SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1998
------------------
|_| Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
--------------- ---------------
SEC File Number: 000-25009
SKIBO FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
United States 25-1820465
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
242 East Main Street, Carnegie, Pennsylvania 15106
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(Address of principal executive offices) (Zip Code)
(412) 276-2424
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(Registrant's telephone number, including area code)
Check whether the registrant: (1) filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares outstanding of common stock
as of November 10, 1998
$0.10 Par Value Common Stock 3,450,000 Shares
- ---------------------------- --------------------
Class Outstanding
Transitional Small Business Disclosure Format (check one)
Yes No X
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<PAGE>
FIRST CARNEGIE DEPOSIT AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
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Page
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PART I. FINANCIAL INFORMATION
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<S> <C> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition (As of
September 30, 1998 (unaudited) and March 31, 1998)..........................................1
Consolidated Statements of Operations and Comprehensive Income (For
the three and six months ended September 30, 1998 and 1997 (unaudited)).....................2
Consolidated Statement of Stockholders' Equity (For the
six months ended September 30, 1998 (unaudited).............................................3
Consolidated Statements of Cash Flows (For the six
months ended September 30, 1998 and 1997 (unaudited)).......................................4
Notes to Consolidated Financial Statements..................................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................................................10
PART 11. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings................................................................................16
Item 2. Changes in Securities............................................................................16
Item 3. Defaults Upon Senior Securities..................................................................16
Item 4. Submission of Matters to a Vote of Security-Holders..............................................16
Item 5. Other Information................................................................................17
Item 6. Exhibits and Reports on Form 8-K.................................................................17
Signatures
</TABLE>
<PAGE>
FIRST CARNEGIE DEPOSIT AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
------------- ----------
ASSETS (Unaudited)
------
<S> <C> <C>
Cash and amounts due from depository institutions $ 535 $ 523
Interest-bearing deposits with other institutions 6,367 2,748
Investment securities:
Held-to-maturity (market value $16,354 and $15,836) 16,152 15,777
Mortgage-backed securities:
Held-to-maturity (market value $49,362 and $54,903) 48,810 54,315
Loans receivable, net 64,961 67,884
Real estate owned, net -- 11
Accrued interest receivable:
Investment securities 199 224
Mortgage-backed securities 361 408
Loans receivable 802 800
Federal Home Loan Bank stock, at cost 2,307 2,307
Premises and equipment, net 736 759
Prepaid expenses and other assets 2,707 2,376
-------- --------
Total Assets $ 143,937 $ 148,132
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Savings deposits $ 75,932 $ 77,226
Federal Home Loan Bank advances 37,800 41,300
Bonds payable 1,441 1,618
Other borrowings 666 666
Advances from borrowers for taxes and insurance 66 166
Accrued expenses and other liabilities 3,381 2,176
-------- -------
Total Liabilities 119,286 123,152
Stockholders' Equity:
Common stock, $0.10 par value; 10,000,000 shares authorized;
2,300,000 issued and outstanding at September 30 and March 31 230 230
Additional paid-in capital 9,847 9,800
Unearned employee stock ownership plan (ESOP) shares (544) (625)
Unearned restricted stock plan (RSP) shares (662) --
Retained earnings, substantially restricted 15,780 15,575
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Total Stockholders' Equity 24,651 24,980
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Total Liabilities and Stockholders' Equity $ 143,937 $ 148,132
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
FIRST CARNEGIE DEPOSIT AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the Three and Six Months Ended September 30, 1998 and 1997
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
----- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 1,198 $ 1,161 $ 2,435 $ 2,320
Mortgage-backed securities 833 1,018 1,724 1,997
Investment securities 255 295 517 648
Other 82 59 169 160
----- ------ ----- -----
Total interest income 2,368 2,533 4,845 5,125
Interest expense:
Savings deposits 872 903 1,751 1,799
Federal Home Loan Bank advances 501 588 1,077 1,175
Bonds payable 39 50 78 100
Other borrowings 14 18 28 35
----- -----
Total interest expense 1,426 1,559 2,934 3,109
----- ----- ----- -----
Net interest income 942 974 1,911 2,016
Provision for loan losses 12 15 15 30
----- ----- ----- -----
Net interest income after
provision for loan losses 930 959 1,896 1,986
Other income:
Fees and service charges 12 11 25 27
Loss on sale of securities -- (4) -- (7)
Other 14 128 22 134
--- --- ---- -----
Total other income 26 135 47 154
Other expenses:
Compensation and employee benefits 377 412 1,033 835
Premises and occupancy costs 55 36 111 113
Federal insurance premiums 12 16 24 29
Other operating expenses 81 100 188 181
--- --- ---
Total other expenses 525 564 1,356 1,158
--- --- ----- -----
Income before income taxes 431 530 587 982
Provision for income taxes 180 210 240 423
---- --- --- ---
Net income $ 251 $ 320 $ 347 $ 559
==== ==== === ===
Other comprehensive income:
Unrealized gain on securities available-
for-sale, net of tax -- 3 -- 11
--- --- --- ---
Total comprehensive income $ 251 $ 323 $ 347 $ 570
=== === === ===
Basic earnings per share $ .11 $ .14 $ .15 $ .25
Diluted earnings per share $ .11 $ .14 $ .15 $ .25
Average shares outstanding-basic 2,241,529 2,219,945 2,239,855 2,218,948
Average shares outstanding-diluted 2,241,529 2,219,945 2,239,855 2,218,948
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
FIRST CARNEGIE DEPOSIT AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the Six Months Ended September 30, 1998 (unaudited)
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Common Stock Additional Unearned Unearned
Number of Paid-in ESOP RSP Retained
Shares Amount Capital Shares Shares Earnings Total
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<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1998 2,300,000 $230 $9,800 $(625) $ -- $15,575 $24,980
Cash dividends declared net
($.15 per share) -- -- -- -- -- (142) (142)
Reduction of equity for restricted
stock plan (RSP) liability -- -- -- -- (843) -- (843)
Excess of fair value above cost of
ESOP shares released or
committed to be released -- -- 47 -- -- -- 47
Amortization of ESOP liability -- -- -- 81 -- -- 81
Amortization of RSP liability -- -- -- -- 181 -- 181
Net income -- -- -- -- -- 347 347
--------------------------------------------------------------------------------------------
Balance at September 30, 1998 2,300,000 $230 $9,847 $(544) $ (662) $15,780 $24,651
============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FIRST CARNEGIE DEPOSIT AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended September 30, 1998 and 1997
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Operating activities:
Net income $ 347 $ 559
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Provision for loan losses 15 30
Depreciation 44 34
Compensation expense-ESOP and RSP 309 52
Loss on sale of mortgage-backed securities available-for-sale -- 3
Loss on sale of investment securities available for-sale -- 4
Net amortization of premiums and discounts 120 86
Decrease (increase) in accrued interest receivable 70 (25)
Decrease (increase) in prepaid expenses (330) 121
Increase in accrued interest payable 316 338
Decrease (increase) in accrued income taxes (13) 29
Other, net 70 141
-------- --------
Net cash provided by operating activities 948 1,372
-------- --------
Investing activities:
Purchases of premises and equipment (21) (14)
Purchases of investment securities held-to maturity (5,598) (4,569)
Purchases of mortgage-backed securities held-to-maturity (3,028) (10,184)
Proceeds from sale of investment securities available-for-sale -- 721
Proceeds from sale of mortgage-backed securities available-for-sale -- 519
Proceeds from maturities/calls and principal repayments of:
Investment securities held-to-maturity 5,213 5,055
Mortgage-backed securities held-to-maturity 8,501 4,656
Mortgage-backed securities available-for-sale -- 33
Loans purchased (6,920) (4,653)
Net principal repayments on loans 9,749 3,849
Decrease in Federal Home Loan Bank stock -- 15
-------- --------
Net cash provided by (used in) investing activities $ 7,896 $ (4,572)
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements. (continued)
4
<PAGE>
FIRST CARNEGIE DEPOSIT AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
For the Six Months Ended September 30, 1998 and 1997
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Financing activities:
Decrease of stock subscriptions $ -- $(13,606)
Net decrease in savings deposits (1,294) (10,796)
Proceeds from Federal Home Loan Bank advances 13,000 29,100
Repayment of Federal Home Loan Bank advances (16,500) (30,400)
Proceeds from other borrowings -- 828
Principal repayment of bonds payable (177) (253)
Net decrease in mortgage escrow (100) (126)
Common stock acquired by ESOP -- (828)
Capitalization of SKIBO Bancshares, M.H.C -- (100)
Cash dividends paid (142) (155)
Net proceeds from sale of common stock -- 9,849
-------- --------
Net cash used in financing activities (5,213) (16,487)
-------- --------
Net increase (decrease) in cash and cash equivalents 3,631 (19,687)
Cash and cash equivalents, beginning of period 3,271 22,701
-------- --------
Cash and cash equivalents, end of period 6,902 3,014
======== ========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest 2,618 2,581
======== ========
Income taxes 253 380
======== ========
Noncash investing activities:
Transfer of held-to-maturity investment securities
to available-for-sale -- 650
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
FIRST CARNEGIE DEPOSIT AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements of First Carnegie
Deposit and subsidiaries (the "Bank") have been prepared in accordance with
instructions for Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. However, such information presented reflects
all adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of the Bank's management, necessary for a fair statement of
results for the interim period. As discussed in Note 9, the Bank became the
wholly owned subsidiary of Skibo Financial Corp. on October 29, 1998.
The results of operations for the three and six months ended September 30, 1998
are not necessarily indicative of the results to be expected for the year ending
March 31, 1999 or any other period. The unaudited consolidated financial
statements and notes thereto should be read in conjunction with the audited
financial statements and notes thereto for the year ended March 31, 1998.
NOTE 2 - Principles of Consolidation
---------------------------
The accompanying unaudited consolidated financial statements include the
accounts of First Carnegie Deposit and its wholly owned subsidiaries, Fedcar,
Inc. and Carnegie Federal Funding Corporation ("CFFC"). Fedcar, Inc. is a
service corporation that is currently inactive. CFFC is a special purpose
subsidiary that was formed for the issuance of collateralized mortgage
obligations. All significant intercompany transactions and balances have been
eliminated in consolidation.
NOTE 3 - Earnings Per Share (EPS)
------------------------
Basic EPS is computed by dividing net income applicable to common stock by the
weighted average number of common shares outstanding during the period, without
considering any dilutive items. Diluted EPS is computed by dividing net income
applicable to common stock by the weighted average number of common shares and
common stock equivalents for items that are dilutive, net of shares assumed to
be repurchased using the treasury stock method at the average share price for
the Bank's common stock during the period. Common stock equivalents arise from
the assumed conversion of outstanding stock options and unvested RSP shares.
As required, all previously reported primary and fully diluted EPS have been
replaced with the presentation of basic and diluted EPS. The computation of
basic and diluted earnings per share is shown in the table below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Basic EPS computation:
Numerator-Net Income $ 251,000 $ 320,000 $ 347,000 $ 559,000
Denominator-Wt Avg common
shares outstanding 2,241,529 2,219,945 2,239,855 2,218,948
Basic EPS $ .11 $ .14 $ .15 $ .25
=========== ========= =========== ===========
Diluted EPS computation:
Numerator-Net Income 251,000 320,000 347,000 559,000
Denominator-Wt Avg
common stock outstanding 2,241,529 2,219,945 2,239,855 2,218,948
Dilutive Stock Options -- -- -- --
Dilutive Unvested RSP -- -- -- --
----------- ----------- ----------- -----------
Weighted avg common
shares and common stock
equivalents 2,241,529 2,219,945 2,239,855 2,218,948
Diluted EPS $ .11 $ .14 $ .15 $ .25
=========== =========== =========== ===========
</TABLE>
6
<PAGE>
FIRST CARNEGIE DEPOSIT AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Options to purchase 51,746 shares of common stock that were outstanding during
the three and six months ended September 30, 1998, were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.
Shares outstanding for the three and six months ended September 30, 1998 and
1997 do not include ESOP shares that were unallocated in accordance with
Statement of Position ("SOP") 93-6, "Employers' Accounting for Employees Stock
Ownership Plans". Unallocated ESOP shares amounted to 54,380 and 78,660 at
September 30, 1998 and 1997, respectively.
NOTE 4 - Reclassification of Prior Period's Statements
---------------------------------------------
Certain items previously reported have been reclassified to conform with the
current period's reporting format.
NOTE 5 - Dividends on Common Stock
-------------------------
On September 10, 1998, the Board of Directors of the Bank declared a $0.075 per
share cash dividend on the Bank's outstanding shares of common stock, payable to
stockholders of record as of September 30, 1998. Skibo Bancshares, M.H.C. (the
"Company") waived the receipt of dividends on its 1,265,000 shares. The cash
dividends on the remaining 1,035,000 outstanding shares were paid on October 15,
1998. There can be no assurance that the Office of Thrift Supervision ("OTS")
will permit future dividend waivers, or of the terms of such permitted waivers.
Furthermore, any waiver of dividends by the Company may result in an adjustment
to the ratio pursuant to which shares of Bank common stock are exchanged for
shares of a stock holding company should the Company convert from the mutual to
stock form of organization. Such an adjustment would have the effect of diluting
the minority stockholders of the Bank.
NOTE 6 - Employee Stock Ownership Plan ("ESOP")
--------------------------------------
The ESOP borrowed $828,000 from an independent third party lender to fund the
purchase of 82,800, or 8.0%, of the shares the Bank sold in the minority stock
offering. The Bank makes scheduled discretionary contributions to the ESOP
sufficient to service the debt over a ten year period. The cost of shares not
committed to be released and unallocated (suspense shares) is reported as a
reduction in stockholders' equity. Dividends on allocated and unallocated shares
are used for debt service. Shares are released to participants based on a
compensation formula.
In connection with the formation of the ESOP, the Bank adopted SOP 93-6. SOP
93-6 requires that (1) compensation expense be recognized based on the average
fair value of the ESOP shares committed to be released; (2) dividends on
unallocated shares used to pay debt service be reported as a reduction of debt
or of accrued interest payable and that dividends on allocated shares be charged
to retained earnings; and (3) ESOP shares which have not been committed to be
released not be considered outstanding for purposes of computing earnings per
share.
Compensation expense related to the ESOP amounted to $88,000 and $31,000 for the
three months ended September 30, 1998 and September 1997, respectively.
Compensation expense amounted to $129,000 and $52,000 for the six months ended
September 30, 1998 and September 1997, respectively. At September 30, 1998,
there were 12,210 ESOP shares committed to be released and 54,380 suspense
shares. ESOP shares totalling 16,210 were allocated as of September 30, 1998.
The fair value of unearned ESOP shares at September 30, 1998 totalled $605,000.
7
<PAGE>
FIRST CARNEGIE DEPOSIT AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 7 - Stock Based Compensation Plans
------------------------------
On April 16, 1998, after stockholder approval, the Bank implemented the "1998
Stock Option Plan" (the "Stock Option Plan") and the "1998 Restricted Stock
Plan"(the "Restricted Stock Plan").
The Stock Option Plan provides for authorizing the issuance of an additional
103,500 shares of common stock by the Bank upon the exercise of stock options
awarded to officers, directors, key employees and other persons providing
services to the Bank. The Bank may also purchase shares through the open market.
There were 103,500 shares of options granted under the Stock Option Plan and
they constitute either Incentive Stock Options or Non-Incentive Stock Options
and were first exercisable at a rate of 50% on the date of the grant and 50% one
year later. The Bank will use the "intrinsic value based method" as prescribed
by APB Opinion 25. Accordingly, common stock issuable pursuant to outstanding
options will be considered outstanding for purposes of calculating earnings per
share, if dilutive.
The Restricted Stock Plan provides for the purchase of 41,400 shares of common
stock in the open market. All of the Common Stock to be purchased by the
Restricted Stock Plan will be purchased at the fair market value of such stock
on the date of purchase. Awards under the Restricted Stock Plan were made in
recognition of expected future services to the Bank by its directors, officers
and key employees responsible for implementation of the policies adopted by the
Bank's Board of Directors and as a means of providing a further retention
incentive. Twenty and thirty-three percent of such awards were earned and
non-forfeitable at the date of the grant and twenty and thirty-three percent
annually thereafter, provided the recipient remains an employee. Executive
officers earn awards at a rate of thirty-three percent per year, while
directors, other officers, and key employees earn at a rate of twenty percent
per year.
NOTE 8 - Recent Accounting, Regulatory and Other Matters
-----------------------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
Comprehensive income is defined as "the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners". The
comprehensive income and related cumulative equity impact of comprehensive
income items will be required to be disclosed as a separate statement or as a
component of the Bank's statement of operations. The Bank adopted SFAS 130 for
the quarter ended June 30, 1998.
For the three months ended September 30, 1998 and 1997, the Bank's total
comprehensive income was $251,000 and $323,000, respectively. Total
comprehensive income is comprised of net income of $251,000 and $320,000 and
other comprehensive income of $0 and $3,000, net of tax, respectively. For the
six months ended September 30, 1998 and 1997, the Bank's total comprehensive
income was $347,000 and $570,000, respectively. Total comprehensive income is
comprised of net income of $347,000 and $559,000 and other comprehensive income
of $0 and $11,000, net of tax, respectively. Other comprehensive income
consisted of unrealized gains on investment securities and mortgage-backed
securities available for sale.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information". SFAS No. 131 requires an entity to
disclose financial information in a manner consistent with internally used
information and requires more detailed disclosures of operating and reporting
segments that are currently in practice. SFAS No. 131 is applicable for years
beginning after December 15, 1997; however, presentation in interim financial
statements is not required for the quarterly reporting period ended September
30, 1998.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure About
Pensions and Other Postretirement Benefits." SFAS No. 132 revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. SFAS No. 132 is applicable
for years beginning after December 15, 1997. Management does not believe the
impact of the adoption will be significant.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative financial instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. Management
has not yet determined the impact, if any, the adoption of this statement will
have on the Bank's consolidated financial condition or results of operations.
SFAS 133 will be effective for all fiscal quarters beginning after June 15,
1999.
8
<PAGE>
FIRST CARNEGIE DEPOSIT AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 9 - Subsequent Event - Reorganization to Stock Holding Company Form of
Organization
----------------------------------------------------------------------
At the Annual Meeting of Stockholders on July 30, 1998, the Bank's Stockholders
approved an Agreement and Plan of Reorganization ("the Plan" or
"Reorganization"), providing for the establishment of a mid-tier stock holding
company. The Plan provided for the establishment of Skibo Financial Corp. (Skibo
Financial) as a stock holding company parent of the Bank, which stock holding
company is majority-owned by Skibo Bancshares, M.H.C., the Bank's mutual holding
company. The former holders of the common stock of the Bank became stockholders
of Skibo Financial and each outstanding share of common stock, par value $.10
per share, of the Bank will be converted into shares of common stock, par value
$.10 per share of Skibo Financial on a three-for two basis. The Reorganization
was completed on October 29, 1998. Effective October 30, 1998, Skibo Financial
replaced the Bank's common stock on the Nasdaq SmallCap Market. For twenty (20)
trading days following the reorganization, the common stock of Skibo Financial
will trade under the symbol "SKBOD." Following the end of the twenty (20) day
period, Skibo Financial will trade under the Bank's old symbol "SKBO."
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Bank's results of operations are primarily dependent upon its net interest
income, which is the difference between the interest income earned on its
assets, primarily loans, mortgage-backed securities, and investments, and the
interest expense on its liabilities, primarily deposits and borrowings. Net
interest income may be affected significantly by general economic and
competitive conditions and policies of regulatory agencies, particularly those
with respect to market interest rates. The results of operations are also
significantly influenced by the level of noninterest expenses, such as employee
salaries and benefits, noninterest income, such as loan-related fees and fees on
deposit-related services, and the Bank's provision for loan losses.
The Management Discussion and Analysis section of this Form 10-QSB contains
certain forward-looking statements (as defined in the Private Securities
Litigation Reform Act of 1995). These forward-looking statements may involve
risks and uncertainties. Although management believes that the expectations
reflected in such forward-looking statements are reasonable, actual results may
differ from the results in these forward-looking statements.
Changes in Financial Condition
The Bank's total assets of $143,937,000 at September 30, 1998, reflected a
decrease of $4,195,000 or 2.8% from $148,132,000 at March 31, 1998. The decrease
in total assets was primarily due to decreases in mortgage-backed securities and
loans receivable, partially offset by increases in investments and interest
bearing deposits at other financial institutions.
The decrease in the Bank's liabilities was primarily due to decreases in savings
deposits and Federal Home Loan Bank ("FHLB") advances. Changes in the components
of assets, liabilities and equity are discussed herein.
Loans Receivable, net. Net loans receivable at September 30, 1998 totalled
$64,961,000, a decrease of $2,923,000 or 4.3%, as compared to $67,884,000 at
March 31, 1998. The decrease was primarily due to principal repayments totalling
$10.5 million, offset by originations of $766,000 and purchases of $6.9 million.
The Bank purchased $3.9 million one -to four-family mortgages and $198,000 farm
mortgages in its normal lending area. The Bank also purchased $1.6 million farm
mortgages and $1.2 million agricultural and Small Business Administration (SBA)
loans outside its normal lending area, primarily in Pennsylvania.
Mortgage-backed Securities. Mortgage-backed securities were $48,810,000 at
September 30, 1998, a decrease of $5,505,000 or 10.1%, as compared to
$54,315,000 at March 31, 1998. The decrease was due to principal repayments and
maturities totalling $8.5 million, offset by purchases of $3.0 million.
Investment Securities. Investment securities totalled $16,152,000 at September
30, 1998, an increase of $375,000 or 2.4%, as compared to $15,777,000 at March
31, 1998. This was primarily a result of purchases of $5.6 million of U.S.
Agency securities, offset by the proceeds from maturities, calls and payments
totalling $5.2 million.
Cash and Cash Equivalents. Cash and cash equivalents, which consist of
interest-bearing and noninterest-bearing deposits, totalled $6,902,000, an
increase of $3,631,000 or 111.0% from the prior quarter. This increase was
primarily due to increased interest-bearing deposits at the FHLB.
Deposits. The Bank's deposits, after interest credited, decreased by $1,294,000
or 1.7% to $75,932,000 at September 30, 1998, as compared to $77,226,000 at
March 31, 1998. The decrease was primarily due to a decrease in certificate of
deposit accounts.
FHLB Advances. FHLB advances, at September 30, 1998, totalled $37,800,000, a
decrease of $3.5 million or 8.5%, as compared to $41,300,000 at March 31, 1998.
The Bank utilized funds received primarily from principal repayments of loans
and mortgage-backed securities to repay a portion of the advances.
Stockholders' Equity. The Bank's stockholders' equity totalled $24,651,000 at
September 30, 1998, as compared to $24,980,000 at March 31, 1998. The decrease
of $329,000 or 1.3% was primarily due to the Bank's implementation of a
restricted stock plan and additional ESOP shares committed to be released to
participant accounts, offset by earnings for the six months ended September 30,
1998. See Note 7 "Stock Based Compensation Plans".
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended September 30, 1998 and 1997
Net Income. The Bank recorded net income of $251,000 for the three months ended
September 30, 1998, as compared to net income of $320,000 for the three months
ended September 30, 1997. The $69,000 or 21.6% decrease in net income for the
three months ended September 30, 1998 was primarily the result of decreases in
net interest income and other income, which were partially offset by decreases
in other expenses, provision for income taxes and provision for loan losses.
Changes in the components of income and expense are discussed herein.
Net Interest Income. Net interest income decreased $32,000 or 3.3% for the three
months ended September 30, 1998, as compared to the three month period ended
September 30, 1997. The decrease was primarily due to a $3.7 million decrease in
the average interest-earning assets and a 28 basis point decrease in the average
yield earned thereon. The average balance of interest-bearing liabilities
decreased by $4.5 million or 3.7% with a 26 basis point decrease in the average
rate paid thereon. Changes in the components of net interest income are
discussed herein.
The interest rate spread, which is the difference between the yield on average
interest-earning assets and the cost of average interest-bearing liabilities,
declined to 1.88% for the three month period ended September 30, 1998 from 1.90%
for the three month period ended September 30, 1997. The decline in the interest
rate spread was primarily the result of purchased one- to four-family mortgages
at yields lower than the yields in the existing loan portfolio and a $2.7
million principal reduction in SBA loans with higher yields. The decline is also
attributable to a decrease in the yield of investments and other interest
earning assets. Such purchases will have an ongoing effect on the average yield
of the Bank's loan portfolio.
Interest Income. Interest income decreased $165,000 or 6.5% to $2,368,000 for
the three month period ended September 30, 1998, as compared to $2,533,000 for
the three month period ended September 30, 1997.
Interest on loans receivable increased $37,000 or 3.2% for the three months
ended September 30, 1998, as compared to the three month period ended September
30, 1997. This increase was primarily the result of a $4.0 million increase in
the average balance of loans receivable due to the addition of one -to
four-family, multi-family, farm mortgages, and agricultural and SBA loans,
offset by a 22 basis point decrease in the average yield earned thereon.
Interest income on mortgage-backed securities decreased $185,000 or 18.2% for
the three months ended September 30, 1998, as compared to the three months ended
September 30, 1997. This decrease was primarily the result of a $9.1 million
decrease in the average balance of such securities and a 22 basis point decrease
in the average yield earned thereon.
Interest income on investment securities decreased by $40,000 or 13.6% for the
three months ended September 30, 1998, as compared to the three months ended
September 30, 1997. The decrease in interest income on investment securities was
primarily due to a $1.9 million lower average balance of such securities, and a
decrease in the average yield of 21 basis points.
Interest income on other interest-earning assets increased by $23,000 or 39.0%
for the three months ended September 30, 1998, as compared to the three months
ended September 30, 1997. The increase was primarily due a $3.3 million increase
in the average interest-earning deposits at other financial institutions, offset
by a 190 basis point decrease in the average yield earned thereon.
The average yield on the average balance of interest-earning assets was 6.86%
and 7.14% for the three month periods ended September 30, 1998 and 1997,
respectively.
Interest Expense. Interest expense totalled $1,426,000 for the three months
ended September 30, 1998, as compared to $1,559,000 for the three months ended
September 30, 1997. The $133,000 or 8.5% decrease was primarily due to decreased
average balances in certificate of deposit accounts, FHLB advances and other
borrowings, and a 26 basis point decrease in the average rate paid on the total
average interest-bearing liabilities.
Interest expense on deposits (including escrows) decreased $31,000 or 3.4% for
the three months ended September 30, 1998, as compared to the three months ended
September 30, 1997. The decrease was primarily due to a $1.4 million decrease in
average deposits and a 7 basis point decrease in the average rate paid thereon.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest on FHLB advances decreased $87,000 or 14.8% for the three months ended
September 30, 1998, as compared to the three months ended September 30, 1997.
The decrease was primarily due to a $2.4 million decrease in the average balance
of such advances and a 54 basis point decrease in the rate paid thereon. The
Bank uses FHLB advances as a funding source and has in the past used borrowings
to supplement deposits, which are the Bank's primary source of funds.
Interest on bonds payable and other borrowings, a less significant portion of
interest expense, decreased by $15,000 or 22.1%, as the average principal amount
of other borrowings decreased by $585,000.
Provision for Loan Losses. During the three month periods ended September 30,
1998 and 1997, the Bank established provisions for loan losses of $12,000 and
$15,000, respectively. This reflected management's evaluation of the underlying
credit risk of the loan portfolio and the level of allowance for loan losses.
At September 30, 1998, the allowance for loan losses totalled $565,000 or .87%
and 65.0% of total loans and total non-performing loans, respectively, as
compared to $549,000 or .81% and 48.6%, respectively, at March 31, 1998. The
Bank's non-performing loans (non-accrual loans and accruing loans 90 days or
more overdue) totalled $869,000 and $1,130,000 at September 30, 1998 and March
31, 1998 respectively, which represented 1.3% and 1.7% of the Bank's total
loans, respectively. The non-performing loans, however, include three Farm
Service Agency (FSA) guaranteed loans at September 30, 1998 and four at March
31, 1998, which represent 85.7% and 93.2% of the total non-performing loans at
September 30, 1998 and March 31, 1998, respectively. The Bank's ratio of
non-performing loans to total assets was .60% and .76% at September 30, 1998 and
March 31, 1998, respectively.
Other Income. During the three months ended September 30, 1998, other income
decreased $109,000 or 80.7%, as compared to the three months ended September 30,
1997. Other income recorded in the prior quarter included a partial settlement
of a real estate judgement in the amount of $120,000. Other income in the
current quarter included a final payment of $10,000 from the sale of property in
the same judgement.
Other Expenses. Total other expenses decreased by $39,000 or 6.9% during the
three months ended September 30, 1998, as compared to the three months ended
September 30, 1997. The decrease was primarily attributable to a decrease in
compensation expense, offset by an increase in premises and occupancy costs. The
reduction in compensation expense was primarily due to a $73,000 adjustment to
the cost of the upcoming purchase of shares of stock to fund the Restricted
Stock Plan (RSP) implemented in April 1998 and a reduction of employees'
salaries due to two employees on disability leave, offset by an increase of
$57,000 in ESOP expenses. With the implementation of the RSP, the portion of
awards that were earned and non-forfeitable (approximately one-fourth) were
expensed at fair market value in the June 1998 quarter in addition to 2 1/2
months of the awards that will vest in April 1999. The RSP expense for the
September quarter was adjusted because of the decline in the fair value of the
stock. Furthermore, the Bank committed to release 6,070 shares of stock in the
ESOP in the September 1998 quarter as compared to 2,070 shares in the September
1997 quarter, which had a negative effect on earnings.
Income Tax Expense. The provision for income tax totalled $180,000 for the three
months ended September 30, 1998, as compared to $210,000 for the three months
ended September 30, 1997. The $30,000 or 14.3% decrease was due to decreased
taxable income.
Results of Operations for the Six Months Ended September 30, 1998 and 1997
Net Income. The Bank recorded net income of $347,000 for the six months ended
September 30, 1998, as compared to net income of $559,000 for the six months
ended September 30, 1997. The $212,000 or 37.9% decrease in net income for the
six months ended September 30, 1998 was primarily the result of decreases in net
interest income and other income and an increase in compensation and employee
benefits expense, partially offset by decreases in provision for income taxes
and provision for loan losses. Changes in the components of income and expense
are discussed herein.
Net Interest Income. Net interest income decreased $105,000 or 5.2% for the six
months ended September 30, 1998, as compared to the six month period ended
September 30, 1997. The decrease was primarily due to a $1.2 million decrease in
the average interest-earning assets and a 34 basis point decrease in the average
yield earned thereon. The average balance of interest-bearing liabilities
decreased by $1.9 million with a 21 basis point decrease in the average rate
paid thereon. Changes in the components of net interest income are discussed
herein.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The interest rate spread declined to 1.88% for the six month period ended
September 30, 1998 from 2.01% for the six month period ended September 30, 1997.
The decline in the interest rate spread was primarily the result of purchased
one- to four-family mortgages at yields lower than the yields in the existing
loan portfolio and a $4.7 million principal reduction in SBA loans with higher
yields. The decline is also attributable to a decease in the yield of
investments and other interest earning assets. Such purchases will have an
ongoing effect on the average yield of the Bank's loan portfolio.
Interest Income. Interest income decreased $280,000 or 5.5% to $4,845,000 for
the six month period ended September 30, 1998, as compared to $5,125,000 for the
six month period ended September 30, 1997.
Interest on loans receivable increased $115,000 or 5.0% for the six months ended
September 30, 1998, as compared to the six month period ended September 30,
1997. This increase was primarily the result of a $5.7 million increase in the
average balance of loans receivable due to the addition of one- to four-family,
multi-family, farm mortgages, and agricultural and SBA loans, offset by a 29
basis point decrease in the average yield due to the lower interest rates on
such loans.
Interest income on mortgage-backed securities decreased $273,000 or 13.7% for
the six months ended September 30, 1998, as compared to the six months ended
September 30, 1997. This decrease was primarily the result of a $6.7 million
decrease in the average balance of such securities and a 16 basis point decrease
in the average yield earned thereon.
Interest income on investment securities decreased by $131,000 or 20.2% for the
six months ended September 30, 1998, as compared to the six months ended
September 30, 1997. The decrease in interest income on investment securities was
primarily due to a $2.7 million lower average balance of such securities and a
decrease in the average yield of 43 basis points.
Interest income on other interest-earning assets increased by $9,000 or 5.6% for
the six months ended September 30, 1998, as compared to the six months ended
September 30, 1997. The increase was primarily due a $2.5 million increase in
the average interest-earning deposits at other financial institutions, offset by
a 283 basis point decrease in the average yield earned thereon.
The average yield on the average balance of interest-earning assets was 6.88%
and 7.22% for the six month periods ended September 30, 1998 and 1997,
respectively.
Interest Expense. Interest expense totalled $2,934,000 for the six months ended
September 30, 1998, as compared to $3,109,000 for the six months ended September
30, 1997. The $175,000 or 5.6% decrease was primarily due to decreased average
balances in certificate of deposit accounts, FHLB advances and other borrowings
and a 21 basis point decrease in the average rate paid on the total average
interest-bearing liabilities.
Interest expense on deposits (including escrows) decreased $48,000 or 2.7% for
the six months ended September 30, 1998, as compared to the six months ended
September 30, 1997. The decrease was primarily due to a $1.3 million decrease in
the average balance of deposits and a 4 basis point decrease in the average rate
paid thereon.
Interest on FHLB advances decreased $98,000 or 8.3% for the six months ended
September 30, 1998, as compared to the six months ended September 30, 1997. The
decrease was primarily due to a 50 basis point decrease in the average rate paid
on advances. The average balances of advances increased $17,000.
Interest on bonds payable and other borrowings, a less significant portion of
interest expense, decreased by $29,000 or 21.5%, as the average principal amount
of other borrowings decreased by $597,000. The average rate paid on bonds
payable and other borrowings remained the same for both six month periods.
Provision for Loan Losses. During the six month periods ended September 30, 1998
and 1997, the Bank established provisions for loan losses of $15,000 and
$30,000, respectively. This reflected management's evaluation of the underlying
credit risk of the loan portfolio and the level of allowance for loan losses.
Other Income. During the six months ended September 30, 1998, other income
decreased $107,000 or 69.5%, as compared to the six months ended September 30,
1997. Other income recorded in the prior six months included a partial
settlement of a real estate judgement in the amount of $120,000. Other income in
the current six months included $15,000, representing a final settlement in the
same judgement.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other Expenses. Total other expenses increased by $198,000 or 17.1% during the
six months ended September 30, 1998, as compared to the six months ended
September 30, 1997. The increase was primarily attributable to an increase in
compensation expense due to the implementation of a restricted stock plan (see
Note 7) and an increase of $77,000 in the ESOP expense, offset by decreases of
$23,000 in salaries expense and $34,000 in Supplemental Employee Pension Plan
(SERP) and Director's Retirement Plan (DRP) insurance costs. With the
implementation of the RSP, the portion of awards that were earned and
non-forfeitable (approximately one-fourth) were expensed at fair market value in
addition to 5 1/2 months of the awards that will vest in April 1999. The RSP
expense for the current six month period was $181,000. Future vesting will occur
over a two- to four-year period. The Bank committed to release 8,140 shares of
stock in the ESOP in the current period as compared to 4,140 shares in the
previous period.
Income Tax Expense. The provision for income tax totalled $240,000 for the six
months ended September 30, 1998, as compared to $423,000 for the six months
ended September 30, 1997. The $183,000 or 43.3% decrease was due to decreased
income.
Liquidity and Capital Requirements
The Bank is required to hold a prescribed amount of statutorily defined liquid
assets. The Director of the OTS may, by regulation, vary the amount of the
liquidity requirement, but only within pre-established statutory limits. The
requirement must be no less than four percent and no greater than ten percent of
the Bank's net withdrawable accounts and borrowings payable on demand or with
unexpired maturities of one year or less. The minimum required liquidity is
currently 4%. The Bank's average liquidity ratio was 96.99% and 77.98%, at
September 30, 1998 and March 31, 1998, respectively.
The Bank is subject to federal regulations that impose certain minimum capital
requirements. Quantitative measures, established by regulation to ensure capital
adequacy, require the Bank to maintain amounts and ratios of tangible and core
capital to adjusted total assets and of total risk-basked capital to
risk-weighted assets. On September 30, 1998, the Bank was in compliance with its
three regulatory capital requirements as follows:
Amount Percent
------ -------
(Dollars in thousands)
Tangible capital........................ $24,651 17.13%
Tangible capital requirement............ 2,159 1.50%
------- ------
Excess over requirement................. $22,492 15.63%
====== =====
Core capital............................ $24,651 17.13%
Core capital requirement................ 4,318 3.00%
------- ------
Excess over requirement................. $20,333 14.13%
====== =====
Risk based capital...................... $25,216 54.05%
Risk based capital requirement.......... 3,732 8.00%
------- ------
Excess over requirement................. $21,484 46.05%
====== =====
Management believes that under current regulations, the Bank will continue to
meet its minimum capital requirements in the foreseeable future. Events beyond
the control of the Bank, such as increased interest rates or a downturn in the
economy in areas in which the Bank operates could adversely affect future
earnings and as a result, the ability of the Bank to meet its future minimum
capital requirements.
At September 30, 1998, the most recent notification from the OTS, the Bank was
categorized as "well capitalized" under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must maintain
minimum Tier I (leverage), Tier I risk-basked, and total risk-based capital
ratios of 5.0%, 6.0%, and 10.0%, respectively. At September 30, 1998, the Bank's
Tier I (leverage), Tier I risk-based, and total risk-basked capital ratios
amounted to 17.13%, 52.84%, and 54.05%, respectively. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk are presented at
March 31, 1998 in the Bank's 1998 Annual Report. See "Market Risk &
Asset/Liability Management". Management believes there have been no material
changes in the Bank's market risk since March 31, 1998.
Year 2000 Compliance Issues
The Bank formed a committee to implement an action plan designed to ensure the
Bank's computer systems, software applications and other date reliant equipment
would function properly after December 31, 1999. This process involves
identifying all equipment, software and third party providers, deemed critical
to the Bank's daily operations, and ascertaining if these products or product
providers are Year 2000 compliant. For items or vendors that were not compliant
and had not achieved significant progress toward compliance by October 1, 1998,
the committee has implemented contingency plans to either replace the product or
vendor, or implement an alternative procedure to mitigate the affected area.
The Bank utilizes an in-house computer system, with all software applications
being developed and modified internally. The Bank first acknowledged and
addressed the potential problem associated with the Year 2000 early in 1990. The
Bank completed renovation of its in-house data processing system prior to
testing in October 1992. Once testing was complete, the Bank began operating
under the year 2000 revisions that pertain to any date related issues spanning
the millennium. The Bank has also received vender certification confirming year
2000 compliance for its hardware and operating system. Management continues to
monitor and test all computerized applications of its in-house system in the
unlikely event that something has been overlooked. Management believes that
remaining efforts towards Year 2000 compliance will require minimal expense and,
therefore, will not have a material impact on the Bank's financial condition or
results of operations.
In addition, management believes that substantially all date reliant equipment
and software will be tested and, if needed, upgraded or replaced by December 31,
1998. Assessments of significant vendors, service providers and customers will
also be completed. Management has developed a contingency plan in regard to all
mission-critical vendors, servicers, and applications. Despite the best efforts
of management to address this issue, the vast number of external entities that
have direct and indirect business relationships with the Bank, such as
customers, vendors, payment system providers and other financial institutions,
makes it impossible to assure that a failure to achieve compliance by one or
more of these entities would not have a material adverse impact on the
operations of the Bank. Successful and timely completion of Year 2000 issues is
based on management's best estimates derived from various assumptions of future
events, which are inherently uncertain, including the progress and results of
companies outside the control of the Bank, testing plans, and all vendors,
suppliers, and customer readiness.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
The Bank was not engaged in any legal proceeding of a material nature
at September 30, 1998. From time to time, the Bank is a party to
routine legal proceedings in the ordinary course of business, such as
claims to enforce liens, condemnation proceedings on properties in
which the Bank holds security interest, claims involving the making
and servicing of real property loans, and other issues incident to the
business of the Bank. There were no lawsuits pending or known to be
contemplated against the Bank at September 30, 1998 that would have a
material effect on the operations or income of the Bank.
Item 2. Changes in Securities.
----------------------
Not applicable.
Item 3. Defaults Upon Senior Securities.
--------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security-Holders.
----------------------------------------------------
The Annual Meeting of Stockholders of the Bank was held on July 30,
1998. There were outstanding on the record date (June 1, 1998) and
entitled to vote at the meeting 2,300,000 shares of common stock, of
which 1,265,000 were held by the Mutual Holding Company ("MHC"). There
were present at the Meeting in person or by proxy the holders of
2,150,066 shares of Common Stock of the Bank, representing 93.5% of
the total votes eligible to be cast, constituting a majority and more
than a quorum of the outstanding shares entitled to vote. The matters
voted upon at the Special Meeting and the vote for each were as
follows:
1. The election of directors, Mr. Layne W. Craig and Mr. John T.
Mendenhall, Jr., for 3-year term expiring in 2001.
FOR WITHHOLD
---------------------- --------------------
Percentage Percentage
Number of Votes Number of Votes
of Votes Cast of Votes Cast
-------- ---- -------- ----
Layne W. Craig 2,137,365 99.4 12,701 .6
John T. Mendenhall, Jr. 2,140,090 99.5 9,976 .5
Accordingly, the proposal described above, having received the
favorable votes of at least a majority of the shares outstanding, and
a majority of the votes cast by stockholders other than the MHC was
declared to be duly adopted by the stockholders of the Bank.
16
<PAGE>
PART II - OTHER INFORMATION
2. The approval of the Agreement and Plan of Reorganization to form a
Mid-Tier Stock Holding Company.
Number % OF VOTES CAST
------ ---------------
FOR 1,887,651 82.1 %
AGAINST 17,170 .7 %
ABSTAIN 7,090 .3 %
Accordingly, the proposal described above, having received the
favorable votes of at least a majority of the shares outstanding, and
a majority of the votes cast by stockholders other than the MHC was
declared to be duly adopted by the stockholders of the Bank.
3. The ratification of the appointment of KPMG Peat Marwick LLP as
auditor for the Bank for the fiscal year ending March 31, 1999.
Number % OF VOTES CAST
------ ---------------
FOR 2,141,365 99.6 %
AGAINST 7,101 .3 %
ABSTAIN 1,600 .1 %
Accordingly, the proposal described above, having received the
favorable votes of at least a majority of the shares outstanding, and
a majority of the votes cast by stockholders other than the MHC was
declared to be duly adopted by the stockholders of the Bank.
Item 5. Other Information.
------------------
See Note 9 regarding the completion the Bank's stock holding company
reorganization.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) 2.0 Agreement and Plan of Reorganization
3.1 Charter of Skibo Financial Corp.
3.2 Bylaws of Skibo Financial Corp.
4.0 Form of Stock Certificate of Skibo Financial Corp.
10.1 Employment Agreement between the Bank and Walter G. Kelly
10.2 1998 Restricted Stock Plan
10.3 1998 Stock Option Plan
11.0 Earnings Per Share Calculation (see note 3 to the Notes
to the Unaudited Consolidated Financial Statements in
this Form 10-QSB.
27.0 Financial Data Schedule (in electronic filing only)
b) Not applicable
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SKIBO FINANCIAL CORP.
Date: November 10, 1998 By: /s/ Walter G. Kelly
-------------------------------------
Walter G. Kelly
President and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
/s/ Walter G. Kelly /s/ Carol A. Gilbert
- ------------------------------------- ---------------------------------------------------
Walter G. Kelly Carol A. Gilbert
President and Chief Executive Officer Chief Financial and Operating Officer and Treasurer
(Duly Authorized Representative) (Principal Financial and Accounting Officer)
Date: November 10, 1998 Date: November 10, 1998
</TABLE>
18
EXHIBIT 2
<PAGE>
FIRST CARNEGIE DEPOSIT
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated as of May 14, 1998, by
and among FIRST CARNEGIE DEPOSIT, a federally chartered stock savings bank (the
"Bank"); SKIBO FINANCIAL CORP., a to-be-formed federal corporation (the "Holding
Company"); and SKIBO INTERIM SAVINGS BANK, a to-be-formed interim stock savings
institution ("Interim").
The parties hereto desire to enter into an Agreement and Plan of
Reorganization whereby the corporate structure of the Bank will be reorganized
into the stock holding company form of ownership (the "Reorganization"). The
result of the Reorganization will be that, immediately after the Effective Date
(as defined herein), all of the issued and outstanding shares of Common Stock of
the Bank will be held by the Holding Company and the holders of the issued and
outstanding shares of Common Stock of the Bank (i.e., the mutual holding
company, Skibo Bancshares, M.H.C., and the minority public stockholders) will
become the holders of the issued and outstanding shares of Common Stock of the
Holding Company.
The Reorganization of the Bank will be accomplished by the following
steps: (1) the formation by the Bank of a wholly-owned subsidiary of the Bank,
Skibo Financial Corp., incorporated under the laws of the United States for the
primary purpose of becoming the sole stockholder of a newly-formed interim stock
savings institution, and subsequently becoming the sole stockholder of the
Common Stock of the Bank, which formation will include the issuance of up to
100,000 shares of the Holding Company Common Stock to the Bank for a price of
$10.00 per share ($1,000,000) for the purpose of initially capitalizing the
Holding Company; (2) the formation of an interim federally chartered savings
institution, "Interim," which will be wholly-owned by the Holding Company; and
(3) the merger of Interim into the Bank (the "Merger"), with the Bank as the
surviving entity. Pursuant to such Merger: (i) all of the issued and outstanding
shares of Common Stock of the Holding Company held by the Bank will be canceled;
(ii) all of the issued and outstanding shares of Common Stock of the Bank will
automatically be converted by operation of law on a three-for-two basis into
issued and outstanding shares of Common Stock of the Holding Company; (iii) all
of the issued and outstanding shares of Common Stock of Interim will
automatically be converted by operation of law into an equal number of issued
and outstanding shares of Common Stock of the Bank, which will be all of the
issued and outstanding stock of the Bank.
NOW, THEREFORE, in order to consummate this Agreement and Plan of
Reorganization (the "Agreement"), and in consideration of the mutual covenants
herein set forth, the parties agree as follows:
1
<PAGE>
ARTICLE I
MERGER OF INTERIM INTO THE BANK
AND RELATED MATTERS
1.1 On the Effective Date, Interim will be merged with and into
the Bank and the separate existence of Interim shall cease,
and all assets and property (real, personal and mixed,
tangible and intangible, chooses in action, rights and
credits) then owned by Interim, or which would inure to it,
shall immediately and automatically, by operation of law and
without any conveyance, transfer, or further action, become
the property of the Bank. The Bank shall be deemed to be a
continuation of Interim, and the Bank shall succeed to the
rights and obligations of Interim.
1.2 Following the Merger, the existence of the Bank shall continue
unaffected and unimpaired by the Merger, with all the rights,
privileges, immunities and powers, and subject to all of the
duties and liabilities, of a corporation organized under the
laws of the United States. The Charter and Bylaws of the Bank,
as presently in effect, shall continue in full force and
effect and shall not be changed in any manner whatsoever by
the Merger.
1.3 From and after the Effective Date, and subject to the actions
of the Board of Directors of the Bank, the business presently
conducted by the Bank (whether directly or through its
subsidiaries) will continue to be conducted by it, as a
wholly-owned subsidiary of the Holding Company, and the
present directors and officers of the Bank will continue in
their present positions. The home office and branch offices of
the Bank in existence immediately prior to the Effective Date
shall continue to be the home office and branch offices of the
Bank from and after the Effective Date.
1.4 The Reorganization will have no effect on the corporate
structure of the Mutual Holding Company, Skibo Bancshares,
M.H.C., which will continue to operate under its current
charter and bylaws, and the present directors and officers of
the Mutual Holding Company will continue in their present
positions.
ARTICLE II
CONVERSION OF STOCK
2.1 The terms and conditions of the Merger, the mode of carrying
the same into effect, and the manner and basis of converting
the Common Stock of the parties to this Agreement shall be as
follows:
A. On the Effective Date, all shares of Common Stock of
the Holding Company held by the Bank shall be
canceled and shall no longer be deemed to be issued
or outstanding for any purpose.
B. On the Effective Date, shares of Common Stock, $.10
par value, of the Bank ("Bank Common Stock") issued
and outstanding immediately prior to the Effective
Date shall automatically by operation of law be
converted into and shall become shares of Common
Stock, $.10 par value, of the Holding Company
2
<PAGE>
("Holding Company Common Stock") on a three-for two
basis, with the rights, privileges, preferences and
voting power incident to each share of Bank Common
Stock prior to such Effective Date. Each person who,
but for the provisions of this Section 2.1B., would
be entitled to a fractional share interest in the
Holding Company Common Stock as a result of the
Reorganization, upon surrender of certificates
theretofore representing shares of Holding Company
Common Stock, shall receive in lieu thereof an amount
in cash equal to such fraction multiplied by the
average of the bid and ask price of the Bank Common
Stock on the last full trading day of the Bank Common
Stock prior to the Effective Date. Each share of
Common Stock of Interim issued and outstanding
immediately prior to the Effective Date shall, on the
Effective Date, automatically by operation of law be
converted into and become one share of Common Stock,
$.10 par value, of the Bank and shall not be further
converted into shares of the Holding Company Common
Stock, so that from and after the Effective Date, all
of the issued and outstanding shares of Common Stock
of the Bank shall be held by the Holding Company.
C. As soon as practicable after the Effective Date, the
certificates representing the outstanding Bank Common
Stock shall be surrendered to the Bank or the
designated agent of the Bank ("Exchange Agent") and,
upon such surrender, the Exchange Agent shall issue
and deliver in substitution therefore, cash and
certificates representing the number of shares of
Holding Company Common Stock into which such
surrendered shares have been converted as herein-
before provided, and cash in lieu of fractional
shares (without interest). Certificates representing
Bank Common Stock which are not surrendered shall be
deemed for all purposes to evidence the ownership of
the number of shares of Holding Company Common Stock
into which said shares of the Bank shall have been
converted as hereinbefore set forth and the right to
receive cash in the amount determined pursuant to
Section 2.1B.; provided, however, that Holding
Company will not distribute to the holder of an
unsurrendered certificate for Bank Common Stock
dividends declared with respect to Holding Company
Common Stock until such owner shall surrender such
certificate, at which time the holder thereof shall
be paid the amount of the dividends having a record
date on or after the Effective Date theretofore
declared with respect to Holding Company Common Stock
without interest. All such dividends unclaimed at
the end of one year from the Effective Date shall be
repaid by the Exchange Agent to Holding Company, and
thereafter the holders of such outstanding
certificates shall look, subject to applicable
escheat, unclaimed funds and other laws, as general
creditors only to Holding Company for payment
thereof.
D. All shares of Holding Company Common Stock into which
shares of Bank Common Stock shall have been converted
pursuant to this Article shall be deemed to have been
issued in full satisfaction of all rights pertaining
to such converted shares.
E. On the Effective Date, the holders of certificates
formerly representing Bank Common Stock outstanding
on the Effective Date shall cease to have any rights
with respect to Bank Common Stock, and their sole
rights shall be with respect
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to the Holding Company Common Stock into which their
shares of Bank Common Stock shall have been converted
by the Merger.
ARTICLE III
CONDITIONS
3.1 The obligations of the Bank, the Holding Company and Interim
to effect the Merger and otherwise consummate the transactions
which are the subject matter hereof shall be subject to
satisfaction of the following conditions:
A. To the extent required by applicable law, rules, and
regulations, the holders of the outstanding shares of
Bank Common Stock shall, at a meeting of the
stockholders of the Bank duly called, have approved
this Agreement by the affirmative vote of two-thirds
of the outstanding shares of Bank Common Stock.
B. The shares of Holding Company Common Stock to be
issued to the Bank stockholders pursuant to the
Merger shall have been, if required by law, duly
registered pursuant to the Securities Act of 1933, as
amended, and the Bank shall have complied with all
applicable state securities or "blue sky" laws
relating to the issuance of the Holding Company
Common Stock.
C. Any and all approvals from the Office of Thrift
Supervision (the "OTS"), the Federal Deposit
Insurance Corporation, the Securities and Exchange
Commission and any other governmental agency having
jurisdiction necessary for the lawful consummation of
the Merger and the issuance and delivery of the
Holding Company Common Stock as contemplated by this
Agreement shall have been
obtained.
D. The Bank shall have received either (i) a ruling from
the Internal Revenue Service or (ii) an opinion from
its legal counsel, to the effect that the
Reorganization will be treated as a non-taxable
transaction under applicable provisions of the
Internal Revenue Code and that no gain or loss will
be recognized by the stockholders of the Bank upon
the exchange of Bank Stock held by them for Holding
Company Stock.
ARTICLE IV
EFFECTIVE DATE OF MERGER
Upon satisfaction or waiver (in accordance with the provisions of this
Agreement) of each of the conditions set forth herein, the parties hereto shall
execute and cause to be filed Articles of Combination, and/or such certificates
or further documents as shall be required by the OTS, the Office of the
Secretary of the OTS, and with such other federal or state regulatory agencies
as may be required. Upon approval by the OTS, and endorsement of such
certificates, the Merger and other transactions contemplated by this Agreement
shall become effective. The Effective Date for all purposes hereunder shall be
the date of such endorsement.
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ARTICLE V
AMENDMENT AND TERMINATION
5.1 The Bank, the Holding Company and Interim, by mutual consent
of their respective Boards of Directors or Incorporators, as
the case may be, to the extent permitted by law, may amend,
modify, supplement and interpret this Agreement in such manner
as may be mutually agreed upon by them at any time before or
after the approval and adoption thereof by the stockholders of
the Bank; provided, however, that no such amendment,
modification, supplement or interpretation shall have a
materially adverse impact on the Bank or its stockholders
except with the approval of the stockholders of the Bank.
5.2 This Agreement may be terminated at the election of any of the
parties hereto if any one or more of the conditions to the
obligations of any of them hereunder shall have been satisfied
and become incapable of fulfillment and shall have not been
waived. This Agreement may also be terminated at any time
prior to the Effective Date by the mutual consent of the
respective Boards of Directors of the parties.
5.3 In the event of the termination of this Agreement pursuant to
any of the foregoing provisions, no party shall have any
further liability or obligation of any nature to any other
party under this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Any of the terms or conditions of this Agreement (other than
the necessary approvals of stockholders and government
authorities) may be waived at any time by any party hereto
which is entitled to the benefit thereof, by action taken by
its Board of Directors; provided, however, that such action
shall be taken only if, in the judgment of the Board of
Directors taking the action, such waiver will not have a
materially adverse effect on the benefits intended under this
Agreement to be afforded to the stockholders of the Bank.
6.2 This Agreement embodies the entire agreement among the parties
and there have been and are no agreements, representations or
warranties among the parties other than those set forth or
provided for herein.
6.3 Any number of counterparts hereof may be executed and each
such counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one
instrument.
6.4 Any notice or waiver to be given to any party shall be in
writing and shall be deemed to have been duly given if
delivered, mailed, or sent by prepaid telegram, addressed to
such party at 242 East Main Street, Carnegie, Pennsylvania
15106.
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6.5 The captions contained in this Agreement are solely for
convenient reference and shall not be deemed to affect the
meaning or interpretation of any paragraph hereof.
6.6 The Bank will pay all fees and expenses incurred in connection
with the transactions contemplated by this Agreement. After
the Reorganization, the Holding Company will incur certain
expenses that arise from its creation for the purpose of
serving as, and continued existence as, the holding company of
the Bank, such as the costs associated with the filing of
reports with the OTS, holding of directors and stockholders
meetings and maintaining relations with and providing reports
to stockholders. The Bank agrees that it will reimburse the
Holding Company for such ordinary and usual expenses when and
as payable by the Holding Company.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement and Plan of Reorganization as of the date first above written.
FIRST CARNEGIE DEPOSIT
BY: /s/ Walter G. Kelly
-----------------------------------------
Walter G. Kelly, President
ATTEST: /s/ Alexander J. Senules
-----------------------------------------
Alexander J. Senules, Corporate Secretary
SKIBO FINANCIAL CORP. (In Formation)
BY: /s/ Walter G. Kelly
-----------------------------------------
Walter G. Kelly, President
ATTEST: /s/ Alexander J. Senules
-----------------------------------------
Alexander J. Senules, Corporate Secretary
SKIBO INTERIM SAVINGS BANK (In formation)
BY: /s/ Walter G. Kelly
-----------------------------------------
Walter G. Kelly, President
ATTEST: /s/ Alexander J. Senules
-----------------------------------------
Alexander J. Senules, Corporate Secretary
EXHIBIT 3.1
<PAGE>
SKIBO FINANCIAL CORP.
FEDERAL STOCK CHARTER
Section 1. Corporate title. The full corporate title of the MHC
subsidiary holding company is Skibo Financial Corp. ("MHC subsidiary holding
company").
Section 2. Office. The domicile of the MHC subsidiary holding company
shall be in the city of Carnegie, in the Commonwealth of Pennsylvania.
Section 3. Duration. The duration of the MHC subsidiary holding company
is perpetual.
Section 4. Purpose and powers. The purpose of the MHC subsidiary
holding company is to pursue any or all of the lawful objectives of a Federal
mutual holding company chartered under Section 10(o) of the Home Owners' Loan
Act, 12 U.S.C. 1467a(o), and to exercise all of the express, implied, and
incidental powers conferred thereby and by all acts amendatory thereof and
supplemental thereto, subject to the Constitution and laws of the United States
as they are now in effect, or as they may hereafter be amended, and subject to
all lawful and applicable rules, regulations, and orders of the Office of Thrift
Supervision ("Office").
Section 5. Capital stock. The total number of shares of all classes of
capital stock that the MHC has the authority to issue is 15,000,000, of which
10,000,000 shall be common stock of par value of $0.10 per share and of which
5,000,000 shall be preferred stock, no par value. The shares may be issued from
time to time as authorized by the board of directors without further approval of
its shareholders, except as otherwise provided in this section 5 or to the
extent that such approval is required by governing law, rule, or regulation. The
consideration for the issuance of the shares shall be paid in full before their
issuance and shall not be less than the par or stated value. Neither promissory
notes nor future services shall constitute payment or part payment for the
issuance of shares of the MHC subsidiary holding company. The consideration for
the shares shall be cash, tangible or intangible property (to the extent direct
investment in such property would be permitted to the MHC subsidiary holding
company), labor, or services actually performed for the MHC subsidiary holding
company, or any combination of the foregoing. In the absence of actual fraud in
the transaction, the value of such property, labor, or services, as determined
by the board of directors of the MHC subsidiary holding company, shall be
conclusive. Upon payment of such consideration, such shares shall be deemed to
be fully paid and nonassessable. In the case of a stock dividend, that part of
the retained earnings of the MHC subsidiary holding company that is transferred
to common stock or paid-in capital accounts upon the issuance of shares as a
stock dividend shall be deemed to be the consideration for their issuance.
Except for shares issued in the initial organization of the MHC
subsidiary holding company, no shares of capital stock (including shares
issuable upon conversion, exchange, or exercise of other securities) shall be
issued, directly or indirectly, to officers, directors, or controlling persons
of the MHC subsidiary holding company other than as part of a general public
offering or as qualifying shares to a director, unless their issuance or the
plan under which they would be issued has been approved by a majority of the
total votes eligible to be cast at a legal meeting.
The holders of common stock shall exclusively possess all voting power.
Each holder of shares of common stock shall be entitled to one vote for each
share held by such holder. Subject to any provision for a liquidation account,
in the event of any liquidation, dissolution, or winding up of the MHC
subsidiary holding company, the holders of the common stock shall be entitled,
after payment or
<PAGE>
provision for payment of all debts and liabilities of the MHC subsidiary holding
company, to receive the remaining assets of the MHC subsidiary holding company
available for distribution, in cash or in kind. Each share of common stock shall
have the same relative rights as and be identical in all respects with all the
other shares of common stock.
A description of the different classes and series (if any) of the MHC
subsidiary holding company's capital stock and a statement of the designations,
and the relative rights, preferences, and limitations of the shares of each
class of and series (if any) of capital stock are as follows:
A. Common stock. Except as provided in this Section 5 (or in any
supplementary sections thereto) the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to payment of dividends, the full amount of
dividends and of sinking fund, retirement fund, or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock and on any class or series
of stock entitled to participate therewith as to dividends out of any assets
legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the MHC
subsidiary holding company, the holders of the common stock (and the holders of
any class or series of stock entitled to participate with the common stock in
the distribution of assets) shall be entitled to receive, in cash or in kind,
the assets of the MHC subsidiary holding company available for distribution
remaining after: (i) Payment or provision for payment of the MHC subsidiary
holding company debts and liabilities; (ii) distributions or provision for
distributions in settlement of its liquidation account; and (iii) distributions
or provisions for distributions to holders of any class or series of stock
having preference over the common stock in the liquidation, dissolution, or
winding up of the MHC subsidiary holding company. Each share of common stock
shall have the same relative rights as and be identical in all respects with all
the other shares of common stock.
B. Preferred stock. The MHC subsidiary holding company may provide in
supplementary sections to its charter for one or more classes of preferred
stock, which shall be separately identified. The shares of any class may be
divided into and issued in series, with each series separately designated so as
to distinguish the shares thereof from the shares of all other series and
classes. The terms of each series shall be set forth in a supplementary section
to the charter. All shares of the same class shall be identical, except as to
the following relative rights and preferences, as to which there may be
variations between different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative
and, if so, from which date(s), the payment date(s) for
dividends, and the participating or other special rights, if
any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
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(d) Whether the shares of such series shall be redeemable and, if
so, the price(s) at which, and the terms and conditions on
which such shares may be redeemed;
(e) The amount(s) payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution, or
winding up of the MHC subsidiary holding company;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled, the
amount of such fund and the manner of its application,
including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes of
stock of the MHC subsidiary holding company and, if so, the
conversion price(s) or the rate(s) of exchange, and the
adjustments thereof, if any, at which such conversion or
exchange may be made, and any other terms and conditions of
such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued
shares of serial preferred stock and whether such shares may
be reissued as shares of the same or any other series of
serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the MHC
subsidiary holding company shall file with the Secretary to the Office a dated
copy of that supplementary section of this charter establishing and designating
the series and fixing and determining the relative rights and preferences
thereof.
Section 6. Preemptive rights. Holders of the capital stock of the MHC
subsidiary holding company shall not be entitled to preemptive rights with
respect to any shares of the MHC subsidiary holding company which may be issued.
Section 7. Directors. The MHC subsidiary holding company shall be under
the direction of a board of directors. The authorized number of directors, as
stated in the MHC subsidiary holding company's bylaws, shall not be fewer than
five nor more than fifteen except when a greater or lesser number is approved by
the Director of the Office, or his or her delegate.
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<PAGE>
Section 8. Certain provisions applicable for five years.
Notwithstanding anything contained in the MHC subsidiary holding company's
charter or bylaws to the contrary, for a period of five years from the date of
completion of the conversion of the savings bank from the mutual to stock form,
the following provisions shall apply:
A. Beneficial ownership limitation. No person, except for the mutual
holding company, Skibo Bancshares, M.H.C., shall directly or indirectly offer to
acquire or acquire the beneficial ownership of more than 10 percent of any class
of an equity security of the MHC mutual holding company. This limitation shall
not apply to a transaction in which the MHC mutual holding company forms a
holding company without a change in the respective beneficial ownership
interests of its stockholders other than pursuant to the exercise of any
dissenter and appraisal rights, the purchase of shares by underwriters in
connection with a public offering, or the purchase of shares by a tax-qualified
employee stock benefit plan which is exempt from the approval requirements under
Section 574.3(c)(1)(vi) of the Office's regulations.
In the event shares are acquired in violation of this Section 8, all
shares beneficially owned by any person in excess of 10% shall be considered
"excess shares" and shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matters submitted to the stockholders for a vote.
For purposes of this Section 8, the following definitions apply:
(1) The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock company, a
trust, an unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing of the
equity securities of the MHC mutual holding company.
(2) The term "offer" includes every offer to buy or otherwise acquire,
solicitation of an offer to sell, tender offer for, or request or invitation for
tenders of, a security or interest in a security for value.
(3) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise.
(4) The term "acting in concert" means (a) knowing participation in a
joint activity or conscious parallel action towards a common goal whether or not
pursuant to an express agreement, or (b) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangements,
whether written or otherwise.
B. Call for special meetings. Special meetings of stockholders relating
to changes in control of the MHC mutual holding company or amendments to its
charter shall be called only upon direction of the board of directors.
Section 9. Amendment of charter. Except as provided in Section 5, no
amendment, addition, alteration, change or repeal of this charter shall be made,
unless such is proposed by the board of directors of the MHC subsidiary holding
company, approved by the shareholders by a majority of the votes eligible to be
cast at a legal meeting, unless a higher vote is otherwise required, and
approved or preapproved by the Office.
4
EXHIBIT 3.2
<PAGE>
SKIBO FINANCIAL CORP.
BYLAWS
ARTICLE I - HOME OFFICE
The home office of Skibo Financial Corp. (the "MHC subsidiary holding
company") shall be at 242 East Main Street, in the Borough of Carnegie, the
County of Allegheny, and the Commonwealth of Pennsylvania.
ARTICLE II - SHAREHOLDERS
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the MHC subsidiary holding
company or at such other convenient place as the board of directors may
determine.
Section 2. Annual Meeting. A meeting of the shareholders of the MHC
subsidiary holding company for the election of directors and for the transaction
of any other business of the MHC subsidiary holding company shall be held
annually within 150 days after the end of the MHC subsidiary holding company's
fiscal year at such date and time within such 150-day period as the board of
directors may determine.
Section 3. Special Meetings. Special meetings of the shareholders for
any purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office"), may be called at any time by the
chairman of the board, the president, or a majority of the board of directors,
and shall be called by the chairman of the board, the president or the secretary
upon the written request of the holders of not less than one-tenth of all the
outstanding capital stock of the MHC subsidiary holding company entitled to vote
at the meeting. Such written request shall state the purpose or purposes of the
meeting and shall be delivered at the home office of the MHC subsidiary holding
company addressed to the chairman of the board, the president or the secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert's Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws or the
board of directors adopts another written procedure for the conduct of meetings.
The board of directors shall designate, when present, either the chairman of the
board or president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place, day
and hour of the meeting and the purpose(s) for which the meeting is called shall
be delivered not fewer than 20 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the chairman of
the board, the president, the secretary, or the directors calling the meeting,
to each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the mail, addressed to
the shareholder at the address as it appears on the stock transfer books or
records of the MHC subsidiary holding company as of the record date prescribed
in section 6 of this article II with postage prepaid. When any shareholders'
meeting, either annual or special, is adjourned for 30 days or more, notice of
the adjourned meeting shall be given as in the case of an original meeting. It
shall not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment is
taken.
<PAGE>
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the board of directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not more than
60 days and, in case of a meeting of shareholders, not fewer than 10 days prior
to the date on which the particular action, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment.
Section 7. Voting Lists. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the MHC subsidiary holding company shall make a complete list of the
shareholders of record entitled to vote at such meeting, or any adjournment
thereof, arranged in alphabetical order, with the address and the number of
shares held by each. This list of shareholders shall be kept on file at the home
office of the MHC subsidiary holding company and shall be subject to inspection
by any shareholder of record or the shareholder's agent at any time during usual
business hours for a period of 20 days prior to such meeting. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection by any shareholder of record or the shareholder's
agent during the entire time of the meeting. The original stock transfer book
shall constitute prima facie evidence of the shareholders entitled to examine
such list or transfer books or to vote at any meeting of shareholders. In lieu
of making the shareholder list available for inspection by shareholders as
provided in the preceding paragraph, the board of directors may elect to follow
the procedures prescribed in ss.552.6(d) of the Office's Regulations as now or
hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the MHC
subsidiary holding company entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders. If less than a majority
of the outstanding shares is represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to constitute less than a quorum. If a quorum is present,
the affirmative vote of the majority of the shares represented at the meeting
and entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number of shareholders voting together or voting by
classes is required by law or the charter. Directors, however, are elected by a
plurality of the votes cast at an election of directors.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney in fact. Proxies may be given telephonically or electronically as long
as the holder uses a procedure for verifying the identity of the shareholder.
Proxies solicited on behalf of the management shall be voted as directed by the
shareholder or, in the absence of such direction, as determined by a majority of
the board of directors. No proxy shall be valid more than eleven months from the
date of its execution except for a proxy coupled with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the MHC subsidiary holding company to the contrary, at any meeting
of the shareholders of the MHC subsidiary holding company
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<PAGE>
any one or more of such shareholders may cast, in person or by proxy, all votes
to which such ownership is entitled. In the event an attempt is made to cast
conflicting votes, in person or by proxy, by the several persons in whose names
shares of stock stand, the vote or votes to which those persons are entitled
shall be cast as directed by a majority of those holding such and present in
person or by proxy at such meeting, but no votes shall be cast for such stock if
a majority cannot agree.
Section 11. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares standing in the name of a trustee may be voted by him or her,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him or her without a transfer of such shares into his or her name.
Shares held in trust in an IRA or Keogh Account, however, may be voted by the
MHC subsidiary holding company if no other instructions are received. Shares
standing in the name of a receiver may be voted by such receiver, and shares
held by or under the control of a receiver may be voted by such receiver without
the transfer into his or her name if authority to do so is contained in an
appropriate order of the court or other public authority by which such receiver
was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the MHC subsidiary
holding company nor shares held by another corporation, if a majority of the
shares entitled to vote for the election of directors of such other corporation
are held by the MHC subsidiary holding company, shall be voted at any meeting or
counted in determining the total number of outstanding shares at any given time
for purposes of any meeting.
Section 12. Cumulative Voting. Shareholders shall not be entitled to
cumulate their votes for election of directors.
Section 13. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the chairman of the
board or the president.
Unless otherwise prescribed by regulations of the Office, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; receiving votes,
ballots, or consents; hearing and determining all challenges and questions in
any way arising in
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connection with the rights to vote; counting and tabulating all votes or
consents; determining the result; and such acts as may be proper to conduct the
election or vote with fairness to all shareholders.
Section 14. Nominating Committee. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the MHC subsidiary holding company. No
nominations for directors except those made by the nominating committee shall be
voted upon at the annual meeting unless other nominations by shareholders are
made in writing and delivered to the secretary of the MHC subsidiary holding
company at least five days prior to the date of the annual meeting. Upon
delivery, such nominations shall be posted in a conspicuous place in each office
of the MHC subsidiary holding company. Ballots bearing the names of all persons
nominated by the nominating committee and by shareholders shall be provided for
use at the annual meeting. However, if the nominating committee shall fail or
refuse to act at least 20 days prior to the annual meeting, nominations for
directors may be made at the annual meeting by any shareholder entitled to vote
and shall be voted upon.
Section 15. New Business. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary of the MHC
subsidiary holding company at least 5 days before the date of the annual
meeting, and all business so stated, proposed, and filed shall be considered at
the annual meeting, but no other proposal shall be acted upon at the annual
meeting. Any shareholder may make any other proposal at the annual meeting and
the same may be discussed and considered, but unless stated in writing and filed
with the secretary at least 5 days before the meeting, such proposal shall be
laid over for action at an adjourned, special, or annual meeting of the
shareholders taking place 30 days or more thereafter. This provision shall not
prevent the consideration and approval or disapproval at the annual meeting of
reports of officers, directors and committees; but in connection with such
reports, no new business shall be acted upon at such annual meeting unless
stated and filed as herein provided.
Section 16. Informal Action by Shareholders. Any action required to be
taken at a meeting of shareholders, or any other action which may be taken at a
meeting of the shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III - BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the MHC
subsidiary holding company shall be under the direction of its board of
directors. The board of directors shall annually elect a chairman of the board
and a president from among its members and shall designate, when present, either
the chairman of the board or the president to preside at its meetings.
Section 2. Number and Term. The board of directors shall consist of
five members, and shall be divided into three classes as nearly equal in number
as possible. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. One class shall be
elected by ballot annually.
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Section 3. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw following the
annual meeting of shareholders. The board of directors may provide, by
resolution, the time and place, for the holding of additional regular meetings
without other notice than such resolution. Directors may participate in a
meeting by means of a conference telephone or similar communications device
through which all persons participating can hear each other at the same time.
Participation by such means shall constitute presence in person for all
purposes.
Section 4. Qualification. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the MHC
subsidiary holding company unless the MHC subsidiary holding company is a wholly
owned subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the chairman of the board, the president
or one-third of the directors. The persons authorized to call special meetings
of the board of directors may fix any place, within the MHC subsidiary holding
company's normal lending territory, as the place for holding any special meeting
of the board of directors called by such persons.
Members of the board of directors may participate in special meetings
by means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such participation
shall constitute presence in person for all purposes.
Section 6. Notice. Written notice of any special meeting shall be given
to each director at least 24 hours prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed, when delivered to the telegraph company if sent by telegram
or when the MHC subsidiary holding company receives notice of delivery if
electronically transmitted. Any director may waive notice of any meeting by a
writing filed with the secretary. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the board of
directors need be specified in the notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by
section 2 of this article III shall constitute a quorum for the transaction of
business at any meeting of the board of directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall be
given in the same manner as prescribed by section 6 of this article III.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted
to be taken by the board of directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
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Section 10. Resignation. Any director may resign at any time by sending
a written notice of such resignation to the home office of the MHC subsidiary
holding company addressed to the chairman of the board or the president. Unless
otherwise specified, such resignation shall take effect upon receipt by the
chairman of the board or the president. More than three consecutive absences
from regular meetings of the board of directors, unless excused by resolution of
the board of directors, shall automatically constitute a resignation, effective
when such resignation is accepted by the board of directors.
Section 11. Vacancies. Any vacancy occurring in the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors by
the shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the board of directors for a
term of office continuing only until the next election of directors by the
shareholders.
Section 12. Compensation. Directors, as such, may receive a stated
salary for their services. By resolution of the board of directors, a reasonable
fixed sum, and reasonable expenses of attendance, if any, may be allowed for
actual attendance at each regular or special meeting of the board of directors.
Members of either standing or special committees may be allowed such
compensation for attendance at committee meetings as the board of directors may
determine.
Section 13. Presumption of Assent. A director of the MHC subsidiary
holding company who is present at a meeting of the board of directors at which
action on any MHC subsidiary holding company matter is taken shall be presumed
to have assented to the action taken unless his or her dissent or abstention
shall be entered in the minutes of the meeting or unless he or she shall file a
written dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the MHC subsidiary holding company within
five days after the date a copy of the minutes of the meeting is received. Such
right to dissent shall not apply to a director who voted in favor of such
action.
Section 14. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director may be removed for cause by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors. Whenever the holders of the shares of any class are entitled to elect
one or more directors by the provisions of the Charter or supplemental sections
thereto, the provisions of this section shall apply, in respect to the removal
of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class and not to the vote of the outstanding shares
as a whole.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer and
two or more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that
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<PAGE>
the executive committee shall not have the authority of the board of directors
with reference to: the declaration of dividends; the amendment of the charter or
bylaws of the MHC subsidiary holding company, or recommending to the
shareholders a plan of merger, consolidation, or conversion; the sale, lease or
other disposition of all or substantially all of the property and assets of the
MHC subsidiary holding company otherwise than in the usual and regular course of
its business; a voluntary dissolution of the MHC subsidiary holding company; a
revocation of any of the foregoing; or the approval of a transaction in which
any member of the executive committee, directly or indirectly, has any material
beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by any member thereof upon not less than one day's notice stating the
place, date and hour of the meeting, which notice may be written or oral. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the MHC subsidiary holding company.
Unless otherwise specified, such resignation shall take effect upon its receipt;
the acceptance of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The board of directors may by resolution
establish an audit, loan, or other committees composed of directors as they may
determine to be necessary or appropriate for the
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conduct of the business of the MHC subsidiary holding company and may prescribe
the duties, constitution and procedures thereof.
ARTICLE V - OFFICERS
Section 1. Positions. The officers of the MHC subsidiary holding
company shall be a president, one or more vice presidents, a secretary and a
treasurer or comptroller, each of whom shall be elected by the board of
directors. The board of directors may also designate the chairman of the board
as an officer. The offices of the secretary and treasurer or comptroller may be
held by the same person and a vice president may also be either the secretary or
the treasurer or comptroller. The board of directors may designate one or more
vice presidents as executive vice president or senior vice president. The board
of directors may also elect or authorize the appointment of such other officers
as the business of the MHC subsidiary holding company may require. The officers
shall have such authority and perform such duties as the board of directors may
from time to time authorize or determine. In the absence of action by the board
of directors, the officers shall have such powers and duties as generally
pertain to their respective offices.
Section 2. Election and Term of Office. The officers of the MHC
subsidiary holding company shall be elected annually at the first meeting of the
board of directors held after each annual meeting of the shareholders. If the
election of officers is not held at such meeting, such election shall be held as
soon thereafter as possible. Each officer shall hold office until a successor
has been duly elected and qualified or until the officer's death, resignation or
removal in the manner hereinafter provided. Election or appointment of an
officer, employee or agent shall not of itself create contractual rights. The
board of directors may authorize the MHC subsidiary holding company to enter
into an employment contract with any officer in accordance with regulations of
the Office; but no such contract shall impair the right of the board of
directors to remove any officer at any time in accordance with section 3 of this
article V.
Section 3. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the MHC subsidiary
holding company will be served thereby, but such removal, other than for cause,
shall be without prejudice to the contractual rights, if any, of the person so
removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be
fixed from time to time by the board of directors.
ARTICLE VI - CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. To the extent permitted by regulations of the
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the board of directors may authorize any officer,
employee, or agent of the MHC subsidiary holding company to enter into any
contract or execute and deliver any instrument in the name of and on behalf of
the MHC subsidiary holding company. Such authority may be general or confined to
specific instances.
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Section 2. Loans. No loans shall be contracted on behalf of the MHC
subsidiary holding company and no evidence of indebtedness shall be issued in
its name unless authorized by the board of directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the MHC subsidiary holding company shall be signed by one or more
officers, employees or agents of the MHC subsidiary holding company in such
manner as shall from time to time be determined by the board of directors.
Section 4. Deposits. All funds of the MHC subsidiary holding company
not otherwise employed shall be deposited from time to time to the credit of the
MHC subsidiary holding company in any duly authorized depositories as the board
of directors may select.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the MHC subsidiary holding company shall be in such form as
shall be determined by the board of directors and approved by the Office. Such
certificates shall be signed by the chief executive officer or by any other
officer of the MHC subsidiary holding company authorized by the board of
directors, attested by the secretary or an assistant secretary, and sealed with
the corporate seal or a facsimile thereof. The signatures of such officers upon
a certificate may be facsimiles if the certificate is manually signed on behalf
of a transfer agent or a registrar other than the MHC subsidiary holding company
itself or one of its employees. Each certificate for shares of capital stock
shall be consecutively numbered or otherwise identified. The name and address of
the person to whom the shares are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the MHC subsidiary
holding company. All certificates surrendered to the MHC subsidiary holding
company for transfer shall be canceled and no new certificate shall be issued
until the former certificate for a like number of shares has been surrendered
and canceled, except that in the case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the MHC subsidiary
holding company as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of
the MHC subsidiary holding company shall be made only on its stock transfer
books. Authority for such transfer shall be given only by the holder of record
or by his or her legal representative, who shall furnish proper evidence of such
authority, or by his or her attorney authorized by a duly executed power of
attorney and filed with the MHC subsidiary holding company. Such transfer shall
be made only on surrender for cancellation of the certificate for such shares.
The person in whose name shares of capital stock stand on the books of the MHC
subsidiary holding company shall be deemed by the MHC subsidiary holding company
to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR
The fiscal year of the MHC subsidiary holding company shall end on the
31st day of March of each year. The appointment of auditors shall be subject to
annual ratification by the shareholders.
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ARTICLE IX - DIVIDENDS
Subject to the terms of the MHC subsidiary holding company's charter
and the regulations and orders of the Office, the board of directors may, from
time to time, declare, and the MHC subsidiary holding company may pay, dividends
on its outstanding shares of capital stock.
ARTICLE X - CORPORATE SEAL
The board of directors shall provide a MHC subsidiary holding company
seal which shall be two concentric circles between which shall be the name of
the MHC subsidiary holding company. The year of incorporation or an emblem may
appear in the center.
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with regulations of
the Office and shall be effective after: (i) approval of the amendment by a
majority vote of the authorized board of directors, or by a majority vote of the
votes cast by the shareholders of the MHC subsidiary holding company at any
legal meeting, and (ii) receipt of any applicable regulatory approval. When the
MHC subsidiary holding company fails to meet its quorum requirements, solely due
to vacancies on the board, then the affirmative vote of a majority of the
sitting board will be required to amend the bylaws.
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================================================================================
COMMON STOCK ______ SHARES
CERTIFICATE NO. SKIBO FINANCIAL CORP.
INCORPORATED UNDER THE
LAWS OF THE UNITED STATES
CUSIP NO. 830611 10 9
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS
CERTIFIES
THAT
IS THE
OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK,
$0.10 PAR VALUE PER SHARE OF
SKIBO FINANCIAL CORP.
The shares evidenced by this certificate are transferable only on the
books of Skibo Financial Corp. by the holder of record hereof in person or by
attorney, upon the surrender of this certificate properly endorsed. These shares
are nonwithdrawable and are not of an insurable type. Such shares are not
insured by the Federal Deposit Insurance Corporation, the Bank Insurance Fund,
the Savings Association Insurance Fund or any other government agency. This
certificate is not valid unless countersigned and registered by the Transfer
Agent and Registrar.
In Witness Whereof, Skibo Financial Corp. has caused this certificate
to be executed by the facsimile signatures of its duly authorized officers and
has caused a facsimile of its corporate seal to be hereunto affixed.
- -------------------------------- --------------------
Alexander J. Senules Walter G. Kelly
Secretary SEAL President
================================================================================
<PAGE>
SKIBO FINANCIAL CORP.
The shares represented by this certificate are issued subject to all
the provisions of the Charter and Bylaws of Skibo Financial Corp. (the "Stock
Company"), as from time to time amended (copies of which are on file at the
principal office of the Stock Company), to all of which the holder by acceptance
hereof assents. The following description constitutes a summary of certain
provisions of, and is qualified in its entirety by reference to, the Charter.
The Charter of the Stock Company contains certain provisions,
applicable upon the effective date of the reorganization of First Carnegie
Deposit into a federal stock savings bank and the concurrent formation of a
mutual holding company, that restrict persons from directly or indirectly
acquiring or holding, or attempting to acquire or hold, the beneficial ownership
of in excess of 10% of the outstanding shares of capital stock of the Stock
Company entitled to vote generally in the election of directors ("Voting
Stock"). The Charter contains a provision pursuant to which the shares
beneficially held in excess of 10% the Voting Stock of the Stock Company are
considered "excess shares" and shall not be counted as shares entitled to vote
and shall not be voted by any person or counted as voting shares in connection
with any matters submitted to the stockholders for a vote. These restrictions
are not applicable to underwriters in connection with a public offering of the
common stock, certain reorganization transactions described in the Charter or to
acquisitions of Voting Stock by the Stock Company, any majority-owned subsidiary
of the Stock Company, or any tax-qualified employee stock benefit plan which is
exempt from the approval requirements under 574.3(c)(1)(vi) of the Office's
regulations. Skibo Bancshares, M.H.C., the federally chartered mutual holding
company of the Stock Holding Company and First Carnegie Deposit (the "Holding
Company") will own in excess of 50% of the Common Stock of the Stock Company so
long as the Holding Company remains in mutual form.
The Board of Directors of the Stock Company is authorized by resolution
or resolutions, from time to time adopted, to provide for the issuance of serial
preferred stock, in series and to fix and state the voting powers, designations,
preferences and relative, participating, optional, or other special rights of
the shares of each such series and the qualifications, limitations and
restrictions thereof. The Stock Company will furnish to any shareholder upon
request and without charge a full description of each class of stock and any
series thereof.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT TRAN ACT - _____ Custodian _____
(Cus) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Tranfers to Minors Act
JT TEN - as joint tenants with right of ____________________________________
survivorship and not as tenants State)
in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ________________ hereby sell, assign and transfer
unto ___________, ___________, Shares of the Common Stock evidenced by this
Certificate, and do hereby irrevocably constitute and appoint ______________,
Attorney, to transfer the said shares on the books of First Carnegie Deposit
with full power of substitution.
Dated ____________________, 19____
----------------------------------
Signature
----------------------------------
Signature
In presence of: _________________________
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
EXHIBIT 10.1
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into this 12th day of June 1997, by and between
First Carnegie Deposit (formerly First Federal Savings & Loan Association of
Carnegie), a Federal stock savings bank, (the "Bank") and Walter G. Kelly (the
"Executive").
WITNESSETH
WHEREAS, the Executive has heretofore been employed by the Bank as the
President and Chief Executive Officer and is experienced in all phases of the
business of the Bank; and
WHEREAS, the Bank desires to be ensured of the Executive's continued
active participation in the business of the Bank; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Bank and in consideration of the Executive's agreeing to remain in the
employ of the Bank, the parties desire to specify the continuing employment
relationship of the Bank and the Executive;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Employment. The Bank hereby employs the Executive in the capacity of
President and Chief Executive Officer. The Executive hereby accepts said
employment and agrees to render such administrative and management services to
the Bank and to Skibo Bancshares, M.H.C., the parent mutual holding company
("Parent") as are currently rendered and as are customarily performed by persons
situated in a similar executive capacity. The Executive shall promote the
business of the Bank and Parent. The Executive's other duties shall be such as
the Board of Directors for the Bank (the "Board of Directors" or "Board") may
from time to time reasonably direct, including normal duties as an officer of
the Bank.
2. Term of Employment. The term of employment under this Agreement
shall be for three years, commencing on the date of this Agreement and, subject
to the requirements of the succeeding sentence, shall be deemed automatically,
without further action, to extend for an additional three (3) months at the end
of each calendar quarter, so that at any time the remaining term of this
Agreement shall be from two and three quarter (2 3/4) years to three (3) years.
Prior to the end of each calendar quarter, the Board of Directors shall consider
and review (with appropriate corporate documentation thereof, and after taking
into account all relevant factors, including the Executive's performance
hereunder) extension of the term under this Agreement, and the term shall
continue to extend in the manner set forth above unless either the Board of
Directors does not approve such extension and provides written notice to the
Executive of such event or the Executive gives written notice to the Bank of his
election not to extend the term,
<PAGE>
in each case with such written notice to be given not less than thirty (30) days
prior to any such calendar quarter. References herein to the term of this
Agreement shall refer both to the initial term and successive terms.
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Bank shall compensate and pay the Executive
during the term of this Agreement a minimum base salary at the rate of $144,685
per annum ("Base Salary"), payable in cash not less frequently than bi-weekly;
provided, that the rate of such salary shall be reviewed by the Board of
Directors not less often than annually, and the Executive shall be entitled to
receive increases at such percentages or in such amounts as determined by the
Board of Directors. The base salary may not be decreased without the Executive's
express written consent.
(b) Discretionary Bonus. The Executive shall be entitled to
participate in an equitable manner with all other senior management employees of
the Bank in discretionary bonuses that may be authorized and declared by the
Board of Directors to its senior management executives from time to time. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Executive's right to participate in such discretionary bonuses when and
as declared by the Board.
(c) Participation in Benefit and Retirement Plans. The Executive
shall be entitled to participate in and receive the benefits of any plan of the
Bank which may be or may become applicable to senior management relating to
pension or other retirement benefit plans, profit-sharing, stock options or
incentive plans, or other plans, benefits and privileges given to employees and
executives of the Bank, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Bank.
(d) Participation in Medical Plans and Insurance Policies. The
Executive shall be entitled to participate in and receive the benefits of any
plan or policy of the Bank which may be or may become applicable to senior
management relating to life insurance, short and long term disability, medical,
dental, eye-care, prescription drugs or medical reimbursement plans.
(e) Vacations and Sick Leave. The Executive shall be entitled to
paid annual vacation leave in accordance with the policies as established from
time to time by the Board of Directors, which shall in no event be less than
four weeks per annum. The Executive shall also be entitled to an annual sick
leave benefit as established by the Board for senior management employees of the
Bank. The Executive shall not be entitled to receive any additional compensation
from the Bank for failure to take a vacation or sick leave, nor shall he be able
to accumulate unused vacation or sick leave from one year to the next, except to
the extent authorized by the Board of Directors.
(f) Expenses. The Bank shall reimburse the Executive or otherwise
provide for or pay for all reasonable expenses incurred by the Executive in
furtherance of, or in connection
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<PAGE>
with the business of the Bank, including, but not by way of limitation,
automobile and traveling expenses, and all reasonable entertainment expenses
(whether incurred at the Executive's residence, while traveling or otherwise),
subject to such reasonable documentation and other limitations as may be
established by the Board of Directors of the Bank. If such expenses are paid in
the first instance by the Executive, the Bank shall reimburse the Executive
therefor.
(g) Changes in Benefits. The Bank shall not make any changes in
such plans, benefits or privileges previously described in Section 3(c), (d) and
(e) which would adversely affect the Executive's rights or benefits thereunder,
unless such change occurs pursuant to a program applicable to all executive
officers of the Bank and does not result in a proportionately greater adverse
change in the rights of, or benefits to, the Executive as compared with any
other executive officer of the Bank. Nothing paid to Executive under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to Executive pursuant to Section 3(a)
hereof.
4. Loyalty; Noncompetition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or interest of the
Bank or Parent.
(b) Nothing contained in this Section 4 shall be deemed to
prevent or limit the right of Executive to invest in the capital stock or other
securities of any business dissimilar from that of the Bank or Parent, or,
solely as a passive or minority investor, in any business.
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under
this Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement,
in which event the Executive's estate shall be entitled to receive the
compensation due the Executive through the last day of the calendar month in
which Executive's death shall have occurred.
(b) The Board of Directors may terminate the Executive's
employment at any time, but any termination by the Board of Directors other than
termination for Just Cause, shall not prejudice the Executive's right to
compensation or other benefits under the Agreement. The Executive shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause. The Board may within its sole discretion, acting in good faith,
terminate the Executive for Just Cause and shall notify such Executive
accordingly. Termination
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for "Just Cause" shall include termination because of the Executive's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provision
of the Agreement.
(c) Except as provided pursuant to Section 9 herein, in the event
Executive's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Executive the salary provided pursuant to Section 3(a) herein, up to the date of
termination of the remaining term (including any renewal term) of this
Agreement, but in no event for a period of less than twelve months, and the cost
of Executive obtaining all health, life, disability, and other benefits which
the Executive would be eligible to participate in through such date based upon
the benefit levels substantially equal to those being provided Executive at the
date of termination of employment.
(d) If the Executive is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(e) If the Bank is in default (as defined in Section 3(x)(1) of
FDIA) all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the
contracting parties.
(f) All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of this Agreement is necessary
for the continued operation of the Bank: (i) by the Director of the Office of
Thrift Supervision ("Director of OTS"), or his or her designee, at the time that
the Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his or her
designee, at the time that the Director of the OTS, or his or her designee
approves a supervisory merger to resolve problems related to operation of the
Bank or when the Bank is determined by the Director of the OTS to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.
(g) The voluntary termination by the Executive during the term of
this Agreement with the delivery of no less than 30 days written notice to the
Board of Directors, other than pursuant to Section 9(b), in which case the
Executive shall be entitled to receive only the compensation, vested rights, and
all employee benefits up to the date of such termination.
(h) Notwithstanding anything herein to the contrary, any payments
made to the Executive pursuant to the Agreement, or otherwise, shall be subject
to and conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
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7. Suspension of Employment. If the Executive is suspended and/or
temporarily prohibited from participating in the conduct of the Bank's affairs
by a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(3) and (g)(1)), the Bank's obligations under the Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank may within its discretion
(i) pay the Executive all or part of the compensation withheld while its
contract obligations were suspended and (ii) reinstate any of its obligations
which were suspended.
8. Disability. If the Executive shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall nevertheless continue to
receive the compensation and benefits provided under the terms of this Agreement
as follows: 100% of such compensation and benefits for a period of 12 months,
but not exceeding the remaining term of the Agreement, and 65% thereafter for
the remainder of the term of the Agreement. Such benefits noted herein shall be
reduced by any benefits otherwise provided to the Executive during such period
under the provisions of disability insurance coverage in effect for Bank
employees. Thereafter, Executive shall be eligible to receive benefits provided
by the Bank under the provisions of disability insurance coverage in effect for
Bank employees. Upon returning to active full-time employment, the Executive's
full compensation as set forth in this Agreement shall be reinstated as of the
date of commencement of such activities. In the event that the Executive returns
to active employment on other than a full-time basis, then his compensation (as
set forth in Section 3(a) of this Agreement) shall be reduced in proportion to
the time spent in said employment, or as shall otherwise be agreed to by the
parties.
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the
event of the involuntary termination of Executive's employment during the term
of this Agreement following any change in control of the Bank or Parent, absent
Just Cause, Executive shall be paid an amount equal to the product of 2.99 times
the Executive's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Executive, either in one
(1) lump sum within thirty (30) days of such termination discounted to the
present value of such payment using as the discount rate the Applicable Federal
Rate specified at Section 280G of the Code, or in periodic payments over the
next 36 months or the remaining term of this Agreement whichever is less, as if
Executive's employment had not been terminated, and such payments shall be in
lieu of any other future payments which the Executive would be otherwise
entitled to receive under Section 6 of this Agreement. Notwithstanding the
forgoing, all sums payable hereunder shall be reduced in such manner and to such
extent so that no such payments made hereunder when aggregated with all other
payments to be made to the Executive by the Bank or the Parent shall be deemed
an "excess parachute payment" in accordance with Section 280G of the Code and be
subject to the excise tax provided at Section 4999(a) of the Code. The term
"control" shall refer to the ownership, holding or power to vote more than 25%
of the Parent's
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or Bank's voting stock, the control of the election of a majority of the
Parent's or Bank's directors, or the exercise of a controlling influence over
the management or policies of the Parent or Bank by any person or by persons
acting as a group within the meaning of Section 13(d) of the Securities Exchange
Act of 1934. The term "person" means an individual other than the Executive, or
a corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Executive may voluntarily terminate his employment during the term of
this Agreement following a change in control of the Bank or Parent, and
Executive shall thereupon be entitled to receive the payment described in
Section 9(a) of this Agreement, upon the occurrence, or within ninety (90) days
thereafter, of any of the following events, which have not been consented to in
advance by the Executive in writing: (i) if Executive would be required to move
his personal residence or perform his principal executive functions more than
twenty-five (25) miles from the Executive's primary office as of the signing of
this Agreement; (ii) if in the organizational structure of the Bank, Executive
would be required to report to a person or persons other than the Board of
Directors of the Bank; (iii) if the Bank should fail to maintain Executive's
base compensation in effect as of the date of the Change in Control and the
existing employee benefits plans, including material fringe benefit, stock
option and retirement plans; (iv) if Executive would be assigned duties and
responsibilities other than those normally associated with his position as
referenced at Section 1, herein; (v) if Executive's responsibilities or
authority have in any way been materially diminished or reduced; or (vi) if
Executive would not be reelected to the Board of Directors of the Bank.
10. Withholding. All payments required to be made by the Bank hereunder
to the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
11. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Bank or Parent which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Bank.
12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any
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breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the Commonwealth of
Pennsylvania.
14. Nature of Obligations. Nothing contained herein shall create or
require the Bank to create a trust of any kind to fund any benefits which may be
payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Bank hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Bank.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. Further, the settlement of the dispute to be approved
by the Board of the Bank may include a provision for the reimbursement by the
Bank to the Executive for all reasonable costs and expenses, including
reasonable attorneys' fees, arising from such dispute, proceedings or actions,
or the Board of the Bank or the Parent may authorize such reimbursement of such
reasonable costs and expenses by separate action upon a written action and
determination of the Board following settlement of the dispute. Such
reimbursement shall be paid within ten (10) days of Executive furnishing to the
Bank or Parent evidence, which may be in the form, among other things, of a
canceled check or receipt, of any costs or expenses incurred by Executive.
18. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
7
EXHIBIT 10.2
<PAGE>
First Carnegie Deposit
1998 Restricted Stock Plan
and Trust Agreement
Article I
---------
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 First Carnegie Deposit ("Savings Bank") hereby establishes the
1998 Restricted Stock Plan (the "Plan") and Trust (the "Trust") upon the terms
and conditions hereinafter stated in this Restricted Stock Plan and Trust
Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
Article II
----------
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and to retain personnel of
experience and ability in key positions of responsibility with the Savings Bank
and its subsidiaries, by providing such personnel of the Savings Bank and its
subsidiaries with an equity interest in the Savings Bank as compensation for
their prior and anticipated future professional contributions and service to the
Savings Bank and its subsidiaries.
Article III
-----------
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meaning as set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Beneficiary" means the person or persons designated by the
Participant to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, the Participant's estate.
3.02 "Board" means the Board of Directors of the Savings Bank, or any
successor corporation thereto.
3.03 "Cause" means the personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profits, intentional
failure to perform stated duties, willful violation of a material provision of
any law, rule or regulation (other than traffic violations and similar offense),
or a material violation of a final cease-and-desist order or any other action
which results in a substantial financial loss to the Savings Bank or its
Subsidiaries.
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3.04 "Change in Control" shall mean: (i) the sale of all, or a material
portion, of the assets of the Savings Bank; (ii) the merger or recapitalization
of the Savings Bank whereby the Savings Bank is not the surviving entity; (iii)
a change in control of the Savings Bank, as otherwise defined or determined by
the Office of Thrift Supervision ("OTS") or regulations promulgated by it; or
(iv) the acquisition, directly or indirectly, of the beneficial ownership
(within the meaning of that term as it is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended, ("1934 Act") and the rules and
regulations promulgated thereunder) of twenty-five percent (25%) or more of the
outstanding voting securities of the Savings Bank by any person, trust, entity
or group other than by Skibo Bancshares, M.H.C., the mutual holding company of
the Savings Bank. This limitation shall not apply to the purchase of shares of
up to 25% of any class of securities of the Savings Bank by a tax-qualified
employee stock benefit plan which is exempt from the approval requirements, set
forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or as may hereafter be
amended. The term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a Change
in Control has occurred shall be conclusive and binding. A Change in Control
shall not include a transaction whereby a Parent is formed which shall be the
owner of 100% of the stock of the Savings Bank.
3.05 "Committee" means the Board of Directors of the Savings Bank or
the Restricted Stock Plan Committee appointed by the Board of Directors of the
Savings Bank pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock, $.10 par value
per share, of the Savings Bank or any successor corporation or Parent thereto.
3.07 "Conversion" means the effective date of the stock charter of the
Savings Bank.
3.08 "Director" means a member of the Board of the Savings Bank.
3.09 "Director Emeritus" means a person serving as a director emeritus,
advisory director, consulting director, or other similar position as may be
appointed by the Board of Directors of the Savings Bank from time to time.
3.10 "Disability" means any physical or mental impairment which renders
the Participant incapable of continuing in the employment or service of the
Savings Bank in his current capacity as determined by the Committee.
3.11 "Employee" means any person who is employed by the Savings Bank or
a Subsidiary.
3.12 "Effective Date" shall mean the date of stockholder ratification
of the Plan by the stockholders of the Savings Bank .
3.13 "Parent" shall mean a stock corporation which may be formed after
the Effective Date which shall own 100% of the stock of the Savings Bank.
3.14 "Participant" means an Employee, Director or Director Emeritus who
receives a Plan Share Award under the Plan.
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3.15 "Plan Shares" means shares of Common Stock held in the Trust which
are awarded or issuable to a Participant pursuant to the Plan.
3.16 "Plan Share Award" or "Award" means a right granted to a
Participant under this Plan to earn or to receive Plan Shares.
3.17 "Plan Share Reserve" means the shares of Common Stock held by the
Trust pursuant to Sections 5.03 and 5.04.
3.18 "Retirement" means the termination of service in all capacities as
an Employee, Director and Director Emeritus following attainment of not less
than age 55 and completion of not less than ten years of Service to the Savings
Bank. Service to the Savings Bank rendered prior to the Effective Date shall be
recognized in determining eligibility to meet the requirements of Retirement
under the Plan.
3.19 "Savings Bank" means First Carnegie Deposit, and any successor
corporation thereto.
3.20 "Subsidiary" means those subsidiaries of the Savings Bank which,
with the consent of the Board, agree to participate in this Plan.
3.21 "Trustee" or "Trustee Committee" means that person(s) or entity
nominated by the Committee and approved by the Board pursuant to Sections 4.01
and 4.02 to hold legal title to the Plan assets for the purposes set forth
herein.
Article IV
----------
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and
interpreted by the Board of Directors or a Committee appointed by said Board,
which shall consist of not less than two non-employee members of the Board,
which shall have all of the powers allocated to it in this and other sections of
the Plan. All persons designated as members of the Committee shall be
"Non-Employee Directors" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended ("1934 Act"). The interpretation and
construction by the Committee of any provisions of the Plan or of any Plan Share
Award granted hereunder shall be final and binding. The Committee shall act by
vote or written consent of a majority of its members. Subject to the express
provisions and limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with respect to
the Plan to the Board at appropriate times, but in no event less than one time
per calendar year. The Committee shall recommend to the Board one or more
persons or entity to act as Trustee in accordance with the provision of this
Plan and Trust and the terms of Article VIII hereof.
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4.02 Role of the Board. The members of the Committee and the Trustee
shall be appointed or approved by, and will serve at the pleasure of the Board.
The Board may in its discretion from time to time remove members from, or add
members to, the Committee, and may remove, replace or add Trustees. The Board
shall have all of the powers allocated to it in this and other sections of the
Plan, may take any action under or with respect to the Plan which the Committee
is authorized to take, and may reverse or override any action taken or decision
made by the Committee under or with respect to the Plan, provided, however, that
the Board may not revoke any Plan Share Award already made except as provided in
Section 7.01(b) herein.
4.03 Limitation on Liability. No member of the Board, the Committee or
the Trustee shall be liable for any determination made in good faith with
respect to the Plan or any Plan Share Awards granted. If a member of the Board,
Committee or any Trustee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by any reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Parent and
the Savings Bank shall indemnify such member against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Savings Bank, and its Subsidiaries
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. Notwithstanding anything herein to the
contrary, in no event shall the Savings Bank take any actions with respect to
this Section 4.03 which is not in compliance with the limitations or
requirements set forth at 12 CFR 545.121, as may be amended from time to time.
Article V
---------
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board of Directors of the
Savings Bank shall determine the amounts (or the method of computing the
amounts) to be contributed by the Savings Bank to the Trust established under
this Plan. Such amounts shall be paid to the Trustee at the time of
contribution. No contributions to the Trust by Participants shall be permitted
except with respect to amounts necessary to meet tax withholding obligations.
5.02 Initial Investment. Any funds held by the Trust prior to
investment in the Common Stock shall be invested by the Trustee in such
interest-bearing account or accounts at the Savings Bank as the Trustee shall
determine to be appropriate.
5.03 Investment of Trust Assets. Following ratification of the Plan by
stockholders of the Savings Bank and receipt of any other necessary regulatory
approvals, the Trust shall purchase Common Stock in an amount equal to up to
100% of the Trust's assets, after providing for any required withholding as
needed for tax purposes, provided, however, that the Trust shall not purchase
more than 41,400 shares of Common Stock, representing 4% of the aggregate shares
of Common Stock issued by the Savings Bank in the Conversion. The Trustee will
purchase shares of Common Stock in the open market sufficient to fund the Plan
Share Reserve.
5.04 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Plan Share Awards under Sections 6.02 and 6.05,
or the decision of the Committee to return Plan Shares to the Savings Bank, the
Plan Share Reserve shall be reduced by the number of Shares
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<PAGE>
subject to the Awards so allocated or returned. Any Shares subject to an Award
which are not earned because of forfeiture by the Participant pursuant to
Section 7.01 shall be added to the Plan Share Reserve.
Article VI
----------
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Employees and Directors Emeritus are eligible to
receive Plan Share Awards within the sole discretion of the Committee. Directors
who are not otherwise Employees shall receive Plan Share Awards pursuant to
Section 6.05.
6.02 Allocations. The Committee will determine which of the Employees
will be granted Plan Share Awards and the number of Shares covered by each
Award, provided, however, that in no event shall any Awards be made which will
violate the Charter or Bylaws of the Savings Bank or its Parent or Subsidiaries
or any applicable federal or state law or regulation. In the event Shares are
forfeited for any reason or additional Shares are purchased by the Trustee, the
Committee may, from time to time, determine which of the Employees will be
granted Plan Share Awards to be awarded from forfeited Shares. In selecting
those Employees and Directors Emeritus to whom Plan Share Awards will be granted
and the number of shares covered by such Awards, the Committee shall consider
the prior and anticipated future position, duties and responsibilities of the
Employees, the value of their prior and anticipated future services to the
Savings Bank and its Subsidiaries, and any other factors the Committee may deem
relevant. All actions by the Committee shall be deemed final, except to the
extent that such actions are revoked by the Board. Notwithstanding anything
herein to the contrary, in no event shall any Participant receive Plan Share
Awards in excess of 25% of the aggregate Plan Shares authorized under the Plan.
6.03 Form of Allocation. As promptly as practicable after a
determination is made pursuant to Section 6.02 or Section 6.05 that a Plan Share
Award is to be made, the Committee shall notify the Participant in writing of
the grant of the Award, the number of Plan Shares covered by the Award, and the
terms upon which the Plan Shares subject to the award may be earned. The date on
which the Committee makes its award determination or the date the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards as determined by the Committee. The Committee shall maintain records as
to all grants of Plan Share Awards under the Plan.
6.04 Allocations Not Required. Notwithstanding anything to the contrary
at Sections 6.01, 6.02 or 6.05, no Employee shall have any right or entitlement
to receive a Plan Share Award hereunder, such Awards being at the sole
discretion of the Committee and the Board, nor shall the Employees as a group
have such a right. The Committee may, with the approval of the Board (or, if so
directed by the Board) return all Common Stock in the Plan Share Reserve to the
Savings Bank at any time, and cease issuing Plan Share Awards.
6.05 Awards to Directors. Notwithstanding anything herein to the
contrary, upon the Effective Date, a Plan Share Award consisting of 2,898 Plan
Shares shall be awarded to each Director of the Savings Bank that is not
otherwise an Employee. Such Plan Share Award shall be earned and non-
forfeitable at the rate of one-fifth as of the Effective Date and an additional
one-fifth following each of the next four successive years during such periods
of service as a Director or Director Emeritus. Further, such Plan Share Award
shall be immediately 100% earned and non-forfeitable in the event of the
Retirement, death or Disability of such Director or Director Emeritus.
Subsequent to the Effective
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Date, Plan Share Awards may be awarded to newly elected or appointed Directors
of the Savings Bank by the Committee, provided that total Plan Share Awards
granted to non-employee Directors of the Savings Bank shall not exceed 28% of
the total Plan Share Reserve in the aggregate under the Plan or 7% of the total
Plan Share Reserve to any individual non-employee Director.
Article VII
-----------
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earnings Plan Shares; Forfeitures.
(a) General Rules. Unless the Committee shall specifically state to the
contrary at the time a Plan Share Award is granted, Plan Shares subject to an
Award shall be earned and non-forfeitable by a Participant at the rate of
one-fifth of such Award following one year after the granting of such Award, and
an additional one-fifth following each of the next four successive years;
provided that such Participant remains an Employee, Director, or Director
Emeritus during such period.
(b) Revocation for Misconduct. Notwithstanding anything herein to the
contrary, the Board shall, by resolution, immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously awarded under
this Plan, to the extent Plan Shares have not been delivered thereunder to the
Participant, whether or not yet earned, in the case of a Participant who is
discharged from the employ or service of the Savings Bank or a Subsidiary for
Cause, or who is discovered after termination of employment or service to have
engaged in conduct that would have justified termination for Cause. A
determination of Cause shall be made by the Board within its sole discretion.
(c) Exception for Terminations Due to Death, Disability or Retirement.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose employment or
service with the Savings Bank or a Subsidiary terminates due to Retirement,
death or Disability, shall be deemed earned and nonforfeitable as of the
Participant's last date of employment or service with the Savings Bank or
Subsidiary and shall be distributed as soon as practicable thereafter.
7.02 Accrual and Payment of Dividends. A holder of a Plan Share Award,
whether or not 100% earned and non-forfeitable, shall also be entitled to
receive an amount equal to any cash dividends declared and paid with respect to
shares of Common Stock represented by such Plan Share Award between the date the
relevant Plan Share Award was granted to such Participant and the date the Plan
Shares are distributed. Such cash dividend amounts shall be paid to such
Participant, less applicable income tax withholding, within 30 days of the
dividend payment date attributable to such dividend payable on the Common Stock.
Such payment shall also include an appropriate amount of earnings, if any, of
the Trust assets with respect to any cash dividends so distributed.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as provided in
Subsections (d) and (e) below, Plan Shares shall be distributed to the
Participant or his Beneficiary, as the case may be, as soon as practicable after
they have been earned. No fractional shares shall be distributed.
Notwithstanding anything herein to the contrary, at the discretion of the
Committee, Plan Shares may be distributed prior
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to such Shares being 100% earned, provided that such Plan Shares shall contain a
restrictive legend detailing the applicable limitations of such shares with
respect to transfer and forfeiture.
(b) Form of Distribution. All Plan Shares, together with any shares
representing stock dividends, shall be distributed in the form of Common Stock.
One share of Common Stock shall be given for each Plan Share earned. Payments
representing cash dividends (and earnings thereon) shall be made in cash.
Notwithstanding anything within the Plan to the contrary, upon a Change in
Control whereby substantially all of the Common Stock of the Company shall be
acquired for cash, all Plan Shares associated with Plan Share Awards, together
with any shares representing stock dividends associated with Plan Share Awards,
shall be, at the sole discretion of the Committee, distributed as of the
effective date of such Change in Control, or as soon as administratively
feasible thereafter, in the form of cash equal to the consideration received in
exchange for such Common Stock represented by such Plan Shares.
(c) Withholding. The Trustee may withhold from any payment or
distribution made under this Plan sufficient amounts of cash or shares of Common
Stock necessary to cover any applicable withholding and employment taxes, and if
the amount of such payment or distribution is not sufficient, the Trustee may
require the Participant or Beneficiary to pay to the Trustee the amount required
to be withheld in taxes as a condition of delivering the Plan Shares. The
Trustee shall pay over to the Savings Bank or Subsidiary which employs or
employed such Participant any such amount withheld from or paid by the
Participant or Beneficiary.
(d) Timing: Exception for 10% Shareholders. Notwithstanding Subsection
(a) above, no Plan Shares may be distributed prior to the date which is five
years from the effective date of the Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares of Common Stock
held by parties other than Parent, unless such action is approved in advance by
a majority vote of disinterested directors of the Board of the Parent or the
Savings Bank. Any Plan Shares remaining undistributed solely by reason of the
operation of this Subsection (d) shall be distributed to the Participant or his
Beneficiary on the date which is five years from the effective date of the
Conversion.
(e) Regulatory Exceptions. No Plan Shares shall be distributed,
however, unless and until all of the requirements of all applicable law and
regulation shall have been fully complied with, including the receipt of
approval of the Plan by the stockholders of the Savings Bank by such vote, if
any, as may be required by applicable law and regulations as determined by the
Board.
7.04 Voting of Plan Shares. After a Plan Share Award has become earned
and non- forfeitable, the Participant shall be entitled to direct the Trustee as
to the voting of the Plan Shares which are associated with the Plan Share Award
and which have not yet been distributed pursuant to Section 7.03, subject to
rules and procedures adopted by the Committee for this purpose. All shares of
Common Stock held by the Trust as to which Participants are not entitled to
direct, or have not directed, the voting of such Shares, shall be voted by the
Trustee as directed by the Committee.
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<PAGE>
Article VIII
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TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 Management of Trust. It is the intention of this Plan and Trust
that the Trustee shall have complete authority and discretion with respect to
the management, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust, except those attributable to cash dividends paid
with respect to Plan Shares not held in the Plan Share Reserve, in Common Stock
to the fullest extent practicable, except to the extent that the Trustee
determines that the holding of monies in cash or cash equivalents is necessary
to meet the obligations of the Trust. In performing their duties, the Trustees
shall have the power to do all things and execute such instruments as may be
deemed necessary or proper, including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
the Common Stock without regard to any law now or hereafter in force
limiting investments for Trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and
in making such investment, the Trustee is authorized to purchase Common
Stock in the market.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above in such deposit accounts, and certificates of deposit
(including those issued by the Savings Bank), obligations of the United
States government or its agencies or such other investments as shall be
considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any time
held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in the
name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may be in the
opinion of the Trustee reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Participant or his Beneficiary as a consequence of a
dispute as to the disposition thereof, whether in a segregated account
or held in common with other assets.
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Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of a court for the exercise of any power
herein contained, or to maintain bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Committee.
8.04 Earnings. All earnings, gains and losses with respect to Trust
assets shall be allocated in accordance with a reasonable procedure adopted by
the Committee, to bookkeeping accounts for Participants or to the general
account of the Trust, depending on the nature and allocation of the assets
generating such earnings, gains and losses. In particular, any earnings on cash
dividends received with respect to shares of Common Stock shall be allocated to
accounts for Participants, except to the extent that such cash dividends are
distributed to Participants, if such shares are the subject of outstanding Plan
Share Awards, or, otherwise to the Plan Share Reserve.
8.05 Expenses. All costs and expenses incurred in the operation and
administration of this Plan, including those incurred by the Trustee, shall be
paid by the Savings Bank.
8.06 Indemnification. Subject to the requirements and limitations of
applicable laws and regulations, the Parent and the Savings Bank shall
indemnify, defend and hold the Trustee harmless against all claims, expenses and
liabilities arising out of or related to the exercise of the Trustee's powers
and the discharge of their duties hereunder, unless the same shall be due to
their gross negligence or willful misconduct.
Article IX
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MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for issuance pursuant to the Plan Share Awards and the number
of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of the Common Stock or other
capital adjustment, change or exchange of the Common Stock, or other increase or
decrease in the number or kind of shares effected without receipt or payment of
consideration by the Savings Bank.
9.02 Amendment and Termination of the Plan. The Board may, by
resolution, at any time, amend or terminate the Plan. The power to amend or
terminate the Plan shall include the power to direct the Trustee to return to
the Savings Bank all or any part of the assets of the Trust, including shares of
Common Stock held in the Plan Share Reserve, as well as shares of Common Stock
and other assets subject to Plan Share Awards which have not yet been earned by
the Participants to whom they have been awarded. However, the termination of the
Trust shall not affect a Participant's right to earn Plan Share Awards and to
the distribution of Common Stock relating thereto, including earnings thereon,
in accordance with the terms of this Plan and the grant by the Committee or the
Board.
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9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Participant, and during the lifetime of the
Participant, Plan Shares may only be earned by and paid to the Participant who
was notified in writing of the Award by the Committee pursuant to Section 6.03.
No Participant or Beneficiary shall have any right in or claim to any assets of
the Plan or Trust, nor shall the Parent, Savings Bank, or any Subsidiary be
subject to any claim for benefits hereunder.
9.04 No Employment Rights. Neither the Plan nor any grant of a Plan
Share Award or Plan Shares hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Participant to continue in the
employ or service of the Parent, Savings Bank, or a Subsidiary thereof.
9.05 Voting and Dividend Rights. No Participant shall have any voting
or dividend rights of a stockholder with respect to any Plan Shares covered by a
Plan Share Award, except as expressly provided in Sections 7.02 and 7.04 above,
prior to the time said Plan Shares are actually distributed to such Participant.
9.06 Governing Law. The Plan and Trust shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania, except to the
extent that Federal Law shall be deemed applicable.
9.07 Effective Date. The Plan shall be effective as of the date of
stockholder ratification of the Plan by stockholders of the Savings Bank.
9.08 Term of Plan. This Plan shall remain in effect until the earlier
of (i) termination by the Board, (ii) the distribution of all assets of the
Trust, or (iii) 21 years from the Effective Date. Termination of the Plan shall
not effect any Plan Share Awards previously granted, and such Plan Share Awards
shall remain valid and in effect until they have been earned and paid, or by
their terms expire or are forfeited.
9.09 Tax Status of Trust. It is intended that the Trust established
hereby shall be treated as a grantor trust of the Savings Bank under the
provisions of Section 671 et seq. of the Internal Revenue Code of 1986, as
amended, as the same may be amended from time to time.
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EXHIBIT 10.3
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FIRST CARNEGIE DEPOSIT
1998 STOCK OPTION PLAN
1. Purpose of the Plan. The Plan shall be known as the First Carnegie
Deposit ("Bank") 1998 Stock Option Plan (the "Plan"). The purpose of the Plan is
to attract and retain qualified personnel for positions of substantial
responsibility and to provide additional incentive to officers, directors, key
employees and other persons providing services to the Bank, or any present or
future parent or subsidiary of the Bank to promote the success of the business.
The Plan is intended to provide for the grant of "Incentive Stock Options,"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and Non-Incentive Stock Options, options that do not so
qualify. The provisions of the Plan relating to Incentive Stock Options shall be
interpreted to conform to the requirements of Section 422 of the Code.
2. Definitions. The following words and phrases when used in this Plan
with an initial capital letter, unless the context clearly indicates otherwise,
shall have the meaning as set forth below. Wherever appropriate, the masculine
pronoun shall include the feminine pronoun and the singular shall include the
plural.
(a) "Award" means the grant by the Committee of an Incentive
Stock Option or a Non-Incentive Stock Option, or any combination thereof, as
provided in the Plan.
(b) "Board" shall mean the Board of Directors of the Bank, or
any successor or parent corporation thereto.
(c) "Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Bank; (ii) the merger or recapitalization
of the Bank whereby the Bank is not the surviving entity; (iii) a change in
control of the Bank, as otherwise defined or determined by the Office of Thrift
Supervision or regulations promulgated by it; or (iv) the acquisition, directly
or indirectly, of the beneficial ownership (within the meaning of that term as
it is used in Section 13(d) of the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder) of twenty-five percent (25%) or more of
the outstanding voting securities of the Bank by any person, trust, entity or
group other than by Skibo Bancshares, M.H.C., the mutual holding company of the
Bank. This limitation shall not apply to the purchase of shares by underwriters
in connection with a public offering of Bank stock, or the purchase of shares of
up to 25% of any class of securities of the Bank by a tax-qualified employee
stock benefit plan which is exempt from the approval requirements, set forth
under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or as may hereafter be
amended. The term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a Change
in Control has occurred shall be conclusive and binding. A Change in Control
shall not include a transaction whereby a Parent is formed which shall be the
owner of 100% of the stock of the Bank.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder.
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(e) "Committee" shall mean the Board or the Stock Option
Committee appointed by the Board in accordance with Section 5(a) of the Plan.
(f) "Common Stock" shall mean the common stock of the Bank, or
any successor or parent corporation thereto.
(g) "Bank" shall mean the First Carnegie Deposit, Carnegie,
Pennsylvania, or any successor or Parent thereof.
(h) "Continuous Employment" or "Continuous Status as an
Employee" shall mean the absence of any interruption or termination of
employment with the Bank or any present or future Parent or Subsidiary of the
Bank. Employment shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the Bank or in the case
of transfers between payroll locations, of the Bank or between the Bank, its
Subsidiaries or a successor.
(i) "Director" shall mean a member of the Board of the Bank,
or any successor or parent corporation thereto.
(j) "Director Emeritus" shall mean a person serving as a
director emeritus, advisory director, consulting director, or other similar
position as may be appointed by the Board of Directors of the Bank from time to
time.
(k) "Disability" means (a) with respect to Incentive Stock
Options, the "permanent and total disability" of the Employee as such term is
defined at Section 22(e)(3) of the Code; and (b) with respect to Non-Incentive
Stock Options, any physical or mental impairment which renders the Participant
incapable of continuing in the employment or service of the Bank in his then
current capacity as determined by the Committee.
(l) "Effective Date" shall mean the date specified in Section
15 hereof.
(m) "Employee" shall mean any person employed by the Bank or
any present or future Parent or Subsidiary of the Bank.
(n) "Fair Market Value" shall mean: (i) if the Common Stock is
traded otherwise than on a national securities exchange, then the Fair Market
Value per Share shall be equal to the mean between the last bid and ask price of
such Common Stock on such date or, if there is no bid and ask price on said
date, then on the immediately prior business day on which there was a bid and
ask price. If no such bid and ask price is available, then the Fair Market Value
shall be determined by the Committee in good faith; or (ii) if the Common Stock
is listed on a national securities exchange, then the Fair Market Value per
Share shall be not less than the average of the highest and lowest selling price
of such Common Stock on such exchange on such date, or if there were no sales on
said date, then the Fair Market Value shall be not less than the mean between
the last bid and ask price on such date.
(o) "Incentive Stock Option" or "ISO" shall mean an option to
purchase Shares granted by the Committee pursuant to Section 8 hereof which is
subject to the limitations and restrictions of Section 8 hereof and is intended
to qualify as an incentive stock option under Section 422 of the Code.
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<PAGE>
(p) "Non-Incentive Stock Option" or "Non-ISO" shall mean an
option to purchase Shares granted pursuant to Section 9 hereof, which option is
not intended to qualify under Section 422 of the Code.
(q) "Option" shall mean an Incentive Stock Option or
Non-Incentive Stock Option granted pursuant to this Plan providing the holder of
such Option with the right to purchase Common Stock.
(r) "Optioned Stock" shall mean stock subject to an Option
granted pursuant to the Plan.
(s) "Optionee" shall mean any person who receives an Option or
Award pursuant to the Plan.
(t) "Parent" shall mean any present or future stock
corporation which would be a "parent corporation" as defined in Sections 424(e)
and (g) of the Code.
(u) "Participant" means any director, officer or key employee
of the Bank or any Parent or Subsidiary of the Bank or any other person
providing a service to the Bank who is selected by the Committee to receive an
Award, or who by the express terms of the Plan is granted an Award.
(v) "Plan" shall mean the First Carnegie Deposit 1998
Stock Option Plan.
(w) "Share" shall mean one share of the Common Stock.
(x) "Subsidiary" shall mean any present or future corporation
which constitutes a "subsidiary corporation" as defined in Sections 424(f) and
(g) of the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of Section 13 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed *103,500 Shares.
Such Shares may either be from authorized but unissued shares or shares
purchased in the market for Plan purposes. If an Award shall expire, become
unexercisable, or be forfeited for any reason prior to its exercise, new Awards
may be granted under the Plan with respect to the number of Shares as to which
such expiration has occurred.
4. Six Month Holding Period.
Subject to vesting requirements, if applicable, except in the
event of death or disability of the Optionee, a minimum of six months must
elapse between the date of the grant of an Option and the date of the sale of
the Common Stock received through the exercise of such Option.
5. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be
administered by the Board of Directors of the Bank or a Committee which shall
consist of not less than two Directors of the Bank
- -------------------
* 10% of shares outstanding as of date of Board adoption.
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<PAGE>
appointed by the Board and serving at the pleasure of the Board. All persons
designated as members of the Committee shall meet the requirements of a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, as found at 17 CFR ss.240.16b-3.
(b) Powers of the Committee. The Committee is authorized (but
only to the extent not contrary to the express provisions of the Plan or to
resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the form and
content of Awards to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall have and
may exercise such other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at any meeting at
which a quorum is present shall be deemed the action of the Committee. In no
event may the Committee revoke outstanding Awards without the consent of the
Participant.
The President of the Bank and such other officers as shall be
designated by the Committee are hereby authorized to execute written agreements
evidencing Awards on behalf of the Bank and to cause them to be delivered to the
Participants. Such agreements shall set forth the Option exercise price, the
number of shares of Common Stock subject to such Option, the expiration date of
such Options, and such other terms and restrictions applicable to such Award as
are determined in accordance with the Plan or the actions of the Committee.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
6. Eligibility for Awards and Limitations.
(a) The Committee shall from time to time determine the
officers, Directors, key employees and other persons who shall be granted Awards
under the Plan, the number of Awards to be granted to each such persons, and
whether Awards granted to each such Participant under the Plan shall be
Incentive and/or Non-Incentive Stock Options. In selecting Participants and in
determining the number of Shares of Common Stock to be granted to each such
Participant, the Committee may consider the nature of the prior and anticipated
future services rendered by each such Participant, each such Participant's
current and potential contribution to the Bank and such other factors as the
Committee may, in its sole discretion, deem relevant. Participants who have been
granted an Award may, if otherwise eligible, be granted additional Awards.
(b) The aggregate Fair Market Value (determined as of the
date the Option is granted) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by each Employee during any calendar
year (under all Incentive Stock Option plans, as defined in Section 422 of the
Code, of the Bank or any present or future Parent or Subsidiary of the Bank)
shall not exceed $100,000. Notwithstanding the prior provisions of this Section
6, the Committee may grant Options in excess of the foregoing limitations,
provided said Options shall be clearly and specifically designated as not being
Incentive Stock Options.
(c) In no event shall Shares subject to Options granted
to non-employee Directors in the aggregate under this Plan exceed more than 28%
of the total number of Shares authorized for delivery under this Plan pursuant
to Section 3 herein or more than 7% to any individual non-employee
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<PAGE>
Director. In no event shall Shares subject to Options granted to any Employee
exceed more than 25% of the total number of Shares authorized for delivery under
the Plan.
7. Term of the Plan. The Plan shall continue in effect for a term of
ten (10) years from the Effective Date, unless sooner terminated pursuant to
Section 18 hereof. No Option shall be granted under the Plan after ten (10)
years from the Effective Date.
8. Terms and Conditions of Incentive Stock Options. Incentive Stock
Options may be granted only to Participants who are Employees. Each Incentive
Stock Option granted pursuant to the Plan shall be evidenced by an instrument in
such form as the Committee shall from time to time approve. Each Incentive Stock
Option granted pursuant to the Plan shall comply with, and be subject to, the
following terms and conditions:
(a) Option Price.
(i) The price per Share at which each Incentive
Stock Option granted by the Committee under the Plan may be exercised shall not,
as to any particular Incentive Stock Option, be less than the Fair Market Value
of the Common Stock on the date that such Incentive Stock Option is granted.
(ii) In the case of an Employee who owns Common
Stock representing more than ten percent (10%) of the outstanding Common Stock
at the time the Incentive Stock Option is granted, the Incentive Stock Option
exercise price shall not be less than one hundred and ten percent (110%) of the
Fair Market Value of the Common Stock on the date that the Incentive Stock
Option is granted.
(b) Payment. Full payment for each Share of Common Stock
purchased upon the exercise of any Incentive Stock Option granted under the Plan
shall be made at the time of exercise of each such Incentive Stock Option and
shall be paid in cash (in United States Dollars), Common Stock or a combination
of cash and Common Stock. Common Stock utilized in full or partial payment of
the exercise price shall be valued at the Fair Market Value at the date of
exercise. The Bank shall accept full or partial payment in Common Stock only to
the extent permitted by applicable law. No Shares of Common Stock shall be
issued until full payment has been received by the Bank, and no Optionee shall
have any of the rights of a stockholder of the Bank until Shares of Common Stock
are issued to the Optionee.
(c) Term of Incentive Stock Option. The term of exercisability
of each Incentive Stock Option granted pursuant to the Plan shall be not more
than ten (10) years from the date each such Incentive Stock Option is granted,
provided that in the case of an Employee who owns stock representing more than
ten percent (10%) of the Common Stock outstanding at the time the Incentive
Stock Option is granted, the term of exercisability of the Incentive Stock
Option shall not exceed five (5) years.
(d) Exercise Generally. Except as otherwise provided in
Section 10 hereof, no Incentive Stock Option may be exercised unless the
Optionee shall have been in the employ of the Bank at all times during the
period beginning with the date of grant of any such Incentive Stock Option and
ending on the date three (3) months prior to the date of exercise of any such
Incentive Stock Option. The Committee may impose additional conditions upon the
right of an Optionee to exercise any Incentive Stock Option granted hereunder
which are not inconsistent with the terms of the Plan or the requirements for
qualification as an Incentive Stock Option. Except as otherwise provided by the
terms of the Plan
5
<PAGE>
or by action of the Committee at the time of the grant of the Options, the
Options will be first exercisable at the rate of 50% on the date of grant and
50% one year thereafter during such periods of service as an Employee, Director
or Director Emeritus.
(e) Cashless Exercise. Subject to vesting requirements, if
applicable, an Optionee who has held an Incentive Stock Option for at least six
months may engage in the "cashless exercise" of the Option. Upon a cashless
exercise, an Optionee shall give the Bank written notice of the exercise of the
Option together with an order to a registered broker-dealer or equivalent third
party, to sell part or all of the Optioned Stock and to deliver enough of the
proceeds to the Bank to pay the Option exercise price and any applicable
withholding taxes. If the Optionee does not sell the Optioned Stock through a
registered broker-dealer or equivalent third party, the Optionee can give the
Bank written notice of the exercise of the Option and the third party purchaser
of the Optioned Stock shall pay the Option exercise price plus any applicable
withholding taxes to the Bank.
(f) Transferability. An Incentive Stock Option granted
pursuant to the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
9. Terms and Conditions of Non-Incentive Stock Options. Each
Non-Incentive Stock Option granted pursuant to the Plan shall be evidenced by an
instrument in such form as the Committee shall from time to time approve. Each
Non-Incentive Stock Option granted pursuant to the Plan shall comply with and be
subject to the following terms and conditions.
(a) Options Granted to Directors. Subject to the limitations
of Section 6(c), Non- Incentive Stock Options to purchase 7,245 shares of Common
Stock will be granted to each Director who is not an Employee as of the
Effective Date, at an exercise price equal to the Fair Market Value of the
Common Stock on such date of grant. The Options will be first exercisable at the
rate of 50% on the Effective Date and 50% one year thereafter during such
periods of service as a Director or Director Emeritus. Upon the death or
Disability of the Director or Director Emeritus, such Option shall be deemed
immediately 100% exercisable. Such Options shall continue to be exercisable for
a period of ten years following the date of grant without regard to the
continued services of such Director as a Director or Director Emeritus. In the
event of the Optionee's death, such Options may be exercised by the personal
representative of his estate or person or persons to whom his rights under such
Option shall have passed by will or by the laws of descent and distribution.
Options may be granted to newly appointed or elected non-employee Directors
within the sole discretion of the Committee. The exercise price per Share of
such Options granted shall be equal to the Fair Market Value of the Common Stock
at the time such Options are granted. All outstanding Awards shall become
immediately exercisable in the event of a Change in Control of the Bank. Unless
otherwise inapplicable, or inconsistent with the provisions of this paragraph,
the Options to be granted to Directors hereunder shall be subject to all other
provisions of this Plan.
(b) Option Price. The exercise price per Share of Common Stock
for each Non-Incentive Stock Option granted pursuant to the Plan shall be at
such price as the Committee may determine in its sole discretion, but in no
event less than the Fair Market Value of such Common Stock on the date of grant
as determined by the Committee in good faith.
(c) Payment. Full payment for each Share of Common Stock
purchased upon the exercise of any Non-Incentive Stock Option granted under the
Plan shall be made at the time of exercise
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<PAGE>
of each such Non-Incentive Stock Option and shall be paid in cash (in United
States Dollars), Common Stock or a combination of cash and Common Stock. Common
Stock utilized in full or partial payment of the exercise price shall be valued
at its Fair Market Value at the date of exercise. The Bank shall accept full or
partial payment in Common Stock only to the extent permitted by applicable law.
No Shares of Common Stock shall be issued until full payment has been received
by the Bank and no Optionee shall have any of the rights of a stockholder of the
Bank until the Shares of Common Stock are issued to the Optionee.
(d) Term. The term of exercisability of each Non-Incentive
Stock Option granted pursuant to the Plan shall be not more than ten (10) years
from the date each such Non-Incentive Stock Option is granted.
(e) Exercise Generally. The Committee may impose additional
conditions upon the right of any Participant to exercise any Non-Incentive Stock
Option granted hereunder which is not inconsistent with the terms of the Plan.
Except as otherwise provided by the terms of the Plan or by action of the
Committee at the time of the grant of the Options, the Options will be first
exercisable at the rate of 50% on the date of grant and 50% one year thereafter
during such periods of service as an Employee, Director or Director Emeritus.
(f) Cashless Exercise. Subject to vesting requirements, if
applicable, an Optionee who has held a Non-Incentive Stock Option for at least
six months may engage in the "cashless exercise" of the Option. Upon a cashless
exercise, an Optionee shall give the Bank written notice of the exercise of the
Option together with an order to a registered broker-dealer or equivalent third
party, to sell part or all of the Optioned Stock and to deliver enough of the
proceeds to the Bank to pay the Option exercise price and any applicable
withholding taxes. If the Optionee does not sell the Optioned Stock through a
registered broker-dealer or equivalent third party, the Optionee can give the
Bank written notice of the exercise of the Option and the third party purchaser
of the Optioned Stock shall pay the Option exercise price plus any applicable
withholding taxes to the Bank.
(g) Transferability. Any Non-Incentive Stock Option granted
pursuant to the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
10. Effect of Termination of Employment, Disability or Death on
Incentive Stock Options.
(a) Termination of Employment. In the event that any
Optionee's employment with the Bank shall terminate for any reason, other than
Disability or death, all of any such Optionee's Incentive Stock Options, and all
of any such Optionee's rights to purchase or receive Shares of Common Stock
pursuant thereto, shall automatically terminate on (A) the earlier of (i) or
(ii): (i) the respective expiration dates of any such Incentive Stock Options,
or (ii) the expiration of not more than three (3) months after the date of such
termination of employment; or (B) at such later date as is determined by the
Committee at the time of the grant of such Award based upon the Optionee's
continuing status as a Director or Director Emeritus of the Bank, but only if,
and to the extent that, the Optionee was entitled to exercise any such Incentive
Stock Options at the date of such termination of employment, and further that
such Award shall thereafter be deemed a Non-Incentive Stock Option. In the event
that a Subsidiary ceases to be a Subsidiary of the Bank, the employment of all
of its employees who are not immediately
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<PAGE>
thereafter employees of the Bank shall be deemed to terminate upon the date such
Subsidiary so ceases to be a Subsidiary of the Bank.
(b) Disability. In the event that any Optionee's employment
with the Bank shall terminate as the result of the Disability of such Optionee,
such Optionee may exercise any Incentive Stock Options granted to the Optionee
pursuant to the Plan at any time prior to the earlier of (i) the respective
expiration dates of any such Incentive Stock Options or (ii) the date which is
one (1) year after the date of such termination of employment, but only if, and
to the extent that, the Optionee was entitled to exercise any such Incentive
Stock Options at the date of such termination of employment.
(c) Death. In the event of the death of an Optionee, any
Incentive Stock Options granted to such Optionee may be exercised by the person
or persons to whom the Optionee's rights under any such Incentive Stock Options
pass by will or by the laws of descent and distribution (including the
Optionee's estate during the period of administration) at any time prior to the
earlier of (i) the respective expiration dates of any such Incentive Stock
Options or (ii) the date which is two (2) years after the date of death of such
Optionee but only if, and to the extent that, the Optionee was entitled to
exercise any such Incentive Stock Options at the date of death. For purposes of
this Section 10(c), any Incentive Stock Option held by an Optionee shall be
considered exercisable at the date of his death if the only unsatisfied
condition precedent to the exercisability of such Incentive Stock Option at the
date of death is the passage of a specified period of time. At the discretion of
the Committee, upon exercise of such Options the Optionee may receive Shares or
cash or a combination thereof. If cash shall be paid in lieu of Shares, such
cash shall be equal to the difference between the Fair Market Value of such
Shares and the exercise price of such Options on the exercise date.
(d) Incentive Stock Options Deemed Exercisable. For purposes
of Sections 10(a), 10(b) and 10(c) above, any Incentive Stock Option held by any
Optionee shall be considered exercisable at the date of termination of
employment if any such Incentive Stock Option would have been exercisable at
such date of termination of employment without regard to the Disability or death
of the Participant.
(e) Termination of Incentive Stock Options. Except as may be
specified by the Committee at the time of grant of an Option, to the extent that
any Incentive Stock Option granted under the Plan to any Optionee whose
employment with the Bank terminates shall not have been exercised within the
applicable period set forth in this Section 10, any such Incentive Stock Option,
and all rights to purchase or receive Shares of Common Stock pursuant thereto,
as the case may be, shall terminate on the last day of the applicable period.
11. Effect of Termination of Employment, Disability or Death on
Non-Incentive Stock Options. The terms and conditions of Non-Incentive Stock
Options relating to the effect of the termination of an Optionee's employment or
service, Disability of an Optionee or his death shall be such terms and
conditions as the Committee shall, in its sole discretion, determine at the time
of termination of service, unless specifically provided for by the terms of the
Agreement at the time of grant of the Award.
12. Recapitalization, Merger, Consolidation, and Other Transactions.
(a) Adjustment. Subject to any required action by the
stockholders of the Bank, within the sole discretion of the Committee, the
aggregate number of Shares of Common Stock for which
8
<PAGE>
Options may be granted hereunder, the number of Shares of Common Stock covered
by each outstanding Option, and the exercise price per Share of Common Stock of
each such Option, shall all be proportionately adjusted for any increase or
decrease in the number of issued and outstanding Shares of Common Stock
resulting from a subdivision or consolidation of Shares (whether by reason of
merger, consolidation, recapitalization, reclassification, split-up, combination
of shares, or otherwise) or the payment of a stock dividend (but only on the
Common Stock) or any other increase or decrease in the number of such Shares of
Common Stock effected without the receipt or payment of consideration by the
Bank (other than Shares held by dissenting stockholders).
(b) Extraordinary Corporate Action. Notwithstanding any
provisions of the Plan to the contrary, subject to any required action by the
stockholders of the Bank, in the event of any Change in Control,
recapitalization, merger, consolidation, exchange of Shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Committee, in its sole discretion,
shall have the power, prior or subsequent to such action or event to:
(i) appropriately adjust the number of Shares of
Common Stock subject to each Option, the Option exercise price per Share of
Common Stock, and the consideration to be given or received by the Bank upon the
exercise of any outstanding Option;
(ii) cancel any or all previously granted Options,
provided that appropriate consideration is paid to the Optionee in connection
therewith; and/or
(iii) make such other adjustments in connection with
the Plan as the Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable; provided, however, that no action shall be taken by
the Committee which would cause Incentive Stock Options granted pursuant to the
Plan to fail to meet the requirements of Section 422 of the Code without the
consent of the Optionee.
(c) Acceleration. The Committee shall at all times have the
power to accelerate the exercise date of Options previously granted under the
Plan.
(d) Non-recurring Dividends. Upon the payment of a special or
non-recurring cash dividend that has the effect of a return of capital to the
stockholders, the Option exercise price per share shall be adjusted
proportionately.
Except as expressly provided in Sections 12(a) and 12(d) hereof, no
Optionee shall have any rights by reason of the occurrence of any of the events
described in this Section 12.
13. Time of Granting Options. The date of grant of an Option under the
Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the grant of an Option shall be
given to each individual to whom an Option is so granted within a reasonable
time after the date of such grant in a form determined by the Committee.
14. Effective Date. The Plan shall become effective upon the date of
approval of the Plan by the stockholders of the Bank. The Committee may make a
determination related to Awards prior to the Effective Date with such Awards to
be effective upon the date of stockholder approval of the Plan.
9
<PAGE>
15. Approval by Stockholders. The Plan shall be approved by a majority
of the stockholders of the Bank within twelve (12) months before or after the
date the Plan is approved by the Board. Furthermore, the Plan must be approved
by a majority of the votes cast by stockholders other than Skibo Bancshares,
M.H.C.
16. Modification of Options. At any time and from time to time, the
Board may authorize the Committee to direct the execution of an instrument
providing for the modification of any outstanding Option, provided no such
modification, extension or renewal shall confer on the holder of said Option any
right or benefit which could not be conferred on the Optionee by the grant of a
new Option at such time, or shall not materially decrease the Optionee's
benefits under the Option without the consent of the holder of the Option,
except as otherwise permitted under Section 18 hereof.
17. Amendment and Termination of the Plan.
(a) Action by the Board. The Board may alter, suspend or
discontinue the Plan, except that no action of the Board may increase the
maximum number of Shares permitted to be optioned under the Plan, materially
increase the benefits accruing to Participants under the Plan or materially
modify the requirements for eligibility for participation in the Plan unless
such action of the Board shall be subject to approval or ratification by the
stockholders of the Bank.
(b) Change in Applicable Law. Notwithstanding any other
provision contained in the Plan, in the event of a change in any federal or
state law, rule or regulation which would make the exercise of all or part of
any previously granted Option unlawful or subject the Bank to any penalty, the
Committee may restrict any such exercise without the consent of the Optionee or
other holder thereof in order to comply with any such law, rule or regulation or
to avoid any such penalty.
19. Conditions Upon Issuance of Shares; Limitations on Option Exercise;
Cancellation of Option Rights.
(a) Shares shall not be issued with respect to any Option granted under
the Plan unless the issuance and delivery of such Shares shall comply with all
relevant provisions of applicable law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities laws and the requirements of any
stock exchange upon which the Shares may then be listed.
(b) The inability of the Bank to obtain any necessary authorizations,
approvals or letters of non-objection from any regulatory body or authority
deemed by the Bank's counsel to be necessary to the lawful issuance and sale of
any Shares issuable hereunder shall relieve the Bank of any liability with
respect to the non-issuance or sale of such Shares.
(c) As a condition to the exercise of an Option, the Bank may require
the person exercising the Option to make such representations and warranties as
may be necessary to assure the availability of an exemption from the
registration requirements of federal or state securities law.
(d) Notwithstanding anything herein to the contrary, upon the
termination of employment or service of an Optionee by the Bank or its
Subsidiaries for "cause" as defined at 12 C.F.R. 563.39(b)(1) as determined by
the Board of Directors, all Options held by such Participant shall cease to be
exercisable as of the date of such termination of employment or service.
10
<PAGE>
(e) Upon the exercise of an Option by an Optionee (or the Optionee's
personal representative), the Committee, in its sole and absolute discretion,
may make a cash payment to the Optionee, in whole or in part, in lieu of the
delivery of shares of Common Stock. Such cash payment to be paid in lieu of
delivery of Common Stock shall be equal to the difference between the Fair
Market Value of the Common Stock on the date of the Option exercise and the
exercise price per share of the Option. Such cash payment shall be in exchange
for the cancellation of such Option. Such cash payment shall not be made in the
event that such transaction would result in liability to the Optionee or the
Bank under Section 16(b) of the Securities Exchange Act of 1934, as amended, and
regulations promulgated thereunder.
20. Reservation of Shares. During the term of the Plan, the Bank will
reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
21. Unsecured Obligation. No Participant under the Plan shall have any
interest in any fund or special asset of the Bank by reason of the Plan or the
grant of any Option under the Plan. No trust fund shall be created in connection
with the Plan or any grant of any Option hereunder and there shall be no
required funding of amounts which may become payable to any Participant.
22. Withholding Tax. The Bank shall have the right to deduct from all
amounts paid in cash with respect to the cashless exercise of Options under the
Plan any taxes required by law to be withheld with respect to such cash
payments. Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option, the Bank shall have the right to require
the Participant or such other person to pay the Bank the amount of any taxes
which the Bank is required to withhold with respect to such Shares, or, in lieu
thereof, to retain, or to sell without notice, a number of such Shares
sufficient to cover the amount required to be withheld.
23. No Employment Rights. No Director, Employee or other person shall
have a right to be selected as a Participant under the Plan. Neither the Plan
nor any action taken by the Committee in administration of the Plan shall be
construed as giving any person any rights of employment or retention as an
Employee, Director or in any other capacity with the Bank or any Subsidiary.
24. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, except to the
extent that federal law shall be deemed to apply.
11
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 535
<INT-BEARING-DEPOSITS> 6,367
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 64,962
<INVESTMENTS-MARKET> 65,716
<LOANS> 64,961
<ALLOWANCE> 565
<TOTAL-ASSETS> 143,937
<DEPOSITS> 75,932
<SHORT-TERM> 3,500
<LIABILITIES-OTHER> 5,554
<LONG-TERM> 34,300
0
0
<COMMON> 230
<OTHER-SE> 24,421
<TOTAL-LIABILITIES-AND-EQUITY> 143,937
<INTEREST-LOAN> 2,435
<INTEREST-INVEST> 2,241
<INTEREST-OTHER> 169
<INTEREST-TOTAL> 4,845
<INTEREST-DEPOSIT> 1,751
<INTEREST-EXPENSE> 1,183
<INTEREST-INCOME-NET> 1,911
<LOAN-LOSSES> 15
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,356
<INCOME-PRETAX> 587
<INCOME-PRE-EXTRAORDINARY> 587
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 347
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
<YIELD-ACTUAL> 2.72
<LOANS-NON> 724
<LOANS-PAST> 145
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 688
<ALLOWANCE-OPEN> 552
<CHARGE-OFFS> 0
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 565
<ALLOWANCE-DOMESTIC> 565
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
