Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ X ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Security of Pennsylvania Financial Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Security of Pennsylvania Financial Corp.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ X ] No fee required.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
[ ] 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:
N/A
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
N/A
- --------------------------------------------------------------------------------
(3) Filing party:
N/A
- --------------------------------------------------------------------------------
(4) Date filed:
N/A
- --------------------------------------------------------------------------------
<PAGE>
Security of Pennsylvania Financial Corp.
31 West Broad Street
Hazleton, Pennsylvania 18201
(570) 454-0824
September 17, 1999
Fellow Stockholders:
You are cordially invited to attend the 1999 annual meeting of
stockholders (the "Annual Meeting") of Security of Pennsylvania Financial Corp.
(the "Company"), the holding company for Security Savings Association of
Hazleton (the "Association"), Hazleton, Pennsylvania, which will be held on
October 25, 1999 at 3:00 p.m., Eastern Time, at the Association's main office,
31 West Broad Street, Hazleton, Pennsylvania.
The attached Notice of the Annual Meeting and Proxy Statement describe
the business to be transacted at the Annual Meeting. Directors and Officers of
the Company as well as a representative of Parente, Randolph, Orlando, Carey &
Associates, the Company's independent accountants, will be present at the Annual
Meeting to respond to questions that you may have regarding our business.
The Board of Directors of the Company has determined that matters to be
considered at the Annual Meeting are in the best interests of the Company and
its stockholders. For the reasons set forth in the Proxy Statement, the Board of
Directors unanimously recommends that you vote "FOR" each of the nominees as
directors specified under Proposal 1, "FOR" approval of the Security of
Pennsylvania Financial Corp. 1999 Stock-Based Incentive Plan as specified under
Proposal 2, and "FOR" the ratification of the Company's independent accountants
as specified under Proposal 3.
Please sign and return the enclosed proxy card promptly. Your
cooperation is appreciated since a majority of the common stock must be
represented, either in person or by proxy, to constitute a quorum for the
conduct of business at the Annual Meeting.
On behalf of the Board of Directors and all of the employees of the
Company and the Association, I thank you for your continued interest and
support.
Sincerely yours,
/s/Richard C. Laubach
Richard C. Laubach
President and Chief Executive Officer
<PAGE>
Security of Pennsylvania Financial Corp.
31 West Broad Street
Hazleton, Pennsylvania 18201
----------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 25, 1999
----------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Annual Meeting") of Security of Pennsylvania Financial Corp. (the "Company"),
the holding company for Security Savings Association of Hazleton, will be held
on October 25, 1999 at 3:00 p.m., Eastern Time, at the Association's main
office, 31 West Broad Street, Hazleton, Pennsylvania.
The purpose of the Annual Meeting is to consider and vote upon the
following matters:
1. The election of two directors to a three-year term of office;
2. The approval of the Security of Pennsylvania Financial Corp.
1999 Stock-Based Incentive Plan;
3. The ratification of the appointment of Parente, Randolph,
Orlando, Carey & Associates as independent accountants of the
Company for the fiscal year ending June 30, 2000; and
4. Such other matters as may properly come before the meeting and
at any adjournments thereof, including whether or not to
adjourn the meeting.
The Board of Directors has established August 31, 1999 as the record
date for the determination of stockholders entitled to receive notice of and to
vote at the Annual Meeting and at any adjournments thereof. Only record holders
of the common stock of the Company as of the close of business on the record
date will be entitled to vote at the Annual Meeting or any adjournments thereof.
In the event there are not sufficient votes for a quorum or to approve the
proposals presented at the Annual Meeting, the Annual Meeting may be adjourned
in order to permit further solicitation of proxies by the Company. A list of
stockholders entitled to vote at the Annual Meeting will be available at
Security of Pennsylvania Financial Corp., 31 West Broad Street, Hazleton,
Pennsylvania 18201, for a period of ten days prior to the Annual Meeting and
will also be available at the Annual Meeting.
By Order of the Board of Directors
/s/Nancy Latoff
Nancy Latoff
Corporate Secretary
Hazleton, Pennsylvania
September 17, 1999
<PAGE>
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
-----------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
October 25, 1999
-----------------------
Solicitation and Voting of Proxies
This Proxy Statement is being furnished to stockholders of Security of
Pennsylvania Financial Corp. (the "Company") in connection with the solicitation
by the Board of Directors ("the Board of Directors" or the "Board") of proxies
to be used at the annual meeting of stockholders (the "Annual Meeting"), to be
held on October 25, 1999, at 3:00 p.m., Eastern Time, at the main office of
Security Savings Association of Hazleton, 31 West Broad Street, Hazleton,
Pennsylvania, and at any adjournments thereof. The 1999 Annual Report to
Stockholders, including the consolidated financial statements of the Company for
the fiscal year ended June 30, 1999, accompanies this Proxy Statement, which is
first being mailed to stockholders on or about September 17, 1999.
Regardless of the number of shares of common stock owned, it is
important that all stockholders be represented by proxy or in person at the
Annual Meeting. Stockholders are requested to vote by completing the enclosed
proxy card and returning it signed and dated in the enclosed postage-paid
envelope. Stockholders are urged to indicate their vote in the spaces provided
on the proxy card. Proxies solicited by the Board of Directors of the Company
will be voted in accordance with the directions given. Where no instructions are
indicated, signed proxy cards will be voted "FOR" the election of the nominees
for director named in this Proxy Statement, "FOR" the approval of the Security
of Pennsylvania Financial Corp. 1999 Stock-Based Incentive Plan (the "Incentive
Plan"), and "FOR" the ratification of Parente, Randolph, Orlando, Carey &
Associates as independent accountants of the Company for the fiscal year ending
June 30, 2000.
Other than the matters listed on the attached Notice of Annual Meeting
of Stockholders, the Board of Directors knows of no additional matters that will
be presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares in accordance with their best judgment on any other business that may
properly come before the Annual Meeting and at any adjournments thereof,
including whether or not to adjourn the Annual Meeting.
A proxy may be revoked at any time prior to its exercise by filing a
written notice of revocation with the Corporate Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
stockholder whose shares are not registered in your own name, you will need
appropriate documentation from your record holder to attend the Annual Meeting
and vote personally at the Annual Meeting.
The cost of solicitation of proxies on behalf of the Board will be
borne by the Company. In addition to the solicitation of proxies by mail, Regan
& Associates, Inc., a proxy solicitation firm, will assist the Company in
soliciting proxies for the Annual Meeting and will be paid a fee of $3,500, plus
out-of-pocket expenses. Proxies may also be solicited personally or by telephone
by directors, officers and other employees of the Company and its subsidiary,
Security Savings Association of Hazleton (the "Association"), without additional
compensation therefor. The Company will also request persons, firms and
corporations
1
<PAGE>
holding shares in their names, or in the name of their nominees, which are
beneficially owned by others, to send proxy material to, and obtain proxies
from, the beneficial owners, and will reimburse those record holders for their
reasonable expenses in doing so.
Voting Securities
The securities which may be voted at the Annual Meeting consist of
shares of common stock of the Company ("Common Stock"), with each share
entitling its owner to one vote on all matters to be voted on at the Annual
Meeting.
The close of business on August 31, 1999, has been fixed by the Board
of Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of, and to vote at, the Annual Meeting
and at any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 1,587,000 shares.
As provided in the Company's Certificate of Incorporation, stockholders
who beneficially own, either directly or indirectly, in excess of 10% of the
Company's outstanding shares (the "Limit") are not entitled to any vote in
respect of the shares beneficially owned in excess of the Limit, and shares held
in excess of the Limit are not treated as outstanding for voting purposes. The
Company's Certificate of Incorporation authorizes the Board of Directors: (i) to
make all determinations necessary to implement and apply the Limit, including
determining whether persons or entities are acting in concert; and (ii) to
demand that any person who is reasonably believed to beneficially own stock in
excess of the Limit to supply information to the Company to enable the Board of
Directors to implement and apply the Limit.
The presence, in person or by proxy, of the holders of record of at
least a majority of the total number of shares of Common Stock entitled to vote
is necessary to constitute a quorum at the Annual Meeting. If you return valid
proxy instructions or attend the meeting in person, your shares will be counted
for purposes of determining whether there is a quorum, even if you abstain from
voting. Broker non-votes also will be counted for purposes of determining the
existence of a quorum. A broker non-vote occurs when a broker, bank or other
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received voting instructions from the
beneficial owner. In the event that there are not sufficient votes for a quorum
or to approve or ratify any proposal at the time of the Annual Meeting, the
Annual Meeting may be adjourned in order to permit the further solicitation of
proxies.
As to the election of directors (Proposal 1), you may vote "FOR" the
election of the nominees proposed by the Board, or "WITHHOLD" authority to vote
for one or more of the nominees being proposed. Directors are elected by a
plurality of votes cast at the Annual Meeting. This means that the nominees
receiving the greatest number of votes will be elected. Broker non-votes or
proxies as to which authority to vote for one or more of the nominees being
proposed is withheld will have no effect on the outcome of the election.
As to the proposed approval of the Incentive Plan (Proposal 2) and as
to the ratification of Parente, Randolph, Orlando, Carey & Associates as
independent accountants of the Company (Proposal 3) and all other matters that
may properly come before the Annual Meeting, you may vote (i) "FOR" the item,
(ii) "AGAINST" the item, or (iii) "ABSTAIN" from voting on such item.
2
<PAGE>
An affirmative vote of the holders of a majority of the votes cast at
the Annual Meeting on Proposal 2 and Proposal 3 is required for approval of each
such Proposal. Shares underlying broker non-votes, shares in excess of the Limit
and abstentions will not be counted as votes cast and will have no effect on the
vote.
Proxies solicited by the Proxy Statement are to be returned to the
Company's transfer agent, Registrar and Transfer Company. The Board of Directors
has designated Registrar and Transfer to act as the inspector of election and
tabulate the votes at the Annual Meeting. Registrar and Transfer is not
otherwise employed by or affiliated with the Company. After the final
adjournment of the Annual Meeting, the proxies will be returned to the Company.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to those persons
disclosed in certain reports filed by such persons with the Securities and
Exchange Commission (the "SEC"), in accordance with Sections 13(d) and 13(g) of
the Securities Exchange Act of 1934 ("Exchange Act") or believed by management
to be beneficial owners of more than 5% of the Company's outstanding shares of
Common Stock on the Record Date. The Company is not aware of any other person,
as such term is defined in the Exchange Act, that owns more than 5% of the
Company's Common Stock as of the Record Date.
<TABLE>
<CAPTION>
Name and Address Number Percent
Title of Class of Beneficial Owner of Shares of Class
- -------------- ---------------------- ----------- ---------
<S> <C> <C> <C>
Common Stock Security Savings Association of 126,960(1) 8.0 %
Hazleton Employee Stock Ownership
Plan and Trust (the "ESOP")
31 West Broad Street
Hazleton, Pennsylvania 18201
</TABLE>
- -----------------------------
(1) Shares of Common Stock were acquired by the ESOP in the Association's
Conversion. First Bankers Trust, N.A. has been appointed as the corporate
trustee for the ESOP (the "ESOP Trustee"). The ESOP Trustee, subject to its
fiduciary duty, must vote all allocated shares held in the ESOP in
accordance with the instructions of the participants. As of the Record
Date, 896 shares had been allocated under the ESOP. Under the ESOP,
unallocated shares and allocated shares as to which voting instructions are
not given by participants are to be voted by the ESOP Trustee in a manner
calculated to most accurately reflect the instructions received from
participants regarding the allocated stock so long as such vote is in
accordance with the provisions of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
Interest of Certain Persons in Matters to be Acted Upon
While no specific determinations have been made, it is anticipated
that, assuming stockholder approval, once the Incentive Plan is implemented in
December 1999, the Company will grant directors, officers and employees of the
Association and the Company, stock options and awards in the form of shares of
Common Stock under the Incentive Plan being presented for approval in Proposal
2.
3
<PAGE>
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of eight (8)
directors and is divided into three classes. Each of the eight members of the
Board of Directors also presently serves as a director of the Association.
Directors are elected for staggered terms of three years each, with the term of
office of only one of the three classes of directors expiring each year.
Directors serve until their successors are elected and qualified.
The two nominees proposed for election at the Annual Meeting are
Richard C. Laubach and John J. Raynock. No person being nominated as a director
is being proposed for election pursuant to any agreement or understanding
between any such person and the Company.
Unless authority to vote for the directors is withheld, the shares
represented by the enclosed proxy card, if it is signed and returned, will be
voted "FOR" the election of all nominees proposed by the Board of Directors. If
any nominee is unable to serve or declines to serve for any reason, it is
intended that proxies will be voted for such other persons as may be designated
by the present Board of Directors. Alternatively, the Board of Directors may
adopt a resolution to reduce the size of the Board. The Board of Directors has
no reason to believe that any of the persons named will be unable or unwilling
to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL
NOMINEES NAMED IN THIS PROXY STATEMENT.
Information with Respect to Nominees, Continuing Directors and
Certain Executive Officers
The following table sets forth, as of the Record Date, the names of
nominees and continuing directors, their ages, a brief description of their
recent business experience, including present occupations and employment, the
year in which each became a director of the Association and the year in which
their terms (or, in the case of nominees, their proposed terms) as director of
the Company expire. This table also sets forth the amount of Common Stock and
the percent thereof beneficially owned by each director and all directors and
executive officers as a group as of the Record Date.
4
<PAGE>
<TABLE>
<CAPTION>
Amount and
Expiration Nature of Ownership
Name and Principal Occupation at Director of Term as Beneficial as a Percent
Present and for Past Five Years Age Since(1) Director Ownership(2) of Class
- -------------------------------------------- ------ ---------- ------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
NOMINEES
Richard C. Laubach 61 1989 2002 5,000 *
President and Chief Executive Officer
of the Company and the Association.
John J. Raynock 68 1987 2002 5,000 *
Secretary and treasurer of E & R
Plumbing and Heating Inc.
CONTINUING DIRECTORS
Frederick L. Barletta 65 1983 2000 15,000 *
Former President and Chief Executive
Officer of the Pines Golf Course and
Restaurant in Edgewood, Pennsylvania.
Peter B. Deisroth 61 1980 2000 2,150 *
Manager of Advanced Mailing Service,
a mail fulfillment house, Partner of
Peton Fashions, a retail clothing store,
sole proprietor of Dizzy's Pizza
and Treasurer of the Board of Directors
of the Association.
George J. Hayden 62 1984 2000 15,000 *
President of George J. Hayden, Inc., an
electrical contracting firm and President
of several fast food restaurants.
Joseph E. Lundy 76 1964 2001 3,000 *
Employed in the insurance industry for
over 45 years until his retirement in
1991.
Vincent L. Marusak 76 1972 2001 15,000 *
Chairman of the Board of the Association.
Former executive at Lehigh Gas and
Oil Company and former partner at
Lehigh Supply.
Anthony P. Sidari 68 1964 2001 5,000 *
Attorney and solicitor of the
Association.
All directors and executive officers as a
group (11 persons).......................... -- -- -- 66,371 4.18%
</TABLE>
- -------------------------------
* Does not exceed 1.0% of the Company's Common Stock.
(1) Includes years of service as a director of the Association. All Directors
of the Company were appointed in 1998, the year of its incorporation.
(2) Each person effectively exercises sole (or shares with spouse or other
immediate family members) voting or dispositive power as to shares
reported.
5
<PAGE>
Meetings and Committees of the Board of Directors
During the fiscal year ended June 30, 1999, the Board of Directors of
the Company, which was formed on August 20, 1998, held 6 meetings, and the Board
of Directors of the Association held 26 meetings. No directors attended less
than 75% of the total meetings of the Board of Directors and committees on which
such directors served during the fiscal year ended June 30, 1999. The Board of
Directors of the Company maintains committees, the nature and composition of
which are described below:
Audit Committee. The Audit Committee, consisting of Messrs. Deisroth,
Hayden and Lundy, reviews audit reports and management's actions regarding the
implementation of audit findings. It also reviews compliance with all relevant
laws and regulations. Due to the timing of the Conversion, the Audit Committee
did not meet during the 1999 fiscal year.
Compensation Committee. The Compensation Committee, consisting of
Messrs. Barletta, Hayden, Lundy, Marusak and Sidari, is responsible for all
matters regarding compensation and fringe benefits for officers and employees of
the Company and the Association. The Compensation Committee meets on an as
needed basis and did not meet during the 1999 fiscal year.
Nominating Committee. The Nominating Committee, consisting of Messrs.
Barletta, Deisroth and Raynock, recommends nominees for election to the Board of
Directors and reviews any nominations for election to the Board of Directors
made by a stockholder of the corporation. The Nominating Committee met 1 time
during the 1999 fiscal year.
Directors' Compensation
Directors' Fees. All directors receive $400 for each Board meeting
attended and for a maximum of three unattended meetings. All outside directors
of the Association also receive $250 for each committee meeting attended. In
addition, the treasurer of the Board of Directors receives a $3,000 annual
retainer. The Association also provides life insurance for all of the directors.
The Association pays $572 annually for a $90,000 policy for Mr. Laubach, $318
annually for $50,000 policies for Messrs. Deisroth and Hayden, $206 annually for
$32,500 policies for Messrs. Barletta, Raynock and Sidari, and $130 annually for
a $13,750 policy for Messrs. Lundy and Marusak. All Directors of the Company are
paid an annual retainer of $4,000.
Director Emeritus. The Association has one Director Emeritus, who is
compensated for each meeting attended, at the same rate of compensation as the
Directors, but may not vote at any meeting of the Board of Directors or be
counted in determining a quorum.
6
<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth the cash
compensation paid by the Company for services rendered in all capacities during
the years ended June 30, 1999 and 1998 to Mr. Laubach. No other executive
officer of the Company received salary and bonus in excess of $100,000 for the
year ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------
Other
Annual All Other
Name and Salary Bonus Compensation Compensation
Principal Positions Year(1) ($)(2) ($) ($)(3) ($)
- ------------------- --------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Richard C. Laubach............................ 1999 $130,250 $12,000 -- $--
President and Chief Executive Officer 1998 123,400 10,000 -- --
</TABLE>
- ----------------------
(1) Compensation information for the year ended June 30, 1997 has been omitted
as neither the Company, nor its predecessor, the Association, was a public
company.
(2) Includes directors' fees.
(3) For fiscal years 1999 and 1998, there were no (a) perquisites over the
lesser of $50,000 or 10% of the individual's total salary and bonus for the
year; (b) payments of above-market preferential earnings on deferred
compensation; (c) payments of earnings with respect to long-term incentive
plans prior to settlement or maturation; (d) tax payment reimbursements; or
(e) preferential discounts on stock. For fiscal years 1999 and 1998, the
Company had no restricted stock or stock related plans in existence.
Employment Agreements
Effective December 30, 1998, the Association and the Company each have
entered into an employment agreement with Mr. Laubach. These employment
agreements are coordinated so that Mr. Laubach is only paid once for the same
service. The employment agreements are intended to ensure that the Association
and the Company will be able to maintain a stable and competent management base.
The continued success of the Association and the Company depends to a
significant degree on the skills and competence of Mr. Laubach.
The employment agreements each provide for a three-year term. The
Association employment agreement provides that, commencing on the first
anniversary date of the agreement and continuing each anniversary date
thereafter, the Board of Directors of the Association may extend the agreement
for an additional year so that the remaining term shall be three years unless
written notice of non-renewal is given by the Board of Directors after
conducting a performance evaluation of Mr. Laubach. The term of the Company
employment agreement is extended on a daily basis unless written notice of
non-renewal is given by the Board of Directors of the Company. The Association
and the Company employment agreements provide for an annual review of base
salary. The current base salary for the employment agreements for Mr. Laubach is
$125,000. Mr. Laubach is also entitled to Directors' fees. In addition to the
base salary, the employment agreements provide for, among other things,
participation in various employee benefit plans and stock-based compensation
programs, as well as furnishing certain fringe benefits available to similarly
situated executive personnel. The employment agreements provide for termination
by the Association or the Company for cause (as described in the agreements) at
any time. In the event the Association or the Company chooses to terminate
employment for reasons other than for cause, or in the event of Mr. Laubach's
resignation from the Association or the Company upon: (i) the failure to
re-elect him to his current office, (ii) a material change in his functions,
duties or responsibilities, (iii) a relocation of his principal
7
<PAGE>
place of employment by more than 25 miles, (iv) liquidation or dissolution of
the Association or the Company, or (v) a breach of the employment agreements by
the Association or the Company; Mr. Laubach or, in the event of death, his
beneficiary, would be entitled to receive an amount generally equal to the
remaining base salary and bonus payments that would have been paid to him during
the remaining term of the employment agreements. In addition, Mr. Laubach would
receive a payment attributable to the contributions that would have been made on
his behalf to any employee benefit plans of the Association or the Company
during the remaining term of the employment agreements. The Association and the
Company would also continue to pay for Mr. Laubach's life, health and disability
coverage for the remaining term of the employment agreements. The employment
agreements restrict Mr. Laubach's right to compete against the Company and the
Association for a period of one year from the date of the agreements if he
voluntarily terminates employment, except in the event of a change in control.
Under the employment agreements, if involuntary termination or, under
certain circumstances, voluntary termination, follows a change in control of the
Association or the Company, Mr. Laubach or, in the event of his death, his
beneficiary, would be entitled to a severance payment and/or liquidated damages
payment generally equal to the greater of: (i) the payments due for the
remaining terms of the agreement, including the value of certain stock-based
incentives previously awarded, or (ii) three times the average of the five
preceding taxable years' annual compensation. The Association and the Company
would also continue Mr. Laubach's life, health, and disability coverage for
thirty-six months from the date of termination. Notwithstanding that both
employment agreements provide for a severance payment in the event of a change
in control, Mr. Laubach would only be entitled to receive a severance payment
under one agreement. The total amount due to Mr. Laubach assuming a termination
of his employment following a change in control that occurred on June 30, 1999,
based solely on the base salary paid to Mr. Laubach and excluding any benefits
under any employee benefit plan which may be payable, would have been
approximately $370,620.
The Company guarantees payments under the Association employment
agreement in the event that payments or benefits are not paid by the
Association. The Company makes payments under the Company employment agreement.
The Association or the Company shall pay all reasonable costs and legal fees
paid or incurred by Mr. Laubach pursuant to any dispute or question of
interpretation relating to the employment agreements if Mr. Laubach is
successful on the merits pursuant to a legal judgment, arbitration or
settlement. The employment agreements also provide that the Association and
Company shall indemnify Mr. Laubach to the fullest extent allowable under
applicable federal, Pennsylvania and Delaware law, as the case may be.
Supplemental Executive Retirement Plan. The Association maintains a
non-qualified deferred compensation arrangement known as a "Supplemental
Executive Retirement Plan" (the "SERP") for Mr. Laubach. The SERP is intended to
provide him benefits to the extent that they cannot be provided under the
Pension Plan and/or the ESOP as a result of the limitations imposed by the
Internal Revenue Code, but that would have been provided under the Pension Plan
and/or the ESOP but for such limitations. Mr. Laubach received no SERP benefit
for the fiscal year ended June 30, 1999. The SERP is intended to make up ESOP
benefits that Mr. Laubach might lose upon his retirement, upon the termination
of his employment in connection with a change in control, or when his
participation in the ESOP ends due to termination of the ESOP in connection with
a change in control (regardless of whether he terminates employment) prior to
the complete scheduled repayment of the ESOP loan. Generally, upon his
retirement or upon a change in control of the Association or the Company prior
to complete repayment of the ESOP Loan, the SERP will provide a benefit equal to
what Mr. Laubach would have received under the ESOP had he remained employed
throughout the term of the ESOP or had the ESOP not been terminated prior to the
scheduled repayment of the ESOP loan less the benefits actually provided under
the ESOP. Mr. Laubach's benefits under the SERP will generally become payable
upon his retirement (in accordance with the standard retirement policies of
8
<PAGE>
the Association), upon the change in control of the Association or the Company
or as determined under the applicable tax-qualified retirement plans sponsored
by the Association.
The Association may establish a grantor trust in connection with the
SERP to satisfy the obligations of the Association with respect to the SERP. The
assets of the grantor trust would remain subject to the claims of the
Association's general creditors in the event of the Association's insolvency
until paid to the individual pursuant to the terms of the SERP.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of any registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the SEC. Executive officers, directors and greater
than 10% stockholders are required by regulation to furnish the Company with
copies of all Section 16(a) reports they file.
Based solely on its review of the copies of the reports it has received
and written representations provided to the Company from the individuals
required to file the reports, the Company believes that each of the Company's
executive officers and directors has complied with applicable reporting
requirements for transactions in the Company's common stock during the fiscal
year ended June 30, 1999.
Transactions With Certain Related Persons
The Association offers officers and full-time employees, who satisfy
general underwriting standards, loans with interest rates up to 1% below the
current interest rates in effect, the Insider Loan Rate ("ILR"); provided,
however, that the ILR is not below the Association's cost of funds at the time
of the approval of the loan. All ILR loans requested by officers are approved by
the Board of Directors. The ILR normally ceases upon termination of employment.
Upon termination of the ILR, the interest rate reverts to the contract rate in
effect at the time of termination. All other terms and conditions contained in
the original mortgage and note continue to remain in effect. Set forth below is
certain information with respect to certain loans made on preferential terms by
the Association to executive officers of the Association which in the aggregate
exceeded $60,000 at any time since July 1, 1998. As of August 31, 1999, seven of
the Association's directors and officers had loans with outstanding balances
totalling approximately $332,000 in the aggregate.
9
<PAGE>
All other transactions between the Company and its executive officers,
directors, holders of 10% or more of the shares of any class of its Common Stock
and affiliates thereof, are currently made on terms no less favorable to the
Company than could have been obtained by it in arm's length negotiations with
unaffiliated persons and are approved by a majority of independent outside
directors of the Company not having any interest in the transaction. All such
loans are made by the Association in the ordinary course of business, with no
favorable terms and such loans do not involve more than the normal risk of
collectibility or present unfavorable features.
<TABLE>
<CAPTION>
Largest
Amount
Outstanding Balance Interest
Date Maturity Since as of Rate as of
of Date July 1, June 30, June 30, Type of
Name Position Loan of Loan 1998 1999 1999 Loan
- ---------------------- ------------- --------- ----------- ----------- ---------- --------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Correale, Joseph Vice President 03/16/99 03/16/09 $23,000 $22,886 6.5% Home equity loan
Correale, Joseph Vice President 04/10/96 04/10/16 73,000 68,086 6.0 First mortgage loan
Evans, Nicolene Assistant VP 10/07/98 10/07/03 22,000 19,462 6.5 Auto loan
Evans, Nicolene Assistant VP 10/10/97 10/10/07 15,000 10,504 6.4 Home equity loan
Evans, Nicolene Assistant VP 06/07/93 06/07/03 45,000 18,709 6.7 Home equity loan
Evans, Nicolene Assistant VP 03/01/88 03/01/05 32,000 12,837 8.7 Line of credit
Marchetti, David P. Vice President 07/01/99 06/01/14 65,000 65,000 5.9 First mortgage loan
Marchetti, David P. Vice President 06/18/99 06/18/06 21,000 21,000 6.5 Home equity loan
Marchetti, David P. Vice President 09/23/97 09/02/99 2,883 678 7.4 Secured loan
</TABLE>
10
<PAGE>
PROPOSAL 2. APPROVAL OF THE SECURITY OF PENNSYLVANIA FINANCIAL CORP.
1999 STOCK-BASED INCENTIVE PLAN
The Board of Directors is presenting for stockholder approval the
Incentive Plan, in the form attached to this proxy statement as Appendix A. The
Incentive Plan provides that it shall become effective on December 31, 1999,
subject to approval of the Incentive Plan by the Company's stockholders. The
effective date of the Incentive Plan was established in order that its
implementation would not be subject to Office of Thrift Supervision (the "OTS")
regulations applicable for one year after a conversion to stock form governed by
those regulations. The purpose of the Incentive Plan is to attract and retain
qualified personnel in key positions, provide officers, employees and directors
of the Company and any of its affiliates, including the Association, with a
proprietary interest in the Company as an incentive to contribute to the success
of the Company, promote the attention of management to other stockholder's
concerns, and reward employees for outstanding performance. The following is a
summary of the Incentive Plan. For complete information, you should review the
Incentive Plan in Appendix A.
General
The Incentive Plan authorizes the granting of options to purchase
shares of Common Stock and awards of restricted shares of Common Stock. Subject
to certain adjustments to prevent dilution of awards to participants, the
maximum number of shares of Common Stock reserved for awards under the Incentive
Plan is 222,180 shares, consisting of 158,700 shares reserved for options and
63,480 shares reserved for restricted stock awards. All employees and
non-employee directors of the Company and its affiliates are eligible to receive
awards under the Incentive Plan. The Incentive Plan will be administered by a
committee (the "Committee") consisting of members of the Board of Directors who
are not employees of the Company or its affiliates. Authorized but unissued
shares or shares previously issued and reacquired by the Company may be used to
satisfy awards under the Incentive Plan. If authorized but unissued shares are
used to satisfy restricted stock awards and the exercise of options granted
under the Incentive Plan, it will result in an increase in the number of shares
outstanding and will have a dilutive effect on the holdings of existing
stockholders. The Company may establish a trust under which the trustee will
purchase, with contributions from the Company or the Association, previously
issued shares to fund the Company's obligation for restricted stock awards. As
of the date of this proxy statement, no awards have been granted under the
Incentive Plan.
Types of Awards
General. The Incentive Plan authorizes the grant of awards in the form
of: (1) options intended to qualify as incentive stock options under Section 422
of the Internal Revenue Code (options which provide certain tax benefits to the
recipients upon compliance with applicable requirements, but which do not result
in tax deductions to the Company); (2) options that do not so qualify (options
which do not provide the same income tax benefits to recipients, but which may
provide tax deductions to the Company), referred to as "non-statutory stock
options"; and (3) grants of restricted shares of stock. Each type of award may
be subject to certain vesting or service requirements or other conditions
imposed by the Committee.
Options. Subject to the terms of the Incentive Plan and applicable
regulations, the Committee has the authority to determine the amount of options
granted to any individual and the date or dates on which each option will become
exercisable and any other conditions applicable to an option. The exercise price
of all options will be determined by the Committee but will be at least 100% of
the fair market value of the underlying common stock at the time of grant. The
exercise price of any option may be paid in cash, common stock, or any other
form permitted by the Committee, at its discretion. See "-Alternate Option
11
<PAGE>
Payments." The term of options will be determined by the Committee, but in no
event will an option be exercisable more than ten years from the date of grant
(or five years from date of grant for a 10% owner with respect to incentive
stock options).
All options granted under the Incentive Plan to officers and employees
may, at the discretion of the Committee, qualify as incentive stock options to
the extent permitted under Section 422 of the Internal Revenue Code. Under
certain circumstances, incentive stock options may be converted into
non-statutory stock options. In order to qualify as incentive stock options
under Section 422 of the Internal Revenue Code, the option must generally be
granted only to an employee, must not be transferable (other than by will or the
laws of descent and distribution), the exercise price must not be less than 100%
of the fair market value of the common stock on the date of grant, the term of
the option may not exceed ten years from the date of grant, and no more than
$100,000 of options may become exercisable for the first time in any calendar
year. Notwithstanding the foregoing requirements, incentive stock options
granted to any person who is the beneficial owner of more than 10% of the
outstanding voting stock of the Company may be exercised only for a period of
five years from the date of grant and the exercise price must be at least equal
to 110% of the fair market value of the underlying common stock on the date of
grant. Each non-employee director of the Company or its affiliates, as well as
employees, are eligible to receive non-statutory stock options.
Unless otherwise determined by the Committee, upon termination of an
option holder's services for any reason other than death, disability, retirement
or termination for cause, all then exercisable options will remain exercisable
for a period of time following termination (three months in the case of
termination from service in general and one year in the cases of death,
disability, retirement or termination following a change in control, as defined
in the Incentive Plan) and all unexercisable options will be canceled. In the
event of the death or disability of an option holder or upon the occurrence of a
change in control, all unexercisable options held by the option holder will
become fully exercisable and remain exercisable for up to one year thereafter.
In the event of termination for cause, all exercisable and unexercisable options
held by the option holder will be canceled. In the event of the retirement of an
option holder, the Committee will, under certain circumstances set forth in the
Incentive Plan, have the discretion to allow unexercisable options to continue
to vest or become exercisable in accordance with their original terms.
Under generally accepted accounting principles, compensation expense is
generally not recognized with respect to the award of options to officers and
employees of the Company and its subsidiaries.
Restricted Stock Awards. Subject to the terms of the Incentive Plan and
applicable regulation, the Committee has the authority to determine the amounts
of restricted stock awards granted to any individual and the dates on which
restricted stock awards granted will vest or any other conditions which must be
satisfied prior to vesting.
When stock awards are distributed (i.e., vest) in accordance with the
Incentive Plan, the recipients will receive an amount equal to accumulated cash
and stock dividends (if any) with respect to shares awarded in the form of
restricted stock plus earnings minus any required tax withholding amounts. In
addition, prior to vesting, recipients of restricted stock awards may also
direct the voting of shares of common stock granted to them.
Unless otherwise determined by the Committee, upon termination of the
services of a recipient of a stock award for any reason other than death,
disability, retirement or termination for cause, all the stock award recipient's
rights in unvested restricted stock awards will be canceled. In the event of the
death or disability of the holder of the stock award or upon the occurrence of a
change in control, all unvested restricted stock awards held by such individual
will become fully vested. In the event of termination for
12
<PAGE>
cause of a holder of a stock award, all unvested stock awards held by such
individual will be canceled. In the event of retirement of the holder of a stock
award, the Committee will, under certain circumstances set forth in the
Incentive Plan and subject to applicable regulation, have the discretion to
determine that all unvested restricted stock awards will continue to vest or be
vested in accordance with the original terms of the grant.
Tax Treatment
Options. An option holder will generally not be deemed to have
recognized taxable income upon grant or exercise of any incentive stock option,
provided that shares transferred in connection with the exercise are not
disposed of by the optionee for at least one year after the date the shares are
transferred in connection with the exercise of the option and two years after
the date of grant of the option. If these holding periods are satisfied, upon
disposal of the shares, the aggregate difference between the per share option
exercise price and the fair market value of the common stock is recognized as
income taxable at capital gains rates. No compensation deduction may be taken by
the Company as a result of the grant or exercise of incentive stock options,
assuming these holding periods are met.
In the case of the exercise of a non-statutory stock option, an option
holder will be deemed to have received ordinary income upon exercise of the
option in an amount equal to the aggregate amount by which the fair market value
of the common stock exceeds the exercise price of the option. In the event
shares received through the exercise of an incentive stock option are disposed
of prior to the satisfaction of the holding periods (a "disqualifying
disposition"), the exercise of the option will essentially be treated as the
exercise of a non-statutory stock option, except that the option holder will
recognize the ordinary income for the year in which the disqualifying
disposition occurs. The amount of any ordinary income recognized by an optionee
upon the exercise of a non-statutory stock option or due to a disqualifying
disposition will be a deductible expense of the Company for federal income tax
purposes.
Restricted Stock Awards. When shares of common stock, as restricted
stock awards, are distributed upon vesting, the recipient recognizes ordinary
income equal to the fair market value of such shares at the date of distribution
plus any dividends and earnings on such shares (provided such date is more than
six months after the date of grant) and the Company is permitted a commensurate
compensation expense deduction for income tax purposes.
Alternate Option Payments
Subject to the terms of the Incentive Plan, the Committee has
discretion to determine the form of payment for the exercise of an option. The
Committee may indicate acceptable forms in the award agreement covering such
options or may reserve its decision to the time of exercise. No option is to be
considered exercised until payment in full is accepted by the Committee. Any
shares of common stock tendered in payment of the exercise price of an option
will be valued at the fair market value of the common stock on the date prior to
the date of exercise.
Amendments
Subject to certain restrictions contained in the Incentive Plan, the
Board of Directors or the Committee may amend the Incentive Plan in any respect,
at any time, provided that no amendment may affect the rights of the holder of
an award without his or her permission and such amendment must comply with
applicable law and regulation.
13
<PAGE>
Adjustments
In the event of any change in the outstanding shares of common stock of
the Company by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Company, or in the event an
extraordinary capital distribution is made, including the payment of an
extraordinary dividend, the Committee may make such adjustments to previously
granted awards, to prevent dilution, diminution or enlargement of the rights of
the holder; provided, however, that in the case of an extraordinary dividend,
the Committee may be required to obtain OTS approval prior to any such
adjustment. All awards under this Incentive Plan will be binding upon any
successors or assigns of the Company.
Nontransferability
Unless determined otherwise by the Committee, awards under the
Incentive Plan will not be transferable by the recipient other than by will or
the laws of intestate succession or pursuant to a domestic relations order. With
the consent of the Committee, a recipient may permit transferability or
assignment for valid estate planning purposes of a non-statutory stock option as
permitted under the Internal Revenue Code or federal securities laws and a
participant may designate a person or his or her estate as beneficiary of any
award to which the recipient would then be entitled, in the event of the death
of the participant.
Effective Date of Plan
The Incentive Plan provides that it shall become effective on December
31, 1999, subject to prior approval of the Incentive Plan by the Company's
stockholders. Accordingly, assuming stockholder approval, the Incentive Plan
will not be implemented and no awards will be made prior to December 31, 1999.
As of the date of this proxy statement, no determination had been made regarding
the granting of awards under the Incentive Plan. Following the Annual Meeting
and prior to the effective date of the Plan, the Committee will consider the
grants to be made. However, under the Incentive Plan, no individual will receive
more than 25% of the shares or options awarded and non-employee directors will
receive no more than 5% individually, or 30% in the aggregate, of the shares or
options under the Incentive Plan.
Unless marked to the contrary, the shares represented by the enclosed
proxy card, if executed and returned, will be voted "FOR" the approval of the
Security of Pennsylvania Financial Corp. 1999 Stock-Based Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF
THE SECURITY OF PENNSYLVANIA FINANCIAL CORP. 1999 STOCK-BASED INCENTIVE PLAN.
14
<PAGE>
PROPOSAL 3. RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Company's Board of Directors has appointed Parente, Randolph,
Orlando, Carey & Associates to be its independent accountants for the
Association and the Company for the fiscal year ending June 30, 2000, subject to
ratification of such appointment by the stockholders. Representatives of
Parente, Randolph, Orlando, Carey & Associates will be present at the Annual
Meeting. They will be given an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
stockholders present at the Annual Meeting.
Unless marked to the contrary, the shares represented by the enclosed
proxy card will be voted "FOR" ratification of the appointment of Parente,
Randolph, Orlando, Carey & Associates as the independent accountants of the
Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF PARENTE, RANDOLPH, ORLANDO, CAREY & ASSOCIATES AS THE
INDEPENDENT ACCOUNTANTS OF THE COMPANY.
ADDITIONAL INFORMATION
Stockholder Proposals
To be considered for inclusion in the Company's proxy statement and
form of proxy relating to the 2000 Annual Meeting of Stockholders, a stockholder
proposal must be received by the Secretary of the Company at the address set
forth on the Notice of Annual Meeting of Stockholders not later than May 20,
2000. If such Annual Meeting is held on a date more than 30 calendar days from
October 25, 1999, a stockholder proposal must be received by a reasonable time
before the proxy solicitation for such Annual Meeting is made. Any such proposal
will be subject to 17 C.F.R. ss. 240.14a-8 of the Rules and Regulations under
the Exchange Act.
Notice of Business to be Conducted at a Special or Annual Meeting
The Bylaws of the Company set forth the procedures by which a
stockholder may properly bring business before a meeting of stockholders.
Pursuant to the Bylaws, only business brought by or at the direction of the
Board of Directors may be conducted at a special meeting. The Bylaws of the
Company provide an advance notice procedure for a stockholder to properly bring
business before an annual meeting. The stockholder must give written advance
notice to the Secretary of the Company not less than ninety (90) days before the
date originally fixed for such meeting; provided, however, that in the event
that less than one hundred (100) days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be received not later than the close of business on the tenth
day following the date on which the Company's notice to stockholders of the
annual meeting date was mailed or such public disclosure was made. The advance
notice by stockholders must include the stockholder's name and address, as they
appear on the Company's record of stockholders, a brief description of the
proposed business, the reason for conducting such business at the annual
meeting, the class and number of shares of the Company's capital stock that are
beneficially owned by such stockholder and any material interest of such
stockholder in the proposed business. In the case of nominations to the Board of
Directors, certain information regarding the nominee must be provided. Nothing
in this paragraph shall be deemed to require the Company to include in its proxy
statement or the proxy relating to any Annual Meeting
15
<PAGE>
any stockholder proposal which does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal is
received.
Other Matters Which May Properly Come Before the Meeting
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 persons named in the accompanying
proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the Annual
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Annual Meeting. However, if you are a stockholder whose
shares are not registered in your own name, you will need appropriate
documentation from your recordholder to vote personally at the Annual Meeting.
A COPY OF THE FORM 10-KSB (WITHOUT EXHIBITS) FOR THE FISCAL YEAR ENDED
JUNE 30, 1999, AS FILED WITH THE SEC, WILL BE FURNISHED WITHOUT CHARGE TO
STOCKHOLDERS OF RECORD UPON WRITTEN REQUEST TO NANCY LATOFF, SECURITY OF
PENNSYLVANIA FINANCIAL CORP., 31 WEST BROAD STREET, HAZLETON, PENNSYLVANIA
18201.
By Order of the Board of Directors
/s/Nancy Latoff
Nancy Latoff
Corporate Secretary
Hazleton, Pennsylvania
September 17, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, YOU ARE REQUESTED TO SIGN, DATE AND PROMPTLY
RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
16
<PAGE>
APPENDIX A
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
1999 STOCK-BASED INCENTIVE PLAN
1. DEFINITIONS
(a) "Affiliate" means any "parent corporation" or "subsidiary
corporation" of the Holding Company, as such terms are defined in Sections
424(e) and 424(f) of the Code.
(b) "Association" means Security Savings Association of Hazleton.
(c) "Award" means, individually or collectively, a grant under the Plan
of Non-Statutory Stock Options, Incentive Stock Options and Stock Awards.
(d) "Award Agreement" means an agreement evidencing and setting forth
the terms of an Award.
(e) "Board of Directors" means the board of directors of the Holding
Company.
(f) "Change in Control" of the Holding Company or the Association shall
mean an event of a nature that: (i) would be required to be reported in response
to Item 1(a) of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); or (ii) results in a Change in Control of the Association or
the Holding Company within the meaning of the Home Owners' Loan Act of 1933, as
amended, the Federal Deposit Insurance Act, and the Rules and Regulations
promulgated by the Office of Thrift Supervision (or its predecessor agency), as
in effect on the date hereof (provided, that in applying the definition of
change in control as set forth under the rules and regulations of the OTS, the
Board shall substitute its judgment for that of the OTS); or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of voting securities of the
Association or the Holding Company representing 20% or more of the Association's
or the Holding Company's outstanding voting securities or right to acquire such
securities except for any voting securities of the Association purchased by the
Holding Company and any voting securities purchased by any employee benefit plan
of the Holding Company or its Subsidiaries, or (B) individuals who constitute
the Board on the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved by a
Nominating Committee solely composed of members which are Incumbent Board
members, shall be, for purposes of this clause (B), considered as though he were
a member of the Incumbent Board, or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Association or
the Holding Company or similar transaction occurs or is effectuated in which the
Association or Holding Company is not the resulting entity; provided, however,
that such an event listed above will be deemed to have occurred or to have been
effectuated upon the receipt of all required federal regulatory approvals not
including the lapse of any statutory waiting periods, or (D) a proxy statement
has been distributed soliciting proxies from stockholders of the Holding
Company, by someone other than the current management of the Holding Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or Association with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to such plan or transaction are exchanged for or
converted into cash or property or securities not issued by the Association
A-1
<PAGE>
or the Holding Company shall be distributed, or (E) a tender offer is made for
20% or more of the voting securities of the Association or Holding Company then
outstanding.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the committee designated by the Board of
Directors, pursuant to Section 2 of the Plan, to administer the Plan.
(i) "Common Stock" means the Common Stock of the Holding Company, par
value, $.01 per share.
(j) "Date of Grant" means the effective date of an Award.
(k) "Disability" means any mental or physical condition with respect to
which the Participant qualifies for and receives benefits for under a long-term
disability plan of the Holding Company or an Affiliate, or in the absence of
such a long-term disability plan or coverage under such a plan, "Disability"
shall mean a physical or mental condition which, in the sole discretion of the
Committee, is reasonably expected to be of indefinite duration and to
substantially prevent the Participant from fulfilling his duties or
responsibilities to the Holding Company or an Affiliate.
(l) "Effective Date" means December 31, 1999, but only if, prior to
such date, the Plan is approved by the Holding Company's shareholders. The Plan
will be so approved if at an annual or special meeting of shareholders held
prior to such date a quorum is present and the votes of the holders of a
majority of the Common Stock present or represented by proxy and entitled to
vote on such matter shall be cast in favor of its approval.
(m) "Employee" means any person employed by the Holding Company or an
Affiliate. Directors who are employed by the Holding Company or an Affiliate
shall be considered Employees under the Plan.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(o) "Exercise Price" means the price at which a Participant may
purchase a share of Common Stock pursuant to an Option.
(p) "Fair Market Value" means the market price of Common Stock,
determined by the Committee as follows:
(i) If the Common Stock was traded on the date in
question on The Nasdaq Stock Market then the Fair
Market Value shall be equal to the closing price
reported for such date;
(ii) If the Common Stock was traded on a stock exchange on
the date in question, then the Fair Market Value
shall be equal to the closing price reported by the
applicable composite transactions report for such
date; and
(iii) If neither of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the
Committee in good faith on such basis as it deems
appropriate.
A-2
<PAGE>
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in The Wall Street Journal. The
Committee's determination of Fair Market Value shall be conclusive and binding
on all persons.
(q) "Holding Company" means Security of Pennsylvania Financial Corp.
(r) "Incentive Stock Option" means a stock option granted to a
Participant, pursuant to Section 7 of the Plan, that is intended to meet the
requirements of Section 422 of the Code.
(s) "Non-Statutory Stock Option" means a stock option granted to a
Participant pursuant to the terms of the Plan but which is not intended to be
and is not identified as an Incentive Stock Option or a stock option granted
under the Plan which is intended to be and is identified as an Incentive Stock
Option but which does not meet the requirements of Section 422 of the Code.
(t) "Option" means an Incentive Stock Option or Non-Statutory Stock
Option.
(u) "Outside Director" means a member of the board(s) of directors of
the Holding Company or an Affiliate who is not also an Employee of the Holding
Company or an Affiliate.
(v) "Participant" means any person who holds an outstanding Award.
(w) "Performance Award" means an Award granted to a Participant
pursuant to Section 9 of the Plan.
(x) "Plan" means this Security of Pennsylvania Financial Corp. 1999
Stock-Based Incentive Plan.
(y) "Retirement" means retirement from employment with the Holding
Company or an Affiliate in accordance with the then current retirement policies
of the Holding Company or Affiliate, as applicable. "Retirement" with respect to
an Outside Director means the termination of service from the board(s) of
directors of the Holding Company and any Affiliate following written notice to
such board(s) of directors of the Outside Director's intention to retire.
(z) "Stock Award" means an Award granted to a Participant pursuant to
Section 8 of the Plan.
(aa) "Termination for Cause" shall mean termination because of a
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 material breach of any provision of any
employment agreement between the Holding Company and/or any subsidiary of the
Holding Company and a Participant.
(bb) "Trust" means a trust established by the Board of Directors in
connection with this Plan to hold Common Stock or other property for the
purposes set forth in the Plan.
(cc) "Trustee" means any person or entity approved by the Board of
Directors or its designee(s) to hold any of the Trust assets.
A-3
<PAGE>
2. ADMINISTRATION
(a) The Committee shall administer the Plan. The Committee shall
consist of two or more disinterested directors of the Holding Company, who shall
be appointed by the Board of Directors. A member of the Board of Directors shall
be deemed to be "disinterested" only if he satisfies (i) such requirements as
the Securities and Exchange Commission may establish for non-employee directors
administering plans intended to qualify for exemption under Rule 16b-3 (or its
successor) under the Exchange Act and (ii) such requirements as the Internal
Revenue Service may establish for outside directors acting under plans intended
to qualify for exemption under Section 162(m)(4)(C) of the Code. The Board of
Directors may also appoint one or more separate committees of the Board of
Directors, each composed of one or more directors of the Holding Company or an
Affiliate who need not be disinterested and who may grant Awards and administer
the Plan with respect to Employees and Outside Directors who are not considered
officers or directors of the Holding Company under Section 16 of the Exchange
Act or for whom Awards are not intended to satisfy the provisions of Section
162(m) of the Code.
(b) The Committee shall (i) select the Employees and Outside Directors
who are to receive Awards under the Plan, (ii) determine the type, number,
vesting requirements and other features and conditions of such Awards, (iii)
interpret the Plan and Award Agreements in all respects and (iv) make all other
decisions relating to the operation of the Plan. The Committee may adopt such
rules or guidelines as it deems appropriate to implement the Plan. The
Committee's determinations under the Plan shall be final and binding on all
persons.
(c) Each Award shall be evidenced by a written agreement ("Award
Agreement") containing such provisions as may be required by the Plan and
otherwise approved by the Committee. Each Award Agreement shall constitute a
binding contract between the Holding Company or an Affiliate and the
Participant, and every Participant, upon acceptance of an Award Agreement, shall
be bound by the terms and restrictions of the Plan and the Award Agreement. The
terms of each Award Agreement shall be in accordance with the Plan, but each
Award Agreement may include any 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 and at a minimum, the Committee shall set forth in each Award
Agreement: (i) the type of Award granted; (ii) the Exercise Price of any Option;
(iii) the number of shares subject to the Award; (iv) the expiration date of the
Award; (v) the manner, time, and rate (cumulative or otherwise) of exercise or
vesting of such Award; and (vi) the restrictions, if any, 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 is hereby authorized to execute Award Agreements on
behalf of the Company or an Affiliate and to cause them to be delivered to the
recipients of Awards.
(d) The Committee may delegate all authority for: (i) the determination
of forms of payment to be made by or received by the Plan and (ii) the execution
of any Award Agreement. The Committee may rely on the descriptions,
representations, reports and estimates provided to it by the management of the
Holding Company or an Affiliate for determinations to be made pursuant to the
Plan, including the satisfaction of any conditions of a Performance Award.
However, only the Committee or a portion of the Committee may certify the
attainment of any conditions of a Performance Award intended to satisfy the
requirements of Section 162(m) of the Code.
A-4
<PAGE>
3. TYPES OF AWARDS
The following Awards may be granted under the Plan:
(a) Non-Statutory Stock Options.
(b) Incentive Stock Options.
(c) Stock Awards.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 14 of the Plan, the
maximum number of shares reserved for Awards under the Plan is 222,180, which
number shall not exceed 14% of the shares of the Common Stock determined
immediately as of the Effective Date. Subject to adjustment as provided in
Section 14 of the Plan, the maximum number of shares reserved hereby for
purchase pursuant to the exercise of Options granted under the Plan is 158,700
which number shall not exceed 10% of the shares of Common Stock as of the
Effective Date. The maximum number of the shares reserved for Stock Awards is
63,480 which number shall not exceed 4% of the shares of Common Stock as of the
Effective Date. The shares of Common Stock issued under the Plan may be either
authorized but unissued shares or authorized shares previously issued and
acquired or reacquired by the Trustee or the Holding Company, respectively. To
the extent that Options and Stock Awards are granted under the Plan, the shares
underlying such Awards will be unavailable for any other use including future
grants under the Plan except that, to the extent that Stock Awards or Options
terminate, expire or are forfeited without having vested or without having been
exercised, new Awards may be made with respect to these shares.
5. ELIGIBILITY
Subject to the terms of the Plan, all Employees and Outside Directors
shall be eligible to receive Awards under the Plan. In addition, the Committee
may grant eligibility to consultants and advisors of the Holding Company or an
Affiliate, as it sees fit.
6. NON-STATUTORY STOCK OPTIONS
The Committee may, subject to the limitations of this Plan and the
availability of shares of Common Stock reserved but not previously awarded under
the Plan, grant Non-Statutory Stock Options to eligible individuals upon such
terms and conditions as it may determine to the extent such terms and conditions
are consistent with the following provisions:
(a) Exercise Price. The Committee shall determine the Exercise Price of
each Non-Statutory Stock Option. However, the Exercise Price shall not be less
than 100% of the Fair Market Value of the Common Stock on the Date of Grant.
(b) Terms of Non-statutory Stock Options. The Committee shall determine
the term during which a Participant may exercise a Non-Statutory Stock Option,
but in no event may a Participant exercise a Non-Statutory Stock Option, in
whole or in part, more than ten (10) years from the Date of Grant. The Committee
shall also determine the date on which each Non-Statutory Stock Option, or any
part thereof, first becomes exercisable and any terms or conditions a
Participant must satisfy in order to exercise each Non- Statutory Stock Option.
The shares of Common Stock underlying each Non-Statutory Stock Option may be
purchased in whole or in part by the Participant at any time during the term of
such Non-Statutory Stock Option, or any portion thereof, once the Non-Statutory
Stock Option becomes exercisable.
A-5
<PAGE>
(c) Non-Transferability. Unless otherwise determined by the Committee
in accordance with this Section 6(c), a Participant may not transfer, assign,
hypothecate, or dispose of in any manner, other than by will or the laws of
intestate succession, a Non-Statutory Stock Option. The Committee may, however,
in its sole discretion, permit transferability or assignment of a Non-Statutory
Stock Option if such transfer or assignment is, in its sole determination, for
valid estate planning purposes and such transfer or assignment is permitted
under the Code and Rule 16b-3 under the Exchange Act. For purposes of this
Section 6(c), a transfer for valid estate planning purposes includes, but is not
limited to: (a) a transfer to a revocable intervivos trust as to which the
Participant is both the settlor and trustee, (b) a transfer for no consideration
to: (i) any member of the Participant's Immediate Family, (ii) any trust solely
for the benefit of members of the Participant's Immediate Family, (iii) any
partnership whose only partners are members of the Participant's Immediate
Family, and (iv) any limited liability corporation or corporate entity whose
only members or equity owners are members of the Participant's Immediate Family,
or (c) a transfer to the Security Savings Charitable Foundation. For purposes of
this Section 6(c), "Immediate Family" includes, but is not necessarily limited
to, a Participant's parents, grandparents, spouse, children, grandchildren,
siblings (including half bothers and sisters), and individuals who are family
members by adoption. Nothing contained in this Section 6(c) shall be construed
to require the Committee to give its approval to any transfer or assignment of
any Non-Statutory Stock Option or portion thereof, and approval to transfer or
assign any Non-Statutory Stock Option or portion thereof does not mean that such
approval will be given with respect to any other Non-Statutory Stock Option or
portion thereof. The transferee or assignee of any Non-Statutory Stock Option
shall be subject to all of the terms and conditions applicable to such
Non-Statutory Stock Option immediately prior to the transfer or assignment and
shall be subject to any other conditions proscribed by the Committee with
respect to such Non-Statutory Stock Option.
(d) Termination of Employment or Service (General). Unless otherwise
determined by the Committee, upon the termination of a Participant's employment
or other service for any reason other than Retirement, Disability or death, a
Change in Control, or Termination for Cause, the Participant may exercise only
those Non-Statutory Stock Options that were immediately exercisable by the
Participant at the date of such termination and only for a period of three (3)
months following the date of such termination, or, if sooner, until the
expiration of the term of the Option.
(e) Termination of Employment or Service (Retirement). Unless otherwise
determined by the Committee, in the event of a Participant's Retirement, the
Participant may exercise only those Non-Statutory Stock Options that were
immediately exercisable by the Participant at the date of Retirement and only
for a period of one (1) year from the date of Retirement.
(f) Termination of Employment or Service (Disability or Death). Unless
otherwise determined by the Committee, in the event of the termination of a
Participant's employment or other service due to Disability or death, all
Non-Statutory Stock Options held by such Participant shall immediately become
exercisable and remain exercisable for a period one (1) year following the date
of such termination, or, if sooner, until the expiration of the term of the
Option.
(g) Termination of Employment or Service (Termination for Cause).
Unless otherwise determined by the Committee, in the event of a Participant's
Termination for Cause, all rights with respect to the Participant's
Non-Statutory Stock Options shall expire immediately upon the effective date of
such Termination for Cause.
(h) Acceleration Upon a Change in Control. In the event of a Change in
Control all Non- Statutory Stock Options held by a Participant as of the date of
the Change in Control shall immediately
A-6
<PAGE>
become exercisable and shall remain exercisable until the expiration of the term
of the Non-Statutory Stock Options.
(i) Payment. Payment due to a Participant upon the exercise of a
Non-Statutory Stock Option shall be made in the form of shares of Common Stock.
(j) Maximum Individual Award. No individual Employee shall be granted
an amount of Non- Statutory Stock Options which exceeds 25% of all Options
eligible to be granted under the Plan within any 60-month period.
7. INCENTIVE STOCK OPTIONS
The Committee may, subject to the limitations of the Plan and the
availability of shares of Common Stock reserved but unawarded under this Plan,
grant Incentive Stock Options to an Employee upon such terms and conditions as
it may determine to the extent such terms and conditions are consistent with the
following provisions:
(a) Exercise Price. The Committee shall determine the Exercise Price of
each Incentive Stock Option. However, the Exercise Price shall not be less than
100% of the Fair Market Value of the Common Stock on the Date of Grant;
provided, however, that if at the time an Incentive Stock Option is granted, the
Employee owns or is treated as owning, for purposes of Section 422 of the Code,
Common Stock representing more than 10% of the total combined voting securities
of the Holding Company ("10% Owner"), the Exercise Price shall not be less than
110% of the Fair Market Value of the Common Stock on the Date of Grant.
(b) Amounts of Incentive Stock Options. To the extent the aggregate
Fair Market Value of shares of Common Stock with respect to which Incentive
Stock Options that are exercisable for the first time by an Employee during any
calendar year under the Plan and any other stock option plan of the Holding
Company or an Affiliate exceeds $100,000, or such higher value as may be
permitted under Section 422 of the Code, such Options in excess of such limit
shall be treated as Non-Statutory Stock Options. Fair Market Value shall be
determined as of the Date of Grant with respect to each such Incentive Stock
Option.
(c) Terms of Incentive Stock Options. The Committee shall determine the
term during which a Participant may exercise an Incentive Stock Option, but in
no event may a Participant exercise an Incentive Stock Option, in whole or in
part, more than ten (10) years from the Date of Grant; provided, however, that
if at the time an Incentive Stock Option is granted to an Employee who is a 10%
Owner, the Incentive Stock Option granted to such Employee shall not be
exercisable after the expiration of five (5) years from the Date of Grant. The
Committee shall also determine the date on which each Incentive Stock Option, or
any part thereof, first becomes exercisable and any terms or conditions a
Participant must satisfy in order to exercise each Incentive Stock Option. The
shares of Common Stock underlying each Incentive Stock Option may be purchased
in whole or in part at any time during the term of such Incentive Stock Option
after such Option becomes exercisable.
(d) Non-Transferability. No Incentive Stock Option shall be
transferable except by will or the laws of descent and distribution and is
exercisable, during his lifetime, only by the Employee to whom the Committee
grants the Incentive Stock Option. The designation of a beneficiary does not
constitute a transfer of an Incentive Stock Option.
A-7
<PAGE>
(e) Termination of Employment (General). Unless otherwise determined by
the Committee, upon the termination of a Participant's employment or other
service for any reason other than Retirement, Disability or death, a Change in
Control, or Termination for Cause, the Participant may exercise only those
Incentive Stock Options that were immediately exercisable by the Participant at
the date of such termination and only for a period of three (3) months following
the date of such termination, or, if sooner, until the expiration of the term of
the Option.
(f) Termination of Employment (Retirement). Unless otherwise determined
by the Committee, in the event of a Participant's Retirement, the Participant
may exercise only those Incentive Stock Options that were immediately
exercisable by the Participant at the date of Retirement and only for a period
of one (1) year from the date of Retirement. Any Option originally designated as
an Incentive Stock Option shall be treated as a Non-Statutory Stock Option to
the extent the Option does not otherwise qualify as an Incentive Stock Option
pursuant to Section 422 of the Code.
(g) Termination of Employment (Disability or Death). Unless otherwise
determined by the Committee, in the event of the termination of a Participant's
employment or other service due to Disability or death, all Incentive Stock
Options held by such Participant shall immediately become exercisable and remain
exercisable for a period one (1) year following the date of such termination,
or, if sooner, until the expiration of the term of the Option.
(h) Termination of Employment (Termination for Cause). Unless otherwise
determined by the Committee, in the event of an Employee's Termination for
Cause, all rights under such Employee's Incentive Stock Options shall expire
immediately upon the effective date of such Termination for Cause.
(i) Acceleration Upon a Change in Control. In the event of a Change in
Control all Incentive Stock Options held by a Participant as of the date of the
Change in Control shall immediately become exercisable and shall remain
exercisable until the expiration of the term of the Incentive Stock Options. Any
Option originally designated as an Incentive Stock Option shall be treated as a
Non-Statutory Stock Option to the extent the Option does not otherwise qualify
as an Incentive Stock Option pursuant to Section 422 of the Code.
(j) Payment. Payment due to a Participant upon the exercise of an
Incentive Stock Option shall be made in the form of shares of Common Stock.
(k) Maximum Individual Award. No individual Employee shall be granted
an amount of Incentive Stock Options which exceeds 25% of all Options eligible
to be granted under the Plan within any 60-month period.
(l) Disqualifying Dispositions. Each Award Agreement with respect to an
Incentive Stock Option shall require the Participant to notify the Committee of
any disposition of shares of Common Stock issued pursuant to the exercise of
such Option under the circumstances described in Section 421(b) of the Code
(relating to certain disqualifying dispositions), within 10 days of such
disposition.
8. STOCK AWARDS
The Committee may make grants of Stock Awards, which shall consist of
the grant of some number of shares of Common Stock, to a Participant upon such
terms and conditions as it may determine to the extent such terms and conditions
are consistent with the following provisions:
A-8
<PAGE>
(a) Grants of the Stock Awards. Stock Awards may only be made in whole
shares of Common Stock. Stock Awards may only be granted from shares reserved
under the Plan and available for award at the time the Stock Award is made to
the Participant.
(b) Terms of the Stock Awards. The Committee shall determine the dates
on which Stock Awards granted to a Participant shall vest and any terms or
conditions which must be satisfied prior to the vesting of any Stock Award or
portion thereof. Any such terms or conditions shall be determined by the
Committee as of the Date of Grant.
(c) Termination of Employment or Service (General). Unless otherwise
determined by the Committee, upon the termination of a Participant's employment
or service for any reason other than Retirement, Disability or death, a Change
in Control, or Termination for Cause, any Stock Awards in which the Participant
has not become vested as of the date of such termination shall be forfeited and
any rights the Participant had to such Stock Awards shall become null and void.
(d) Termination of Employment or Service (Retirement). Unless otherwise
determined by the Committee, in the event of a Participant's Retirement, any
Stock Awards in which the Participant has not become vested as of the date of
Retirement shall be forfeited and any rights the Participant had to such
unvested Stock Awards shall become null and void.
(e) Termination of Employment or Service (Disability or death). Unless
otherwise determined by the Committee, in the event of a termination of the
Participant's service due to Disability or death all unvested Stock Awards held
by such Participant shall immediately vest as of the date of such termination.
(f) Termination of Employment or Service (Termination for Cause).
Unless otherwise determined by the Committee, or in the event of the
Participant's Termination for Cause, all Stock Awards in which the Participant
had not become vested as of the effective date of such Termination for Cause
shall be forfeited and any rights such Participant had to such unvested Stock
Awards shall become null and void.
(g) Acceleration Upon a Change in Control. In the event of a Change in
Control all unvested Stock Awards held by a Participant shall immediately vest.
(h) Maximum Individual Award. No individual Employee shall be granted
an amount of Stock Awards which exceeds 25% of all Stock Awards eligible to be
granted under the Plan within any 60-month period.
(i) Issuance of Certificates. Unless otherwise held in Trust and
registered in the name of the Trustee, reasonably promptly after the Date of
Grant with respect to shares of Common Stock pursuant to a Stock Award, the
Holding Company shall cause to be issued a stock certificate, registered in the
name of the Participant to whom such Stock Award was granted, evidencing such
shares; provided, that the Holding Company shall not cause such a stock
certificate to be issued unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear the
following legend:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including forfeiture provisions and
restrictions against transfer) contained in the Security of
Pennsylvania Financial Corp. 1999 Stock-Based Incentive Plan
and Award Agreement entered into between the registered owner
of such shares and Security of Pennsylvania Financial Corp. or
its Affiliates. A
A-9
<PAGE>
copy of the Plan and Award Agreement is on file in the office
of the Corporate Secretary of Security of Pennsylvania
Financial Corp. located at 31 W. Broad Street, Hazleton,
Pennsylvania 18201.
Such legend shall not be removed until the Participant becomes vested in such
shares pursuant to the terms of the Plan and Award Agreement. Each certificate
issued pursuant to this Section 8(i), in connection with a Stock Award, shall be
held by the Holding Company or its Affiliates, unless the Committee determines
otherwise.
(j) Non-Transferability. Except to the extent permitted by the Code,
the rules promulgated under Section 16(b) of the Exchange Act or any successor
statutes or rules:
(i) The recipient of a Stock Award shall not sell,
transfer, assign, pledge, or otherwise encumber
shares subject to the Stock Award until full vesting
of such shares has occurred. For purposes of this
section, the separation of beneficial ownership and
legal title through the use of any "swap" transaction
is deemed to be a prohibited encumbrance.
(ii) Unless determined otherwise by the Committee and
except in the event of the Participant's death or
pursuant to a domestic relations order, a Stock Award
is not transferable and may be earned in his lifetime
only by the Participant to whom it is granted. Upon
the death of a Participant, a Stock Award is
transferable by will or the laws of descent and
distribution. The designation of a beneficiary shall
not constitute a transfer.
(iii) If a recipient of a Stock Award is subject to the
provisions of Section 16 of the Exchange Act, shares
of Common Stock subject to such Stock Award may not,
without the written consent of the Committee (which
consent may be given in the Award Agreement), be sold
or otherwise disposed of within six (6) months
following the date of grant of the Stock Award.
(k) Accrual of Dividends. To the extent Stock Awards are held in Trust
and registered in the name of the Trustee, unless otherwise specified by the
Trust Agreement whenever shares of Common Stock underlying a Stock Award are
distributed to a Participant or beneficiary thereof under the Plan, such
Participant or beneficiary shall also be entitled to receive, with respect to
each such share distributed, a payment equal to any cash dividends and the
number of shares of Common Stock equal to any stock dividends, declared and paid
with respect to a share of the Common Stock if the record date for determining
shareholders entitled to receive such dividends falls between the date the
relevant Stock Award was granted and the date the relevant Stock Award or
installment thereof is issued. There shall also be distributed an appropriate
amount of net earnings, if any, of the Trust with respect to any dividends paid
out on the shares related to the Stock Award.
(l) Voting of Stock Awards. After a Stock Award has been granted but
for which the shares covered by such Stock Award have not yet been vested,
earned and distributed to the Participant pursuant to the Plan, the Participant
shall be entitled to vote or to direct the Trustee to vote, as the case may be,
such shares of Common Stock which the Stock Award covers subject to the rules
and procedures adopted by the Committee for this purpose and in a manner
consistent with the Trust agreement.
A-10
<PAGE>
(m) Payment. Payment due to a Participant upon the redemption of a
Stock Award shall be made in the form of shares of Common Stock.
9. PERFORMANCE AWARDS
(a) The Committee may determine to make any Award under the Plan
contingent upon the satisfaction of any conditions related to the performance of
the Holding Company, an Affiliate of the Participant. Each Performance Award
shall be evidenced in the Award Agreement, which shall set forth the applicable
conditions, the maximum amounts payable and such other terms and conditions as
are applicable to the Performance Award. Unless otherwise determined by the
Committee, each Performance Award shall be granted and administered to comply
with the requirements of Section 162(m) of the Code and subject to the following
provisions:
(b) Any Performance Award shall be made not later than 90 days after
the start of the period for which the Performance Award relates and shall be
made prior to the completion of 25% of such period. All determinations regarding
the achievement of any applicable conditions will be made by the Committee. The
Committee may not increase during a year the amount of a Performance Award that
would otherwise be payable upon satisfaction of the conditions but may reduce or
eliminate the payments as provided for in the Award Agreement.
(c) Nothing contained in the Plan will be deemed in any way to limit or
restrict the Committee from making any Award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
(d) A Participant who receives a Performance Award payable in Common
Stock shall have no rights as a shareholder until the Company Stock is issued
pursuant to the terms of the Award Agreement.
The Common Stock may be issued without cash consideration.
(e) A Participant's interest in a Performance Award may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(f) No Award or portion thereof that is subject to the satisfaction of
any condition shall be distributed or considered to be earned or vested until
the Committee certifies in writing that the conditions to which the
distribution, earning or vesting of such Award is subject have been achieved.
10. DEFERRED PAYMENTS
The Committee, in its discretion, may permit a Participant to elect to
defer receipt of all or any part of any cash or stock payment under the Plan, or
the Committee may determine to defer receipt by some or all Participants, of all
or part of any such payment. The Committee shall determine the terms and
conditions of any such deferral, including the period of deferral, the manner of
deferral, and the method for measuring appreciation on deferred amounts until
their payout.
11. METHOD OF EXERCISE OF OPTIONS
Subject to any applicable Award Agreement, any Option may be exercised
by the Participant in whole or in part at such time or times, and the
Participant may make payment of the Exercise Price in such form or forms
permitted by the Committee, including, without limitation, payment by delivery
of cash, Common Stock or other consideration (including, where permitted by law
and the Committee, Awards)
A-11
<PAGE>
having a Fair Market Value on the day immediately preceding the exercise date
equal to the total Exercise Price, or by any combination of cash, shares of
Common Stock and other consideration, including exercise by means of a cashless
exercise arrangement with a qualifying broker-dealer, as the Committee may
specify in the applicable Award Agreement.
12. RIGHTS OF PARTICIPANTS
No Participant shall have any rights as a shareholder with respect to
any shares of Common Stock covered by an Option until the date of issuance of a
stock certificate for such Common Stock. Nothing contained herein or in any
Award Agreement confers on any person any right to continue in the employ or
service of the Holding Company or an Affiliate or interferes in any way with the
right of the Holding Company or an Affiliate to terminate a Participant's
services.
13. DESIGNATION OF BENEFICIARY
A Participant may, with the consent of the Committee, designate a
person or persons to receive, in the event of death, any Award to which the
Participant would then be entitled. Such designation will be made upon forms
supplied by and delivered to the Holding Company and may be revoked in writing.
If a Participant fails effectively to designate a beneficiary, then the
Participant's estate will be deemed to be the beneficiary.
14. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, or other increase or decrease in such shares without receipt
or payment of consideration by the Holding Company, or in the event an
extraordinary capital distribution is made, the Committee may make such
adjustments to previously granted Awards, to prevent dilution, diminution, or
enlargement of the rights of the Participant, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of
Common Stock or other securities that may underlie future
Awards under the Plan;
(b) adjustments in the aggregate number or kind of shares of
Common Stock or other securities underlying Awards already
made under the Plan;
(c) adjustments in the Exercise Price of outstanding Incentive
and/or Non-Statutory Stock Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. All Awards under
this Plan shall be binding upon any successors or assigns of the Holding
Company. Notwithstanding the above, in the event of an extraordinary capital
distribution, any adjustment under this Section 14 shall be subject to required
approval by the Office of Thrift Supervision.
A-12
<PAGE>
15. TAXES
(a) Whenever under this Plan, cash or shares of Common Stock are to be
delivered upon exercise or payment of an Award or any other event with respect
to rights and benefits hereunder, the Committee shall be entitled to require as
a condition of delivery (i) that the Participant remit an amount sufficient to
satisfy all federal, state, and local withholding tax requirements related
thereto, (ii) that the withholding of such sums come from compensation otherwise
due to the Participant or from any shares of Common Stock due to the Participant
under this Plan or (iii) any combination of the foregoing provided, however,
that no amount shall be withheld from any cash payment or shares of Common Stock
relating to an Award which was transferred by the Participant in accordance with
this Plan. Furthermore, Participants may direct the Committee to instruct the
Trustee to sell shares of Common Stock to be delivered upon the payment of an
Award to satisfy tax obligations.
(b) If any disqualifying disposition described in Section 7(l) is made
with respect to shares of Common Stock acquired under an Incentive Stock Option
granted pursuant to this Plan, or any transfer described in Section 6(c) is
made, or any election described in Section 16 is made, then the person making
such disqualifying disposition, transfer, or election shall remit to the Holding
Company or its Affiliates an amount sufficient to satisfy all federal, state,
and local withholding taxes thereby incurred; provided that, in lieu of or in
addition to the foregoing, the Holding Company or its Affiliates shall have the
right to withhold such sums from compensation otherwise due to the Participant,
or, except in the case of any transfer pursuant to Section 6(c), from any shares
of Common Stock due to the Participant under this Plan.
16. NOTIFICATION UNDER SECTION 83(b)
The Committee may, on the Date of Grant or any later date, prohibit a
Participant from making the election described below. If the Committee has not
prohibited such Participant from making such election, and the Participant
shall, in connection with the exercise of any Option, or the grant of any Stock
Award, make the election permitted under Section 83(b) of the Code, such
Participant shall notify the Committee of such election within 10 days of filing
notice of the election with the Internal Revenue Service, in addition to any
filing and notification required pursuant to regulations issued under the
authority of Section 83(b) of the Code.
17. AMENDMENT OF THE PLAN AND AWARDS
(a) Except as provided in paragraph (c) of this Section 17, the Board
of Directors may at any time, and from time to time, modify or amend the Plan in
any respect, prospectively or retroactively; provided however, that provisions
governing grants of Incentive Stock Options shall be submitted for shareholder
approval to the extent required by such law, regulation or otherwise. Failure to
ratify or approve amendments or modifications by shareholders shall be effective
only as to the specific amendment or modification requiring such ratification.
Other provisions of this Plan will remain in full force and effect. No such
termination, modification or amendment may adversely affect the rights of a
Participant under an outstanding Award without the written permission of such
Participant.
(b) Except as provided in paragraph (c) of this Section 17, the
Committee may amend any Award Agreement, prospectively or retroactively;
provided, however, that no such amendment shall adversely affect the rights of
any Participant under an outstanding Award without the written consent of such
Participant.
A-13
<PAGE>
(c) In no event shall the Board of Directors amend the Plan or shall
the Committee amend an Award Agreement in any manner that has the effect of:
(i) Allowing any Option to be granted with an exercise below
the Fair Market Value of the Common Stock on the Date of
Grant.
(ii) Allowing the exercise price of any Option previously
granted under the Plan to be reduced subsequent to the Date of
Award.
(d) Notwithstanding anything in this Plan or any Award Agreement to the
contrary, if any Award or right under this Plan would, in the opinion of the
Holding Company's accountants, cause a transaction to be ineligible for pooling
of interest accounting that would, but for such Award or right, be eligible for
such accounting treatment, the Committee, at its discretion, may modify, adjust,
eliminate or terminate the Award or right so that pooling of interest accounting
is available.
18. EFFECTIVE DATE OF PLAN
The Plan shall become effective on December 31, 1999, but only if,
prior to such date, the Plan is approved by the Holding Company's stockholders.
The Plan will be so approved if at an annual or special meeting of stockholders
held prior to such date a quorum is present and the votes of the holders of a
majority of the Common Stock present or represented by proxy and entitled to
vote on such matter shall be cast in favor of its approval. If the Plan is not
approved by stockholders in accordance with IRS regulations, the Plan shall
remain in full force and effect, and any Incentive Stock Options granted under
the Plan shall be deemed to be Non-Statutory Stock Options and any Award
intended to comply with Section 162(m) of the Code shall not comply with Section
162(m) of the Code.
19. TERMINATION OF THE PLAN
The right to grant Awards under the Plan will terminate upon the
earlier of: (i) ten (10) years after the Effective Date; (ii) the issuance of a
number of shares of Common Stock pursuant to the exercise of Options or the
distribution of Stock Awards is equivalent to the maximum number of shares
reserved under the Plan as set forth in Section 4 hereof. The Board of Directors
has the right to suspend or terminate the Plan at any time, provided that no
such action will, without the consent of a Participant, adversely affect a
Participant's vested rights under a previously granted Award.
20. APPLICABLE LAW
The Plan will be administered in accordance with the laws of the state
of Delaware to the extent not pre-empted by applicable federal law.
21. TREATMENT OF UNVESTED, UNEXERCISED, OR NON-EXERCISABLE AWARDS
UPON A CHANGE IN CONTROL
In the event of a Change in Control where the Holding Company or the
Association is not the surviving entity, the Board of Directors of the Holding
Company and/or the Association, as applicable, shall require that the successor
entity take one of the following actions with respect to all Awards held by
Participants at the date of the Change in Control:
A-14
<PAGE>
(i) Assume the Awards with the same terms and conditions as
granted to the Participant under this Plan; or
(ii) Replace the Awards with comparable Awards, subject to the
same or more favorable terms and conditions as the Award
granted to the Participant under this Plan, whereby the
Participant will be granted common stock or the option to
purchase common stock of the successor entity; or, only if the
Committee determines that neither of the alternatives set
forth in clauses (i) or (ii) are legally available,
(iii) Replace the Awards with a cash payment under an
incentive plan, program, or other arrangement of the successor
entity that preserves the economic value of the Awards and
makes any such cash payment subject to the same vesting or
exercisability schedule applicable to such Awards.
The determination of comparability of Awards offered by a successor
entity under clause (ii) of above shall be made by the Committee, and the
Committee's determination shall be conclusive and binding.
A-15
<PAGE>
REVOCABLE PROXY
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
October 25, 1999 - 3:00 p.m. Eastern Time
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints the official proxy committee of the Board of
Directors of Security of Pennsylvania Financial Corp. (the "Company"), each with
full power of substitution, to act as proxy for the undersigned, and to vote all
shares of common stock of the Company which the undersigned is entitled to vote
only at the Annual Meeting of Stockholders, to be held on October 25, 1999, at
3:00 p.m. Eastern Time, at the main office of Security Savings Association of
Hazleton, 31 W. Broad Street, Pennsylvania and at any and all adjournments
thereof, with all of the powers the undersigned would possess if personally
present at such meeting as follows:
1. The election as directors of all nominees listed (unless the "For All Except"
box is marked and the instructions below are complied with):
Richard C. Laubach and John J. Raynock
[ ] For [ ] Withhold [ ] For All Except
INSTRUCTION: To withhold authority to vote for any individual nominee write that
nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. The approval of the Security of Pennsylvania Financial Corp. 1999 Stock-Based
Incentive Plan.
[ ] For [ ] Against [ ] Abstain
3. The ratification of the appointment of Parente, Randolph, Orlando, Carey &
Associates as independent auditors of Security of Pennsylvania Financial
Corp. for the year ending June 30, 2000.
[ ] For [ ] Against [ ] Abstain
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
This proxy is revocable and will be voted as directed, but if no instructions
are specified, this proxy will be voted "FOR" each of the proposals listed. If
any other business is presented at the Annual Meeting, including whether or not
to adjourn the meeting, this proxy will be voted by the proxy committee in their
best judgment. At the present time, the Board of Directors knows of no other
business to be presented at the Annual Meeting.
<PAGE>
Please be sure to sign and date
this Proxy in the box below.
-----------------------------
Date
-----------------------------
Stockholder sign above
-----------------------------
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
The above-signed acknowledges receipt from the Company prior to the execution
of this proxy of a Notice of Annual Meeting of Stockholders and of a Proxy
Statement dated September 17, 1999 and of the Annual Report to Stockholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give full title.
If shares are held jointly, each holder may sign but only one signature is
required.
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
