<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ending March 31, 1999
-------------------
or
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number 0-25355
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PFSB BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
Missouri 31-1627743
- ------------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification NO.)
P.O. Box 72, Palmyra, MO 63461
- --------------------------------- ------------
(Address of principal executive offices) (Zip Code)
573-769-2134
- ---------------------------------
(Issuer's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 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____
-----
As of May 13, 1999, there were 559,000 shares of the Registrant's Common Stock,
$.01 par value per share, outstanding.
Transitional Small Business Disclosure Format
Yes____ No X
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<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
FORM 10-QBS
MARCH 31, 1999
<TABLE>
<CAPTION>
INDEX PAGE
- ----- ----
<S> <C>
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 1
CONSOLIDATED STATEMENTS OF INCOME 2
CONSOLIDATED STATEMENTS OF CASH FLOWS 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4-6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7-10
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1 - LEGAL PROCEEDINGS 11
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS 11
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
ITEM 5 - OTHER INFORMATION 11
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 12
</TABLE>
SIGNATURES
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash (includes interest-bearing deposits of $8,968 and $1,004, respectively) $ 9,296 $ 2,268
Investment securities
Available-for-sale, at fair value 4,324 7,087
Held-to-maturity (fair value of $6,693 and $5,640, respectively) 6,708 5,589
Mortgage-backed securities held-to-maturity (fair value of $2,307
and $2,624 respectively) 2,311 2,584
Stock in Federal Home Loan Bank of Des Moines ("FHLB") 391 373
Loans receivable, net (allowance for loan losses of $280 at March 31, 1999
and $280 at September 30, 1998) 40,665 40,513
Accrued interest receivable 429 444
Premises and equipment 526 562
Foreclosed real estate 94 --
Other assets 35 56
------- -------
TOTAL ASSETS $64,779 $59,476
======= =======
LIABILITIES AND EQUITY
Liabilities
Deposits $53,835 $52,724
Advances from FHLB -- 500
Advances from borrowers for property taxes and insurance 31 50
Other liabilities 132 154
------- -------
TOTAL LIABILITIES $53,998 $53,428
Equity
Common stock, $.01 par value per share; 5,000,000 authorized, 559,000 issued and
outstanding at March 31, 1999, none issued and outstanding at September 30, 1998 6 --
Additional paid-in capital 5,055 --
Retained earnings - substantially restricted 6,149 6,017
Unrealized gain on securities, net of taxes 18 31
Unearned ESOP shares (447) --
------- -------
TOTAL EQUITY $10,781 $ 6,048
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TOTAL LIABILITIES AND EQUITY $64,779 $59,476
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1999 1998 1999 1998
---------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Mortgage loans $ 773 $ 758 $1,538 $1,522
Consumer and other loans 8 9 17 17
Investment securities 192 226 380 420
Mortgage-backed securities 39 2 81 52
Interest-bearing deposits 34 65 64 88
------ ------ ------ ------
TOTAL INTEREST INCOME 1,046 1,060 2,080 2,099
INTEREST EXPENSE:
Deposits 667 659 1,353 1,328
Advances from FHLB -- -- 8 9
------ ------ ------ ------
TOTAL INTEREST EXPENSE 667 659 1,361 1,337
------ ------ ------ ------
NET INTEREST INCOME 379 401 719 762
PROVISION FOR LOAN LOSSES -- -- -- --
------ ------ ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 379 401 719 762
NON-INTEREST INCOME (LOSS):
Service charges and other fees 15 19 30 34
Income from foreclosed assets 9 -- 1 --
Gain (loss) on sale of investment 7 -- 11 --
Gain (loss) on disposal of premises & equipment -- 1 52 1
Other 4 5 6 6
------ ------ ------ ------
TOTAL NON-INTEREST INCOME 35 25 100 41
NON-INTEREST EXPENSE:
Employee salaries and benefits 159 137 324 289
Occupancy costs 37 36 70 66
Advertising 10 7 18 16
Data processing 26 36 49 56
Federal insurance premiums 4 4 12 12
Other 77 53 138 115
------ ------ ------ ------
TOTAL NON-INTEREST EXPENSE 313 273 611 554
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 101 153 208 249
INCOME TAXES 38 53 76 86
------ ------ ------ ------
NET INCOME $ 63 $ 100 $ 132 $ 163
====== ====== ====== ======
NET INCOME PER SHARE $ 0.12 * $ 0.26 *
====== ====== ====== ======
</TABLE>
*Operating as Palmyra Saving & Building Association, F.A., a mutual institution.
See accompanying notes to Consolidated Financial Statements
-2-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1999 1998
----------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 132 $ 163
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 33 26
Amortization of premiums and discounts (2) (3)
Gain on sale of foreclosed real estate (9) ---
Loan fee amortization and payoffs (2) (1)
Gain on sale of investments (11) (4)
Changes to assets and liabilities increasing (decreasing) cash flows
Accrued interest receivable 15 38
Other assets 21 3
Other liabilities (14) (99)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 163 123
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities, held-to-maturity (4,119) (1,497)
Proceeds from maturities and calls of investment
securities, held-to-maturity 3,007 1,790
Purchase of investment securities, available-for-sale (1,997) (2,495)
Proceeds from maturities and calls of investment
securities, available-for-sale 4,745 4,200
Purchase of mortgage-backed securities -- (375)
Principal collected on mortgage-backed securities 273 273
Purchase of FHLB stock (17) --
Loans originated, net of repayments 756 1,044
Proceeds from sale of foreclosed assets 95 --
Purchase of mortgage loans (1,108) (1,520)
Proceeds from sale of education loans 21 7
Purchase of premises and equipment (44) (69)
Net book value of premises and equipment disposals 48 --
------- -------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,660 1,358
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 1,110 1,112
Repayment of FHLB advances (500) (1,000)
Net increase (decrease) in advances for taxes and insurance (18) (24)
Proceeds from sale of common stock 5,060 ---
Loan to ESOP (447) ---
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,205 88
------- -------
NET INCREASE IN CASH 7,028 1,569
CASH, BEGINNING OF PERIOD 2,268 2,146
------- -------
CASH, END OF PERIOD $ 9,296 $ 3,715
======= =======
</TABLE>
-3-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--Basis of Presentation
- -----------------------------
The accompanying unaudited consolidated financial statements (except for the
statements of financial condition on September 30, 1998, which are audited) have
been prepared by the PFSB Bancorp, Inc. (the "Company") in accordance with
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
are reflected in the March 31, 1999, interim financial statements.
The results of operations for the period ended March 31, 1999, are not
necessarily indicative of the operating results for the full year.
The accompanying consolidated financial statements and related notes of PFSB
Bancorp, Inc should be read in conjunction with the audited financial statements
and related notes included in the Company's Prospectus dated February 11, 1999.
NOTE B--Formation of Holding Company and Conversion to Stock Form
- -----------------------------------------------------------------
On March 31, 1999, the Company became the holding company for Palmyra Savings
(the "Bank) upon the Bank's conversion from a federally chartered mutual savings
association to a federally chartered capital stock savings bank. The conversion
was accomplished through the sale and issuance by the Company of 559,000 shares
of common stock at $10 per share. Proceeds from the sale of common stock, net of
expenses incurred of $529,699 were $5,060,301, inclusive of $447,200 related to
shares held by Palmyra Savings' Employee Stock Ownership Plan ("ESOP"). The
financial statements included herein have not been restated as a result of the
consummation of the conversion.
NOTE C--Earnings Per Share
- --------------------------
Earnings per share data is not relevant for any period prior to September 30,
1998 since the Company had no stockholders prior to the initial stock offering
completed March 31, 1999. Basic earnings per share is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per common share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. There were no
potentially dilutive securities outstanding as of March 31, 1999.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1999 1998 1999 1998
--------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Basic earnings per share:
Income available to common shareholders $ 63 * $ 132 *
===== ===== ===== ====
Average common shares outstanding 514 * 514 *
===== ===== ===== ====
Basic earnings per share $0.12 * $0.26 *
===== ===== ===== ====
</TABLE>
-4-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE D--Employee Stock Ownership Plan
- -------------------------------------
In connection with the conversion to stock form, Palmyra Savings established an
ESOP for the exclusive benefit of participating employees (all salaried
employees who have completed at least 1000 hours of service in a twelve-month
period and have attained the age of 21). The ESOP borrowed funds from the
Company in an amount sufficient to purchase 44,720 shares (8% of the Common
Stock issued in the stock offering). The loan is secured by the shares purchased
and will be repaid by the ESOP with funds from contributions made by Palmyra
Savings, dividends received by the ESOP and any other earnings on ESOP assets.
Contributions will be applied to repay interest on the loan first, then the
remainder will be applied to principal. The loan is expected to be repaid in
approximately 10 years. Shares purchased with the loan proceeds are held in a
suspense account for allocation among participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense account are
allocated among participants in proportion to their compensation relative to
total compensation of all active participants. Participants will vest in their
accrued benefits under the employee stock ownership plan at the rate of 20% per
year, beginning upon the completion of two years of service. Vesting is
accelerated upon retirement, death or disability of the participant. Forfeitures
will be reallocated to remaining plan participants. Benefits may be payable upon
retirement, death, disability or separation from service. Since Palmyra Savings'
annual contributions are discretionary, benefits payable under the ESOP cannot
be estimated.
The Company accounts for its ESOP in accordance with Statement of Position
("SOP") 93-6, Employers Accounting for Employee Stock Ownership Plans.
Accordingly, the debt of the ESOP is eliminated in consolidation and the shares
pledged as collateral are reported as unearned ESOP shares in the consolidated
statements of financial condition. Contributions to the ESOP shall be
sufficient to pay principal and interest currently due under the loan agreement.
As shares are committed to be released from collateral, the Company reports
compensation expense equal to the average market price of the shares for the
respective period, and the shares become outstanding for earnings per share
computations. Dividends on allocated ESOP shares are recorded as a reduction of
retained earnings; dividends on unallocated ESOP shares are recorded as a
reduction of debt and accrued interest.
A summary of ESOP shares at March 31, 1999 is as follows:
Shares committed for release -0-
Unreleased shares 44,720
---------
TOTAL 44,720
=========
Fair value of unreleased shares $447,200
=========
-5-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE E--Comprehensive Income
- ----------------------------
On October 1, 1998 the Company adopted the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income, which established
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. For the three and six month periods ended March 31, 1999
and 1998, unrealized holding gains and losses on investments in debt and equity
securities available-for-sale were the Company's only other comprehensive income
component.
Comprehensive income for the three and six month periods ended March 31, 1999
and 1998 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1999 1998 1999 1998
----------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net income
Other comprehensive income: $ 63 $ 100 $ 132 $ 163
Net unrealized holding gains (losses) on investments
in debt and equity securities available-for-sale (8) 13 (2) (11)
Adjustments for net securities (gains) losses realized
in net income, net of applicable income taxes -- -- -- --
----- ----- ----- -----
Total other comprehensive income $ 55 $ 113 $ 130 $ 152
===== ===== ===== =====
</TABLE>
Comprehensive income
-6-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
- --------------------------
This report contains forward-looking statements within the meaning of the
federal securities laws. These statements are not historical facts, rather they
are statements based on the PFSB Bancorp, Inc.'s (the "Company's") current
expectations regarding its business strategies and their intended results and
its future performance. Forward-looking statements are preceded by terms such as
"expects," "believes," " anticipates," " intends," and similar expressions.
Forward-looking statements are not guarantees of future performance. Numerous
risks and uncertainties could cause or contribute to the Company's actual
results, performance and achievements to be materially different from those
expressed or implied by the forward-looking statements. Factors that may cause
or contribute to these differences include, without limitation, general economic
conditions, including changes in market interest rates and changes in monetary
and fiscal policies of the federal government; legislative and regulatory
changes; the Company's ability to remedy any computer malfunctions that may
result from the advent of the year 2000; and other factors disclosed
periodically in the Company's filings with the Securities and Exchange
Commission. Because of the risks and uncertainties inherent in forward-looking
statements, readers are cautioned not to place undue reliance on them, whether
included in this report or made elsewhere from time to time by the Company or on
its behalf. The Company assumes no obligation to update any forward-looking
statements.
General
- -------
The Company is a Missouri corporation that was organized for the purpose of
becoming the holding company for Palmyra Savings ("Bank") upon the Bank's
conversion from a federal mutual savings association to a federal stock savings
bank. The Bank's conversion was completed on March 31, 1999. The Bank's business
consists principally of attracting retail deposits from the general public and
using these funds to originate and purchase residential mortgage loans generally
located in Missouri.
The Company's operating results depend primarily on its net interest income,
which is the difference between the income it receives from its loans and
investments, and the interest paid on deposits and borrowings. The Company's
operating results are also affected by non-interest income and expenses. Non-
interest income would include such items as loan service fees, service charges,
and other fees. Non-interest expense would include such items as salaries and
benefits, occupancy costs, data processing expenses, and other expenses.
The discussion and analysis included herein covers material changes in results
of operations during the three month and six month periods ended March 31, 1999
and 1998 as well as those material changes in liquidity and capital resources
that have occurred since September 30, 1998.
Financial Condition At March 31, 1999 And September 30, 1998
- ------------------------------------------------------------
Total assets increased $5.3 million or 8.9% to $64.8 million at March 31, 1999
primarily due the stock conversion which was completed March 31, 1999 resulting
in net proceeds to the Company of $5.1 million. The $8.0 million increase in
interest-bearing deposits is due to a combination of stock conversion proceeds
which have yet to be invested in long term assets and investment securities
which were called before maturity and have not yet been reinvested. Deposits
increased by $1.1 million or 2.1% due primarily to growth in passbook savings
accounts.
The Bank had one short term Federal Home Loan Bank advance which was repaid
early in the second quarter.
Results Of Operations For The Three Months Ended March 31, 1999 And 1998
- ------------------------------------------------------------------------
Net income for the three months ended March 31, 1999 decreased $37,000 or 37.0%
compared to the three months ended March 31, 1998. Non-interest income increased
$10,000, and income taxes decreased $15,000. However, those increases were
offset by a $22,000 decrease in net interest income and a $40,000 increase in
non-interest expense.
The $22,000 decrease in net interest income was due primarily to the decreased
yield on investment securities. From March 31, 1998 to March 31, 1999, the net
yield on investments decreased from 6.00% to 5.32%. Although investment
securities and interest bearing deposits increased $5.2 million, the majority of
this increase is attributable to the stock conversion and occurred in the last
few days of the three month period ended March 31, 1999.
-7-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The $10,000 increase in non-interest income is attributable to profit on the
sale of foreclosed real estate, which amounted to $9,000 for the three month
period ended March 31, 1999.
The $40,000 increase in non-interest expense is due in part to a $22,000
increase in employee expense which reflects the addition of three full-time
employees, one of whom is to fill a vacancy created by the retirement of a
branch manager on March 31, 1999. The remainder of the increase in non-interest
expenses is primarily due to the cost of replacing forms and stationery due to
the Banks name change as a result of the Bank's stock conversion.
The $15,000 decrease in income tax expense primarily reflected decreased pre-tax
income.
Results Of Operations For The Six Months Ended March 31, 1999 And 1998
- ----------------------------------------------------------------------
Net income for the six months ended March 31, 1999 decreased $31,000 or 18.9%
compared to the six months ended March 31, 1998. Non-interest income increased
$59,000, and income taxes decreased $10,000. However, those increases were
offset by a $43,000 decrease in net interest income and a $57,000 increase in
non-interest expense.
The $43,000 decrease in net interest income was due primarily to the decreased
yield on investment securities. From March 31, 1998 to March 31, 1999 the net
yield on investments decreased from 6.00% to 5.32%. Although investment
securities and interest bearing deposits increased $5.2 million, the majority of
this increase is attributable to the stock conversion and occurred in the last
few days of the current period.
The $59,000 increase in non-interest income is attributable to the sale of the
branch office building located in Kahoka, Missouri, and to profit on investment
securities which were called prior to maturity. The Bank now rents back the
premises from the purchaser.
The $57,000 increase in non-interest expense is due in part to a $35,000
increase in employee expense which reflects the addition of three full-time
employees, one of whom is to fill a vacancy created by the retirement of a
branch manager on March 31, 1999. The remainder of the increase in non-interest
expense is primarily due to the cost of replacing forms and stationery due to
the Bank's name change as a result of the Bank's stock conversion.
The $10,000 decrease in income tax expense primarily reflected decreased pre-tax
income.
Liquidity And Capital Resources
- -------------------------------
The Company's subsidiary, Palmyra Savings' primary sources of funds are
maturities and prepayments of investment securities, customer deposits, proceeds
from principal and interest payments on loans and Federal Home Loan Bank of Des
Moines advances. While investment securities maturities and scheduled
amortization of loans are a predictable source of funds, deposit flows,
investment securities prepayments and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition.
Palmyra Savings must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. Palmyra Savings generally maintains sufficient cash
and short-term investments to meet short-term liquidity needs. At March 31,
1999, cash and interest-bearing deposits totaled $9.3 million, or 14.4% of total
assets, and investment securities classified as available-for-sale totaled $4.3
million. At March 31, 1999, the Bank had no outstanding advances.
Office of Thrift Supervision regulations require savings institutions to
maintain an average daily balance of liquid assets equal to at least 4.0% of the
average daily balance of its net withdrawable deposits and short-term
borrowings. The Bank's actual liquidity ratio at March 31, 1999 was 18.5%.
The Bank's primary investing activity is the origination and purchase of one- to
four-family mortgage loans. At March 31, 1999, the Bank had approved loan
commitments totaling $759,000 and had undisbursed loans in process of $446,000.
Certificates of deposit that are scheduled to mature in less than one year from
March 31, 1999 totaled $22.4 million. Historically, the Bank has been able
-8-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
to retain a significant amount of its deposits as they mature. Management
believes it has adequate resources to fund all loan commitments from savings
deposits, loan payments, maturities of investment securities and the ability to
obtain advances from the Federal Home Loan Bank.
Office of Thrift Supervision regulations require Palmyra Savings to maintain
specific amounts of regulatory capital. As of March 31, 1999, Palmyra Savings
complied with all regulatory capital requirements as of that date with tangible,
core and risk-based capital ratios of 12.73%, 12.73% and 28.77%, respectively.
Effective April 1, 1999 the regulatory core capital requirement increases to
4.0% for all savings associations except those with the top examination rating.
Year 2000 Issues
- ----------------
Palmyra Savings is a user of computers, computer software and equipment
utilizing embedded microprocessors that may be effected by the year 2000 issue.
The year 2000 issue exists because many computer systems and applications use
two-digit date fields to designate a year. As the century date change occurs,
date-sensitive systems may recognize the year 2000 as 1900, or not at all. This
inability to recognize or properly treat the year 2000 may cause erroneous
results, ranging from system malfunctions to incorrect or incomplete processing.
This possibility poses several potential risks to the Company.
The Company is dependant on a third-party data processing center to process
customers banking transactions. Failure of one or more of the data processing
centers computers systems could result in the Company's inability to properly
process customer transactions. This possibility could result in the loss of
customers to other financial institutions, resulting in a loss of revenue.
Concern on the part of depositors that Year 2000 issues could impair access to
their deposit account balances following the Year 2000 date change could result
in larger than normal deposit outflows prior to December 31, 1999. These
possible outflows could result in liquidity shortages for the Company, which
could cause loss of customer confidence. This possibility could also result in
the loss of customers to other financial institutions, resulting in a loss of
revenue.
Since it is not possible to predict the extent and longevity of such potential
problems, management believes it is also not possible to estimate the potential
lost revenue due to Year 2000 issues.
The Company has developed and is implementing a comprehensive plan to insure
that all information and non-information technology assets are Year 2000
compliant. A complete inventory of all technology assets and a review of all
third-party vendors and service providers was made to identify systems which
posed potential Year 2000 problems. Having identified these internal and
external
components, the Company has replaced some of its computer hardware with Year
2000 compliant equipment. The Company has requested third-party providers to
insure that their systems have been tested and are Year 2000 compliant. All
major third-party providers have indicated that they expect to be Year 2000
compliant by the first quarter of 1999. Proxy testing and connectivity testing
with the data processing center has been completed, and the data center has
indicated that it is Year 2000 compliant. The Company has tested all internal
hardware and software systems and determined that they are also Year 2000
compliant.
The Company's liquidity position is such that a short term increase in deposit
outflows, if it should occur, should have no serious impact on operations.
The Company has developed a business resumption and contingency plan to document
plans of action to be implemented if there is a Year 2000 disruption. Although
the Company feel that the probability of an extended disruption is unlikely, the
plan takes into account possible disruptions caused by the loss of utilities
such as power, water or telecommunications. The Company is prepared to handle
customers transactions off-line for a short period of time if necessary.
-9-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company estimates its total costs relating to Year 2000 issues to be
$82,000, of which approximately $66,000 has been incurred as of March 31, 1999.
The Company has implemented an aggressive information campaign to assure its
customers and the community that they are prepared for the Year 2000, and to
inform them of what they can do to make sure they are also prepared. So far
Company personnel have participated in one community forum on Year 2000 issues,
and a mailing to all our customers is being prepared.
-10-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor Palmyra Savings is a party to any material legal
proceedings at this time. From time to time Palmyra Savings is involved in
various claims and legal actions arising in the ordinary course of business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
a. Changes in Securities. Not applicable.
b. Use of Proceeds. On March 31, 1999, the Company completed an offering of
securities registered pursuant to the Securities Act of 1933, as amended.
In connection therewith:
1. The effective date of the registration Statement on Form SB-2, as
amended (File No. 333-69191) was February 11, 1999.
2. The offering of securities was not underwritten. Trident Securities,
Inc. acted as marketing agent.
3. The class of securities registered was common stock, $0.01 par value
per share. The amount of such securities registered was 859,625 shares
at an offering price of $10.00 per share. The offering terminated on
March 19, 1999 with the sale of 559,000 shares at a price of $10.00
per share.
4. The total offering expenses incurred by the Company were $529,699,
none of which were paid directly or indirectly to directors or
officers of the Company or their associates.
5. The net proceeds of the offering were $5.1 million of which $447,200
was loaned to the Bank's employee stock ownership plan to purchase
stock in the offering. One-half of the net proceeds were invested in
the subsidiary bank and the remaining was invested in short-term
securities. These uses of proceeds do not represent a material change
in the use of proceeds described in the Company's Prospectus dated
February 11, 1999.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
-11-
<PAGE>
PFSB BANCORP, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
(Continued)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
3.1 Articles of Incorporation of PFSB Bancorp, Inc.*
3.2 Bylaws of PFSB Bancorp, Inc.*
10.1 Palmyra Savings Employment Agreement with Eldon R. Mette
10.2 Palmyra Savings Employment Agreement with Ronald L. Nelson
27.0 Financial Data Schedule
b. Reports on From 8-K
None
* Incorporated by reference from the Form SB-2 (Registration No. 333-69191), as
amended, as filed on December 18, 1998.
-12-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PFSB Bancorp, Inc.
Date: May 17, 1999 By:/s/ Eldon R. Mette
----------------------------------
Eldon R. Mette
President and Chief Executive
Officer
Date: May 17, 1999 By:/s/ Ronald L. Nelson
----------------------------------
Ronald L. Nelson
Executive Vice President,
Treasurer and Secretary
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of March 31, 1999, by and between
PALMYRA SAVINGS (the "BANK"), PFSB BANCORP, INC., (the "COMPANY"), a Missouri
corporation; and ELDON R. METTE ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE
for the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to
serve as President and Chief Executive Officer of the Bank. EXECUTIVE also
agrees to serve, if elected, as an officer and director of the COMPANY or any
subsidiary or affiliate of the COMPANY or the BANK. EXECUTIVE shall render
administrative and management duties to the BANK such as are customarily
performed by persons situated in a similar executive capacity.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of
the date first above written and shall continue for thirty six (36) months
thereafter. Commencing on the first anniversary date, and continuing at each
anniversary date thereafter, the Board of Directors of the BANK (the "Board")
may extend the Agreement for an additional year. Prior to the extension of the
Agreement as provided herein, the Board of Directors of the BANK will conduct a
formal performance evaluation of EXECUTIVE for purposes of determining whether
to extend the Agreement, and the results thereof shall be included in the
minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods
of absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
EXECUTIVE may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the BANK,
or materially affect the performance of EXECUTIVE's duties pursuant to this
Agreement.
<PAGE>
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Sections 1 and 2. The
BANK shall pay EXECUTIVE as compensation a salary of $77,250 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement, EXECUTIVE's
Base Salary shall be reviewed at least annually; the first such review will be
made no later than one year from the date of this Agreement. Such review shall
be conducted by a Committee designated by the Board, and the Board may increase
EXECUTIVE's Base Salary. In addition to the Base Salary provided in this Section
3(a), the BANK shall provide EXECUTIVE at no cost to EXECUTIVE with all such
other benefits as are provided uniformly to permanent full-time employees of the
BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the BANK will not, without
EXECUTIVE's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect EXECUTIVE's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), EXECUTIVE will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the BANK in the future to its senior executives
and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements.
EXECUTIVE will be entitled to incentive compensation and bonuses as provided in
any plan, or pursuant to any arrangement of the BANK, in which EXECUTIVE is
eligible to participate. Nothing paid to EXECUTIVE under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
EXECUTIVE is entitled under this Agreement, except as provided under Section
5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of
this Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable
travel and other obligations under this Agreement and may provide such
additional compensation in such form and such amounts as the Board may from time
to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time employment hereunder for any reason other than
a Change in Control, as defined in Section 5(a) hereof; disability, as defined
in Section 6(a) hereof; death; retirement, as defined in Section 7 hereof; or
Termination for
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Cause, as defined in Section 8 hereof; (ii) EXECUTIVE's resignation from the
BANK's employ, upon (A) unless consented to by EXECUTIVE, a material change in
EXECUTIVE's function, duties, or responsibilities, which change would cause
EXECUTIVE's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof described in Sections 1 and 2,
above (any such material change shall be deemed a continuing breach of this
Agreement), (B) a relocation of EXECUTIVE's principal place of employment by
more than 35 miles from its location at the effective date of this Agreement, or
a material reduction in the benefits and perquisites to EXECUTIVE from those
being provided as of the effective date of this Agreement, (C) the liquidation
or dissolution of the BANK, or (D) any material breach of this Agreement by the
BANK. Upon the occurrence of any event described in clauses (A), (B), (C) or
(D), above, EXECUTIVE shall have the right to elect to terminate his employment
under this Agreement by resignation upon not less than sixty (60) days prior
written notice given within a reasonable period of time not to exceed, except in
case of a continuing breach, four (4) calendar months after the event giving
rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the payments due to EXECUTIVE for the remaining
term of the Agreement, including Base Salary, bonuses, and any other cash or
deferred compensation paid or to be paid (including the value of employer
contributions that would have been made on EXECUTIVE's behalf over the remaining
term of the agreement to any tax-qualified retirement plan sponsored by the BANK
as of the Date of Termination), to EXECUTIVE for the term of the Agreement
provided, however, that if the BANK is not in compliance with its minimum
capital requirements or if such payments would cause the BANK's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as the BANK is in capital compliance. All payments made pursuant
to this Section 4(b) shall be paid in substantially equal monthly installments
over the remaining term of this Agreement following EXECUTIVE's termination;
provided, however, that if the remaining term of the Agreement is less than one
(1) year (determined as of EXECUTIVE's Date of Termination), such payments and
benefits shall be paid to EXECUTIVE in a lump sum within thirty (30) days of the
Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will
cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the BANK for EXECUTIVE
prior to his termination. Such coverage shall cease upon the expiration of the
remaining term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall
have occurred a Change in Control of the COMPANY or the BANK. For purposes of
this Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed
to occur (a) if there occurs a change in control of the BANK or the COMPANY
within the meaning of the Home Owners Loan Act of
3
<PAGE>
1933 and 12 C.F.R. Part 574, (b) if any person (as such term is used in Sections
13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the COMPANY or the BANK representing
twenty-five percent (25%) or more of the combined voting power of the COMPANY's
or the BANK's then outstanding securities, (c) if the membership of the board of
directors of the COMPANY or the BANK changes as the result of a contested
election, such that individuals who were directors at the beginning of any
twenty-four (24) month period (whether commencing before or after the date of
adoption of this Agreement) do not constitute a majority of the Board at the end
of such period, or (d) upon the consummation of a transaction approved by the
shareholders of the COMPANY or the BANK involving a merger, consolidation, sale
or disposition of all or substantially all of the COMPANY's or the BANK's
assets, or a similar transaction occurs in which the COMPANY or the BANK is not
the resulting entity.
(b) If any of the events described in Section 5(a) hereof constituting
a Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control (as defined herein) has occurred,
EXECUTIVE shall be entitled to the benefits provided in paragraphs (c), (d) and
(e) of this Section 5 upon his subsequent involuntary termination following the
effective date of a Change in Control (or voluntary termination within twelve
(12) months of the effective date of a Change in Control following any material
demotion, loss of title, office or significant authority, material reduction in
his annual compensation or benefits (other than a reduction affecting the BANK's
personnel generally), or the relocation of his principal place of employment by
more than 35 miles from its location immediately prior to the Change in
Control), unless such termination is because of his death, retirement as
provided in Section 7, termination for Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of (S)(S).280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage shall
cease upon the expiration of thirty-six (36) months. In addition, EXECUTIVE
shall be entitled to receive the value of employer contributions that would have
been made on EXECUTIVE's behalf over the remaining term of the agreement to any
tax-qualified retirement plan sponsored by the BANK as of the Date of
Termination.
(e) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under (S)(S).280G of
4
<PAGE>
the Code, then, at the election of EXECUTIVE, (i) such payments or benefits
shall be payable or provided to EXECUTIVE over the minimum period necessary to
reduce the present value of such payments or benefits to an amount which is one
dollar ($1.00) less than three (3) times EXECUTIVE's "base amount" under
(S)(S).280G(b)(3) of the Code or (ii) the payments or benefits to be provided
under this Section 5 shall be reduced to the extent necessary to avoid treatment
as an excess parachute payment with the allocation of the reduction among such
payments and benefits to be determined by EXECUTIVE.
6. TERMINATION FOR DISABILITY.
(a) If EXECUTIVE shall become disabled as defined in the BANK's then
current disability plan (or, if no such plan is then in effect, if EXECUTIVE is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code as determined by a physician designated by the Board), the BANK may
terminate EXECUTIVE's employment for "Disability."
(b) Upon EXECUTIVE's termination of employment for Disability, the
BANK will pay EXECUTIVE, as disability pay, a bi-weekly payment equal to three-
quarters (3/4) of EXECUTIVE's bi-weekly rate of Base Salary on the effective
date of such termination. These disability payments shall commence on the
effective date of EXECUTIVE's termination and will end on the earlier of (i) the
date EXECUTIVE returns to the full-time employment of the BANK in the same
capacity as he was employed prior to his termination for Disability and pursuant
to an employment agreement between EXECUTIVE and the BANK; (ii) EXECUTIVE's
full-time employment by another employer; (iii) EXECUTIVE attaining the age of
sixty-five (65); or (iv) EXECUTIVE's death; or (v) the expiration of the term of
this Agreement. The disability pay shall be reduced by the amount, if any, paid
to EXECUTIVE under any plan of the BANK providing disability benefits to
EXECUTIVE.
(c) The BANK will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
BANK for EXECUTIVE prior to his termination for Disability. This coverage and
payments shall cease upon the earlier of (i) the date EXECUTIVE returns to the
full-time employment of the BANK, in the same capacity as he was employed prior
to his termination for Disability and pursuant to an employment agreement
between EXECUTIVE and the BANK; (ii) EXECUTIVE's full-time employment by another
employer; (iii) EXECUTIVE's attaining the age of sixty-five (65); (iv)
EXECUTIVE's death; or (v) the expiration of the term of this Agreement.
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to EXECUTIVE during any period during which
EXECUTIVE is incapable of performing his duties hereunder by reason of temporary
disability.
5
<PAGE>
7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to him.
Upon termination of EXECUTIVE upon Retirement, EXECUTIVE shall be entitled to
all benefits under any retirement plan of the BANK or the COMPANY and other
plans to which EXECUTIVE is a party. Upon the death of EXECUTIVE during the term
of this Agreement, the BANK shall pay to EXECUTIVE's estate the compensation due
to EXECUTIVE through the last day of the calendar month in which his death
occurred. Upon the voluntary resignation of EXECUTIVE during the term of this
Agreement, other than in connection with an Event of Termination, the BANK shall
pay to EXECUTIVE the compensation due to EXECUTIVE through his Date of
Termination.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of 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 infractions) or final
cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to EXECUTIVE and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, EXECUTIVE was guilty of
conduct justifying termination for Cause and specifying the reasons thereof.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after termination for Cause. Any stock options granted to EXECUTIVE
under any stock option plan or any unvested awards granted under any other stock
benefit plan of the BANK, the COMPANY, or any subsidiary or affiliate thereof,
shall become null and void effective upon EXECUTIVE's receipt of Notice of
Termination for Cause pursuant to Section 10 hereof, and shall not be
exercisable by EXECUTIVE at any time subsequent to such Termination for Cause.
9. REQUIRED PROVISIONS.
(a) The BOARD may terminate EXECUTIVE's employment at any time, but
any termination by the BOARD, other than Termination for Cause, shall not
prejudice EXECUTIVE's right to compensation or other benefits under this
Agreement. EXECUTIVE shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 8
herein.
(b) If 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 Federal
6
<PAGE>
Deposit Insurance Act ("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, in its discretion, (i) pay EXECUTIVE all or part of the
compensation withheld while its contract obligations were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the
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 parties.
(e) All obligations under this Agreement shall be terminated (except
to the extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA or
(ii) by the Director, or his designee at the time the Director or such designee
approves a supervisory merger to resolve problems related to operation of the
BANK or when the BANK is determined by the Director 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.
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
(S)(S).1828(k) and any regulations promulgated thereunder.
10. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of EXECUTIVE's employment under the provision so
indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, other than Termination for Cause,
the date
7
<PAGE>
specified in the Notice of Termination . In the event of EXECUTIVE's Termination
for Cause, the Date of Termination shall be the same as the date of the Notice
of Termination.
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by EXECUTIVE in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
11. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant
to an Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not
to compete with the BANK and/or the COMPANY for a period of one (1) year
following such termination in any city, town or county in which the BANK and/or
the COMPANY has an office or has filed an application for regulatory approval to
establish an office, determined as of the effective date of such termination.
EXECUTIVE agrees that during such period and within said cities, towns and
counties, EXECUTIVE shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the BANK and/or the
COMPANY. The parties hereto, recognizing that irreparable injury will result to
the BANK and/or the COMPANY, its business and property in the event of
EXECUTIVE's breach of this Subsection 11(a) agree that in the event of any such
breach by EXECUTIVE, the BANK and/or the COMPANY will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by EXECUTIVE, EXECUTIVE's partners, agents, servants,
employers, employees and all persons acting for or with EXECUTIVE. EXECUTIVE
represents and admits that in the event of the termination of his employment
pursuant to Section 4 hereof, EXECUTIVE's experience and capabilities are such
that EXECUTIVE can obtain employment in a business engaged in other lines and/or
of a different nature than the BANK and/or the COMPANY, and that the enforcement
of a remedy by way of injunction will not prevent EXECUTIVE from earning a
livelihood. Nothing herein will be construed as prohibiting the BANK and/or the
COMPANY from pursuing any other remedies available to the BANK and/or the
COMPANY for such breach or threatened breach, including the recovery of damages
from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the BANK. EXECUTIVE will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned
8
<PAGE>
or considered business activities of the BANK or affiliates thereof to any
person, firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, EXECUTIVE may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the BANK. In the
event of a breach or threatened breach by EXECUTIVE of the provisions of this
Section, the BANK will be entitled to an injunction restraining EXECUTIVE from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof, or from
rendering any services to any person, firm, corporation, other entity to whom
such knowledge, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting the BANK from
pursuing any other remedies available to the BANK for such breach or threatened
breach, including the recovery of damages from EXECUTIVE.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
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15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have
been waived, nor shall there by any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act other
than that specifically waived.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Missouri,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state
law or regulation, including , specifically, 12 C.F.R. Section 563.39(b), the
provisions of such law or regulation shall prevail.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if EXECUTIVE is successful pursuant to a legal
judgment, arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest
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extent permitted under Missouri law against all expenses and liabilities
reasonably incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved by reason of his having been a
director or officer of the BANK (whether or not he continues to be a directors
or officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgment, court costs and
attorneys' fees and the cost of reasonable settlements. The provisions of 12
C.F.R. 545.121 shall apply to the BANK's obligations under this Section 20.
21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee,
whether direct or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all the business or assets of the BANK or the COMPANY,
expressly and unconditionally to assume and agree to perform the BANK's or the
COMPANY's obligations under this Agreement, in the same manner and to the same
extent that the BANK or the COMPANY would be required to perform if no such
succession or assignment had taken place.
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement
to be executed and their seal to be affixed hereunto by a duly authorized
officer, and EXECUTIVE has signed this Agreement, all on the 31st day of March,
1999
ATTEST: PALMYRA SAVINGS
/s/ Ronald L. Nelson BY: /s/ L. Edward Schaeffer
- ------------------------------- -----------------------------------
L. Edward Schaeffer
For the Entire Board of Directors
ATTEST: PFSB BANCORP, INC.
/s/ Ronald L. Nelson BY: /s/ L. Edward Schaeffer
- ------------------------------- -----------------------------------
L. Edward Schaeffer
For the Entire Board of Directors
WITNESS: EXECUTIVE
/s/ Diane L. Smith /s/ Eldon R. Mette
- ------------------------------- --------------------------------------
Eldon R. Mette
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of March 31, 1999, by and between
PALMYRA SAVINGS (the "BANK"), PFSB BANCORP, INC., (the "COMPANY"), a Missouri
corporation; and RONALD L. NELSON ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE
for the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to
serve as Vice President, Treasurer and Secretary of the Bank. EXECUTIVE also
agrees to serve, if elected, as an officer and director of the COMPANY or any
subsidiary or affiliate of the COMPANY or the BANK. EXECUTIVE shall render
administrative and management duties to the BANK such as are customarily
performed by persons situated in a similar executive capacity.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of
the date first above written and shall continue for thirty six (36) months
thereafter. Commencing on the first anniversary date, and continuing at each
anniversary date thereafter, the Board of Directors of the BANK (the "Board")
may extend the Agreement for an additional year. Prior to the extension of the
Agreement as provided herein, the Board of Directors of the BANK will conduct a
formal performance evaluation of EXECUTIVE for purposes of determining whether
to extend the Agreement, and the results thereof shall be included in the
minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods
of absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
EXECUTIVE may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the BANK,
or materially affect the performance of EXECUTIVE's duties pursuant to this
Agreement.
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3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Sections 1 and 2. The
BANK shall pay EXECUTIVE as compensation a salary of $51,500 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement, EXECUTIVE's
Base Salary shall be reviewed at least annually; the first such review will be
made no later than one year from the date of this Agreement. Such review shall
be conducted by a Committee designated by the Board, and the Board may increase
EXECUTIVE's Base Salary. In addition to the Base Salary provided in this Section
3(a), the BANK shall provide EXECUTIVE at no cost to EXECUTIVE with all such
other benefits as are provided uniformly to permanent full-time employees of the
BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the BANK will not, without
EXECUTIVE's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect EXECUTIVE's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), EXECUTIVE will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the BANK in the future to its senior executives
and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements.
EXECUTIVE will be entitled to incentive compensation and bonuses as provided in
any plan, or pursuant to any arrangement of the BANK, in which EXECUTIVE is
eligible to participate. Nothing paid to EXECUTIVE under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
EXECUTIVE is entitled under this Agreement, except as provided under Section
5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of
this Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable
travel and other obligations under this Agreement and may provide such
additional compensation in such form and such amounts as the Board may from time
to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time employment hereunder for any reason other than
a Change in Control, as defined in Section 5(a) hereof; disability, as defined
in Section 6(a) hereof; death; retirement, as defined in Section 7 hereof; or
Termination for
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Cause, as defined in Section 8 hereof; (ii) EXECUTIVE's resignation from the
BANK's employ, upon (A) unless consented to by EXECUTIVE, a material change in
EXECUTIVE's function, duties, or responsibilities, which change would cause
EXECUTIVE's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof described in Sections 1 and 2,
above (any such material change shall be deemed a continuing breach of this
Agreement), (B) a relocation of EXECUTIVE's principal place of employment by
more than 35 miles from its location at the effective date of this Agreement, or
a material reduction in the benefits and perquisites to EXECUTIVE from those
being provided as of the effective date of this Agreement, (C) the liquidation
or dissolution of the BANK, or (D) any material breach of this Agreement by the
BANK. Upon the occurrence of any event described in clauses (A), (B), (C) or
(D), above, EXECUTIVE shall have the right to elect to terminate his employment
under this Agreement by resignation upon not less than sixty (60) days prior
written notice given within a reasonable period of time not to exceed, except in
case of a continuing breach, four (4) calendar months after the event giving
rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the payments due to EXECUTIVE for the remaining
term of the Agreement, including Base Salary, bonuses, and any other cash or
deferred compensation paid or to be paid (including the value of employer
contributions that would have been made on EXECUTIVE's behalf over the remaining
term of the agreement to any tax-qualified retirement plan sponsored by the BANK
as of the Date of Termination), to EXECUTIVE for the term of the Agreement
provided, however, that if the BANK is not in compliance with its minimum
capital requirements or if such payments would cause the BANK's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as the BANK is in capital compliance. All payments made pursuant
to this Section 4(b) shall be paid in substantially equal monthly installments
over the remaining term of this Agreement following EXECUTIVE's termination;
provided, however, that if the remaining term of the Agreement is less than one
(1) year (determined as of EXECUTIVE's Date of Termination), such payments and
benefits shall be paid to EXECUTIVE in a lump sum within thirty (30) days of the
Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will
cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the BANK for EXECUTIVE
prior to his termination. Such coverage shall cease upon the expiration of the
remaining term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall
have occurred a Change in Control of the COMPANY or the BANK. For purposes of
this Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed
to occur (a) if there occurs a change in control of the BANK or the COMPANY
within the meaning of the Home Owners Loan Act of
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1933 and 12 C.F.R. Part 574, (b) if any person (as such term is used in Sections
13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the COMPANY or the BANK representing
twenty-five percent (25%) or more of the combined voting power of the COMPANY's
or the BANK's then outstanding securities, (c) if the membership of the board of
directors of the COMPANY or the BANK changes as the result of a contested
election, such that individuals who were directors at the beginning of any
twenty-four (24) month period (whether commencing before or after the date of
adoption of this Agreement) do not constitute a majority of the Board at the end
of such period, or (d) upon the consummation of a transaction approved by the
shareholders of the COMPANY or the BANK involving a merger, consolidation, sale
or disposition of all or substantially all of the COMPANY's or the BANK's
assets, or a similar transaction occurs in which the COMPANY or the BANK is not
the resulting entity.
(b) If any of the events described in Section 5(a) hereof constituting
a Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control (as defined herein) has occurred,
EXECUTIVE shall be entitled to the benefits provided in paragraphs (c), (d) and
(e) of this Section 5 upon his subsequent involuntary termination following the
effective date of a Change in Control (or voluntary termination within twelve
(12) months of the effective date of a Change in Control following any material
demotion, loss of title, office or significant authority, material reduction in
his annual compensation or benefits (other than a reduction affecting the BANK's
personnel generally), or the relocation of his principal place of employment by
more than 35 miles from its location immediately prior to the Change in
Control), unless such termination is because of his death, retirement as
provided in Section 7, termination for Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of (S)(S).280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage shall
cease upon the expiration of thirty-six (36) months. In addition, EXECUTIVE
shall be entitled to receive the value of employer contributions that would have
been made on EXECUTIVE's behalf over the remaining term of the agreement to any
tax-qualified retirement plan sponsored by the BANK as of the Date of
Termination.
(e) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under (S)(S).280G of
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the Code, then, at the election of EXECUTIVE, (i) such payments or benefits
shall be payable or provided to EXECUTIVE over the minimum period necessary to
reduce the present value of such payments or benefits to an amount which is one
dollar ($1.00) less than three (3) times EXECUTIVE's "base amount" under
(S)(S).280G(b)(3) of the Code or (ii) the payments or benefits to be provided
under this Section 5 shall be reduced to the extent necessary to avoid treatment
as an excess parachute payment with the allocation of the reduction among such
payments and benefits to be determined by EXECUTIVE.
6. TERMINATION FOR DISABILITY.
(a) If EXECUTIVE shall become disabled as defined in the BANK's then
current disability plan (or, if no such plan is then in effect, if EXECUTIVE is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code as determined by a physician designated by the Board), the BANK may
terminate EXECUTIVE's employment for "Disability."
(b) Upon EXECUTIVE's termination of employment for Disability, the
BANK will pay EXECUTIVE, as disability pay, a bi-weekly payment equal to three-
quarters (3/4) of EXECUTIVE's bi-weekly rate of Base Salary on the effective
date of such termination. These disability payments shall commence on the
effective date of EXECUTIVE's termination and will end on the earlier of (i) the
date EXECUTIVE returns to the full-time employment of the BANK in the same
capacity as he was employed prior to his termination for Disability and pursuant
to an employment agreement between EXECUTIVE and the BANK; (ii) EXECUTIVE's
full-time employment by another employer; (iii) EXECUTIVE attaining the age of
sixty-five (65); or (iv) EXECUTIVE's death; or (v) the expiration of the term of
this Agreement. The disability pay shall be reduced by the amount, if any, paid
to EXECUTIVE under any plan of the BANK providing disability benefits to
EXECUTIVE.
(c) The BANK will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
BANK for EXECUTIVE prior to his termination for Disability. This coverage and
payments shall cease upon the earlier of (i) the date EXECUTIVE returns to the
full-time employment of the BANK, in the same capacity as he was employed prior
to his termination for Disability and pursuant to an employment agreement
between EXECUTIVE and the BANK; (ii) EXECUTIVE's full-time employment by another
employer; (iii) EXECUTIVE's attaining the age of sixty-five (65); (iv)
EXECUTIVE's death; or (v) the expiration of the term of this Agreement.
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to EXECUTIVE during any period during which
EXECUTIVE is incapable of performing his duties hereunder by reason of temporary
disability.
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7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to him.
Upon termination of EXECUTIVE upon Retirement, EXECUTIVE shall be entitled to
all benefits under any retirement plan of the BANK or the COMPANY and other
plans to which EXECUTIVE is a party. Upon the death of EXECUTIVE during the
term of this Agreement, the BANK shall pay to EXECUTIVE's estate the
compensation due to EXECUTIVE through the last day of the calendar month in
which his death occurred. Upon the voluntary resignation of EXECUTIVE during
the term of this Agreement, other than in connection with an Event of
Termination, the BANK shall pay to EXECUTIVE the compensation due to EXECUTIVE
through his Date of Termination.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of 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 infractions) or final
cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to EXECUTIVE and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, EXECUTIVE was guilty of
conduct justifying termination for Cause and specifying the reasons thereof.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after termination for Cause. Any stock options granted to EXECUTIVE
under any stock option plan or any unvested awards granted under any other stock
benefit plan of the BANK, the COMPANY, or any subsidiary or affiliate thereof,
shall become null and void effective upon EXECUTIVE's receipt of Notice of
Termination for Cause pursuant to Section 10 hereof, and shall not be
exercisable by EXECUTIVE at any time subsequent to such Termination for Cause.
9. REQUIRED PROVISIONS.
(a) The BOARD may terminate EXECUTIVE's employment at any time, but any
termination by the BOARD, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 8 herein.
(b) If 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 Federal
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Deposit Insurance Act ("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, in its discretion, (i) pay EXECUTIVE all or part of the
compensation withheld while its contract obligations were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the 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 parties.
(e) All obligations under this Agreement shall be terminated (except to the
extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA or
(ii) by the Director, or his designee at the time the Director or such designee
approves a supervisory merger to resolve problems related to operation of the
BANK or when the BANK is determined by the Director 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.
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
(S)1828(k) and any regulations promulgated thereunder.
10. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of EXECUTIVE's employment under the provision so
indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, other than Termination for
Cause, the date
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specified in the Notice of Termination . In the event of EXECUTIVE's Termination
for Cause, the Date of Termination shall be the same as the date of the Notice
of Termination.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by EXECUTIVE in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
11. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to an
Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not to
compete with the BANK and/or the COMPANY for a period of one (1) year following
such termination in any city, town or county in which the BANK and/or the
COMPANY has an office or has filed an application for regulatory approval to
establish an office, determined as of the effective date of such termination.
EXECUTIVE agrees that during such period and within said cities, towns and
counties, EXECUTIVE shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the BANK and/or the
COMPANY. The parties hereto, recognizing that irreparable injury will result to
the BANK and/or the COMPANY, its business and property in the event of
EXECUTIVE's breach of this Subsection 11(a) agree that in the event of any such
breach by EXECUTIVE, the BANK and/or the COMPANY will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by EXECUTIVE, EXECUTIVE's partners, agents, servants,
employers, employees and all persons acting for or with EXECUTIVE. EXECUTIVE
represents and admits that in the event of the termination of his employment
pursuant to Section 4 hereof, EXECUTIVE's experience and capabilities are such
that EXECUTIVE can obtain employment in a business engaged in other lines and/or
of a different nature than the BANK and/or the COMPANY, and that the enforcement
of a remedy by way of injunction will not prevent EXECUTIVE from earning a
livelihood. Nothing herein will be construed as prohibiting the BANK and/or the
COMPANY from pursuing any other remedies available to the BANK and/or the
COMPANY for such breach or threatened breach, including the recovery of damages
from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the BANK. EXECUTIVE will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof to any person,
firm, corporation,
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or other entity for any reason or purpose whatsoever. Notwithstanding the
foregoing, EXECUTIVE may disclose any knowledge of banking, financial and/or
economic principles, concepts or ideas which are not solely and exclusively
derived from the business plans and activities of the BANK. In the event of a
breach or threatened breach by EXECUTIVE of the provisions of this Section, the
BANK will be entitled to an injunction restraining EXECUTIVE from disclosing, in
whole or in part, the knowledge of the past, present, planned or considered
business activities of the BANK or affiliates thereof, or from rendering any
services to any person, firm, corporation, other entity to whom such knowledge,
in whole or in part, has been disclosed or is threatened to be disclosed.
Nothing herein will be construed as prohibiting the BANK from pursuing any other
remedies available to the BANK for such breach or threatened breach, including
the recovery of damages from EXECUTIVE.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
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15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Missouri,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state
law or regulation, including , specifically, 12 C.F.R. Section 563.39(b), the
provisions of such law or regulation shall prevail.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if EXECUTIVE is successful pursuant to a legal
judgment, arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest
10
<PAGE>
extent permitted under Missouri law against all expenses and liabilities
reasonably incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved by reason of his having been a
director or officer of the BANK (whether or not he continues to be a directors
or officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgment, court costs and
attorneys' fees and the cost of reasonable settlements. The provisions of 12
C.F.R. 545.121 shall apply to the BANK's obligations under this Section 20.
21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent that
the BANK or the COMPANY would be required to perform if no such succession or
assignment had taken place.
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement to
be executed and their seal to be affixed hereunto by a duly authorized officer,
and EXECUTIVE has signed this Agreement, all on the 31st day of March, 1999
ATTEST: PALMYRA SAVINGS
/s/ Ronald L. Nelson BY: /s/ L. Edward Schaeffer
- -------------------- -----------------------
L. Edward Schaeffer
For the Entire Board of Directors
ATTEST: PFSB BANCORP, INC.
/s/ Ronald L. Nelson BY: /s/ L. Edward Schaeffer
- -------------------- -----------------------
L. Edward Schaeffer
For the Entire Board of Directors
WITNESS: EXECUTIVE
/s/ Diane L. Smith /s/ Ronald L. Nelson
- ------------------ --------------------
Ronald L. Nelson
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF PSFB BANCORP, INC. FOR THE SIX MONTHS ENDED MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> SEP-30-1998
<PERIOD-END> JAN-01-1999
<CASH> 328
<INT-BEARING-DEPOSITS> 8,968
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,324
<INVESTMENTS-CARRYING> 6,708
<INVESTMENTS-MARKET> 0
<LOANS> 40,665
<ALLOWANCE> 280
<TOTAL-ASSETS> 64,779
<DEPOSITS> 53,835
<SHORT-TERM> 0
<LIABILITIES-OTHER> 163
<LONG-TERM> 0
0
0
<COMMON> 6
<OTHER-SE> 10,775
<TOTAL-LIABILITIES-AND-EQUITY> 64,779
<INTEREST-LOAN> 1,555
<INTEREST-INVEST> 525
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,080
<INTEREST-DEPOSIT> 1,353
<INTEREST-EXPENSE> 1,361
<INTEREST-INCOME-NET> 719
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 611
<INCOME-PRETAX> 208
<INCOME-PRE-EXTRAORDINARY> 132
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
<YIELD-ACTUAL> 4.54
<LOANS-NON> 138
<LOANS-PAST> 0
<LOANS-TROUBLED> 66
<LOANS-PROBLEM> 411
<ALLOWANCE-OPEN> 280
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 280
<ALLOWANCE-DOMESTIC> 237
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 43
</TABLE>
