer, or shall interfere with the right of any Employer to discharge or otherwise terminate any Employee's or Director's service at any time.
8.03 Gender. Whenever any masculine terminology is used in this Plan, it shall be taken to include the feminine, unless the context otherwise indicates.
8.04 Applicable Law. This Plan shall be construed and regulated, and its validity and effect and the rights hereunder of all parties interested shall at all times be determined, in
accordance with the laws of the State of New York, except to the extent such state law is preempted by federal law.
8.05 Titles and Headings. The titles and headings included herein are included for convenience only and shall not be construed as in any way affecting or modifying the text of this Plan, which text shall control.
8.06 Withholding. The Committee and each Employer reserve the right to withhold from payments of Bonuses and other Incentive Awards such amounts of income, payroll, and other taxes as it deems advisable or required, and if the amount of such cash payment is not sufficient, the Committee or any Employer may require that the Participant or Beneficiary pay the amount required to be withheld as a condition of delivering Bonuses or other Incentive Awards.
8.07 Stockholder Approval. The effectiveness of this Plan shall be contingent on its approval by the favorable vote of the holders of the Common Stock, to the extent required under federal or state law or the Adoption Agreement. Any Incentive Awards made prior to the receipt of such approval shall be contingent thereon. Article V of the Plan shall be effective whether or not the Plan receives stockholder approval.
Exhibit "A"
CARVER FEDERAL SAVINGS BANK
INCENTIVE COMPENSATION PLAN
Deferred Compensation Agreement
AGREEMENT, made this ______ day of _____, 199_, by and between _____________ (the "Participant"), and Carver Federal Savings Bank (the "Employer").
WHEREAS, Carver Federal Savings Bank has established the Carver Federal Savings Bank Incentive Compensation Plan (the "Plan"), and the Participant is eligible to make a deferred compensation election pursuant to Article V of said Plan;
NOW THEREFORE, it is mutually agreed as follows:
1. The Participant, by the execution hereof, agrees to participate in the Plan upon the terms and conditions set forth therein, and, in accordance therewith, makes the following elections:
a. The amount of fees/compensation which the Participant hereby elects to defer is _______ percent (__%) of the amount otherwise earned from the date of this Agreement forward.
b. Until distributed to the Participant, the amounts deferred pursuant hereto shall appreciate or depreciate for each Plan Year as though they were invested as follows:
___% in a fund having the highest interest rate which the Bank pays on certificates of deposit having a term of one year.
___% in a fund invested in common stock of Carver Federal Savings Bank.
___% in a fund having a rate of return equal to the percentage designated in the Adoption Agreement (2%) times the Multiplier.
c. The amounts deferred and any related accumulated income on such deferrals shall be distributed, in cash, beginning on the first day of the month following the Participant's _____________ termination of service with the Employer, _____ attainment of age ________, OR _________ the later to occur of these events.
d. The Participant hereby elects to have the amount
deferred hereunder and earnings attributable thereto be distributed as follows:
_____ one lump sum, or ___ substantially equal annual (_____ monthly) payments
over a period of ____ years.
2. The Participant hereby designates ___________________________ to be his or her beneficiary and to receive the balance of any unpaid deferred compensation and related earnings.
3. With respect to amounts deferred while this Agreement is in effect, the elections made hereunder shall be irrevocable, except that a Participant may at any time and from time to time prospectively change (i) the investment election made in paragraph l.b. hereof, and (ii) the beneficiary designation made in paragraph 2 hereof. A Participant may at any time file a new agreement that supersedes this Agreement with respect to amounts earned from the date of the superseding agreement forward.
4. The Employer agrees to make payment of the amount due the Participant in accordance with the terms of the Plan and the elections made by the Participant herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the day and year first above written.
PARTICIPANT
EMPLOYER
CARVER FEDERAL SAVINGS BANK
INCENTIVE COMPENSATION PLAN
Adoption Agreement
The Employer named below is hereby establishing an incentive compensation plan having the terms and conditions set forth in the Basic Plan Document of the Carver Federal Savings Bank Incentive Compensation Plan, as modified by the elections made in this Adoption Agreement. The Employer recognizes and affirms that by leaving any box or line blank in this Adoption Agreement, the Employer has rejected the choice associated therewith.
I. GENERAL INFORMATION ABOUT THE PLAN
A. The name of this Plan is the Carver Federal Savings Bank Incentive Compensation Plan (the "Plan").
B. The effective date of the Plan is April 1, 1995 (the "Effective Date").
C. The fiscal year for the Plan is the 12-month period ending March 31 (the "Plan Year"), with the initial Plan Year beginning on the Effective Date and ending on March 31, 1996.
D. The Plan is contingent upon its approval by --
1. [ ] The Employer's primary banking regulator.
2. [ ] a stockholder vote sufficient to satisfy the
requirements of [X] SECY Rule 16b-3, and/or
[X] Section 422 of the Code.
3. [ ] None of the above.
E. The Employer's Peer Group shall consist of publicly-traded [ ] commercial banks [X] thrift institutions having --
1. [X] their headquarters in New York and contiguous states.
2. [X] an asset size below $500 million.
II. GENERAL INFORMATION ABOUT THE EMPLOYER
A. The employer sponsoring the Plan is Carver Federal Savings Bank (the "Employer").
B. The address of the Employer is 121 W. 125th Street, New York, New York 10027.
C. The Employer's taxpayer identification number is 13-1592005.
D. The telephone number of the Employer is (212) 876-4747, and its facsimile number is (212) 666-8340.
F. The Employer directs that the following individual receive information about the Plan: Mr. Thomas L. Clark, Jr., President and Chief Executive Officer.
G. The committee (the "Committee") responsible for administering and interpreting the Plan shall --
1. [ ] consist of the following individuals:
_____________________, _________________, and
__________________________.
2. [X] be the Employer's Compensation Committee, as appointed by the Board from time to time.
H. The common stock to be reserved for issuance under the Plan shall be 115,718 shares of common stock, par value $.01 per share, of Carver Federal Savings Bank's common stock (the "Common Stock").
III. ELIGIBILITY AND PARTICIPATION
A. For each Plan Year, an individual will participate in the Plan if he or she falls within any one of the following classes on a Participant Determination Date:
1. [ ] Each non-employee member of the Board ("Eligible Directors").
2. [X] Key Employees designated by the Committee ("Eligible Key Employees").
3. [ ] Other staff employees designated by the Committee ("Eligible Employees").
B. The following date or dates will constitute Participant Determination Dates:
1. [ ] The first day of the Plan Year.
2. [X] The last day of the Plan Year.
3. [ ] Service is required on both of the above dates.
C. Notwithstanding the choices made in Items 111. A. and 111. B. hereof the following persons or classes of persons shall participate in the Plan for the fiscal year ending March 31, 1996: Executive employees Clark Lewis, Mukherjee, Bruce, Gay, St Rose, Brea, Kabia, Dabney, Harmon, Jackson, and Harris (Olivia).
IV. CALCULATION OF THE MULTIPLIER
A. For each Plan Year, the Multiplier will equal the lesser of 8.0 and the sum of
1. 50% of the ROA Factor. 2. 50% of the ROE Factor. 3. 50% of the NPL Factor. 4 50% of the Efficiency Factor. 5. 50% of the CRA Rating Factor. 6. 50% for the CAMEL Rating Factor. 7. 25% of the Deposit Factor. 8. 25% Other: Loan Factor. |
B. The ROA Factor will equal the ratio of (i) the Employer's ROA for the Plan Year, to (ii) the product of the Employer's budgeted ROA for the Plan Year and the Peer Group Adjustment Factor.
C. The ROE Factor will equal the ratio of (i) the Employer's ROE for the Plan Year, to (ii) the product of the Employer's budgeted ROE for the Plan Year and the Peer Group Adjustment Factor.
D. The NPL Factor will equal the ratio of (i) the product of the Employer's budgeted NPL for the Plan Year and the Peer Group Adjustment Factor, to (ii) the Employer's NPL for the Plan Year.
E. The Efficiency Factor will equal the ratio of (i) the product of the Employer's budgeted Efficiency Ratio for the Plan Year and the Peer Group Adjustment Factor, to (ii) the Employer's Efficiency Ratio for the Plan Year.
F. The CRA Rating Factor will be determined according to the following schedule:
1. 1.2 for an "Outstanding" CRA Rating.
2. 1.0 for a "Satisfactory" CRA Rating.
3. 0.0 for a "Needs Improvement" CRA Rating.
4. -1.0 for an "Unsatisfactory" CRA Rating.
G. The CAMEL Rating Factor will be determined according to the following schedule:
1. 1.2 for a CAMEL Rating of 1.
2. 1.0 for a CAMEL Rating of 2.
3. -1.0 for a CAMEL Rating below 2.
H. The Deposit Factor will equal the ratio of the Employer's total deposits on the last day of the Plan Year to its total deposits on the first day of the Plan Year.
I. Notwithstanding the foregoing, if a ratio referred to in Items
IV.B. through IV.E. is less than 50% for any Plan Year, the
corresponding Factor shall be zero.
V. INCENTIVE AWARDS
A. For each Plan Year, Bonuses will be paid in accordance with
Section 4.01 and the following elections:
1. [ ] Each Eligible Director will receive a Bonus equal to __% of his or her Compensation times the Multiplier.
2. [X] Each Eligible Key Employee will receive a Bonus equal to 4% of his or her Compensation times the Multiplier.
3. [X] Each Eligible Employee will receive a Bonus equal to 4% of his or her Compensation times the Multiplier.
4. [ ] In the discretion of the Committee, but based upon a bonus pool at least equal to $______ times the Multiplier, with the Employer's President and ________ being entitled to at least ____% and __ %, respectively, of such bonus pool.
B. For each Plan Year, Restricted Stock Awards will be made in accordance with Section 4.02 and the following elections:
1. [ ] Each Eligible Director will receive a Restricted Stock Award of Shares having a Market Value on the date of the award equal to _% of the Bonus he or she receives for the Plan Year.
2. [X] Each Eligible Key Employee will receive a Restricted Stock Award of Shares having a Market Value on the date of the award equal to 30% of the Bonus he or she receives for the Plan Year.
3. Each Restricted Stock Award shall become vested at the rate of 20% per Year of Service, provided that vesting will accelerate to 100% upon the Participant's termination of service with the Employer due to his or her death or Disability.
C. For each Plan Year, Options will be granted in accordance with
Section 4.03 and the following elections:
1. [ ] Each Eligible Director will receive an Option to purchase a number of Shares equal to __% of the number of Shares subject to the Participant's Restricted Stock Award for the Plan Year.
2. [X] Each Eligible Key Employee will receive an Option to purchase four times the number of Shares subject to the Participant's Restricted Stock Award for the Plan Year.
3. Each Option will become exercisable at the rate of 20% per Year of Service, but will become immediately exercisable upon termination of the Participant's service due to his or her death or Disability.
VI. DEFERRED COMPENSATION
A. Who may make deferred compensation elections in accordance with Article V of the Basic Plan Document?
1. [X] Non-Employee Directors.
2. [X] The following Eligible Employees and Eligible Key Employees: Clarke, Lewis, Mukherjee, Bruce, Gray, St. Rose, Brea, Kabia, Dabney, Harmon, Jackson, and Harris (Olivia).
B. What investments may Participants select for the rate of return on their deferred compensation?
1. [X] The Multiplier times 2 percent.
2. [X] The highest interest rate being paid by the Employer on 12-month certificates of deposit.
3. [X] The rate of return on Common Stock.
4. [ ] Other: _________________________________.
C. How does this deferred compensation program affect any existing deferred compensation program maintained by the Employer?
1. [ ] There is no existing deferred compensation program.
2. [X] The existing deferred compensation program will be amended and restated as of July 1, 1995, and thereafter be governed by Article V of the Basic Plan Document.
3. [ ] The existing deferred compensation program will remain in effect, but only for amounts deferred prior to ________________ ___, 19___.
D. How will fee deferrals subject to Article V of the Plan be held until distributed to Participant?
1. [X] As part of the Employer's general assets.
2. [ ] In a grantor ("rabbi") trust.
VII. MISCELLANEOUS PROVISION
A. Section IV.A.8 of this Adoption Agreement shall be modified in the following manner: "Loan Factor" shall mean the ratio of the Bank's total outstanding loans on the last day of the Plan Year to its total outstanding loans on the last day of the prior Plan Year.
B. Section _______ of this Adoption Agreement shall be modified in the following manner: ________________________________________
WHEREFORE, on this ____ day of ________, 1995, the Employer hereby executes this Adoption Agreement, and thereby establishes the Plan upon the terms and conditions set forth herein and in the Basic Plan Document.
CARVER FEDERAL SAVINGS BANK
Witness:
- ---------------------------- [SEAL]
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into this 3rd day of January, 1995, by and between Carver Federal Savings Bank (the "Bank") and Thomas L. Clark, Jr. (the "Employee").
WHEREAS, the Employee has heretofore been employed as the President and Chief Executive Officer of similar financial institutions and is experienced in all phases of the business of the Bank; and
WHEREAS, the parties desire by this writing to set forth the employment relationship of the Bank and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed as a Director and the President of the Bank and Chief Executive Officer effective upon February 1, 1995 (the "Effective Date"). The Employee shall report directly to the Board of Directors and render such administrative and management services for the Bank as are currently rendered and as are customarily performed by persons situated in a similar executive capacity. The Employee shall also promote, by entertainment or otherwise, as and to the extent permitted by law, the business of the Bank. The Employee's other duties shall be such as the Board of Directors ("Board") may from time to time reasonably direct.
2. Base Compensation. The Bank agrees to pay the Employee during the term of this Agreement a salary at the rate of $165,000.00 per annum, payable in cash not less frequently than monthly. The Board shall review, not less often than annually, the rate of the Employee's salary, and in its sole discretion may decide to increase his salary.
3. Discretionary Bonuses. The Employee shall participate in an equitable manner with all other senior management employees of the Bank in discretionary bonuses that the Board may award from time to time to the Bank's senior management employees. No other compensation provided for in this Agreement shall be deemed a substitute for the Employee's right to participate in such discretionary bonuses.
4. (a) Participation in Retirement, Medical and Other Plans. The Employee shall participate in any plan that the Bank maintains for the benefit of its employees if the plan relates to (i) pension, profit-sharing, or other retirement benefits, (ii) medical insurance or the reimbursement of medical or dependent care expenses, or (iii) other group benefits, including disability and life insurance plans; provided, however, that the Bank shall provide the Employee with disability income insurance in an amount at least equal to fifty percent (50%) of his base compensation and life insurance in an amount at least equal to double his base compensation. Employee shall also be entitled to a paid parking space convenient to the location of the Bank's main office.
(b) Employee Benefits; Expenses. The Employee shall be eligible to participate equitably in any fringe benefits which are or may become available to the Bank's
senior management employees, including for example: any stock option or incentive compensation plans, club memberships, and any other benefits which are commensurate with the responsibilities and functions to be performed by the Employee under this Agreement. The Employee shall be reimbursed for all reasonable out-of-pocket business expenses which he shall incur in connection with his services under this Agreement upon substantiation of such expenses in accordance with the policies of the Bank. Such reimbursement shall include an allowance for automobile expenses of up to $350 per month.
5. Term. The Bank hereby employs the Employee, and the Employee hereby accepts such employment under this Agreement, for the period commencing on the Effective Date and ending 36 months thereafter (or such earlier date as is determined in accordance with Sections 9 or 10); provided that notwithstanding any determination by the Bank not to extend the term of this Agreement, said term shall not expire prior to the expiration of thirty-six (36) months after a Change in Control (as defined in Section 10) shall have occurred. Additionally, on each annual anniversary date from the Effective Date, the Employee's term of employment shall be extended for an additional one-year period beyond the then effective expiration date provided the Board determines in a duly adopted resolution that the performance of the Employee has met the Board's requirements and standards, and that this Agreement shall be extended.
6. Loyalty; Noncompetition.
(a) During the period of his employment hereunder and except for illnesses, reasonable vacation periods, and reasonable leaves of absence, the Employee shall devote all his full business time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, from time to time, Employee may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations, which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, or unfavorably affect the performance of Employee's duties pursuant to this Agreement, or will not violate any applicable statute or regulation. "Full business time" is hereby defined as that amount of time usually devoted to like companies by similarly situated executive officers. During the term of his employment under this Agreement, the Employee shall not engage in any business or activity contrary to the business affairs or interests of the Bank, or be gainfully employed in any other position or job other than as provided above.
(b) Nothing contained in this Section 6 shall be deemed to prevent or limit the Employee's right to invest in the capital stock or other securities of any business dissimilar from that of the Bank, or, solely as a passive or minority investor, in any business.
7. Standards. The Employee shall perform his duties under this Agreement in accordance with such reasonable standards as the Board may establish from time to time. The Bank will provide Employee with the working facilities and staff customary for similar executives and necessary for him to perform his duties.
8. Vacation and Sick Leave. At such reasonable times as the Board shall in its discretion permit, the Employee shall be entitled, without loss of pay, to absent himself
voluntarily from the performance of his employment under this Agreement, all such voluntary absences to count as vacation time; provided that:
(a) The Employee shall be entitled to an annual vacation in accordance with the policies that the Board periodically establishes for senior management employees of the Bank but in no event less than three (3) weeks.
(b) The Employee shall not receive any additional compensation from the Bank on account of his failure to take sick leave, and the Employee shall not accumulate unused vacation or sick leave from one fiscal year to the next, except Employee may accumulate vacation leave up to two (2) weeks per year, not to exceed a total of six (6) weeks, or otherwise as may be authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Employee shall be entitled without loss of pay, to absent himself voluntarily from the performance of his employment with the Bank for such additional periods of time and for such valid and legitimate reasons as the Board may in its discretion determine. Further, the Board may grant to the Employee a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave benefit as established by the Board.
9. Termination and Termination Pay. Subject to Section 10 hereof, the Employee's employment hereunder may be terminated under the following circumstances:
(a) Death. The Employee's employment under this Agreement shall terminate upon his death during the term of this Agreement, in which event the Employee's estate shall be entitled to receive the compensation due the Employee through the last day of the calendar month in which his death occurred.
(b) Disability. The Bank may terminate the Employee's
employment after having established the Employee's Disability. For purposes of
this Agreement, "Disability" means a physical or mental infirmity which impairs
the Employee's ability to substantially perform his duties under this Agreement
and which results in the Employee becoming eligible for long-term disability
benefits under the Bank's long-term disability plan (or, if the Bank has no
such plan in effect, which impairs the Employee's ability to substantially
perform his duties under this Agreement for a period of one hundred eighty
(180) consecutive days). The Employee shall be entitled to the compensation
and benefits provided for under this Agreement for (i) any period during the
term of this Agreement and prior to the establishment of the Employee's
Disability during which the Employee is unable to work due to the physical or
mental infirmity, or (ii) any period of Disability which is prior to the
Executive's termination of employment pursuant to this Section 9(b).
(c) Just Cause. The Board may, by written notice to the Employee, immediately terminate his employment at any time, for Just Cause. The Employee shall have no right to receive compensation or other benefits for any period after termination for Just
Cause. Termination for "Just Cause" shall mean termination because of, in the good faith determination of the Board, 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, or material breach of any provision of this Agreement. Notwithstanding the foregoing, (i) the Employee shall not be deemed to have been terminated for Just Cause unless there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to the Employee and an opportunity for the Employee to be heard before the Board), finding that in the good faith opinion of the Board the Employee was guilty of conduct set forth above in the second sentence of this Subsection (c) and specifying the particulars thereof in detail. Notwithstanding the foregoing, the Employee may not exercise any options, which may be granted to him under the Carver Federal Savings Bank 1994 Stock Option and Incentive Plan at any time after notice of his proposed termination for cause has been served.
(d) Without Just Cause. Subject to Section 10 hereof,
the Board may, by written notice to the Employee, immediately terminate his
employment at any time for a reason other than Just Cause, in which event the
Employee shall be entitled to receive the following compensation and benefits:
(i) the base compensation provided pursuant to Section 2 hereof for the balance
of the term as provided in Section 5 hereof, or any extension thereof, and (ii)
the cost to the Employee of obtaining all health, life, disability and other
benefits which the Employee would have been eligible to participate in through
the conclusion of the period for which the base compensation shall be continued
as provided by the preceding clause, based upon the benefit levels
substantially equal to those that the Bank provided for the Employee at the
date of termination of employment. Said sum shall be paid, at the option of
the Employee, either (I) in periodic payments over the remaining term of this
Agreement, as if the Employee's employment had not been terminated, or (II) in
one lump sum within ten (10) days of such termination.
Notwithstanding the foregoing, but only to the extent required under federal banking law, the amount payable under clause (i) hereof shall be reduced to the extent that on the date of the Employee's termination of employment, the benefits payable under clauses (i) and (ii) hereof and pursuant to any other agreement or benefit plan to which the Employee is a party, exceed the limitation on severance benefits that is set forth in Regulatory Bulletin 27a of the Office of Thrift Supervision, as in effect on the Effective Date.
(e) Termination or Suspension Under Federal Law. (1) If
the Employee is removed and/or permanently prohibited from participating in the
conduct of the Bank's affairs by an order issued under Sections 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) and
(g)(1)), all obligations of the Bank under this Agreement shall terminate, as
of the effective date of the order, but vested rights of the parties shall not
be affected.
(2) If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of the date of default; however, this Paragraph shall not affect the vested rights of the parties.
(3) All obligations under this Agreement shall terminate, except to the extent that continuation of this Agreement is necessary for the continued operation of the Bank: (i) by the Director of the Office of Thrift Supervision ("Director of OTS"), or his or her designee, at the time that the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust Corporation enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her designee, at the time that the Director of the OTS, or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director of the OTS to be in an unsafe or unsound condition. Such action shall not affect any vested rights of the parties.
(4) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the Employee from participating in the conduct of the Bank's affairs, the Bank's obligations under this Agreement shall be suspended as of the date of such service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay the Employee all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended.
(f) Voluntary Termination by Employee. Subject to
Section 10 hereof, the Employee may voluntarily terminate employment with the
Bank during the term of this Agreement, upon at least 60 days' prior written
notice to the Board of Directors, in which case the Employee shall receive only
his compensation, vested rights and employee benefits up to the date of his
termination.
10. Change in Control.
(a) Notwithstanding any provision herein to the contrary, if the Employee's employment under this Agreement is terminated by the Bank, without the Employee's prior written consent and for a reason other than Just Cause, in connection with or within twelve (12) months after any change in control of the Bank, the Employee shall be paid an amount equal to the difference between (i) the product of 2.99 times his "base amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code") and regulations promulgated thereunder, and (ii) the sum of any other parachute payments (as defined under Section 280G(b)(2) of the Code) that the Employee receives on account of the change in control. Said sum shall be paid in one lump sum within ten (10) days of such termination.
The term "change in control" shall mean (1) the ownership, holding or power to vote more than 25% of the Bank's voting stock, (2) the control of the election of a majority of the Bank's directors, (3) the exercise of a controlling influence over the management or policies of the Bank by any person or by persons acting as a "group" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or (4) during any period of two consecutive years, individuals (the "Continuing Directors") who at the beginning of such period constitute the Board of Directors of the Bank (the "Incumbent Board") cease for any reason to constitute at least two-thirds thereof, provided that any individual whose election or nomination for election as a member of the Incumbent Board was approved by a vote of at least two-thirds of the Continuing Directors then in office shall be considered a Continuing Director. The term
"person" means an individual other than the Employee, or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the contrary, the Employee may voluntarily terminate his employment under this Agreement within twelve (12) months following a change in control of the Bank, and the Employee shall thereupon be entitled to receive the payment described in Section 10(a) of this Agreement, upon the occurrence of any of the following events, or within ninety (90) days thereafter, which have not been consented to in advance by the Employee in writing: (i) the requirement that the Employee move his personal residence, or perform his principal executive functions, more than thirty-five (35) miles from his primary office as of the date of the change in control; (ii) a material reduction in the Employee's base compensation as in effect on the date of the change in control or as the same may be increased from time to time; (iii) the failure by the Bank to continue to provide the Employee with compensation and benefits provided for under this Agreement, as the same may be increased from time to time, or with benefits substantially similar to those provided to him under any of the employee benefit plans in which the Employee now or hereafter becomes a participant, or the taking of any action by the Bank which would directly or indirectly reduce any of such benefits or deprive the Employee of any material fringe benefit enjoyed by him at the time of the change in control; (iv) the assignment to the Employee of duties and responsibilities materially different from those normally associated with his position as referenced at Section 1; (v) a failure to elect or reelect the Employee to the Board of Directors of the Bank, if the Employee is serving on the Board on the date of the change in control; or (vi) a material diminution or reduction in the Employee's responsibilities or authority (including reporting responsibilities) in connection with his employment with the Bank.
(c) Any payments made to the Employee pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.
(d) Within five business days before or after a change in control as defined in Section 11(a) of this Agreement, the Bank shall (i) deposit, or cause to be deposited, in a trust (the "Trust"), an amount equal to 2.99 times the Employee's "base amount" as deemed in Section 280G(b)(3) of the Code, and (ii) provide the trustee of the Trust with a written direction to hold said amount and any investment return thereon in a segregated account for the benefit of the Employee, and to follow the procedures set forth in the next paragraph as to the payment of such amounts from the Trust.
During the 12-consecutive month period following the date on which the Bank makes the deposit referred to in the preceding paragraph, the Employee may provide the trustee of the Trust with a written notice requesting that the trustee pay to the Employee an amount designated in the notice as being payable pursuant to Section 10(a) or (b). Within three business days after receiving said notice, the trustee of the Trust shall send a copy of the notice to the Bank via overnight and registered mail return receipt requested. On the tenth (10th) business day after mailing said notice to the Bank, the trustee of the Trust shall pay the Employee the amount designated therein in immediately available funds, unless prior thereto the Bank provides the trustee with a written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding arbitration for a determination of the amount payable to the Employee pursuant to Section 10(a) or (b) hereof, and the costs of such arbitration (including any legal fees and expenses incurred by the Employee) shall be paid by the Bank. The trustee shall choose the arbitrator to settle the dispute, and such arbitrator shall be from a list provided by and he shall be bound by the rules of the American Arbitration Association in making his determination. The parties and the trustee shall be bound by the results of the arbitration and, within 3 days of the determination by the arbitrator, the trustee shall pay from the Trust the amounts required to be paid to the Employee and/or the Bank, and in no event shall the trustee be liable to either party for making the payments as determined by the arbitrator.
Upon the earlier of (i) any payment from the Trust to the Employee, or (ii) the date 12 months after the date on which the Bank makes the deposit referred to in the first paragraph of this subsection (d), the trustee of the Trust shall pay to the Bank the entire balance remaining in the segregated account maintained for the benefit of the Employee. The Employee shall thereafter have no further rights under this Section 10, no further interest in the Trust pursuant to this Agreement, and no further rights or claims against the Bank pursuant to this Agreement.
(e) In the event that any dispute arises between the Employee and the Bank as to the terms or interpretation of this Agreement, including this Section 10, whether instituted by formal legal proceedings or otherwise, including any action that the Employee takes to enforce the terms of this Section 10 or to defend against any action taken by the Bank, the Employee shall be reimbursed for all costs and expenses, including reasonable attorneys' fees, arising from such dispute, proceedings or actions, provided that the Employee shall obtain a final judgement by a court of competent jurisdiction in favor of the Employee. Such reimbursement shall be paid within ten (10) days of Employee's furnishing to the Bank written evidence, which may be in the form, among other things, of a cancelled check or receipt, of any costs or expenses incurred by the Employee.
11. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Bank which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Bank.
(b) Since the Bank is contracting for the unique and personal skills of the Employee, the Employee shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Bank.
12. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided.
13. Applicable Law. Except to the extent preempted by Federal law, the laws of the State of New York shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.
14. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
15. Entire Agreement. This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first hereinabove written.
ATTEST: CARVER FEDERAL SAVINGS BANK
By:
- ---------------------------- ----------------------------
Secretary Its:
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WITNESS:
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into this __ day of , 1995, by and between Carver Federal Savings Bank (the "Bank") and Biswarup Mukherjee (the "Employee"), effective on the date (the "Effective Date") of the Bank's conversion from a mutual to a stock form of ownership.
WHEREAS, the Employee has heretofore been employed by the Bank as Executive Vice President and Chief Financial Officer and is experienced in all related phases of the business of the Bank; and
WHEREAS, the parties desire by this writing to set forth the continuing employment relationship of the Bank and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed as the Executive Vice President of the Bank. The Employee shall render such administrative and management services for the Bank as are currently rendered and as are customarily performed by persons situated in a similar executive capacity. The Employee shall also promote, by entertainment or otherwise, as and to the extent permitted by law, the business of the Bank. The Employee's other duties shall be such as the Board of Directors of the Bank ("Board") may from time to time reasonably direct, including normal duties as an officer of the Bank.
2. Base Compensation. The Bank agrees to pay the Employee during the term of this Agreement a salary at the rate of $100,000.00 per annum, payable in cash not less frequently than monthly. The Board shall review, not less often than annually, the rate of the Employee's salary, and in its sole discretion may decide to increase his salary.
3. Discretionary Bonuses. The Employee shall be eligible to participate in an equitable manner with all other senior management employees of the Bank in discretionary bonuses that the Board may award from time to time to the Bank's senior management employees. No other compensation provided for in this Agreement shall be deemed a substitute for the Employee's right to participate in such discretionary bonuses.
4. (a) Participation in Retirement, Medical and Other Plans. The Employee shall be eligible to participate in any plan that the Bank maintains for the benefit of its employees if the plan relates to (i) pension, profit-sharing, or other retirement benefits, (ii) medical insurance or the reimbursement of medical or dependent care expenses, or (iii) other group benefits, including disability and life insurance plans.
(b) Employee Benefits; Expenses. The Employee shall be eligible to participate in any fringe benefits which are or may become available to the Bank's senior management employees, including for example: any stock option or incentive compensation plans, club memberships, and any other benefits which are commensurate with the responsibilities and functions to be performed by the Employee under this Agreement. The Employee shall be reim-
bursed for all reasonable out-of-pocket business expenses which he shall incur in connection with his services under this Agreement upon substantiation of such expenses in accordance with the policies of the Bank.
5. Term. The Bank hereby employs the Employee, and the Employee hereby accepts such employment under this Agreement, for the period commencing on the Effective Date and ending 36 months thereafter (or such earlier date as is determined in accordance with Sections 9 or 11); provided that notwithstanding any determination by the Bank not to extend the term of this Agreement, said term shall not expire prior to the expiration of thirty-six (36) months after a Change in Control (as defined in Section 11) shall have occurred. Additionally, on each annual anniversary date from the Effective Date, the Employee's term of employment shall be extended for an additional one-year period beyond the then effective expiration date provided the Board determines in a duly adopted resolution that the performance of the Employee has met the Board's requirements and standards, and that this Agreement shall be extended.
6. Loyalty; Noncompetition.
(a) During the period of his employment hereunder and except for illnesses, reasonable vacation periods, and reasonable leaves of absence, the Employee shall devote all his full business time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, from time to time, Employee may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations, which will not present any conflict of interest with the Bank or any of its subsidiaries or affiliates, or unfavorably affect the performance of Employee's duties pursuant to this Agreement, or will not violate any applicable statute or regulation. "Full business time" is hereby defined as that amount of time usually devoted to like companies by similarly situated executive officers. During the term of his or her employment under this Agreement, the Employee shall not engage in any business or activity contrary to the business affairs or interests of the Bank, or be gainfully employed in any other position or job other than as provided above.
(b) Nothing contained in this Paragraph 6 shall be deemed to prevent or limit the Employee's right to invest in the capital stock or other securities of any business dissimilar from that of the Bank, or, solely as a passive or minority investor, in any business.
7. Standards. The Employee shall perform his duties under this Agreement in accordance with such reasonable standards as the Board may establish from time to time. The Bank will provide Employee with the working facilities and staff customary for similar executives and necessary for him to perform his duties.
8. Vacation and Sick Leave. At such reasonable times as the Board shall in its discretion permit, the Employee shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment under this Agreement, all such voluntary absences to count as vacation time; provided that:
(a) The Employee shall be entitled to an annual vacation in accordance with the policies that the Board periodically establishes for senior management employees of the Bank but in no event less than three (3) weeks.
(b) The Employee shall not receive any additional compensation from the Bank on account of his failure to take a vacation or sick leave, and the Employee shall not accumulate unused vacation or sick leave from one fiscal year to the next, except in either case to the extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Employee shall be entitled without loss of pay, to absent himself voluntarily from the performance of his employment with the Bank for such additional periods of time and for such valid and legitimate reasons as the Board may in its discretion determine. Further, the Board may grant to the Employee a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave benefit as established by the Board.
9. Termination and Termination Pay. Subject to Section 11 hereof, the Employee's employment hereunder may be terminated under the following circumstances:
(a) Death. The Employee's employment under this Agreement shall terminate upon his death during the term of this Agreement, in which event the Employee's estate shall be entitled to receive the compensation due the Employee through the last day of the calendar month in which his death occurred.
(b) Disability. The Bank may terminate the Employee's
employment after having established the Employee's Disability. For purposes of
this Agreement, "Disability" means a physical or mental infirmity which impairs
the Employee's ability to substantially perform his duties under this Agreement
and which results in the Employee becoming eligible for long-term disability
benefits under the Bank's long-term disability plan (or, if the Bank has no
such plan in effect, which impairs the Employee's ability to substantially
perform his duties under this Agreement for a period of one hundred eighty
(180) consecutive days). The Employee shall be entitled to the compensation and
benefits provided for under this Agreement for (i) any period during the term
of this Agreement and prior to the establishment of the Employee's Disability
during which the Employee is unable to work due to the physical or mental
infirmity, or (ii) any period of Disability which is prior to the Executive's
termination of employment pursuant to this Section 9(b).
(c) Just Cause. The Board may, by written notice to the Employee, immediately terminate his employment at any time, for Just Cause. The Employee shall have no right to receive compensation or other benefits for any period after termination for Just Cause. Termination for "Just Cause" shall mean termination because of, in the good faith determination of the Board, 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, or material breach of any provision of this Agreement. Notwithstanding the foregoing, (i) the Employee shall not be deemed to have been terminated for Just Cause unless there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to the Employee and an opportunity for the Employee to be heard before the Board), finding that in the good faith opinion of the Board the Employee was guilty of conduct set forth above in the second sentence of this Subsection (c) and specifying the particulars thereof in detail. Notwithstanding the foregoing, the Employee may not exercise any options granted to him under the Carver Federal Savings Bank 1995 Stock Option and Incentive Plan, or any other option plan or agreement at any time after notice of his proposed termination for cause has been served.
(d) Without Just Cause. Subject to Section 10 hereof, the
Board may, by written notice to the Employee, immediately terminate his
employment at any time for a reason other than Just Cause, in which event the
Employee shall be entitled to receive the following compensation and benefits:
(i) the salary provided pursuant to Section 2 hereof, up to the date of
termination the term (including any renewal term) of this Agreement (the
"Expiration Date"), but in no event less than the salary for a 12-month period,
and (ii) the cost to the Employee of obtaining all health, life, disability and
other benefits which the Employee would have been eligible to participate in
through the Expiration Date based upon the benefit levels substantially equal
to those that the Bank provided for the Employee at the date of termination of
employment. Said sum shall be paid, at the option of the Employee, either (I)
in periodic payments over the remaining term of this Agreement, as if the
Employee's employment had not been terminated, or (II) in one lump sum within
ten (10) days of such termination.
Notwithstanding the foregoing, but only to the extent required under federal banking law, the amount payable under clause (i) hereof shall be reduced to the extent that on the date of the Employee's termination of employment, the benefits payable under clauses (i) and (ii) hereof and pursuant to any other agreement or benefit plan to which the Employee is a party, exceed the limitation on severance benefits that is set forth in Regulatory Bulletin 27a of the Office of Thrift Supervision, as in effect on the Effective Date.
(e) Termination or Suspension Under Federal Law. (1) If
the Employee is removed and/or permanently prohibited from participating in the
conduct of the Bank's affairs by an order issued under Sections 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) and
(g)(l)), all obligations of the Bank under this Agreement shall terminate, as
of the effective date of the order, but vested rights of the parties shall not
be affected.
(2) If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of the date of default; however, this Paragraph shall not affect the vested rights of the parties.
(3) All obligations under this Agreement shall terminate, except to the extent that continuation of this Agreement is necessary for the continued operation of the Bank: (i) by the Director of the Office of Thrift Supervision ("Director of OTS"), or his or her designee, at
the time that the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust Corporation enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her designee, at the time that the Director of the OTS, or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director of the OTS to be in an unsafe or unsound condition. Such action shall not affect any vested rights of the parties.
(4) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the Employee from participating in the conduct of the Bank's affairs, the Bank's obligations under this Agreement shall be suspended as of the date of such service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay the Employee all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended.
(f) Voluntary Termination by Employee. Subject to Section 11 hereof, the Employee may voluntarily terminate employment with the Bank during the term of this Agreement, upon at least 60 days' prior written notice to the Board of Directors, in which case the Employee shall receive only his compensation, vested rights and employee benefits up to the date of his termination.
10. Change in Control.
(a) Notwithstanding any provision herein to the contrary, if the Employee's employment under this Agreement is terminated by the Bank, without the Employee's prior written consent and for a reason other than Just Cause, in connection with or within twelve (12) months after any change in control of the Bank, the Employee shall be paid an amount equal to the difference between (i) the product of 2.99 times his "base amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code") and regulations promulgated thereunder, and (ii) the sum of any other parachute payments (as defined under Section 280G(b)(2) of the Code) that the Employee receives on account of the change in control. Said sum shall be paid in one lump sum within ten (10) days of such termination.
The term "change in control" shall mean (1) the ownership, holding or power to vote more than 2570 of the Bank's voting stock, (2) the control of the election of a majority of the Bank's directors, (3) the exercise of a controlling influence over the management or policies of the Bank by any person or by persons acting as a "group" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or (4) during any period of two consecutive years, individuals (the "Continuing Directors") who at the beginning of such period constitute the Board of Directors of the Bank (the "Incumbent Board") cease for any reason to constitute at least two-thirds thereof, provided that any individual whose election or nomination for election as a member of the Incumbent Board was approved by a vote of at least two-thirds of the Continuing Directors then in office shall be considered a Continuing Director. The term "person" means an individual other than the Employee, or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the contrary, the Employee may voluntarily terminate his employment under this Agreement within twelve (12) months following a change in control of the Bank, and the Employee shall thereupon be entitled to receive the payment described in Section 1l(a) of this Agreement, upon the occurrence of any of the following events, or within ninety (90) days thereafter, which have not been consented to in advance by the Employee in writing: (i) the requirement that the Employee move his personal residence, or perform his principal executive functions, more than thirty-five (35) miles from his primary office as of the date of the change in control; (ii) a material reduction in the Employee's base compensation as in effect on the date of the change in control or as the same may be increased from time to time; (iii) the failure by the Bank to continue to provide the Employee with compensation and benefits provided for under this Agreement, as the same may be increased from time to time, or with benefits substantially similar to those provided to him under any of the employee benefit plans in which the Employee now or hereafter becomes a participant, or the taking of any action by the Bank which would directly or indirectly reduce any of such benefits or deprive the Employee of any material fringe benefit enjoyed by him at the time of the change in control; (iv) the assignment to the Employee of duties and responsibilities materially different from those normally associated with his position as referenced at Section 1; (v) a failure to elect or reelect the Employee to the Board of Directors of the Bank, if the Employee is serving on the Board on the date of the change in control; or (vi) a material diminution or reduction in the Employee's responsibilities or authority (including reporting responsibilities) in connection with his employment with the Bank.
(c) Any payments made to the Employee pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder. In addition, but only to the extent required under federal banking law, the amount payable under this Section 10 shall be reduced to the extent that on the date of the Employee's termination of employment, the benefits payable hereunder exceed the limitation on severance benefits that is set forth in Regulatory Bulletin 27a of the Office of Thrift Supervision, as in effect on the Effective Date. Furthermore, if the Bank is a "problem association", as defined in Regulatory Bulletin 27a of the Office of Thrift Supervision, on the date that a payment or payments becomes due hereunder, the Board may elect to make such payment or payments in substantially equal quarterly installments over a period not exceeding three years.
(d) Within five business days before or after a change in control as defined in Section 1l(a) of this Agreement, the Bank shall (i) deposit, or cause to be deposited, in a trust (the "Trust), an amount equal to 2.99 times the Employee's "base amount" as defined in Section 280G(b)(3) of the Code, and (ii) provide the trustee of the Trust with a written direction to hold said amount and any investment return thereon in a segregated account for the benefit of the Employee, and to follow the procedures set forth in the next paragraph as to the payment of such amounts from the Trust.
During the 12-consecutive month period following the date on which the Bank makes the deposit referred to in the preceding paragraph, the Employee may provide the trustee of the Trust with a written notice requesting that the trustee pay to the Employee an amount designated in the notice as being payable pursuant to Section 11(a) or (b). Within three business days after receiving said notice, the trustee of the Trust shall send a copy of the notice to the
Bank via overnight and registered mail return receipt requested. On the tenth
(10th) business day after mailing said notice to the Bank, the trustee of the
Trust shall pay the Employee the amount designated therein in immediately
available funds, unless prior thereto the Bank provides the trustee with a
written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Employee pursuant
to Section 11 (a) or (b) hereof, and the costs of such arbitration (including
any legal fees and expenses incurred by the Employee) shall be paid by the
Bank. The trustee shall choose the arbitrator to settle the dispute, and such
arbitrator shall be bound by the rules of the American Arbitration Association
in making his determination. The parties and the trustee shall be bound by the
results of the arbitration and, within 3 days of the determination by the
arbitrator, the trustee shall pay from the Trust the amounts required to be
paid to the Employee and/or the Bank, and in no event shall the trustee be
liable to either party for making the payments as determined by the arbitrator.
Upon the earlier of (i) any payment from the Trust to the Employee, or (ii) the date 12 months after the date on which the Bank makes the deposit referred to in the first paragraph of this subsection (d), the trustee of the Trust shall pay to the Bank the entire balance remaining in the segregated account maintained for the benefit of the Employee. The Employee shall thereafter have no further rights under this Section 11, no further interest in the Trust pursuant to this Agreement, and no further rights or claims against the Bank pursuant to this Agreement.
(e) In the event that any dispute arises between the Employee and the Bank as to the terms or interpretation of this Agreement, including this Section 11, whether instituted by formal legal proceedings or otherwise, including any action that the Employee takes to enforce the terms of this Section 11 or to defend against any action taken by the Bank, the Employee shall be reimbursed for all costs and expenses, including reasonable attorneys' fees, arising from such dispute, proceedings or actions, provided that the Employee shall obtain a final judgement by a court of competent jurisdiction in favor of the Employee. Such reimbursement shall be paid within ten (10) days of Employee's furnishing to the Bank written evidence, which may be in the form, among other things, of a cancelled check or receipt, of any costs or expenses incurred by the Employee.
11. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Bank which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Bank.
(b) Since the Bank is contracting for the unique and personal skills of the Employee, the Employee shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Bank.
12. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided.
13. Applicable Law. Except to the extent preempted by Federal law, the laws of the State of New York shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.
14. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
15. Entire Agreement. This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first hereinabove written.
ATTEST: CARVER FEDERAL SAVINGS BANK
By:
- ---------------------------- ----------------------------
Secretary Its:
----------------------------
|
WITNESS:
Most recently revised: 3/28/95
CARVER FEDERAL SAVINGS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
This agreement entered into as of the 30th day of January, 1995 by and between Carver Federal Savings Bank (the "Bank") and Richard T. Greene (the "Executive").
WHEREAS, the Executive currently is employed in the capacity of President of the Bank.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements hereinafter contained, and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree to this Agreement as follows:
ARTICLE I
Definitions
"Agreement" shall mean this agreement between the Executive and the Bank.
"Annual Offset Amount" shall mean the sum of (i) the primary social security benefit payable annually to the Executive as of the earliest date, following his termination of employment, on which he could begin to collect such benefit (regardless of when such payment actually begins), (ii) the annual benefit that would be payable to the Executive under the Bank's Retirement Income Plan in the form of a 50% joint and survivor annuity, with his Surviving Spouse as contingent beneficiary, commencing upon his termination of employment (regardless of when he actually begins to collect such benefits), and (iii) the annual amount that would be payable to the Executive if that portion of his account under the Bank's 401k Savings Plan which would be attributable to the Bank's contributions (assuming the Executive contributed the maximum amounts permitted by Federal tax laws) were paid to him in the form of a 50% joint and survivor annuity, with his Surviving Spouse as contingent beneficiary, commencing upon his termination of employment (regardless of when he actually begins to collect such benefits).
"Average Annual Compensation" shall mean the average of the Executive's highest Compensation for the three calendar years (whether or not such years are consecutive) in the five calendar years immediately preceding the calendar year in which his employment with the Bank terminates for any reason.
"Benefits" shall mean, collectively, the benefits payable under Articles II and III of the Agreement.
"Bank" shall mean Carver Federal Savings Bank.
"Compensation" shall mean the amount of W-2 earnings paid to the
Executive by the Bank (plus any amounts withheld from the Executive under a
401(k) Plan or a cafeteria plan sponsored by the Bank) within a calendar year.
"Executive" shall mean Richard T. Greene.
"Just Cause" shall have the meaning set forth in, and be determined in accordance with, Section 9(c) of the Bank's Employment Agreement with the Executive, as such agreement may be amended from time to time.
"Surviving Spouse" shall mean the Executive's spouse, if any, on the date of his death, but shall not include a spouse from whom he is legally separated or divorced at the time of his death.
ARTICLE II
Retirement Benefits for the Executive
In the event that the Executive's employment with the Bank terminates
for any reason other than death or Just Cause, the Bank shall pay the Executive
an annual benefit, for ten years, in an amount per year equal to the excess of
(i) 50% of his Average Annual Compensation, over (ii) his Annual Offset Amount.
The payments due under this Article shall begin on the first day of the second
month following the date of the Executive's termination of employment with the
Bank, and shall thereafter be made on the annual anniversary dates of such
first payment date. Except as provided in Article III, no benefits shall be
payable hereunder after the death of the Executive.
Any payment made to the Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
Notwithstanding the foregoing, but only to the extent required under federal banking law, the amount payable hereunder shall be reduced to the extent that on the date of the Employee's termination of employment, either (i) the present value of his Benefits exceeds the limitations that are set forth in Regulatory Bulletin 27a of the Office of Thrift Supervision, as in effect on the Effective Date, or (ii) such reduction is necessary to avoid subjecting the Bank to liability under Section 280G of the Internal Revenue Code of 1986, as amended.
ARTICLE III
Death Benefits
Death benefits shall be payable only pursuant to this Article III.
In the event that the Executive dies before benefit payments commence under Article II hereof, the Bank shall pay to the Executive's Surviving Spouse an annual benefit, for ten years, in an amount per year equal to 50% of the annual
benefit that the Executive would have received under Article II if he had terminated employment on the date of his death. Such payment of Benefits shall commence on the first day of the first month following the date of the Executive's death, and shall thereafter be made on the annual anniversary dates of such first payment date.
In the event that the Executive dies after benefit payments have commenced under Article II hereof, the Bank shall pay to the Executive's Surviving Spouse 50% of the annual Benefit that the Executive would have received if he had survived to collect all of the Benefits payable to him under this Agreement. Such payment of Benefits shall be made on the annual anniversary dates of the date on which Benefit payments commenced under Article II hereof.
ARTICLE IV
Source of Benefits
The primary source of benefits shall be the general assets of the Bank. However, the Bank may establish and fund an irrevocable trust, whereby assets of the Bank will be held by such trust pursuant to such Trust Agreement, subject to claims by general creditors of the Bank by appropriate judicial action as provided by such Trust. Any insurance policy or any other asset acquired or held by the Bank in connection with the liabilities assumed by it hereunder, shall not be deemed to be held under any trust for the benefit of the Executive or his Surviving Spouse (if any), or to be security for the performance of the obligations of the Bank, but shall be, and remain, a general, unpledged, unrestricted asset of the Bank. Neither Executive nor his Surviving Spouse (if any) shall be named as owner of any insurance policy, if any, held in connection with the liabilities hereunder.
The trustee of a trust established hereunder shall inform the Board annually prior to the commencement of each fiscal year as to the manner in which trust assets shall be invested. In the event that funds from the trust are at any time insufficient to pay Benefits, the obligation to pay Benefits shall constitute an unfunded, unsecured promise by the Bank to provide such payments as and to the extent such Benefits become payable. In such case, Benefits shall be paid from the general assets of the Bank, and no person shall, by virtue of this Agreement, have any interest in such assets (other than as an unsecured creditor of the Bank).
ARTICLE V
Assignment
Except as otherwise is provided by this Agreement, it is agreed that neither the Executive nor his Surviving Spouse (if any) shall have any right to commute, sell, assign, transfer, encumber and pledge or otherwise convey the right to receive any Benefits hereunder, which Benefits and the rights thereto are expressly declared to be nonassignable and nontransferable.
ARTICLE VI
No Retention of Services;
Termination or Suspension under Federal Law
The Benefits payable under this Agreement shall be independent of, and
in addition to, any other employment agreement that may exist from time to time
between the parties hereto, or any other compensation payable by the Bank to
the Executive, whether salary, bonus, retirement income under employee benefits
plans sponsored or maintained by the Bank, or otherwise. This Agreement shall
not restrict the right of the Bank to terminate the Executive's employment, or
restrict the right of the Executive to terminate his employment. If the
Employee is removed and/or permanently prohibited from participating in the
conduct of the Bank's affairs by an order issued under Sections 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) or
(g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but vested rights of the parties shall not be affected.
If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of the date of default; however, this paragraph shall not affect the vested rights of the parties.
All obligations under this Agreement shall terminate, except to the extent that continuation of this Agreement is necessary for the continued operation of the Bank: (i) by the Director of this Office of Thrift Supervision ("Director of OTS"), or his or her designee, at the time that the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust Corporation enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her designee, at the time that the Director of the OTS, or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director of the OTS to be in an unsafe or unsound condition. Such action shall not affect any vested rights of the parties.
If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the Employee from participating in the conduct of the Bank's affairs, the Bank's obligations under this Agreement shall be suspended as of the date of such service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay the Employee all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended.
ARTICLE VII
Rights of the Executive
The rights of the Executive and of his Surviving Spouse (if any) under this Agreement shall be solely those of an unsecured creditor of the Bank except as may be provided in this Article.
ARTICLE VIII
Termination for Just Cause
In the event of the Executive's termination of employment for Just Cause, no Benefits shall be payable hereunder, and the Bank shall have no further obligations hereunder, unless and to the extent that the Bank determines, in its sole and absolute discretion, to the contrary. The provisions of this Article shall supersede any provisions of this Agreement to the contrary.
ARTICLE IX
Reorganization
The Bank agrees that it will not merge or consolidate with any other corporation or organization, or permit its business activities to be taken over by any other organization, unless and until the succeeding or continuing corporation or other organization shall expressly assume
the rights and obligations of the Bank herein set forth. The Bank further agrees that it will not cease its business activities or terminate its existence, other than as heretofore set forth in this paragraph, without having made adequate provision for the fulfillment of its obligation hereunder.
ARTICLE X
Amendments
This Agreement may be revoked or be amended in whole or in part only by a writing signed by all of the parties hereto.
ARTICLE XI
State Law
This Agreement shall be construed and governed in all respects under and by the laws of the State of New York, except to the extent that this agreement is superseded by Federal law. If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.
ARTICLE XII
Headings
Heading and subheadings in this Agreement are inserted for convenience and reference only and constitute no part of this Agreement.
ARTICLE XIII
Counterparts
This Agreement may be executed in an original and any number of counterparts, each of which shall constitute an original of one and the same instrument.
ARTICLE XIV
Gender
This shall be construed, where required, so that the masculine gender includes the feminine.
ARTICLE XV
Effective Date
The effective date of this Agreement shall be June 28, 1994. Unless terminated earlier in accordance with Article XVII, this Agreement shall remain in effect during the term of employment of the Executive and until all benefits payable hereunder have been made.
ARTICLE XVI
Interpretation of the Agreement
The Board of Directors of the Bank shall have sole and absolute discretion to administer, construe, and interpret the Agreement, and the decisions of the Board shall be conclusive and binding on all affected parties (unless such decisions are arbitrary and capricious).
ARTICLE XVII
Arbitration of Disputes
In the event that any dispute arises between the Executive and the Bank as to the terms or interpretation of this Agreement, said dispute shall be referred to the American Arbitration Association, and the parties expressly consent to submit said dispute to be so arbitrated. The decision of the American Arbitration Association shall be final and binding on all the parties, and there shall be no appeal therefrom.
ARTICLE XVIII
Termination of Agreement
The Bank and the Executive (or his Surviving Spouse in the event she survives him) may terminate this Agreement at any time in a writing executed by the parties.
[signature page follows]
IN WITNESS WHEREOF, the Bank has caused this Agreement to be signed in its corporate name by its duly authorized officer, impressed with its corporate seal, and properly attested to, and the Executive has hereto set his hand, all on the day and year first above written.
ATTEST: CARVER FEDERAL SAVINGS BANK
Attest: By:
---------------------------- ----------------------------
Its Chairman of the Board
EXECUTIVE
Witness: By:
--------------------------- ----------------------------
Richard T. Greene
|
[RADICS & CO., LLC LETTERHEAD]
June 6, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Carver Bancorp, Inc. Registration Statement on Form S-4
Ladies and Gentlemen:
We have read the second paragraph of "Proposal 2 -- Ratification of Appointment of Independent Auditors" in the proxy statement-prospectus included as part of the Registration Statement on Form S-4 of Carver Bancorp, Inc. We agree with the statements contained in such paragraph.
Very truly yours,
(formerly Stephen P. Radics & Co.)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Carver Federal Savings Bank
We consent to the use of our report dated May 31, 1996 included herein relating to the consolidated statement of financial condition of Carver Federal Savings Bank of March 31, 1996 and the related consolidated statements of income, changes in stockholders' equity andd cash flows for the year ended March 31, 1996.
/s/ Mitchell & Titus, LLP
Mitchell & Titus, LLP
June 7, 1996
New York, New York
|
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the inclusion in the Registration Statement on Form S-4, to be filed on or about June 6, 1996, of Carver Bancorp, Inc. of our report dated May 12, 1995 on the consolidated financial statements of Carver Federal Savings Bank as of March 31, 1995 and for each of the years in the two year period there ended.
Pine Brook, New Jersey
June 6, 1996
| ARTICLE 9 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL CONDITION AND THE CONSOLIDATED CONDENSED STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | DEC 31 1995 |
| PERIOD END | DEC 31 1995 |
| CASH | 3,226 |
| INT BEARING DEPOSITS | 350,123 |
| FED FUNDS SOLD | 6,800 |
| TRADING ASSETS | 0 |
| INVESTMENTS HELD FOR SALE | 114,328 |
| INVESTMENTS CARRYING | 113,970 |
| INVESTMENTS MARKET | 0 |
| LOANS | 82,608 |
| ALLOWANCE | 1,206 |
| TOTAL ASSETS | 367,632 |
| DEPOSITS | 256,952 |
| SHORT TERM | 58,000 |
| LIABILITIES OTHER | 1,882 |
| LONG TERM | 15,948 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 23 |
| OTHER SE | 34,717 |
| TOTAL LIABILITIES AND EQUITY | 367,632 |
| INTEREST LOAN | 4,879 |
| INTEREST INVEST | 17,633 |
| INTEREST OTHER | 1,095 |
| INTEREST TOTAL | 23,529 |
| INTEREST DEPOSIT | 8,390 |
| INTEREST EXPENSE | 13,594 |
| INTEREST INCOME NET | 9,935 |
| LOAN LOSSES | 131 |
| SECURITIES GAINS | 0 |
| EXPENSE OTHER | 9,053 |
| INCOME PRETAX | 1,359 |
| INCOME PRE EXTRAORDINARY | 1,359 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 753 |
| EPS PRIMARY | 0.35 |
| EPS DILUTED | 0.35 |
| YIELD ACTUAL | 7.03 |
| LOANS NON | 2,034 |
| LOANS PAST | 1,221 |
| LOANS TROUBLED | 0 |
| LOANS PROBLEM | 0 |
| ALLOWANCE OPEN | 1,075 |
| CHARGE OFFS | 131 |
| RECOVERIES | 0 |
| ALLOWANCE CLOSE | 1,206 |
| ALLOWANCE DOMESTIC | 1,206 |
| ALLOWANCE FOREIGN | 0 |
| ALLOWANCE UNALLOCATED | 319 |