[Harleysville Savings Financial Corporation Letterhead]
December 19, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Harleysville Savings Financial Corporation, the holding company for
Harleysville Savings Bank. The meeting will be held at the Family Heritage
Restaurant located in Franconia, Pennsylvania on Wednesday, January 24, 2001 at
9:30 a.m., Eastern Time. The matters to be considered by stockholders at the
Annual Meeting are described in the accompanying materials.
It is very important that your shares be voted at the Annual Meeting
regardless of the number you own or whether you are able to attend the meeting
in person. We urge you to mark, sign, and date your proxy card today and return
it in the envelope provided, even if you plan to attend the Annual Meeting. This
will not prevent you from voting in person, but will ensure that your vote is
counted if you are unable to attend.
Your continued support of and interest in Harleysville Savings
Financial Corporation is sincerely appreciated.
Sincerely,
/s/ Edward J. Molnar
--------------------
Edward J. Molnar
President and Chief
Executive Officer
<PAGE>
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
271 Main Street
Harleysville, Pennsylvania 19438
(215) 256-8828
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 24, 2001
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Harleysville Savings Financial Corporation (the "Company") will be
held at the Family Heritage Restaurant, located in Franconia, Pennsylvania, on
Wednesday, January 24, 2001 at 9:30 a. m., Eastern Time, for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:
(1) To elect three (3) directors for a three-year term and until
their successors are elected and qualified;
(2) To adopt the Harleysville Savings Financial Corporation 2000
Stock Option Plan;
(3) To ratify the appointment by the Board of Directors of
Deloitte & Touche as the Company's independent auditors for
the year ending September 30, 2001; and
(4) To transact such other business as may properly come before
the meeting or any adjournment thereof. Management is not
aware of any other such business.
The Board of Directors has fixed December 8, 2000 as the voting record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting and at any adjournment thereof. Only those stockholders of
record as of the close of business on that date will be entitled to vote at the
Annual Meeting or at any such adjournment.
By Order of the Board of Directors
/s/ Diane P. Moyer
Diane P. Moyer
Senior Vice President and Secretary
Harleysville, Pennsylvania
December 19, 2000
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE>
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
--------------------
PROXY STATEMENT
--------------------
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 24, 2001
This Proxy Statement is furnished to holders of common stock, $.01 par
value per share ("Common Stock"), of Harleysville Savings Financial Corporation
(the "Company"), a Pennsylvania corporation which acquired all of the
outstanding capital stock of Harleysville Savings Bank (the "Bank") in
connection with the holding company reorganization of the Bank in February 2000
(the "Reorganization"). Proxies are being solicited on behalf of the Board of
Directors of the Company to be used at the Annual Meeting of Stockholders
("Annual Meeting") to be held at the Family Heritage Restaurant, located in
Franconia, Pennsylvania, on Wednesday, January 24, 2001 at 9:30 a.m., Eastern
Time, and at any adjournment thereof for the purposes set forth in the Notice of
Annual Meeting of Stockholders. This Proxy Statement is first being mailed to
stockholders on or about December 19, 2000.
The proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for the matters described below and, upon the
transaction of such other business as may properly come before the meeting, in
accordance with the best judgment of the persons appointed as proxies. Any
stockholder giving a proxy has the power to revoke it at any time before it is
exercised by (i) filing with the Secretary of the Company written notice thereof
(Diane P. Moyer, Senior Vice President and Secretary, Harleysville Savings
Financial Corporation, 271 Main Street, Harleysville, Pennsylvania 19438); (ii)
submitting a duly-executed proxy bearing a later date; or (iii) appearing at the
Annual Meeting and giving the Secretary notice of his or her intention to vote
in person. Proxies solicited hereby may be exercised only at the Annual Meeting
and any adjournment thereof and will not be used for any other meeting.
VOTING
Only stockholders of record of the Company at the close of business on
December 8, 2000 ("Voting Record Date") are entitled to notice of and to vote at
the Annual Meeting and at any adjournment thereof. On the Voting Record Date,
there were approximately 2,285,051 shares of Common Stock issued and outstanding
and the Company had no other class of equity securities outstanding. Each share
of Common Stock is entitled to one vote at the Annual Meeting on all matters
properly presented at the Annual Meeting.
The presence in person or by proxy of at least a majority of the issued
and outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. Directors will be elected by a
plurality of the votes cast at the Annual Meeting. The affirmative vote of a
majority of the total votes cast at the Annual Meeting is required for approval
of the proposals to adopt the Company's 2000 Stock Option Plan (the "Option
Plan") and to ratify the appointment of the Company's independent auditors.
Abstentions will be counted for purposes of determining the presence of
a quorum at the Annual Meeting. Because of the required votes, abstentions will
have no effect on the voting for the election of directors or the proposals to
adopt the Option Plan and to ratify the appointment of the Company's independent
auditors. Under rules applicable to broker-dealers, all of the proposals for
consideration at the Annual Meeting are considered "discretionary" items upon
which brokerage firms may vote in their discretion on behalf of their client if
such clients have not furnished voting instructions. Thus, there are no
proposals to be considered at the Annual Meeting which are considered "non-
discretionary" and for which there will be "broker non-votes."
<PAGE>
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR, DIRECTORS
WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
Election of Directors
The Articles of Incorporation of the Company provide that the Board of
Directors of the Company shall be divided into three classes which are as equal
in number as possible, and that the members of each class are to be elected for
a term of three years and until their successors are elected and qualified. One
class of directors is to be elected annually and stockholders are not permitted
to cumulate their votes for the election of directors. No nominee for director
is related to any other director or executive officer of the Company by blood,
marriage or adoption.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees for director listed
below. If any person named as nominee should be unable or unwilling to stand for
election at the time of the Annual Meeting, the proxies will nominate and vote
for any replacement nominee or nominees recommended by the Board of Directors.
At this time, the Board of Directors knows of no reason why any of the nominees
listed below may not be able to serve as a director if elected.
The following tables present information concerning the nominees for
director and each director whose term continues, including his tenure as a
director of the Company.
Nominees for Director for Three-Year Term Expiring in 2004
<TABLE>
<CAPTION>
Position with the Company and
Principal Occupation During Director
Name Age the Past Five Years Since (1)
---- --- --------------------- ---------
<S> <C> <C> <C>
Sanford L. Alderfer 48 Mr. Alderfer is President of Alderfer --
Auction Company, located in Hatfield,
Pennsylvania.
Mark R. Cummins 44 Mr. Cummins is Executive Vice President, 1995
Chief Investment Officer and Treasurer of
Harleysville Insurance Companies located
in Harleysville, Pennsylvania.
Ronald B. Geib 46 Mr. Geib has served as the Company's --
Executive Vice President and Chief
Operating Officer since February 2000 and
the Bank's Executive Vice President and
Chief Operating Officer since September
1999. Mr. Geib previously served as the
Bank's Senior Vice President, Treasurer,
and Chief Financial Officer from 1980 to
1999. Mr. Geib joined the Bank in 1976.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES
FOR DIRECTOR.
2
<PAGE>
<TABLE>
<CAPTION>
Members of the Board of Directors Continuing in Office
Directors With Terms Expiring in 2002
Position with the Company and
Principal Occupation During Director
Name Age the Past Five Years Since(1)
---- --- --------------------- --------
<S> <C> <C> <C>
Paul W. Barndt 71 Mr. Barndt is Founder of the Barndt 1975
Agency, Inc., a real estate and
insurance agency located in
Sumneytown, Pennsylvania.
Philip A. Clemens 51 Mr. Clemens is Chairman and Chief 1987
Executive Officer of Clemens
Family Corporation, a meat
processing company located in
Hatfield, Pennsylvania.
Edward J. Molnar 60 Mr. Molnar has served as the 1968
Company's President and Chief
Executive Officer since February
2000 and the Bank's Chief Executive
Officer since 1967 and also as the
Bank's President since 1976.
<CAPTION>
Directors With Terms Expiring in 2003
Position with the Company and
Principal Occupation Director
Name Age During the Past Five Years Since(1)
---- --- -------------------------- ---------
<S> <C> <C> <C>
David J. Friesen 57 Mr. Friesen is a certified public 1987
accountant and Director of
Development at PennView Christian
School located in Souderton,
Pennsylvania.
George W. Meschter 48 Mr. Meschter is the President of 1981
Meschter Insurance Group, an
insurance agency located in
Collegeville, Pennsylvania.
</TABLE>
---------------
(1) Includes service as a director of the Bank.
3
<PAGE>
Stockholder Nominations
Article III, Section 3.12 of the Company's Bylaws governs nominations
for election to the Board and requires all such nominations, other than those
made by the Board, to be made at a meeting of stockholders called for the
election of directors, and only by a stockholder who has complied with the
notice provisions in that section. Stockholder nominations must be made pursuant
to timely notice in writing to the Secretary of the Company. To be timely, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company not later than (i) with respect to an
election to be held at an annual meeting of stockholders, 90 days prior to the
anniversary date of the mailing of proxy materials by the Company for the
immediately preceding annual meeting, or in the case of the first annual meeting
of stockholders following the Reorganization, not later than 90 days prior to
the anniversary date of the mailing of proxy materials by the Bank in connection
with the immediately preceding annual meeting of stockholders of the Bank prior
to the Reorganization, and (ii) with respect to an election to be held at a
special meeting of stockholders for the election of directors, the close of
business on the tenth day following the date on which notice of such meeting is
first given to stockholders.
Each written notice of a stockholder nomination shall set forth: (a) the
name and address of the stockholder who intends to make the nomination and of
the person or persons to be nominated; (b) a representation that the stockholder
is a holder of record of stock of the Company entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (e) the consent of each nominee to serve
as a director of the Company if so elected. The presiding officer of the meeting
may refuse to acknowledge the nomination of any person not made in compliance
with the foregoing procedures. The Company did not receive any nominations from
stockholders for the Annual Meeting.
The Board of Directors and Its Committees
Regular meetings of the Board of Directors of the Company and the Bank
are typically held on a monthly basis and special meetings of the Board of
Directors are held from time-to-time as needed. There were 13 meetings of the
Board of Directors of the Company held during fiscal 2000. No director attended
fewer than 75% of the aggregate of the total number of meetings of the Board of
Directors and the total number of meetings of committees of the Board on which
the director served during the year.
The Board of Directors of the Company has established various
committees, including Audit, Human Resources and Nominating Committees.
The Audit Committee reviews the records and affairs of the Company to
determine its financial condition, reviews with management and the independent
auditors the systems of internal control, and monitors the Company's adherence
in accounting and financial reporting to generally accepted accounting
principles. Currently, Messrs. Cummins, Friesen and Alderfer serve as members of
this committee. The Audit Committee met three times during fiscal 2000.
The Human Resource Committee, which met three times during fiscal 2000,
reviews the Company's compensation programs and recommends salary and benefits
for the Company's employees. The members of the committee are currently Messrs.
Barndt, Meschter and Clemens.
The Nominating Committee, which met one time during fiscal 2000 with
respect to nominations for the 2000 Annual Meeting, advises the Board of
Directors with respect to nominations of directors and recommends candidates to
the Board of Directors as nominees for election at the annual meeting and
reviews and recommends directors fees to
4
<PAGE>
be paid by to members of the Board of Directors. The members of the Nominating
Committee are Messrs. Alderfer, Friesen and Meschter.
Executive Officers Who Are Not Directors
The following table sets forth certain information with respect to the
executive officers of the Company and the Bank who are not directors or
nominees.
<TABLE>
<CAPTION>
Positions(s) with the Company and Principal Occupation
Name Age During the Past Five Years
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Marian Bickerstaff 50 Mrs. Bickerstaff has served as the Company's Senior Vice
President since February 2000, the Bank's Senior Vice
President since September 1999 and as the Bank's Chief
Lending Officer since 1985. Mrs. Bickerstaff was Vice
President of the Bank from 1985 to 1999. Mrs. Bickerstaff
joined the Bank in 1975.
Diane P. Moyer 61 Mrs. Moyer has served as the Company's Senior Vice
President since February 2000, the Bank's Senior Vice
President since September 1999 and as the Bank's Vice
President in charge of Branch Operations and Personnel
since 1986. Mrs. Moyer has also served the Bank as
Corporate Secretary since 1993 having previously served as
Assistant Corporate Secretary since 1976. Mrs. Moyer
joined the Bank in 1973. Mrs. Moyer intends to retire from
the Company on December 31, 2000.
Brendan J. McGill 32 Mr. McGill has served as the Company's Senior Vice
President, Treasurer and Chief Financial Officer since
February 2000 and joined the Bank in September 1999 as
Senior Vice President, Treasurer and Chief Financial
Officer. Prior thereto, Mr. McGill was an auditor with the
accounting firm of Deloitte & Touche, specializing in
financial institutions.
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of the Common Stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and the
Nasdaq Stock Market. Officers, directors and greater than 10% stockholders are
required by regulation to furnish the Company with copies of all Section 16(a)
forms they file. The Company knows of no person who owns 10% or more of the
Common Stock. Based solely on review of the copies of such forms furnished to
the Company, the Company believes that during the year ended September 30, 2000,
all Section 16(a) filing requirements applicable to its executive officers and
directors were met.
5
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Stock as of the Voting Record Date, and certain other information with respect
to (i) the only persons or entities, including any "group" as that term is used
in Section 13(d)(3) of the Exchange Act, who or which was known to the Company
to be the beneficial owner of more than 5% of the issued and outstanding Common
Stock on the Voting Record Date, (ii) each director and director nominee of the
Company, (iii) certain named executive officers of the Company, and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial of Beneficial
Owner or Number of Ownership as of Percent of
Persons in Group December 8, 2000(1)(2) Common Stock
------------------ ---------------------- ------------
<S> <C> <C>
Harleysville Savings Financial 266,752 (3) 11.68%
Corporation Employee Stock
Ownership Pension Plan
271 Main Street
Harleysville, Pennsylvania 19438
First Manhattan Company 146,813 (4) 6.25
437 Madison Avenue
New York, New York 10022
Directors and Nominees:
Sanford L. Alderfer 5,110 (5) 0.23
Paul W. Barndt 17,701 (6)(7) 0.78
Philip A. Clemens 17,010 (6)(7)(8) 0.75
Mark R. Cummins 80,814 (9) 3.53
David J. Friesen 37,710 (6)(10) 1.65
Ronald B. Geib 72,156 (11) 3.14
George W. Meschter 33,499 (6)(7)(12) 1.47
Edward J. Molnar 132,268 (13) 5.75
Named Executive Officers:
Marian Bickerstaff 69,127 (14) 3.01
All directors and executive 543,351 (15) 23.06
officers as a group (11 persons)
</TABLE>
-----------------
(1) Based upon filings made pursuant to the Exchange Act and information
furnished by the respective individuals. Under regulations promulgated
pursuant to the Exchange Act, shares of Common Stock are deemed to be
beneficially owned by a person if he or she directly or indirectly has
or shares (i) voting power, which includes the power to vote or to
direct the voting of the shares, or (ii) investment power, which
includes the power to dispose or to direct the disposition of the
shares. Unless otherwise indicated, the named beneficial owner has sole
voting and dispositive power with respect to the shares.
(2) Under applicable regulations, a person is deemed to have beneficial
ownership of any shares of Common Stock which may be acquired within 60
days of the Voting Record Date pursuant to the exercise of outstanding
stock options. Shares of Common Stock which are subject to stock
options are deemed to be outstanding for the
6
<PAGE>
purpose of computing the percentage of outstanding Common Stock owned
by such person or group but not deemed outstanding for the purpose of
computing the percentage of Common Stock owned by any other person or
group.
(3) Includes 165,633 shares held in the Company's Employee Stock Ownership
Pension Plan ("ESOP") for the account of officers who may direct the
voting of such shares, and 101,119 shares allocated to other employee
participants in the plan who may direct the voting of such shares.
(4) Pursuant to filings under the Exchange Act, includes 135,113 shares
which First Manhattan Company has sole voting and dispositive power,
3,300 shares which it has shared voting and dispositive power and 8,400
shares which it has shared dispositive and no voting power.
(5) Includes 4,660 shares held in the Sanford Alderfer Auction Company,
Inc. Profit Sharing Plan, which Mr. Alderfer is a trustee.
(6) Includes 2,440 shares which may be acquired within 60 days of the
Voting Record Date pursuant to vested stock options.
(7) Does not include 266,752 shares held in the ESOP as to which Messrs.
Barndt, Clemens and Meschter serve as trustees and disclaim beneficial
ownership.
(8) Includes 4,125 shares held by Mr. Clemens' wife and 3,080 shares held
by Mr. Clemens' daughters.
(9) Includes 74,249 shares owned by the Harleysville Insurance Companies of
which Mark R. Cummins is the Executive Vice President, Chief Investment
Officer and Treasurer. As such, Mr. Cummins has the power to direct the
voting and disposition of these shares. Mr. Cummins disclaims
beneficial ownership of the 74,249 shares. Also includes 4,565 shares
which may be acquired within 60 days of the Voting Record Date pursuant
to vested stock options.
(10) Includes 4,165 shares held solely by Mr. Friesen's wife.
(11) Includes 39,266 shares held by Mr. Geib under the ESOP, 9,833 shares
held by Mr. Geib's wife, 1,710 shares held by Mr. Geib's children, and
19,412 shares which may be acquired within 60 days of the Voting Record
Date pursuant to vested stock options.
(12) Includes 6,664 shares owned by Meschter Insurance Group of which Mr.
Meschter is President and 4,584 shares held in a trust which Mr.
Meschter is trustee, 1,514 shares held by Mr. Meschter's son and 718
shares held by Mr. Meschter's wife.
(13) Includes 61,472 shares held by Mr. Molnar under the ESOP, and 17,164
shares which may be acquired within 60 days of the Voting Record Date
pursuant to vested stock options.
(14) Includes 33,104 shares held by Mrs. Bickerstaff under the ESOP, 100
shares held by Mrs. Bickerstaff's husband, and 13,909 shares which may
be acquired within 60 days of the Voting Record Date pursuant to vested
stock options.
(15) Includes 72,014 shares subject to outstanding stock options which are
exercisable within 60 days of the Voting Record Date, and 165,633
shares held in the ESOP for the account of officers. Also includes
74,249 shares owned by the Harleysville Mutual Insurance Company of
which Mark R. Cummins is Executive Vice President, Chief Investment
Officer and Treasurer. Mr. Cummins has the power to direct the voting
and disposition of these shares. Mr. Cummins disclaims beneficial
ownership of these 74,249 shares.
7
<PAGE>
MANAGEMENT COMPENSATION
Summary Compensation Table
The following table sets forth a summary of certain information
concerning the compensation awarded to or paid by the Company and the Bank for
services rendered in all capacities during the past three years to the Chief
Executive Officer and the only other executive officers of the Company and its
subsidiaries whose total compensation during the year ended September 30, 2000
exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- -----------------------
Name and Stock All Other
Principal Position Year Salary Bonus(1) Grants Options Compensation(2)
------------------ ---- ------ ----- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Edward J. Molnar 2000 $175,712 $40,784 - - $37,836
President and Chief 1999 163,000 39,131 - - 32,851
Executive Officer 1998 155,000 37,183 - - 31,350
Ronald B. Geib 2000 116,554 27,053 - - 19,115
Executive Vice President 1999 108,300 25,979 - - 15,660
and Chief Operating 1998 103,100 24,764 - - 14,880
Officer
Marian Bickerstaff 2000 92,560 21,484 - - 15,132
Senior Vice President 1999 85,675 20,568 - - 12,390
1998 81,575 19,597 - - 11,775
</TABLE>
---------------------
(1) Bonus is determined pursuant to the Company's Profit Sharing Incentive
Plan.
(2) In fiscal 2000, represents $24,000, $16,440 and $13,005 contributed by
the Company pursuant to the ESOP to the accounts of Messrs. Molnar and
Geib and Mrs. Bickerstaff, respectively, $4,236, $2,675 and $2,127
contributed by the Company under the Harleysville Savings' 401(k) Plan
("401(k) Plan") pursuant to the company match of contributions to the
accounts of Messrs. Molnar and Geib and Mrs. Bickerstaff, respectfully,
and the payment of $9,600 in directors' fees to Mr. Molnar.
Directors' Fees
Directors of the Bank received a fee of $250 per month, plus $550 for each
regular Board meeting attended during fiscal 2000. Directors of the Bank, with
the exception of President Molnar, received $225 for each committee meeting
attended during fiscal 2000.
Stock Options
The following table sets forth certain information concerning exercises of
stock options by the named executive officers during the year ended September
30, 2000 and stock options held at September 30, 2000.
8
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
Value of
Number of Unexercised
Unexercised Options at
Options at Year End Year End(1)
Shares --------------------------------- ---------------------------------
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Edward J. Molnar 8,000 $32,060 11,173 5,990 $60,195 $32,271
Ronald B. Geib - - - - 15,328 4,082 82,585 21,992
Marian Bickerstaff 1,445 5,339 10,621 3,284 57,237 17,693
========================================================================================================================
</TABLE>
(1) Based on an assumed market price of $15.06 per share of Common Stock at
September 30, 2000.
Compensation Committee
The Human Resource Committee of the Board of Directors determines executive
compensation. During fiscal 2000, the members of the Committee were Messrs.
Clemens, Barndt and Meschter. No member of the Committee is a current or former
officer or employee of the Company or the Bank. The report of the Committee with
respect to compensation for the Chief Executive Officer and all other executive
officers is set forth below.
Report of the Human Resource Committee
The Committee determines the compensation levels of the Chief Executive
Officer and the other executive officers by reviewing published studies of
compensation paid to executives performing similar duties for financial
institutions. The principal resource used for peer group comparisons is the 2000
Compensation Survey complied by America's Community Bankers and the L. R. Webber
2000 Salary and Benefits Pennsylvania Bank Survey.
The objectives of the Committee are to establish a fair compensation policy
to govern executive officers' base salaries and incentive plans to attract and
motivate competent executives whose efforts will fulfill the Company's public
responsibility to provide an important link between people who have money to
save and those who need to borrow; to be a responsible corporate citizen of the
community; to provide a rewarding place for the Company's employees to work; and
to achieve a fair and appropriate return for the Company's shareholders.
The base salary paid to the President and Chief Executive Officer in fiscal
2000 was $175,712 compared to $163,000 in fiscal 1999. The 7.7% increase in base
salary is commensurate with the Company's compensation objectives. Base salaries
increased on average of 7.8% for the Bank's other senior executives in fiscal
2000. The Committee believes that the senior executive officer's salary
structure is within the competitive range for the industry based upon a
comparison with financial institutions of similar size. Further, these increases
were primarily the result of an increase of 6% in base salary for all employees
of the Bank effective January 1, 2000. Such increases were effected in
connection with the adoption of the Harleysville Savings 401(k) Plan, which
provides for a company match of one-half of a participants first 6% contribution
to the plan as well as a reduction in the Company's contribution to the ESOP
from 15% to 6% of each participant's salary.
Philip A. Clemens
Paul W. Barndt
George W. Meschter
9
<PAGE>
Performance Graph
The following graph compares the yearly cumulative total return on the
Company's Common Stock (or prior to the Reorganization, the Bank's Common Stock)
over the past five years with (i) the yearly cumulative total return on the
stocks included in the Nasdaq Stock Market Index and (ii) the yearly cumulative
total return on the stocks included in the Nasdaq Banks Index (all banks listed
on the Nasdaq Stock Market). The cumulative returns are computed assuming the
reinvestment of dividends at the frequency with which dividends were paid during
the applicable years.
<TABLE>
<CAPTION>
Table of Cumulative Values
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Harleysville Savings $ 103.59 $ 116.80 $ 212.81 $ 238.22 $ 159.53 $ 168.84
Nasdaq Market Index 138.05 163.84 224.92 228.48 373.27 358.96
Nasdaq Banks Index 126.64 156.79 247.13 227.91 247.65 207.49
Book Value Per Share 8.69 9.11 10.32 11.68 12.83 14.05
Market Value Per Share 9.75 10.80 19.88 22.04 14.00 15.06
</TABLE>
10
<PAGE>
Employment Agreements
The Bank has entered into five-year employment agreements with Messrs.
Edward J. Molnar and Ronald B. Geib and Mrs. Marian Bickerstaff. The agreements
are extended automatically each year to continue for a five-year term. The
agreement with Mr. Molnar provides for a current salary of $184,000 and
agreement with Mr. Geib provides for a current salary of $122,000. The agreement
with Mrs. Bickerstaff provides for a current salary of less than $100,000.
The agreements are terminable by the Bank for "just cause" as defined,
at any time or in certain events specified by federal regulations. The
agreements also provide for severance payments and other benefits, respectively:
(i) in the event of involuntary termination of employment in connection with any
"change in control" of the Bank, as defined, or (ii) in connection with a
voluntary termination of employment where, subsequent to an acquisition of
control, officers are assigned duties inconsistent with their positions, duties,
responsibilities and status immediately prior to such change in control.
"Just cause" is defined as termination for personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, conviction of a
felony, willful violation of any law or regulation to be enforced by or the
FDIC, or the Department of Banking of the Commonwealth of Pennsylvania
("Department"), willful violation of a final cease-and/or-desist order, willful
or intentional breach or neglect by an employee of his duties, persistent
negligence or misconduct in the performance of his duties or material breach of
any provision of the Agreement, as determined by a court of competent
jurisdiction or a federal or state regulatory agency having jurisdiction over
the Bank. No act, or failure to act, on an employee's part shall be considered
"willful" unless done, or omitted to be done, by him not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Bank; provided that any act or omission to act on an employee's behalf in
reliance upon an opinion of counsel to the Bank or counsel to the employee shall
not be deemed to be willful. A "change in control" of the Bank is defined as a
change in control of a nature that would be required to be reported under
federal securities laws; provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person," as defined, other
than the Bank or any "person" who on the date in question is a director or
officer of the Bank, is or becomes the "beneficial owner," as defined, directly
or indirectly, of securities of the Bank representing 25% or more of the
combined voting power of the Bank's then outstanding securities, or (B) during
any period of two consecutive years during the term of the Agreement,
individuals who at the beginning of such period constitute the Board of
Directors of the Bank cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a director at the
beginning of such period has been approved in advance by directors representing
at least two-thirds of the directors then in office who were directors at the
beginning of the period.
In the event of a voluntary or involuntary termination pursuant to a
change of control of the Bank, such severance payments would amount to the
aggregate of the product of an employee's average base salary over the five-year
taxable period preceding the taxable year in which the date of termination
occurs (or such lesser amount of time if the employee has not been employed by
the Bank for five years at the time of termination) multiplied by 2.99. Such
severance payment would be made in a lump sum on or before the fifth day
following the date of termination, provided, however, that if the lump sum
severance payment either alone or together with the other payments which the
employee has the right to receive would constitute an "excess parachute payment"
as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), such lump sum severance payment is required to be reduced to the
largest amount as will result in no portion of the lump sum severance payment
being an "excess parachute payment." If the employment of Edward J. Molnar,
Ronald B. Geib and Marian Bickerstaff had been terminated on September 30, 2000
pursuant to a change in control of the Bank, as defined, Messrs. Molnar and Geib
and Mrs. Bickerstaff would have been entitled to receive severance payments
amounting to approximately $481,337, $310,085 and $245,576, respectively.
The agreements also provide that an employee may terminate his or her
employment following a change in control for good reason, as defined, which
includes a failure by the Bank to comply with any material provision of the
Agreement or the assignment of the employee subsequent to a change in control of
the Bank to duties inconsistent with
11
<PAGE>
his or her duties prior to the change in control. In such case, the Bank is
required to pay as severance to the employee an amount equal to the product of
his or her current annual base salary multiplied by the greater of the number of
years remaining in the term of employment or the number 2.99. The agreements do
not contain any provision restricting the right to compete against the Bank upon
termination of employment.
The Board of Directors may, from time to time, extend employment
agreements to other senior executive officers.
Profit Sharing Incentive Plan
The Bank maintains a Profit Sharing Incentive Plan ("Profit Sharing
Plan") which is designed to provide cash incentive payments to the Bank's
officers and employees when the Bank exceeds certain performance criteria. All
of the Bank's employees participate in the Profit Sharing Plan. The Profit
Sharing Plan provides that the Bank will make allocations to a bonus pool
provided three performance criteria are satisfied: (1) the Bank's return on
total stockholders' equity shall exceed an annualized rate of 10.75 percent (the
"Target Return"), (2) the Bank's one year gap position under the Bank's asset
liability management policy may not exceed the guidelines established by the
Board of Directors, and (3) the percentage of the Bank's loans which are 60 days
or more overdue may not exceed 1.5 percent of its total assets. If these
criteria are satisfied, a percentage of the Bank's profit in excess of the
Target Return is allocated to a bonus pool. The percentage of the Bank's profit
in excess of the Target Return which is allocated to the bonus pool ranges from
90 percent of the first fifteen basis points by which the Bank's profit exceeds
the Target Return to five percent of any profit greater than 1.35 percent in
excess of the Target Return. Awards from the bonus pool are based on each
participant's base earnings as a percentage of the total base earnings of all
participants, and a weighing factor which recognizes that the Bank's senior
management, middle management and other employees have varying levels of
responsibility for the Bank's overall performance. Incentive payments to Messrs.
Molnar and Geib and Mrs. Bickerstaff, for the year ended September 30, 2000 were
$40,784, $27,053 and $21,484, respectively, and are reflected in the Summary
Compensation Table above. The total amount of incentive payments made to all
employees of the Bank employees (82 people) who received payments pursuant to
the Profit Sharing Plan for the year ended September 30, 2000, including
payments to the Bank's five executive officers, was $229,562.
Employee Stock Ownership Pension Plan
The Board of Directors of the Company and its stockholders have adopted
an Employee Stock Ownership Pension Plan ("ESOP"). The trustees of the ESOP are
Messrs. Clemens, Meschter and Barndt. The trustees also serve as the
administrators of the ESOP. The trustees hold, invest, reinvest, manage,
administer and distribute the assets of the ESOP for the exclusive benefit of
participants, retired participants and their beneficiaries in accordance with
the terms of the ESOP and the Employee Stock Ownership Trust ("Trust")
established pursuant to the ESOP. All of the assets of the ESOP are held in the
Trust, which is managed by the trustees. The ESOP is subject to the
participation, vesting, fiduciary responsibility, reporting, and disclosure and
claims procedure requirements of ERISA.
All employees of the Company who (i) have completed 12 months of
service with the Company and (ii) have attained the age of 21 are eligible and
shall participate in the ESOP. An employee shall be credited with a year of
service during a ESOP year if said employee completes at least 1,000 hours of
service during such period.
In general, the ESOP requires the Company to contribute to the Trust in
cash each year an amount which is not less than the amount required to enable
the Trust to discharge its current obligations. The Company may make additional
contributions in cash, shares of the Common Stock or other property, which shall
be valued at its fair market value, as the Company's Board of Directors may
determine.
Contributions of the Company in cash and other cash received by the
Trust will be applied to pay any current obligations of the Trust incurred for
the purchase of Common Stock, or may be applied to purchase additional shares of
Common Stock from current stockholders or from the Company. The investment
policy of the ESOP is to invest
12
<PAGE>
primarily in Common Stock of the Company; however, the ESOP permits the
investment of contributions to the ESOP into other assets, including
certificates of deposit and securities issued by the U.S. government or its
agencies.
The ESOP requires the Company to pay all costs of administering the
ESOP and any similar expenses of the trustees, excluding normal brokerage
charges which are included in the costs of stock purchased. All shares of Common
Stock which are allocated to participants' stock accounts shall be voted by the
trustees in accordance with instructions from the participants. All unallocated
shares of Common Stock held by the Trust or in a suspense account shall be voted
by the trustees.
Participation in the ESOP terminates as of the anniversary date
coinciding with or next following a participant's death, disability or
retirement. Upon termination of a participant's employment for any reason other
than death, disability or retirement, or upon a break in service, the
participant shall have vested and nonforfeitable rights in a portion of his or
her stock and investment accounts based upon the participant's years of credited
service at his or her date of termination. A participant is fully vested in his
stock and investment accounts after five years of plan participation.
Vested benefits under the ESOP will normally be distributed in a single
distribution as soon as possible following a participant's separation from
service. Distribution of benefits under the ESOP may be made in cash or in a
combination of shares of Common Stock and cash.
The Company's contributions to the ESOP are deductible by the Company
to the extent provided by the Code and the ESOP will not be subject to federal
income tax on its income and gain. A participant will not be taxed on
contributions made by the Company or earnings on such contributions until he
receives a distribution under the ESOP.
During fiscal 2000, the Company contributed approximately $226,200 to
the Trust which was allocated to participants' accounts according to the terms
of the Plan.
401(k) Plan
The Company adopted the Harleysville Savings 401(k) Plan ("401(k)
Plan"), a deferred salary savings plan, effective January 1, 2000. All officers
and employees working 1,000 hours or more in a plan year, who have attained the
age of 21 and have completed 12 months of service, may participate in the 401(k)
Plan on an optional basis. Under the plan, participants may defer up to 12% of
their salary by payroll deduction. The Company or its subsidiaries will make a
matching contribution of 50% of the first 6% of the participant's contribution.
All contributions are invested via a plan trust. The Company's matching
contributions are vested at 100% after five years of service. All contributions
are invested via a plan trust at the direction of the participant among several
options, including several different mutual funds. Benefit payments normally are
made in connection with a participant's retirement. Under current Internal
Revenue Service regulations, the amount contributed to the plan and the earnings
on those contributions are not subject to Federal income tax until they are
withdrawn from the plan.
Employee Stock Purchase Plan
The Board of Directors of the Company and its stockholders have adopted
the 1995 Employee Stock Purchase Plan, (the "Purchase Plan"), which is intended
as an incentive to encourage all eligible employees of the Company to acquire
stock ownership in the Company through payroll deductions so that they may share
in its performance. The Company's stockholders approved adoption of the Purchase
Plan at the annual meeting held in January 1996. The Purchase Plan is
administered and interpreted by the Salary and Benefit Committee of the Board of
Directors.
Pursuant to the Purchase Plan, shares of the Company's Common Stock are
offered to employees of the Company in up to two offering periods during which
payroll deductions will be accumulated under the Purchase Plan during any
calendar year. Any employee of the Company or any parent or subsidiary,
including officers whether or not directors of the Company, is eligible to
enroll in the Purchase Plan by completing a payroll deduction form provided by
the Company. Upon enrollment, an employee shall elect to make contributions to
the Purchase Plan by payroll deductions in an aggregate amount not less than 2%
nor more than 10% of such employee's total compensation.
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<PAGE>
On the first business day of each offering period, the Company grants
to each eligible employee who is then a participant in the Purchase Plan an
option to purchase on the last business day of such period shares of the Common
Stock at an option price determined by the Committee, which shall not be less
than eighty-five percent (85%) of the lesser of (a) the fair market value of the
shares on the first business day in an offering period, or (b) the fair market
value of the shares on the last business day of such offering period.
Indebtedness of Management
In accordance with applicable federal law and regulations, the Bank
offers to its directors, officers and employees mortgage financing on their
primary residences and for various consumer loans. Such loans are made in the
ordinary course of business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than the normal risk
of collectability or present other unfavorable features.
The following table sets forth information as to all directors and
executive officers and members of their immediate families who had loans with
the Bank of $60,000 or more during fiscal 2000.
<TABLE>
<CAPTION>
Largest Amount Amount
Outstanding During the Outstanding Interest
Period as of Rate as of
Name and Position or Nature of from October 1, 1999 September 30, September 30,
Relationship Indebtedness Year Loan Made to September 30, 2000 2000 2000
------------------- --------------- -------------- ---------------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Marian Bickerstaff Home Mortgage 1996 $232,804 $229,907 7.25%
Senior Vice President
</TABLE>
PROPOSAL TO ADOPT THE 2000 STOCK OPTION PLAN
General
The Board of Directors has adopted the 2000 Option Plan which is
designed to attract and retain qualified personnel in key positions, provide
officers and key employees with a proprietary interest in the Company as an
incentive to contribute to the success of the Company and reward key employees
for outstanding performance. The Option Plan is also designed to attract and
retain qualified directors for the Company. The Option Plan provides for the
annual grant of incentive stock options intended to comply with the requirements
of Section 422 of the Code ("incentive stock options"), and non-incentive or
compensatory stock options (collectively "Awards"). Awards will be available for
grant to officers, key employees and directors of the Company and any
subsidiaries, except that non-employee directors will be eligible to receive
only awards of non-incentive stock options under the plan.
Description of the Option Plan
The following description of the Option Plan is a summary of its terms
and is qualified in its entirety by reference to the Option Plan, a copy of
which is attached hereto as Appendix A.
Administration. The Option Plan will be administered and interpreted by
a committee of the Board of Directors ("Committee") that is comprised solely of
two or more non-employee directors. The members of the Committee will initially
consist of Messrs . Barndt, Clemens and Meschter.
14
<PAGE>
Stock Options. Under the Option Plan, the Board of Directors or the
Committee will determine which officers, key employees and non-employee
directors will be granted options, whether such options will be incentive or
compensatory options (in the case of options granted to employees), the number
of shares subject to each option, the exercise price of each option, whether
such options may be exercised by delivering other shares of Common Stock and
when such options become exercisable. The per share exercise price of an
incentive stock option shall be at least equal to the fair market value of a
share of Common Stock on the date the option is granted, and the per share
exercise price of a compensatory stock option shall at least equal the greater
of par value or the fair market value of a share of Common Stock on the date the
option is granted.
All options granted to participants under the Option Plan shall become
vested and exercisable at the rate, and subject to such limitations, as
specified by the Board of Directors or the Committee at the time of grant.
Notwithstanding the foregoing, no vesting shall occur on or after a
participant's employment or service with the Company is terminated for any
reason other than his death, disability or retirement. Unless the Committee or
Board of Directors shall specifically state otherwise at the time an option is
granted, all options granted to participants shall become vested and exercisable
in full on the date an optionee terminates his employment or service with the
Company or a subsidiary company because of his death, disability or retirement.
In addition, all stock options will become vested and exercisable in full upon a
change in control of the Company, as defined in the Option Plan.
Each stock option or portion thereof shall be exercisable at any time
on or after it vests and is exercisable until the earlier of ten years after its
date of grant or three months after the date on which the employee's employment
or service as a non-employee director terminates, unless extended by the
Committee or the Board of Directors to a period not to exceed five years from
such termination. Unless stated otherwise at the time an option is granted (i)
if an employee terminates his employment with the Company as a result of
disability or retirement without having fully exercised his options, the
optionee shall have one year following his termination due to disability or
retirement to exercise such options, and (ii) if an optionee terminates his
employment or service with the Company following a change in control of the
Company without having fully exercised his options, the optionee shall have the
right to exercise such options during the remainder of the original ten year
term of the option. However, failure to exercise incentive stock options within
three months after the date on which the optionee's employment terminates may
result in adverse tax consequences to the optionee. If an optionee dies while
serving as an employee or a non-employee director or terminates employment or
service as a result of disability or retirement and dies without having fully
exercised his options, the optionee's executors, administrators, legatees or
distributees of his estate shall have the right to exercise such options during
the one year period following his death, provided no option will be exercisable
more than ten years from the date it was granted.
Stock options are non-transferable except by will or the laws of
descent and distribution. Notwithstanding the foregoing, an optionee who holds
non-qualified options may transfer such options to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust for the benefit
or one or more of these individuals. Options so transferred may thereafter be
transferred only to the optionee who originally received the grant or to an
individual or trust to whom the optionee could have initially transferred the
option. Options which are so transferred shall be exercisable by the transferee
according to the same terms and conditions as applied to the optionee.
Payment for shares purchased upon the exercise of options may be made
either in cash, by certified or cashier's check or, if permitted by the
Committee or the Board, by delivering shares of Common Stock (including shares
acquired pursuant to the exercise of an option) with a fair market value equal
to the total option price, by withholding some of the shares of Common Stock
which are being purchased upon exercise of an option, or any combination of the
foregoing. To the extent an optionee already owns shares of Common Stock prior
to the exercise of his or her option, such shares could be used (if permitted by
Committee or the Board) as payment for the exercise price of the option. If the
fair market value of a share of Common Stock at the time of exercise is greater
than the exercise price per share, this feature would enable the optionee to
acquire a number of shares of Common Stock upon exercise of the option which is
greater than the number of shares delivered as payment for the exercise price.
In addition, an optionee can exercise his or her option in whole or in part and
then deliver the shares acquired upon such exercise (if permitted by the
Committee or the Board) as payment for the exercise price of all or part of his
options. Again, if the fair market value of a share of Common Stock at the time
of exercise is greater than the exercise price per share, this feature would
enable the optionee to either (1) reduce the amount of cash required to receive
a fixed number of shares upon exercise of the option or (2) receive a greater
number of shares upon exercise of the option for the same amount of cash that
would have otherwise been used.
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<PAGE>
Because options may be exercised in part from time to time, the ability to
deliver Common Stock as payment of the exercise price could enable the optionee
to turn a relatively small number of shares into a large number of shares.
Number of Shares Covered by the Option Plan. A total of 110,000 shares
of Common Stock, which is equal to approximately 4.8% of the issued and
outstanding Common Stock, has been reserved for future issuance pursuant to the
Option Plan. In the event of a stock split, reverse stock split, subdivision,
stock dividend or any other capital adjustment, the number of shares of Common
Stock under the Option Plan, the number of shares to which any Award relates and
the exercise price per share under any option shall be adjusted to reflect such
increase or decrease in the total number of shares of Common Stock outstanding
or such capital adjustment.
Amendment and Termination of the Option Plan. The Board of Directors
may at any time terminate or amend the Option Plan with respect to any shares of
Common Stock as to which Awards have not been granted, subject to any required
stockholder approval or any stockholder approval which the Board may deem to be
advisable. The Board of Directors may not, without the consent of the holder of
an Award, alter or impair any Award previously granted or awarded under the
Option Plan except as specifically authorized by the plan.
Unless sooner terminated, the Option Plan shall continue in effect for
a period of ten years from November 15, 2000, the date that the Option Plan was
adopted by the Board of Directors. Termination of the Option Plan shall not
affect any previously granted Awards.
Awards to be Granted. The Committee intends to grant incentive options
to officers and employees and to grant non-incentive options to non-employee
directors pursuant to the terms of the Option Plan, which will vest one year
from the date of grant with an exercise price equal to the fair value market of
a share of Common Stock on the date of grant. Such grants may occur before the
Annual Meeting but will be subject to stockholder approval of the Option Plan.
At December 1, 2000, the closing price of a share of Common Stock as reported on
the Nasdaq Stock Market was $14.25. The following table sets forth certain
information with respect to such grants.
<TABLE>
<CAPTION>
Number of Shares
Name of Individual or Subject to
Number of Persons in Group Title Stock Options
-------------------------- ----- -------------
<S> <C> <C>
Edward J. Molnar President and Chief Executive 2,100
Officer
Ronald B. Geib Executive Vice President and 1,400
Chief Operating Officer
Marian Bickerstaff Senior Vice President 1,100
All executive officers as -- 5,600
a group (four persons)
All non-employee directors -- 7,500
as a group (six persons)
All employees, not including executive -- 12,610
officers, as a group (50 persons)
</TABLE>
Federal Income Tax Consequences. Under current provisions of the Code,
the federal income tax treatment of incentive stock options and compensatory
stock options is different. As regards incentive stock options, an optionee who
meets certain holding period requirements will not recognize income at the time
the option is granted or at the time the option is exercised, and a federal
income tax deduction generally will not be available to the Company any time as
a result of such grant or exercise. With respect to compensatory stock options,
the difference between the fair market value on the date of exercise and the
option exercise price generally will be treated as compensation income upon
exercise, and the Company will be entitled to a deduction in the amount of
income so recognized by the optionee.
16
<PAGE>
Section 162(m) of the Code generally limits the deduction for certain
compensation in excess of $1 million per year paid by a publicly-traded
corporation to its chief executive officer and the four other most highly
compensated executive officers ("covered executive"). Certain types of
compensation, including compensation based on performance goals, are excluded
from the $1 million deduction limitation. In order for compensation to qualify
for this exception: (i) it must be paid solely on account of the attainment of
one or more preestablished, objective performance goals; (ii) the performance
goal must be established by a compensation committee consisting solely of two or
more outside directors, as defined; (iii) the material terms under which the
compensation is to be paid, including performance goals, must be disclosed to
and approved by stockholders in a separate vote prior to payment; and (iv) prior
to payment, the compensation committee must certify that the performance goals
and any other material terms were in fact satisfied (the "Certification
Requirement").
Treasury regulations provide that compensation attributable to a stock
option is deemed to satisfy the requirement that compensation be paid solely on
account of the attainment of one or more performance goals if: (i) the grant is
made by a compensation committee consisting solely of two or more outside
directors, as defined; (ii) the plan under which the option is granted states
the maximum number of shares with respect to which options may be granted during
a specified period to any employee; and (iii) under the terms of the option, the
amount of compensation the employee could receive is based solely on an increase
in the value of the stock after the date of grant or award. The Certification
Requirement is not necessary if these other requirements are satisfied.
The Option Plan has been designed to meet the requirements of Section
162(m) of the Code and, as a result, the Company believes that compensation
attributable to stock options granted under the Option Plan in accordance with
the foregoing requirements will be fully deductible under Section 162(m) of the
Code. If the non-excluded compensation of a covered executive exceeded $1
million, however, compensation attributable to other awards, such as restricted
stock, may not be fully deductible unless the grant or vesting of the award is
contingent on the attainment of a performance goal determined by a compensation
committee meeting specified requirements and disclosed to and approved by the
stockholders of the Company. The Board of Directors believes that the likelihood
of any impact on the Company from the deduction limitation contained in Section
162(m) of the Code is remote at this time.
The above description of tax consequences under federal law is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
Accounting Treatment. Neither the grant nor the exercise of an
incentive stock option or a non-qualified stock option under the Stock Option
Plan currently requires any charge against earnings under generally accepted
accounting principles. In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," which is effective for transactions
entered into after December 15, 1995. This Statement establishes financial
accounting and reporting standards for stock-based employee compensation plans.
This Statement defines a fair value method of accounting for an employee stock
option or similar equity instrument and encourages all entities to adopt that
method of accounting for all of their employee stock compensation plans.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value method of accounting prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees." Under the fair value
method, compensation cost is measured at the grant date based on the value of
the award and is recognized over the service period, which is usually the
vesting period. Under the intrinsic value method, compensation cost is the
excess, if any, of the quoted market price of the stock at grant date or other
measurement date over the amount an employee must pay to acquire the stock. The
Company anticipates that it will use the intrinsic value method, in which event
pro forma disclosure will be included in the footnotes to the Company's
financial statements to show what net income and earnings per share would have
been if the fair value method had been utilized. If the Company elects to
utilize the fair value method, its net income and earnings per share may be
adversely affected.
17
<PAGE>
Stockholder Approval. All Awards granted under the Option Plan will be
subject to the approval by stockholders. Stockholder ratification of the Option
Plan will satisfy listing requirements of the Nasdaq Stock Market and federal
tax requirements.
The Board of Directors recommends that stockholders vote FOR adoption
of the 2000 Stock Option Plan.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Deloitte & Touche
independent certified public accountants, to perform the audit of the Company's
financial statements for the year ending September 30, 2001, and further
directed that the selection of auditors be submitted for ratification by the
stockholders at the Annual Meeting.
The Company has been advised by Deloitte & Touche that neither that
firm nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
certified public accountants and clients. Deloitte & Touche will have one or
more representatives at the Annual Meeting who will have an opportunity to make
a statement, if they so desire, and will be available to respond to appropriate
questions.
The Board of Directors recommends that you vote FOR the ratification of
the appointment of Deloitte & Touche as independent auditors for fiscal 2001.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is scheduled to be held in January 2002, must be received at
the principal executive offices of the Company, 271 Main Street, Harleysville,
Pennsylvania 19438, Attention: Marian Bickerstaff, Senior Vice President and
Secretary, no later than August 21, 2001. If such proposal is in compliance with
all of the requirements of Rule 14a-8 of the Exchange Act, it will be included
in the proxy statement and set forth on the form of proxy issued for such annual
meeting of stockholders. It is urged that any such proposals be sent certified
mail, return receipt requested.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 of the Exchange Act may be
brought before an annual meeting pursuant to the Company's Bylaws, which
provides that business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, or
(b) otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Company. To be timely a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Company not later than
ninety days prior to the anniversary date of the mailing of proxy materials by
the Company in connection with the immediately preceding annual meeting of
stockholders or in the case of the first annual meeting of stockholders
following the Reorganization, not later than 90 days prior to the anniversary
date of the mailing of proxy materials by the Bank in connection with the
immediately preceding annual meeting of stockholders of the Bank prior to the
Reorganization. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting, (b) the name and address, as they appear on the Company's books, of the
stockholder proposing such business, (c) the class and number of shares of the
Company which are beneficially owned by the stockholder, and (d) any material
interest of the stockholder in such business. To be timely with respect to the
next annual meeting of stockholders of the Company, a stockholders notice must
be received by the Company no later than September 20, 2001.
18
<PAGE>
ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the year
ended September 30, 2000 accompanies this Proxy Statement. Such annual report is
not part of the proxy solicitation materials.
Upon receipt of a written request, the Company will furnish to any
stockholder without charge a copy of the Company's Annual Report on Form 10-K
required to be filed with the Securities and Exchange Commission under the
Exchange Act. Such written requests should be directed to Diane P. Moyer, Senior
Vice President and Secretary, Harleysville Savings Financial Corporation, 271
Main Street, Harleysville, Pennsylvania 19438. The Form 10-K is not part of the
proxy solicitation materials.
OTHER MATTERS
Management is not aware of any business to come before the Annual
Meeting other than the matters described above in this Proxy Statement. However,
if any other matters should properly come before the meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by the Company.
The Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending the proxy
materials to the beneficial owners of the Common Stock. In addition to
solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
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APPENDIX A
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
2000 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Harleysville Savings Financial Corporation (the "Corporation") hereby
establishes this 2000 Stock Option Plan (the "Plan") upon the terms and
conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Corporation and its Subsidiary Companies by providing Employees and
Non-Employee Directors with a proprietary interest in the Corporation as an
incentive to contribute to the success of the Corporation and its Subsidiary
Companies, and rewarding Employees for outstanding performance and the
attainment of targeted goals. All Incentive Stock Options issued under this Plan
are intended to comply with the requirements of Section 422 of the Code, and the
regulations thereunder, and all provisions hereunder shall be read, interpreted
and applied with that purpose in mind.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option granted pursuant to the terms of this
Plan.
3.02 "Bank" means Harleysville Savings Bank, the wholly owned
subsidiary of the Corporation.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Change in Control of the Corporation" shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act,
whether or not the Corporation in fact is required to comply with Regulation 14A
thereunder; provided that, without limitation, such a change in control shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the Corporation, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing 25% or
more of the combined voting power of the Corporation's then outstanding
securities, or (ii) during any period of twenty-four consecutive months during
the term of an Option, individuals who at the beginning of such period
constitute the Board of the Corporation cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination for election by
the Corporation's stockholders, of each director who was not a director at the
date of grant has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the period.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
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3.06 "Committee" means a committee of two or more directors appointed
by the Board pursuant to Article IV hereof each of whom shall be a Non-Employee
Director as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor
thereto and within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.
3.07 "Common Stock" means shares of the common stock, $.10 par value
per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company, or, if no
such plan applies, which would qualify such individual for disability benefits
under the long-term disability plan maintained by the Corporation, if such
individual were covered by that plan.
3.09 "Effective Date" means the day upon which the Board approves this
Plan.
3.10 "Employee" means any person who is employed by the Corporation or
a Subsidiary Company, or is an Officer of the Corporation or a Subsidiary
Company, but not including directors who are not also Officers of or otherwise
employed by the Corporation or a Subsidiary Company.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.12 "Fair Market Value" shall be equal to the fair market value per
share of the Corporation's Common Stock on the date an Award is granted. For
purposes hereof, the Fair Market Value of a share of Common Stock shall be the
closing sale price of a share of Common Stock on the date in question (or, if
such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the composite
of the markets, if more than one) or national quotation system in which such
shares are then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal market or
national quotation system then in use, or if no such quotations are available,
the price furnished by a professional securities dealer making a market in such
shares selected by the Committee.
3.13 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.14 "Non-Employee Director" means a member of the Board of the
Corporation or Board of Directors of the Bank who is not an Officer or Employee
of the Corporation or any Subsidiary Company.
3.15 "Non-Qualified Option" means any Option granted under this Plan
which is not an Incentive Stock Option.
3.16 "Officer" means an Employee whose position in the Corporation or
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.17 "Option" means a right granted under this Plan to purchase Common
Stock.
3.18 "Optionee" means an Employee or Non-Employee Director or former
Employee or Non-Employee Director to whom an Option is granted under the Plan.
3.19 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Corporation or a Subsidiary Corporation, or, if no such plan is applicable,
which would constitute "retirement" under the Corporation's pension benefit
plan, if such individual were a participant in that plan.
3.20 "Subsidiary Companies" means those subsidiaries of the
Corporation, including the Bank, which meet the definition of "subsidiary
corporations" set forth in Section 425(f) of the Code, at the time of granting
of the Option in question.
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ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority to adopt, amend
and rescind such rules, regulations and procedures as, in its opinion, may be
advisable in the administration of the Plan, including, without limitation,
rules, regulations and procedures which (i) deal with satisfaction of an
Optionee's tax withholding obligation pursuant to Section 12.02 hereof, (ii)
include arrangements to facilitate the Optionee's ability to borrow funds for
payment of the exercise or purchase price of an Award, if applicable, from
securities brokers and dealers, and (iii) include arrangements which provide for
the payment of some or all of such exercise or purchase price by delivery of
previously-owned shares of Common Stock or other property and/or by withholding
some of the shares of Common Stock which are being acquired. The interpretation
and construction by the Committee of any provisions of the Plan, any rule,
regulation or procedure adopted by it pursuant thereto or of any Award shall be
final and binding in the absence of action by the Board.
4.02 Appointment and Operation of the Committee. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board.
The Board from time to time may remove members from, or add members to, the
Committee, provided the Committee shall continue to consist of two or more
members of the Board, each of whom shall be a Non-Employee Director, as defined
in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor thereto. In
addition, each member of the Committee shall be an "outside director" within the
meaning of Section 162(m) of the Code and regulations thereunder at such times
as is required under such regulations. The Committee shall act by vote or
written consent of a majority of its members. Subject to the express provisions
and limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. It may
appoint one of its members to be chairman and any person, whether or not a
member, to be its secretary or agent. The Committee shall report its actions and
decisions to the Board at appropriate times but in no event less than one time
per calendar year.
4.03 Revocation for Misconduct. The Board or the Committee may by
resolution immediately revoke, rescind and terminate any Option, or portion
thereof, to the extent not yet vested to the extent not yet exercised,
previously granted or awarded under this Plan to an Employee who is discharged
from the employ of the Corporation or a Subsidiary Company for cause, which, for
purposes hereof, shall mean termination because of the Employee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order. Options granted to a Non-Employee
Director who is removed for cause pursuant to the Corporation's Articles of
Incorporation and Bylaws or the Bank's Charter and Bylaws shall terminate as of
the effective date of such removal.
4.04 Limitation on Liability. Neither the members of the Board nor any
member of the Committee shall be liable for any action or determination made in
good faith with respect to the Plan, any rule, regulation or procedure adopted
by it pursuant thereto or any Awards granted under it. If a member of the Board
or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Corporation
shall, subject to the requirements of applicable laws and regulations, indemnify
such member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Corporation and its Subsidiary Companies and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
4.05 Compliance with Law and Regulations. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
The Corporation shall not be required to issue or deliver any certificates for
shares of Common Stock prior to the completion of any registration or
qualification of or obtaining of consents or approvals with respect
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to such shares under any federal or state law or any rule or regulation of any
government body, which the Corporation shall, in its sole discretion, determine
to be necessary or advisable. Moreover, no Option may be exercised if such
exercise would be contrary to applicable laws and regulations.
4.06 Restrictions on Transfer. The Corporation may place a legend upon
any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees and Non-Employee Directors of
the Corporation and its Subsidiary Companies as may be designated from time to
time by the Board or the Committee. Awards may not be granted to individuals who
are not Employees or Non-Employee Directors of either the Corporation or its
Subsidiary Companies. Non-Employee Directors shall be eligible to receive only
Non-Qualified Options.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 Option Shares. The aggregate number of shares of Common Stock
which may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be 110,000. None of such shares shall be the subject of more
than one Award at any time, but if an Option as to any shares is surrendered
before exercise, or expires or terminates for any reason without having been
exercised in full, or for any other reason ceases to be exercisable, the number
of shares covered thereby shall again become available for grant under the Plan
as if no Awards had been previously granted with respect to such shares.
6.02 Source of Shares. The shares of Common Stock issued under the Plan
may be authorized but unissued shares, treasury shares or shares purchased by
the Corporation on the open market or from private sources for use under the
Plan.
ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
7.01 Determination of Awards. The Board or the Committee shall, in its
discretion, determine from time to time which Employees and Non-Employee
Directors will be granted Awards under the Plan, the number of shares of Common
Stock subject to each Award, whether each Option will be an Incentive Stock
Option or a Non-Qualified Stock Option and the exercise price of an Option. In
making all such determinations there shall be taken into account the duties,
responsibilities and performance of each Optionee, his present and potential
contributions to the growth and success of the Corporation, his salary and such
other factors deemed relevant to accomplishing the purposes of the Plan.
7.02 Maximum Awards to any Person. Notwithstanding anything contained
in this Plan to the contrary, the maximum number of shares of Common Stock to
which Awards may be granted to any individual in any calendar year shall be
40,000.
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ARTICLE VIII
OPTIONS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 Stock Option Agreement. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which shall
set forth the total number of shares of Common Stock to which it pertains, the
exercise price, whether it is a Non-Qualified Option or an Incentive Stock
Option, and such other terms, conditions, restrictions and privileges as the
Board or the Committee in each instance shall deem appropriate, provided they
are not inconsistent with the terms, conditions and provisions of this Plan.
Each Optionee shall receive a copy of his executed Stock Option Agreement.
8.02 Option Exercise Price.
(a) Incentive Stock Options. The per share price at which the
subject Common Stock may be purchased upon exercise of an Incentive Stock Option
shall be no less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Incentive Stock Option is granted, except
as provided in Section 8.09(b).
(b) Non-Qualified Options. The per share price at which the
subject Common Stock may be purchased upon exercise of a Non-Qualified Option
shall be established by the Committee at the time of grant, but in no event
shall be less than the greater of (i) the par value or (ii) one hundred percent
(100%) of the Fair Market Value of a share of Common Stock at the time such
Non-Qualified Option is granted.
8.03 Vesting and Exercise of Options.
(a) General Rules. Incentive Stock Options and Non-Qualified
Options shall become vested and exercisable at the rate, to the extent and
subject to such limitations as may be specified by the Board or the Committee.
Notwithstanding the foregoing, no vesting shall occur on or after an Employee's
employment or service as a Non-Employee Director with the Corporation and all
Subsidiary Companies is terminated for any reason other than his death,
Disability, Retirement or a Change in Control of the Corporation. In determining
the number of shares of Common Stock with respect to which Options are vested
and/or exercisable, fractional shares will be rounded up to the nearest whole
number if the fraction is 0.5 or higher, and down if it is less.
(b) Accelerated Vesting. Unless the Committee or Board shall
specifically state otherwise at the time an Option is granted, all Options
granted under this Plan shall become vested and exercisable in full on the date
an Optionee terminates his employment with the Corporation or a Subsidiary
Company or service as a Non-Employee Director because of his death, Disability
or Retirement. In addition, all outstanding Options shall become immediately
vested and exercisable in full as of the effective date of a Change in Control
of the Corporation.
8.04 Duration of Options.
(a) General Rule. Except as provided in Sections 8.04(b) and
8.09, each Option or portion thereof shall be exercisable at any time on or
after it vests and remain exercisable until the earlier of (i) ten (10) years
after its date of grant or (ii) three (3) months after the date on which the
Employee or Non-Employee Director ceases to be employed by or serve the
Corporation and all Subsidiary Companies, or any successor thereto, unless the
Board or the Committee in its discretion decides at the time of grant or
thereafter to extend such period of exercise upon termination of employment or
service to a period not exceeding five (5) years.
(b) Exceptions. Unless the Board or the Committee shall
specifically state otherwise at the time an Option is granted, if an Employee
terminates his employment with the Corporation or a Subsidiary Company as a
result of Disability or Retirement without having fully exercised his Options,
the Employee shall have the right, during the one (1) year period following his
termination due to Disability or Retirement, to exercise such Options.
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Unless the Board or the Committee shall specifically state otherwise at
the time an Option is granted, if an Employee or Non-Employee Director
terminates his employment or service with the Corporation or a Subsidiary
Company following a Change in Control of the Corporation without having fully
exercised his Options, the Optionee shall have the right to exercise such
Options during the remainder of the original ten (10) year term of the Option
from the date of grant.
If an Optionee dies while in the employ or service of the Corporation
or a Subsidiary Company or terminates employment or service with the Corporation
or a Subsidiary Company as a result of Disability or Retirement and dies without
having fully exercised his Options, the executors, administrators, legatees or
distributees of his estate shall have the right, during the one (1) year period
following his death, to exercise such Options.
In no event, however, shall any Option be exercisable more than ten
(10) years from the date it was granted.
8.05 Nonassignability. Options shall not be transferable by an Optionee
except by will or the laws of descent or distribution, and during an Optionee's
lifetime shall be exercisable only by such Optionee or the Optionee's guardian
or legal representative. Notwithstanding the foregoing, or any other provision
of this Plan, an Optionee who holds Non-Qualified Options may transfer such
Options to his or her spouse, lineal ascendants, lineal descendants, or to a
duly established trust for the benefit of one or more of these individuals.
Options so transferred may thereafter be transferred only to the Optionee who
originally received the grant or to an individual or trust to whom the Optionee
could have initially transferred the Option pursuant to this Section 8.05.
Options which are transferred pursuant to this Section 8.05 shall be exercisable
by the transferee according to the same terms and conditions as applied to the
Optionee.
8.06 Manner of Exercise. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be set
forth in the written Stock Option Agreement provided for in Section 8.01 above.
8.07 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of any Option shall be
made to the Corporation upon exercise of the Option. All shares sold under the
Plan shall be fully paid and nonassessable. Payment for shares may be made by
the Optionee in cash or, at the discretion of the Board or the Committee, by
delivering shares of Common Stock (including shares acquired pursuant to the
exercise of an Option) or other property equal in Fair Market Value to the
purchase price of the shares to be acquired pursuant to the Option, by
withholding some of the shares of Common Stock which are being purchased upon
exercise of an Option, or any combination of the foregoing.
8.08 Voting and Dividend Rights. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded on
the Corporation's stockholder ledger as the holder of record of such shares
acquired pursuant to an exercise of an Option.
8.09 Additional Terms Applicable to Incentive Stock Options. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.08 above, to those
contained in this Section 8.09.
(a) Notwithstanding any contrary provisions contained
elsewhere in this Plan and as long as required by Section 422 of the Code, the
aggregate Fair Market Value, determined as of the time an Incentive Stock Option
is granted, of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
under this Plan, and stock options that satisfy the requirements of Section 422
of the Code under any other stock option plan or plans maintained by the
Corporation (or any parent or Subsidiary Company), shall not exceed $100,000.
(b) Limitation on Ten Percent Stockholders. The price at which
shares of Common Stock may be purchased upon exercise of an Incentive Stock
Option granted to an individual who, at the time such Incentive Stock Option is
granted, owns, directly or indirectly, more than ten percent (10%) of the total
combined voting power of all
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classes of stock issued to stockholders of the Corporation or any Subsidiary
Company, shall be no less than one hundred and ten percent (110%) of the Fair
Market Value of a share of the Common Stock of the Corporation at the time of
grant, and such Incentive Stock Option shall by its terms not be exercisable
after the earlier of the date determined under Section 8.04 or the expiration of
five (5) years from the date such Incentive Stock Option is granted.
(c) Notice of Disposition; Withholding; Escrow. An Optionee
shall immediately notify the Corporation in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section 421 of the Code) of any shares of
Common Stock acquired through exercise of an Incentive Stock Option, within two
(2) years after the grant of such Incentive Stock Option or within one (1) year
after the acquisition of such shares, setting forth the date and manner of
disposition, the number of shares disposed of and the price at which such shares
were disposed of. The Corporation shall be entitled to withhold from any
compensation or other payments then or thereafter due to the Optionee such
amounts as may be necessary to satisfy any withholding requirements of federal
or state law or regulation and, further, to collect from the Optionee any
additional amounts which may be required for such purpose. The Committee may, in
its discretion, require shares of Common Stock acquired by an Optionee upon
exercise of an Incentive Stock Option to be held in an escrow arrangement for
the purpose of enabling compliance with the provisions of this Section 8.09(c).
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any outstanding Award relates,
the maximum number of shares that can be covered by Awards to each Employee,
each Non-Employee Director and all Non-Employee Directors as a group, and the
exercise price per share of Common Stock under any outstanding Option shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the effective date of
this Plan resulting from a split, subdivision or consolidation of shares or any
other capital adjustment, the payment of a stock dividend, or other increase or
decrease in such shares effected without receipt or payment of consideration by
the Corporation. If, upon a merger, consolidation, reorganization, liquidation,
recapitalization or the like of the Corporation, the shares of the Corporation's
Common Stock shall be exchanged for other securities of the Corporation or of
another corporation, each recipient of an Award shall be entitled, subject to
the conditions herein stated, to purchase or acquire such number of shares of
Common Stock or amount of other securities of the Corporation or such other
corporation as were exchangeable for the number of shares of Common Stock of the
Corporation which such optionees would have been entitled to purchase or acquire
except for such action, and appropriate adjustments shall be made to the per
share exercise price of outstanding Options.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to any required stockholder approval or any stockholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the holder of an
Award, alter or impair any Award previously granted or awarded under this Plan
except as specifically authorized herein.
ARTICLE XI
EMPLOYMENT AND SERVICE RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create any
right on the part of any Employee or Non-Employee Director to continue in such
capacity.
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ARTICLE XII
WITHHOLDING
12.01 Tax Withholding. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the Corporation
the amount required to be withheld as a condition to delivering the shares
acquired pursuant to an Award. The Corporation also may withhold or collect
amounts with respect to a disqualifying disposition of shares of Common Stock
acquired pursuant to exercise of an Incentive Stock Option, as provided in
Section 8.09(c).
12.02 Methods of Tax Withholding. The Board or the Committee is
authorized to adopt rules, regulations or procedures which provide for the
satisfaction of an Optionee's tax withholding obligation by the retention of
shares of Common Stock to which the Employee would otherwise be entitled
pursuant to an Award and/or by the Optionee's delivery of previously-owned
shares of Common Stock or other property.
ARTICLE XIII
EFFECTIVE DATE OF THE PLAN; TERM
13.01 Effective Date of the Plan. This Plan shall become effective on
the Effective Date, and Awards may be granted hereunder no earlier than the date
that this Plan is approved by stockholders of the Corporation and prior to the
termination of the Plan, provided that this Plan is approved by stockholders of
the Corporation pursuant to Article XIV hereof.
13.02 Term of the Plan. Unless sooner terminated, this Plan shall
remain in effect for a period of ten (10) years ending on the tenth anniversary
of the Effective Date. Termination of the Plan shall not affect any Awards
previously granted and such Awards shall remain valid and in effect until they
have been fully exercised or earned, are surrendered or by their terms expire or
are forfeited.
ARTICLE XIV
STOCKHOLDER APPROVAL
The Corporation shall submit this Plan to stockholders for approval at
a meeting of stockholders of the Corporation held within twelve (12) months
following the Effective Date in order to meet the requirements of (i) Section
422 of the Code and regulations thereunder, (ii) Section 162(m) of the Code and
regulations thereunder, and (iii) the National Association of Securities
Dealers, Inc. for quotation of the Common Stock on the Nasdaq Stock Market's
National Market.
ARTICLE XV
MISCELLANEOUS
15.01 Governing Law. To the extent not governed by federal law, this
Plan shall be construed under the laws of the Commonwealth of Pennsylvania.
15.02 Pronouns. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
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REVOCABLE PROXY
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION FOR USE ONLY AT THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JANUARY 24, 2001 AND AT ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of Harleysville Savings Financial
Corporation (the "Company"), hereby appoints the Board of Directors, or any
successors in their respective positions, as proxy, with full powers of
substitution, and hereby authorizes the Board to represent and vote, as
designated below, all the shares of common stock of the Company held of record
by the undersigned on December 8, 2000 at the Annual Metting of Stockholders to
be held at the Family Heritage Restaurant located in Franconia, Pennsylvania on
January 24, 2001 at 9:30 a.m., Eastern Time, or any adjournment thereof.
I. ELECTION OF DIRECTORS. For a term of three years: Sandford L. Alderfer, Mark
R. Cummins and Ronald B. Geib
With- For all
For hold Except
[ ] [ ] [ ]
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"For All Except" and write that nominee's name in the space provided below.
--------------------------------------------------------------------------------
2. Proposal to adopt the Hareleysville Savings Financial Corporation 2000 Stock
Option Plan
For Against Abstain
[ ] [ ] [ ]
3. Proposal to ratify the appointment by the Board of Directors of Dellitte &
Touche, as the Company's independent auditors for the year ending September
30, 2001.
For Against Abstain
[ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting as described in the
accompanying Proxy Statement.
Please be sure to sign and date this Proxy in the box below.
_____________________________________________________________
Date
_____________________________________________________________
Stockholder sign above Co-holder (if any) sign above
<PAGE>
Detach above card, sign, date and mail in postage paid envelope provided.
HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
HARLEYSVILLE, PENNSYLVANIA
If not otherwise specified, this proxy will be voted FOR the election of the
Board of Directors' nominees to the Board of Directors named in Proposal 1, FOR
the approval of the 2000 Stock Option Plan in Proposal 2, FOR rativication of
the independent auditors in Proposal 3 and otherwise at the discretion of the
proxies. In their discretion, the proxies are authorized to vote with respect to
approval of the minutes of the last meeting or stockholders, the election of any
person as director if a nominee is unalbe to serve or for good cause will not
serve, matters incident to the conduct of the meeting and upon such other
business as may properly come before this meeting. This proxy may be revoked at
any time prior to the time it is voted at the Annual Meeting.
The above signed hereby acknowledges receipt of a Notice of Annual Meeting of
Stockholders of Harleysvelle Savings Financial Corporation, to be held on
January 24, 2001 or any adjournment thereof, and a Proxy Statement Annual
Meeting, prior to the signing of this proxy.
Please sign exactly as your name(s) appear(s) on this Proxy. When signing in a
representative capacity, please give title. When shares are held jointly, bot
should sign.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE
