Opinion ID: 2558869
Heading Depth: 1
Heading Rank: 2

Heading: Adoption and Implementation of the 2005 Plan

Text: Bancorp scheduled its 2005 annual meeting of stockholders for July 14, 2005. In connection therewith, Bancorp issued a notice of annual meeting and proxy statement to its stockholders, including Seidman. The notice of the annual meeting of stockholders conspicuously noted that the stockholders would be asked to consider and act on ... [t]he approval of [Bancorp's] 2005 Equity Incentive Plan [(2005 Plan)]. The accompanying proxy statement  which was subject to filing with and examination by the Securities and Exchange Commission (SEC) prior to its issuance [4]  contained an exhaustive summary of that plan, explained that the board of directors of Bancorp had adopted the 2005 Plan, subject to stockholder approval, and attached a complete copy of the 2005 Plan as an appendix to the proxy statement. In particular, the proxy statement identified four purposes for the proposal and adoption of the 2005 Plan. These were (1) to attract and retain qualified personnel in key positions[;] (2) to provide officers, employees and non-employee directors of [Bancorp] and [the Bank] with a proprietary interest in [Bancorp] as an incentive to contribute to the success of [Bancorp;] (3) to promote the attention of management to other stockholder concerns[;] and (4) to reward employees for outstanding performance. It noted further that Bancorp believes that stock-based incentive awards will further focus employees and directors on the dual objectives of creating stockholder value and promoting [Bancorp]'s success, and that the 2005 Plan will help to attract, retain and motivate valued employees and directors. It emphasized that the 2005 Plan will promote the interests of [Bancorp] and its stockholders and that it will give [Bancorp] flexibility to provide incentives based on the attainment of corporate objectives and increases in stockholder value. In its summary description of the 2005 Plan, the proxy statement noted that the 2005 Plan would be administered by a compensation committee. It explained that stock awards under the 2005 Plan would consist of two types: grants of stock options, which give[] the recipient the right to purchase shares of [Bancorp] common stock at a future date at a specified price per share[,] and restricted stock awards, which are grant[s] of a certain number of shares of common stock subject to the lapse of certain restrictions (such as continued service) determined by the [compensation c]ommittee. Specifically, the proxy statement noted that the [compensation c]ommittee has broad authority under the 2005 Plan with respect to awards granted thereunder, including, without limitation, the authority to:  select the individuals to receive awards under the 2005 Plan;  determine the type, number, vesting requirements and other features and conditions of individual awards, including whether performance goals will be attached to awards; and  interpret the 2005 Plan and award agreements issued with respect to individual awards [of stock options or restricted stock awards]. The proxy statement's summary description of the 2005 Plan further explained that there were limits on the aggregate amount of stock subject to stock options and/or restricted stock awards, and that, subject to the stockholders first approving the 2005 Plan and [p]rior to making any awards under the 2005 Plan, the [compensation c]ommittee will consider all information it determines to be necessary in order to make appropriate grants, including surveys detailing grants made by similarly situated companies. It further noted that, in the usual process of determining compensation levels, [t]he [compensation c]ommittee reviews comparative salaries paid by other financial institutions when establishing salaries and benefits for given positions and intends to consider similar data when making awards. It repeated that, [u]nder the terms of the 2005 Plan, the [compensation c]ommittee may consider, among other things, individual or [Bancorp] performance in making grants or as a condition of vesting for any grant. Finally, the proxy statement conspicuously notes that Clifton MHC, the mutual holding company for [Bancorp], owns 55.2% of the outstanding shares of common stock of [Bancorp;] that [a]ll shares of common stock owned by Clifton MHC will be voted in accordance with the instructions of the Board of Directors of Clifton MHC, the members of which are identical to the members of the Board of Directors of [Bancorp;] and that Clifton MHC is expected to vote such shares `FOR' approval of the 2005 Plan. That said, the proxy statement also makes clear that, in order for the 2005 Plan [t]o be approved, this matter requires the affirmative vote of a majority of the votes eligible to be cast at the annual meeting, including the shares held by Clifton MHC (`Vote Standard A') and the affirmative vote of a majority of the votes cast at the annual meeting, excluding the shares held by Clifton MHC (`Vote Standard B'). (first emphasis in original; second emphasis supplied). [5] Likewise, the version of the 2005 Plan attached to the proxy statement further set forth the details of the 2005 Plan. In addition to the matters described in the summary plan description that is part of the proxy statement, the 2005 Plan made clear how the 2005 Plan was to be administered, the maximum number of shares available for either stock option grants or restricted stock awards, and, specifically, that the 2005 Plan will comply with the requirements set forth in 12 C.F.R. [§] 575.8 and 12 C.F.R. [§] 563b.500. [6] It is uncontested that the 2005 Plan was approved at the July 14, 2005 annual meeting of Bancorp's stockholders. Based on that approval, the compensation committee issued (1) grants of stock options to all seven of the members of Bancorp's board of directors and to twenty-two other employees of the Bank, and (2) restricted stock awards to the board members and to forty-two other employees of the Bank. In doing so, the compensation committee was guided by and complied with the relevant OTS regulations, which limit the issuance of stock awards in mutual savings and loan associations that convert to stock savings and loan associations under a mutual holding company structure: the board of directors, in the aggregate, cannot receive more than thirty percent of the awards, 12 C.F.R. § 563b.500(a)(5); no member of the board of directors may receive more than five percent of the awards, ibid.; and any award granted to an employee is capped at twenty-five percent of the awards that can be granted, 12 C.F.R. § 563b.500(a)(4). Also, the compensation committee reviewed four different scenarios for granting the stock awards, and consulted with counsel, various Certified Public Accountants, and a compensation consultant before awarding the stock and stock options under the [2005] Plan.