SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material under Rule 14a-12
Berkshire Bancorp Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
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|_| Fee paid previously with preliminary materials.
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|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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BERKSHIRE BANCORP INC.
160 BROADWAY
NEW YORK, NEW YORK 10038
TEL: (212) 791-5362
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2007
To the Stockholders of
BERKSHIRE BANCORP INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Berkshire
Bancorp Inc., a Delaware corporation (the "Company", "us", "our", or "we"), will
be held on Thursday, May 17, 2007, at 10:00 A.M. (eastern time), at the offices
of Blank Rome LLP, The Chrysler Building, 24th Floor, 405 Lexington Avenue, New
York, New York 10174, for the following purposes:
1. To elect six directors to hold office until the next Annual Meeting of
Stockholders and until their respective successors have been duly
elected and qualified; and
2. To transact such other business as may properly come before the Annual
Meeting of Stockholders and any adjournment(s) thereof.
The Board of Directors has fixed the close of business on April 6, 2007 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting. Only stockholders of record at the close of
business on that date will be entitled to notice of, and to vote at, the Annual
Meeting of Stockholders and any adjournment(s) thereof.
Enclosed with this Notice are a Proxy Statement, a proxy card and return
envelope, and the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 2006 (which includes the Company's Annual Report on Form 10-K
as filed with the Securities and Exchange Commission).
All stockholders are cordially invited to attend the meeting in person.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE POSTAGE PREPAID
ENVELOPE WHICH HAS BEEN PROVIDED.
By Order of the Board of Directors
of BERKSHIRE BANCORP INC.
Emanuel J. Adler
Secretary
Dated: April 16, 2007
BERKSHIRE BANCORP INC.
160 BROADWAY
NEW YORK, NEW YORK 10038
TELEPHONE NO.: (212) 791-5362
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2007
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APRIL 16, 2007
INFORMATION REGARDING PROXIES
This Proxy Statement is being furnished in connection with the solicitation
of proxies by and on behalf of the Board of Directors of Berkshire Bancorp Inc.
(the "Company") for use at the Company's 2006 Annual Meeting of Stockholders
(the "Annual Meeting") to be held on Thursday, May 17, 2007, at 10:00 A.M.
(eastern time), at the offices of Blank Rome LLP, The Chrysler Building, 24th
Floor, 405 Lexington Avenue, New York, New York 10174 and at any adjournment(s)
or postponement(s) thereof for the purposes set forth in the accompanying Notice
of Meeting. This Proxy Statement and the accompanying proxy card are first being
mailed to stockholders of the Company on or about April 20, 2007.
The principal executive offices of the Company are located at 160 Broadway,
New York, New York 10038.
The cost of solicitation of proxies will be borne by the Company. In
addition to the solicitation of proxies principally by the use of the mail,
directors, officers and other employees of the Company, acting on its behalf and
without special compensation, may solicit proxies by telephone, facsimile, email
or personal interview. The Company will, at its expense, request brokers and
other custodians, nominees and fiduciaries to forward proxy soliciting material
to the beneficial owners of shares held of record by such persons. It is
estimated that said solicitation costs will be nominal.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors has fixed the close of business on April 6, 2007 as
the record date (the "Record Date") for the determination of stockholders of the
Company who are entitled to receive notice of, and to vote at, the Annual
Meeting. Only stockholders of record on the Record Date shall be entitled to
notice of, and to vote at, the Annual Meeting. At the close of business on the
Record Date, an aggregate of 6,898,206 shares of the Company's common stock were
outstanding, each of which is entitled to one vote on each matter to be voted
upon at the Annual Meeting. The Company's stockholders do not have cumulative
voting rights. The Company has no other class of securities entitled to vote at
the Annual Meeting.
VOTING PROCEDURES; REVOCATIONS
When a proxy card in the form enclosed with this Proxy Statement is
returned properly executed, the shares represented thereby will be voted at the
Annual Meeting in accordance with the directions indicated thereon. If a proxy
card is properly executed but no directions are indicated thereon, the shares
will be voted FOR the election of each of the nominees for director named herein
as shown on the form of proxy card.
The Board of Directors does not know of any other business to come before
the Annual Meeting. However, if any other matters should properly come before
the Annual Meeting or any adjournment or postponement thereof for which specific
authority has not been solicited from the stockholders, then, to the extent
permissible by law, the persons named in the proxies will vote the proxies
(which confer authority upon them to vote on any such matters) in accordance
with their judgment. A stockholder who executes and returns the enclosed proxy
card may revoke it at any time prior to its exercise by giving written notice of
such revocation to the Secretary or Assistant Secretary of the Company, by
executing a subsequently dated proxy card or by voting in person at the Annual
Meeting. Attendance at the Annual Meeting by a stockholder who has executed and
returned a proxy card does not alone revoke such proxy. Votes will be counted
and certified by one or more Inspectors of Election who are expected to be
employees of American Stock Transfer & Trust Company, the Company's transfer
agent. If your shares are held in the name of a bank or broker, you must obtain
a legal proxy from the bank or broker to attend the Annual Meeting and vote in
person.
Proxies in the accompanying form are being solicited by, and on behalf of,
the Company's Board of Directors. The persons named in the proxy have been
designated as proxies by the Company's Board of Directors. Pursuant to Delaware
corporate law, the presence of the holders of a majority of the outstanding
shares of the Company's Common Stock entitled to vote, represented at the Annual
Meeting in person or by proxy, will constitute a quorum.
Directions to withhold authority, abstentions and broker non-votes, if any,
will be counted for purposes of determining the existence of a quorum at the
Annual Meeting. The Company does not expect to receive any broker non-votes
because the uncontested election of directors is the only matter to be presented
for action at the Annual Meeting. Broker non-votes occur when a broker or other
nominee that holds shares for a beneficial owner does not vote on a proposal
because the broker or other nominee does not have discretionary authority to
vote on the proposal and has not received voting instructions from the
beneficial owner.
If a quorum is present at the Annual Meeting, the nominees for director
shall be elected by a plurality of the votes present (in person or by proxy) at
the Annual Meeting and entitled to vote thereon, meaning that the six nominees
receiving the highest vote totals will be elected as Directors of the Company;
and all other matters will be approved by a majority of votes cast and entitled
to vote at the meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
The entire Board of Directors is to be elected at the Annual Meeting. The
Company's by-laws presently limits the size of the Board of Directors to not
less than three (3) nor more than eleven (11) persons. The Board currently has
been set at six (6) persons. Accordingly, at the Annual Meeting, six (6)
nominees will be elected to hold office as directors. The six persons listed
below have been nominated to serve as directors of the Company until the next
annual meeting of stockholders and until their respective successors have been
duly elected and qualified. Five of the nominees are currently directors of the
Company. The sixth, Mr. Moses Krausz, has been identified by Mr. Moses Marx, a
non-management member of the Board of Directors of the Company, and recommended
by the independent members of the Board of Directors of the Company, as a
nominee. In the unexpected event that any of such nominees should become unable
or decline to serve, proxies may be voted for the election of substitute
nominees as are designated by the Company's Board of Directors.
The names of the nominees for election as directors are listed below,
together with certain personal information, including the present principal
occupation and recent business experience of each nominee (based solely upon
information furnished by such persons). Each of the persons named below has
indicated to the Board of Directors of the Company that he will be able to serve
as a director if elected and each has consented to be named in this Proxy
Statement.
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Proxies in the accompanying form will be voted at the Annual Meeting in
favor of the election of each of the nominees listed below, unless authority to
do so is specifically withheld as to an individual nominee or nominees or all
nominees as a group. Proxies cannot be voted for a greater number of persons
than the number of nominees named. Directors will be elected by a plurality of
the votes present at the Annual Meeting in person or by proxy and entitled to
vote thereon (assuming a quorum exists).
THE NOMINEES
YEAR
COMMENCED
SERVING AS
A DIRECTOR
NAME, PRINCIPAL OCCUPATION OF THE
AND OTHER DIRECTORSHIPS AGE COMPANY
-------------------------- --- -----------
William L. Cohen 65 1993
Mr. Cohen has served as the Chief Executive
Officer of Andover Properties, LLC, a real estate
development company specializing in self storage
facilities since November 2003, and has been a
private investor for over seven years. Mr. Cohen
was President, Chief Executive Officer and
Chairman of the Board of The Andover Apparel Group
Inc., an apparel manufacturing company, from 1980
to 2000.
Martin A. Fischer 69 2006
Mr. Fischer was elected a director on December 6,
2006. He has been the President and Chief
Executive of Mount Carmel Cemetery Association, a
New York State not-for-profit corporation, since
April 2001. Mr. Fischer was counsel to Warshaw,
Burstein, Cohen, Schlesinger and Kuh, a New York
City law firm, from 1987 until 2001 and served as
President, Chief Operating Officer and a director
of Kinney System, Inc. and The Katz Parking
System, Inc. from 1981 to 1986. Mr. Fischer was
appointed Commissioner of the New York State
Insurance Fund in 1977 and served as its Chairman
until January 1995.
Moses Krausz 66 --
Mr. Krausz has held the position of President of
the Bank since March 1992 and Chief Executive
Officer since November 1993. Prior to joining the
Bank, Mr. Krausz was Managing Director of SFS
Management Co., L.P., a mortgage banker, from 1987
to 1992 and was President of UMB Bank and Trust
Company, a New York State chartered bank, from
1978 to 1987.
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YEAR
COMMENCED
SERVING AS
A DIRECTOR
NAME, PRINCIPAL OCCUPATION OF THE
AND OTHER DIRECTORSHIPS AGE COMPANY
-------------------------- --- -----------
Moses Marx 71 1995
Mr. Marx has been the General Partner of United
Equities Company LLC since 1954 and General
Partner of United Equities Commodities Company
since 1972. He is also President of Momar Corp.
All of these are investment companies. Mr. Marx is
a director of The Cooper Companies, Inc. (a
developer and manufacturer of healthcare
products).
Steven Rosenberg 58 1995
Mr. Rosenberg has served as President and Chief
Executive Officer of the Company since March 1999
and served as Vice President-Finance and Chief
Financial Officer of the Company from April 1990
to March 1999. Mr. Rosenberg continues to serve as
the Chief Financial Officer of the Company. From
September 1987 through April 1990, he served as
President and Director of Scomel Industries, Inc.,
a company engaged in international marketing and
consulting. Mr. Rosenberg is a director of The
Cooper Companies, Inc.
Randolph B. Stockwell 60 1988
Mr. Stockwell has been a private investor for over
ten years. Since 1999, Mr. Stockwell has served as
President of Yachting Systems of America, LLC. He
served in various capacities with the Community
Bank, a commercial bank, from September 1972 to
January 1987.
There are no family relationships (whether by blood, marriage or adoption)
among any of the Company's current directors or executive officers.
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CORPORATE GOVERNANCE
We have an ongoing commitment to good governance and business practices. In
furtherance of this commitment we regularly monitor developments in the area of
corporate governance, and review our processes and procedures in light of such
developments. We review changes in federal law and the rules and regulations
promulgated by the Securities and Exchange Commission ("SEC") and NASDAQ
regulations applicable to companies whose securities are quoted on NASDAQ. We
comply with new laws and rules and implement other corporate governance
practices which we believe to be in the best interest of the Company and its
stockholders. We believe that we have in place policies which are designed to
enhance our stockholders' interests.
The Company qualifies as a Controlled Company under applicable NASDAQ rules
by virtue of more than 50% of the voting power of the Company being controlled
by one individual as set forth below in "Securities Held By Management," and
therefore is exempt from the requirement of NASD Rule 4350(c) that a majority of
the Board of Directors must be comprised of independent directors as well as the
requirements of Rule 4350(c) regarding determination of compensation of officers
and nomination of directors. We have complied with these rules through the date
hereof. In the future, inasmuch as the Company is a controlled company,
compensation will be determined by the independent members of the Board and
approved by the disinterested members of the Board, and nominations to the Board
will be made by the Board, in each case including both directors who qualify and
directors who do not qualify as independent directors.
Corporate Code of Ethics. We have adopted a Corporate Code of Ethics,
copies of which are available without cost upon written request to the Company's
Chief Executive Officer at the Company's principal executive office. All of our
employees, officers, and directors, including the Chief Executive Officer and
Chief Financial Officer, are required to adhere to our Corporate Code of Ethics
in discharging their work-related responsibilities. Employees are required to
report any conduct that they believe in good faith to be an actual or apparent
violation of the Ethics Policy.
We also have a confidential hotline through which our employees may report
concerns about the Company's business practices. In keeping with the
Sarbanes-Oxley Act of 2002, the Audit Committee has established procedures for
receipt and handling of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and to allow for the
confidential, anonymous submission by our employees of concerns regarding
accounting or auditing matters.
BOARD COMMITTEES, MEETINGS AND COMPENSATION
Our Board of Directors has established two Committees, the Audit Committee
and the Stock Incentive Committee. Committee membership is determined by the
Board, and all committee members are independent directors as determined by the
Board in accordance with the independence requirements under corporate
governance rules for companies whose securities are quoted on NASDAQ. Audit
Committee members also meet the independence requirements under Section 10A(m)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules thereunder. Where appropriate, each Committee maintains a written charter
detailing its authority and responsibilities that is adopted by the Board of
Directors. Charters are reviewed periodically as legislative and regulatory
developments and business circumstances warrant. Charters are available without
cost to any stockholder requesting a copy in writing to the attention of Mr.
Steven Rosenberg at the Company's executive offices. The Audit Committee charter
is attached as Exhibit A to this proxy statement.
(i) The Audit Committee is responsible for (a) the quality and integrity of
the Company's financial statements, (b) the Company's compliance with legal and
regulatory requirements regarding accounting matters, (c) the selection,
qualification and monitoring of independence of the independent accounting firm
serving as auditors of the Company and (d) the performance of the Company's
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internal audit function and the work of the independent auditors. The Committee
advises and makes recommendations to the Board of Directors regarding the
financial, investment and accounting procedures and practices followed by the
Company. The members of the Committee are Messrs. Stockwell (Chair), Cohen and
Fischer. The Board has determined that Messrs. Stockwell and Cohen are both
deemed to be financial experts under applicable rules of the SEC.
(ii) The Stock Incentive Committee is responsible for the administration of
our 1999 Stock Incentive Plan. The members of the Committee are Messrs. Cohen
(Chair), Fischer and Stockwell.
We do not have a nominating committee. In accordance with NASDAQ
Marketplace rules, nominations of persons to serve on our Board of Directors for
the coming year were made by the Board based upon the recommendation of at least
a majority of the independent members of the Board.
Considering the regulatory requirements and taking into account its limited
size, our Board believes that it is appropriate for the Board, acting as a
whole, to identify, and screen, all nominees for Directors of the Company for
selection and to fulfill all of the functions of a formal nominating committee.
The Board has adopted the following formal procedures for the consideration by
the Board members responsible for identifying, screening and recommending
Director nominees, to receive and consider any such nominees that may be made by
stockholders of the Company.
Stockholders must submit their recommendations in writing to the Company at
its executive offices within the time period and in accordance with the
procedure specified below. The Board will consider nominees recommended by the
Company's stockholders provided that the recommendation contains sufficient
information for them to assess the suitability of the candidate, including the
candidate's qualifications. Candidates recommended by stockholders that comply
with these procedures will receive the same consideration that candidates
recommended by members of the Board receive. Each recommendation for nomination
is required to set forth:
* the name and address of the stockholder making the nomination and the
person or persons nominated;
* a representation that the stockholder is a holder of record of capital
stock of the Company entitled to vote at such a meeting and intends to
appear in person or by proxy at the meeting to vote for the person or
persons nominated and the number of shares owned of record or
beneficially owned by the stockholder;
* a description of all arrangements and understandings between the
stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination was made by
the stockholder;
* 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 SEC had the nominee been
nominated by the Board; and
* the written consent of each nominee to serve as a director of the
Company if so elected.
Each recommendation must also include information regarding the recommended
candidate relevant to a determination of whether the recommended candidate would
be barred from being considered independent under NASDAQ Marketplace Rule 4200
or, alternatively, a statement that the recommended candidate would not be so
barred. Moreover, no candidate will be considered if the candidate (i) is
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involved as a plaintiff in on-going litigation with the Company or any of its
subsidiaries or is employed by an entity which is involved as a plaintiff in
on-going litigation with the Company or any of its subsidiaries or (ii) is the
subject of any on-going criminal investigation or any investigation of any
regulatory authority, including any investigations for fraud or financial
misconduct or (iii) is affiliated with a competitor of the Company or any of its
subsidiaries. A nomination which does not comply with the above requirements or
is not submitted within the time period specified below will not be considered.
A stockholder wishing to nominate a candidate for election to the Board at
a meeting of stockholders at which directors are to be elected is required to
give the written notice containing the required information specified above and
addressed to the Chief Executive Officer/President of the Company so that it is
received by the Company's Chief Executive Officer/President no later than (i)
the latest date upon which stockholder proposals must be submitted to the
Company for inclusion in its proxy statement relating to such meeting pursuant
to Rule 14a-8 under the Exchange Act or other applicable rules or regulations
under the federal securities laws or, if no such rules apply, at least 90 days
prior to the date one year from the date of the immediately preceding annual
meeting of stockholders, and (ii) with respect to an election to be held at a
special meeting of stockholders, 30 days prior to the printing of the Company's
proxy materials with respect to such meeting or if no proxy materials are being
distributed to stockholders, at least the close of business on the fifth day
following the date on which notice of such meeting is first given to
stockholders.
The qualities and skills sought in prospective members of the Board
generally require that director candidates be qualified individuals who, if
added to the Board, would provide the mix of director characteristics,
experience, perspectives and skills appropriate for the Company. Criteria for
selection of candidates include, but are not limited to: (i) business and
financial acumen, as determined by the Board in its discretion, (ii) qualities
reflecting a proven record of accomplishment and ability to work with others,
(iii) knowledge of the Company's industry, (iv) relevant experience and
knowledge of corporate governance practices, and (v) expertise in an area
relevant to the Company. Such persons should not have commitments that would
conflict with the time commitments of a Director of the Company. Such persons
shall have other characteristics considered appropriate for membership on the
Board of Directors, as determined by the Board.
We do not have a compensation committee. It is the view of the Board of
Directors that it is appropriate for us not to have a compensation committee
because we are a "Controlled Company" under the applicable rules of the NASDAQ
Marketplace. Executive compensation, except compensation governed by the terms
of an employment agreement, is determined by the independent members of the
Board and for fiscal 2007 such determination was made by Messrs. William L.
Cohen, Martin A. Fischer and Randolph B. Stockwell, the independent members of
the Board and approved by the disinterested members of the Board, which is
comprised of all the members of the Board, except for Mr. Steven Rosenberg's
compensation, in which case the disinterested members were all of the members of
the Board except Mr. Rosenberg.
During the fiscal year ended December 31, 2006, the Board met one time and
acted four times by unanimous written consent. The Audit Committee met six times
during fiscal year 2006. The Stock Incentive Committee did not meet during
fiscal year 2006. Each director attended all of the total number of meetings of
the Board and not less than 75% of the meetings of the committees of the Board
on which he served. The Company does not have a policy requiring the directors
to attend Annual Meetings of Stockholders. However, each director attended the
Company's 2006 Annual Meeting of Stockholders.
For a description of compensation paid to Directors, see "Management
Compensation - Compensation of Directors."
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THE BOARD OF DIRECTORS
Our Board is elected annually, and each director stands for election every
year. We do not have a classified or staggered board. Our Board is comprised of
six Directors, of which two are employees, one is a significant stockholder of
the Company and three have been affirmatively determined by the Board to be
independent, meeting the objective requirements set forth by NASDAQ and the SEC,
and having no other relationship to the Company other than their service on the
Board of Directors.
Stockholders wishing to communicate with the Board of Directors or with a
specific Board member may do so by writing to the Board, or to the particular
Board member, and delivering the communication in person or mailing it to:
Steven Rosenberg, Chief Executive Officer, Berkshire Bancorp Inc., 160 Broadway,
New York, New York 10038.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is information regarding persons deemed executive officers
of the Company who are not also directors or nominees for director.
NAME AGE OFFICE
---- --- ------
David Lukens 57 Executive Vice President and Chief Financial
Officer of The Berkshire Bank
Mr. Lukens has been Senior Vice President and Chief Financial Officer of
the Bank since December 1999 and Executive Vice President since December 2003.
Prior to joining the Bank, Mr. Lukens was Senior Vice President and Chief
Financial Officer of First Washington State Bank, a New Jersey commercial bank,
from 1994 to 1999 and was Vice President and Controller at the Philadelphia, PA
branch of Bank Leumi Le-Israel B.M., an international commercial bank, from 1978
to 1994.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
(as defined therein), directors and persons owning more than ten (10%) percent
of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership of all equity and derivative securities of
the Company with the SEC. SEC regulations also require that a copy of all such
Section 16(a) forms filed be furnished to the Company by the filer.
Based solely on a review of the copies of such forms and amendments thereto
received by the Company, or on written representations from our executive
officers and directors that no Forms 5 were required to be filed, we believe
that during fiscal 2006 all Section 16(a) filing requirements applicable to our
executive officers, directors and beneficial owners of more than ten (10%)
percent of our Common Stock were met.
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SECURITIES HELD BY MANAGEMENT
The following table sets forth information regarding beneficial ownership
of our common stock as of the Record Date by (i) each of our current directors,
(ii) the individuals named in the Summary Compensation Table set forth below and
(iii) all of our current directors and executive officers as a group. Under the
rules of the SEC, a person is deemed to be a beneficial owner of a security if
he has or shares the power to vote or direct the voting of such security or the
power to dispose or direct the disposition of such security. A person is also
deemed to be a beneficial owner of any security of which that person has the
right to acquire beneficial ownership within sixty (60) days of the Record Date.
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF OWNERSHIP AS OF ERCENT
TITLE OF CLASS BENEFICIAL OWNER (a) THE RECORD DATE OF CLASS
-------------- -------------------------------- ------------------ --------
Common Stock William L. Cohen 7,500 (1) *
160 Broadway
New York, NY 10038
Common Stock Martin A. Fischer 9,800 (2) *
160 Broadway
New York, NY 10038
Common Stock Moses Krausz 148,691 (3) 2.1%
4 East 39th Street
New York, NY 10016
Common Stock David Lukens 15,600 (4) *
4 East 39th Street
New York, NY 10016
Common Stock Moses Marx 3,538,864 (5) 51.3%
160 Broadway
New York, NY 10038
Common Stock Steven Rosenberg 62,580 (6) *
160 Broadway
New York, NY 10038
Common Stock Randolph B. Stockwell 24,000 (7) *
160 Broadway
New York, NY 10038
Common Stock All executive officers and
directors as a group (7 persons) 3,807,035 (8) 54.3%
------------------------------------------------
* Less than 1%
(a) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act.
(1) Includes 3,000 shares issuable upon the exercise of options which have been
granted to Mr. Cohen under our 1999 Stock Incentive Plan.
(2) Includes 1,500 shares issuable upon the exercise of options which have been
granted to Mr. Fischer under our 1999 Stock Incentive Plan.
(3) Includes 60,000 shares issuable upon the exercise of options which have
been granted to Mr. Krausz under our 1999 Stock Incentive Plan and 2,100
shares owned by Mr. Krausz's spouse.
(4) Includes 15,000 shares issuable upon the exercise of options which have
been granted to Mr. Lukens under our 1999 Stock Incentive Plan.
(5) Includes 3,000 shares issuable upon the exercise of options which have been
granted to Mr. Marx under our 1999 Stock Incentive Plan, 285,000 shares
owned by Momar Corporation and 386,163 shares owned by Terumah Foundation.
Does not include 37,302.32 shares representing 23.0% of the shares owned by
Eva and Esther, L.P., of which Mr. Marx has a 23.0% limited partnership
interest. Mr. Marx's daughters and their husbands are the general partners
of Eva and Esther, L.P.
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(6) Includes 30,000 shares issuable upon the exercise of options which have
been granted to Mr. Rosenberg under our 1999 Stock Incentive Plan.
(7) Includes 3,000 shares issuable upon the exercise of options which have been
granted to Mr. Stockwell under our 1999 Stock Incentive Plan.
(8) Includes 115,500 shares of common stock which are issuable upon the
exercise of outstanding options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 2000, the Bank entered into a lease agreement with Bowling Green
Associates, LP, the principal owner of which is Mr. Moses Marx, a director of
the Company, for commercial space to open a bank branch. We obtained an
appraisal of the market rental value of the space from an independent appraisal
firm and management believes that the terms of the lease, including the annual
rent of $328,000 paid in fiscal 2006, is comparable to the terms and annual rent
that would be paid to non-affiliated parties in a similar commercial transaction
for similar commercial space. We currently pay an annual rent of $353,000
pursuant to this lease.
POLICY REGARDING APPROVAL OF TRANSACTIONS BETWEEN BERKSHIRE AND RELATED PARTIES
It is the policy of the Board of Directors of the Company that the Company,
acting by its independent directors, shall on an ongoing basis conduct an
appropriate review of all related party transactions required to be disclosed
pursuant to SEC Regulation S-K Item 404 for potential conflict of interest
situations and that all such related party transactions must be approved by the
Company's Audit Committee.
COMPENSATION DISCUSSION AND ANALYSIS
Our Board of Directors has delegated primary authority for executive
compensation to the three independent members of the Board, or Independent
Directors, who, though not a formal compensation committee of the Board, act in
such capacity.
PHILOSOPHY ON EXECUTIVE COMPENSATION
It is our philosophy to compensate executive officers in a manner that
promotes the recruitment, motivation and retention of exceptional employees who
will help us achieve our strategic business objectives and increase stockholder
value. Our executive compensation philosophy is implemented through compensation
programs based upon the following principles:
* Targeted total compensation (salary, bonus, and long-term incentives) and
benefits package for executives should be set near the median levels of
compensation for corporate executives delivered by certain peer companies,
taking into account the relative responsibilities of the executive officers
involved. Actual total compensation in any given year may be above or below
the target level based on individual and corporate performance.
* Our total compensation package should provide an appropriate mix of fixed
and variable compensation to support a meaningful pay-for-performance
relationship for our executive officers.
10
* Performance-based compensation should be tied to performance measures
believed to enhance future stockholder value.
* Our long-term incentive program should be designed to encourage executive
retention and link executive compensation directly to long-term stockholder
interests.
* Compensation plans should be easy to understand and administer.
OVERVIEW OF COMPANY POLICY ON EXECUTIVE COMPENSATION
Our executive compensation policy and practice is established by the
Independent Directors. Specific policies and practices relating to each element
of named executive officers' compensation are described below. The objective of
our compensation policy is to provide an overall compensation opportunity that
is competitive with that offered for similar positions by similar organizations
in our industry. Executive compensation may be above or below this general level
at times for a variety of reasons, including performance, recruiting or
retention requirements and market conditions.
Actual compensation against this generally median target is designed to be
commensurate with our corporate performance and the individual performance of
our executives. We generally structure our benefits based on a review of the
typical practices within our industry and our business strategy.
Our approach to the total pay package for our executive officers is to view
the various elements of the package as a portfolio of rewards, designed to
achieve different specific purposes but to balance each other in motivating
appropriate behavior, rewarding different aspects of performance or meeting
corporate objectives for attracting and retaining the talent needed to
successfully lead our company and increase stockholder value.
THE ROLE OF THE INDEPENDENT DIRECTORS AND MANAGEMENT IN DETERMINING EXECUTIVE
COMPENSATION
For compensation purposes, our executive officers consist of the three
executive officers named in the Summary Compensation Table. The Independent
Directors approve all key elements of our executive compensation and benefit
programs for the named executive officers. In addition, they assess our
financial performance and capital position compared to our plan in determining
future awards under the plans. Finally, the Independent Directors approve all
salary increases, cash bonus amounts, equity grants, employment, severance, or
change of control agreements and all benefit programs as they apply to the named
executive officers.
COMPENSATION POLICY REGARDING NAMED EXECUTIVE OFFICERS
Each element of compensation is described below. Generally, the mix of pay
elements, including salary and annual cash bonus, long-term incentive and equity
opportunity, benefits and perquisites, are designed to address the needs of our
company and reflect the competitive marketplace. We review the mix and
allocation to individuals regularly, but maintain a flexible policy to deliver
compensation that motivates, retains and rewards our executives. In executing
this policy, the Independent Directors consider a variety of factors, applying
its collective judgment where appropriate, against a frame of reference that the
total pay opportunity should be generally competitive.
11
BASE SALARIES
In general, we target base salaries at competitive levels relative to
executive officers in comparable positions in our industry, taking into account
the comparable responsibilities of the executive officers involved. Where the
responsibilities of executive positions are different from those typically found
among other bank holding companies or banks, or where executives are new to
their responsibilities or play a particularly critical role, base salaries may
be targeted above or below median competitive levels. In determining salaries,
the Independent Directors also take into account individual leadership,
integrity and vision, experience and performance relative to other executive
officers in comparable positions. We believe the named executive officers'
salaries reported in the Summary Compensation Table are in keeping with this
philosophy.
ANNUAL NON-EQUITY INCENTIVE AWARDS
For 2006, the Independent Directors determined the cash awards for the
named executive officers which represent, in their view, a generally competitive
level of bonus for corporate and individual performance. This amount is set for
each individual and position so that, along with base salary, the executive's
total cash pay would be comparable to the cash compensation of executives of
similarly sized companies in our industry.
ANNUAL INCENTIVE PERFORMANCE GOALS AND MEASURES
At the beginning of each year, the Independent Directors review our
business plan and budgets for the coming year. Historically and in 2006, the
targets for performance are measured by the (i) management of our loan
portfolio, loan products and underwriting standards, (ii) management of our
investment activities and portfolio of investment securities, (iii) integration
of new bank branches, (iv) integration of new technologies and information
systems, (v) safety and soundness of the bank, (vi) financial performance to
budget, and (vii) growth in stockholders' equity. The annual incentive portion
of total compensation is designed to reward executives for meeting these
objectives which we believe are the important drivers for the long-term success
of our company.
At year end, the Independent Directors review performance against these
objectives and apply more judgmental factors, which reflect actual achievements
in such areas as the quality of earnings, risk positioning and strategic
positioning of our portfolio of loans and investment securities. The effect of
market and industry conditions, interest rates and the economy in general on
performance is also considered. Total payouts may be adjusted up or down based
on this assessment.
Based on their assessment of each executive officer's performance for the
year relative to our plan, their judgment on the appropriate effect of any of
the factors discussed above and any individual performance adjustments, the
Independent Directors make a decision on the actual bonus to be paid to such
executive officer for the year. The decision is based in part upon
recommendations made by the Chief Executive Officer and the named executive
officer's immediate superior, if not the Chief Executive Officer.
Further detail on individual annual bonus payments made to the named
executive officers is provided in the Summary Compensation Table and its
accompanying narrative.
LONG-TERM AND INCENTIVE AWARDS
We provide periodic, but not annual, long-term equity incentives through
our 1999 Stock Incentive Plan which was approved by our stockholders. Equity
incentives in past years provided for long-term compensation opportunities for
the named executive officers in the form of a fair market value stock option
grant.
12
STOCK OPTIONS
We intend that the value of any future stock options we grant be measured
by the fair value of the option at grant date under Financial Accounting
Standard No. 123(R) ("FAS 123(R)"). We believe that periodic, not annual, stock
option grants best link executive compensation to the interests of our
stockholders. The value realizable from this type of award is solely dependent
on the increase in our stock price over the term of the options, after which the
options expire. Our practice in regard to stock options and other equity grants
is that such grants are typically made to existing executives on a periodic
basis, with possible exceptions for new hires, promotions or special retention
awards. The Independent Directors review management recommendations as to stock
option grants to employees below the named executive officer level.
Typically, stock option awards are approved in advance and they are
effective on a future pre-selected date. We do not select stock option grant
dates for executives in coordination with the release of material, non-public
information, or time the release of such information because of option grant
dates. Historically, we have awarded non-qualified stock options which vest in
full one year from the date of the award and expire five years thereafter.
RESTRICTED STOCK
We have not used restricted stock grants in the past, though we may do so
in the future. Restricted stock, unlike a stock option, is an outright grant of
common stock in which ownership vests over a period of time. If restricted stock
is granted, then, throughout the vesting period holders of restricted stock
would have the right to vote their restricted shares and to receive dividends.
POLICY ON POST-TERMINATION BENEFITS
Our policy on executive post-termination benefits is to review each
situation as it arises. We seek to provide fair and appropriate treatment to all
of our employees depending upon the termination situation.
CHANGE OF CONTROL TERMINATION POLICIES
We have no change of control agreements with any of our employees.
RETIREMENT PLAN
Substantially all full-time employees are eligible to participate in the
Berkshire Bancorp Inc. Retirement Income Plan after one year of employment. We
believe that retirement plan benefits are an integral part of compensation of
our executive officers and other employees. We provide these benefits in order
to make an income stream available to the recipients that will assist in meeting
their post-retirement needs. Benefits are determined by compensation and years
of service. Further detail regarding the retirement plan is provided in the
Pension Benefits Table and accompanying discussion.
DEFERRED COMPENSATION
Certain named executives are eligible to participate in the Deferred
Compensation Plan of The Berkshire Bank. This plan, adopted in July 2006, is
designed to allow executives to defer base salary and annual incentives until a
future date. The interest rates at which these deferrals accrue are not
guaranteed and we believe are in line with competitive practice in our industry.
Further detail on the interest rates we pay is provided in the Nonqualified
Deferred Compensation Table and accompanying discussion.
13
PERQUISITES AND OTHER BENEFITS
We do not provide perquisites of any kind to our named executive officers.
However, our executives are eligible to participate in the benefit plans
available to all of our employees.
NON-EMPLOYEE DIRECTOR COMPENSATION
In 2006, the Independent Directors reviewed the components of our
non-employee director compensation program and recommended to the Board that it
remain unchanged. A further review will be undertaken in 2007 to assure that
director pay remains appropriate. Details regarding director compensation is
provided in the Director Compensation Table and accompanying discussion.
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") disallows a tax deduction for compensation in excess of $1 million paid
to our Chief Executive Officer or any of our other named executive officers
whose total compensation is required to be reported. However, performance-based
compensation that satisfies the requirements of Section 162(m) is deductible. We
intend to establish and administer executive officer compensation programs that
are deductible. However, we may award compensation from time to time that is not
fully tax deductible if we determine that such awards are consistent with our
philosophy and in the best interests of our stockholders.
Section 409A of the Code provides that amounts deferred under nonqualified
deferred compensation plans are included in an employee's income when they vest
unless specified requirements are met. If these requirements are not met,
employees are also subject to an additional income tax and interest penalties.
Our nonqualified deferred compensation plans are intended to meet, and will be
amended to meet, these requirements. As a result, our employees will be taxed
when the deferred compensation is actually paid to them and we will be entitled
to a tax deduction at that time.
Section 280G of the Code disallows a company's tax deduction for what are
defined as "excess parachute payments," and Section 4999 imposes a 20% excise
tax on any person who receives excess parachute payments. None of our named
executive officers are entitled to such payments upon termination of their
employment, including termination following a change of control of our company.
We do not have change of control agreements with any of our named executive
officers.
Our stock awards generally accelerate in the event of a change of control
and qualifying termination of employment. This acceleration could contribute to
potential excess parachute payments.
ACCOUNTING CONSIDERATIONS
Stock options, restricted stock, and performance shares are accounted for
based on their grant date fair value, as determined under FAS 123R. We consider
the accounting expense as well as the cash expense of all programs as part of
our design and review criteria.
14
REPORT ON EXECUTIVE COMPENSATION
The independent directors have reviewed and discussed the Compensation
Discussion and Analysis set forth in this Proxy Statement with our management;
and
Based on such review and discussions the Independent Directors recommended
to our Board of Directors that the Compensation Discussion and Analysis be
included in this Proxy Statement.
William L. Cohen
Martin A. Fischer
Randolph B. Stockwell
EXECUTIVE COMPENSATION
The following table shows the compensation paid in or with respect to the
last fiscal year to the individual who served as our Chief Executive Officer and
Chief Financial Officer for the fiscal year ended December 31, 2006, and to each
of the other executive officers of the Bank whose total compensation was more
than $100,000 during the fiscal year ended December 31, 2006 (our "named
executive officers").
SUMMARY COMPENSATION TABLE
CHANGE IN
PENSION VALUE
AND
NONQUALIFIED
DEFERRED
COMPENSATION ALL OTHER
NAME AND PRINCIPAL SALARY BONUS EARNINGS COMPENSATION TOTAL
POSITION YEAR $ $ $ $ $
Steven Rosenberg 2006 200,000 25,000 232,267 -- 457,267
President, Chief Executive
Officer and Chief Financial
Officer
Moses Krausz 2006 422,130 250,000 -- 11,424 683,554
President and Chief
Executive Officer of The
Berkshire Bank
David Lukens 2006 174,000 25,000 11,996 7,658 218,654
Executive Vice President
and Chief Financial Officer
of The Berkshire Bank
15
NARRATIVE SUMMARY COMPENSATION TABLE
Mr. Rosenberg does not have an employment agreement with us. The amounts
reported for Change in Pension Value and Nonqualified Deferred Compensation
Earnings includes only the change in the value of his benefit payable under our
Retirement Income Plan. Mr. Rosenberg does not participate in the Bank's 401(k)
Plan or its Deferred Compensation Plan.
Mr. Krausz has an employment agreement with us. The agreement expires on
April 20, 2008 unless automatically renewed for up to three additional years as
provided for in the agreement. The agreement provides for the payment to Mr.
Krausz of a specified base salary with fixed annual increases, the payment of a
discretionary bonus and participation in our employee benefit plans. There are
no change in control provisions in Mr. Krausz's employment agreement. Mr. Krausz
is a participant in the Bank's 401(k) Plan and its Deferred Compensation Plan.
The amounts reported in All Other Compensation consists of contributions we made
to Mr. Krausz's 401(k) account of $6,600, income associated with life insurance
coverage and aggregate earnings on the Deferred Compensation Plan.
Mr. Lukens has an employment agreement with us. The agreement will expire
on June 30, 2008 unless automatically renewed for up to three additional years
as provided for in the agreement. The agreement provides for the payment to Mr.
Lukens of a base salary and annual bonus, and participation in our employee
benefit plans. There are no change in control provisions Mr. Lukens' employment
agreement. The amounts reported for Change in Pension Value and Nonqualified
Deferred Compensation Earnings includes only the change in the value of Mr.
Luken's benefit payable under our Retirement Income Plan. Mr. Lukens is a
participant in the Bank's 401(k) Plan and its Deferred Compensation Plan. The
amounts reported in All Other Compensation consists of contributions we made to
Mr. Lukens' 401(k) account of $5,970, income associated with life insurance
coverage and aggregate earnings on the Deferred Compensation Plan.
16
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR ENDED DECEMBER 31, 2006
There were no grants of awards made to any of our named executive officers
in 2006 under any non-equity or equity incentive plan.
The following table sets forth certain information regarding equity-based
awards held by each of our named executive officers as of December 31, 2006.
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2006
----------------------------------------------------------------------------
OPTION AWARDS
----------------------------------------------------------------------------
EQUITY INCENTIVE
NUMBER OF NUMBER OF PLAN AWARDS:
SECURITIES SECURITIES NUMBER OF
UNDERLYING UNDERLYING SECURITIES
UNEXERCISED UNEXERCISED UNDERLYING OPTION
OPTIONS OPTIONS UNEXERCISED EXERCISE OPTION
(#) (#) UNEARNED OPTIONS PRICE EXPIRATION
NAME EXERCISABLE UNEXERCISABLE (#) $ DATE
Steven Rosenberg 30,000 -- -- 10.00 07/31/07
Moses Krausz 60,000 -- -- 10.00 07/31/07
David Lukens 15,000 -- -- 10.00 07/31/07
----------------------------------------------------------------------------
STOCK AWARDS
----------------------------------------------------------------------------
EQUITY
INCENTIVE PLAN
AWARDS:
MARKET OR
EQUITY INCENTIVE PAYOUT VALUE OF
NUMBER OF PLAN AWARDS: UNEARNED
SHARES OR NUMBER OF UNEARNED SHARES, UNITS,
UNITS OF MARKET VALUE OF SHARES, UNITS, OR OR OTHER RIGHTS
STOCK THAT SHARES OR UNITS OF OTHER RIGHTS THAT THAT HAVE NOT
HAVE NOT STOCK THAT HAVE NOT HAVE NOT VESTED VESTED
VESTED VESTED (#) (#)
NAME (#) (#)
Steven Rosenberg -- -- -- --
Moses Krausz -- -- -- --
David Lukens -- -- -- --
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR ENDED DECEMBER 31, 2006
The following table sets forth certain information regarding option
exercises by our named executive officers during the year ended December 31,
2006.
-------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
-------------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES
ACQUIRED ON ACQUIRED ON
EXERCISE VALUE REALIZED ON VESTING VALUE REALIZED ON
(#) EXERCISE (1) (#) VESTING
NAME ($) ($)
Steven Rosenberg -- -- -- --
Moses Krausz -- -- -- --
David Lukens 5,000 28,083 -- --
(1) Calculated based upon the closing sale price of our common stock on the date
of exercise less the exercise price for such shares, but excluding any tax
obligation incurred by the named executive officer in connection with the
exercise.
17
1999 STOCK INCENTIVE PLAN
Our 1999 Stock Incentive Plan permits the granting of awards in the form of
nonqualified stock options, incentive stock options, restricted stock, deferred
stock, and other stock-based incentives. Up to 600,000 shares of our common
stock may be issued pursuant to the 1999 Stock Incentive Plan (subject to
appropriate adjustment in the event of changes in our corporate structure).
Officers, directors and other key employees of us or any of our subsidiaries are
eligible to receive awards under the 1999 Stock Incentive Plan. The option
exercise price of all options which are granted under the 1999 Stock Incentive
Plan must be at least equal to 100% of the fair market value of a share of
common stock of the Company on the date of grant. At December 31, 2006, options
to acquire 557,757 shares of our common stock have been granted under this plan,
185,878 options are outstanding and exercisable, and 42,243 options are
available for future grants.
POST-EMPLOYMENT COMPENSATION
PENSION BENEFITS
NUMBER OF PRESENT VALUE PAYMENTS
YEARS CREDITED OF ACCUMULATED DURING LAST
SERVICE BENEFIT FISCAL YEAR
NAME PLAN NAME (#) ($) ($)
Steven Rosenberg Retirement Income Plan 15.7 1,063,312 --
David Lukens Retirement Income Plan 6.0 57,953 --
RETIREMENT INCOME PLAN. Our Retirement Income Plan is a noncontributory defined
benefit plan covering substantially all of our full-time, non-union United
States employees. Under the Retirement Income Plan, our benefits were based upon
a combination of employee compensation and years of service. We paid the entire
cost of the plan for our employees and funded such costs as they accrued. Our
funding policy was to make annual contributions within minimum and maximum
levels required by applicable regulations. Our customary contributions were
designed to fund normal cost on a current basis and fund over 30 years the
estimated prior service cost of benefit improvements (15 years of annual gains
and losses). The projected unit cost method was used to determine the annual
cost. Plan assets consist principally of equity and fixed income mutual funds.
Benefit accruals were frozen as of September 15, 1988, resulting in a plan
curtailment. As a result of such curtailment, we did not accrue benefits for
future services; however, we did continue to contribute as necessary for any
unfunded liabilities. In 2000, we reinstated the Retirement Income Plan to cover
substantially all of our full-time, non-union United States employees.
Except for Mr. Rosenberg whose benefit is subject to the laws governing the
Retirement Income Plan, a participant in the Retirement Income Plan accumulates
a balance in his or her retirement account by receiving: (i) an annual
retirement credit of 5% of gross wages paid during the year, but not in excess
of the applicable annual maximum compensation permitted to be taken into account
under Internal Revenue Service guidelines for each year of service; and (ii) an
annual interest credit based upon the 30-year U. S. Treasury securities rate. We
pay the entire cost of the Retirement Income Plan for our employees and fund
such costs as they accrue.
Our plan provides for a normal retirement age of 65. However, the estimated
annual unreduced benefits payable under the Retirement Income Plan upon earlier
retirement at age 62 for Messrs. Rosenberg and Lukens are approximately $160,000
and $16,000, respectively. In accordance with the laws currently governing the
Retirement Income Plan, the estimated annual benefit payable to Mr. Rosenberg is
not expected to increase. Mr. Krausz is not a participant in the Retirement
Income Plan.
18
NONQUALIFIED DEFERRED COMPENSATION
EXECUTIVE REGISTRANT AGGREGATE AGGREGATE AGGREGATE BALANCE
CONTRIBUTIONS IN CONTRIBUTIONS IN EARNINGS IN FISCAL WITHDRAWALS/ AT DECEMBER 31,
FISCAL YEAR 2006 FISCAL YEAR 2006 YEAR 2006 DISTRIBUTIONS 2006
$ $ $ $ $
NAME PLAN NAME
Moses Krausz Deferred Compensation Plan 7,000 -- 75 -- 7,075
David Lukens Deferred Compensation Plan 2,610 -- 28 -- 2,638
-------------------
All of the amounts reported under the caption Registrant's Contributions
and Aggregate Earnings in Fiscal 2006 have also been reported in the Summary
Compensation Table for fiscal 2006. None of the amounts reported in Aggregate
Balance at December 31, 2006 were reported as compensation to the named
executive officer in our Summary Compensation Tables of previous years.
DEFERRED COMPENSATION PLAN. The Bank's deferred compensation plan was
established in July 2006 to provide for a systematic method by which key
employees of the Bank may defer payment of not less than 3% and not more than
50% of his or her compensation that would otherwise be payable during the year.
The Deferred Compensation Plan is intended to be a nonqualified and unfunded
plan maintained primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees pursuant to
Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income
Security Act of 1974, as amended.
On June 30 and December 31 of each year, account balances are credited with
the applicable earnings rate, the highest deposit rate paid by the Bank on its
generally available interest bearing deposit accounts (excluding time deposits),
in effect at that time. Distributions from the Deferred Compensation Plan may be
made upon (i) termination of employment, (ii) an unforeseeable emergency, (iii)
death, (iv) disability, as defined under Section 409A of the Code and (v) a
Change in Control Event, to the extent such Change in Control Event constitutes
permissible payment under Section 409A of the Code.
19
COMPENSATION OF DIRECTORS
DIRECTOR COMPENSATION FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006.
CHANGE IN
PENSION VALUE
AND
NONQUALIFIED
FEES EARNED NON-EQUITY DEFERRED
OR PAID IN STOCK OPTION INCENTIVE PLAN COMPENSATION ALL OTHER
CASH AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
NAME $ $ $ $ $ $ $
William L. Cohen 32,500 -- -- -- -- -- 32,500
Moses Marx 26,500 -- -- -- -- -- 26,500
Martin A. Fischer (a) 3,083 -- -- -- -- -- 3,083
Thomas V. Guarino (b) 28,416 -- -- -- -- -- 28,416
Randolph B. Stockwell 30,500 -- -- -- -- -- 30,500
Each director who is not also an employee receives a stipend of $25,000 per
annum and $1,500 for each day during which he participates in a meeting of the
Board or a Committee of the Board. Each of these directors also receives a fee
of $1,000 for telephonic meetings of the Board or a Board Committee. In
addition, see "1999 Stock Incentive Plan" above.
-------------------
(a) Mr. Fischer was elected to the Board on December 7, 2006.
(b) Mr. Guarino resigned from the Board effective August 31, 2006.
(c) Messrs. Cohen, Marx and Stockwell each own stock options for 3,000 shares
of the our common stock.
(d) Mr. Fischer owns stock options for 1,500 shares of our common stock.
EQUITY COMPENSATION PLANS
The following table details information regarding our existing equity
compensation plans as of December 31, 2006.
(c)
NUMBER OF SECURITIES
(a) (b) REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
BE ISSUED UPON EXERCISE EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a)
------------- ----------------------- -------------------- -------------------------
Equity compensation 185,878 $ 9.76 42,243
plans approved by
security holders
Equity compensation -- -- --
plans not approved by
security holders
Total 185,878 $ 9.76 42,243
20
REPORT OF THE AUDIT COMMITTEE
The Audit Committee (the "Audit Committee") of the Company is comprised of
three independent directors and operates under a written charter adopted by the
Board.
The primary function of the Audit Committee is to provide advice with
respect to the Company's financial matters and to assist the Board of Directors
in fulfilling its oversight responsibilities regarding finance, accounting, tax
and legal compliance. The Audit Committee's primary duties and responsibilities
are to:
a. Periodically assess the integrity of the Company's financial reporting
process and systems of internal control regarding accounting.
b. Select the Company's outside auditors and periodically assess their
independence and performance.
c. Provide an avenue of communication among the Company's independent
accountants, management and the Board of Directors.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.
The Audit Committee held six meetings during fiscal year 2006. During these
meetings, the Audit Committee reviewed and discussed the Company's financial
statements with management and Grant Thornton LLP ("Grant Thornton"), its
independent certified public accountants.
The Audit Committee reviewed and discussed the audited financial statements
of the Company for the fiscal year ended December 31, 2006 with the Company's
management and management represented to the Audit Committee that the Company's
financial statements were prepared in accordance with accounting principles
generally accepted in the United States of America. The Audit Committee
discussed with Grant Thornton matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees).
The Audit Committee received the written disclosures and conforming letter
from Grant Thornton required by Independence Standards Board Standard No. 1
(Independence Discussion with Audit Committees), and the Audit Committee
discussed with Grant Thornton their independence from the Company. It considered
the non-audit services provided by Grant Thornton and determined that the
services provided are compatible with maintaining Grant Thornton's independence.
Based on the Audit Committee's discussions with management and Grant
Thornton LLP and the Audit Committee's review of the representations of
management and the report of Grant Thornton LLP to the Audit Committee, the
Audit Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2006 for filing with the Securities and
Exchange Commission.
THE AUDIT COMMITTEE
RANDOLPH B. STOCKWELL (CHAIRMAN)
WILLIAM L. COHEN
MARTIN A. FISCHER
21
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
presented at the Annual Meeting, but if any such matters properly come before
the Annual Meeting, the persons holding the accompanying proxy will vote in
accordance with their judgment.
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Grant Thornton LLP has audited and reported upon the financial statements
of the Company for the fiscal year ended December 31, 2006. It is currently
anticipated that Grant Thornton LLP will be selected by the Audit Committee of
the Board of Directors to examine and report upon our financial statements for
the fiscal year ending December 31, 2007. A representative of Grant Thornton LLP
is expected to be present at the Annual Meeting with the opportunity to make a
statement if he or she desires to do so and is expected to be available to
respond to appropriate questions.
The total fees paid to Grant Thornton for the last two fiscal years are as
follows:
FISCAL YEAR ENDED FISCAL YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
----------------- -----------------
AUDIT FEES: $ 281,540 $ 168,581
AUDIT RELATED FEES: Professional services $ -- $ 26,959
rendered for employee benefit plan audits,
accounting assistance in connection with
acquisitions and consultations related to
financial accounting and reporting standards
TAX FEES: Tax consulting, preparation of returns $ 68,200 $ 57,160
ALL OTHER FEES: Professional services rendered $ -- $ --
for corporate support
The Audit Committee has established its pre-approval policies and
procedures, pursuant to which the Audit Committee approved the foregoing audit
and permissible non-audit services provided by Grant Thornton LLP in 2006.
Consistent with the Audit Committee's responsibility for engaging the Company's
independent auditors, all audit and permitted non-audit services require
pre-approval by the Audit Committee. The full Audit Committee approves proposed
services and fee estimates for these services. The Audit Committee chairperson
has been designated by the Audit Committee to approve any audit and permissible
non-audit services arising during the year that were not pre-approved by the
Audit Committee and services that were pre-approved. Services approved by the
Audit Committee chairperson are communicated to the full Audit Committee at its
next regular quarterly meeting and the Audit Committee reviews services and fees
for the fiscal year at each such meeting. Pursuant to these procedures, the
Audit Committee approved the foregoing audit and permissible non-audit services
provided by Grant Thornton LLP.
22
SUBMISSION OF STOCKHOLDER PROPOSALS
A stockholder proposal that complies with all of the applicable
requirements under Rule 14a-8 of the Exchange Act and any other applicable
regulation or statute must be received by the Company on or prior to December
18, 2007 at the address of the Company set forth on the first page of this Proxy
Statement in order to be eligible for inclusion in the Company's proxy statement
for the 2008 Annual Meeting of Stockholders. Any such proposal should be
directed to the Secretary or Assistant Secretary of the Company.
In accordance with Rules 14a-4(c) and 14a-5(e) promulgated under the
Exchange Act, the Company hereby notifies its stockholders that it did not
receive notice of any proposed matter to be submitted for stockholder vote at
the Annual Meeting and, therefore, any proxies received in respect of the Annual
Meeting will be voted in the discretion of the Company's management on any other
matters which may properly come before the Annual Meeting. The Company further
notifies its stockholders that if the Company does not receive notice by March
6, 2008 of a proposed matter to be submitted by a stockholder for stockholders
vote at the 2008 Annual Meeting of Stockholders, then any proxies held by
persons designated as proxies by the Company's Board of Directors in respect of
such Annual Meeting may be voted at the discretion of such persons on such
matter if it shall properly come before such Annual Meeting.
By Order of the Board of Directors
Emanuel J. Adler
Secretary
Dated: April 16, 2007
23
EXHIBIT A
AUDIT COMMITTEE CHARTER
FOR
BERKSHIRE BANCORP INC.
Purpose
The Audit Committee (the "Committee") is appointed by the Board of Directors
(the "Board"). The Committee's primary purpose is to assist the Board in
fulfilling its oversight responsibilities with respect to:
a. The integrity of the Company's financial reporting process and systems
of internal controls regarding accounting; and
b. The independence and qualifications of the Company's outside auditors.
In addition, the Committee will assist in providing an avenue of communication
among the outside auditors, management and the Board.
Composition
The Committee shall have at least three (3) members, comprised solely of
independent directors as such term is defined in Rule 4200 of the National
Association of Securities Dealers, Inc. ("NASD") listing standards, or any
successor rule, subject to the exception in Rule 4350 of the NASD listing
standards, or any successor rule, and subject to the effective dates and any
transition periods contained in such listing standards.
Each member of the Committee shall be able to read and understand fundamental
financial statements, including the Company's balance sheet, income statement
and cash flow statement. In addition, at least one member of the Committee shall
have past experience in finance or accounting, requisite professional
certification in accounting or any other comparable background which results in
the individual's financial sophistication, including being or having been a
chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.
The Board shall elect or appoint a chairman of the Committee who will have
authority to act on behalf of the Committee between meetings.
Responsibilities and Authority
The responsibilities and authority of the Committee are as follows:
a. The Committee shall review and reassess the adequacy of this Charter
annually.
b. The Committee shall have sole authority to appoint, determine funding
for and oversee the outside auditors as set forth in Section 10A(m)(2)
of the Securities Exchange Act of 1934.
24
c. The Committee shall engage in a dialogue with the outside auditor with
respect to any disclosed relationships or services that, in the view
of the Committee, may impact the objectivity and independence of the
outside auditor.
d. The Committee shall receive from the Company's outside auditor, at
least annually, a formal written statement delineating all
relationships between the outside auditor and the Company, consistent
with Independence Standards Board Standard 1, or any successor
standard.
e. The Committee, in consultation with the outside auditor and management
of the Company, shall review the engagement of the outside auditors,
audit scope and procedures to be followed in conducting the annual
audit of the Company's financial statements.
f. The Committee shall review the Company's annual audited financial
statements prior to the inclusion of the audited financial statements
in the Company's filings with the SEC. In addition, the Committee will
discuss any items required to be communicated by the outside auditor
in accordance with Statement on Auditing Standards ("SAS") No. 61, as
amended by SAS No. 91, or any successor standard.
g. The Committee, based upon its review and discussions, shall recommend
to the Board whether or not the audited financial statements shall be
included in the Company's Annual Report on Form 10-K.
h. The Committee shall provide a report to be included in the Company's
annual proxy statement containing such information as may be required
by applicable law or regulation.
i. The Committee shall have the responsibility to establish procedures
for complaints as set forth in Section 10A(m)(4) of the Securities
Exchange Act of 1934.
j. The Committee shall have the authority to pre-approve all audit
services and any non-audit services to be performed by the outside
auditors that are permissible under Section 10A(i)of the Securities
Exchange Act of 1934 or any successor rule.
k. The Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it shall have
direct access to the outside auditors, with or without management
being present, as well as anyone in the Company.
l. The Committee may retain, at the Company's expense, legal, accounting
or other consultants or experts it deems to be necessary in the
performance of its duties as set forth in Section 10(A)m(2) of the
Securities Exchange Act of 1934.
m. The Committee may act as a qualified legal compliance committee as
defined in 17CFR Part 205.2.
25
n. The Committee shall perform such other activities and make such other
recommendations to the Board on such matters, within the scope of its
functions and consistent with this Charter, as may come to its
attention and which in its discretion warrant consideration by the
Board.
Delegation
Any responsibility or authority of the audit committee, including, but not
limited to, the authority to preapprove all audit and permitted non-audit
services, may be delegated to one or more members of the Committee.
Limitations
The Committee is responsible for the duties set forth in this Charter but is not
responsible for either the preparation of the financial statements or the
auditing of the financial statements. Management has the responsibility for
preparing the financial statements and implementing internal controls. The
outside auditors have the responsibility for auditing the financial statements
and monitoring the effectiveness of the internal controls. The review of the
financial statements by the Committee is not of the same quality as the audit
performed by the outside auditors and is not an audit. The oversight exercised
by the Committee is not a guarantee that the financial statements will be free
from mistake or fraud. In carrying out its responsibilities, the Committee
believes its polices and procedures should remain flexible in order to best
react to a changing environment.
26
BERKSHIRE BANCORP INC.
160 BROADWAY
NEW YORK, NEW YORK 10038
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 17, 2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Steven Rosenberg and Emanuel Adler, and
each of them, as proxies, with full power of substitution in each of them, in
the name, place and stead of the undersigned, to vote at the Annual Meeting of
Stockholders of Berkshire Bancorp Inc. on Thursday, May 17, 2007, at 405
Lexington Avenue, New York, New York, or at any adjournment or adjournments
thereof, according to the number of votes that the undersigned would be entitled
to vote if personally present, upon the following matters:
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE to vote for all nominees listed
CONTRARY BELOW). below.
William L. Cohen, Martin A. Fischer, Moses Krausz, Moses Marx,
Steven Rosenberg and Randolph B. Stockwell
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE BELOW.)
-------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES LISTED ABOVE.
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF
NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED "FOR" ALL BOARD NOMINEES
LISTED IN PROPOSAL 1.
DATED:______________________, 2007 Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
----------------------------------
Signature
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Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.