SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
SEC File Number: 000-23230
PHS Bancorp, Inc.
(Exact Name of registrant as specified in its charter)
PENNSYLVANIA 23-2744266
- ------------ ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
744 Shenango Road
P.O. Box 1568
Beaver Falls, Pennsylvania 15010
(724) 846 - 7300
--------------------------------
(Address, including zip code, and
telephone number, including area
code of Principal Executive Offices)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days. Yes [X] No [ ]
As of November 10, 1998 there were 2,760,000 shares outstanding of the issuer's
class of common stock.
<PAGE>
PEOPLES HOME SAVINGS BANK
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
Page
Number
Part I Financial Information
Item 1. Financial Statements
<S> <C> <C>
Consolidated Balance Sheet (unaudited) as of September 30, 1998
and December 31, 1997 3
Consolidated Statement of Income (unaudited) for the Three
and Nine Months ended September 30, 1998 and 1997 4
Consolidated Statement of Changes in Stockholders' Equity
(unaudited) for the Nine Months ended September 30, 1998 5
Consolidated Statement of Cash Flows (unaudited) for the
Nine Months ended September 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 16
Part II Other Information 17 - 18
Signatures 19
</TABLE>
<PAGE>
PEOPLES HOME SAVINGS BANK
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions $ 2,524,325 $ 2,388,632
Interest - bearing deposits with other institutions 4,588,535 3,307,604
Investment securities:
Available for sale 25,594,038 24,252,738
Held to maturity (market value $ 15,227,118
and $10,073,052) 15,114,267 10,014,815
Mortgage - backed securities:
Available for sale 36,083,880 30,159,139
Held to maturity (market value $ 47,508,247
and $40,885,072) 46,483,888 40,233,666
Loans (net of allowance for loan losses of $ 1,281,255
and $1,394,084) 98,291,941 99,691,337
Accrued interest receivable 1,677,374 1,393,399
Premises and equipment 4,517,461 4,424,493
Federal Home Loan Bank stock 1,374,800 1,019,500
Other assets 665,527 849,960
------------ ------------
TOTAL ASSETS $ 236,916,036 $ 217,735,283
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 176,913,430 $ 174,286,149
Advances from Federal Home Loan Bank 27,494,800 12,117,000
Other borrowings 1,534,054 1,115,765
Accrued interest payable and other liabilities 1,661,785 1,607,431
------------ ------------
Total liabilities 207,604,069 189,126,345
------------ ------------
Preferred stock, no par value; 2,000,000 shares authorized
and none issues and outstanding - -
Common stock, $.10 par value; 10,000,000 shares authorized
and 2,760,000 shares issued and outstanding 276,000 276,000
Additional paid in capital 10,583,662 10,560,263
Retained earnings - substantially restricted 18,331,223 17,728,095
Unearned ESOP shares at cost (79,860 and 63,660 shares) -1,253,027 -915,113
Net unrealized gain on securities 1,374,109 959,693
------------ ------------
Total stockholders' equity 29,311,967 28,608,938
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 236,916,036 $ 217,735,283
============ ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
3
<PAGE>
PEOPLES HOME SAVINGS BANK
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $ 2,121,501 $ 2,115,657 $ 6,282,458 $ 6,178,051
Investment securities:
Taxable 358,694 238,032 932,599 745,524
Exempt from federal income tax 243,899 288,470 748,748 962,293
Mortgage - backed securities 1,272,484 1,033,131 3,784,766 3,054,528
Interest - bearing deposits with other institutions 80,991 97,930 228,873 172,599
-------------- -------------- -------------- --------------
Total interest income 4,077,569 3,773,220 11,977,444 11,112,995
-------------- -------------- -------------- --------------
INTEREST EXPENSE
Deposits 1,810,437 1,875,177 5,464,224 5,638,147
Advances from Federal Home Loan Bank 279,481 29,415 749,830 246,636
Other borrowings 30,190 19,043 83,915 19,043
-------------- -------------- -------------- --------------
Total interest expense 2,120,108 1,923,635 6,297,969 5,903,826
-------------- -------------- -------------- --------------
Net interest income 1,957,461 1,849,585 5,679,475 5,209,169
PROVISION FOR LOAN LOSSES 95,000 140,000 275,000 445,000
-------------- -------------- -------------- --------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,862,461 1,709,585 5,404,475 4,764,169
-------------- -------------- -------------- --------------
NONINTEREST INCOME
Service charges on deposit accounts 110,856 142,969 333,394 408,440
Investment securities gains, net - - 116,858 77,340
Gain on sale of loans, net - 5,670 27,765 8,685
Rental income, net 26,145 14,757 67,254 62,904
Other income 89,565 81,348 167,044 131,393
-------------- -------------- -------------- --------------
Total noninterest income 226,566 244,744 712,315 688,762
-------------- -------------- -------------- --------------
NONINTEREST EXPENSE
Compensation and employee benefits 966,137 811,674 2,584,355 2,152,992
Occupancy and equipment costs 265,009 211,986 775,408 617,052
Deposit insurance premium 26,254 27,628 79,909 84,173
Data processing costs 10,427 77,842 71,353 210,493
Other expenses 410,624 370,376 1,171,560 1,125,282
-------------- -------------- -------------- --------------
Total noninterest expense 1,678,451 1,499,506 4,682,585 4,189,992
-------------- -------------- -------------- --------------
Income before income taxes 410,576 454,823 1,434,205 1,262,939
Income taxes 93,000 -16,475 306,677 93,525
-------------- -------------- -------------- --------------
NET INCOME $ 317,576 $ 471,298 $ 1,127,528 $ 1,169,414
============== ============== ============== ==============
Basic earnings per share (since inception July 10, 1997) $0.12 $0.15 $0.42 $0.15
============== ============== ============== ==============
Weighted average number of shares outstanding 2,678,646 2,710,388 2,680,311 2,710,388
============== ============== ============== ==============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
4
<PAGE>
PEOPLES HOME SAVINGS BANK
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Additional Unallocated Other Total
Common Paid in Retained Shares Held Comprehensive Stockholders' Comprehensive
Stock Capital Earnings by ESOP Income Equity Income
-------- ------------ ------------ -------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $276,000 $10,560,263 $17,728,095 ($915,113) $959,693 $28,608,938
Net Income 1,127,528 1,127,528 1,127,528
Other comprehensive income:
Unrealized gain on available
for sale securities,
net of reclassification
adjustment 414,416 414,416 414,416
---------
Comprehensive income $1,541,944
=========
Cash dividends ($0.19 per share) (524,400) (524,400)
Common stock acquired by ESOP (448,512) (448,512)
ESOP shares earned 23,399 110,598 133,997
------- ---------- ---------- ---------- --------- ----------
Balance, September 30, 1998 $276,000 $10,583,662 $18,331,223 ($1,253,027) $1,374,109 $29,311,967
====== ========== ========== ========== ========= ==========
Disclosure of
reclassification adjustment:
Unrealized holding gain
arising during the period 491,542
Less: reclassification
adjustment for gain
included in net income
(net of tax) (77,126)
---------
Net change in unrealized
gain on securities 414,416
=========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
5
<PAGE>
PEOPLES HOME SAVINGS BANK
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended Sept. 30,
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $1,127,528 $1,169,414
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 275,000 445,000
Provision for depreciation 373,125 232,079
Amortization of discounts, premiums and
loan origination fees 777,122 814,624
Gains on sale of investment securities, net (116,858) (77,340)
Gains on sale of loans, net (27,765) (8,685)
Decrease in loans held for sale 1,051,051 48,739
Increase in accrued interest receivable (283,975) (48,881)
Increase (decrease) in accrued interest payable 45,672 (34,849)
Amortization of ESOP unearned compensation 133,997 -
Other, net (278,049) 362,551
------------- ------------
Net cash provided by operating activities 3,076,848 2,902,652
------------- ------------
INVESTING ACTIVITIES
Investment and mortgage-backed securities available for sale:
Proceeds from sales 2,259,493 8,184,339
Proceeds from maturities and principal repayments 4,845,300 1,779,133
Purchases (13,617,911) (11,121,077)
Investment and mortgage-backed securities held to maturity:
Proceeds from maturities and principal repayments 11,275,748 7,280,195
Purchases (22,780,366) (2,147,643)
Increase in loans receivable, net (578,337) (5,704,005)
Proceeds from sale of repossessed assets 306,784 556,427
Purchase of premises and equipment, net (466,093) (1,525,654)
Purchase of Federal Home Loan Bank Stock (355,300) (47,400)
------------- ------------
Net cash used for investing activities (19,110,682) (2,745,685)
------------- ------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 2,627,281 (2,529,552)
Proceeds from Advances from Federal Home Loan Bank 15,377,800 -
Repayment of short term Advances from Federal Home Loan Bank - (6,000,000)
Proceeds from other borrowings 448,512 1,032,065
Repayment of other borrowings (30,223) (4,927)
Common stock acquired by ESOP (448,512) (812,438)
Proceeds from sale of common stock - 11,827,733
Capitalization of PHS Bancorp, MHC - (1,000,000)
Cash dividends paid (524,400) -
------------- ------------
Net cash provided by financing activities 17,450,458 2,512,881
------------- ------------
Increase in cash and cash equivalents 1,416,624 2,669,848
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,696,236 5,384,939
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $7,112,860 $8,054,787
============= ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
6
<PAGE>
Peoples Home Savings Bank
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of Peoples Home Savings Bank (the "Bank"),
includes its wholly-owned subsidiary, HOMECO (the "Subsidiary"). All significant
intercompany balances and transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with instructions to Form 10-Q and, therefore, do not necessarily
include all information which would be included in audited financial statements.
The information furnished reflects all normal recurring adjustments which are,
in the opinion of management, necessary for the fair statement of the results of
the period. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year or any
other period. The unaudited consolidated financial statements should be read in
conjunction with the audited financial statements and the notes thereto for the
year ended December 31, 1997.
Comprehensive Income
Effective January 1, 1998, the Bank adopted the Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." In adopting
Statement No. 130, the Bank is required to present comprehensive income and its
components in a full set of general purpose financial statements. The Bank has
elected to report the effects of Statement No. 130 as part of the Statement of
Changes in Stockholders' Equity.
NOTE 2 - MUTUAL HOLDING COMPANY REORGANIZATION
On July 9, 1997, the Bank reorganized from a Pennsylvania mutual savings bank
into a Pennsylvania mutual holding company structure (the "Reorganization").
Pursuant to the Reorganization, the Bank, among other things, exchanged its
Pennsylvania mutual savings bank charter for a Pennsylvania stock savings
charter and formed PHS Bancorp, M.H.C., a Pennsylvania-chartered mutual holding
company (the "MHC"). Concurrently with the Reorganization, 1,242,000 shares of
the Bank's Common Stock (representing 45% of the then issued and outstanding
shares of the Bank's Common Stock) were issued in a public offering to certain
depositors of the Bank at a price of $10.00 per share.
The Bank received net proceeds of approximately $11.8 million. The MHC received
1,518,000 shares of the Bank common stock (representing 55.0% of the then issued
and outstanding shares of the Bank' a common stock) and $1,000,000 in cash.
Subsequent to the Reorganization, the Bank's Employee Stock Ownership Plan
("ESOP") purchased 96,000 shares of common stock of the Bank in open market
transactions with funds provided by a third party lender. The ESOP is authorized
to purchase up to 99,360 shares of the Bank's common stock (8% of the shares
issued in the public offering).
7
<PAGE>
Pursuant to applicable regulations, the Company is required to own more than a
majority of the common stock of the Bank, and therefore the Company is able to
elect the Board of Directors and otherwise direct the affairs of the Bank.
Voting rights in the Company are held by the Board of Directors. Any conversion
of the Company to stock form would require, among other things, the approval of
qualifying depositors and stockholders of the Bank.
The Bank may not declare or pay a cash dividend on any of its stock if the
effect thereof would cause the Bank's regulatory capital to be reduced below (i)
the amount required for the liquidation account established in connection with
the Reorganization; or (ii) the regulatory capital requirements imposed by the
Federal Deposit Insurance Corporation ("FDIC") and the Pennsylvania Department
of Banking ("Department") .
NOTE 3 - EARNINGS PER SHARE
Earnings per share for the nine months ended September 30, 1998 have been
calculated based upon the weighted average number of shares issued and
outstanding. The number of shares used in the earnings per share computation
were 2,678,646 and 2,680,311 for the three and nine month periods ended
September 30, 1998, respectively. Net income used in the earnings per share
computation was $317,576 and $1,127,528 , respectively. The number of shares
used in the earnings per share computation were 2,710,388 for both the three and
nine month periods ended September 30, 1997. Net income used in the earnings per
share computation was $416,074 which represents net income since inception, July
10, 1997.
Shares outstanding do not include ESOP shares that were purchased and
unallocated in accordance with SOP 93-6, "Employers' Accounting for Stock
Ownership Plans."
NOTE 4 - STOCK HOLDING COMPANY REORGANIZATION
On November 9, 1998 the Bank completed its reorganization to the stock holding
company form of organization. In connection with the reorganization,
stockholders of the Bank exchanged their shares of common stock in the Bank for
shares of common stock in PHS Bancorp, Inc., a Pennsylvania corporation, on a
one for one basis. Upon completion of the reorganization, there were 2,760,000
shares of common stock of PHS Bancorp, Inc. issued and outstanding. PHS Bancorp,
M.H.C. owns 55% of the outstanding stock of PHS Bancorp, Inc., the stock holding
company.
Beginning Tuesday, November 10, 1998, PHS Bancorp, Inc. succeeded the Bank's
common stock in the over-the-counter market on the Nasdaq National Market and,
for the first 20 trading days, will trade under the symbol "PHSBD." Upon
expiration of the 20-day period, the common stock will trade under the Bank's
old symbol "PHSB."
PHS Bancorp, Inc. will file periodic financial reports with the Securities and
Exchange Commission.
8
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The Private Securities Litigation Act of 1995 contains safe harbor provisions
regarding forward-looking statements. When used in this discussion, the words
"believes", "anticipates", "contemplates", "expects", and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain risks and uncertainties which could cause actual results to differ
materially from those projected. Those risks and uncertainties include changes
in interest rates, risks associated with the effect of opening a new branch, the
ability to control costs and expenses, and general economic conditions. The Bank
and the Company undertake no obligation to publicly release the results of any
revisions to those forward looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Financial Condition
Total assets at September 30, 1998 increased $19.2 million or 8.8% from December
31, 1997. Increases in investment and mortgage-backed securities of $18.6
million and interest-bearing deposits of $1.3 million were partially offset by a
decrease in loans receivable of $1.4 million.
Loans receivable at September 30, 1998, of $98.3 million represented a decrease
of 1.4% from $99.7 million at December 31, 1997. The decrease in the loan
portfolio was primarily attributable to the sale of the Bank's student loan
portfolio as the Bank intends to stop originating and holding student loans.
Investment and mortgage-backed securities increased $18.6 million to $123.3
million at September 30, 1998, from $104.7 million at December 31, 1997. This
increase was the result of purchases of $36.4 million which were funded by sales
of $2.3 million, maturities of $3.5 million, principal repayments of $12.6
million and increased Federal Home Loan Bank advances of $15.4 million. The
purchases funded by fixed rate borrowings were part of the Bank's leverage
strategy. The sales of securities were in conjunction with a restructuring of
the securities portfolio to reduce levels of tax exempt securities to maximize
the tax benefits of such securities in light of alternative minimum tax
computations.
Total deposits after interest credited at September 30, 1998, were $176.9
million, an increase of $2.6 million or 1.5% from $174.3 million at December 31,
1997.
Advances from the Federal Home Loan Bank of Pittsburgh increased $15.4 million
to $27.5 million at September 30, 1998 from $12.1 million at December 31, 1997.
This increase was the result of additional borrowings to fund securities
purchases, as discussed above.
Other borrowings increased to $418,000 at September 30, 1998 primarily due to
borrowings of $448,000 to fund the purchase of 23,400 shares of stock for the
Employee Stock Ownership Plan.
Stockholders' equity increased $703,000 for the nine month period ended
September 30, 1998, due to net income of $1,128,000 and an increase in net
unrealized gains on securities of $414,000. These increases were partially
offset by an increase in unearned ESOP shares of $338,000 and cash dividends
paid of $524,000.
9
<PAGE>
Results of Operations
Comparison of Operating Results for the Three Months Ended September 30, 1998
and September 30, 1997
General.
Net income for the three months ended September 30, 1998 decreased by $153,000
to $318,000, from $471,000 for the three months ended September 30, 1997. This
decrease was primarily due to a decrease in non-interest income of $18,000 and
increases in non-interest expense of $179,000 and increased income tax
provisions of $109,000. These decreases were partially offset by an increase in
net interest income of $108,000 along with a decrease in provisions for loan
losses of $45,000.
Net Interest Income.
Reported net interest income increased $108,000 or 5.8% for the three months
ended September 30, 1998. Net interest income on a tax equivalent basis
increased by $94,000 or 4.9% in a period when both average interest earning
assets and average interest-bearing liabilities increased (increased $20.2
million and $22.0 million, respectively). The Bank's net interest rate spread
decreased 10 basis points (with 100 basis points being equal to 1%) to 3.34% for
the three months ended September 30, 1998. The increase in average earning
assets of $20.2 million was primarily due to a $23.1 million increase in average
investment and mortgage-backed securities partially offset by a $2.9 million
decrease in average loans.
Interest Income.
Interest income totaled $4.1 million for the three months ended September 30,
1998, an increase of $304,000 or 8.1% over the total of $3.8 million for the
three months ended September 30, 1997. This increase was mainly due to an
increase in the Bank's average interest-earning assets of $20.2 million for the
three months ended September 30, 1998. Interest earned on loans increased $5,000
or 0.2%, in 1998. The increase was due to a 27 basis point increase in the yield
earned partially offset by a $2.9 million decrease in the average balance of
loans. Interest earned on investment and mortgage-backed securities (including
securities held for sale) increased $299,000 or 18.0%, in 1998. The increase was
due to a $19.1 million increase in the average balance of investment and
mortgage-backed securities offset by a 7 basis point decrease in the yield
earned.
Interest Expense.
Interest expense increased $196,000 to $2.1 million for the three months ended
September 30, 1998. The increase in interest expense was due to a $22.1 million
increase in the average balance of interest-bearing liabilities due to increased
borrowings pursuant to the Bank's leverage strategy partially offset by an eight
basis point decrease in the average cost of interest-bearing liabilities.
Provision for Losses on Loans.
The provision for loan losses decreased by $45,000 to $95,000 for the three
months ended September 30, 1998, from $140,000 for the three months ended
September 30, 1997. While management believes that the allowance for loan losses
is sufficient, there can be no assurance that regulators, in reviewing the
Bank's loan portfolio, will not request the Bank to significantly increase its
allowance for loan losses, or that a deteriorating real estate market will cause
the Bank to significantly increase its allowance for loans losses, therefore
negatively effecting the Bank's financial condition and earnings.
10
<PAGE>
Non-interest Income.
Non-interest income decreased $18,000 to $227,000 for the three months ended
September 30, 1998, from $245,000 for the three months ended September 30, 1997.
This decrease was primarily due to a decrease in service charges on deposit
accounts of $32,000 partially offset by increased rental income of $11,000.
Non-interest Expense.
Non-interest expense increased $178,000 to $1,678,000 for the three months ended
September 30, 1998, from $1,500,000 for the three months ended September 30,
1997. This increase was primarily due to increases in compensation and employee
benefits (including stock related benefits) of $154,000 for the three months
ended September 30, 1998.
The increase in compensation and employee benefits of $154,000 was primarily the
result of an accrual for expense related to the Bank's Restricted Stock Plan of
$136,000. See also Item 4 - Results of Votes of Securities Holders and Item 5 -
Other Information, regarding the Bank's stock benefit plans and stock holding
company reorganization.
Income Tax Expense.
Income tax expense increased $109,000 to $93,000 for the three months ended
September 30, 1998, from a tax benefit of $16,000 for the three months ended
September 30, 1997.
Comparison of Operating Results for the Nine Months Ended September 30, 1998 and
September 30, 1997
General.
Net income for the nine months ended September 30, 1998 decreased by $41,000 to
$1,128,000, from $1,169,000 for the nine months ended September 30, 1997. This
decrease was primarily due to increases in non-interest expense of $493,000 and
increased income tax provisions of $213,000. These decreases to net income were
partially offset by an increase in net interest income of $470,000 along with an
increase in non-interest income of $23,000 and a decrease in provisions for loan
losses of $170,000.
Net Interest Income.
Reported net interest income increased $ 470,000 or 9.5% for the nine months
ended September 30, 1998. Net interest income on a tax equivalent basis
increased by $360,000 or 6.3% in a period when both average interest earning
assets and average interest-bearing liabilities increased (increased $18.9
million and $12.7 million, respectively). The Bank's net interest rate spread
decreased 21 basis points (with 100 basis points being equal to 1%) to 3.26% for
the nine months ended September 30, 1998. The increase in average earning assets
of $18.9 million was primarily due to a $19.1 million increase in average
investment and mortgage-backed securities partially offset by a $0.2 million
decrease in average loans.
11
<PAGE>
Interest Income.
Interest income totaled $12.0 million for the nine months ended September 30,
1998, an increase of $860,000 or 7.8% over the total of $11.1 million for the
nine months ended September 30, 1997. This increase was mainly due to an
increase in the Bank's average interest-earning assets of $18.9 million for the
nine months ended September 30, 1998. Interest earned on loans increased
$104,000 or 1.7%, in 1998. The increase was due to a 15 basis point increase in
the yield earned partially offset by a $0.2 million decrease in the average
balance of loans. Interest earned on investment and mortgage-backed securities
(including securities held for sale) increased $760,000 or 15.4%, in 1998. The
increase was due to a $19.1 million increase in the average balance of
investment and mortgage-backed securities offset by a 21 basis point decrease in
the yield earned.
Interest Expense.
Interest expense increased $394,000 to $6.3 million for the nine months ended
September 30, 1998. The increase in interest expense was due to a $12.7 million
increase in the average balance of interest-bearing liabilities due to increased
borrowings pursuant to the Bank's leverage strategy partially offset by a one
basis point decrease in the average cost of interest-bearing liabilities.
Provision for Losses on Loans.
The provision for loan losses decreased by $170,000 to $275,000 for the nine
months ended September 30, 1998, from $445,000 for the nine months ended
September 30, 1997. Gross loans at September 30, 1998 totaled $99.6 million
compared to $101.4 million at September 30, 1997 resulting in the allowance for
loan losses being 1.29% of total loans at September 30, 1998 and 1.37% of total
loans at September 30, 1997. While management believes that the allowance for
loan losses is sufficient, there can be no assurance that regulators, in
reviewing the Bank's loan portfolio, will not request the Bank to significantly
increase its allowance for loan losses, or that a deteriorating real estate
market will cause the Bank to significantly increase its allowance for loans
losses, therefore negatively effecting the Bank's financial condition and
earnings.
Non-interest Income.
Non-interest income increased $23,000 to $712,000 for the nine months ended
September 30, 1998, from $689,000 for the nine months ended September 30, 1997.
This increase was primarily due to gains on the sale of securities for the nine
months ended September 30, 1998 of $117,000, an increase of $40,000 from $77,000
for the nine months ended September 30, 1997, due primarily to the restructuring
of the Bank's portfolio as previously discussed, along with increases in gains
on sales of loans of $19,000, increased automated teller machine fees of
$13,000, and increased rental income of $4,000. These increases were partially
offset by a decrease in service charges of $75,000, due to check printing
charges being charged directly to depositors accounts instead the printer
charging the Bank and the Bank subsequently charging depositors.
Non-interest Expense.
Non-interest expense increased $493,000 to $4,683,000 for the nine months ended
September 30, 1998, from $4,190,000 for the nine months ended September 30,
1997. This increase was primarily due to increases in compensation and employee
benefits (including stock related benefits) of $431,000 and occupancy and data
processing expenses of $ 19,000 for the nine months ended September 30, 1998.
12
<PAGE>
The increase in compensation and employee benefits of $431,000 was primarily the
result of increased compensation of $246,000 due to employees working additional
hours during the Bank's computer system conversion along with staffing increases
and normal merit increases, a $25,000 increase in expense related to the Bank's
ESOP, and an accrual for expense related to the Bank's Restricted Stock Plan of
$136,000. See also Item 4 - Results of Votes of Securities Holders and Item 5 -
Other Information, regarding the Bank's stock benefit plans and stock holding
company reorganization.
Income Tax Expense.
Income Tax Expense increased $213,000 to $307,000 for the nine months ended
September 30, 1998, from $94,000 for the nine months ended September 30, 1997.
Liquidity and Capital Requirements
General. Liquidity refers to the Bank's ability to generate sufficient cash to
meet the funding needs of current loan demand, savings deposit withdrawals, and
to pay operating expenses. The Bank has historically maintained a level of
liquid assets in excess of regulatory requirements. Maintaining a high level of
liquid assets tends to decrease earnings, as liquid assets tend to have a lower
yield than other assets with longer terms (e.g. loans) . The Bank adjusts
liquidity as appropriate to meet its asset/liability objectives.
The Bank's primary sources of funds are deposits, amortization and prepayment of
loans and mortgage-backed securities, maturities of investment securities and
funds provided from operations. While scheduled loan and mortgage-backed
securities repayments are a relatively predictable source of funds, deposit
flows and loan and mortgage-backed securities prepayments are greatly influenced
by interest rates, economic conditions and competition. In addition, the Bank
invests excess funds in overnight deposits which provide liquidity to meet
lending requirements
The primary activity of the Bank is originating loans and purchasing investment
and mortgage-backed securities. During the nine months ended September 30, 1998
and 1997, the bank originated loans in the amounts of $36.1 and $34.9 million,
respectively. The Bank also purchases investment and mortgage-backed securities
to invest excess liquidity and to supplement local loan demand. During the nine
months ended September 30, 1998 and 1997, the Bank purchased investment and
mortgage-backed securities in the amounts of $36.4 and $13.3 million,
respectively.
The Bank has other sources of liquidity if a need for additional funds arises,
such as FHLB of Pittsburgh advances. Additional sources of liquidity can be
found in the Bank's balance sheet, such as investment securities and
unencumbered mortgage-backed securities that are readily marketable. Management
believes that the Bank has adequate resources to fund all of its commitments.
The Bank may not declare or pay a cash dividend on any of its stock if the
effect thereof would cause the Bank's regulatory capital to be reduced below (1)
the amount required for the liquidation account established in connection with
the Bank's mutual holding company reorganization and stock issuance, or (2) the
regulatory capital requirements imposed by the Department and the FDIC.
13
<PAGE>
Regulatory Capital Requirements. As a condition of deposit insurance, current
FDIC regulations require that the Bank calculate and maintain a minimum
regulatory capital level on a quarterly basis and satisfy such requirement at
the calculation date and throughout the ensuing quarter.
At September 30, 1998, the Bank's Tier I risk-based and total risk-based capital
ratios were 28.3% and 29.5%, respectively. Current regulations require Tier I
risk-based capital of 6% and total risk - based capital of 10% risk-based assets
to be considered well capitalized. The Bank's leverage ratio was 12.2% at
September 30, 1998. Current regulations require a leveraged ratio 5% to be
considered well capitalized.
Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk are presented at
December 31, 1997 in the Bank's 1997 Annual Report. See "Market Risk Analysis".
Management believes there have been no material changes in the Bank's market
risk since December 31, 1997.
Impact of Inflation and Changing Prices
The financial statements and related data have been prepared in accordance with
generally accepted accounting principles which require the measurement of
financial position and operating results in terms of historical dollars, without
consideration for changes in the relative purchasing power of money over time
caused by inflation
Unlike industrial companies, nearly all of the assets and liabilities of a
financial institution are monetary in nature. As a result, interest rates have a
more significant impact on a financial institution' s performance than general
levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the price of goods and services, since
such goods and services are affected by inflation. In the current interest rate
environment, liquidity and the maturity structure of the Bank's assets and
liabilities are critical to the maintenance of acceptable performance levels.
Year 2000 Compliance
During fiscal 1998, the Bank adopted a Year 2000 Compliance Plan (the "Plan")
and established a Year 2000 Compliance Committee (the "Committee"). The
objectives of the Plan and the Committee are to prepare the Bank for the
millennium. As recommended by the Federal Financial Institutions Examination
Council, the Plan encompasses the following phases: Awareness, Assessment,
Renovation, Validation and Implementation. These phases will enable the Bank to
identify risks, develop an action plan, perform adequate testing and complete
certification that its processing systems will be Year 2000 ready. Execution of
the plan is currently on target. The Bank is currently in Phase 3, Renovation,
(which includes code enhancements, program changes, hardware and software
upgrades, system replacements and third party vendor monitoring) and Phase 4,
Validation, (which includes testing of incremental changes to hardware and
software, testing connections with third-party vendors and establishing controls
to ensure timely completion of all hardware and software prior to final
implementation.) Prioritization of the most critical applications has been
addressed, along with contract and service agreements. The primary operating
software for the Bank is obtained and maintained by an external provider of
software (the "External Provider"). The Bank has maintained ongoing contact with
this vendor so that modification of the software is a top priority and is
expected to be accomplished, though there is no assurance, by December 31, 1998.
The Bank has contacted all other material vendors and suppliers
14
<PAGE>
regarding their Year 2000 readiness. Each of these third parties has delivered
written assurance to the Bank that they expect to be Year 2000 compliant prior
to the Year 2000. The Bank has contacted material customers and non-information
technology suppliers (i.e., utility systems, telephone systems and security
systems) regarding their Year 2000 state of readiness. The Renovation phase is
targeted for completion by December 31, 1998 and the Validation phase is
targeted for completion by March 31, 1999. The Implementation phase is to
certify that systems are Year 2000 ready, along with assurances that any new
systems are compliant on a going forward basis. The implementation phase is
targeted for completion by September 30, 1999.
The Bank expects to incur internal staffing costs as well as consulting and
other expenses related to testing and enhancements to prepare the systems for
the Year 2000. The Bank does not anticipate that the related costs will be
material in any single year. In total, the Bank estimates that it's cost for
compliance will amount to approximately $300,000 over the two year period from
1998 - 1999. A significant portion of these costs are not likely to be
incremental costs to the Bank, but rather the redeployment of existing
resources. As of September 30, 1998 the Bank estimates that approximately
$75,000 of these costs have been incurred. No assurance can be given that the
Year 2000 Compliance Plan will be completed successfully by the Year 2000, in
which event the Bank could incur significant costs. If the External Provider is
unable to resolve the potential problem in time, The Bank would likely
experience significant data processing delays, mistakes or failures. These
delays, mistakes or failures could hava a significant adverse impact on the
financial statements of the Company.
Successful and timely completion of the Year 2000 project is based on
management's best estimates derived from various assumptions of future events,
which are inherently uncertain, including the progress and results of the Bank's
External Provider, testing plans, and all vendors, suppliers and customer
readiness.
15
<PAGE>
Risk Elements
Nonperforming Assets
The following schedule presents information concerning nonperforming assets
including nonaccrual loans, loans 90 days or more past due, and other real
estate owned at September 30, 1998 and December 31, 1997. A loan is classified
as nonaccrual when, in the opinion of management, there are serious doubts about
collectibility of interest and principal. At the time the accrual of interest is
discontinued, future income is recognized only when cash is received.
September 30, December 31,
1998 1997
---- ----
(Dollars in Thousands)
Loans on nonaccrual basis $ 383 $ 757
Loans past due 90 days or more 123 113
---- ----
Total non-performing loans 506 870
---- ----
Real estate owned 0 33
---- ----
Total non-performing assets $ 506 $ 903
==== ====
Total non-performing loans to
total loans 0.51% 0.86%
==== ====
Total non-performing loans to
total assets 0.21% 0.40%
==== ====
Total non-performing assets to
total assets 0.21% 0.41%
==== ====
Combined non-performing loans and other non-performing assets at September 30,
1998, represented 0.51% of total loans which was down from 0.86% at year-end
1997. The allowance for loan losses was 253.2% of total non-performing assets at
September 30, 1998, and increase of 64.0% from 154.4% at December 31, 1997.
16
<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in rights of the Company's Security holders.
None.
Item 3. Defaults by the Company on its senior securities.
None.
Item 4. Results of Votes of Security Holders.
At a special meeting of Stockholders of the Bank on August 20, 1998
(and subsequently reconvened on October 22, 1998), the following items
were presented:
Approval of the 1998 Stock Option Plan. The plan received 2,194,957
votes in favor, 75,078 votes against and 16,818 votes abstained.
Approval of the 1998 Restricted Stock Plan. The plan received
2,156,824 votes in favor, 120,406 votes against and 9,258 votes
abstained.
Adoption of an Agreement and Plan of Reorganization to form a middle
tier stock holding company. The proposal received 2,144,002 votes in
favor, 38,538 votes against and 9,488 votes abstained.
Item 5. Other Information.
On May 21, 1998, the Bank adopted an Agreement and Plan of
Reorganization whereby the Bank will form an intermediate stock
holding company under Pennsylvania law. Existing stockholders of the
Bank will exchange their shares for shares of the stock holding
company. Upon completion of the reorganization, the Bank will become a
wholly owned subsidiary of the stock holding company and the stock
holding company will become a majority owned subsidiary of the MHC.
The common stock of the holding company will replace the Bank's stock
on the Nasdaq National Market under the symbol "PHSB." The
reorganization closed on November 9, 1998. See also Item 4. - Results
of Votes of Securities Holders.
17
<PAGE>
Item 6. Exhibits and Reports on Form 8 - K.
(a) The following exhibits are filed as part of this report.
2.0 Agreement and Plan of Reorganization
3.1 Articles of Incorporation of PHS Bancorp, Inc.
3.2 Bylaws of PHS Bancorp, Inc.
4.3 Stock Certificate of PHS Bancorp, Inc.
10.4 Amended employment agreement between Peoples Home Savings Bank
and James P. Wetzel, Jr.
10.5 1998 Restricted Stock Plan
10.6 1998 Stock Option Plan
11.7 Statement regarding computation of earnings per share (see Note 3
to the Notes to Unaudited Consolidated Financial Statements in the
Form 10-Q)
27.0 Financial Data Schedule*
(b) Reports on Form 8 - K.
None.
- ---------------------------
* In electronic filing only.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 10, 1998
PHS Bancorp, Inc.
- -----------------
(Registrant)
By: /s/ James P. Wetzel
---------------------------------
James P. Wetzel, Jr.
President and Chief Executive Officer
By: /s/ Richard E. Canonge
---------------------------------
Richard E. Canonge
Chief Financial Officer and Treasurer
19
EXHIBIT 2
<PAGE>
PEOPLES HOME SAVINGS BANK
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated as of May 21, 1998, by
and among PEOPLES HOME SAVINGS BANK, a Pennsylvania chartered stock savings bank
(the "Savings Bank"); PHS BANCORP, INC., a to-be-formed Pennsylvania corporation
(the "Holding Company"); and PEOPLES HOME INTERIM SAVINGS BANK, a to-be-formed
interim stock savings institution ("Interim").
The parties hereto desire to enter into an Agreement and Plan of
Reorganization whereby the corporate structure of the Savings Bank will be
reorganized into the stock holding company form of ownership (the
"Reorganization"). The result of the Reorganization will be that, immediately
after the Effective Date (as defined herein), all of the issued and outstanding
shares of Common Stock of the Savings Bank will be held by the Holding Company
and the holders of the issued and outstanding shares of Common Stock of the
Savings Bank (i.e., the mutual holding company, PHS Bancorp, M.H.C., and the
minority public stockholders) will become the holders of the issued and
outstanding shares of Common Stock of the Holding Company.
The Reorganization of the Savings Bank will be accomplished by the
following steps: (1) the formation by the Savings Bank of a wholly-owned
subsidiary of the Savings Bank, PHS Bancorp, Inc., incorporated under the laws
of the Commonwealth of Pennsylvania for the primary purpose of becoming the sole
stockholder of a newly-formed interim stock savings institution, and
subsequently becoming the sole stockholder of the Common Stock of the Savings
Bank, which formation will include the issuance of up to 100,000 shares of the
Holding Company Common Stock to the Savings Bank for a price of $10 per share
($1,000,000) for the purpose of initially capitalizing the Holding Company; (2)
the formation of an interim Pennsylvania-chartered savings institution,
"Interim," which will be wholly-owned by the Holding Company; and (3) the merger
of Interim into the Savings Bank (the "Merger"), with the Savings Bank as the
surviving entity. Pursuant to such Merger: (i) all of the issued and outstanding
shares of Common Stock of the Holding Company held by the Savings Bank will be
canceled; (ii) all of the issued and outstanding shares of Common Stock of the
Savings Bank will automatically be converted by operation of law on a
one-for-one basis into issued and outstanding shares of Common Stock of the
Holding Company; (iii) all of the issued and outstanding shares of Common Stock
of Interim will automatically be converted by operation of law on a one-for-one
basis into an equal number of issued and outstanding shares of Common Stock of
the Savings Bank, which will be all of the issued and outstanding stock of the
Savings Bank.
NOW, THEREFORE, in order to consummate this Agreement and Plan of
Reorganization (the "Agreement"), and in consideration of the mutual covenants
herein set forth, the parties agree as follows:
1
<PAGE>
ARTICLE I
MERGER OF INTERIM INTO THE SAVINGS BANK
AND RELATED MATTERS
1.1 On the Effective Date, Interim will be merged with and into the
Savings Bank and the separate existence of Interim shall cease, and
all assets and property (real, personal and mixed, tangible and
intangible, chooses in action, rights and credits) then owned by
Interim, or which would inure to it, shall immediately and
automatically, by operation of law and without any conveyance,
transfer, or further action, become the property of the Savings Bank.
The Savings Bank shall be deemed to be a continuation of Interim, and
the Savings Bank shall succeed to the rights and obligations of
Interim.
1.2 Following the Merger, the existence of the Savings Bank shall continue
unaffected and unimpaired by the Merger, with all the rights,
privileges, immunities and powers, and subject to all of the duties
and liabilities, of a corporation organized under the laws of
Pennsylvania. The Articles and Bylaws of the Savings Bank, as
presently in effect, shall continue in full force and effect and shall
not be changed in any manner whatsoever by the Merger.
1.3 From and after the Effective Date, and subject to the actions of the
Board of Trustees of the Savings Bank, the business presently
conducted by the Savings Bank (whether directly or through its
subsidiaries) will continue to be conducted by it, as a wholly-owned
subsidiary of the Holding Company, and the present trustees and
officers of the Savings Bank will continue in their present positions.
The home office and branch offices of the Savings Bank in existence
immediately prior to the Effective Date shall continue to be the home
office and branch offices of the Savings Bank from and after the
Effective Date.
1.4 The Reorganization will have no effect on the corporate structure of
the Mutual Holding Company, PHS Bancorp, M.H.C., which will continue
to operate under its current certificate and bylaws, and the present
trustees and officers of the Mutual Holding Company will continue in
their present positions.
ARTICLE II
CONVERSION OF STOCK
2.1 The terms and conditions of the Merger, the mode of carrying the same
into effect, and the manner and basis of converting the Common Stock
of the parties to this Agreement shall be as follows:
A. On the Effective Date, all shares of Common Stock of the Holding
Company held by the Savings Bank shall be canceled and shall no
longer be deemed to be issued or outstanding for any purpose.
B. On the Effective Date, each share of Common Stock, $.10 par
value, of the Savings Bank ("Savings Bank Common Stock') issued
and outstanding immediately prior to the Effective Date shall
automatically by operation of law
2
<PAGE>
be converted into and shall become one share of Common Stock,
$.10 par value, of the Holding Company ("Holding Company Common
Stock"), with the rights, privileges, preferences and voting
power incident to each share of Savings Bank Common Stock prior
to such Effective Date. Each share of Common Stock of Interim
issued and outstanding immediately prior to the Effective Date
shall, on the Effective Date, automatically by operation of law
be converted into and become one share of Common Stock, $.10 par
value, of the Savings Bank and shall not be further converted
into shares of the Holding Company Common Stock, so that from and
after the Effective Date, all of the issued and outstanding
shares of Common Stock of the Savings Bank shall be held by the
Holding Company.
C. From and after the Effective Date, each holder of an outstanding
certificate or certificates, which, prior thereto, represented
shares of Savings Bank Common Stock, shall, upon surrender of the
same to the Savings Bank or the designated agent of the Savings
Bank ("Exchange Agent"), be entitled to receive, in exchange
therefor, a certificate or certificates representing the number
of whole shares of Holding Company Common Stock into which the
shares theretofore represented by the certificate or certificates
to be surrendered shall have been converted, as provided in the
foregoing provisions of this Section. Until so surrendered, each
such outstanding certificate which, prior to the Effective Date,
represented shares of Savings Bank Common Stock shall be deemed
for all corporate purposes to evidence the ownership of the
number of whole shares of Holding Company Common Stock into which
the shares of the Common Stock of the Savings Bank shall have
been so converted.
D. All shares of Holding Company Common Stock into which shares of
Savings Bank Common Stock shall have been converted pursuant to
this Article shall be deemed to have been issued in full
satisfaction of all rights pertaining to such converted shares.
E. On the Effective Date, the holders of certificates formerly
representing Savings Bank Common Stock outstanding on the
Effective Date shall cease to have any rights with respect to
Savings Bank Common Stock, and their sole rights shall be with
respect to the Holding Company Common Stock into which their
shares of Savings Bank Common Stock shall have been converted by
the Merger.
ARTICLE III
CONDITIONS
3.1 The obligations of the Savings Bank, the Holding Company and Interim
to effect the Merger and otherwise consummate the transactions which
are the subject matter hereof shall be subject to satisfaction of the
following conditions:
A. To the extent required by applicable law, rules, and regulations,
the holders of the outstanding shares of Savings Bank Common
Stock shall, at a meeting of the stockholders of the Savings Bank
duly called, have approved this Agreement by
3
<PAGE>
the affirmative vote of a majority of the outstanding shares of
Savings Bank Common Stock.
B. The shares of Holding Company Common Stock to be issued to the
Savings Bank stockholders pursuant to the Merger shall have been,
if required by law, duly registered pursuant to the Securities
Act of 1933, as amended, and the Savings Bank shall have complied
with all applicable state securities or "blue sky" laws relating
to the issuance of the Holding Company Common Stock.
C. Any and all approvals from the Pennsylvania Department of Banking
(the "PDB"), the Federal Deposit Insurance Corporation, the Board
of Governors of the Federal Reserve System ("FRB"), the
Securities and Exchange Commission and any other governmental
agency having jurisdiction necessary for the lawful consummation
of the Merger and the issuance and delivery of the Holding
Company Common Stock as contemplated by this Agreement shall have
been obtained.
D. The Savings Bank shall have received either (i) a ruling from the
Internal Revenue Service or (ii) an opinion from its legal
counsel, to the effect that the Reorganization will be treated as
a non-taxable transaction under applicable provisions of the
Internal Revenue Code and that no gain or loss will be recognized
by the stockholders of the Savings Bank upon the exchange of
Savings Bank Stock held by them for Holding Company Stock.
ARTICLE IV
EFFECTIVE DATE OF MERGER
Upon satisfaction or waiver (in accordance with the provisions of this
Agreement) of each of the conditions set forth herein, the parties hereto shall
execute and cause to be filed Articles of Combination, and/or such certificates
or further documents as shall be required by the PDB, the Office of the
Secretary of the PDB, and with such other federal or state regulatory agencies
as may be required. Upon approval by the PDB, and endorsement of such
certificates, the Merger and other transactions contemplated by this Agreement
shall become effective. The Effective Date for all purposes hereunder shall be
the date of such endorsement.
ARTICLE V
AMENDMENT AND TERMINATION
5.1 The Savings Bank, the Holding Company and Interim, by mutual consent
of their respective Boards of Trustees or Incorporators, as the case
may be, to the extent permitted by law, may amend, modify, supplement
and interpret this Agreement in such manner as may be mutually agreed
upon by them at any time before or after the approval and adoption
thereof by the stockholders of the Savings Bank; provided, however,
that no such amendment, modification, supplement or interpretation
shall have a materially adverse impact on the Savings Bank or its
stockholders except with the approval of the stockholders of the
Savings Bank.
4
<PAGE>
5.2 This Agreement may be terminated at the election of any of the parties
hereto if any one or more of the conditions to the obligations of any
of them hereunder shall have been satisfied and become incapable of
fulfillment and shall have not been waived. This Agreement may also be
terminated at any time prior to the Effective Date by the mutual
consent of the respective Boards of Trustees of the parties.
5.3 In the event of the termination of this Agreement pursuant to any of
the foregoing provisions, no party shall have any further liability or
obligation of any nature to any other party under this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 This Agreement incorporates and adopts any restrictions that may be
(or have been) imposed on the Holding Company or the Mutual Holding
Company, relating to the waver of dividends by the Mutual Holding
Company, the repurchase of stock by the Holding Company or the Mutual
Holding Company or the conversion of the Mutual Holding Company to
stock form.
6.2 Any of the terms or conditions of this Agreement (other than the
necessary approvals of stockholders and government authorities) may be
waived at any time by any party hereto which is entitled to the
benefit thereof, by action taken by its Board of Trustees; provided,
however, that such action shall be taken only if, in the judgment of
the Board of Trustees taking the action, such waiver will not have a
materially adverse effect on the benefits intended under this
Agreement to be afforded to the stockholders of the Savings Bank.
6.3 This Agreement embodies the entire agreement among the parties and
there have been and are no agreements, representations or warranties
among the parties other than those set forth or provided for herein.
6.4 Any number of counterparts hereof may be executed and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one instrument.
6.5 Any notice or waiver to be given to any party shall be in writing and
shall be deemed to have been duly given if delivered, mailed, or sent
by prepaid telegram, addressed to such party at 744 Shenango Road,
Beaver Falls, Pennsylvania 15010.
6.6 The captions contained in this Agreement are solely for convenient
reference and shall not be deemed to affect the meaning or
interpretation of any paragraph hereof.
6.7 The Savings Bank will pay all fees and expenses incurred in connection
with the transactions contemplated by this Agreement. After the
Reorganization, the Holding Company will incur certain expenses that
arise from its creation for the purpose of serving as, and continued
existence as, the holding company of the Savings Bank, such
5
<PAGE>
as the costs associated with the filing of reports with the PDB,
holding of trustees and stockholders meetings and maintaining
relations with and providing reports to stockholders. The Savings Bank
agrees that it will reimburse the Holding Company for such ordinary
and usual expenses when and as payable by the Holding Company.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement and Plan of Reorganization as of the date first above written.
PEOPLES HOME SAVINGS BANK
BY: /s/ James P. Wetzel, Jr.
-------------------------------------------
James P. Wetzel, Jr., President
ATTEST: /s/ John M. Rowse
-------------------------------------------
John M. Rowse, Corporate Secretary
PHS BANCORP, INC. (In Formation)
BY: /s/ James P. Wetzel, Jr.
-------------------------------------------
James P. Wetzel, Jr., President
ATTEST: /s/ John M. Rowse
-------------------------------------------
John M. Rowse, Corporate Secretary
PEOPLES HOME INTERIM SAVINGS BANK
(In Formation)
BY: /s/ James P. Wetzel, Jr.
-------------------------------------------
James P. Wetzel, Jr., President
ATTEST: /s/ John M. Rowse
-------------------------------------------
John M. Rowse, Corporate Secretary
EXHIBIT 3.1
<PAGE>
ARTICLES OF INCORPORATION
OF
PHS BANCORP, INC.
Article 1. Name. The name of the corporation is PHS Bancorp, Inc.
(hereinafter referred to as the "Corporation").
Article 2. Registered Office. The address of the initial registered
office of the Corporation in the Commonwealth of Pennsylvania is 1427 Seventh
Avenue, Beaver Falls, Pennsylvania 15010.
Article 3. Nature of Business. The purpose of the Corporation is to act
as a bank holding company and to engage in any lawful act or activity for which
a corporation may be organized under the Business Corporation Law of 1988, as
amended, of the Commonwealth of Pennsylvania (the "BCL").
The Corporation is incorporated under the provisions of the BCL.
Article 4. Duration. The term of the existence of the Corporation shall
be perpetual.
Article 5. Capital Stock.
A. Authorized Amount. The total number of shares of capital stock which
the Corporation has authority to issue is 15,000,000 of which 5,000,000 shall be
serial preferred stock, no par value (hereinafter the "Preferred Stock") and
10,000,000 shall be common stock, par value $.10 per share (hereinafter the
"Common Stock"). Except to the extent required by governing law, rule or
regulation, the shares of capital stock may be issued from time to time by the
Board of Directors without further approval of stockholders. The Corporation
shall have the authority to purchase its capital stock out of funds lawfully
available therefor.
B. Common Stock. Except as provided in this Article 5 (or in any
resolution or resolutions adopted by the Board of Directors pursuant hereto),
the exclusive voting power shall be vested in the Common Stock, with each holder
thereof being entitled to one vote for each share of such Common Stock standing
in the holder's name on the books of the Corporation. Subject to any rights and
preferences of any class of stock having preference over the Common Stock,
holders of Common Stock shall be entitled to such dividends as may be declared
by the Board of Directors out of funds lawfully available therefor. Upon any
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, holders of Common Stock shall be entitled to
receive pro rata the remaining assets of the Corporation after the holders of
any class of stock having preference over the Common Stock have been paid in
full any sums to which they may be entitled.
C. Authority of Board to Fix Terms of Preferred Stock. A description of
each class of shares and a statement of the voting rights, designations,
preferences, qualifications, privileges, limitations, options, conversion
rights, and other special rights granted to or imposed upon the shares of each
class and of the authority vested in the Board of Directors of the Corporation
to establish series of Preferred Stock or to determine that Preferred Stock will
be issued as a class without series and to fix and determine the voting rights,
designations, preferences and other special rights of the Preferred Stock as a
class or of the series thereof are as follows:
1
<PAGE>
Preferred Stock may be issued from time to time as a class without
series or in one or more series. Each series shall be designated by the Board of
Directors so as to distinguish the shares thereof from the shares of all other
series and classes. The Board of Directors may by resolution from time to time
divide shares of Preferred Stock into series, or determine that the Preferred
Stock shall be issued as a class without series, fix and determine the number of
shares in a series and the terms and conditions of the issuance of the class or
the series, and, subject to the provisions of this Article 5, fix and determine
the rights, preferences, qualifications, privileges, limitations and other
special rights, if any, of the class (if none of such shares of the class have
been issued) or of any series so established, including but not limited to,
voting rights (which may be limited, multiple, fractional or non-voting rights),
the rate of dividend, if any, and whether or to what extent, if any, such
dividends shall be cumulative (including the date from which dividends shall be
cumulative, if any), the price at and the terms and conditions on which shares
may be redeemed, if any, the preference and the amounts payable on shares in the
event of voluntary or involuntary liquidation, sinking fund provisions for the
redemption or purchase of shares in the event shares of the class or of any
series are issued with sinking fund provisions, and the terms and conditions on
which the shares of the class or of any series may be converted in the event the
shares of the class or of any series are issued with the privilege of
conversion.
The Board of Directors may, in its discretion, at any time or from time
to time, issue or cause to be issued all or any part of the authorized and
unissued shares of Preferred Stock for consideration of such character and value
as the Board of Directors shall from time to time fix or determine.
D. Repurchase of Shares. The Corporation may, from time to time,
pursuant to authorization by the board of directors of the Corporation and
without action by the stockholders, purchase or otherwise acquire shares of any
class, bonds, debentures, notes, scrip, warrants, obligations, evidences of
indebtedness, or other securities of the Corporation in such manner, upon such
terms, and in such amounts as the board of directors shall determine; subject,
however, to such limitations or restrictions, if any, as are contained in the
express terms of any class of shares of the Corporation outstanding at the time
of the purchase or acquisition in question or as are imposed by law or
regulation.
Article 6. Incorporator. The name and mailing address of the sole
incorporator is as follows:
Number and Class
of Shares
Name Address Subscribed For
- ------------------- ------------------ ---------------------
James P. Wetzel, Jr. 1427 Seventh Street 100 shares of
Beaver Falls, PA 15010 Common Stock
Article 7. Directors. The business and affairs of the Corporation shall
be managed by or under the direction of a Board of Directors.
A. Number. The number of directors of the Corporation shall be such
number, not less than 5 nor more than 15 (exclusive of directors, if any, to be
elected by holders of preferred stock of the Corporation, voting separately as a
class), as shall be provided from time to time in or in accordance with the
bylaws, provided that no decrease in the number of directors shall have the
effect of shortening the term of any incumbent director, and provided further
that no action shall be taken to decrease or increase
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the number of directors from time to time unless at least eighty percent (80%)
of the directors then in office shall concur in said action.
B. Classified Board. The Board of Directors of the Corporation shall be
divided into three classes of directors which shall be designated Class I, Class
II and Class III. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. Such classes shall
be as nearly equal in number as the then total number of directors constituting
the entire board of directors shall permit, with the terms of office of all
members of one class expiring each year. At the first annual meeting of
stockholders, directors in Class I shall be elected to hold office for a term
expiring at the third succeeding annual meeting thereafter. At the second annual
meeting of stockholders, directors of Class II shall be elected to hold office
for a term expiring at the third succeeding meeting thereafter. At the third
annual meeting of stockholders, directors of Class III shall be elected to hold
office for a term expiring at the third succeeding annual meeting thereafter.
Thereafter, at each succeeding annual meeting, directors whose term shall expire
at any annual meeting shall continue to serve until such time as his successor
shall have been duly elected and shall have qualified unless his position on the
board of directors shall have been abolished by action taken to reduce the size
of the board of directors prior to said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes appropriate so that
the number of directors in each class is as specified in the immediately
preceding paragraph. The Board of Directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Notwithstanding the foregoing, no
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director. Should the number of directors of the Corporation be
increased, the additional directorships shall be allocated among classes as
appropriate so that the number of directors in each class is as specified in the
immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of
the Corporation shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the Board of Directors shall consist of
said directors so elected in addition to the number of directors fixed as
provided above in this Article 7. Notwithstanding the foregoing, and except as
otherwise may be required by law, whenever the holders of any one or more series
of preferred stock of the Corporation shall have the right, voting separately as
a class, to elect one or more directors of the Corporation, the terms of the
director or directors elected by such holders shall expire at the next
succeeding annual meeting of stockholders.
C. No Cumulative Voting. Stockholders of the Corporation shall not be
permitted to cumulate their votes for the election of directors.
D. Vacancies. Except as otherwise fixed pursuant to the provisions of
Article 5 hereof relating to the rights of the holders of any class or series of
stock having preference over the Common Stock as to dividends or upon
liquidation to elect directors, any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, shall be filled by a majority vote of the directors then in office,
whether or not a quorum is present, or by a sole remaining director, and any
director so chosen shall serve until the term of the class to which he was
appointed shall expire and until his successor is elected and qualified. When
the number of directors is changed, the Board of Directors shall determine the
class or classes to which the increased or decreased number of directors shall
be appointed, provided that no decrease in the number of directors shall shorten
the term of any incumbent director.
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E. Removal. Any director (including persons elected by directors to
fill vacancies in the Board of Directors) may be removed from office only with
cause by an affirmative vote of not less than a majority of the total votes
eligible to be cast by stockholders. Cause for removal shall exist only if the
director whose removal is proposed has been either declared of unsound mind by
an order of a court of competent jurisdiction, convicted of a felony or of an
offense punishable by imprisonment for a term of more than one year by a court
of competent jurisdiction, or deemed liable by a court of competent jurisdiction
for gross negligence or misconduct in the performance of such director's duties
to the Corporation. At least 30 days prior to such meeting of stockholders,
written notice shall be sent to the director whose removal will be considered at
the meeting. Directors may also be removed from office in the manner provided in
Sections 1726(b) and 1726(c) of the BCL, or any successors to such sections.
F. Nominations of Directors. Nominations of candidates for election as
directors at any annual meeting of stockholders may be made (a) by, or at the
direction of, a majority of the Board of Directors or (b) by any stockholder
entitled to vote at such annual meeting. Only persons nominated in accordance
with the procedures set forth in this Article 7.F shall be eligible for election
as directors at an annual meeting. Ballots bearing the names of all the persons
who have been nominated for election as directors at an annual meeting in
accordance with the procedures set forth in this Article 7.F shall be provided
for use at the annual meeting.
Nominations, other than those made by or at the direction of the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Article 7.F. To be timely, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the Corporation not less than 60 days prior to
the anniversary date of the immediately preceding annual meeting of stockholders
of the Corporation; provided, however, that with respect to the first scheduled
annual meeting, notice by the stockholder must be so delivered or received no
later than the close of business on the tenth day following the day on which
notice of the date of the scheduled meeting must be delivered or received no
later than the close of business on the fifth day preceding the date of the
meeting. Such stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or re-election as a director
and as to the stockholder giving the notice (i) the name, age, business address
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of Corporation
stock which are Beneficially Owned (as defined in Article 11.A(e)) by such
person on the date of such stockholder notice, and (iv) any other information
relating to such person that is required to be disclosed in solicitations of
proxies with respect to nominees for election as directors, pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including, but not limited to, information required to be
disclosed by Items 4, 5, 6 and 7 of Schedule 14A and information which would be
required to be filed on Schedule 14B with the Securities and Exchange Commission
(or any successors of such items or schedules); and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the Corporation's
books, of such stockholder and any other stockholders known by such stockholder
to be supporting such nominees and (ii) the class and number of shares of
Corporation stock which are Beneficially Owned by such stockholder on the date
of such stockholder notice and, to the extent known, by any other stockholders
known by such stockholder to be supporting such nominees on the date of such
stockholder notice. At the request of the Board of Directors, any person
nominated by, or at the direction of, the Board for election as a director at an
annual meeting shall furnish to the Secretary of the Corporation the same
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee.
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The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of this Article 7.F. If the
Board of Directors, or a designated committee thereof, determines that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Article 7.F in any material respect, the
Secretary of the Corporation shall notify such stockholder of the deficiency in
the notice. The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of time,
not to exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board of
Directors or such committee reasonably determines that the additional
information provided by the stockholder, together with information previously
provided, does not satisfy the requirements of this Article 7.F in any material
respect, then the Board of Directors may reject such stockholder's nomination.
The Secretary of the Corporation shall notify a stockholder in writing whether
his nomination has been made in accordance with the time and informational
requirements of this Article 7.F. Notwithstanding the procedures set forth in
this paragraph, if neither the Board of Directors nor such committee makes a
determination as to the validity of any nominations by a stockholder, the
presiding officer of the annual meeting shall determine and declare at the
annual meeting whether the nomination was made in accordance with the terms of
this Article 7.F. If the presiding officer determines that a nomination was made
in accordance with the terms of this Article 7.F, he shall so declare at the
annual meeting and ballots shall be provided for use at the meeting with respect
to such nominee. If the presiding officer determines that a nomination was not
made in accordance with the terms of this Article 7.F, he shall so declare at
the annual meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing, and except as otherwise required by law,
whenever the holders of any one or more series of Preferred Stock shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the provisions of this Article 7.F shall not apply with respect to
the director or directors elected by such holders of Preferred Stock.
Article 8. Preemptive Rights. No holder of any of the shares of any
class or series of stock or of options, warrants or other rights to purchase
shares of any class or series or of other securities of the Corporation shall
have any preemptive right to purchase or subscribe for any unissued stock of any
class or series, or any unissued bonds, certificates of indebtedness, debentures
or other securities convertible into or exchangeable for stock of any class or
series or carrying any right to purchase stock of any class or series; but any
such unissued stock, bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock or carrying any right to
purchase stock may be issued pursuant to resolution of the board of directors of
the Corporation to such persons, firms, corporations or associations, whether or
not holders thereof, and upon such terms as may be deemed advisable by the board
of directors in the exercise of its sole discretion.
Article 9. Elimination of Directors' Liability. Directors of the
Corporation shall have no liability to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that this
Article 9 shall not eliminate liability of a director (i) that has breached or
failed to perform the duties of his office, and such a breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness, or (ii)
under Section 1713(b) of the BCL. If the BCL is amended after the effective date
of these Articles of Incorporation to further eliminate or limit the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the BCL, as so
amended.
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Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
Article 10. Indemnification, etc. of Officers, Directors, Employees and
Agents.
A. Persons. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, including actions by or in the right of
the Corporation, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise.
B. Extent -- Derivative Suits. In case of a threatened, pending or
completed action or suit by or in the right of the Corporation against a person
named in paragraph A by reason of his holding a position named in paragraph A,
the Corporation shall indemnify him if he satisfies the standard in paragraph C,
for expenses (including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of the action or suit.
C. Standard -- Derivative Suits. In case of a threatened, pending or
completed action or suit by or in the right of the Corporation, a person named
in paragraph A shall be indemnified only if:
1. he is successful on the merits or otherwise; or
2. he acted in good faith in the transaction which is the
subject of the suit or action, and in a manner he reasonably believed to be in,
or not opposed to, the best interest of the Corporation, including, but not
limited to, the taking of any and all actions in connection with the
Corporation's response to any tender offer or any offer or proposal of another
party to engage in a Business Combination (as defined in Article 13 of these
Articles) not approved by the board of directors. However, he shall not be
indemnified in respect of any claim, issue or matter as to which he has been
adjudged liable to the Corporation unless (and only to the extent that) the
court of common pleas or the court in which the suit was brought shall
determine, upon application, that despite the adjudication of liability but in
view of all the circumstances, he is fairly and reasonably entitled to indemnity
for such expenses as the court shall deem proper.
D. Extent -- Nonderivative Suits. In case of a threatened, pending or
completed suit, action or proceeding (whether civil, criminal, administrative or
investigative), other than a suit by or in the right of the Corporation,
together hereafter referred to as a nonderivative suit, against a person named
in paragraph A by reason of his holding a position named in paragraph A, the
Corporation shall indemnify him if he satisfies the standard in paragraph E, for
amounts actually and reasonably incurred by him in connection with the defense
or settlement of the nonderivative suit, including, but not limited to (i)
expenses (including attorneys' fees), (ii) amounts paid in settlement, (iii)
judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative suit, a
person named in paragraph A shall be indemnified only if:
1. he is successful on the merits or otherwise; or
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2. he acted in good faith in the transaction which is the
subject of the nonderivative suit and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Corporation, including, but not
limited to, the taking of any and all actions in connection with the
Corporation's response to any tender offer or any offer or proposal of another
party to engage in a Business Combination (as defined in Article 13 of these
Articles) not approved by the board of directors and, with respect to any
criminal action or proceeding, he had no reasonable cause to believe his conduct
was unlawful. The termination of a nonderivative suit by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not, in itself, create a presumption that the person failed to satisfy the
standard of this paragraph E.2.
F. Determination That Standard Has Been Met. A determination that the
standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in paragraph C.2 (second sentence), the determination may be
made by:
1. the board of directors by a majority vote of a quorum
consisting of directors of the Corporation who were not parties to the action,
suit or proceeding;
2. if such a quorum is not obtainable or if obtainable and a
majority of a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion; or
3. the stockholders of the Corporation.
G. Proration. Anyone making a determination under paragraph F may
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advancement of Expenses. Reasonable expenses incurred by a director,
officer, employee or agent of the Corporation in defending a civil or criminal
action, suit or proceeding described in Article 10.B may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that the person is not
entitled to be indemnified by the Corporation.
I. Other Rights. The indemnification and advancement of expenses
provided by or pursuant to this Article 10 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any insurance or other agreement, vote of stockholders or
directors or otherwise, both as to actions in their official capacity and as to
actions in another capacity while holding an office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
J. Insurance. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article 10.
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K. Security Fund; Indemnity Agreements. By action of the Board of
Directors (notwithstanding their interest in the transaction), the Corporation
may create and fund a trust fund or fund of any nature, and may enter into
agreements with its officers, directors, employees and agents for the purpose of
securing or insuring in any manner its obligation to indemnify or advance
expenses provided for in this Article 10.
L. Modification. The duties of the Corporation to indemnify and to
advance expenses to any person as provided in this Article 10 shall be in the
nature of a contract between the Corporation and each such person, and no
amendment or repeal of any provision of this Article 10, and no amendment or
termination of any trust or other fund created pursuant to Article 10.K hereof,
shall alter to the detriment of such person the right of such person to the
advancement of expenses or indemnification related to a claim based on an act or
failure to act which took place prior to such amendment, repeal or termination.
M. Proceedings Initiated by Indemnified Persons. Notwithstanding any
other provision in this Article 10, the Corporation shall not indemnify a
director, officer, employee or agent for any liability incurred in an action,
suit or proceeding initiated by (which shall not be deemed to include
counter-claims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of or
participation in the action, suit or proceeding is authorized, either before or
after its commencement, by the affirmative vote of a majority of the directors
then in office.
N. Savings Clause. If this Article 10 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee, and
agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article 10 that shall
not have been invalidated and to the full extent permitted by applicable law.
If the BCL is amended to permit further indemnification of the
directors, officers, employees and agents of the Corporation, then the
Corporation shall indemnify such persons to the fullest extent permitted by the
BCL, as so amended. Any repeal or modification of this Article by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director, officer, employee or agent existing at the time of
such repeal or modification.
Article 11. Meetings of Stockholders and Stockholder Proposals.
A. Definitions.
(a) Acquire. The term "Acquire" includes every type of
acquisition, whether effected by purchase, exchange, operation of law or
otherwise.
(b) Acting in Concert. The term "Acting in Concert" means (a)
knowing participation in a joint activity or conscious parallel action towards a
common goal whether or not pursuant to an express agreement, or (b) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise.
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(c) Affiliate. An "Affiliate" of, or a Person "affiliated
with," a specified Person, means a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.
(d) Associate. The term "Associate" when used to indicate a
relationship with any Person means:
(i) Any corporation or organization (other than the
Corporation or a Subsidiary of the Corporation), or any
subsidiary or parent thereof, of which such Person is a
director, officer or partner or is, directly or indirectly,
the Beneficial Owner of 10% or more of any class of equity
securities;
(ii) Any trust or other estate in which such Person
has a 10% or greater beneficial interest or as to which such
Person serves as trustee or in a similar fiduciary capacity,
provided, however, such term shall not include any employee
stock benefit plan of the Corporation or a Subsidiary of the
Corporation in which such Person has a 10% or greater
beneficial interest or serves as a trustee or in a similar
fiduciary capacity;
(iii) Any relative or spouse of such Person (or any
relative of such spouse) who has the same home as such Person
or who is a director or officer of the Corporation or a
Subsidiary of the Corporation (or any subsidiary or parent
thereof); or
(iv) Any investment company registered under the
Investment Company Act of 1940 for which such Person or any
Affiliate or Associate of such Person serves as investment
advisor.
(e) Beneficial Owner (including Beneficially Owned). A Person
shall be considered the "Beneficial Owner" of any shares of stock (whether or
not owned of record):
(i) With respect to which such Person or any
Affiliate or Associate of such Person directly or indirectly
has or shares (A) voting power, including the power to vote or
to direct the voting of such shares of stock, and/or (B)
investment power, including the power to dispose of or to
direct the disposition of such shares of stock;
(ii) Which such Person or any Affiliate or Associate
of such Person has (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding
or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, and/or (B) the right to
vote pursuant to any agreement, arrangement or understanding
(whether such right is exercisable immediately or only after
the passage of time) (but shall not be deemed to be the
beneficial owner of any voting shares solely by reason of a
revocable proxy granted for a particular meeting of
stockholders pursuant to a public solicitation of proxies for
such meeting, with respect to shares which neither such person
nor any such affiliate is otherwise deemed the beneficial
owner); or
(iii) Which are Beneficially Owned within the meaning
of (i) or (ii) of this Article 11.A(e) by any other Person
with which such first-mentioned Person or any of its
Affiliates or Associates either (A) has any agreement,
arrangement or understanding,
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written or oral, with respect to acquiring, holding, voting or
disposing of any shares of stock of the Corporation or any
Subsidiary of the Corporation or acquiring, holding or
disposing of all or substantially all, or any Substantial
Part, of the assets or business of the Corporation or a
Subsidiary of the Corporation, or (B) is Acting in Concert.
For the purpose only of determining whether a Person is the
Beneficial Owner of a percentage specified in this Article 11
of the outstanding Voting Shares, such shares shall be deemed
to include any Voting Shares which may be issuable pursuant to
any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants,
options or otherwise and which are deemed to include any
Voting Shares which may be issuable pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants, options or
otherwise and which are deemed to be Beneficially Owned by
such Person pursuant to the foregoing provisions of this
Article 11.A(e), but shall not include any other Voting Shares
which may be issuable in such manner.
(iv) Provided, however, that (1) no director or
officer of the Corporation (or any Affiliate of any such
director or officer) shall, solely by reason of any or all of
such directors or officers acting in their capacities as such,
be deemed, for any purposes hereof, to beneficially own any
stock beneficially owned by any other such director or officer
(or any Affiliate thereof), and (2) neither any employee stock
ownership, stock option or similar plan of the Corporation or
any subsidiary of the Corporation, nor any trustee with
respect thereto or any Affiliate of such trustee (solely by
reason of such capacity of such trustee), shall be deemed, for
any purposes hereof, to beneficially own any stock held under
any such plan.
(f) Offer. The term "Offer" shall mean every written offer to
buy or acquire, solicitation of an offer to sell, tender offer or
request or invitation for tender of, a security or interest in a
security for value; provided that the term "Offer" shall not include
(i) inquiries directed solely to the management of the Corporation and
not intended to be communicated to stockholders which are designed to
elicit an indication of management's receptivity to the basic structure
of a potential acquisition with respect to the amount of cash and or
securities, manner of acquisition and formula for determining price, or
(ii) non-binding expressions of understanding or letters of intent with
the management of the Corporation regarding the basic structure of a
potential acquisition with respect to the amount of cash and/or
securities, manner of acquisition and formula for determining price.
(g) Person. The term "Person" shall mean any individual,
partnership, corporation, association, trust, group or other entity.
When two or more Persons act as a partnership, limited partnership,
syndicate, association or other group for the purpose of acquiring,
holding or disposing of shares of stock, such partnership, syndicate,
associate or group shall be deemed a "Person."
(h) Substantial Part. The term "Substantial Part" as used with
reference to the assets of the Corporation or of any Subsidiary means
assets having a value of more than 10% of the total consolidated assets
of the Corporation and its Subsidiaries as of the end of the
Corporation's most recent fiscal year ending prior to the time the
determination is being made.
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(i) Subsidiary. "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or
indirectly, by the Person in question.
(j) Voting Shares. "Voting Shares" shall mean shares of the
Corporation entitled to vote generally in an election of directors.
B. Certain Determinations With Respect to Article 11. A majority of the
directors shall have the power to determine for the purposes of this Article 11,
on the basis of information known to them and acting in good faith: (A) the
number of Voting Shares of which any Person is the Beneficial Owner, (B) whether
a Person is an Affiliate or Associate of another, (C) whether a Person has an
agreement, arrangement or understanding with another as to the matters referred
to in the definition of "Beneficial Owner" as hereinabove defined, and (D) such
other matters with respect to which a determination is required under this
Article.
C. Directors, Officers or Employees. Directors, officers or employees
of the Corporation or any Subsidiary thereof shall not be deemed to be a group
with respect to their individual acquisitions of any class of equity securities
of the Corporation solely as a result of their capacities as such.
D. Special Meetings of Stockholders. Special meetings of the
stockholders of the Corporation may be called only by (i) the Board of Directors
pursuant to a resolution approved by the affirmative vote of a majority of the
directors then in office, (ii) the Chairman of the Board or (iii) the President.
E. Action Without a Meeting. Notwithstanding any other provision of
these Articles of Incorporation or the Bylaws of the Corporation, no action
required to be taken or which may be taken at any annual or special meeting of
stockholders of the Corporation may be taken without a meeting, and the power of
stockholders to consent in writing, without a meeting, to the taking of any
action is specifically denied.
F. Stockholder Proposals. At an annual meeting of stockholders, only
such new business shall be conducted, and only such proposals shall be acted
upon, as shall have been brought before the annual meeting by, or at the
direction of, (a) the Board of Directors or (b) any stockholder of the
Corporation who complies with all the requirements set forth in this Article
11.F.
Proposals, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Article 11.F. For stockholder proposals
to be included in the Corporation's proxy materials, the stockholder must comply
with all the timing and informational requirements of Rule 14a-8 of the Exchange
Act (or any successor regulation). With respect to stockholder proposals to be
considered at the annual meeting of stockholders but not included in the
Corporation's proxy materials, the stockholder's notice shall be delivered to,
or mailed and received at, the principal executive offices of the Corporation
not less than 60 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders of the Corporation. Such stockholder's notice
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting (a) a brief description of the proposal desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business and, to the extent known, any
other stockholders known by such stockholder to be supporting such proposal, (c)
the class and number of shares of the Corporation stock which are Beneficially
Owned by the stockholder on the date of such stockholder notice and, to the
extent known, by any other stockholders known by such
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stockholder to be supporting such proposal on the date of such stockholder
notice, and (d) any financial interest of the stockholder in such proposal
(other than interests which all stockholders would have).
The Board of Directors may reject any stockholder proposal not timely
made in accordance with the terms of this Article 11.F. If the Board of
Directors, or a designated committee thereof, determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements of this Article 11.F in any material respect, the Secretary of the
Corporation shall promptly notify such stockholder of the deficiency in the
notice. The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of time,
not to exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board of
Directors or such committee determines that the additional information provided
by the stockholder, together with information previously provided, does not
satisfy the requirements of this Article 11.F in any material respect, then the
Board of Directors may reject such stockholder's proposal. The Secretary of the
Corporation shall notify a stockholder in writing whether his proposal has been
made in accordance with the time and informational requirements of this Article
11.F. Notwithstanding the procedures set forth in this paragraph, if neither the
Board of Directors nor such committee makes a determination as to the validity
of any stockholder proposal, the presiding officer of the annual meeting shall
determine and declare at the annual meeting whether the stockholder proposal was
made in accordance with the terms of this Article 11.F. If the presiding officer
determines that a stockholder proposal was made in accordance with the terms of
this Article 11.F, he shall so declare at the annual meeting and ballots shall
be provided for use at the meeting with respect to any such proposal. If the
presiding officer determines that a stockholder proposal was not made in
accordance with the terms of this Article 11.F, he shall so declare at the
annual meeting and any such proposal shall not be acted upon at the annual
meeting.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of report of officers, directors and
committees of the Board of Directors, but in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed and
received as herein provided.
Article 12. Restriction on Voting the Corporation's Common Stock.
A. Voting Restriction. Unless otherwise indicated in this Article 12,
the definitions and other provisions set forth in Articles 11.A, 11.B and 11.C
are also applicable to this Article 12. Notwithstanding any other provision of
these Articles of Incorporation, in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a Person who, as of any record date for the determination of stockholders
entitled to vote on any matter, beneficially owns in excess of 10% of the
then-outstanding shares of Common Stock (the "Limit"), be entitled, or permitted
to any vote in respect of the shares held in excess of the Limit. The number of
votes which may be cast by any record owner by virtue of the provisions hereof
in respect of Common Stock beneficially owned by such person owning shares in
excess of the Limit shall be a number equal to the total number of votes which a
single record owner of all Common Stock owned by such person would be entitled
to cast, multiplied by a fraction, the numerator of which is the number of
shares of such class or series which are both beneficially owned by such person
and owned of record by such record owner and the denominator of which is the
total number of shares of Common Stock beneficially owned by such person owning
shares in excess of the Limit. For a period of five years from the completion of
the conversion of Peoples Home Savings Bank, Beaver Falls, Pennsylvania (the
"Savings Bank"), from
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mutual to stock form, no Person shall directly or indirectly Offer to Acquire or
Acquire the Beneficial Ownership of more than 10% of any class of an equity
security of the Corporation.
B. Exclusions. The foregoing restrictions shall not apply to (i) the
purchase of shares by underwriters in connection with a public offering, or (ii)
the purchase of shares by a tax-qualified employee stock benefit plan.
C. Board Determinations. The Board of Directors shall have the power to
construe and apply the provisions of this Article and to make all determinations
necessary or desirable to implement such provisions, including but not limited
to matters with respect to (i) the number of shares of Common Stock beneficially
owned by any person, (ii) whether a person is an Affiliate of another, (iii)
whether a person has an agreement, arrangement, or understanding with another as
to the matters referred to in the definition of beneficial ownership, (iv) the
application of any other definition or operative provision of the Article to the
given facts, or (v) any other matter relating to the applicability or effect of
this Article. The Board of Directors shall have the right to demand that any
person who is reasonably believed to beneficially own Common Stock in excess of
the Limit (or holds of record Common Stock beneficially owned by any person in
excess of the Limit) supply the Corporation with complete information as to (i)
the record owner(s) of all shares beneficially owned by such person who is
reasonably believed to own shares in excess of the Limit, (ii) any other factual
matter relating to the applicability or effect of this Article as may reasonably
be requested of such person. Any constructions, applications, or determinations
made by the Board of Directors, pursuant to this Article in good faith and on
the basis of such information and assistance as was then reasonably available
for such purpose shall be conclusive and binding upon the Corporation and its
stockholders.
D. Enforceability. In the event any provision (or portion thereof) of
this Article shall be found to be invalid, prohibited or unenforceable for any
reason, the remaining provisions (or portions thereof) of this Article shall
remain in full force and effect, and shall be construed as if such invalid,
prohibited or unenforceable provision had been stricken here from or otherwise
rendered inapplicable, it being the intent of this Corporation and its
stockholders that each such remaining provision (or portion thereof) of this
Article remain, to the fullest extent permitted by law, applicable and
enforceable as to all stockholders, including stockholders owning an amount of
stock over the Limit, notwithstanding any such finding.
Article 13. Approval of Business Combinations.
A. General Requirement. The definitions and other provisions set forth
in Articles 11.A, 11.B and 11.C are also applicable to this Article 13. The
affirmative vote of the holders of not less than eighty percent (80%) of the
outstanding shares of "Voting Shares" shall be required for the approval or
authorization of any "Business Combination" as defined and set forth below:
1. Any merger, consolidation, share exchange or division of
the Corporation or any Subsidiary of the Corporation with or into (i) any
Interested Shareholder (as hereinafter defined), or (ii) with, involving or
resulting in any other corporation (whether or not itself an Interested
Shareholder of the Corporation) which is, or after the merger, consolidation,
share exchange or division would be, an Affiliate or Associate of the Interested
Shareholder;
2. A sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or series of transactions) to or with the
Interested Shareholders or any Affiliate or Associate
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of such Interested Shareholder of assets of the Corporation or any Subsidiary of
the Corporation (i) having an aggregate Market Value (as hereinafter defined)
equal to 10% or more of the aggregate Market Value of all the assets, determined
on a consolidated basis, of the Corporation; (ii) having an aggregate Market
Value equal to 10% or more of the aggregate Market Value of all outstanding
shares of the Corporation; or (iii) representing 10% or more of the earning
power or net income, determined on a consolidated basis, of the Corporation.
3. The issuance or transfer by the Corporation or any
Subsidiary of the Corporation (in one or a series of transactions) of any shares
of the Corporation or any Subsidiary of the Corporation which has an aggregate
Market Value equal to 5% or more of the aggregate Market Value of all the
outstanding shares of the Corporation to the Interested Shareholder or any
Affiliate or Associate of such Interested Shareholder except pursuant to the
exercise of option rights to purchase shares, or pursuant to the conversion of
securities having conversion rights, offered, or a dividend or distribution paid
or made, pro rata to all shareholders of the Corporation.
4. The adoption at any time of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by, or pursuant to any
agreement, arrangement or understanding with the Interested Shareholder or any
Affiliate or Associate of such Interested Shareholder.
5. A reclassification of securities (including, without
limitation, any split of shares, dividend of shares, or other distribution of
shares in respect of shares, or any reverse split of shares), or
recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any Subsidiary of the Corporation, or any other transaction
(whether or not with or into or otherwise involving the Interested Shareholder),
proposed by, or pursuant to any agreement, arrangement or understanding (whether
or not in writing) with, the Interested Shareholder or any Affiliate or
Associate of the Interested Shareholder, which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding shares of
any class or series of Voting Shares or securities convertible into Voting
Shares of the Corporation or any Subsidiary of the Corporation which is,
directly or indirectly, owned by the Interested Shareholder or any Affiliate or
Associate of the Interested Shareholder, except as a result of immaterial
changes due to fractional share adjustments.
The affirmative vote required by this Article 13 shall be in addition
to the vote of the holders of any class or series of stock of the Corporation
otherwise required by law, by any other Article of these Articles of
Incorporation, as the same may be amended from time to time, by any resolution
of the Board of Directors providing for the issuance of a class or series of
stock, or by any agreement between the Corporation and any national securities
exchange.
B. Certain Definitions.
1. "Share Acquisition Date" means with respect to any Person
and the Corporation, the date that such person first became an Interested
Shareholder of the Corporation.
2. The "Market Value" of the common stock of the Corporation
shall be the highest closing sale price during the 30-day period immediately
preceding the date in question of the share on the composite tape for New York
Stock Exchange-listed shares, or, if the shares are not quoted on the composite
tape or if the shares are not listed on the exchange, on the principal United
States securities exchange registered under the exchange act on which such
shares are listed, or, if the shares are not listed on any such exchange, the
highest closing bid quotation with respect to the shares during the 30-day
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period preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then in use or, if no
quotations are available, the fair market value on the date in question of the
shares as determined by the Board of Directors of the Corporation in good faith.
In the case of property other than cash or shares, the fair market value of the
property on the date in question as determined by the Board of Directors of the
Corporation in good faith.
3. The term "Interested Shareholder," means any Person (other
than the Corporation or any Subsidiary of the Corporation) that:
(i) Is the Beneficial Owner, directly or indirectly, of shares
entitling that Person to cast at least 20% of the Voting Shares (as defined in
Article 11.A);
(ii) Is an Affiliate or Associate of the Corporation and at
any time within the five-year period immediately prior to the date in question
was the Beneficial Owner, directly or indirectly, of shares entitling that
Person to cast at least 20% of the Voting Shares.
Exception - For the purpose of determining whether a Person is an
Interested Shareholder:
(1) The number of votes that would be entitled to be cast in
an election of directors of the Corporation shall be calculated by including
shares deemed to be beneficially owned by the Person through application of the
definition of "Beneficial Owner" in Article 11.A, but excluding any other
unissued shares of such Corporation which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion or
option rights or otherwise; and
(2) There shall be excluded from the Beneficial Ownership of
the Interested Shareholder any:
(i) Shares which were acquired pursuant to a stock split,
stock dividend, reclassification or similar recapitalization with respect to
shares described under this paragraph that have been held continuously since
their issuance by the Corporation by the natural Person or entity that acquired
them from the Corporation.
C. Exceptions. The provisions of this Article 13 shall not apply to a
Business Combination which is approved by two-thirds of those members of the
Board of Directors who were directors prior to the time when the Interested
Shareholder became an Interested Shareholder (the "Continuing Directors"). The
provisions of this Article 13 also shall not apply to a Business Combination:
(1) Approved by the affirmative vote of the holders of shares
entitling such holders to cast a majority of the votes that all shareholders
would be entitled to cast in an election of directors of the Corporation, not
including any Voting Shares beneficially owned by the Interested Shareholder or
any Affiliate or Associate of such Interested Shareholder, at a meeting called
for such purpose no earlier than three months after the Interested Shareholder
became, and if at the time of the meeting the Interested Shareholder is, the
Beneficial Owner, directly or indirectly, of shares entitling the Interested
Shareholder to cast at least eighty percent (80%) of the votes that all
shareholders would be entitled to cast in an election of directors of the
Corporation, and if the Business Combination satisfies all the conditions of
Article 14 herein; or
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(2) Approved by the affirmative vote of all of the holders of
all of the outstanding common shares.
(3) Approved by the affirmative vote of the holders of shares
entitling such holders to cast a majority of the votes that all shareholders
would be entitled to cast in an election of directors of the Corporation, not
including any Voting Shares beneficially owned by the Interested Shareholder or
any Affiliate or Associate of the Interested Shareholder, at a meeting called
for such purpose no earlier than five years after the Interested Shareholder's
Share Acquisition Date.
(4) Approved at a shareholders' meeting called for such
purpose no earlier than five years after the Interested Shareholder's Share
Acquisition Date that meets all of the conditions of Article 14 herein.
D. Additional Provisions. Nothing contained in this Article 13, shall
be construed to relieve an Interested Shareholder from any fiduciary obligation
imposed by law. In addition, nothing contained in this Article 13 shall prevent
any shareholder of the Corporation from objecting to any Business Combination
and from demanding any appraisal rights which may be available to such
shareholder.
E. Notwithstanding Article 15 or any provisions of these Articles of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by laws, these Articles of
Incorporation or the Bylaws of the Corporation), the affirmative vote of the
holders of at least eighty percent (80%) of the outstanding shares entitled to
vote thereon (and, if any class or series is entitled to vote thereon
separately, the affirmative vote of the holders of at least eighty percent (80%)
of the outstanding shares of each such class or series) shall be required to
amend or repeal this Article 13 or adopt any provisions inconsistent with this
Article.
Article 14. Fair Price Requirements
A. General Requirement. No "Business Combination" (as defined in
Article 13) shall be effected unless all of the following conditions, to the
extent applicable, are fulfilled.
1. The aggregate amount of the cash and the Market Value as of the
Consummation Date (as defined herein) of consideration other than cash to be
received per share by holders of outstanding common shares of the Corporation in
the Business Combination is at least equal to the higher of: (i) the highest per
share price paid by the Interested Shareholder at a time when the shareholder
was the Beneficial Owner, directly or indirectly, of shares entitling that
Person to cast at least 5% of the Voting Shares for any common shares of the
same class or series acquired by it within the five-year period immediately
prior to the Announcement Date (as hereinafter defined) or the transaction in
which the Interested Shareholder became an Interested Shareholder; whichever is
higher; plus, in either case, interest compounded annually from the earliest
date on which the highest per-share acquisition price was paid through the
Consummation Date at the rate of one-year United States treasury obligations
from time to time in effect; less the aggregate amount of any cash dividends
paid, and the Market Value of any dividends paid other than in cash, per common
share since such earliest date, up to the amount of the interest, or (ii) the
Market Value per common share on the Announcement Date with respect to the
Business Combination or on the Interested Shareholder's Share Acquisition Date,
whichever is higher; plus interest compounded annually from such date through
the Consummation Date at the rate of one-year United States treasury obligations
from time to time in effect; less the aggregate amount of any cash
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dividends paid, and the Market Value of any dividends paid other than in cash,
per common share since such date, up to the amount of the interest.
2. The aggregate amount of the cash and the Market Value as of the
Consummation Date of consideration other than cash to be received per share by
holders of outstanding shares of any class or series of shares, other than
common shares, of the Corporation is at least equal to the highest of the
following (whether or not the Interested Shareholder has previously acquired any
shares of such class or series of shares): (i) the highest per-share price paid
by the Interested Shareholder at a time when the shareholder was the Beneficial
Owner directly or indirectly, of shares entitling that Person to cast at least
5% of the Voting Shares for any shares of such class or series of shares
acquired by it within the five-year period immediately prior to the Announcement
Date; or the transaction in which the Interested Shareholder became an
Interested Shareholder; whichever is higher: plus, in either case, interest
compounded annually from the earliest date on which the highest per-share
acquisition price was paid through the Consummation Date at the rate for
one-year United States treasury obligations from time to time in effect; less
the aggregate amount of any cash dividends paid, and the Market Value of any
dividends paid other than in cash, per share of such class or series of shares
since such earliest date, up to the amount of the interest; or (ii) the highest
preferential amount per share to which the holders of shares of such class or
series of shares are entitled in the event of any voluntary liquidation,
dissolution or winding up of the Corporation, plus the aggregate amount of any
dividends declared or due as to which such holders are entitled prior to payment
of dividends on some other class or series of shares (unless the aggregate
amount of the dividends is included in such preferential amount), or (iii) the
Market Value per share of such class or series of shares on the Announcement
Date with respect to the Business Combination or on the Interested Shareholder's
Share Acquisition Date, whichever is higher; plus interest compounded annually
from such date through the Consummation Date at the rate for one-year United
States treasury obligations from time to time in effect; less the aggregate
amount of any cash dividends paid and the Market Value of any dividends paid
other than in cash, per share of such class or series of shares since such date,
up to the amount of the interest.
3. The consideration to be received by holders of a particular class or
series of outstanding shares (including common shares) of the Corporation in the
Business Combination is in cash or in the same form as the Interested
Shareholder has used to acquire the largest number of shares of such class or
series of shares previously acquired by it, and the consideration shall be
distributed promptly.
4. The holders of all outstanding shares of the Corporation not
beneficially owned by the Interested Shareholder immediately prior to the
consummation of the Business Combination are entitled to receive in the Business
Combination cash or other consideration for such shares in compliance with
paragraphs (1), (2) and (3).
5. After the Interested Shareholder's Share Acquisition Date and prior
to the Consummation Date with respect to the Business Combination, the
Interested Shareholder has not become the Beneficial Owner of any additional
Voting Shares of such Corporation except: (i) as part of the transaction which
resulted in such Interested Shareholder becoming an Interested Shareholder; (ii)
by virtue of proportionate splits of shares, share dividends or other
distributions of shares in respect of shares not constituting a Business
Combination as defined in Article 13; (iii) through a Business Combination
meeting all of the conditions of section 2555(1), (2), (3) or (4) of the BCL;
(iv) through purchase by the Interested Shareholder at any price which, if the
price had been paid in an otherwise permissible Business Combination the
Announcement Date and Consummation Date of which were the date of such purchase,
would have satisfied the requirements of paragraphs (1), (2) and (3); or (v)
through purchase required
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by and pursuant to the provisions of, and at no less than the fair value
(including interest to the date of payment) as determined by a court-appointed
appraiser under BCL section 2547 (relating to valuation procedures) or, if such
fair value was not then so determined, then at a price that would satisfy the
conditions in subparagraph (4).
The conditions imposed by this Article 14 shall be in addition to all
other conditions (including, without limitation, the vote of the holders of any
class or series of stock of the Corporation) otherwise imposed by law, by any
other Article of these Articles of Incorporation, by any resolution of the Board
of Directors providing for the issuance of a class or series of stock, or by any
agreement between the Corporation and any national securities exchange.
B. Certain Definitions. For the purpose of this Article 14, the
definitions of "Beneficial Owner," "Business Combination," "Market Value,"
"Principal Shareholder," "Share Acquisition Date," "Substantial Part," and
"Voting Shares," set forth in Articles 11 and 13 will apply to this Article 14.
1. The term "Announcement Date," when used in reference to any
Business Combination, shall mean the date of the first public announcement of
the final definitive proposal for such Business Combination.
2. The term "Consummation Date" when used with respect to any
Business Combination, the date of consummation of the Business Combination, or,
in the case of a Business Combination as to which a shareholder vote is taken,
the later of the business day prior to the vote or 20 days prior to the date of
consummation of such Business Combination.
C. Additional Provisions. Nothing contained in this Article 14 shall be
construed to relieve an Interested Shareholder from any fiduciary obligation
imposed by law. In addition, nothing contained in this Article 14 shall prevent
any shareholders of the Corporation from objecting to any Business Combination
and from demanding any appraisal rights which may be available to such
shareholders.
3. Notwithstanding Article 15 or any other provisions of these
Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding
the fact that a lesser percentage may be specified by law, these Articles of
Incorporation or the Bylaws of the Corporation), the affirmative vote of the
holders of at least eighty percent (80%) of the outstanding shares entitled to
vote thereon (and, if any class or series is entitled to vote thereon
separately, the affirmative vote of the holders of at least eighty percent (80%)
of the outstanding shares of each such class or series) shall be required to
amend or repeal or adopt any provisions inconsistent with this Article.
Article 15. Amendment of Articles and Bylaws.
A. Articles. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by law, and all rights conferred upon
stockholders herein are granted subject to this reservation. No amendment,
addition, alteration, change or repeal of these Articles of Incorporation shall
be made unless it is first approved by the Board of Directors of the Corporation
pursuant to a resolution adopted by the affirmative vote of a majority of the
directors then in office, and thereafter is approved by the holders of a
majority (except as provided below) of the shares of the Corporation entitled to
vote generally in an election of directors, voting together as a single class,
as well as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof. Notwithstanding anything contained in these
Articles
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of Incorporation to the contrary, the affirmative vote of the holders of at
least eighty percent (80%) of the shares of the Corporation entitled to vote
generally in an election of directors, voting together as a single class, as
well as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof, shall be required to amend, adopt, alter,
change or repeal any provision inconsistent with Articles 7, 8, 9, 10, 11, 12,
13, 14 and 15.
B. Bylaws. The Board of Directors or stockholders may adopt, alter,
amend or repeal the Bylaws of the Corporation. Such action by the Board of
Directors shall require the affirmative vote of a majority of the directors then
in office at any regular or special meeting of the Board of Directors. Such
action by the stockholders shall require the affirmative vote of the holders of
at least eighty percent (80%) of the shares of the Corporation entitled to vote
generally in an election of directors, voting together as a single class, as
well as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof.
Article 16. Control Share Acquisitions. Subchapter G, "Control-Share
Acquisitions," of Chapter 25 of the BCL shall not apply to the Corporation.
Article 17. Disgorgement by Certain Controlling Shareholders Following
Attempts to Acquire Control. Subchapter H, "Disgorgement by Certain Controlling
Shareholders Following Attempts to Acquire Control," of Chapter 25 of the BCL
shall not apply to the Corporation.
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IN WITNESS WHEREOF, said PHS Bancorp, Inc. has caused these Articles of
Incorporation to be signed by James P. Wetzel, Jr., its Incorporator, this the
14th day of October, 1993.
PHS BANCORP, INC.
/s/James P. Wetzel, Jr.
---------------------------------------------
James P. Wetzel, Jr., Incorporator
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EXIBIT 3.2
<PAGE>
BYLAWS
OF
PHS BANCORP, INC.
ARTICLE I. OFFICES
1.1 Registered Office and Registered Agent. The registered office of
PHS Bancorp, Inc.(the "Corporation") shall be located in the Commonwealth of
Pennsylvania at such place as may be fixed from time to time by the Board of
Directors upon filing of such notices as may be required by law, and the
registered agent shall have a business office identical with such registered
office.
1.2 Other Offices. The Corporation may have other offices within or
outside the Commonwealth of Pennsylvania at such place or places as the Board of
Directors may from time to time determine.
ARTICLE II. STOCKHOLDERS' MEETING
2.1 Meeting Place. All meetings of the stockholders shall be held at
the principal place of business of the Corporation, or at such other place
within or without the Commonwealth of Pennsylvania as shall be determined by the
Board of Directors and stated in the notice of such meeting.
2.2 Annual Meeting Time. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on such date and time
as may be determined by the Board of Directors and stated in the notice of such
meeting.
2.3 Organization and Conduct. Each meeting of the stockholders shall be
presided over by the President, or in his absence by any Vice President. The
Secretary, or in his absence a temporary Secretary, shall act as secretary of
each meeting of the stockholders. In the absence of the Secretary and any
temporary Secretary, the chairman of the meeting may appoint any person present
to act as secretary of the meeting. The chairman of any meeting of the
stockholders, unless prescribed by law or regulation or unless the Board of
Directors has otherwise determined, shall determine the order of the business
and the procedure at the meeting, including such regulation of the manner of
voting and the conduct of discussions as shall be deemed appropriate by him in
his sole discretion.
2.4 Notice.
(a) Notice of the time and place of the annual meeting of
stockholders shall be given by delivering personally or by mailing a written or
printed notice of the same, at least 10 days and not more than 60 days prior to
the meeting, to each stockholder of record entitled to vote at such meeting.
When any stockholders' meeting, either annual or special, is adjourned for 30
days or more, or if a new record date is fixed for an adjourned meeting of
stockholders, notice of the adjourned meeting shall be given as in the case of
an original meeting. It shall not be necessary to give any notice of the time
and place of any meeting adjourned for less than 30 days or of the business to
be transacted thereat (unless a new
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record date is fixed therefor), other than an announcement at the meeting at
which such adjournment is taken.
(b) At least 10 days and not more than 60 days prior to the
meeting, a written or printed notice of each special meeting of stockholders,
stating the place, day and hour of such meeting, and the purpose or purposes for
which the meeting is called, shall be either delivered personally or mailed to
each stockholder of record entitled to vote at such meeting.
2.5 Voting Record. The officer or agent having charge of the transfer
books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to inspection of any shareholder during the whole time of
the meeting for the purposes thereof.
2.6 Quorum. Except as otherwise required by law:
(a) A quorum at any annual or special meeting of stockholders
shall consist of stockholders representing, either in person or by proxy, a
majority of the outstanding capital stock of the Corporation entitled to vote at
such meeting.
(b) The votes of a majority in interest of those present at
any properly called meeting or adjourned meeting of stockholders, at which a
quorum as defined above is present, shall be sufficient to transact business.
2.7 Voting of Shares.
(a) Except as otherwise provided in these Bylaws or to the
extent that voting rights of the shares of any class or classes are limited or
denied by the Articles of Incorporation, each stockholder, on each matter
submitted to a vote at a meeting of stockholders, shall have one vote for each
share of capital stock registered in his name on the books of the Corporation.
(b) Directors are to be elected by a plurality of votes cast
by the shares entitled to vote in the election at a meeting at which a quorum is
present. Stockholders shall not be permitted to cumulate their votes for the
election of directors. If, at any meeting of the stockholders, due to a vacancy
or vacancies or otherwise, directors of more than one class of the Board of
Directors are to be elected, each class of directors to be elected at the
meeting shall be elected in a separate election by a plurality vote.
2.8 Fixing Record Date. The board of directors of the Corporation may
fix a time prior to the date of any meeting of shareholders as a record date for
the determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled notwithstanding
any transfer of shares on the books of the corporation after any record date
fixed as provided in this subsection. The board of directors may similarly fix a
record date for the determination of shareholders of record for any other
purpose. When a determination of shareholders of record has been made as
provided in this section for purposes of a meeting, the determination shall
apply to any adjournment thereof unless the board fixes a new record date for
the adjourned meeting.
2
<PAGE>
2.9 Proxies. A stockholder may vote either in person or by proxy
executed in writing by the stockholder, or his duly authorized attorney-in-fact.
No proxy shall be valid after 11 months from the date of its execution, unless
otherwise provided in the proxy.
2.10 Voting of Shares in the Name of Two or More Persons. Where shares
are held jointly or as tenants in common by two or more persons as fiduciaries
or otherwise, if only one or more of such persons is present in person or by
proxy, all of the shares standing in the names of such persons shall be deemed
to be represented for the purpose of determining a quorum and the Corporation
shall accept as the vote of all such shares the votes cast by him or a majority
of them and if in any case such persons are equally divided upon the manner of
voting the shares held by them, the vote of such shares shall be divided equally
among such persons, without prejudice to the rights of such joint owners or the
beneficial owners thereof among themselves, except that, if there shall have
been filed with the Secretary of the Corporation a copy, certified by an
attorney-at-law to be correct, of the relevant portions of the agreements under
which such shares are held or the instrument by which the trust or estate was
created or the decree of court appointing them, or of a decree of court
directing the voting of such shares, the persons specified as having such voting
power in the latest such document so filed, and only such persons, shall be
entitled to vote such shares but only in accordance therewith.
2.11 Voting of Shares by Certain Holders. Shares standing in the name
of another corporation may be voted by an officer, agent or proxy as the bylaws
of such corporation may prescribe, or, in the absence of such provision, as the
Board of Directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy. Shares standing in the name of a receiver may be voted by such receiver
without the transfer thereof into his name if authority to do so is contained in
an appropriate order of the court or other public authority by which such
receiver was appointed. A stockholder whose shares are pledged shall be entitled
to vote such shares until the shares have been transferred into the name of the
pledgee or nominee, and thereafter the pledgee or nominee shall be entitled to
vote the shares so transferred.
2.12 Inspectors. For each meeting of stockholders, the Board of
Directors may appoint one or more inspectors of election. If for any meeting the
inspector(s) appointed by the Board of Directors shall be unable to act or the
Board of Directors shall fail to appoint any inspector, one or more inspectors
may be appointed at the meeting by the chairman thereof. Such inspectors shall
conduct the voting in each election of directors and, as directed by the Board
of Directors or the chairman of the meeting, the voting on each matter voted on
at such meeting, and after the voting shall make a certificate of the vote
taken. Inspectors need not be stockholders.
2.13 Action By Shareholders Without a Meeting. No action required to be
taken or which may be taken at any annual or special meeting of stockholders of
the Corporation may be taken without a meeting as set forth in the Corporation's
Articles of Incorporation, which provisions are incorporated herein with the
same effect as if they were set forth herein.
ARTICLE III. CAPITAL STOCK
3.1 Certificates. Certificates of stock shall be issued in numerical
order, and each stockholder shall be entitled to a certificate signed by the
President or a Vice President, and the Secretary or the Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of
3
<PAGE>
such officers may be facsimiles if the certificate is manually signed on behalf
of a transfer agent, or registered by a registrar, other than the Corporation
itself or an employee of the Corporation. If an officer who has signed or whose
facsimile signature has been placed upon such certificate ceases to be an
officer before the certificate is issued, it may be issued by the Corporation
with the same effect as if the person were an officer on the date of issue. Each
certificate of stock shall state:
(a) that the Corporation is incorporated under the laws of the
Commonwealth of Pennsylvania;
(b) the name of the person to whom issued;
(c) the number and class of shares and the designation of the
series, if any, which such certificate represents;
(d) the par value of each share represented by such
certificate, or a statement that such shares are without par value; and
(e) that the Corporation will furnish to any shareholder upon
request and without charge, a full statement of the designations, preferences,
limitations and relative rights and preferences of each class authorized to be
issued.
3.2 Transfers.
(a) Transfers of stock shall be made only upon the stock
transfer books of the Corporation, kept at the registered office of the
Corporation or at its principal place of business, or at the office of its
transfer agent or registrar, and before a new certificate is issued the old
certificate shall be surrendered for cancellation. The Board of Directors may,
by resolution, open a share register in any state of the United States, and may
employ an agent or agents to keep such register, and to record transfers of
shares therein.
(b) Shares of stock shall be transferred by delivery of the
certificates therefor, accompanied either by an assignment in writing on the
back of the certificate or an assignment separate from the certificate, or by a
written power of attorney to sell, assign and transfer the same, signed by the
holder of said certificate. No shares of stock shall be transferred on the books
of the Corporation until the outstanding certificates therefor have been
surrendered to the Corporation.
3.3 Registered Owner. Registered stockholders shall be treated by the
Corporation as the holders in fact of the stock standing in their respective
names and the Corporation shall not be bound to recognize any equitable or other
claim to or interest in any share on the part of any other person, whether or
not it shall have express or other notice thereof, except as expressly provided
below or by the laws of the Commonwealth of Pennsylvania. The Board of Directors
may adopt by resolution a procedure whereby a stockholder of the Corporation may
certify in writing to the Corporation that all or a portion of the shares
registered in the name of such stockholder are held for the account of a
specified person or persons. The resolution shall set forth:
(a) The classification of stockholder who may certify;
(b) The purpose or purposes for which the certification may be
made;
4
<PAGE>
(c) The form of certification and information to be contained
therein;
(d) If the certification is with respect to a record date or
closing of the stock transfer books, the date within which the certification
must be received by the Corporation; and
(e) Such other provisions with respect to the procedure as are
deemed necessary or desirable.
Upon receipt by the Corporation of a certification complying with the
above requirements, the persons specified in the certification shall be deemed,
for the purpose or purposes set forth in the certification, to be the holders of
record of the number of shares specified in place of the stockholder making the
certification.
3.4 Mutilated, Lost or Destroyed Certificates. In case of any
mutilation, loss or destruction of any certificate of stock, another may be
issued in its place upon receipt of proof of such mutilation, loss or
destruction. The Board of Directors may impose conditions on such issuance and
may require the giving of a satisfactory bond or indemnity to the Corporation in
such sum as they might determine, or establish such other procedures as they
deem necessary.
3.5 Fractional Shares or Scrip. The Corporation may (a) issue fractions
of a share which shall entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the Corporation in
the event of liquidation; (b) arrange for the disposition of fractional
interests by those entitled thereto; (c) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such shares are
determined; or (d) issue scrip in registered or bearer form which shall entitle
to holder to receive a certificate for a full share upon the surrender of such
scrip aggregating a full share.
3.6 Shares of Another Corporation. Shares owned by the Corporation in
another corporation, domestic or foreign, may be voted by such officer, agent or
proxy as the Board of Directors may determine or, in the absence of such
determination, by the President of the Corporation.
ARTICLE IV. BOARD OF DIRECTORS
4.1 Number and Powers. The management of all the affairs, property and
interest of the Corporation shall be vested in a Board of Directors. The Board
of Directors shall be divided into three classes as nearly equal in number as
possible. The initial Board of Directors shall consist of seven (7) persons. The
classification and term of the directors shall be as set forth in the
Corporation's Articles of Incorporation, which provisions are incorporated
herein with the same effect as if they were set forth herein. Directors need not
be stockholders or residents of the Commonwealth of Pennsylvania. In addition to
the powers and authorities expressly conferred upon it by these Bylaws and the
Articles of Incorporation, the Board of Directors may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the Articles of Incorporation or by these Bylaws directed or required to
be exercised or done by the stockholders.
5
<PAGE>
4.2 Change of Number. The number of directors may at any time be
increased or decreased by a vote of two-thirds of the Board of Directors,
provided that no decrease shall have the effect of shortening the term of any
incumbent director except as provided in Sections 4.4 and 4.5 hereunder.
Notwithstanding anything to the contrary contained within these Bylaws, the
number of directors may neither be less than five nor more than 15.
4.3 Resignation. Any director may resign at any time by sending a
written notice of such resignation to the home office of the Corporation
addressed to the Chairman or the President. Unless otherwise specified therein,
such resignation shall take effect upon receipt thereof by the Chairman or the
President.
4.4 Vacancies. All vacancies in the Board of Directors shall be filled
in the manner provided in the Corporation's Articles of Incorporation, which
provisions are incorporated herein with the same effect as if they were set
forth herein.
4.5 Removal of Directors. Directors may be removed only in the manner
provided in the Corporation's Articles of Incorporation, which provisions are
incorporated herein with the same effect as if they were set forth herein.
4.6 Regular Meetings. Regular meetings of the Board of Directors or any
committee thereof may be held without notice at the principal place of business
of the Corporation or at such other place or places, either within or without
the Commonwealth of Pennsylvania, as the Board of Directors or such committee,
as the case may be, may from time to time designate. The annual meeting of the
Board of Directors shall be held without notice immediately after the
adjournment of the annual meeting of stockholders.
4.7 Special Meetings.
(a) Special meetings of the Board of Directors may be called
at any time by the Chairman, President or by a majority of the authorized number
of directors, to be held at the principal place of business of the Corporation
or at such other place or places as the Board of Directors or the person or
persons calling such meeting may from time to time designate. Notice of all
special meetings of the Board of Directors shall be given to each director by
ten days' service of the same by telegram, by letter, or personally. Such notice
need neither specify the business to be transacted at, nor the purpose of, the
meeting.
(b) Special meetings of any committee may be called at any
time by such person or persons and with such notice as shall be specified for
such committee by the Board of Directors, or in the absence of such
specification, in the manner and with the notice required for special meetings
of the Board of Directors.
4.8 Quorum. A majority of the Board of Directors shall be necessary at
all meetings to constitute a quorum for the transaction of business.
4.9 Waiver of Notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. A waiver of notice signed by
6
<PAGE>
the director or directors, whether before or after the time stated for the
meeting, shall be equivalent to the giving of notice.
4.10 Registering Dissent. A director who is present at a meeting of the
Board of Directors at which action on a corporate matter is taken shall be
presumed to have assented to such action unless his dissent is entered in the
minutes of the meeting, or unless he files his written dissent to such action
with the person acting as the secretary of the meeting before the adjournment
thereof, or unless he delivers his dissent in writing to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
4.11 Executive, Audit and Other Committees. Standing or special
committees may be appointed by the Board of Directors from its own number from
time to time, and the Board of Directors may from time to time invest such
committees with such powers as it may see fit, subject to such conditions as may
be prescribed by the Board. An Executive Committee may be appointed by
resolution passed by a majority of the full Board of Directors. It shall have
and exercise all of the authority of the Board of Directors, except in reference
to amending the Articles of Incorporation, adopting a plan of merger or
consolidation, recommending the sale, lease or exchange or other dispositions of
all or substantially all the property and assets of the Corporation otherwise
than in the usual and regular course of business, recommending a voluntary
dissolution or a revocation thereof, or amending these Bylaws. An Audit
Committee may be appointed by resolution passed by a majority of the full Board
of Directors, and at least a majority of the members of the Audit Committee
shall be directors who are not also officers of the Corporation. The Audit
Committee shall review the records and affairs of the Corporation to determine
its financial condition, shall review the Corporation's systems of internal
control with management and the Corporation's independent auditors and shall
monitor the Corporation's adherence in accounting and financial reporting to
generally accepted accounting principles, as well as such other duties as may be
assigned to it by the Board of Directors. All committees appointed by the Board
of Directors shall keep regular minutes of the transactions of their meetings
and shall cause them to be recorded in books kept for that purpose in the office
of the Corporation. The designation of any such committee, and the delegation of
authority thereto, shall not relieve the Board of Directors, or any member
thereof, of any responsibility imposed by law.
4.12 Remuneration. The Board of Directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have the authority to establish reasonable
compensation of all directors for services to the Corporation as directors,
officers, or otherwise, or to delegate such authority to any appropriate
committee; provided, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of standing or special committees may
be allowed like compensation for attending committee meetings.
4.13 Action by Directors Without a Meeting. Any action which may be
taken at a meeting of the directors, or of a committee thereof, may be taken
without a meeting if a consent in writing, setting forth the action so taken or
to be taken, shall be signed by all of the directors, or all of the members of
the committee, as the case may be. Such consent shall have the same effect as a
unanimous vote.
4.14 Action of Directors by Communications Equipment. Any action which
may be taken at a meeting of directors, or of a committee thereof, may be taken
by means of a conference telephone or similar communications equipment.
7
<PAGE>
ARTICLE V. OFFICERS
5.1 Designations. The officers of the Corporation shall be the
President, a Secretary and a Treasurer, as well as such Vice Presidents
(including Executive and Senior Vice Presidents), Assistant Secretaries and
Assistant Treasurers as the Board may designate, who shall be elected for one
year by the directors at their first meeting after the annual meeting of
stockholders, and who shall hold office until their successors are elected and
qualify. Any two or more offices may be held by the same person, except that the
offices of President and Secretary may not be held by the same person.
5.2 Powers and Duties. The officers of the Corporation shall have such
authority and perform such duties as the Board of Directors may from time to
time authorize or determine. In the absence of action by the Board of Directors,
the officers shall have such powers and duties as generally pertain to their
respective offices.
5.3 Delegation. In the case of absence or inability to act of any
officer of the Corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any director or other person whom
it may select.
5.4 Vacancies. Vacancies in any office arising from any cause may be
filled by the Board of Directors at any regular or special meeting of the Board.
5.5 Other Officers. Directors may appoint such other officers and
agents as it shall deem necessary or expedient, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
5.7 Term - Removal. The officers of the Corporation shall hold office
until their successors are chosen and qualify. Any officer or agent elected or
appointed by the Board of Directors may be removed at any time, with or without
cause, by the affirmative vote of a majority of the whole Board of Directors,
but such removal shall be without prejudice to the contractual rights, if any,
of the person so removed.
ARTICLE VI. FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the 31st day of
December of each year. The Corporation shall be subject to an annual audit as of
the end of its fiscal year by independent public accountants appointed by and
responsible to the Board of Directors. The appointment of such accountants shall
be subject to annual ratification by the stockholders.
ARTICLE VII. DIVIDENDS AND FINANCE
7.1 Dividends. Dividends may be declared by the Board of Directors and
paid by the Corporation out of retained earnings of the Corporation subject to
the conditions and limitations imposed by the laws of the Commonwealth of
Pennsylvania.
7.2. Reserves. Before making any distribution of earned surplus, there
may be set aside out of the earned surplus of the Corporation such sum or sums
as the directors from time to time in their absolute discretion deem expedient
as a reserve fund to meet contingencies, or for equalizing dividends, or for
maintaining any property of the Corporation, or for any other purpose. Any
earned surplus of any
8
<PAGE>
year not distributed as dividends shall be deemed to have thus been set apart
until otherwise disposed of by the Board of Directors.
7.3 Depositories. The monies of the Corporation shall be deposited in
the name of the Corporation in such bank or banks or trust company or trust
companies as the Board of Directors shall designate, and shall be drawn out only
by check or other order for payment of money signed by such persons and in such
manner as may be determined by resolution of the Board of Directors.
ARTICLE VIII. PERSONAL LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable for
monetary damages for any action taken, or any failure to take any action, as a
director to the extent set forth in the Corporation's Articles of Incorporation,
which provisions are incorporated herein with the same effect as if they were
set forth herein.
ARTICLE IX. BUSINESS COMBINATIONS
The affirmative vote of the holders of not less than 80% of the
outstanding shares of "Voting Shares" shall be required for the approval of
certain "Business Combination," as those terms are defined and as such approval
is set forth in the Articles of Incorporation of the Corporation which are
incorporated herein with the full force and effect as if they were set forth
herein.
ARTICLE X. NOTICES
Except as may otherwise be required by law, any notice to any
stockholder or director may be delivered personally or by mail. If mailed, the
notice shall be deemed to have been delivered when deposited in the United
States mail, addressed to the addressee at his last known address in the records
of the Corporation, with postage thereon prepaid.
ARTICLE XI. SEAL
The corporate seal of the Corporation shall be in such form and bear
such inscription as may be adopted by resolution of the Board of Directors, or
by usage of the officers on behalf of the Corporation.
ARTICLE XII. BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account and shall keep minutes and proceedings of meetings of its stockholders
and Board of Directors; and it shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a record
of its stockholders, giving the names and addresses of all stockholders and the
number and class of the shares held by each. Any books, records and minutes may
be in written form or any other form capable of being converted into written
form within a reasonable time.
ARTICLE XIII. AMENDMENTS
These Bylaws may be altered, amended or repealed only as set forth in
the Corporation's Articles of Incorporation, which provisions are incorporated
herein with the same effect as if they were set forth herein.
9
EXHIBIT 4
<PAGE>
================================================================================
CERTIFICATE No. PHS BANCORP, INC. COMMON STOCK
PAR VALUE $.10
SHARES
INCORPORATED UNDER THE CUSIP NO. 693347 10 6
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA SEE REVERSE FOR CERTAIN DEFINITIONS
THIS
CERTIFIES
THAT
IS THE
OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.10 PAR VALUE PER SHARE OF
PHS BANCORP, INC.
The shares represented by this certificate are transferable only on the
stock transfer books of the Corporation by the holder of record hereof in
person, or by his duly authorized attorney or legal representative, upon the
surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all the provisions
contained in the Corporation's official corporate papers filed in the Department
of State of Pennsylvania, as amended (copies of which are on file with the
Transfer Agent), to all of the provisions the holder by acceptance hereof,
assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
In Witness Whereof, PHS Bancorp, Inc. has caused this certificate to be
executed by the signature of its duly authorized officers and has caused its
corporate seal to be hereunto affixed.
DATED:
- ------------------------------------- ----------------------------------
PRESIDENT AND CHIEF EXECUTIVE OFFICER SECRETARY
SEAL
Incorporated 1993
================================================================================
<PAGE>
PHS BANCORP, INC.
The shares represented by this certificate are issued subject to all the
provisions of the Articles of Incorporation and Bylaws of PHS Bancorp, Inc. (the
"Corporation"), as from time to time amended (copies of which are on file at the
principal office of the Corporation), to all of which the holder by acceptance
hereof assents. The following description constitutes a summary of certain
provisions of, and is qualified in its entirety by reference to, the Articles.
The Articles of the Corporation contain certain provisions, applicable upon
the effective date of the reorganization of Peoples Home Savings Bank into the
stock form and the concurrent formation of a mutual holding company, that
restrict persons from directly or indirectly acquiring or holding, or attempting
to acquire or hold, the beneficial ownership of in excess of 10% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors ("Voting Stock"). The Articles contain a
provision pursuant to which the shares beneficially held in excess of 10% the
Voting Stock of the Corporation are considered "excess shares" and shall not be
counted as shares entitled to vote and shall not be voted by any person or
counted as voting shares in connection with any matters submitted to the
stockholders for a vote. These restrictions are not applicable to underwriters
in connection with a public offering of the common stock, certain reorganization
transactions described in the Articles or to acquisitions of Voting Stock by the
Corporation, any majority-owned subsidiary of the Corporation, or any
tax-qualified employee stock benefit plan. PHS Bancorp, M.H.C., the ("MHC"), the
Pennsylvania chartered mutual holding company of the Corporation and Peoples
Home Savings Bank will own in excess of 50% of the Common Stock of the
Corporation so long as the MHC remains in mutual form.
The Board of Directors of the Corporation is authorized by resolution or
resolutions, from time to time adopted, to provide for the issuance of serial
preferred stock, no par value per share, in series and to fix and state the
voting powers, designations, preferences and relative, participating, optional,
or other special rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. The Corporation will
furnish to any shareholder upon request and without charge a full description of
each class of stock and any series thereof.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
------ -------
(Cus) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gift to Minors
JT TEN - as joint tenants with right of
survivorship and not as tenants Act ________________________
in common (State)
Additional abbreviations may also be used through not in the above list.
FOR VALUE RECEIVED ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares of the
- -------------------------------------------------------------------
Common Stock represented by the within Certificate and do hereby irrevocably
constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said Stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated ________________________
----------------------------------------
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the Certificate in every particular, without alteration
or enlargement or any change whatever.
THIS CERTIFICATE IS NOT A DEPOSIT AND IS NOT FEDERALLY INSURED OR GUARANTEED
EXHIBIT 10.1
<PAGE>
EMPLOYMENT AGREEMENT
AS AMENDED
THIS AGREEMENT entered into this 1st day of April, 1998 ("Effective
Date"), by and between Peoples Home Savings Bank, Beaver Falls, Pennsylvania
(the "Bank") and James P. Wetzel, Jr. (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Bank as
President and Chief Executive Officer and is experienced in all phases of the
business of the Bank; and
WHEREAS, the parties have previously entered into an Employment
Agreement, dated March 20, 1995 ("Prior Agreement"); and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Bank and the Employee, and to amend the Prior
Agreement in its entirety as set forth hereinafter.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the
President and Chief Executive Officer of the Bank. The Employee shall render
such administrative and management services to the Bank as are currently
rendered and as are customarily performed by persons situated in a similar
executive capacity. The Employee shall promote to the extent permitted by law
the business of the Bank. The Employee's other duties shall be such as the Board
of Directors for the Bank (the "Board of Directors") may from time to time
reasonably direct, including normal duties as an officer of the Bank.
2. Base Compensation. The Bank agrees to pay the Employee during the
term of this Agreement compensation in the form of a salary at the rate of
$150,000.00 per annum, payable in cash not less frequently than monthly;
provided, that the rate of such salary shall be reviewed by the Board of
Directors not less often than annually, and Employee shall be entitled to
receive annually an increase at such percentage or in such an amount as the
Board of Directors in its sole discretion may decide at such time.
3. Discretionary Bonus. The Employee shall be entitled to participate
in an equitable manner with all other senior management employees of the Bank in
discretionary bonuses that may be authorized and declared by the Board of
Directors to its senior management employees from time to time. No other
compensation provided for in this Agreement shall be deemed a substitute for the
Employee's right to participate in such discretionary bonuses when and as
declared by the Board of Directors.
<PAGE>
4. (a) Participation in Retirement and Medical Plans. The Employee
shall be entitled to participate in any plan of the Bank relating to pension,
profit-sharing, or other retirement benefits and medical coverage or
reimbursement plans that the Bank may adopt for the benefit of its employees.
Additionally, Employee's dependent family shall be eligible to participate in
medical and dental insurance plans sponsored by the Bank with the cost of such
premiums paid by the Bank.
(b) Employee Benefits; Expenses. The Employee shall be eligible to
participate in any fringe benefits which may be or may become applicable to the
Bank's senior management employees, including by example, participation in any
stock option or incentive plans adopted by the Board of Directors of Bank, club
memberships, a reasonable expense account, use of an automobile furnished by the
Bank or similar automobile allowance, and any other benefits which are
commensurate with the responsibilities and functions to be performed by the
Employee under this Agreement. The Bank shall reimburse Employee for all
reasonable out-of-pocket expenses which Employee shall incur in connection with
his service for the Bank.
(c) Post-Retirement & Disability Medical Insurance. Upon retirement
from employment with the Bank at any time on or after attainment of age 55 or
upon the disability of the Employee in accordance with Section 11 herein,
Employee shall be eligible to maintain participation in the group medical
insurance plan sponsored by the Bank from time to time for the benefit of
Employee and Employee's dependent family on the same basis as such coverage was
in effect as of the date of such retirement or disability, until such time that
Employee and Employee's spouse shall be eligible for coverage under the Federal
Medicare System, or any successor program. Notwithstanding anything herein to
the contrary, this Section 4(c) of the Agreement shall survive beyond the term
of this Agreement.
5. Term. The term of employment of Employee under this Agreement shall
be for the period commencing on the Effective Date and ending thirty-six (36)
months thereafter. Additionally, on each annual anniversary date from the
Effective Date, the term of employment under this Agreement shall be extended
for an additional one year period beyond the then effective expiration date upon
a determination and resolution of the Board of Directors that the performance of
the Employee has met the requirements and standards of the Board, and that the
term of such Agreement shall be extended.
6. Loyalty; Noncompetition.
(a) The Employee shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the Bank.
<PAGE>
(b) Nothing contained in this Section 6 shall be deemed to prevent or
limit the right of Employee to invest in the capital stock or other securities
of any business dissimilar from that of the Bank, or, solely as a passive or
minority investor, in any business.
7. Standards. The Employee shall perform his duties under this
Agreement in accordance with such reasonable standards expected of employees
with comparable positions in comparable organizations and as may be established
from time to time by the Board of Directors.
8. Vacation and Sick Leave. At such reasonable times as the Board of
Directors shall in its discretion permit, the Employee shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of his
employment under this Agreement, with all such voluntary absences to count as
vacation time; provided that:
(a) The Employee shall be entitled to annual vacation leave in
accordance with the policies as are periodically established by the Board of
Directors for senior management employees of the Bank.
(b) The Employee shall not be entitled to receive any additional
compensation from the Bank on account of his failure to take vacation leave and
Employee shall not be entitled to accumulate unused vacation from one fiscal
year to the next, except in either case to the extent authorized by the Board of
Directors for senior management employees of the Bank.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and legitimate reasons as the Board of Directors in its discretion may
determine. Further, the Board of Directors shall be entitled to grant to the
Employee a leave or leaves of absence with or without pay at such time or times
and upon such terms and conditions as the Board of Directors in its discretion
may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Bank. In the event that any sick leave benefit shall not have been used
during any year, such leave shall accrue to subsequent years only to the extent
authorized by the Board of Directors for employees of the Bank.
9. Termination and Termination Pay.
The Employee's employment under this Agreement shall be terminated upon
any of the following occurrences:
(a) The death of the Employee during the term of this Agreement, in
which event the Employee's estate shall be entitled
<PAGE>
to receive the compensation due the Employee through the last day of the
calendar month in which Employee's death shall have occurred.
(b) The Board of Directors may terminate the Employee's employment at
any time, but any termination by the Board of Directors other than termination
for Just Cause, shall not prejudice the Employee's right to compensation or
other benefits under the Agreement. The Employee shall have no right to receive
compensation or other benefits for any period after termination for Just Cause.
Termination for "Just Cause" shall include 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, or material breach of any
provision of the Agreement.
(c) Except as provided pursuant to Section 12 herein, in the event
Employee's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Employee the salary provided pursuant to Section 2 herein, up to the date of
termination of the term (including any renewal term) of this Agreement and the
cost of Employee obtaining all health, life, disability, and other benefits
which the Employee would be eligible to participate in through such date based
upon the benefit levels substantially equal to those being provided Employee at
the date of termination of employment.
10. Regulatory Exclusion. Notwithstanding anything herein to the
contrary, any payments made to the Employee pursuant to the Agreement, or
otherwise, shall be subject to and conditioned upon compliance with 12 USC
ss.1828(k) and any regulations promulgated thereunder.
11. Disability. If the Employee shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Employee shall nevertheless continue to
receive the compensation and benefits which may be payable to Employee under the
provisions of disability insurance coverage in effect for Bank employees, but in
no event less than 100% of compensation provided for at Section 2 herein for a
period of six (6) months and 65% for the remainder of term of the agreement.
Upon returning to active full-time employment, the Employee's full compensation
as set forth in this Agreement shall be reinstated as of the date of
commencement of such activities. In the event that the Employee returns to
active employment on other than a full-time basis, then his compensation (as set
forth in Section 2 of this Agreement) shall be reduced in proportion to the time
spent in said employment, or as shall otherwise be agreed to by the parties.
<PAGE>
12. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment under this Agreement,
absent Just Cause, in connection with, or within eighteen (18) months after, any
change in control of the Bank, Employee shall be paid an amount equal to the
product of 2.999 times the Employee's "base amount" as defined in Section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code") and
regulations promulgated thereunder. Said sum shall be paid, at the option of
Employee, either in one (1) lump sum within thirty (30) days of such termination
of employment or in periodic payments over the next 36 months or the remaining
term of this Agreement, whichever is less, as if Employee's employment had not
been terminated, and such payments shall be in lieu of any other future payments
which the Employee would be otherwise entitled to receive under Section 9 of
this Agreement. The term "control" shall refer to the ownership, holding or
power to vote more than 25% of the Bank's (or its holding company's) outstanding
voting stock by any person, the control of the election of a majority of the
Bank's (or its holding company's) Board of Directors, or the exercise of a
controlling influence over the management or policies of the Bank by any person
or by persons acting as a group within the meaning of Section 13(d) of the
Securities Exchange Act of 1934 ("Exchange Act"). The term "person" means an
individual other than the Employee, or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Employee may voluntary terminate his employment under this Agreement
within eighteen (18) months following a change in control of the Bank, and
Employee shall thereupon be entitled to receive the payment described in Section
12(a) of this Agreement, upon the occurrence, or within 120 days thereafter, of
any of the following events, which have not been consented to in advance by the
Employee in writing: (i) if Employee would be required to move his personal
residence or perform his principal executive functions more than thirty-five
(35) miles from the Employee's primary office as of the signing of this
Agreement; (ii) if in the organizational structure of the Bank, Employee would
be required to report to a person or persons other than the Board of Directors
of the Bank; (iii) if the Bank should fail to maintain the Employee's base
compensation as provided at Section 2, herein, or to maintain the existing
employee benefits plans, including material fringe benefit, and retirement
plans; (iv) if Employee would be assigned duties and responsibilities other than
those normally associated with his position as referenced at Section 1, herein;
(v) if Employee would not be elected or reelected to the Board of Directors of
the Bank; or (vi) if Employee's responsibilities or authority have in any way
been materially diminished or reduced.
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13. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank.
(b) Since the Bank is contracting for the unique and personal skills of
the Employee, the Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
14. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
15. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the Commonwealth of Pennsylvania, except to the extent that Federal law
shall be deemed to apply.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extend that the parties may otherwise reach a mutual
settlement of such issue. The Bank shall incur the cost of all fees and expenses
associated with filing a request for arbitration with the AAA, whether such
filing is made on behalf of the Bank or the Employee, and the costs and
administrative fees associated with employing the arbitrator and related
administrative expenses assessed by the AAA. The Bank shall reimburse Employee
for all costs and expenses, including reasonable attorneys' fees, arising from
such dispute, proceedings or actions, notwithstanding the ultimate outcome
thereof, following the delivery of the decision of the arbitrator or upon
delivery of other legal judgment or settlement of the matter. Such reimbursement
shall be paid within ten (10) days of Employee furnishing to the Bank evidence,
which may be in the form, among other things, of a canceled check or receipt, of
any costs or expenses incurred by Employee.
EXHIBIT 10.2
<PAGE>
PEOPLES HOME SAVINGS BANK
1998 STOCK OPTION PLAN
1. Purpose of the Plan. The Plan shall be known as the Peoples Home
Savings Bank ("Bank") 1998 Stock Option Plan (the "Plan"). The purpose of the
Plan is to attract and retain qualified personnel for positions of substantial
responsibility and to provide additional incentive to officers, directors, key
employees and other persons providing services to the Bank, or any present or
future parent or subsidiary of the Bank to promote the success of the business.
The Plan is intended to provide for the grant of "Incentive Stock Options,"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and Non-Incentive Stock Options, options that do not so
qualify. The provisions of the Plan relating to Incentive Stock Options shall be
interpreted to conform to the requirements of Section 422 of the Code.
2. Definitions. The following words and phrases when used in this Plan
with an initial capital letter, unless the context clearly indicates otherwise,
shall have the meaning as set forth below. Wherever appropriate, the masculine
pronoun shall include the feminine pronoun and the singular shall include the
plural.
(a) "Award" means the grant by the Committee of an Incentive Stock
Option or a Non-Incentive Stock Option, or any combination thereof, as provided
in the Plan.
(b) "Board" shall mean the Board of Directors of the Bank, or any
successor or parent corporation thereto.
(c) "Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Bank; (ii) the merger or recapitalization
of the Bank whereby the Bank is not the surviving entity; (iii) a change in
control of the Bank, as otherwise defined or determined by the Pennsylvania
Department of Banking ("Department") or regulations promulgated by it; or (iv)
the acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of that term as it is used in Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder) of twenty-five
percent (25%) or more of the outstanding voting securities of the Bank by any
person, trust, entity or group other than by PHS Bancorp, M.H.C., the mutual
holding company of the Bank. This limitation shall not apply to the purchase of
shares by underwriters in connection with a public offering of Bank stock, or
the purchase of shares of up to 25% of any class of securities of the Bank by a
tax-qualified employee stock benefit plan. The term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. The decision of the Committee as
to whether a Change in Control has occurred shall be conclusive and binding. A
Change in Control shall not include a transaction whereby a Parent is formed
which shall be the owner of 100% of the stock of the Bank.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder.
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(e) "Committee" shall mean the Board or the Stock Option Committee
appointed by the Board in accordance with Section 5(a) of the Plan.
(f) "Common Stock" shall mean the common stock of the Bank, or any
successor or parent corporation thereto.
(g) "Continuous Employment" or "Continuous Status as an Employee"
shall mean the absence of any interruption or termination of employment with the
Bank or any present or future Parent or Subsidiary of the Bank. Employment shall
not be considered interrupted in the case of sick leave, military leave or any
other leave of absence approved by the Bank or in the case of transfers between
payroll locations, of the Bank or between the Bank, its Parent, its Subsidiaries
or a successor.
(h) "Director" shall mean a member of the Board of the Bank, or any
successor or parent corporation thereto.
(i) "Director Emeritus" shall mean a person serving as a director
emeritus, advisory director, consulting director, or other similar position as
may be appointed by the Board of Directors of the Bank from time to time.
(j) "Disability" means (a) with respect to Incentive Stock Options,
the "permanent and total disability" of the Employee as such term is defined at
Section 22(e)(3) of the Code; and (b) with respect to Non-Incentive Stock
Options, any physical or mental impairment which renders the Participant
incapable of continuing in the employment or service of the Bank in his then
current capacity as determined by the Committee.
(k) "Dividend Equivalent Rights" shall mean the rights to receive a
cash payment in accordance with Section 12 of the Plan.
(l) "Effective Date" shall mean the date specified in Section 15
hereof.
(m) "Employee" shall mean any person employed by the Bank or any
present or future Parent or Subsidiary of the Bank.
(n) "Fair Market Value" shall mean: (i) if the Common Stock is
traded otherwise than on a national securities exchange, then the Fair Market
Value per Share shall be equal to the mean between the last bid and ask price of
such Common Stock on such date or, if there is no bid and ask price on said
date, then on the immediately prior business day on which there was a bid and
ask price. If no such bid and ask price is available, then the Fair Market Value
shall be determined by the Committee in good faith; or (ii) if the Common Stock
is listed on a national securities exchange, then the Fair Market Value per
Share shall be not less than the average of the highest and lowest selling price
of such Common Stock on such exchange on such date, or if there were no sales on
said date, then the Fair Market Value shall be not less than the mean between
the last bid and ask price on such date.
(o) "Incentive Stock Option" or "ISO" shall mean an option to
purchase Shares granted by the Committee pursuant to Section 8 hereof which is
subject to the limitations and restrictions of Section 8 hereof and is intended
to qualify as an incentive stock option under Section 422 of the Code.
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<PAGE>
(p) "Non-Incentive Stock Option" or "Non-ISO" shall mean an option
to purchase Shares granted pursuant to Section 9 hereof, which option is not
intended to qualify under Section 422 of the Code.
(q) "Option" shall mean an Incentive Stock Option or Non-Incentive
Stock Option granted pursuant to this Plan providing the holder of such Option
with the right to purchase Common Stock.
(r) "Optioned Stock" shall mean stock subject to an Option granted
pursuant to the Plan.
(s) "Optionee" shall mean any person who receives an Option or
Award pursuant to the Plan.
(t) "Parent" shall mean any present or future corporation which
would be a "parent corporation" as defined in Sections 424(e) and (g) of the
Code.
(u) "Participant" means any director, officer or key employee of
the Bank or any Parent or Subsidiary of the Bank or any other person providing a
service to the Bank who is selected by the Committee to receive an Award, or who
by the express terms of the Plan is granted an Award.
(v) "Plan" shall mean the Peoples Home Savings Bank 1998 Stock
Option Plan.
(w) "Retirement" shall mean termination of service in all
capacities as an Employee, Director and Director Emeritus following attainment
of not less than age 55 and completion of not less than ten years of Service to
the Bank. Service to the Bank rendered prior to the Effective Date shall be
recognized in determining eligibility to meet the requirements of Retirement
under the Plan.
(x) "Savings Bank" or "Bank" shall mean Peoples Home Savings Bank,
or any successor corporation thereto.
(y) "Share" shall mean one share of the Common Stock.
(z) "Subsidiary" shall mean any present or future corporation which
constitutes a "subsidiary corporation" as defined in Sections 424(f) and (g) of
the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of Section 13 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed 124,200 Shares.
Such Shares may either be from authorized but unissued shares or shares
purchased in the market for Plan purposes. If an Award shall expire, become
unexercisable, or be forfeited for any reason prior to its exercise, new Awards
may be granted under the Plan with respect to the number of Shares as to which
such expiration has occurred.
4. Six Month Holding Period.
Subject to vesting requirements, if applicable, except in the event
of death or Disability of the Optionee or a Change in Control of the Bank, a
minimum of six months must elapse between the
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<PAGE>
date of the grant of an Option and the date of the sale of the Common Stock
received through the exercise of such Option.
5. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be administered by
the Board of Directors of the Bank or a Committee which shall consist of not
less than two Directors of the Bank appointed by the Board and serving at the
pleasure of the Board. All persons designated as members of the Committee shall
meet the requirements of a "Non-Employee Director" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended, as found at 17 CFR
ss.240.16b-3.
(b) Powers of the Committee. The Committee is authorized (but only
to the extent not contrary to the express provisions of the Plan or to
resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the form and
content of Awards to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall have and
may exercise such other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at any meeting at
which a quorum is present shall be deemed the action of the Committee. In no
event may the Committee revoke outstanding Awards without the consent of the
Participant.
The President of the Bank and such other officers as shall be
designated by the Committee are hereby authorized to execute written agreements
evidencing Awards on behalf of the Bank and to cause them to be delivered to the
Participants. Such agreements shall set forth the Option exercise price, the
number of shares of Common Stock subject to such Option, the expiration date of
such Options, and such other terms and restrictions applicable to such Award as
are determined in accordance with the Plan or the actions of the Committee.
(c) Effect of Committee's Decision. All decisions, determinations
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
6. Eligibility for Awards and Limitations.
(a) The Committee shall from time to time determine the officers,
Directors, key employees and other persons who shall be granted Awards under the
Plan, the number of Awards to be granted to each such persons, and whether
Awards granted to each such Participant under the Plan shall be Incentive and/or
Non-Incentive Stock Options. In selecting Participants and in determining the
number of Shares of Common Stock to be granted to each such Participant, the
Committee may consider the nature of the prior and anticipated future services
rendered by each such Participant, each such Participant's current and potential
contribution to the Bank and such other factors as the Committee may, in its
sole discretion, deem relevant. Participants who have been granted an Award may,
if otherwise eligible, be granted additional Awards.
(b) The aggregate Fair Market Value (determined as of the date the
Option is granted) of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by each Employee during any calendar year
(under all Incentive Stock Option plans, as defined in Section 422 of the Code,
of the Bank or any present or future Parent or Subsidiary of the Bank) shall not
exceed $100,000. Notwithstanding the prior provisions of this Section 6, the
Committee may grant Options in
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<PAGE>
excess of the foregoing limitations, provided said Options shall be clearly and
specifically designated as not being Incentive Stock Options.
(c) In no event shall Shares subject to Options granted to
non-employee Directors in the aggregate under this Plan exceed more than 30% of
the total number of Shares authorized for delivery under this Plan pursuant to
Section 3 herein or more than 5% to any individual non-employee Director. In no
event shall Shares subject to Options granted to any Employee exceed more than
25% of the total number of Shares authorized for delivery under the Plan.
7. Term of the Plan. The Plan shall continue in effect for a term of
ten (10) years from the Effective Date, unless sooner terminated pursuant to
Section 18 hereof. No Option shall be granted under the Plan after ten (10)
years from the Effective Date.
8. Terms and Conditions of Incentive Stock Options. Incentive Stock
Options may be granted only to Participants who are Employees. Each Incentive
Stock Option granted pursuant to the Plan shall be evidenced by an instrument in
such form as the Committee shall from time to time approve. Each Incentive Stock
Option granted pursuant to the Plan shall comply with, and be subject to, the
following terms and conditions:
(a) Option Price.
(i) The price per Share at which each Incentive Stock Option
granted by the Committee under the Plan may be exercised shall not, as to any
particular Incentive Stock Option, be less than the Fair Market Value of the
Common Stock on the date that such Incentive Stock Option is granted.
(ii) In the case of an Employee who owns Common Stock
representing more than ten percent (10%) of the outstanding Common Stock at the
time the Incentive Stock Option is granted, the Incentive Stock Option exercise
price shall not be less than one hundred and ten percent (110%) of the Fair
Market Value of the Common Stock on the date that the Incentive Stock Option is
granted.
(b) Payment. Full payment for each Share of Common Stock purchased
upon the exercise of any Incentive Stock Option granted under the Plan shall be
made at the time of exercise of each such Incentive Stock Option and shall be
paid in cash (in United States Dollars), Common Stock or a combination of cash
and Common Stock. Common Stock utilized in full or partial payment of the
exercise price shall be valued at the Fair Market Value at the date of exercise.
The Bank shall accept full or partial payment in Common Stock only to the extent
permitted by applicable law. No Shares of Common Stock shall be issued until
full payment has been received by the Bank, and no Optionee shall have any of
the rights of a stockholder of the Bank until Shares of Common Stock are issued
to the Optionee.
(c) Term of Incentive Stock Option. The term of exercisability of
each Incentive Stock Option granted pursuant to the Plan shall be not more than
ten (10) years from the date each such Incentive Stock Option is granted,
provided that in the case of an Employee who owns stock representing more than
ten percent (10%) of the Common Stock outstanding at the time the Incentive
Stock Option is granted, the term of exercisability of the Incentive Stock
Option shall not exceed five (5) years.
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<PAGE>
(d) Exercise Generally. Except as otherwise provided in Section 10
hereof, no Incentive Stock Option may be exercised unless the Optionee shall
have been in the employ of the Bank at all times during the period beginning
with the date of grant of any such Incentive Stock Option and ending on the date
three (3) months prior to the date of exercise of any such Incentive Stock
Option. The Committee may impose additional conditions upon the right of an
Optionee to exercise any Incentive Stock Option granted hereunder which are not
inconsistent with the terms of the Plan or the requirements for qualification as
an Incentive Stock Option. Except as otherwise provided by the terms of the Plan
or by action of the Committee at the time of the grant of the Options, the
Options will be first exercisable at the rate of one-third on the date of grant
and one-third annually thereafter during such periods of service as an Employee,
Director or Director Emeritus.
(e) Cashless Exercise. Subject to vesting requirements, if
applicable, an Optionee who has held an Incentive Stock Option for at least six
months may engage in the "cashless exercise" of the Option. Upon a cashless
exercise, an Optionee shall give the Bank written notice of the exercise of the
Option together with an order to a registered broker-dealer or equivalent third
party, to sell part or all of the Optioned Stock and to deliver enough of the
proceeds to the Bank to pay the Option exercise price and any applicable
withholding taxes. If the Optionee does not sell the Optioned Stock through a
registered broker-dealer or equivalent third party, the Optionee can give the
Bank written notice of the exercise of the Option and the third party purchaser
of the Optioned Stock shall pay the Option exercise price plus any applicable
withholding taxes to the Bank.
(f) Transferability. An Incentive Stock Option granted pursuant to
the Plan shall be exercised during an Optionee's lifetime only by the Optionee
to whom it was granted and shall not be assignable or transferable otherwise
than by will or by the laws of descent and distribution.
9. Terms and Conditions of Non-Incentive Stock Options. Each
Non-Incentive Stock Option granted pursuant to the Plan shall be evidenced by an
instrument in such form as the Committee shall from time to time approve. Each
Non-Incentive Stock Option granted pursuant to the Plan shall comply with and be
subject to the following terms and conditions.
(a) Options Granted to Directors. Subject to the limitations of
Section 6(c), Non-Incentive Stock Options to purchase 6,210 shares of Common
Stock will be granted to each Director who is not an Employee as of the
Effective Date, at an exercise price equal to the Fair Market Value of the
Common Stock on such date of grant. The Options will be first exercisable at the
rate of one-third on the Effective Date and one-third annually thereafter during
such periods of service as a Director or Director Emeritus. Upon the death,
Disability or Retirement of the Director or Director Emeritus, such Option shall
be deemed immediately 100% exercisable. Such Options shall continue to be
exercisable for a period of ten years following the date of grant without regard
to the continued services of such Director as a Director or Director Emeritus.
In the event of the Optionee's death, such Options may be exercised by the
personal representative of his estate or person or persons to whom his rights
under such Option shall have passed by will or by the laws of descent and
distribution. Options may be granted to newly appointed or elected non-employee
Directors within the sole discretion of the Committee. The exercise price per
Share of such Options granted shall be equal to the Fair Market Value of the
Common Stock at the time such Options are granted. All Options awarded in
accordance with this Section 9(a) as of the Effective Date shall have Dividend
Equivalent Rights associated with such Options, as detailed at Section 12
herein. All outstanding Awards shall become immediately exercisable in the event
of a Change in Control of the Bank. Unless otherwise inapplicable, or
inconsistent with the provisions of this
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<PAGE>
paragraph, the Options to be granted to Directors hereunder shall be subject to
all other provisions of this Plan.
(b) Option Price. The exercise price per Share of Common Stock for
each Non-Incentive Stock Option granted pursuant to the Plan shall be at such
price as the Committee may determine in its sole discretion, but in no event
less than the Fair Market Value of such Common Stock on the date of grant as
determined by the Committee in good faith.
(c) Payment. Full payment for each Share of Common Stock purchased
upon the exercise of any Non-Incentive Stock Option granted under the Plan shall
be made at the time of exercise of each such Non-Incentive Stock Option and
shall be paid in cash (in United States Dollars), Common Stock or a combination
of cash and Common Stock. Common Stock utilized in full or partial payment of
the exercise price shall be valued at its Fair Market Value at the date of
exercise. The Bank shall accept full or partial payment in Common Stock only to
the extent permitted by applicable law. No Shares of Common Stock shall be
issued until full payment has been received by the Bank and no Optionee shall
have any of the rights of a stockholder of the Bank until the Shares of Common
Stock are issued to the Optionee.
(d) Term. The term of exercisability of each Non-Incentive Stock
Option granted pursuant to the Plan shall be not more than ten (10) years from
the date each such Non-Incentive Stock Option is granted.
(e) Exercise Generally. The Committee may impose additional
conditions upon the right of any Participant to exercise any Non-Incentive Stock
Option granted hereunder which is not inconsistent with the terms of the Plan.
Except as otherwise provided by the terms of the Plan or by action of the
Committee at the time of the grant of the Options, the Options will be first
exercisable at the rate of one-third on the date of grant and one-third annually
thereafter during such periods of service as an Employee, Director or Director
Emeritus.
(f) Cashless Exercise. Subject to vesting requirements, if
applicable, an Optionee who has held a Non-Incentive Stock Option for at least
six months may engage in the "cashless exercise" of the Option. Upon a cashless
exercise, an Optionee shall give the Bank written notice of the exercise of the
Option together with an order to a registered broker-dealer or equivalent third
party, to sell part or all of the Optioned Stock and to deliver enough of the
proceeds to the Bank to pay the Option exercise price and any applicable
withholding taxes. If the Optionee does not sell the Optioned Stock through a
registered broker-dealer or equivalent third party, the Optionee can give the
Bank written notice of the exercise of the Option and the third party purchaser
of the Optioned Stock shall pay the Option exercise price plus any applicable
withholding taxes to the Bank.
(g) Transferability. Any Non-Incentive Stock Option granted
pursuant to the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
10. Effect of Termination of Employment, Disability, Death and
Retirement on Incentive Stock Options.
(a) Termination of Employment. In the event that any Optionee's
employment with the Bank shall terminate for any reason, other than Disability
or death, all of any such Optionee's
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Incentive Stock Options, and all of any such Optionee's rights to purchase or
receive Shares of Common Stock pursuant thereto, shall automatically terminate
on (A) the earlier of (i) or (ii): (i) the respective expiration dates of any
such Incentive Stock Options, or (ii) the expiration of not more than three (3)
months after the date of such termination of employment; or (B) at such later
date as is determined by the Committee at the time of the grant of such Award
based upon the Optionee's continuing status as a Director or Director Emeritus
of the Bank, but only if, and to the extent that, the Optionee was entitled to
exercise any such Incentive Stock Options at the date of such termination of
employment, and further that such Award shall thereafter be deemed a
Non-Incentive Stock Option. In the event that a Subsidiary ceases to be a
Subsidiary of the Bank, the employment of all of its employees who are not
immediately thereafter employees of the Bank shall be deemed to terminate upon
the date such Subsidiary so ceases to be a Subsidiary of the Bank.
(b) Disability. In the event that any Optionee's employment with
the Bank shall terminate as the result of the Disability of such Optionee, such
Optionee may exercise any Incentive Stock Options granted to the Optionee
pursuant to the Plan at any time prior to the earlier of (i) the respective
expiration dates of any such Incentive Stock Options or (ii) the date which is
one (1) year after the date of such termination of employment, but only if, and
to the extent that, the Optionee was entitled to exercise any such Incentive
Stock Options at the date of such termination of employment.
(c) Death. In the event of the death of an Optionee, any Incentive
Stock Options granted to such Optionee may be exercised by the person or persons
to whom the Optionee's rights under any such Incentive Stock Options pass by
will or by the laws of descent and distribution (including the Optionee's estate
during the period of administration) at any time prior to the earlier of (i) the
respective expiration dates of any such Incentive Stock Options or (ii) the date
which is two (2) years after the date of death of such Optionee but only if, and
to the extent that, the Optionee was entitled to exercise any such Incentive
Stock Options at the date of death. For purposes of this Section 10(c), any
Incentive Stock Option held by an Optionee shall be considered exercisable at
the date of his death if the only unsatisfied condition precedent to the
exercisability of such Incentive Stock Option at the date of death is the
passage of a specified period of time. At the discretion of the Committee, upon
exercise of such Options the Optionee may receive Shares or cash or a
combination thereof. If cash shall be paid in lieu of Shares, such cash shall be
equal to the difference between the Fair Market Value of such Shares and the
exercise price of such Options on the exercise date.
(d) Incentive Stock Options Deemed Exercisable. For purposes of
Sections 10(a), 10(b) and 10(c) above, any Incentive Stock Option held by any
Optionee shall be considered exercisable at the date of termination of
employment if any such Incentive Stock Option would have been exercisable at
such date of termination of employment without regard to the Disability or death
of the Participant.
(e) Termination of Incentive Stock Options; Vesting Upon
Retirement. Except as may be specified by the Committee at the time of grant of
an Option, to the extent that any Incentive Stock Option granted under the Plan
to any Optionee whose employment with the Bank terminates shall not have been
exercised within the applicable period set forth in this Section 10, any such
Incentive Stock Option, and all rights to purchase or receive Shares of Common
Stock pursuant thereto, as the case may be, shall terminate on the last day of
the applicable period. Notwithstanding the foregoing, the Committee may
authorize at the time of the grant of an Option that such Award shall be
immediately 100% exercisable upon the Retirement of the Optionee.
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11. Effect of Termination of Employment, Disability, Death or
Retirement on Non-Incentive Stock Options. The terms and conditions of
Non-Incentive Stock Options relating to the effect of the Retirement or other
termination of an Optionee's employment or service, Disability of an Optionee or
his death shall be such terms and conditions as the Committee shall, in its sole
discretion, determine at the time of termination of service, unless specifically
provided for by the terms of the Agreement at the time of grant of the Award.
12. Dividend Equivalent Rights. The Committee, in its sole discretion,
may include as a term of any Option, the right of the Optionee to receive
Dividend Equivalent Rights. Such rights shall provide that upon the payment of a
cash dividend on the Common Stock, the holder of such Options shall receive
payment of compensation in an amount equivalent to the dividend payable as if
such Options had been exercised and such Common Stock held as of the dividend
record date. Such rights shall expire upon the expiration or exercise of such
underlying Options. Such rights are non-transferable and shall attach to Options
whether or not such Options are immediately exercisable. The dividend equivalent
payments associated with Options shall be paid to the Option holder within 30
days of the dividend payment date of the Common Stock. All Options granted to
non-employee Directors of the Bank as of the Effective Date in accordance with
Section 9(a) of the Plan shall have Dividend Equivalent Rights associated with
such Options.
13. Recapitalization, Merger, Consolidation, Change in Control and
Other Transactions.
(a) Adjustment. Subject to any required action by the stockholders
of the Bank, within the sole discretion of the Committee, the aggregate number
of Shares of Common Stock for which Options may be granted hereunder, the number
of Shares of Common Stock covered by each outstanding Option, and the exercise
price per Share of Common Stock of each such Option, shall all be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding Shares of Common Stock resulting from a subdivision or
consolidation of Shares (whether by reason of merger, consolidation,
recapitalization, reclassification, split-up, combination of shares, or
otherwise) or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such Shares of Common Stock
effected without the receipt or payment of consideration by the Bank (other than
Shares held by dissenting stockholders).
(b) Change in Control. All outstanding Awards shall become
immediately exercisable in the event of a Change in Control of the Bank. In the
event of such a Change in Control, the Committee and the Board of Directors will
take one or more of the following actions to be effective as of the date of such
Change in Control:
(i) provide that such Options shall be assumed, or equivalent
options shall be substituted, ("Substitute Options") by the acquiring or
succeeding corporation (or an affiliate thereof), provided that: (A) any such
Substitute Options exchanged for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, and (B) the shares of stock issuable
upon the exercise of such Substitute Options shall constitute securities
registered in accordance with the Securities Act of 1933, as amended, ("1933
Act") or such securities shall be exempt from such registration in accordance
with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively, "Registered
Securities"), or in the alternative, if the securities issuable upon the
exercise of such Substitute Options shall not constitute Registered Securities,
then the Optionee will receive upon consummation of the Change in Control
transaction a cash payment for each Option surrendered equal to the difference
between (1) the Fair Market Value of the consideration to be received for each
share of Common Stock in the Change in Control transaction times the number of
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shares of Common Stock subject to such surrendered Options, and (2) the
aggregate exercise price of all such surrendered Options, or
(ii) in the event of a transaction under the terms of which
the holders of the Common Stock of the Bank will receive upon consummation
thereof a cash payment (the "Merger Price") for each share of Common Stock
exchanged in the Change in Control transaction, to make or to provide for a cash
payment to the Optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such Options held by each
Optionee (to the extent then exercisable at prices not in excess of the Merger
Price) and (B) the aggregate exercise price of all such surrendered Options in
exchange for such surrendered Options.
(c) Extraordinary Corporate Action. Notwithstanding any provisions
of the Plan to the contrary, subject to any required action by the stockholders
of the Bank, in the event of any Change in Control, recapitalization, merger,
consolidation, exchange of Shares, spin-off, reorganization, tender offer,
partial or complete liquidation or other extraordinary corporate action or
event, the Committee, in its sole discretion, shall have the power, prior or
subsequent to such action or event to:
(i) appropriately adjust the number of Shares of Common Stock
subject to each Option, the Option exercise price per Share of Common Stock, and
the consideration to be given or received by the Bank upon the exercise of any
outstanding Option;
(ii) cancel any or all previously granted Options, provided
that appropriate consideration is paid to the Optionee in connection therewith;
and/or
(iii) make such other adjustments in connection with the Plan
as the Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable; provided, however, that no action shall be taken by
the Committee which would cause Incentive Stock Options granted pursuant to the
Plan to fail to meet the requirements of Section 422 of the Code without the
consent of the Optionee.
(d) Acceleration. The Committee shall at all times have the power
to accelerate the exercise date of Options previously granted under the Plan.
(e) Non-recurring Dividends. Upon the payment of a special or
non-recurring cash dividend that has the effect of a return of capital to the
stockholders, the Option exercise price per share shall be adjusted
proportionately and in an equitable manner, except to the extent that the
Participant shall otherwise receive payments associated with Dividend Equivalent
Rights attributable to such Options with regard to such special or non-recurring
cash dividends.
Except as expressly provided in Sections 13(a), 13(b) and 13(e) hereof,
no Optionee shall have any rights by reason of the occurrence of any of the
events described in this Section 13.
14. Time of Granting Options. The date of grant of an Option under the
Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the grant of an Option shall be
given to each individual to whom an Option is so granted within a reasonable
time after the date of such grant in a form determined by the Committee.
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15. Effective Date. The Plan shall become effective upon the date of
approval of the Plan by the stockholders of the Bank. The Committee may make a
determination related to Awards prior to the Effective Date with such Awards to
be effective upon the date of stockholder approval of the Plan.
16. Approval by Stockholders. The Plan shall be approved by
stockholders of the Bank within twelve (12) months before or after the date the
Plan is approved by the Board.
17. Modification of Options. At any time and from time to time, the
Board may authorize the Committee to direct the execution of an instrument
providing for the modification of any outstanding Option, provided no such
modification, extension or renewal shall confer on the holder of said Option any
right or benefit which could not be conferred on the Optionee by the grant of a
new Option at such time, or shall not materially decrease the Optionee's
benefits under the Option without the consent of the holder of the Option,
except as otherwise permitted under Section 18 hereof.
18. Amendment and Termination of the Plan.
(a) Action by the Board. The Board may alter, suspend or
discontinue the Plan, except that no action of the Board may increase (other
than as provided in Section 13 hereof) the maximum number of Shares permitted to
be optioned under the Plan, materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements for
eligibility for participation in the Plan unless such action of the Board shall
be subject to approval or ratification by the stockholders of the Bank.
(b) Change in Applicable Law. Notwithstanding any other provision
contained in the Plan, in the event of a change in any federal or state law,
rule or regulation which would make the exercise of all or part of any
previously granted Option unlawful or subject the Bank to any penalty, the
Committee may restrict any such exercise without the consent of the Optionee or
other holder thereof in order to comply with any such law, rule or regulation or
to avoid any such penalty.
19. Conditions Upon Issuance of Shares; Limitations on Option Exercise;
Cancellation of Option Rights.
(a) Shares shall not be issued with respect to any Option granted
under the Plan unless the issuance and delivery of such Shares shall comply with
all relevant provisions of applicable law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities laws and the requirements of any
stock exchange upon which the Shares may then be listed.
(b) The inability of the Bank to obtain any necessary
authorizations, approvals or letters of non-objection from any regulatory body
or authority deemed by the Bank's counsel to be necessary to the lawful issuance
and sale of any Shares issuable hereunder shall relieve the Bank of any
liability with respect to the non-issuance or sale of such Shares.
(c) As a condition to the exercise of an Option, the Bank may
require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
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(d) Notwithstanding anything herein to the contrary, upon the
termination of employment or service of an Optionee by the Bank or its
Subsidiaries for "cause" as defined at 12 C.F.R. 563.39(b)(1) as determined by
the Board of Directors, all Options held by such Participant shall cease to be
exercisable as of the date of such termination of employment or service.
(e) Upon the exercise of an Option by an Optionee (or the
Optionee's personal representative), the Committee, in its sole and absolute
discretion, may make a cash payment to the Optionee, in whole or in part, in
lieu of the delivery of shares of Common Stock. Such cash payment to be paid in
lieu of delivery of Common Stock shall be equal to the difference between the
Fair Market Value of the Common Stock on the date of the Option exercise and the
exercise price per share of the Option. Such cash payment shall be in exchange
for the cancellation of such Option. Such cash payment shall not be made in the
event that such transaction would result in liability to the Optionee or the
Bank under Section 16(b) of the Securities Exchange Act of 1934, as amended, and
regulations promulgated thereunder.
20. Reservation of Shares. During the term of the Plan, the Bank will
reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
21. Unsecured Obligation. No Participant under the Plan shall have any
interest in any fund or special asset of the Bank by reason of the Plan or the
grant of any Option under the Plan. No trust fund shall be created in connection
with the Plan or any grant of any Option hereunder and there shall be no
required funding of amounts which may become payable to any Participant.
22. Withholding Tax. The Bank shall have the right to deduct from all
amounts paid in cash with respect to the cashless exercise of Options and
Dividend Equivalent Rights under the Plan any taxes required by law to be
withheld with respect to such cash payments. Where a Participant or other person
is entitled to receive Shares pursuant to the exercise of an Option, the Bank
shall have the right to require the Participant or such other person to pay the
Bank the amount of any taxes which the Bank is required to withhold with respect
to such Shares, or, in lieu thereof, to retain, or to sell without notice, a
number of such Shares sufficient to cover the amount required to be withheld.
23. No Employment Rights. No Director, Employee or other person shall
have a right to be selected as a Participant under the Plan. Neither the Plan
nor any action taken by the Committee in administration of the Plan shall be
construed as giving any person any rights of employment or retention as an
Employee, Director or in any other capacity with the Bank, or its Subsidiaries.
24. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Pennsylvania, except to the extent that
federal law shall be deemed to apply.
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EXHIBIT 10.3
<PAGE>
Peoples Home Savings Bank
Restricted Stock Plan
and Trust Agreement
Article I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Peoples Home Savings Bank ("Savings Bank") hereby establishes the
Restricted Stock Plan (the "Plan") and Trust (the "Trust") upon the terms and
conditions hereinafter stated in this Restricted Stock Plan and Trust Agreement
(the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
Article II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and to retain personnel of
experience and ability in key positions of responsibility with the Savings Bank
and its subsidiaries, by providing such personnel of the Savings Bank and its
subsidiaries with an equity interest in the Savings Bank as compensation for
their prior and anticipated future professional contributions and service to the
Savings Bank and its subsidiaries.
Article III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meaning as set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Beneficiary" means the person or persons designated by the
Participant to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, the Participant's estate.
3.02 "Board" means the Board of Directors of the Savings Bank, or any
successor corporation thereto.
3.03 "Cause" means the personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profits, intentional
failure to perform stated duties, willful violation of a material provision of
any law, rule or regulation (other than traffic violations and similar offense),
or a material violation of a final cease-and-desist order or any other action
which results in a substantial financial loss to the Savings Bank or its
Subsidiaries.
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3.04 "Change in Control" shall mean: (i) the sale of all, or a material
portion, of the assets of the Parent or Savings Bank; (ii) the merger or
recapitalization of the Parent or the Savings Bank whereby the Parent or Savings
Bank is not the surviving entity; (iii) a change in control of the Parent or
Savings Bank, as otherwise defined or determined by the Pennsylvania Department
of Banking ("Department") or regulations promulgated by it; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of that term as it is used in Section 13(d) of the 1934 Act and the
rules and regulations promulgated thereunder) of twenty-five percent (25%) or
more of the outstanding voting securities of the Parent or Savings Bank by any
person, trust, entity or group. This limitation shall not apply to the purchase
of shares of up to 25% of any class of securities of the Parent or Savings Bank
by a tax-qualified employee stock benefit plan. The term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. The decision of the Committee as
to whether a Change in Control has occurred shall be conclusive and binding. A
Change in Control shall not include a transaction whereby a Parent is formed
which shall be the owner of 100% of the stock of the Savings Bank.
3.05 "Committee" means the Board of Directors of Savings Bank or the
Restricted Stock Plan Committee appointed by the Board of Directors of the
Savings Bank pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock of the Savings
Bank or any successor corporation or Parent thereto.
3.07 "Conversion" means the effective date of the stock charter of the
Savings Bank.
3.08 "Director" means a member of the Board of the Savings Bank.
3.09 "Director Emeritus" means a person serving as a director emeritus,
advisory director, consulting director, or other similar position as may be
appointed by the Board of Directors of the Savings Bank or any Parent from time
to time.
3.10 "Disability" means any physical or mental impairment which renders
the Participant incapable of continuing in the employment or service of the
Savings Bank in his current capacity as determined by the Committee.
3.11 "Employee" means any person who is employed by the Savings Bank or
a Subsidiary.
3.12 "Effective Date" shall mean the date of stockholder approval of
the Plan by the stockholders of the Savings Bank.
3.13 "Parent" shall mean a stock corporation which may be formed after
the Effective Date which shall own 100% of the stock of the Savings Bank.
3.14 "Participant" means an Employee, Director or Director Emeritus who
receives a Plan Share Award under the Plan.
3.15 "Plan Shares" means shares of Common Stock held in the Trust which
are awarded or issuable to a Participant pursuant to the Plan.
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3.16 "Plan Share Award" or "Award" means a right granted to a
Participant under this Plan to earn or to receive Plan Shares.
3.17 "Plan Share Reserve" means the shares of Common Stock held by the
Trust pursuant to Sections 5.03 and 5.04.
3.18 "Retirement" means the termination of service in all capacities as
an Employee, Director and Director Emeritus following attainment of not less
than age 55 and completion of not less than ten years of Service to the Savings
Bank. Service to the Savings Bank rendered prior to the Effective Date shall be
recognized in determining eligibility to meet the requirements of Retirement
under the Plan.
3.19 "Savings Bank" means Peoples Home Savings Bank, and any successor
corporation thereto.
3.20 "Subsidiary" means those subsidiaries of the Savings Bank which,
with the consent of the Board, agree to participate in this Plan.
3.21 "Trustee" or "Trustee Committee" means that person(s) or entity
nominated by the Committee and approved by the Board pursuant to Sections 4.01
and 4.02 to hold legal title to the Plan assets for the purposes set forth
herein.
Article IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and
interpreted by the Board of Directors of the Savings Bank or a Committee
appointed by said Board, which shall consist of not less than two non-employee
members of the Board, which shall have all of the powers allocated to it in this
and other sections of the Plan. All persons designated as members of the
Committee shall be "Non- Employee Directors" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended ("1934 Act"). The
interpretation and construction by the Committee of any provisions of the Plan
or of any Plan Share Award granted hereunder shall be final and binding. The
Committee shall act by vote or written consent of a majority of its members.
Subject to the express provisions and limitations of the Plan, the Committee may
adopt such rules, regulations and procedures as it deems appropriate for the
conduct of its affairs. The Committee shall report its actions and decisions
with respect to the Plan to the Board at appropriate times, but in no event less
than one time per calendar year. The Committee shall recommend to the Board one
or more persons or entity to act as Trustee in accordance with the provision of
this Plan and Trust and the terms of Article VIII hereof.
4.02 Role of the Board. The members of the Committee and the Trustee
shall be appointed or approved by, and will serve at the pleasure of the Board.
The Board may in its discretion from time to time remove members from, or add
members to, the Committee, and may remove, replace or add Trustees. The Board
shall have all of the powers allocated to it in this and other sections of the
Plan, may take any action under or with respect to the Plan which the Committee
is authorized to take, and may reverse or override any action taken or decision
made by the Committee under or with respect to the Plan, provided, however, that
the Board may not revoke any Plan Share Award already made except as provided in
Section 7.01(b) herein.
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4.03 Limitation on Liability. No member of the Board, the Committee or
the Trustee shall be liable for any determination made in good faith with
respect to the Plan or any Plan Share Awards granted. If a member of the Board,
Committee or any Trustee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by any reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Savings Bank
shall indemnify such member against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in the
best interests of the Savings Bank and its Subsidiaries and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Notwithstanding anything herein to the contrary, in no event shall
the Savings Bank take any actions with respect to this Section 4.03 which is not
in compliance with the limitations or requirements set forth by regulations of
the Federal Deposit Insurance Corporation or the Department, as may be amended
from time to time.
Article V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board of Directors of the
Savings Bank shall determine the amounts (or the method of computing the
amounts) to be contributed by the Savings Bank to the Trust established under
this Plan. Such amounts shall be paid to the Trustee at the time of
contribution. No contributions to the Trust by Participants shall be permitted
except with respect to amounts necessary to meet tax withholding obligations.
5.02 Initial Investment. Any funds held by the Trust prior to
investment in the Common Stock shall be invested by the Trustee in such
interest-bearing account or accounts at the Savings Bank as the Trustee shall
determine to be appropriate.
5.03 Investment of Trust Assets. Following approval of the Plan by
stockholders of the Savings Bank and receipt of any other necessary regulatory
approvals, the Trust shall purchase Common Stock in an amount equal to up to
100% of the Trust's assets, after providing for any required withholding as
needed for tax purposes, provided, however, that the Trust shall not purchase
more than 49,680 shares of Common Stock, representing 4% of the aggregate shares
of Common Stock issued by the Savings Bank in the Conversion to parties other
than PHS Bancorp, M.H.C. ("MHC"). The Trustee may purchase shares of Common
Stock in the open market or, in the alternative, may purchase authorized but
unissued shares of the Common Stock or treasury shares from the Savings Bank
sufficient to fund the Plan Share Reserve.
5.04 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Plan Share Awards under Sections 6.02 and 6.05,
or the decision of the Committee to return Plan Shares to the Savings Bank or
the Parent, the Plan Share Reserve shall be reduced by the number of Shares
subject to the Awards so allocated or returned. Any Shares subject to an Award
which are not earned because of forfeiture by the Participant pursuant to
Section 7.01 shall be added to the Plan Share Reserve.
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Article VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Employees and Directors Emeritus are eligible to
receive Plan Share Awards within the sole discretion of the Committee. Directors
who are not otherwise Employees shall receive Plan Share Awards pursuant to
Section 6.05.
6.02 Allocations. The Committee will determine which of the Employees
will be granted Plan Share Awards and the number of Shares covered by each
Award, provided, however, that in no event shall any Awards be made which will
violate the Charter or Bylaws of the Savings Bank or its Parent or Subsidiaries
or any applicable federal or state law or regulation. In the event Shares are
forfeited for any reason or additional Shares are purchased by the Trustee, the
Committee may, from time to time, determine which of the Employees will be
granted Plan Share Awards to be awarded from forfeited Shares. In selecting
those Employees and Directors Emeritus to whom Plan Share Awards will be granted
and the number of shares covered by such Awards, the Committee shall consider
the prior and anticipated future position, duties and responsibilities of the
Employees, the value of their prior and anticipated future services to the
Savings Bank and its Subsidiaries, and any other factors the Committee may deem
relevant. All actions by the Committee shall be deemed final, except to the
extent that such actions are revoked by the Board. Notwithstanding anything
herein to the contrary, in no event shall any Participant receive Plan Share
Awards in excess of 25% of the aggregate Plan Shares authorized under the Plan.
6.03 Form of Allocation. As promptly as practicable after a
determination is made pursuant to Section 6.02 or Section 6.05 that a Plan Share
Award is to be made, the Committee shall notify the Participant in writing of
the grant of the Award, the number of Plan Shares covered by the Award, and the
terms upon which the Plan Shares subject to the award may be earned. The date on
which the Committee makes its award determination or the date the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards as determined by the Committee. The Committee shall maintain records as
to all grants of Plan Share Awards under the Plan.
6.04 Allocations Not Required. Notwithstanding anything to the contrary
at Sections 6.01, 6.02 or 6.05, no Employee shall have any right or entitlement
to receive a Plan Share Award hereunder, such Awards being at the sole
discretion of the Committee and the Board, nor shall the Employees as a group
have such a right. The Committee may, with the approval of the Board (or, if so
directed by the Board) return all Common Stock in the Plan Share Reserve to the
Savings Bank at any time, and cease issuing Plan Share Awards.
6.05 Awards to Directors. Notwithstanding anything herein to the
contrary, upon the Effective Date, a Plan Share Award consisting of 2,484 Plan
Shares shall be awarded to each Director of the Savings Bank that is not
otherwise an Employee. Such Plan Share Award shall be earned and non-
forfeitable at the rate of 25% as of December 15, 1998, and an additional 25%
following each of the next three successive years during such periods of service
as a Director or Director Emeritus. Further, such Plan Share Award shall be
immediately 100% earned and non-forfeitable in the event of the death,
Disability or Retirement of such Director or Director Emeritus, or upon a Change
in Control of the Savings Bank or Parent. Subsequent to the Effective Date, Plan
Share Awards may be awarded to newly elected or appointed Directors of the
Savings Bank by the Committee, provided that total Plan Share Awards granted to
non-employee Directors of the Savings Bank shall not exceed 30% of the total
Plan
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Share Reserve in the aggregate under the Plan or 5% of the total Plan Share
Reserve to any individual non-employee Director.
Article VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earnings Plan Shares; Forfeitures.
(a) General Rules. Unless the Committee shall specifically states to
the contrary at the time a Plan Share Award is granted, Plan Shares subject to
an Award shall be earned and non-forfeitable by a Participant at the rate of
one-fifth of such Award as of the date of the granting of such Award, and an
additional one-fifth following each of the next four successive years; provided
that such Participant remains an Employee, Director, or Director Emeritus during
such period.
(b) Revocation for Misconduct. Notwithstanding anything herein to the
contrary, the Board shall, by resolution, immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously awarded under
this Plan, to the extent Plan Shares have not been delivered thereunder to the
Participant, whether or not yet earned, in the case of a Participant who is
discharged from the employ or service of the Savings Bank or a Subsidiary for
Cause, or who is discovered after termination of employment or service to have
engaged in conduct that would have justified termination for Cause. A
determination of Cause shall be made by the Board within its sole discretion.
(c) Exception for Terminations Due to Death, Disability or Retirement.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose employment or
service with the Savings Bank or a Subsidiary terminates due to death,
Disability or Retirement, shall be deemed earned and nonforfeitable as of the
Participant's last date of employment or service with the Savings Bank or
Subsidiary and shall be distributed as soon as practicable thereafter.
(d) Exception for Termination after a Change in Control.
Notwithstanding the general rule contained in Section 7.01 above, all Plan
Shares subject to a Plan Share Award held by a Participant shall be deemed to be
immediately 100% earned and non-forfeitable in the event of a Change in Control
of the Parent or Savings Bank and shall be distributed as soon as practicable
thereafter.
7.02 Accrual and Payment of Dividends. A holder of a Plan Share Award,
whether or not 100% earned and non-forfeitable, shall also be entitled to
receive an amount equal to any cash dividends declared and paid with respect to
shares of Common Stock represented by such Plan Share Award between the date the
relevant Plan Share Award was granted to such Participant and the date the Plan
Shares are distributed. Such cash dividend amounts shall be paid to such
Participant, less applicable income tax withholding, within 30 days of the
dividend payment date attributable to such dividend payable on the Common Stock.
Such payment shall also include an appropriate amount of earnings, if any, of
the Trust assets with respect to any cash dividends so distributed.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as provided in
Subsections (d) and (e) below, Plan Shares shall be distributed to the
Participant or his Beneficiary, as the case may be, as soon
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as practicable after they have been earned. No fractional shares shall be
distributed. Notwithstanding anything herein to the contrary, at the discretion
of the Committee, Plan Shares may be distributed prior to such Shares being 100%
earned, provided that such Plan Shares shall contain a restrictive legend
detailing the applicable limitations of such shares with respect to transfer and
forfeiture.
(b) Form of Distribution. All Plan Shares, together with any shares
representing stock dividends, shall be distributed in the form of Common Stock.
One share of Common Stock shall be given for each Plan Share earned. Payments
representing cash dividends (and earnings thereon) shall be made in cash.
Notwithstanding anything within the Plan to the contrary, upon a Change in
Control whereby substantially all of the Common Stock of the Company shall be
acquired for cash, all Plan Shares associated with Plan Share Awards, together
with any shares representing stock dividends associated with Plan Share Awards,
shall be, at the sole discretion of the Committee, distributed as of the
effective date of such Change in Control, or as soon as administratively
feasible thereafter, in the form of cash equal to the consideration received in
exchange for such Common Stock represented by such Plan Shares.
(c) Withholding. The Trustee may withhold from any payment or
distribution made under this Plan sufficient amounts of cash or shares of Common
Stock necessary to cover any applicable withholding and employment taxes, and if
the amount of such payment or distribution is not sufficient, the Trustee may
require the Participant or Beneficiary to pay to the Trustee the amount required
to be withheld in taxes as a condition of delivering the Plan Shares. The
Trustee shall pay over to the Parent, Savings Bank or Subsidiary which employs
or employed such Participant any such amount withheld from or paid by the
Participant or Beneficiary.
(d) Timing: Exception for 10% Shareholders. Notwithstanding Subsection
(a) above, no Plan Shares may be distributed prior to the date which is five
years from the effective date of the Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares of Common Stock
held by parties other than the MHC, unless such action is approved in advance by
a majority vote of disinterested directors of the Board of the Savings Bank or
the Parent. Any Plan Shares remaining undistributed solely by reason of the
operation of this Subsection (d) shall be distributed to the Participant or his
Beneficiary on the date which is five years from the effective date of the
Conversion.
(e) Regulatory Exceptions. No Plan Shares shall be distributed,
however, unless and until all of the requirements of all applicable law and
regulation shall have been fully complied with, including the receipt of
approval of the Plan by the stockholders of the Savings Bank by such vote, if
any, as may be required by applicable law and regulations as determined by the
Board.
7.04 Voting of Plan Shares. A Participant shall be entitled to direct
the Trustee as to the voting of any Plan Shares which are associated with a Plan
Share Award, whether or not earned and non- forfeitable, and which have not yet
been distributed pursuant to Section 7.03, subject to rules and procedures
adopted by the Committee for this purpose. All shares of Common Stock held by
the Trust as to which Participants are not entitled to direct, or have not
directed, the voting of such Shares, shall be voted by the Trustee as directed
by the Committee.
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Article VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 Management of Trust. It is the intention of this Plan and Trust
that the Trustee shall have complete authority and discretion with respect to
the management, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust, except those attributable to cash dividends paid
with respect to Plan Shares not held in the Plan Share Reserve, in Common Stock
to the fullest extent practicable, except to the extent that the Trustee
determines that the holding of monies in cash or cash equivalents is necessary
to meet the obligations of the Trust. In performing their duties, the Trustees
shall have the power to do all things and execute such instruments as may be
deemed necessary or proper, including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
the Common Stock without regard to any law now or hereafter in force
limiting investments for Trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and
in making such investment, the Trustee is authorized to purchase Common
Stock from the Savings Bank or from any other source, and such Common
Stock so purchased may be outstanding, newly issued, or treasury
shares.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above in such deposit accounts, and certificates of deposit
(including those issued by the Savings Bank), obligations of the United
States government or its agencies or such other investments as shall be
considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any time
held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in the
name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may be in the
opinion of the Trustee reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Participant or his Beneficiary as a consequence of a
dispute as to the disposition thereof, whether in a
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segregated account or held in common with other assets.
(i) As may be directed by the Committee or the Board from time to time,
the Trustee shall pay to the Saving Bank earnings of the Trust
attributable to the Plan Share Reserve.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of a court for the exercise of any power
herein contained, or to maintain bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Committee.
8.04 Earnings. All earnings, gains and losses with respect to Trust
assets shall be allocated in accordance with a reasonable procedure adopted by
the Committee, to bookkeeping accounts for Participants or to the general
account of the Trust, depending on the nature and allocation of the assets
generating such earnings, gains and losses. In particular, any earnings on cash
dividends received with respect to shares of Common Stock shall be allocated to
accounts for Participants, except to the extent that such cash dividends are
distributed to Participants, if such shares are the subject of outstanding Plan
Share Awards, or, otherwise to the Plan Share Reserve.
8.05 Expenses. All costs and expenses incurred in the operation and
administration of this Plan, including those incurred by the Trustee, shall be
paid by the Savings Bank.
8.06 Indemnification. Subject to the requirements and limitations of
applicable laws and regulations, the Parent and the Savings Bank shall
indemnify, defend and hold the Trustee harmless against all claims, expenses and
liabilities arising out of or related to the exercise of the Trustee's powers
and the discharge of their duties hereunder, unless the same shall be due to
their gross negligence or willful misconduct.
Article IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for issuance pursuant to the Plan Share Awards and the number
of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of the Common Stock or other
capital adjustment, change or exchange of the Common Stock, or other increase or
decrease in the number or kind of shares effected without receipt or payment of
consideration by the Savings Bank.
9.02 Amendment and Termination of the Plan. The Board may, by
resolution, at any time, amend or terminate the Plan. The power to amend or
terminate the Plan shall include the power to direct the Trustee to return to
the Savings Bank or the Parent all or any part of the assets of the Trust,
including shares of Common Stock held in the Plan Share Reserve, as well as
shares of Common Stock and other assets subject to Plan Share Awards which have
not yet been earned by the Participants to whom they
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have been awarded. However, the termination of the Trust shall not affect a
Participant's right to earn Plan Share Awards and to the distribution of Common
Stock relating thereto, including earnings thereon, in accordance with the terms
of this Plan and the grant by the Committee or the Board.
9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Participant, and during the lifetime of the
Participant, Plan Shares may only be earned by and paid to the Participant who
was notified in writing of the Award by the Committee pursuant to Section 6.03.
No Participant or Beneficiary shall have any right in or claim to any assets of
the Plan or Trust, nor shall the Parent, Savings Bank, or any Subsidiary be
subject to any claim for benefits hereunder.
9.04 No Employment Rights. Neither the Plan nor any grant of a Plan
Share Award or Plan Shares hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Participant to continue in the
employ or service of the Savings Bank, or a Subsidiary thereof.
9.05 Voting and Dividend Rights. No Participant shall have any voting
or dividend rights of a stockholder with respect to any Plan Shares covered by a
Plan Share Award, except as expressly provided in Sections 7.02 and 7.04 above,
prior to the time said Plan Shares are actually distributed to such Participant.
9.06 Governing Law. The Plan and Trust shall be governed by and
construed under the laws of the State of Pennsylvania, except to the extent that
Federal Law shall be deemed applicable.
9.07 Effective Date. The Plan shall be effective as of the date of
approval of the Plan by stockholders of the Savings Bank.
9.08 Term of Plan. This Plan shall remain in effect until the earlier
of (i) termination by the Board, (ii) the distribution of all assets of the
Trust, or (iii) 21 years from the Effective Date. Termination of the Plan shall
not effect any Plan Share Awards previously granted, and such Plan Share Awards
shall remain valid and in effect until they have been earned and paid, or by
their terms expire or are forfeited.
9.09 Tax Status of Trust. It is intended that the Trust established
hereby shall be treated as a grantor trust of the Savings Bank under the
provisions of Section 671 et seq. of the Internal Revenue Code of 1986, as
amended, as the same may be amended from time to time.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
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SUCH FINANCIAL INFORMATION.
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