SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement /_/ Confidential, for Use of the
/X/ Definitive Proxy Statement Commission Only (as permitted
/_/ Definitive Additional Materials by Rule 14a-6(e)(2))
/_/ Soliciting Material Pursuant to Rule 14a-12
PVF CAPITAL CORP.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/_/ Fee paid previously with preliminary materials:
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/_/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[PVF Capital Corp. Logo]
September 19, 2003
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders of PVF Capital
Corp. (the "Company") to be held at the Company's Corporate Center, 30000 Aurora
Road, Solon, Ohio on Monday, October 20, 2003 at 10:00 a.m., local time.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. During the meeting, we will
also report on the operations of the Company. Directors and officers of the
Company as well as representatives of Crowe, Chizek and Company LLP, the
Company's independent auditors, will be present to respond to any questions the
stockholders may have.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND
THE ANNUAL MEETING. Your vote is important, regardless of the number of shares
you own. This will not prevent you from voting in person but will assure that
your vote is counted if you are unable to attend the meeting.
Sincerely,
/s/C. Keith Swaney
C. Keith Swaney
President
PVF CAPITAL CORP.
30000 AURORA ROAD
SOLON, OHIO 44139
(440) 248-7171
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 20, 2003
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of PVF Capital Corp. (the "Company") will be held at the Company's
Corporate Center, 30000 Aurora Road, Solon, Ohio at 10:00 a.m. on Monday,
October 20, 2003.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of four directors of the Company for two-year terms;
2. The approval of the amendment and restatement of the PVF Capital
Corp. 2000 Incentive Stock Option Plan as the PVF Capital Corp.
2000 Incentive Stock Option and Deferred Compensation Plan;
3. The ratification of the appointment of Crowe, Chizek and Company
LLP as independent certified public accountants of the Company
for the fiscal year ending June 30, 2004; and
4. The transaction of such other matters as may properly come before
the Meeting or any adjournments thereof.
The Board of Directors is not aware of any other business to come
before the Meeting.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Meeting may be adjourned. Stockholders of
record at the close of business on September 9, 2003, are the stockholders
entitled to vote at the Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed form of proxy which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the Meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Jeffrey N. Male
JEFFREY N. MALE
SECRETARY
Solon, Ohio
September 19, 2003
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
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PROXY STATEMENT
OF
PVF CAPITAL CORP.
30000 AURORA ROAD
SOLON, OHIO 44139
ANNUAL MEETING OF STOCKHOLDERS
October 20, 2003
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of PVF Capital Corp. (the "Company") to be
used at the Annual Meeting of Stockholders of the Company (the "Meeting") which
will be held at the Company's Corporate Center, 30000 Aurora Road, Solon, Ohio
on Monday, October 20, 2003 at 10:00 a.m., local time. The accompanying notice
of meeting and this Proxy Statement are being first mailed to stockholders on or
about September 19, 2003.
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VOTING AND REVOCABILITY OF PROXIES
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Proxies solicited by the Board of Directors of the Company will be voted in
accordance with the directions given therein. Where no instructions are given,
properly executed proxies which have not been revoked will be voted "FOR" the
nominees for director set forth below and in favor of the other proposal set
forth in this Proxy Statement for consideration at the Meeting. The proxy
confers discretionary authority on the persons named therein to vote with
respect to the election of any person as a director where the nominee is unable
to serve or for good cause will not serve, and with respect to matters incident
to the conduct of the Meeting. If any other business is presented at the
Meeting, proxies will be voted by those named therein in accordance with the
determination of a majority of the Board of Directors. Proxies marked as
abstentions will not be counted as votes cast. In addition, shares held in
street name which have been designated by brokers on proxy cards as not voted
("broker no votes") will not be counted as votes cast. Proxies marked as
abstentions or as broker no votes, however, will be treated as shares present
for purposes of determining whether a quorum is present.
Stockholders who execute the form of proxy enclosed herewith retain the
right to revoke such proxies at any time prior to exercise. Unless so revoked,
the shares represented by properly executed proxies will be voted at the Meeting
and all adjournments thereof. Proxies may be revoked at any time prior to
exercise by written notice to the Secretary of the Company at the address above
or by filing of a properly executed, later dated proxy. A proxy will not be
voted if a stockholder attends the Meeting and votes in person. The presence of
a stockholder at the Meeting in itself will not revoke such stockholder's proxy.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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The securities which can be voted at the Meeting consist of shares of the
Company's common stock, $.01 par value per share (the "Common Stock").
Stockholders of record as of the close of business on September 9, 2003 (the
"Record Date") are entitled to one vote for each share of Common Stock then held
on all matters. As of the Record Date, 6,374,489 shares of the Common Stock were
issued and outstanding. The presence, in person or by proxy, of at least a
majority of the total number of shares of Common Stock outstanding and entitled
to vote will be necessary to constitute a quorum at the Meeting.
Persons and groups beneficially owning in excess of 5% of the Common Stock
are required to file certain reports with respect to such ownership pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
following table sets forth, as of the Record Date, certain information as to the
Common Stock beneficially owned by the only persons known to the Company to
beneficially own more than 5% of the Common
1
Stock, by each of the Company's directors, by the non-director executive officer
of the Company named in the Summary Compensation Table set forth under the
caption "Proposal I -- Election of Directors -- Executive Compensation --
Summary Compensation Table," and by all executive officers and directors of the
Company as a group. All executive officers and directors of the Company have the
Company's address.
Percent of Shares
Name and Address Amount and Nature of Common Stock
of Beneficial Owner Beneficial Ownership (1) Outstanding
Persons Owning Greater than 5%:
John R. Male 352,876 (2) 5.52%
30000 Aurora Road
Solon, Ohio 44139
Jeffrey L. Gendell 408,677 (3) 6.41
Tontine Financial Partners, L.P.
Tontine Management, L.L.C.
Tontine Overseas Associates, L.L.C.
55 Railroad Avenue, 3rd Floor
Greenwich, Connecticut 06830
Name of Directors
and Executive Officers:
Directors:
Robert K. Healey 41,865 (4) .66
Gerald A. Fallon 6,600 .10
Raymond J. Negrelli 15,840 .25
Stuart D. Neidus 42,017 (5) .66
Stanley T. Jaros 20,666 .32
C. Keith Swaney 207,486 3.24
Ronald D. Holman, II -- --
Executive Officer:
Jeffrey N. Male 244,465 (6) 3.83
All Executive Officers and Directors
as a Group (9 persons) 931,815 14.35
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner, for purposes of this table, of any shares of
Common Stock if he has or shares voting or investment power with respect to
such Common Stock or has a right to acquire beneficial ownership at any
time within 60 days from the Record Date. As used herein, "voting power" is
the power to vote or direct the voting of shares and "investment power" is
the power to dispose or direct the disposition of shares. Unless otherwise
indicated, the beneficial owner has sole voting and investment power with
respect to the listed shares. The amounts shown include 22,281, 8,166,
6,600, 6,600, 11,826, 11,826, 37,358, 0, 14,851 and 119,508 shares that
Directors John R. Male, Robert K. Healey, Gerald A. Fallon, Raymond J.
Negrelli, Stuart D. Neidus, Stanley T. Jaros, C. Keith Swaney and Ronald D.
Holman, II, Mr. Jeffrey N. Male, and all executive officers and directors
as a group, respectively, have the right to acquire pursuant to options
exercisable within 60 days of the Record Date.
(2) Includes 5,853 shares as to which Mr. John R. Male's wife has voting and
investment power and 20,865 shares held by the Bank's 401(k) Plan, as to
which shares Mr. John R. Male has sole voting and shared investment power.
Also includes 70,690 shares held by trusts for the benefit of Mr. John R.
Male's mother; Mr. John R. Male serves as trustee of such trusts and as
such has sole voting and investment power over such shares. The amount
shown does not include 24,159 shares in which John R. Male has a pecuniary
interest through this ownership of a limited partnership interest in a
family limited partnership; he does not have or share voting or dispositive
power over such shares.
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(3) According to their statement on Schedule 13D, as amended filed on February
21, 2003, Jeffrey L. Gendell shares voting and dispositive power over the
listed shares, Tontine Financial Partners, L.P. and Tontine Management,
L.L.C. share voting and dispositive power with respect to 364,457 shares
and Tontine Overseas Associates, L.L.C. shares voting and dispositive power
with respect to 44,220 shares. Amounts are adjusted for a 10% stock
dividend paid on the Common Stock on August 29, 2003.
(4) Includes 2,414 shares held by a revocable trust for the benefit of Mr.
Healey's wife and 27,655 shares held by a revocable trust for the benefit
of Mr. Healey; Mr. Healey does not have or share voting or investment power
over such shares. Does not include 86,425 shares held by an irrevocable
trust for the benefit of Mr. Healey's wife, as to which shares Mr. Healey
does not have or share voting or investment power.
(5) Includes 124 shares as to which Mr. Neidus' wife has voting and investment
power.
(6) Includes 27,655 shares held by a revocable trust for the benefit of Mr.
Jeffrey N. Male and 2,414 shares held by a revocable trust for the benefit
of Mr. Jeffrey N. Male's wife; Mr. Jeffrey N. Male is co-trustee of such
trusts and shares voting and investment power over such shares. Does not
include 21,725 shares owned by Mr. Jeffrey N. Male's son who resides in his
household. The amount shown also does not include 24,159 shares in which
Jeffrey N. Male has a pecuniary interest through this ownership of a
limited partnership interest in a family limited partnership; he does not
have or share voting or dispositive power over such shares.
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PROPOSAL I -- ELECTION OF DIRECTORS
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The Company's Board of Directors is composed of eight members. The
Company's Articles of Incorporation require that, if the Board of Directors
consists of seven or eight members, directors be divided into two classes, as
nearly equal in number as possible, each class to serve for a two-year period
and until their successors are elected and qualified, with approximately
one-half of the directors elected each year. The Board of Directors has
nominated John R. Male, Stanley T. Jaros, Raymond J. Negrelli and Ronald D.
Holman, II, all of whom are currently members of the Board, to serve as
directors for a two-year period and until their successors are elected and
qualified. Under Ohio law, directors are elected by a plurality of the votes
cast at the Meeting, i.e., the nominees receiving the highest number of votes
will be elected regardless of whether such votes constitute a majority of the
shares represented at the Meeting.
It is intended that the persons named in the proxies solicited by the Board
of Directors will vote for the election of the named nominees. If any nominee is
unable to serve, the shares represented by all valid proxies which have not been
revoked will be voted for the election of such substitute as the Board of
Directors may recommend or the size of the Board may be reduced to eliminate the
vacancy. At this time, the Board knows of no reason why any nominee might be
unavailable to serve.
The following table sets forth the names of the Board's nominees for
election as directors of the Company and of those directors who will continue to
serve as such after the Meeting. Also set forth is certain other information
with respect to each person's age, the year he first became a director of the
Company or the Bank, and the expiration of his term as a director. Messrs.
Robert K. Healey and John R. Male were initially appointed as directors of the
Company in 1994 in connection with the Company's incorporation. All other
directors were appointed directors of the Company and the Bank in the years
indicated on the following table. There are no arrangements or understandings
between the Company and any director pursuant to which such person has been
elected a director of the Company, and no director is related to any other
director or executive officer by blood, marriage or adoption, except that John
R. Male, the Chairman of the Board and Chief Executive Officer of the Company
and the Bank, is the brother of Jeffrey N. Male, the Vice President and
Secretary of the Company and the Executive Vice President in charge of
residential lending operations of the Bank.
3
Age Year First Elected Current
as of the as Director of the Term
Name Record Date Company or the Bank to Expire
BOARD NOMINEES FOR TERMS TO EXPIRE AT THE 2005 ANNUAL MEETING
John R. Male 55 1981 2003
Stanley T. Jaros 58 1997 2003
Raymond J. Negrelli 51 2002 2003
Ronald D. Holman, II 43 2003 2003
DIRECTORS CONTINUING IN OFFICE
Robert K. Healey 78 1973 2004
Stuart D. Neidus 52 1996 2004
C. Keith Swaney 60 2000 2004
Gerald A. Fallon 54 2002 2004
Presented below is certain information concerning the directors of the
Company. Unless otherwise stated, all directors have held the positions
indicated for at least the past five years.
John R. Male. Mr. Male has been with the Bank since 1971, where he has held
various positions including branch manager, mortgage loan officer, manager of
construction lending, savings department administrator and chief lending
officer. Mr. Male was named President and Chief Executive Officer of the Bank in
1986 and was named President of the Company upon its organization in 1994. Mr.
Male was named Chairman of the Board of Directors and Chief Executive Officer of
the Company and the Bank in October 2000. Mr. Male serves in various public
service and charitable organizations. He currently serves on the Board of
Trustees for Heather Hill, a long-term care hospital in Chardon, Ohio. He also
serves as a director of American Stone Industries, Inc. He has an undergraduate
degree from Tufts University and an MBA from Case Western Reserve University.
Stanley T. Jaros. Mr. Jaros is a partner in the law firm of Moriarty &
Jaros, P.L.L. He has served as a trustee of a number of Cleveland area nonprofit
organizations, and was a member of the Cleveland Landmarks Commission. Mr. Jaros
is a graduate of Brown University and Case Western Reserve Law School and
received an MBA from the University of Pennsylvania.
Raymond J. Negrelli. Mr. Negrelli is an investor in and developer of real
estate, primarily retail and office properties, in northeast Ohio. He is the
President of Raymond J. Negrelli, Inc., a General Partner in Bay Properties Co.
and a General Partner of Landerbrook Co., all of which are based in Euclid,
Ohio. He is a member of the Community Leadership Council of Hillcrest Hospital,
Mayfield Heights, Ohio and a member of the Executive Committee of the Cuyahoga
County Republican Organization.
Ronald D. Holman, II. Mr. Holman is a partner in the law firm of Cavitch,
Familo, Durkin & Frutkin in Cleveland, Ohio. In addition, from 1989 to 2000 he
served as a legal analyst on various news shows for WEWS TV in Cleveland, Ohio.
Mr. Holman serves on the Boards of Directors for the following nonprofit
institutions: Center for Families and Children (Vice Chair from 1997 to 1999 and
Chair from 2000 to 2002), Florence Crittenton Services Fund of the Cleveland
Foundation (President from 1996 to 1998), the Dartmouth Club of Northeastern
Ohio (Treasurer), 100 Black Men of Greater Cleveland, Inc. (member of the
Executive Committee and General
4
Counsel since 1998), and Shaker Heights Alumni Association. Mr. Holman is a
graduate of Dartmouth College and Columbia University School of Law.
Robert K. Healey. Mr. Healey currently is retired. He had been employed
from 1961 to 1987 by Leaseway Transportation Corp. and most recently served as
Executive Vice President -- Managed Controlled Transportation. He formerly
served on the Boards of Trustees of St. Vincent Charity Hospital, New Direction,
Western Reserve Historical Society, the Woodruff Foundation and Glen Oak School.
Stuart D. Neidus. Mr. Neidus currently holds the position of Chairman and
Chief Executive Officer of Anthony & Sylvan Pools Corporation, a publicly traded
company that operates in the leisure industry and is one of the nation's largest
in-ground residential concrete swimming pool installers. Prior to this position,
he served as Executive Vice President and Chief Financial Officer of Essef
Corporation from September 1996 until Anthony & Sylvan's split-off from Essef in
August 1999. At Premier Industrial Corporation he held various positions from
1992 until 1996, most recently as Executive Vice President until the company was
acquired by Farnell Electronics plc. Prior to that, Mr. Neidus spent 19 years
with the international accounting firm of KPMG LLP, serving as an audit partner
from 1984 until 1992. He has served as a board member and on advisory committees
of many nonprofit and civic organizations over the years.
C. Keith Swaney. Mr. Swaney joined the Bank in 1962 and was named Executive
Vice President and Chief Financial Officer in 1986. He was named Vice President
and Treasurer of the Company upon its organization in 1994. Mr. Swaney was named
President and Chief Operating Officer of the Company and the Bank in October
2000. He continues to serve as Treasurer of the Company and as Chief Financial
Officer of the Bank. He is responsible for all internal operations of the
Company and the Bank. Over the years, he has participated in various charitable
organizations and currently serves on the Hiram House Board of Trustees. Hiram
House, for over 106 years, has served thousands of northeast Ohio children
through a variety of summer camps and outdoor education. Mr. Swaney attended
Youngstown State University and California University in Pennsylvania.
Gerald A. Fallon. Mr. Fallon was Executive Vice President and Manager of
Capital Markets for KeyBank, NA, Cleveland, Ohio, from December 1994 through
March 2001, and Senior Managing Director of Capital Markets for McDonald
Investment Inc, Cleveland, Ohio, from November 1998 through March 2001. He
currently serves as a director of Digital Lightwave, Inc., a corporation with a
class of securities registered under Section 12 of the Securities Exchange Act
of 1934, and as an advisory director of Winfield Associates -- Burning River
Hedge Fund and Logos Communications, Inc., both privately held companies. He
serves as a director of the Bratenahl Land Conservancy and as a director of the
Bratenahl Village Audit Committee.
Meetings and Committees of the Board of Directors
The Boards of Directors of the Company and the Bank conduct their business
through meetings of the respective Boards and their committees. During the year
ended June 30, 2003, the Company's Board of Directors held 11 meetings and the
Bank's Board of Directors held 14 meetings. No current director attended fewer
than 75% of the total aggregate meetings of the Board of Directors and
committees on which such Board member served during the year ended June 30,
2003.
The Board of Directors has an Audit Committee comprising directors Stuart
D. Neidus, Robert K. Healey and Gerald A. Fallon. All members of the Audit
Committee are deemed to be independent within the meaning of Rule 4200(a)(15) of
the National Association of Securities Dealers' listing standards. The committee
met periodically to examine and approve the audit report prepared by the
independent auditors of the Company and its subsidiaries, to review and
recommend the independent auditors to be engaged by the Company, to review the
internal audit function and internal accounting controls and to review and
approve the conflict of interest policy. The Audit Committee has adopted a
written charter. A copy of the Audit Committee Charter is attached as Exhibit A
to this Proxy Statement. During the year ended June 30, 2003, the Audit
Committee met six times.
In accordance with the Company's Bylaws, the entire Board of Directors acts
as the Company's Nominating Committee. The Nominating Committee meets to
consider potential nominees. In its deliberations, the Nominating Committee
considers the candidate's knowledge of the banking business and involvement in
5
community, business and civic affairs, and also considers whether the candidate
would allow the Board to continue its geographic diversity that provides for
adequate representation of its market area. The Board of Directors of the
Company met once as the Nominating Committee during the year ended June 30,
2003. The Company's Articles of Incorporation set forth procedures that must be
followed by stockholders seeking to make nominations for directors. In order for
a stockholder of the Company to make any nominations, he or she must give
written notice thereof to the Secretary of the Company not less than thirty days
nor more than sixty days prior to the date of any such meeting; provided,
however, that if less than forty days' notice of the meeting is given to
stockholders, such written notice shall be delivered or mailed, as prescribed,
to the Secretary of the Company not later than the close of business on the
tenth day following the day on which notice of the meeting was mailed to
stockholders. Each such notice given by a stockholder with respect to
nominations for the election of directors must set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice; (ii) the principal occupation or employment of each such nominee;
and (iii) the number of shares of stock of the Company which are beneficially
owned by each such nominee. In addition, the stockholder making such nomination
must promptly provide any other information reasonably requested by the Company.
The Compensation Committee consists of directors Stanley T. Jaros, Stuart
D. Neidus and Robert K. Healey. The Committee evaluates the compensation and
fringe benefits of the directors, officers and employees, recommends changes and
monitors and evaluates employee morale. The Compensation Committee met four
times during the year ended June 30, 2003.
Compensation Committee Report on Executive Compensation
Overview and Philosophy. The Company's executive compensation policies are
established by the Compensation Committee of the Board of Directors (the
"Committee") composed of three outside directors. The Committee is responsible
for developing the Company's executive compensation policies. The Company's
President, under the direction of the Committee, implements the Company's
executive compensation policies. The Committee's objectives in designing and
administering the specific elements of the Company's executive compensation
program are as follows:
o To link executive compensation rewards to increases in shareholder
value, as measured by favorable long-term operating results and
continued strengthening of the Company's financial condition.
o To provide incentives for executive officers to work towards achieving
successful annual results as a step in achieving the Company's
long-term operating results and strategic objectives.
o To correlate, as closely as possible, executive officers' receipt of
compensation with the attainment of specified performance objectives.
o To maintain a competitive mix of total executive compensation, with
particular emphasis on awards related to increases in long-term
shareholder value.
o To attract and retain top performing executive officers for the
long-term success of the Company.
o To facilitate stock ownership through the granting of stock options.
In furtherance of these objectives, the Committee has determined that there
should be three specific components of executive compensation: base salary, a
cash bonus plan and a stock option plan designed to provide long-term incentives
through the facilitation of stock ownership in the Company.
Base Salary. The Committee makes recommendations to the Board concerning
executive compensation on the basis of surveys of salaries paid to executive
officers of other savings bank holding companies, non-diversified
6
banks and other financial institutions similar in size, market capitalization
and other characteristics. The Committee's objective is to provide for base
salaries that are competitive with those paid by the Company's peers.
Management Incentive Compensation Plan. The Company maintains a
formula-based bonus plan (the "Management Incentive Compensation Plan"), which
provides for annual cash incentive compensation based on achievement of a
combination of individual and Company and Bank performance objectives. Under the
Management Incentive Compensation Plan, at the beginning of the fiscal year, the
Committee establishes target performance measures for the Company and the Bank.
The relevant performance measures for the Company are return on equity ("ROE"),
earnings per share and appreciation in the market price for the Common Stock.
The relevant performance measures for the Bank are ROE and return on assets
("ROA") for the Bank and appreciation in the market price for the Common Stock.
In addition, the Committee establishes individual performance goals for each
employee. Bonuses are determined at the end of the fiscal year based on actual
Company or Bank performance relative to previously established performance goals
and a rating given to each employee reflecting the employee's success in
achieving his or her specific individual performance goals established at the
beginning of the year. The bonuses that would be paid to each of the three
highest ranking executive officers are based on actual Company performance,
while the bonuses paid to other officers are based on actual Bank performance.
The Company's three most senior executive officers can receive a maximum bonus
equal to 150% of base salary. The Company's other officers can receive a maximum
bonus equal to 40% of base salary.
Stock Options. The Committee believes that stock options are an important
element of compensation because they provide executives with incentives linked
to the performance of the Common Stock. The Company awards stock options as a
means of providing employees the opportunity to acquire a proprietary interest
in the Company and to link their interests with those of the Company's
stockholders. Options are granted with an exercise price equal to the market
value of the Common Stock on the date of grant, and thus acquire value only if
the Company's stock price increases. Although there is no specific formula, in
determining the level of option awards, the Committee takes into consideration
the same Company, Bank and stock price performance criteria considered under the
Management Incentive Compensation Plan, as well as individual performance.
In addition to the three primary components of executive compensation
described above, the Committee believed it fair and appropriate to provide for a
reasonable level of financial security for its long-standing senior executive
officer team consisting of John R. Male, Chairman of the Board and Chief
Executive Officer of the Company and the Bank, C. Keith Swaney, President, Chief
Operating Officer and Treasurer of the Company and President, Chief Operating
Officer and Chief Financial Officer of the Bank, and Jeffrey N. Male, the Vice
President and Secretary of the Company and the Executive Vice President of the
Bank. In consultation with an outside consultant, the Compensation Committee
determined to implement a supplemental executive retirement plan, the only
current participants in which are John R. Male, C. Keith Swaney and Jeffrey N.
Male, and to enter into severance agreements with each of those three executive
officers. A description of the supplemental executive retirement plan and the
severance agreements is set forth below under "-- Executive Compensation --
Severance Agreements" and "-- Supplemental Executive Retirement Plan." The
severance agreements are intended to provide the three executive officers with a
reasonable level of financial security in the event of a change in control of
the Company or the Bank, and the supplemental executive retirement plan is
intended to provide the three executive officers with retirement income that
increases with each year of service to the Bank with full vesting occurring upon
the attainment of age 65.
Compensation of the Chief Executive Officer. The Committee determines the
Chief Executive Officer's compensation on the basis of several factors. In
determining Mr. John R. Male's base salary, the Committee conducted surveys of
compensation paid to chief executive officers of similarly situated savings
banks and non-diversified banks and other financial institutions of similar
size. The Committee believes that Mr. Male's base salary is generally
competitive with or below the average salary paid to executives of similar rank
and expertise at banking institutions which the Committee considered to be
comparable.
Mr. Male received bonus compensation under the Management Incentive
Compensation Plan in fiscal year 2003 based on the Company's ROE and earnings
per share and increases in the market price of the Common Stock and Mr. Male's
achievement of individual performance goals based on the formula set forth
above.
7
The Committee believes that the Company's executive compensation program
serves the Company and its shareholders by providing a direct link between the
interests of executive officers and those of shareholders generally and by
helping to attract and retain qualified executive officers who are dedicated to
the long-term success of the Company.
MEMBERS OF THE COMPENSATION COMMITTEE
Robert K. Healey
Stanley T. Jaros
Stuart D. Neidus
Comparative Stock Performance Graph
The graph and table which follow show the cumulative total return on the
Common Stock during the period from June 30, 1998 through June 30, 2003 with (1)
the total cumulative return of all companies whose equity securities are traded
on the Nasdaq Stock Market and (2) the total cumulative return of banking
companies traded on the Nasdaq Stock Market. The comparison assumes $100 was
invested on June 30, 1998 in the Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends. The stockholder returns shown on
the performance graph are not necessarily indicative of the future performance
of the Common Stock or of any particular index.
CUMULATIVE TOTAL STOCKHOLDER RETURN
COMPARED WITH PERFORMANCE OF SELECTED INDEXES
June 30, 1998 through June 30, 2003
[Line graph appears here depicting the cumulative total stockholder return of
$100 invested in the Common Stock as compared to $100 invested in all companies
whose equity securities are traded on the Nasdaq market and banking companies
whose equity securities are traded on the Nasdaq market. Line graph begins at
June 30, 1998 and plots the cumulative total stockholder return at June 30,
1998, 1999, 2000, 2001, 2002 and 2003. Plot points are provided below.]
- ---------------------- ----------- ----------- ---------- ----------- ---------- ----------
06/30/98 06/30/99 06/30/00 06/30/01 06/30/02 6/30/03
- ---------------------- ----------- ----------- ---------- ----------- ---------- ----------
- ---------------------- ----------- ----------- ---------- ----------- ---------- ----------
COMPANY $100.00 $ 86.46 $ 67.60 $79.94 $100.11 $126.34
- ---------------------- ----------- ----------- ---------- ----------- ---------- ----------
- ---------------------- ----------- ----------- ---------- ----------- ---------- ----------
NASDAQ 100.00 143.67 212.43 115.46 78.65 87.33
- ---------------------- ----------- ----------- ---------- ----------- ---------- ----------
- ---------------------- ----------- ----------- ---------- ----------- ---------- ----------
NASDAQ BANKS 100.00 98.77 80.98 112.34 125.92 127.79
- ---------------------- ----------- ----------- ---------- ----------- ---------- ----------
8
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
noncash compensation for fiscal 2003 awarded to or earned by the Company's Chief
Executive Officer and other executive officers whose total salary and bonus for
fiscal 2003 exceeded $100,000. No other executive officer of the Company or the
Bank earned salary and bonus in fiscal 2003 exceeding $100,000 for services
rendered in all capacities to the Company and its subsidiaries.
Annual Compensation
Name and Fiscal Other Annual
Principal Position Year Salary Bonus Compensation (1)
John R. Male 2003 $221,590 $154,686 $ --
Chairman of the Board 2002 213,000 137,981 --
Chief Executive Officer of 2001 179,538 98,338 --
the Company and the Bank
C. Keith Swaney 2003 $168,999 $98,313 $ --
President and Chief Operating 2002 164,112 87,696 --
Officer of the Company and 2001 148,772 71,022 --
the Bank, Treasurer of the
Company and Chief Financial
Officer of the Bank
Jeffrey N. Male 2003 $136,499 $79,406 $ --
Vice President and Secretary 2002 131,253 70,831 --
of the Company and Executive 2001 120,161 57,365 --
Vice President of the Bank
Long-Term Compensation
Awards Payouts
Restricted Securities All
Name and Fiscal Stock Underlying LTIP Other
Principal Position Year Award(s) Options (2) Payouts Compensation
John R. Male 2003 -- 4,620 $ -- $ 190,691(3)
Chairman of the Board 2002 -- 5,082 -- 112,248
Chief Executive Officer of 2001 -- 5,590 -- 108,197
the Company and the Bank
C. Keith Swaney 2003 -- 3,960 $ -- $ 226,484(3)
President and Chief Operating 2002 -- 4,356 -- 162,964
Officer of the Company and 2001 -- 4,791 -- 143,208
the Bank, Treasurer of the
Company and Chief Financial
Officer of the Bank
Jeffrey N. Male 2003 -- 3,080 $ -- $ 90,767(3)
Vice President and Secretary 2002 -- 3,388 -- 51,491
of the Company and Executive 2001 -- 3,726 -- 48,508
Vice President of the Bank
(1) Executive officers of the Company receive indirect compensation in the form
of certain perquisites and other personal benefits. The amount of such
benefits received by each named executive officer in fiscal 2003 did not
exceed 10% of the executive officer's salary and bonus.
(2) Adjusted for 10% stock dividends on the Company's Common Stock paid on
August 31, 2001, August 30, 2002 and August 29, 2003.
(3) Consists of $25,200 and $25,200 in directors' fees paid to John R. Male and
C. Keith Swaney, respectively, $2,979, $4,273 and $2,763 of premiums on
disability insurance policies paid for the benefit of John R. Male, C.
Keith Swaney and Jeffrey N. Male, respectively, $6,900, $11,340 and $5,470
of premiums on life insurance policies paid for the benefit of John R.
Male, C. Keith Swaney and Jeffrey N. Male, respectively, $4,422, $4,299 and
$3,669 of matching contributions paid by the Company pursuant to the
Company's 401(k) plan for the benefit of John R. Male, C. Keith Swaney and
Jeffrey N. Male, respectively, $147,093, $178,122 and $76,240 accrued for
the benefit of John R. Male, C. Keith Swaney and Jeffrey N. Male,
respectively, pursuant to the Bank's Supplemental Executive Retirement
Plan, and $4,097, $3,250 and $2,625 in payments made to John R. Male, C.
Keith Swaney and Jeffrey N. Male, respectively, pursuant to a plan under
which all employees receive annual compensation equal to one week's salary
for each year of service above 20 years of service.
9
Option Grants in Last Fiscal Year. The following table contains information
concerning the grant of stock options during the year ended June 30, 2003 to the
executive officers named in the Summary Compensation Table set forth above.
Potential Realizable
Number of Percent of Total Value at Assumed
Securities Options Granted Annual Rates of Stock
Underlying to Employees Exercise Expiration Price Appreciation
Name Options Granted (1) in Fiscal Year Price (1) Date for Option Term (2)
5% 10%
John R. Male 4,620 15.7% $11.07 11/01/07 $14,137 $31,231
C. Keith Swaney 3,960 13.4 10.05 11/01/12 25,027 63,439
Jeffrey N. Male 3,080 10.4 11.07 11/01/07 9,425 20,821
(1) Amounts are adjusted to reflect the 10% stock dividend paid on the Common
Stock on August 29, 2003. All options become exercisable at the rate of 20%
per year, with the first 20% having become exercisable on November 1, 2002,
the date of grant, and an additional 20% becoming exercisable on each
anniversary thereafter.
(2) Represents the difference between the aggregate exercise price of the
options and the aggregate value of the underlying Common Stock at the
expiration date of the options assuming the indicated annual rate of
appreciation in the value of the Common Stock as of the date of grant,
November 1, 2000, based on the closing sale price of the Common Stock as
quoted on the Nasdaq SmallCap Market adjusted for the 10% dividend paid on
the Common Stock on August 29, 2003.
During the past ten full fiscal years, the Company has not adjusted or
amended the exercise price of stock options previously awarded to a named
executive officer, whether through amendment, cancellation or replacement
grants, except as necessary to adjust the exercise price upon the Company's
payment of stock dividends so as not to change the economic benefit of
previously granted options.
Option Exercises in Last Fiscal Year and Year-End Option Values. The
following table sets forth information concerning option exercises during fiscal
year 2003 and the value of options held at the end of fiscal year 2003 by the
Company's Chief Executive Officer and other officers named in the Summary
Compensation Table set forth above.
Number of Value of
Number of Securities Underlying Unexercised
Shares Unexercised Options In-the-Money Options
Acquired on Value at Fiscal Year-End (3) at Fiscal Year-End (4)
Name Exercise (1) Realized (2) Exercisable/Unexercisable Exercisable/Unexercisable
John R. Male 9,223 $8,762 17,990 / 10,215 $ 71,556 / $28,898
C. Keith Swaney -- -- 33,683 / 8,753 177,313 / 32,524
Jeffrey N. Male 6,149 6,579 11,990 / 6,812 47,692 / 19,271
(1) Not adjusted for the subsequent 10% stock dividend paid on August 29, 2003.
(2) Calculated based on the product of: (a) the number of shares acquired on
exercise, and (b) the difference between the fair market value of the
underlying Common Stock on the exercise date, determined based on the last
closing bid price prior to the exercise date, and the exercise price of the
options.
(3) Adjusted for a 10% stock dividend paid on the Common Stock on September 1,
1997, a 50% stock dividend paid on the Common Stock on August 17, 1998, a
10% stock dividend paid on the Common Stock on September 7, 1999, a 10%
stock dividend paid on the Company's Common Stock on September 1, 2000, a
10% stock dividend paid on the Common Stock on August 31, 2001, a 10% stock
dividend paid on the Common Stock on August 30, 2002, and a 10% dividend
paid on the Common Stock on August 29, 2003.
(4) Calculated based on the product of: (a) the number of shares subject to
options, and (b) the difference between the fair market value of underlying
Common Stock at June 30, 2003, determined based on $13.80, the last closing
bid price on June 30, 2003 of the Common Stock on the Nasdaq SmallCap
Market, adjusted to $12.54 to reflect the effect of the 10% stock dividend
paid on the Common Stock on August 29, 2003, and the exercise price of the
options.
Severance Agreements. The Company and the Bank have entered into severance
agreements (the "Severance Agreements") with John R. Male, C. Keith Swaney and
Jeffrey N. Male (each of whom is referred to as
10
an "Executive"). The Severance Agreements are for terms of three years. On each
anniversary date from the date of commencement of the Severance Agreements, the
term of the Agreements will be extended for an additional one-year period beyond
the then effective expiration date upon a determination by the Board of
Directors that the performance of each Employee has met the required performance
standards.
The Severance Agreements provide that in the event of an Executive's
involuntary termination of employment, or voluntary termination for "good
reason," within one year following a "change in control" of the Bank or the
Company other than for "cause," the Executive will receive the following
benefits: (i) a payment equal to two times the Executive's annual compensation
(base salary plus annual incentive compensation) for the year preceding the year
in which termination occurred, payable in a lump sum within 30 days following
termination; (ii) the Bank or the Company shall cause the Executive to become
fully vested in any benefit plans, programs or arrangements in which the
Executive participated, and the Bank will contribute to the Executive's 401(k)
plan account the Bank's matching and/or profit sharing which would have been
paid had the Executive remained in the employ of the Bank throughout the
remainder of the 401(k) plan year; and (iii) the Executive will receive
continued life, health and disability insurance coverage substantially identical
to the coverage maintained by the Bank or the Company for the Executive prior to
termination until the earlier of the Executive's employment with another
employer or 12 months following termination. "Change in control" is defined
generally in the Severance Agreements as: (i) the acquisition, by any person or
persons acting in concert of the power to vote more than 25% of the Company's
voting securities or the acquisition by a person of the power to direct the
Company's management or policies; (ii) the merger of the Company with another
corporation on a basis whereby less than 50% of the total voting power of the
surviving corporation is represented by shares held by former shareholders of
the Company prior to the merger; or (iii) the sale by the Company of the Bank or
substantially all its assets to another person or entity. In addition, a change
in control occurs when, during any consecutive two-year period, directors of the
Company or the Bank at the beginning of such period cease to constitute a
majority of the Board of Directors of the Company or the Bank, unless the
election of replacement directors was approved by a two-thirds vote of the
initial directors then in office. "Good reason" is defined in the Severance
Agreements as any of the following events: (i) a change in the Executive's
status, title, position or responsibilities which, in the Executive's reasonable
judgment, does not represent a promotion, the assignment to the executive of any
duties or responsibilities which, in the Executive's reasonable judgment, are
inconsistent with his status, title, position or responsibilities, or the
removal of the Executive from or failure to reappoint him to any of such
positions other than for cause; (ii) materially reducing the Executive's base
compensation as then in effect; (iii) the relocation of the Executive's
principal place of employment to a location that is more than 35 miles from the
location where the Executive previously was principally employed; (iv) the
failure to provide the Executive with benefits substantially similar to those
provided to him under existing employee benefit plans, or materially reducing
any benefits or depriving the Executive of any material fringe benefit; (v)
death; or (vi) disability prior to retirement. In the event that an Executive
prevails over the Company or the Bank in a legal dispute as to the Severance
Agreement, he will be reimbursed for his legal and other expenses.
Supplemental Executive Retirement Plan. Effective July 1, 1998, the Bank
adopted a Supplemental Executive Retirement Plan (the "SERP"), which is designed
to pay retirement benefits from the general assets of the Bank to eligible
employees of the Bank. Eligibility to participate in the SERP is limited to
employees of the Bank who are designated by the Compensation Committee of the
Bank's Board of Directors. Currently, the employees designated to participate in
the SERP are John R. Male, C. Keith Swaney and Jeffrey N. Male (the
"Participants").
Under the SERP, commencing upon a Participant's retirement after reaching
age 65, or earlier if approved by the Compensation Committee, he will receive a
benefit equal to 60% of "final pay" reduced by any benefits payable under the
Bank's qualified retirement plans. "Final pay" is defined as the Participant's
highest year's combined salary and target bonus (under the Management Incentive
Compensation Plan) during the Participant's last five years of employment with
the Bank. The Participant will vest in the SERP plan benefits each year, on a
pro rata basis, beginning with the one year anniversary date of the effective
date that the Participant becomes eligible to participate in the SERP and
continuing with each succeeding annual anniversary date until attainment of age
65. Upon attainment of age 65 and provided that he has remained continuously in
the employ of the Bank, the Participant will be fully vested. A Participant
becomes fully vested prior to age 65 upon death or disability or upon a "change
in control," as defined above under "-- Severance Agreements." Payments under
the SERP continue for
11
the lifetime of the Participant or for the joint lives of the Participant and
his spouse if actuarially converted to the "actuarial equivalent" joint and
survivor annuity. In addition, benefits are paid in the form of a single life
annuity or, upon the request of the Participant and approval of the Compensation
Committee, converted to the "actuarial equivalent" single lump sum distribution.
"Actuarial equivalent" is defined as a payment or payments equal in the
aggregate to the value at the applicable date of the benefit determined
actuarially on the basis of the current Pension Benefit Guarantee Corporation
("PBGC") interest rate and the mortality table then in use by the PBGC. The
Participant loses all benefits under the SERP in the event his employment with
the Bank is terminated for cause.
Directors' Compensation
The Bank pays each member of the Board of Directors an annual retainer of
$25,200. In addition, directors may receive a fee of $2,500 per day for
attendance at day-long special Board events such as Board retreats. No
additional fees are paid by the Company for attendance at Board of Directors
meetings.
In addition, nonemployee directors are eligible to participate in the PVF
Capital Corp. 2000 Stock Option Plan, and the Board of Directors has adopted a
schedule for option grants such that shortly following each annual meeting of
stockholders, each nonemployee director who served as such at the closing of the
annual meeting will be granted nonqualified options to acquire 1,000 shares of
Common Stock. Pursuant to this schedule, options to acquire 1,100 shares of
Common Stock were granted on November 1, 2002 to nonemployee Directors Jaros,
Neidus, Healey, Fallon and Negrelli. In addition, as new directors, nonemployees
Directors Fallon and Negrelli were granted additional options to acquire 5,500
shares of Common Stock on November 1, 2002. The numbers of options granted set
forth above are adjusted for a 10% stock dividend paid on the Common Stock on
August 29, 2003. All the options have a term of 10 years, became exercisable
immediately upon grant and have an exercise price equal to the fair market value
of the Common Stock on the date of grant.
Indebtedness of Management
Under applicable law, the Bank's loans to directors and executive officers
must be made on substantially the same terms, including interest rates, as those
prevailing for comparable transactions with non-affiliated persons, and must not
involve more than the normal risk of repayment or present other unfavorable
features. Furthermore, loans above the greater of $25,000 or 5% of the Bank's
capital and surplus (i.e, up to $3.0 million at June 30, 2003) to such persons
must be approved in advance by a disinterested majority of the Bank's Board of
Directors.
The Bank has a policy of offering loans to officers and directors and
employees in the ordinary course of business, on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons. These loans do not involve more than
the normal risk of collectibility or present other unfavorable features.
Certain Business Relationships
Mr. Stanley T. Jaros, a director of the Company, is a partner with the law
firm of Moriarty & Jaros, P.L.L., which performed services for the Company and
the Bank during the fiscal year ended June 30, 2003 and proposes to perform
services during the fiscal year ending June 30, 2004. Fees paid by the Company
and the Bank to Moriarty & Jaros, P.L.L. during the fiscal year ended June 30,
2003 totaled approximately $79,162.
Mr. Raymond J. Negrelli, a director of the Company, is a 50% owner of Bay
Properties Co., an Ohio general partnership. Bay Properties Co. is a 50% owner
and general partner of Park View Plaza, Ltd ("PVP"), an Ohio limited partnership
formed to develop and operate a 10,000 square foot retail plaza located in
Cleveland, Ohio. PVF Service Corporation, a wholly owned subsidiary of the
Company, is a 25% owner and limited partner of PVP. The Bank maintains a branch
office in the retail plaza owned and operated by PVP and during the year ended
June 30, 2003, the Bank paid a total of $58,862 in rent and operating cost
reimbursements to PVP. For the fiscal year ending June 30, 2004, the Company
estimates that it will pay a total of $58,335 in rent and operating cost
reimbursements to PVP.
12
- --------------------------------------------------------------------------------
PROPOSAL II-- APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE
PVF CAPITAL CORP. 2000 INCENTIVE STOCK OPTION PLAN AS THE PVF CAPITAL CORP.
2000 INCENTIVE STOCK OPTION AND DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
Introduction
A proposal to approve the amendment and restatement of the PVF Capital
Corp. 2000 Incentive Option Plan (the "Incentive Plan") will be presented for
stockholder approval at the Meeting. If the amendment and restatement of the
Incentive Plan is approved by stockholders at the Meeting, such plan will be
amended and restated as the PVF Capital Corp. 2000 Incentive Stock Option and
Deferred Compensation Plan (the "Amended Incentive Plan"). The Board of
Directors of the Company unanimously approved, subject to stockholder approval,
the Amended Incentive Plan on September 1, 2003.
In October, 2000, the stockholders of the Company approved the Incentive
Stock, which provided for the grant of stock options ("Options") to purchase up
to 250,000 shares of Common Stock (302,500 shares after adjusting for subsequent
stock dividends) to certain directors and key officers and employees of the
Company and its subsidiaries. The Amended Incentive Plan provides for the grant
of Options and the grant of stock appreciation rights ("SARs"), restricted stock
("Restricted Stock") and unrestricted stock ("Unrestricted Stock") up to a total
of 302,500 shares of Common Stock. This proposal does not increase the number of
shares of Common Stock available for issuance under the Incentive Plan. At
September 9, 2003, the closing price of the Company's Common Stock was $14.99
per share. Since the Company's directors and named executive officers are
eligible for awards under the Amended Incentive Plan, they have an interest in
this proposal.
The Board of Directors believes that approval of the Amended Incentive Plan
is necessary to continue to advance the interests of the Company and its
stockholders by providing an incentive to directors and key employees for
outstanding performance in order to generate superior returns to the
stockholders, and to attract, motivate and retain the services of qualified
directors and employees. The additional forms of award that may be granted under
the Amended Incentive Plan provide flexibility to implement various compensation
strategies as those strategies may change over time.
No grant of SARs, Restricted Stock or Unrestricted Stock under the Amended
Incentive Plan will occur until stockholder approval of the Amended Incentive
Plan is obtained. The terms of the Amended Incentive Plan are summarized below.
The Amended Incentive Plan is attached hereto as Exhibit B and should be
consulted for additional information. All statements made herein regarding the
Amended Incentive Plan are only intended to summarize the Amended Incentive Plan
and are qualified in their entirety by reference to the Amended Incentive Plan.
Purpose of the Amended Incentive Plan
The purpose of the Amended Incentive Plan is to promote the success and
enhance the value of the Company by linking the personal interests of the
members of the Board and the Company's employees, officers and executives to
those of Company shareholders and by providing such individuals with an
incentive for outstanding performance in order to generate superior returns to
shareholders of the Company. The Amended Incentive Plan is further intended to
provide flexibility to the Company in its ability to motivate, attract, and
retain the services of members of the Board, employees, officers, and executives
of the Company upon whose judgment, interest, and special effort the successful
conduct of the Company's operation is largely dependent.
Description of the Amended Incentive Plan
Administration. The Amended Incentive Plan is administered by a committee
(the "Committee"), appointed by the Board of Directors, consisting of at least
two directors of the Company who are "Non-employee Directors" within the meaning
of the federal securities laws. To the extent necessary or desirable, each
member of the Committee shall also qualify as an "outside director" within the
meaning of the federal tax laws and shall meet
13
such additional criteria as may be necessary or desirable to comply with
regulatory or stock exchange rules or exemptions. At present, the Committee
consists of Directors Neidus, Healey and Jaros.
Subject to the terms of the Amended Incentive Plan, the Committee has sole
discretionary authority to select participants and grant awards, to determine
the type of awards granted and the terms and conditions of awards (which terms
and conditions need not be the same in each case), to impose restrictions on any
award and to determine the manner in which such restrictions may be removed, to
interpret the Amended Incentive Plan and any award thereunder, to prescribe,
amend and rescind rules and regulations relating to the Amended Incentive Plan
and to make all other determinations deemed necessary or advisable in
administering the Amended Incentive Plan.
Eligible Persons. Under the Amended Incentive Plan, the Committee may grant
awards to directors of the Company or one of its subsidiaries (including members
of the Committee) and to key executives (which term is deemed to include among
others, the president, any vice president, the secretary, the treasurer or any
manager in charge of a principal business unit, division or function (such as
sales, administration or finance), any other officer who performs a
policy-making function, or any other person who performs similar policy-making
functions for the Company or any of its subsidiaries) and who on the grant date
is in the employ of the Company or one of its subsidiaries (the "subsidiaries"),
as defined in the Internal Revenue Code of 1986, as amended ("Code"). As of the
Record Date, the Company and its subsidiaries had eight directors and ten
employees whom it considered to be key executives eligible to participate in the
Amended Incentive Plan. The Committee is not obligated to treat participants in
the Amended Incentive Plan uniformly.
Shares Available for Grant. The Amended Incentive Plan reserves 302,500
shares of Common Stock for issuance pursuant to awards granted under the Amended
Incentive Plan. Such shares may be (i) authorized but unissued shares, (ii)
shares held in treasury or (iii) shares purchased by the Company in the open
market. Under the Amended Incentive Plan, the maximum number of shares for which
Options and SARs may be awarded to any one participant during any fiscal year is
25,000 shares. The aggregate number of shares of Common Stock available for
grant under the Amended Incentive Plan and the maximum number of shares of
Common Stock with respect to Options and SARs that may be awarded in any fiscal
year will be appropriately adjusted for any increase or decrease in the number
of shares of Common Stock of the Company resulting from a stock dividend or
split, recapitalization, merger, consolidation, combination or exchange of
shares or similar corporate change. In the event that any award under the
Amended Incentive Plan is terminated, cancelled, expires, lapses or is forfeited
for any reason, the shares subject to such award, or the unexercised portion
thereof, shall again become available for grant under the Amended Incentive
Plan.
Types of Awards and General Provisions. Under the Amended Incentive Plan,
the Committee may grant "Awards" to eligible persons, including:
o Incentive stock options ("ISOs") as defined in Section 422 of the Code;
o Non-qualified stock options ("NSOs");
o Stock appreciation rights ("SARs");
o Restricted Stock; and
o Unrestricted Stock.
The terms and conditions of each Award will be reflected in an award
agreement between the Company and the participant ("Award Agreement"). Awards
may be granted either alone or in addition to or in tandem with another Award.
The number of shares covered by each outstanding Award and (if applicable) the
exercise price per share shall be proportionally adjusted for any increase or
decrease in the number of shares of Common Stock of the Company resulting from a
subdivision or consolidation of shares or the payment of a stock dividend or any
other increase or decrease in the number of shares outstanding effected without
receipt or payment of consideration by the Company. The Committee may offer to
exchange or buy out any Award previously granted to a participant for cash,
shares of Common Stock or another Award, on such terms and conditions as the
Committee shall determine.
14
Stockholder Rights. No Award shall give the participant any of the rights
of a stockholder of the Company unless and until the shares of Common Stock
subject to the Award are, in fact, issued to such person in connection with such
Award.
Options. ISOs and NSOs together are called "Options." The maximum term for
an Option is 10 years from the date of grant, except that the maximum term of an
ISO may not exceed five years if the optionee owns more than 10% of the Common
Stock on the date of grant. Each Option granted shall become exercisable at such
time and on such conditions as determined by the Committee in the Award
Agreement; however, no Option granted to a participant who is not a director
shall be exercisable before the optionee has completed one year of continued
employment or service with the Company or one of its subsidiaries. The exercise
price as to any Option shall be the fair market value (determined under Section
422 of the Code) of the shares on the date of grant. In the case of a
participant who owns more than 10% of the combined voting power of all classes
of stock of the Company on the date of grant, such exercise price for an ISO may
not be less than 110% of fair market value of the shares. As required by federal
tax laws, if the aggregate fair market value (determined when an Option is
granted) of the Common Stock with respect to which ISOs are first exercisable by
an optionee in any calendar year (under all plans of the Company and of any
subsidiary) exceeds $100,000, the Options granted in excess of $100,000 will be
treated as NSOs.
Exercise of Options. The exercise of Options will be subject to such terms
and conditions as are established by the Committee in the Award Agreement. In
the absence of Committee action to the contrary, an otherwise unexpired Option,
except for NSOs granted to directors, shall cease to be exercisable upon (i) an
optionee's termination of employment for "cause" (as defined in the Amended
Incentive Plan), (ii) for ISOs, the termination of employment for any reason
other than death or "disability" (as defined in the Amended Incentive Plan),
(iii) for NSOs, the date three months after an optionee's termination of
employment for a reason other than cause, death, or disability, or earlier if
the Option expires in accordance with its terms, (iv) in the case of an optionee
who becomes disabled, the earlier of the date the Option expires in accordance
with its terms or the date one year after the optionee terminates service due to
disability, or (v) in the case of a deceased optionee, the earlier of the date
the Option expires in accordance with its terms or the date one year after the
optionee's death in the event of death of the optionee during employment.
An optionee may exercise Options, subject to provisions relative to their
termination and limitations on their exercise, only by (i) written notice to the
President of the Company of intent to exercise the Option with respect to a
specified number of shares of Common Stock, and (ii) payment to the Company
(contemporaneously with delivery of such notice) with a cashier's check,
certified check or existing holdings of Common Stock held for more than six
months of the amount of the exercise price for the number of shares with respect
to which the Option is then being exercised. Common Stock utilized in full or
partial payment of the exercise price for Options shall be valued at its market
value at the date of exercise.
Transferability of Options. Each Option granted under the Amended Incentive
Plan shall, by its terms, not be transferable otherwise than by will or the laws
of descent and distribution. Notwithstanding the foregoing, a participant who
holds Options may transfer such Options (but not ISOs) to his or her spouse,
lineal ascendants, lineal descendants, or to a duly established trust for the
benefit of one or more of these individuals. Options so transferred may
thereafter be transferred only to the participant who originally received the
grant or to an individual or trust to whom the participant could have initially
transferred the Options.
Stock Appreciation Rights. The Amended Incentive Plan permits the granting
of SARs by the Committee. Each SAR shall be subject to such terms and
conditions, including grant price, method of exercise, method of settlement and
form of consideration payable in settlement, as determined by the Committee in
the Award Agreement at the time of the grant. The Committee shall determine the
term of each SAR; however, the term of any SAR granted in tandem with an ISO may
not exceed ten (10) years. If the SAR is granted in connection with an ISO, the
grant price of the SAR shall not be less than the fair market value of a share
of Common Stock on the date of grant. Upon exercise of a SAR, the participant
has the right to receive the excess, if any, of the fair market value on the
date of exercise of the number of shares of Common Stock to which such SAR
relates, over the grant price of
15
such SAR for the number of shares of Common Stock to which such SAR relates. The
grant price of an SAR related to an ISO cannot be less than the fair market
value of a share of Common Stock on the date of grant.
Stock Awards. Restricted Stock and Unrestricted Stock are together called
"Stock Awards." Each Stock Award shall be subject to such terms and conditions
as determined by the Committee in the Award Agreement at the time of the grant.
Unrestricted Stock awards may be granted by the Committee with or without
conditions and may provide for an immediate or deferred transfer of shares to
the participant. Restricted Stock awards shall be subject to such restrictions
on transferability and risks of forfeiture as the Committee may determine. If
the participant terminates employment with the Company during the restriction
period related to any Restricted Stock award, the shares of Common Stock subject
to the restriction shall be forfeited; however, the Committee may waive any
restriction or forfeiture condition related to such shares of Common Stock.
Performance-Based Awards. The Amended Incentive Plan permits the Committee
to grant Stock Awards intended to qualify as "performance-based compensation"
under Section 162(m) of the Code to certain participants that qualify as
"covered employees" under Section 162(m) of the Code. The terms and conditions
of each Performance-Based Award, including the type of Performance-Based Award,
the performance goals to be achieved, and the performance period (as defined in
the Amended Incentive Plan) during which the performance goals are to be
achieved, shall be determined by the Committee in the Award Agreement at the
time of grant. The participant must be employed by the Company or one of its
subsidiaries on the last day of the performance period to be eligible to receive
the Performance-Based Award. Each Performance-Based Award must be disclosed to
and approved by the stockholders of the Company before any shares of Common
Stock subject to the Performance-Based Award are transferred to a participant or
any restrictions on such shares lapse.
Conditions on Issuance of Shares. The Committee shall not be required to
issue shares of Common Stock under an Award unless the issuance complies with
applicable laws, regulation of government authorities and the requirements of
any exchange on which shares of Common Stock are traded. In addition, the
Committee will have the discretionary authority to impose such restrictions on
shares of Common Stock issued pursuant to an Award as it may deem appropriate or
desirable, and to that end may require that a participant make certain
representations or warranties.
Limits on Transfers of Awards. No right or interest of a participant in any
Award may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company, or shall be subject to any lien, obligation, or
liability of the participant to any other party other than the Company. No Award
shall be assignable or transferable by a participant other than by will or the
laws of descent and distribution, except that the Committee, in its discretion,
may permit a participant to make a gratuitous transfer of an Award that is not
an ISO to his or her spouse, lineal descendants, lineal ascendants, or a duly
established trust for the benefit of one or more of these individuals.
Elections to Defer Compensation. The Amended Incentive Plan permits
participants to elect to defer receipt of all or any part of the following forms
of compensation:
o Annual salary;
o Fiscal year bonus;
o Director's fees (if the participant is a Director of the Company); or
o Common Stock or cash deliverable pursuant to an Award (if permitted by
the Committee in its discretion).
All elections by a participant shall remain in full force for all future
years until modified or revoked. Upon becoming eligible to participate, a
participant has thirty (30) days to make an election to defer salary earned
after such election. Any increase or decrease in such deferral amount must be
made by December 1st of the preceding calendar year. An election to defer a
fiscal year bonus (or increase or decrease the amount to be deferred) must be
made by June 1st of the preceding fiscal year; however, a participant may make
an election to defer up to fifty percent (50%) of a fiscal year bonus for the
fiscal year ending June 30, 2004, if such election is made by December 1, 2003.
16
Deferred Compensation Account. The Company shall establish a special ledger
account ("Deferred Compensation Account") on the books of the Company for each
participant who elects to defer compensation. Deferred salary shall be credited
to the participant's Deferred Compensation Account on the last day of each
calendar month. The amount of any deferred salary, director's fees, fiscal year
bonus or Award will be credited to the participant's Deferred Compensation
Account on the last day of the month in which such salary, director's fees,
fiscal year bonus or Award would have become payable or transferable to the
participant.
Investment Election. Each participant may elect that the deferred
compensation be credited to his or her Deferred Compensation Account in the form
of cash, shares of the Company's Common Stock or such deemed investment options
as are offered by the Board of Directors or the Committee. In the absence of a
participant election, the amount credited to the Deferred Compensation Account
shall be credited as cash. Any deferred compensation credited to a participant's
Deferred Compensation Account as cash shall accrue interest at a rate that is no
less than the prime rate charged to the Company by its principal bank, but shall
not exceed the highest rate paid on Individual Retirement Accounts ("IRA") by
the Company plus two percent (2%) (based on the weighted average daily prime
rate or IRA rate for the three month period ending on the last day of the
quarter).
If a participant elects for a deferred amount to be credited as shares of
the Company's Common Stock, his or her Deferred Compensation Account shall be
credited with the number of shares of Common Stock equal in value to the
deferred amount, with the value of such Common Stock determined in accordance
with a valuation methodology approved by the Board of Directors or the
Committee. The Common Stock credited to the Deferred Compensation Account shall
merely constitute a bookkeeping entry of the Company and the participant shall
have no voting, dividend or other legal or economic rights with respect to such
Common Stock. No actual shares of Common Stock will be issued until the
participant receives a distribution from the Deferred Compensation Plan. At the
end of each fiscal quarter, dividends that would have been payable with respect
to such Common Stock shall be credited to the Deferred Compensation Account as
additional shares of Common Stock. No participant will be granted the right to
take payment of the Common Stock in cash rather than shares of Common Stock. If
a participant who has elected to receive deferred compensation in the form of
shares of Common Stock shall be deemed to have violated the short-swing profit
rules of the federal securities laws, then such election shall be void and such
deferred amount shall be credited to the participant's Deferred Compensation
Account as cash.
Trust. The Company may establish one or more trusts to fund deferred
compensation obligations under the Amended Incentive Plan. Each trust shall be
permitted to hold cash, Common Stock of the Company, or other assets to the
extent of the Company's obligations. Although the assets of such a trust would
be intended to be used for the exclusive purpose of paying the deferred
compensation obligations under the Amended Incentive Plan, the assets of the
trust would remain subject to the Company's general creditors. As a result, the
rights of participants in any assets of such a trust shall be no greater than
the rights of an unsecured creditor of the Company.
Distributions. Except in the case of financial hardship, a participant will
not receive a distribution from his or her Deferred Compensation Account until
the earlier of (1) termination of the participant's employment or directorship
with the Company or (2) the death or legal incapacitation of the participant
(each a "Distribution Event"). In addition, a Director may, at the time he first
becomes eligible to participate in the Deferred Compensation Plan, specify an
age (not less than 55 years) to receive distributions of his Deferred
Compensation Account. The Committee has the authority, in its sole discretion,
to allow an early distribution from a participant's Deferred Compensation
Account in the event of severe financial hardship due to the sudden illness of
the participant or a participant's family member, or the loss of the
participant's property due to casualty or other extraordinary circumstance.
Each participant's Deferred Compensation Account shall be distributed in
either a lump sum or in annual installments over a period of up to ten years as
specified by the participant at the time of his initial election to defer
compensation ("Distribution Election"). A participant may change his
Distribution Election at any time prior to sixty (60) days before a Distribution
Event. If a participant dies prior to distribution of the entire balance of the
Deferred Compensation Account, the undistributed balance shall be paid to the
beneficiary designated by the
17
participant or in the absence of such designation, to the legal representative
or the person or entity identified in the deceased participant's last will.
If the participant fails to provide a Distribution Election, the Board of
Directors, in its sole discretion, shall determine the Distribution Election. In
addition, the Board of Directors may, in its sole discretion, distribute the
balance of a participant's Deferred Compensation Account in a lump sum, even if
the participant had elected installment payments, in the event a participant
whose employment with the Company has been terminated continues to be affiliated
with a direct competitor of the Company after reasonable notice from the Board.
Change in Control. In the event of a "change in control" of the Company,
each participant will be permitted to elect, during the thirty (30) day period
immediately prior to the change in control, to receive a distribution of all or
a portion of his or her Deferred Compensation Account during the seven (7) day
period after the change in control. For purposes of the Amended Incentive Plan,
"change in control" means:
(i) the acquisition by a person or persons acting in concert of the power
to vote twenty-five percent (25%) or more of a class of the Company's voting
securities;
(ii) the acquisition by a person of the power to direct the Company's or
the Bank's management or policies, if the Board of Directors or the Office of
Thrift Supervision has made a determination that such acquisition constitutes or
will constitute an acquisition of control of the Bank or Company for the
purposes of the Savings & Loan Holding Company Act or the Change in Bank Control
Act and the regulations thereunder;
(iii) during any period of two (2) consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
cease, for any reason, to constitute at least a majority thereof, unless the
election of each Director who was not a Director at the beginning of such period
has been approved in advance by Directors representing at least two-thirds (2/3)
of the Directors then in office who were Directors in office at the beginning of
the period; provided, however, that for purposes of this clause (iii), each
Director who is first elected to the Board (or first nominated by the Board for
election by the shareholders) with the approval of at least two-thirds (2/3) of
the Directors who were Directors at the beginning of the period shall be deemed
to be a Director at the beginning of the two-year period;
(iv) the Company shall have merged into or consolidated with another
corporation, or merged another corporation into the Company, on a basis whereby
less than fifty percent (50%) of the total voting power of the surviving
corporation is represented by shares held by persons who were shareholders of
the Company immediately before the merger or consolidation; or
(v) the Company shall have sold to another person (a) substantially all of
the Company's assets or (b) the Bank.
The term "person" refers to an individual, corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or other entity.
Non-Transferability of Deferred Compensation. A participant's right to
receive payments of deferred compensation are not assignable or transferable,
shall not be subject to alienation, anticipation, sale, pledge, encumbrance or
other legal process, and shall not be in any manner subject to the debts or
liabilities of such participant. In the event a participant attempts such a
transfer, the Committee may, in its discretion, terminate such participant's
interest in such deferred compensation to the extent the Committee deems
necessary or advisable to prevent or limit the effects of such transfer. Any
deferred compensation effected by such termination shall be retained by the
Company or the trust and the Committee may, in its sole discretion, pay to such
participant, his or her spouse or children in such a manner as the Committee
deems proper.
Effect of Dissolution and Related Transactions. Subject to any required
action by the stockholders, if the Company shall be the surviving corporation in
any merger or consolidation (except a merger or consolidation in which the
stockholders of the Company receive the securities of another corporation), each
Award shall pertain to
18
and apply to the securities which a holder of the number of shares of Common
Stock subject to the Award would have been entitled. Upon a dissolution of the
Company, a sale of all or substantially all of the Company's assets, a merger or
consolidation in which the Company is not the surviving corporation, a merger or
consolidation in which the Company is the surviving corporation but the
stockholders of the Company receive securities of another corporation or other
property, or the sale or disposition of all or substantially all of the
Company's assets, the Committee, in its sole discretion, shall have the
authority (a) to cancel each outstanding Award and pay to the participant, for
each share of Common Stock subject to the cancelled Award, an amount in cash
equal to the difference between the value of the securities or other property to
be received by the holder of a share of Common Stock and the exercise price of
the Award, or (b) to provide for the exchange of each outstanding Award with a
substitute award of the same type with respect to the property for which such
Award is exchanged, with such adjustments to the exercise price or number of
shares or amount of property subject to the substitute award as the Committee
deems appropriate.
Duration of Amended Incentive Plan. The Amended Incentive Plan will expire
by its terms on October 16, 2010, after which date no Award may be granted,
except that the Amended Incentive Plan may be terminated at an earlier date by
action of the Board of Directors. The expiration of the Amended Incentive Plan,
or its termination by the Board of Directors, will not affect any Award then
outstanding.
Amendment and Termination of Amended Incentive Plan. The Board of Directors
shall have complete power and authority to amend the Amended Incentive Plan,
provided, however, the Board of Directors may not, without the affirmative vote
of the holders of a majority of the voting stock of the Company, make any
amendment which would (a) abolish the Committee without designating such other
committee, change the qualifications of its members, or withdraw the
administration of the Amended Incentive Plan from its supervision, (b) increase
the maximum number of shares for which Awards may be granted, (c) amend the
formula for determination of the exercise price of Options, (d) extend the term
of the Amended Incentive Plan or (e) amend the requirements as to the employees
eligible to receive Awards. In addition, the Board of Directors shall not make
any other amendment to the Amended Incentive Plan without stockholder approval
to the extent necessary or desirable to comply with any applicable law,
regulation or stock exchange rule. Without the written consent of the
participant, except as provided in the Amended Incentive Plan, no termination or
amendment of the Amended Incentive Plan shall adversely affect in any material
way any Award previously granted.
Financial Considerations. The Company will receive no monetary
consideration for the granting of Awards under the Amended Incentive Plan. It
will receive no monetary consideration other than the exercise price for shares
of Common Stock issued to participants upon exercise of an Award that is an
Option.
Federal Income Tax Consequences
ISOs. An optionee recognizes no taxable income upon the grant of ISOs. If
the optionee holds the shares purchased upon exercise of an ISO for at least two
years from the date the ISO is granted, and for at least one year from the date
the ISO is exercised, any gain realized on the sale of the shares received upon
exercise of the ISO is taxed as long-term capital gain. However, the difference
between the fair market value of the Common Stock on the date of exercise and
the exercise price of the ISO will be treated by the optionee as current income
in the year of exercise for purposes of the alternative minimum tax. If an
optionee disposes of the shares before the expiration of either of the two
special holding periods noted above, the disposition is a "disqualifying
disposition." In this event, the optionee will be required, at the time of the
disposition of the Common Stock, to treat the lesser of the gain realized or the
difference between the exercise price and the fair market value of the Common
Stock at the date of exercise as ordinary income, and the excess, if any, as
capital gain.
The Company will not be entitled to any deduction for federal income tax
purposes as the result of the grant or exercise of an ISO, regardless of whether
or not the exercise of the ISO results in liability to the optionee for
alternative minimum tax. However, if an optionee has ordinary income taxable as
compensation as a result of a disqualifying disposition, the Company will be
entitled to deduct an equivalent amount.
19
NSOs. In the case of a NSO, an optionee will recognize ordinary income upon
the exercise of the NSO in an amount equal to the difference between the fair
market value of the shares on the date of exercise and the option price (or, if
the optionee is subject to certain restrictions imposed by the federal
securities laws, upon the lapse of those restrictions unless the optionee makes
a special tax election within 30 days after the date of exercise to have the
general rule apply). Upon a subsequent disposition of such shares, any amount
received by the optionee in excess of the fair market value of the shares as of
the exercise will be taxed as capital gain. The Company will be entitled to a
deduction for federal income tax purposes at the same time and in the same
amount as the ordinary income recognized by the optionee in connection with the
exercise of a NSO.
SARs. A participant recognizes no taxable income upon the grant of an SAR.
Upon the exercise of the SAR, the participant will recognize ordinary income in
an amount equal to excess of the fair market value of the shares received over
the grant price of such shares under the SAR. The Company will be entitled to
deduct for federal income tax purposes the same amount as the ordinary income
recognized by the participant at the time of the exercise.
Restricted Stock. Generally, except as described in the following
paragraph, a participant recognizes no taxable income upon the grant or purchase
of Restricted Stock that is subject to a "substantial risk of forfeiture," as
defined in Section 83 of the Code, until such time as the Restricted Stock is no
longer subject to the substantial risk of forfeiture. At that time, the
participant will be taxed, at ordinary income rates, on the difference between
the fair market value of the shares and the amount the participant paid, if any,
for the Restricted Stock. The Company will be eligible for a tax deduction at
the time the participant recognizes the income in an amount equal to the income
recognized.
A participant may elect, under Section 83(b) of the Code, to recognize
taxable ordinary income at the time the Restricted Stock is awarded in an amount
equal to the fair market value of the shares at the time of the grant,
determined without regard to any forfeiture restrictions. If such an election is
made, the Company will be entitled to a deduction at that time in the same
amount. Future appreciation of the shares will be taxed at either the long-term
or short-term capital gains rate when the shares are sold depending upon the
length of time the participant held the shares. However, if, after making such
an election, the shares are forfeited, the participant will be unable to claim a
deduction.
Unrestricted Stock. If the Unrestricted Stock award provides for the
immediate transfer of shares to the participant, the participant will recognize
ordinary income in an amount equal to the fair market value of the shares at the
time of grant. If the Unrestricted Stock award provides for a deferred transfer
of shares to the participant, the participant will recognize taxable ordinary
income at the time the Unrestricted Stock is actually transferred to the
participant. The Company will be entitled to a deduction at such time and in the
same amount as the participant recognizes income.
Deferred Compensation. For purposes of the federal income tax laws, it is
intended that participants will not realize taxable income on any compensation
that is deferred under the Amended Incentive Plan at the time such compensation
is earned. When a participant receives any distributions from his or her
Deferred Compensation Account, any cash and the fair market value of any shares
of Common Stock distributed to the participant will be treated as ordinary
income. The Company will be entitled to a deduction for federal income tax
purposes at the same time and in the same amount as the ordinary income
recognized by the participant in connection with a distribution from the
participant's Deferred Compensation Account.
New Plan Benefits
The grant of an Award, the types of Awards and the number of shares of
Common Stock subject to such Awards under the Amended Plan are subject to the
discretion of the Committee; therefore, the benefits or amounts that will be
received by any participant or group of participants in the Amended Incentive
Plan, if approved, including directors and key employees, are not currently
determinable. To date, only Options have been granted to participants. The
following table sets forth the aggregate number of shares subject to Options
granted during the fiscal year ended June 30, 2003.
20
Number of Shares
Underlying
Name and Position/Group Options Granted (1)
John R. Male, Chairman of the Board and Chief Executive Officer of the 4,620
Company and the Bank
C. Keith Swaney, Director, President and Chief Operating Officer of the 3,960
Company and the Bank, Treasurer of the Company and Chief Financial Officer
of the Bank
Jeffery N. Male, Vice President and Secretary of the Company and Senior Vice 3,080
President of the Bank
Robert K. Healey, Director 1,100
Gerald A. Fallon, Director 6,600
Raymond J. Negrelli, Director 6,600
Stuart D. Neidus, Director 1,100
Stanley T. Jaros, Director 1,100
Ronald D. Holman, II, Director -- (2)
All Executive Officers as a Group (3 persons) 11,660
All Non-Employee Directors as a Group (6 persons) 16,500
All Non-Executive Officer Employees as a Group (9 persons) 13,200
_______________
(1) Adjusted for a 10% stock dividend paid on the Common Stock on August 29,
2003.
(2) Mr. Holman was not a member of the Board of Directors on November 1, 2002,
the date options were granted during the year ended June 30, 2003.
In addition, had the Amended Incentive Plan been effective during the year
ended June 30, 2003, the Company estimates that it would have awarded 9,900
shares of Restricted Stock to all non-executive officer employees as a group,
with no awards of Restricted Stock to directors or executive officers. No SARs
would have been awarded during the year ended June 30, 2003.
The amount of benefits payable in the future as a result of deferred
compensation under the Amended Incentive Plan, if approved, is not currently
determinable because such benefits depend on the number of participants in the
Amended Incentive Plan, the amount of compensation each participant elects to
defer, and the fair market value of the Company's Common Stock as it changes
over time.
21
Equity Compensation Plans
The following table sets forth certain information as of June 30, 2003 with
respect to the Company's equity compensation plans under which equity securities
of the Company are authorized for issuance:
(a) (b) (c)
Number of securities remaining
available for future issuance
Number of securities to be Weighted-average exercise under equity compensation
Plan Category issued price of outstanding plans (excluding securities
upon exercise of outstanding options, warrants and rights reflected in column (a)) (1)
Options, warrants and rights (1)
Equity compensation 367,926 $8.38 310,012
plans approved
by security holders
Equity compensation -- -- --
plans not approved
by security holders
Total 367,926 8.38 310,012
(1) Adjusted for a 10% stock dividend paid on the Common Stock on September 1,
1997, a 50% stock dividend paid on the Common Stock on August 17, 1998, a 10%
stock dividend paid on the Common Stock on September 7, 1999, a 10% stock
dividend paid on the Company's Common Stock on September 1, 2000, a 10% stock
dividend paid on the Common Stock on August 31, 2001, a 10% stock dividend paid
on the Common Stock on August 30, 2002, and a 10% dividend paid on the Common
Stock on August 29, 2003.
Recommendation and Vote Required
The Board of Directors has determined that the Amended Incentive Plan is
desirable, cost effective, and produces incentives which will benefit the
Company and its stockholders. The Board of Directors is seeking stockholder
approval of the Amended Incentive Plan, in order to satisfy the requirements of
the Code for favorable tax treatment of ISOs, to comply with Nasdaq requirements
and to exempt certain option transactions from the short-swing trading rules of
the Securities and Exchange Commission ("SEC").
Stockholder approval of the Incentive Plan requires the affirmative vote of
the holders of a majority of the votes cast by stockholders of the Company at
the Meeting. The Board of Directors recommends a vote "FOR" approval of the
Amended Incentive Plan.
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AUDIT COMMITTEE REPORT
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The Audit Committee has reviewed and discussed the audited financial
statements of the Company with management and has discussed with Crowe, Chizek
and Company LLP ("Crowe, Chizek"), the Company's independent auditors, the
matters required to be discussed under Statements on Auditing Standards No. 61
("SAS 61"). In addition, the Audit Committee has received from Crowe, Chizek the
written disclosures and the letter required to be delivered by Crowe, Chizek
under Independence Standards Board Standard No. 1 ("ISB Standard No. 1") and has
met with representatives of Crowe, Chizek to discuss the independence of the
auditing firm.
The Audit Committee has reviewed the non-audit services currently provided
by the Company's independent auditor and has considered whether the provision of
such services is compatible with maintaining the independence of the Company's
independent auditors.
22
Based on the Audit Committee's review of the financial statements, its
discussion with Crowe, Chizek regarding SAS 61, and the written materials
provided by Crowe Chizek under ISB Standard No. 1 and the related discussion
with Crowe, Chizek of their independence, the Audit Committee has recommended to
the Board of Directors that the audited financial statements of the Company be
included in its Annual Report on Form 10-K for the year ended June 30, 2003 for
filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Stuart D. Neidus
Robert K. Healey
Gerald A. Fallon
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PROPOSAL III -- RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
The Audit Committee of the Board of Directors has renewed the Company's
arrangements with Crowe, Chizek and Company LLP, independent public accountants,
to be its auditors for the 2004 fiscal year, subject to ratification by the
Company's stockholders. A representative of Crowe, Chizek and Company LLP will
be present at the Meeting to respond to stockholders' questions and will have
the opportunity to make a statement if he or she so desires.
The appointment of the auditors must be approved by a majority of the votes
cast by the stockholders of the Company at the Meeting. The Board of Directors
recommends that shareholders vote "FOR" the approval of the appointment of
auditors.
On January 22, 2002, the Company's Board of Directors dismissed KPMG LLP as
its independent accountants. Such dismissal became effective on February 12,
2002, the date on which KPMG LLP completed its review of the Company's Quarterly
Report on Form 10-Q for the Quarter Ended December 31, 2001. The decision was
recommended by the Audit Committee of the Board of Directors and unanimously
approved by the Board. The firm of Crowe Chizek and Company, LLP, Cleveland,
Ohio, was engaged to perform an audit of the Company's financial statements for
the fiscal year ended June 30, 2002 and to provide other accounting services.
KPMG LLP served as the Company's independent accountants to audit the
Company's consolidated financial statements for the year ended June 30, 2001.
KPMG LLP's audit report on the Company's financial statements for the year ended
June 30, 2001 did not contain any adverse opinion or disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope or accounting
principles.
During the Company's fiscal year ended June 30, 2001 and for the subsequent
interim period from July 1, 2001 through February 12, 2002, there were no
disagreements with KPMG LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of KPMG LLP, would have
caused them to make reference thereto in their audit report.
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INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Crowe, Chizek and Company LLP, served as the Company's independent auditors
for the 2003 and 2002 fiscal years. For the years ended June 30, 2003 and 2002,
the Company was billed by Crowe, Chizek and Company LLP for fees aggregating
$56,675 and $98,522, respectively. Such fees were comprised of the following:
Audit Fees
During the fiscal years ended June 30, 2003 and 2002, the aggregate fees
billed for professional services rendered for the audit of the Company's annual
financial statements and the reviews of the financial statements
23
included in the Company's Quarterly Reports on Form 10-Q filed during the fiscal
years ended June 30, 2003 and 2002 were $33,375 and $43,000, respectively, which
were paid to Crowe, Chizek and Company LLP.
Audit-Related Fees
The aggregate fees billed for Audit-Related services for the fiscal year
ended June 30, 2003 and 2002 were $15,550 and $15,000, respectively. Such fees
were for FDICIA services, review of the Form 10-K and SAS 71 quarterly review.
Tax Fees
No fees were billed to the Company for tax services by Crowe, Chizek and
Company LLP for the fiscal years ended June 30, 2003 and 2002.
All Other Fees
The aggregate fees for services not included above were $7,750 and $40,522,
respectively, for the fiscal years ended June 30, 2003 and 2002. The fee for
fiscal year 2003 related to the 401(k) audit and internal audit assessment, and
the fee for fiscal year 2002 related to information systems internal control
review, 401(k) audit, and internal audit assessment.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
Pursuant to regulations promulgated under the Exchange Act, the Company's
officers, directors and persons who own more than 10% of the outstanding Common
Stock ("Reporting Persons") are required to file reports detailing their
ownership and changes of ownership in such Common Stock (collectively,
"Reports"), and to furnish the Company with copies of all such Reports. Based
solely on its review of the copies of such Reports or written representations
that no such Reports were necessary that the Company received during the past
fiscal year or with respect to the last fiscal year, management believes that
during the fiscal year ended June 30, 2003, all of the Reporting Persons
complied with these reporting requirements.
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OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement and
matters incident to the conduct of the Meeting. However, if any other matters
should properly come before the Meeting, it is intended that proxies in the
accompanying form will be voted in respect thereof in accordance with the
determination of a majority of the Board of Directors.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation. The
Company has retained Georgeson Shareholder, a proxy soliciting firm, to assist
in the solicitation of proxies, for which they will receive a fee of $850.
The Company's Annual Report to Stockholders, including financial
statements, is being mailed to all stockholders of record as of the close of
business on the Record Date. Any stockholder who has not received a copy
24
of such Annual Report may obtain a copy by writing to the Secretary of the
Company. Such Annual Report is not to be treated as a part of the proxy
solicitation material or as having been incorporated herein by reference.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
Under the Company's First Amended and Restated Articles of Incorporation,
stockholder proposals must be submitted in writing to the Secretary of the
Company at the address stated later in this paragraph no less than thirty days
nor more than sixty days prior to the date of such meeting; provided, however,
that if less than forty days' notice of the meeting is given to stockholders,
such written notice shall be delivered or mailed, as prescribed, to the
Secretary of the Company not later than the close of business on the tenth day
following the day on which notice of the meeting was mailed to stockholders. For
consideration at the Annual Meeting, a stockholder proposal must be delivered or
mailed to the Company's Secretary no later than September 29, 2003. In order to
be eligible for inclusion in the Company's proxy materials for next year's
Annual Meeting of Stockholders, any stockholder proposal to take action at such
meeting must be received at the Company's executive office at 30000 Aurora Road,
Solon, Ohio 44139, no later than May 24, 2004. Any such proposal shall be
subject to the requirements of the proxy rules adopted under the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Jeffrey N. Male
JEFFREY N. MALE
SECRETARY
Solon, Ohio
September 19, 2003
- --------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JUNE 30, 2003 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE
FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN
REQUEST TO: CORPORATE SECRETARY, PVF CAPITAL CORP., 30000 AURORA ROAD, SOLON,
OHIO 44139.
- --------------------------------------------------------------------------------
25
Exhibit A
PVF CAPITAL CORP.
AUDIT COMMITTEE CHARTER
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") of PVF Capital Corp. (the "Company") in
fulfilling its responsibility to provide oversight and monitoring
responsibilities by reviewing: the financial reports and other financial
information provided by the Company to any governmental body or the public; the
Company's systems of internal controls regarding finance, accounting, legal
compliance and ethics that management and the Board have established and may
establish from time to time; the Company's auditing, accounting and financial
reporting practices generally; and all potential conflict of interest
situations, including those arising from any related-party transactions.
Consistent with this function, the Audit Committee should encourage continuous
improvement of, and should foster adherence to, the Company's policies,
procedures and practices at all levels. The Audit Committee's primary duties and
responsibilities are to:
o Serve as an independent and objective party to monitor the Company's
financial reporting practices and internal control system.
o Review and appraise the qualifications and performance of the Company's
independent accountants and internal auditing department.
o Provide an open avenue of communication among the independent accountants,
financial and senior management, the internal auditing department and the
Board of Directors.
AUTHORITY
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with unrestricted access to all books, records,
facilities and personnel of the Company and the power to retain outside counsel,
auditors or other experts for this purpose.
MEMBERSHIP
The Committee shall be comprised of at least three members of the Board, and the
Committee's composition will meet the requirements of applicable laws, the Audit
Committee Policy of NASDAQ, and all rules and regulations of the Securities and
Exchange Commission.
Accordingly, all members will be Directors:
o Who are independent. The independence standard means that, except in the
capacity as a member of the Board of Directors and a member of the audit
and any other Board committee, the audit committee member may not be an
employee of the Company and may not accept any consulting, advisory, or
other compensatory fee from the Company or be an affiliated person of the
Company or any of its subsidiaries; and
o Who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Committee. It is desired
that at least one member of the Committee will have accounting or related
financial management expertise.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and it recognizes that the management of
the Company is responsible for preparing the financial statements of the Company
and that the independent audit firm is responsible for auditing those financial
statements. Additionally, the Committee
Page 1 of 3
PVF CAPITAL CORP.
AUDIT COMMITTEE CHARTER
recognizes that financial management, as well as the independent auditor, have
more time, knowledge and more detailed information on the Company than do
Committee members; consequently, in carrying out its oversight responsibilities,
the Committee is not providing any expert or special assurance as to the
Company's financial statements or any professional certification as to the
outside auditor's work. The members of the Committee shall perform their
responsibilities in good faith; in a manner each of them reasonably believes to
be in the best interest of the Company and in accordance with applicable laws
and regulations.
The following functions shall be common recurring activities of the Committee in
fulfilling its oversight function:
Independent External Auditor
o Select, retain or terminate the independent auditors and, in connection
therewith, annually to receive, evaluate and discuss with the independent
auditors a formal written report from them setting forth all consulting or
other relationships with the Company, which shall include specific
representations as to their objectivity and independence as required by
Independence Standards Board Statement No. 1.
o Meet with the Company's independent accountants, including private meetings
as necessary, (i) to review the arrangements for and scope of the annual
audit and any special audits; (ii) to discuss any matters of concern
relating to the Company's financial statements, including any adjustments
to such statements recommended by the auditors, or other results of said
audit(s); (iii) to consider the auditors' comments with respect to the
Company's financial policies, procedures and internal accounting controls
and management's responses thereto; and (iv) to review the form of opinion
the independent accountants propose to render to the Board of Directors and
shareholders.
o Approve the independent audit firm's estimated fees for the annual audit
and quarterly review work as outlined in its engagement letter; and review
the independent auditors' performance.
o Review and discuss with the independent auditor all necessary accounting
policies and practices to be used, all alternative treatments of financial
information within generally accepted accounting principles that have been
discussed with management and the risks of using such alternative
treatments, and other material written communications between the
independent auditor and management.
o Review, evaluate and approve any non-audit services the independent auditor
may perform for the Company and disclose such approved non-auditor services
in periodic reports to stockholders.
o Act as a liaison between the Company's independent accountants and the full
Board of Directors.
o As required by law, the Audit Committee shall assure the regular rotation
of the lead and concurring audit partner, and consider whether there should
be a regular rotation of the auditor itself.
Financial Reporting and Disclosures
o Consider the effect upon the Company of any changes in accounting
principles or practices proposed by management or the independent
accountants.
Page 2 of 3
PVF CAPITAL CORP.
AUDIT COMMITTEE CHARTER
o Review the Company's financial statements, including interim financial
statements, annual financial statements with accompanying auditors' opinion
and management letters, filings of Forms 10-K and 10-Q, the matters
required to be discussed by Statement of Auditing Standards ("SAS") No. 61,
and any other financial reports requiring Board approval before submission
to the Securities and Exchange Commission or other government agency.
o Prepare, review and approve the annual proxy disclosure regarding the
activities and report of the Audit Committee for the year.
o Review and discuss the types of presentation and information to be included
in earnings press releases, and any additional financial information and
earning guidance generally provided to analysts and rating agencies.
o Review and discuss the form and content of the certification documents for
the quarterly reports on Form 10-Q and the annual report on Form 10-K with
the general auditor, the independent auditor, the chief financial officer
and the chief executive officer.
o Satisfy itself that the Company is in reasonable compliance with pertinent
laws and regulations and conducting its affairs ethically.
Internal Controls
o Review and discuss with management, internal audit, and the independent
audit firm the quality and adequacy of the Company's internal controls.
o Review and, if deemed necessary, investigate concerns and/or complaints
regarding accounting, internal accounting controls, or other auditing or
questionable matters submitted confidentially and anonymously to the
Committee.
Internal Audit
Oversee the Company's internal audit function to include: approving the
Company's Internal Audit Policy, approving the appointment and termination of
the Internal Auditor, approving the annual audit plan, and reviewing staffing
and results of internal audits.
Communication
Report its activities to the full Board of Directors on a regular basis and to
make such recommendations with respect to the above and other matters as the
Committee may deem necessary or appropriate;
APPROVAL
This Charter is subject to annual review by the Committee and the Board of
Directors.
Page 3 of 3
Exhibit B
PVF CAPITAL CORP.
2000 INCENTIVE STOCK OPTION
AND
DEFERRED COMPENSATION PLAN
ARTICLE 1
PURPOSE
1.1 GENERAL. The purpose of the PVF Capital Corp. 2000 Incentive Stock
Option and Deferred Compensation Plan (the "Plan") is to promote the success and
enhance the value of PVF Capital Corp. (the "Company") by linking the personal
interests of the members of the Board and the Company's employees, officers and
executives to those of Company shareholders and by providing such individuals
with an incentive for outstanding performance in order to generate superior
returns to shareholders of the Company. The Plan is further intended to provide
flexibility to the Company in its ability to motivate, attract, and retain the
services of members of the Board, employees, officers, and executives of the
Company upon whose judgment, interest, and special effort the successful conduct
of the Company's operation is largely dependent. For purposes of this Plan,
"Company" shall be deemed to include subsidiaries of PVF Capital Corp., unless
the context requires otherwise.
ARTCLE 2
EFFECTIVE DATE AND TERM
2.1 EFFECTIVE DATE. The Plan was originally effective as of September 26,
2000 (the "Effective Date"). The Plan, as hereby amended and restated, will be
effective as of the date it is approved by the shareholders of the Company. No
Awards which could not have been granted under the prior version of the Plan
shall be made prior to shareholder approval of this amended and restated version
of the Plan.
2.2 TERM. Unless sooner terminated by the Board, the Plan shall terminate
on the tenth (10th) anniversary of the Effective Date, and no Awards may be
granted under the Plan thereafter. The termination of the Plan shall not affect
any Award that is outstanding on the termination date, without the consent of
the Participant.
ARTICLE 3
DEFINITIONS AND CONSTRUCTION
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:
(a) "Award" means any Option, Stock Appreciation Right, Restricted Stock
Award, Unrestricted Stock Award, or Performance-Based Award granted to
a Participant under the Plan.
(b) "Award Agreement" means a writing, in such form as the Committee in
its discretion shall prescribe, evidencing an Award.
(c) "Bank" means Park View Federal Savings Bank.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means, in the good faith determination of the Board, the
Participant's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, or willful violation of any law,
rule or regulation (other than traffic violations or similar offenses)
or final cease-and-desist order. No act, or failure to act, on the
Participant's part shall be considered "willful" unless he has acted,
or failed to act, with an absence of good faith and without a
reasonable belief that his action or failure to act was in the best
interest of the Company.
(f) "Change in Control" means:
(1) the acquisition by a person or persons acting in concert of the
power to vote twenty-five percent (25%) or more of a class of the
Company's voting securities;
(2) the acquisition by a person of the power to direct the Bank's or
Company's management or policies, if the Board of Directors or
the OTS has made a determination that such acquisition
constitutes or will constitute an acquisition of control of the
Bank or the Company for the purposes of the Savings & Loan
Holding Company Act or the Change in Bank Control Act and the
regulations thereunder;
(3) during any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the members of the
Board cease, for any reason, to constitute at least a majority
thereof, unless the election of each director who was not a
director at the beginning of such period has been approved in
advance by directors representing at least two-thirds (2/3) of
the directors then in office who were directors in office at the
beginning of the period; provided, however, that for purposes of
this clause (3), each director who is first elected to the Board
(or first nominated by the Board for election by the
shareholders) with the approval of at least two-thirds (2/3) of
the directors who were directors at the beginning of the period
shall be deemed to be a director at the beginning of the two-year
period;
(4) the Company shall have merged into or consolidated with another
corporation, or merged another corporation into the Company, on a
basis whereby less than fifty percent (50%) of the total voting
power of the surviving corporation is represented by shares held
by persons who were shareholders of the Company immediately
before the merger or consolidation; or
(5) the Company shall have sold to another person (i) substantially
all of the Company's assets or (ii) the Bank.
The term "person" refers to an individual, corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or other entity.
(g) "Code" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
(h) "Committee" means the committee of the Board described in Article 4.
(i) "Covered Employee" means an Employee who is a "covered employee"
within the meaning of Section 162(m) of the Code.
(j) "Deferred Compensation Account" means the bookkeeping account
established for each Participant pursuant to Section 12.2 of this
Plan.
(k) "Disability" shall have the meaning set forth in Section 22(e)(3) of
the Code.
(l) "Distribution Event" means an event as a result of which a Participant
is entitled to receive the balance of his or her Deferred Compensation
Account pursuant to Section 12.3 of this Plan, namely (i) with respect
to a Participant who is an employee of the Company and the portion of
his or her Deferred Compensation Account attributable to an Award or
other compensation earned as an employee, the date the Participant
terminates his or her employment with the Company, and (ii) with
respect a Participant who is a member of the Board and the portion of
his or her Deferred Compensation Account attributable to an Award or
other compensation earned as a member of the Board, the earlier of (A)
the date the Participant terminates his or her service as a member of
the Board, or (B) the Participant's attainment of the age specified
(not younger than age 55) in an election form filed by the Participant
with the Committee at such time as he or she first becomes eligible to
defer compensation pursuant to Article 12 of this Plan.
2
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the regulations promulgated thereunder.
(n) "Fair Market Value" means, as of any given date, the fair market value
of Stock on a particular date determined in accordance with the
requirements of Section 422 of the Code.
(o) "Incentive Stock Option" means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provision
thereto.
(p) "Non-Employee Director" means a member of the Board who qualifies as a
"Non-Employee Director" as defined in Rule 16b-3(b)(3) under the
Exchange Act, or any successor definition adopted by the Board.
(q) "Non-Qualified Stock Option" means an Option that is not intended to
be an Incentive Stock Option.
(r) "Option" means a right granted to a Participant under Article 7 of the
Plan to purchase Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option.
(s) "Participant" means a person who, as a member of the Board, an
employee, officer, or executive of the Company, has been granted an
Award under the Plan, or who has been designated as eligible to make
an election to defer compensation under this Plan.
(t) "Performance-Based Awards" means Stock Awards granted to selected
Covered Employees pursuant to Article 9, but which are subject to the
terms and conditions set forth in Article 10. All Performance-Based
Awards are intended to qualify as "performance-based compensation"
under Section 162(m) of the Code.
(u) "Performance Criteria" means the criteria that the Committee selects
for purposes of establishing the Performance Goal or Performance Goals
for a Participant for a Performance Period. The Performance Criteria
that will be used to establish Performance Goals may include, but
shall not be limited to, one or more of the following: pre- or
after-tax net earnings, sales growth, operating earnings, operating
cash flow, working capital, return on net assets, return on
stockholders' equity, return on assets, return on capital, Stock price
growth, stockholder returns, gross or net profit margin, earnings per
share, price per share of Stock, and market share, any of which may be
measured either in absolute terms or as compared to any incremental
increase or as compared to results of a peer group. The Committee
shall, within the time prescribed by Section 162(m) of the Code,
define in an objective fashion the manner of calculating the
Performance Criteria it selects to use for such Performance Period for
such Participant.
(v) "Performance Goals" means, for a Performance Period, the goals
established in writing by the Committee for the Performance Period
based upon the Performance Criteria. Depending on the Performance
Criteria used to establish such Performance Goals, the Performance
Goals may be expressed in terms of overall Company performance or the
performance of a division, business unit, or an individual. The
Committee, in its discretion, may, within the time prescribed by
Section 162(m) of the Code, adjust or modify the calculation of
Performance Goals for such Performance Period in order to prevent the
dilution or enlargement of the rights of Participants (i) in the event
of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event, or development, or (ii) in recognition of,
or in anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial statements of the Company, or
in response to, or in anticipation of, changes in applicable laws,
regulations, accounting principles, or business conditions.
(w) "Performance Period" means the one or more periods of time, which may
be of varying and overlapping durations, as the Committee may select,
over which the attainment of one or more Performance Goals will be
measured for the purpose of determining a Participant's right to, and
the payment of, a Performance-Based Award.
3
(x) "Plan" means the PVF Capital Corp. 2000 Incentive Stock Option and
Deferred Compensation Plan (formerly known as the "PVF Capital Corp.
2000 Incentive Stock Option Plan"), as set forth herein.
(y) "Restricted Stock Award" means Stock granted to a Participant under
Article 9 that is subject to certain restrictions and to risk of
forfeiture.
(z) "Stock" means the common stock of the Company and such other
securities of the Company that may be substituted for Stock pursuant
to Article 13.
(aa) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.
(bb) "Stock Award" means a Restricted Stock Award or an Unrestricted Stock
Award.
(cc) "Unrestricted Stock Award" means Stock granted to a Participant under
Article 9 that is not subject to restrictions or a risk of forfeiture.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by a Committee appointed by,
and which serves at the discretion of, the Board. The Committee shall consist of
at least two individuals, each of whom qualifies as a Non-Employee Director. To
the extent necessary or desirable each member of the Committee shall also
qualify as an "outside director" under Code Section 162(m) and the regulations
issued thereunder. The members of the Committee shall meet such additional
criteria as may be necessary or desirable to comply with regulatory or stock
exchange rules or exemptions. The Company will pay all reasonable expenses of
the Committee.
4.2 AUTHORITY OF COMMITTEE. Subject to any specific designation in the
Plan, the Committee has the exclusive power, authority and discretion to:
(a) Designate Participants to receive Awards;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under the
Plan including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the
Award, any schedule for lapse of forfeiture restrictions or
restrictions on the exercisability of an Award, and accelerations
or waivers thereof, based in each case on such considerations as
the Committee in its sole discretion determines;
(e) Amend, modify, or terminate any outstanding Award, with the
Participant's consent unless the Committee has the authority to
amend, modify, or terminate an Award without the Participant's
consent under any other provision of the Plan.
(f) Determine whether, to what extent, and under what circumstances
an Award may be settled in, or the exercise price of an Award may
be paid in, cash, Stock, other Awards, or other property, or an
Award may be canceled, forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
4
(h) Decide all other matters that must be determined in connection
with an Award;
(i) Establish, adopt, revise, amend or rescind any guidelines, rules
and regulations as it may deem necessary or advisable to
administer the Plan; and
(j) Interpret the terms of, and rule on any matter arising under, the
Plan or any Award Agreement;
(k) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable
to administer the Plan, including but not limited to, the
determination of whether and to what extent any Performance Goals
have been achieved; and
(l) Retain counsel, accountants and other consultants to aid in
exercising its powers and carrying out its duties under the Plan.
4.3 DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties and any other persons claiming an
interest in any Award or under the Plan.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment provided in Section 13.1, the
aggregate number of shares of Stock reserved and available for grant under the
Plan shall be two hundred and fifty thousand (250,000).
5.2 LAPSED AWARDS. To the extent that an Award terminates, is cancelled,
expires, lapses or is forfeited for any reason, including, but not limited to,
the failure to achieve any Performance Goals, any shares of Stock subject to the
Award will again be available for the grant of an Award under the Plan.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS. Notwithstanding any
provision in the Plan to the contrary, and subject to the adjustment in Section
13.1, the maximum number of shares of Stock with respect to Options and Stock
Appreciation Rights that may be granted to any one Participant during the
Company's fiscal year shall be twenty-five thousand (25,000).
ARTICLE 6
ELIGIBILITY AND PARTICIPATION
6.1 ELIGIBILITY. Persons eligible to participate in this Plan include all
members of the Board and any key executive of the Company (which term shall be
deemed to include among others, the president, any vice president, secretary,
treasurer or any manager in charge of a principal business unit, division or
function (such as sales, administration or finance), any other officer who
performs a policy making function, or any other person who performs similar
policy making functions for the Company or any of its subsidiaries) and who on
the date of any Award is in the employ of the Company or one of its then
subsidiary corporations, as defined in Section 424 of the Code.
6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from among all eligible individuals,
those to whom Awards shall be granted and shall determine the nature and amount
of each Award. No individual shall have any right to be granted an Award under
this Plan.
5
ARTICLE 7
STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
Option shall be the Fair Market Value as of the date of grant.
(b) TIME AND CONDITIONS OF EXERCISE. Except as provided herein, the
Committee shall determine the time or times at which an Option
may be exercised in whole or in part. The Committee shall also
determine the performance or other conditions, if any, that must
be satisfied before all or part of an Option may be exercised;
provided, however, in no event shall an Option granted to a
Participant who is not a member of the Board be exercisable
before the Participant has completed one year of continued
employment or service with the Company. An Option will lapse
immediately if a Participant's employment or services are
terminated for Cause.
(1) The Option of any Participant whose employment is terminated
for any reason, other than for death, Disability or Cause
shall be exercisable to the extent provided therein, through
the earlier of the date which is three months after
termination of employment or the date that such Option
expires in accordance with its terms, and shall expire
thereafter.
(2) In the event of the death of a Participant while an employee
of the Company or within three months after the termination
of employment of the Participant for other than Cause, or in
the event of the termination of employment by a Participant
for Disability, the Option may be exercised as follows:
(A) In the event of the death of a Participant during
employment or the death of the Participant within three
months after the termination of employment for other
than Cause, each Option granted to such Participant
shall be exercisable to the extent provided therein but
not later than one year after his or her death (but not
beyond the stated duration of the Option). Any such
exercise shall be made only by or to the executor or
administrator of the estate of the deceased Participant
or person or persons to whom the deceased Participant's
rights under the Option shall pass by will or the laws
of descent and distribution and to the extent, if any,
that the deceased Participant was entitled at the date
of his or her death.
(B) In the case of a Participant whose employment is
terminated on account of Disability, the Option shall
be exercisable or payable to the extent provided
therein on the earlier of one year after termination of
employment or the date that such Option expires in
accordance with its terms. During such period, the
Option may be exercised by the Participant with respect
to the same number of shares, in the same manner and to
the same extent as if the Participant had continued
employment during such period.
(3) Each Option granted under the Plan shall, by its terms, not
be transferable otherwise than by will or the laws of
descent and distribution. Notwithstanding the foregoing, or
any other provision of this Plan, a Participant who holds
Options may transfer such Options (but not Incentive Stock
Options) to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit
of one or more of these individuals. Options so transferred
may thereafter be transferred only to the Participant who
originally received the grant or to an individual or trust
to whom the Participant could have initially transferred the
Options pursuant to this Section 7.1(b)(3). Options which
are transferred pursuant to this Section 7.1(b)(3) shall be
exercisable by the transferee according to the same terms
and conditions as applied to the Participant.
(4) For the purposes of this Section, Options granted to
directors may be exercised at any time prior to the
expiration date of the Option. In the event of the death of
the director, Options may be exercised at any time prior to
the expiration date of the option. Any such exercise or
payment shall be made only by or to the executor or
administrator of the estate of the deceased Director or
person or persons to whom the deceased Director's rights
under the Option shall pass by will or the laws of descent
and distribution and to the extent, if any, that the
deceased Director was entitled at the date of his or her
death.
6
(c) PAYMENT. An Option shall be exercised by giving a written notice
to the President of the Company stating the number of shares of
Stock with respect to which the Option is being exercised and
containing such other information as the President may request
and by tendering payment therefore with a cashier's check,
certified check, or with existing holdings of Common Stock held
for more than six months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by an Award
Agreement. The Award Agreement shall include such additional
provisions as may be specified by the Committee.
7.2 INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be granted only
to employees and the terms of any Incentive Stock Options granted under the Plan
must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be
set by the Committee, provided that the exercise price for any
Incentive Stock Option may not be less than the Fair Market Value
as of the date of the grant.
(b) EXERCISE. In no event, may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the
following circumstances.
(1) The Incentive Stock Option shall lapse ten years from the
date it is granted, unless an earlier time is set in the
Award Agreement.
(2) The Incentive Stock Option shall lapse upon termination of
employment for Cause or for any other reason, other than the
Participant's death or Disability, unless otherwise provided
in the Award Agreement.
(3) If the Participant terminates employment on account of
Disability or death before the Option lapses pursuant to
paragraph (1) or (2) above, the Incentive Stock Option shall
lapse, unless it was previously exercised, on the earlier of
(i) the date on which the Option would have lapsed had the
Participant not become Disabled or lived and had his
employment status (i.e., whether the Participant was
employed by the Company on the date of his Disability or
death or had previously terminated employment) remained
unchanged; or (ii) 12 months after the date of the
Participant's termination of employment on account of
Disability or death.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00 or such other limitation as imposed by Section 422(d)
of the Code, or any successor provision. To the extent that
Incentive Stock Options are first exercisable by a Participant in
excess of such limitation, the excess shall be considered
Non-Qualified Stock Options.
(e) TEN PERCENT OWNERS. An Incentive Stock Option shall be granted to
any individual who, at the date of grant, owns stock possessing
more than ten percent of the total combined voting power of all
classes of Stock of the Company only if such Option is granted at
a price that is not less than 110% of Fair Market Value on the
date of grant and the Option is exercisable for no more than five
years from the date of grant.
(f) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive
Stock Option may be exercised only by the Participant.
7
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation
Right, the Participant to whom it is granted has the right to
receive the excess, if any, of:
(1) The Fair Market Value of a share of Stock on the date of
exercise; over
(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than
the Fair Market Value of a share of Stock on the date of
grant in the case of any SAR related to any Incentive Stock
Option.
(b) OTHER TERMS. All such Awards shall be evidenced by an Award
Agreement. The terms, methods of exercise, methods of settlement,
form of consideration payable in settlement, and any other terms
and conditions of any Stock Appreciation Right shall be
determined by the Committee at the time of the grant of the Award
and shall be reflected in the Award Agreement.
ARTICLE 9
STOCK AWARDS
9.1 GRANT OF STOCK. The Committee is authorized to grant Unrestricted Stock
Awards and Restricted Stock Awards to Participants in such amounts and subject
to such terms and conditions as determined by the Committee. All such Awards
shall be evidenced by an Award Agreement.
9.2 ISSUANCE AND RESTRICTIONS. An Unrestricted Stock Award may provide for
a transfer of shares of Stock to a Participant at the time the Award is granted,
or it may provide for a deferred transfer of shares of Stock subject to
conditions prescribed by the Committee. Restricted Stock Awards shall be subject
to such restrictions on transferability and risks of forfeiture as the Committee
may impose. These restrictions and risks may lapse separately or in combination
at such times, under such circumstances, in such installments, or otherwise, as
the Committee determines at the time of the grant of the Award or thereafter.
9.3 FORFEITURE. Except as otherwise determined by the Committee at the time
of the grant of the Award or thereafter, upon termination of employment during
the applicable restriction period, Stock subject to a Restricted Stock Award
that is at that time subject to restrictions shall be forfeited, provided,
however, that the Committee may provide in any Restricted Stock Award that
restrictions or forfeiture conditions relating to the Stock will be waived in
whole or in part in the event of terminations resulting from specified causes,
and the Committee may in other cases waive in whole or in part restrictions or
forfeiture conditions relating to the Stock.
9.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock Awards granted
under the Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing shares of Stock subject to Restricted Stock Awards
are registered in the name of the Participant, certificates must bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such shares, and the Company may, at its discretion, retain
physical possession of the certificate until such time as all applicable
restrictions lapse.
ARTICLE 10
PERFORMANCE-BASED AWARDS
10.1 PURPOSE. The purpose of this Article 10 is to provide the Committee
the ability to qualify the Awards under Article 9 as "performance-based
compensation" under Section 162(m) of the Code. If the Committee, in its
discretion, decides to grant a Performance-Based Award to a Covered Employee,
the provisions of this Article 10 shall control over any contrary provision
contained in Article 10.
8
10.2 APPLICABILITY. This Article 10 shall apply only to those Covered
Employees selected by the Committee to receive Performance-Based Awards. The
Committee may, in its discretion, grant Stock Awards to Covered Employees that
do not satisfy the requirements of this Article 10. The designation of a Covered
Employee as a Participant for a Performance Period shall not in any manner
entitle the Participant to receive an Award for the period. Moreover,
designation of a Covered Employee as a Participant for a particular Performance
Period shall not require designation of such Covered Employee as a Participant
in any subsequent Performance Period and designation of one Covered Employee as
a Participant shall not require designation of any other Covered Employees as a
Participant in such period or in any other period.
10.3 DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE AWARDS. With
regard to a particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period, the type of
Performance-Based Awards to be issued, the kind and/or level of the Performance
Goal, and whether the Performance Goal is to apply to the Company or any
division or business unit thereof.
10.4 PAYMENT OF PERFORMANCE-BASED AWARDS. Unless otherwise provided in the
relevant Award Agreement, a Participant must be employed by the Company on the
last day of the Performance Period to be eligible for a Performance-Based Award
for such Performance Period. In determining the actual size of an individual
Performance-Based Award, the Committee may reduce or eliminate the amount of the
Performance-Based Award earned for the Performance Period, if in its sole and
absolute discretion, such reduction or elimination is appropriate.
10.5 SHAREHOLDER APPROVAL. The Board shall disclose to the shareholders of
the Company the material terms of any Performance - Based Award, and shall seek
approval of the shareholders of the Performance - Based Award before any Stock
is transferred to a Participant, or before any restrictions with respect to same
lapse, pursuant to such Award. The Committee shall certify that the Performance
Goals with respect to any Performance - Based Award have been achieved before
any Stock is transferred to a Participant, or before any restrictions with
respect to same lapse. Such disclosure, approval and certification shall be
effected in accordance with the requirements of Section 162(m)(4)(C) of the
Code.
ARTICLE 11
PROVISIONS APPLICABLE TO AWARDS
11.1 STAND-ALONE AND TANDEM AWARDS. Awards granted under the Plan may, in
the discretion of the Committee, be granted either alone, in addition to, or in
tandem with, any other Award granted under the Plan. Awards granted in addition
to or in tandem with other Awards may be granted either at the same time as or
at a different time from the grant of such other Awards.
11.2 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange
or buy out any previously granted Award for a payment in cash, Stock, or another
Award, based on the terms and conditions the Committee determines and
communicates to the Participant at the time the offer is made.
11.3 TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant.
11.4 LIMITS ON TRANSFER. No right or interest of a Participant in any Award
may be pledged, encumbered, or hypothecated to or in favor of any party other
than the Company, or shall be subject to any lien, obligation, or liability of
such Participant to any other party other than the Company. No Award shall be
assignable or transferable by a Participant other than by will or the laws of
descent and distribution, except that the Committee, in its discretion, may
permit a Participant to make a gratuitous transfer of an Award that is not an
Incentive Stock Option to his or her spouse, lineal descendants, lineal
ascendants, or a duly established trust for the benefit of one or more of these
individuals.
11.5 BENEFICIARIES. Notwithstanding Section 11.4, a Participant may, in the
manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution
9
with respect to any Award upon the Participant's death. A beneficiary, legal
guardian, legal representative, or other person claiming any rights under the
Plan is subject to all terms and conditions of the Plan and any Award applicable
to the Participant, except to the extent the Plan and Award otherwise provide,
and to any additional restrictions deemed necessary or appropriate by the
Committee. If no beneficiary has been designated or survives the Participant,
payment shall be made to the Participant's estate. Subject to the foregoing, a
beneficiary designation may be changed or revoked by a Participant at any time
provided the change or revocation is filed with the Committee.
11.6 STOCK CERTIFICATES. Notwithstanding anything herein to the contrary,
the Company shall not be required to issue or deliver any certificates
evidencing shares of Stock pursuant to the exercise of any Awards, unless and
until the Board has determined, with advice of counsel, that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authorities and, if applicable, the requirements of
any exchange on which the shares of Stock are listed or traded. All Stock
certificates delivered under the Plan are subject to any stop-transfer orders
and other restrictions as the Committee deems necessary or advisable to comply
with Federal, state, or foreign jurisdiction, securities or other laws, rules
and regulations and the rules of any national securities exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The Committee
may place legends on any Stock certificate to reference restrictions applicable
to the Stock. In addition to the terms and conditions provided herein, the Board
may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems advisable in order to
comply with any such laws, regulations, or requirements.
11.7 LOAN AGREEMENTS. Each Award shall be subject to the condition that the
Company shall not be obligated to issue or transfer any Stock or cash to the
holder of the Award, upon the exercise or vesting thereof, if at any time the
Committee or the Board shall determine that the issuance or transfer of such
Stock or cash would be in violation of any covenant in any of the Company's loan
agreements or other contracts.
ARTICLE 12
DEFERRAL OF COMPENSATION
12.1 RIGHT TO DEFER COMPENSATION.
(a) TYPES OF DEFERRALS. Any Participant designated by the Board or by
the Committee may elect to defer (i) all or any portion of the
Participant's salary, (ii) any percentage of a fiscal year bonus
determined by the Board or other duly constituted authority or
delegate to be paid to such Participant, or (iii) all or any
portion of the Participant's director's fees. Such election shall
remain in force for all future years until modified or revoked.
In addition, the Committee, in its discretion, may permit a
Participant to elect to defer his or her receipt of the payment
of cash or the delivery of shares of Stock that would otherwise
be due to such Participant pursuant to an Award. Any election
under this Section 12.1 shall be made by written notice delivered
to the Board or Committee, specifying the amount (or percentage)
of salary and/or bonus and/or directors' fees and/or the award to
be deferred.
(b) TIMING OF ELECTIONS. A Participant may, at any time within 30
days of first becoming eligible to participate in this Plan, make
an election to defer salary or director's fees earned after such
election. Any increase or decrease in future deferrals of salary
or director's fees earned during a calendar year must be made by
December 1 of the preceding calendar year. A Participant may make
an initial election to defer a bonus for a fiscal year, or may
elect to increase or decrease the amount of a fiscal year bonus
to be deferred, if such election is made by June 1 of the
preceding fiscal year; provided, however, that a Participant may
make an election to defer up to fifty percent (50%) of a bonus
for the fiscal year ending June 30, 2004 if such election is made
by December 1, 2003. A Participant may make an election to defer
the receipt of cash or shares of Stock otherwise payable or
transferable to the Participant pursuant to an Award in
accordance with the terms of such Award.
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12.2 DEFERRED COMPENSATION ACCOUNTS.
(a) ESTABLISHMENT OF ACCOUNTS. A Deferred Compensation Account in the
name of each Participant who has elected to defer compensation
under the Plan shall be established and maintained as a special
ledger account on the books of the Company. On the last day of
each calendar month in which salary or director's fees deferred
under this Plan would have become payable to a Participant (in
the absence of an election to defer payment thereof), the amount
of such deferred salary or director's fees shall be credited to
the Participant's Deferred Compensation Account. On the last day
of the month in which the bonuses deferred under this Plan would
have become payable to a Participant in the absence of an
election to defer payment thereof, the amount of such deferred
bonus shall be credited to the Participant's Deferred
Compensation Account. On the last day of the month in which an
Award would have otherwise become payable or transferable to a
Participant in the absence of an election to defer receipt
thereof, the amount of such deferred Award shall be credited to
the Participant's Deferred Compensation Account.
(b) DEEMED INVESTMENT OF ACCOUNT BALANCE.
(i) Except as otherwise provided by the terms of an Award, the
Participant shall, at the time of making a deferred
compensation election under this Plan, make an election
directing the Company to credit to the Deferred Compensation
Account in that calendar year based upon the options made
available by the Board or designated Committee which options
may include either cash, Stock, or a combination of cash and
Stock equal in value to the amount of the current year's
salary or bonus deferred under the Plan. In addition to cash
or Stock, the Board or the Committee may offer to the
Participant such deemed investment options as it shall
decide are appropriate. Such investment options may include
deemed investments in individual stocks or bonds, mutual
funds, and such other investment options as the Board or
Committee may choose. The Board or Committee shall not be
required to offer the same deemed investment options to each
Participant but may restrict certain investment options to
designated Participants. In the absence of a contrary
election by a Participant, the amount credited to a Deferred
Compensation Account shall be credited as cash.
(ii) If the Participant directs that any amount credited to the
Deferred Compensation account be credited in the form of
Stock, the Board shall credit to the Deferred Compensation
Account sufficient shares of Stock equal in value to the
Deferred Compensation Account balance, or such lesser amount
as the Participant shall direct. The value of such Stock
shall be determined in accordance with a valuation
methodology approved by the Board or by the Committee.
Except as provided in Section 12.6, such Stock credited to
the Deferred Compensation Account shall merely constitute a
bookkeeping entry of the Company, and (except as provided
herein) the Participant shall have no voting, dividend, or
other legal or economic rights with respect to such Stock.
At the end of each fiscal quarter, an amount equivalent to
all dividends which would otherwise have been payable with
respect to such Stock shall be credited to the Deferred
Compensation Account as additional Stock. The amount of the
Participant's Deferred Compensation Account that is credited
as cash shall accrue interest at a rate no less than the
prime rate charged the Company by its principal bank and
shall not exceed the highest rate paid on Individual
Retirement Accounts ("IRAs") by the Bank plus two percent
(2%). Such interest with respect to a Deferred Compensation
Account shall be credited to such account quarterly, based
on the weighted average daily prime rate or the IRA rate for
the three (3) month period ending on the last day of the
quarter.
(ii) The Participant shall elect the portion of their deferral to
be allocated to Stock or cash or such other option as made
available by the Board at the time of making such election
to defer compensation. Such allocation may not be amended
with respect to such deferral. Any allocation to Stock shall
be paid in the form of Stock. No Participant will be granted
the right to take payment of the Stock in cash rather than
in shares.
(iii)If, at any time, the deferral of a Participant is allocated
to Stock, and such Participant shall be deemed to have
violated the short-swing profit rules of Section 16(b) of
the Exchange Act through such allocation, the allocation to
Stock shall be void and such allocation shall default to
cash.
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12.3 PAYMENT OF DEFERRED COMPENSATION.
(a) IN GENERAL. Amounts credited to a Participant's Deferred
Compensation Account shall be payable upon the Participant's
Distribution Event. The Participant shall determine the method of
distributing the amounts in the Deferred Compensation Account at
the time the first election to participate in the Plan is made,
which shall be either a single distribution or a series of up to
ten (10) consecutive, substantially equal annual installments
paid to such Participant or his or her beneficiary, as the case
may be, on or before January 15 of each year, commencing in the
year following the Distribution Event. If no such election is
made, the method of distribution shall be determined solely by
the Board. If the Participant has elected to receive installment
distributions, and less than the full value of the Participant's
Deferred Compensation Account balance has been distributed as of
the date of his or her death, the balance shall be paid to the
Participant's beneficiary in accordance with the same method in
effect at the Participant's death, except that the beneficiary
may elect, with the consent of the Committee, to receive the
balance of the Deferred Compensation Account in a single lump
sum. For purposes of this Article 12, a Participant's
"beneficiary" shall mean the person or persons designated by the
Participant pursuant to Section 11.5 of this Plan, or, in the
absence of such designation or if no such person survives the
Participant, the Participant's estate. If any portion of the
Participant's Deferred Compensation Account is credited with
Stock, then distributions from that portion of the Deferred
Compensation Account shall be made directly in the form of Stock.
Undistributed amounts shall continue to earn interest or accrue
dividends, as the case may be.
(b) MODIFICATION OF PAYMENT TERMS. A Participant may change a
Distribution Election at any time at least sixty (60) days prior
to a Distribution Event. If a Participant electing to participate
in the Plan ceases to be an employee of the Company or a member
of the Board, prior to full payment of the entire amount in the
Deferred Compensation Account, shall, after reasonable warning
from the Board, persist in an affiliation with any business that
is a principal competitor with a significant portion of the
business conducted by the Company, the entire balance of such
Deferred Compensation Account may, if directed by the Board in
its sole discretion, be paid immediately to such Participant in a
lump sum. In the event a Participant dies prior to receiving
payment of the entire amount in the Deferred Compensation
Account, the unpaid balance shall be paid to such beneficiary as
may have been designated by the Participant in writing to the
Company as the person, firm or trust to receive any post-death
distribution under this Plan, or, in the absence of such written
designation, to the legal representative or any person, firm or
organization designated in the Participant's last will to receive
such distributions.
(c) CHANGE IN CONTROL. In the event of a Change in Control, a
Participant shall be permitted to elect to receive a distribution
of all or a portion of his or her Deferred Compensation Account,
provided that any such election hereunder must be made within the
period commencing thirty days prior to such Change in Control and
ending on the date of such Change in Control. Any distribution
pursuant to this Section 12.3(c) shall be made (i) in the form of
cash and/or Stock as his or her Deferred Compensation Account is
allocated and (ii) within seven (7) days subsequent to the Change
in Control.
(d) HARDSHIP DISTRIBUTION IN THE CASE OF FINANCIAL EMERGENCY. Prior
to the time a Deferred Compensation Account of a Participant
would otherwise become payable, the Committee, in its sole
discretion, may elect to distribute all or a portion of the
Deferred Compensation Account in the event such Participant
requests a distribution by reason of severe financial hardship.
For purposes of this Plan, severe financial hardship shall be
deemed to exist in the event the Committee determines that a
Participant needs a distribution to meet immediate and heavy
financial needs resulting from a sudden or unexpected illness or
accident of the Participant, or a member of his or her family,
loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as
a result of events beyond the control of the Participant. A
distribution based on financial hardship shall not exceed the
amount required to meet the immediate financial need created by
the hardship. In the event the Participant is a member of the
Committee making such determination, the Participant shall not
participate in the decision by the Committee.
12.4 TRUST PROVISIONS.
(a) ESTABLISHMENT OF TRUST. The Company may in its sole discretion
establish one or more trusts to provide a source of payment for
its obligations under the Plan and such trust shall be permitted
to hold cash, Stock, or other assets to the extent of the
Company's obligations hereunder. The Company may, but is
12
not required to, utilize a single trust with respect to its
obligations to Participants who are members of the Board and
Participants who are not members of the Board.
(b) CLAIMS OF COMPANY'S CREDITORS. All assets held by any trust
created hereunder and all distributions to be made by any trustee
pursuant to this Plan and any trust agreement shall be subject to
the claims of general creditors of the Company, including
judgment creditors and bankruptcy creditors. The rights of a
Participant or his or her beneficiaries in or to any assets of
the trust shall be no greater than the rights of an unsecured
creditor of the Company.
(c) NOTIFICATION OF INSOLVENCY. In the event the Company becomes
insolvent, the Chief Executive Officer and Chairman of the Board
of the Company shall immediately notify the trustees of all
trusts created hereunder of that fact. The trustees shall make no
distributions to any Participant or any beneficiary from any
assets held in trust pursuant to the Plan after such notification
is received or at any time after the trustee has actual knowledge
that the Company is insolvent. Under any such circumstance, the
trustee shall dispose of property held in trust pursuant to the
Plan only as a court of competent jurisdiction may direct. For
purposes of this Plan, the Company shall be deemed "insolvent" by
the trustee if the Company is subject to a pending voluntary or
involuntary proceeding as a debtor under the United States
Bankruptcy Code, as the same may be amended from time to time,
whether or not the Company has provided the trustee with the
notification required by this Section 12.4(c), or if the trustee
has been notified pursuant to this Section 12.4(c) that the
Company is insolvent.
12.5 NON-ASSIGNMENT. No right or interest of any Participant or any person
claiming through or under such Participant in the Particiapant's Deferred
Compensation Account shall be assignable or transferable in any manner or be
subject to alienation, anticipation, sale, pledge, encumbrance or other legal
process (including execution, levy, garnishment, attachment, bankruptcy, or
otherwise) or in any manner be subject to the debts or liabilities of such
Participant. If any Participant or any such person shall attempt to or shall
transfer, assign, alienate, anticipate, sell, pledge or otherwise encumber his
or her benefits hereunder or any part thereof, or if by reason of his or her
bankruptcy or other event happening at any time such benefits would devolve upon
anyone else or would not be enjoyed by him or her, then the Committee, in its
discretion, may terminate his or her interest in any such benefit to the extent
the Committee considers necessary or advisable to prevent or limit the effects
of such occurrence. Termination shall be effected by filing a written
declaration of termination with the Committee's records and making reasonable
efforts to deliver a copy to such Participant or any such other person or his or
her legal representative. As long as any Participant is alive, any amounts
affected by the termination shall be retained by the Company or the trustee of
any trust established pursuant to Section 12.4 of this Plan and, in the
Committee's sole and absolute discretion, may be paid to or expended for the
benefit of such Participant, his or her spouse, his or her children, or any
other person or persons in fact dependent upon him or her in such a manner as
the Committee shall deem proper.
ARTICLE 13
CHANGES IN CAPITAL STRUCTURE
13.1 GENERAL.
(a) SHARES AVAILABLE FOR GRANT. In the event of any change in the
number of shares of Stock outstanding by reason of any stock
dividend or split, recapitalization, merger, consolidation,
combination or exchange of shares or similar corporate change,
the maximum aggregate number of shares of Stock with respect to
which the Committee may grant Awards shall be appropriately
adjusted by the Committee. In the event of any change in the
number of shares of Stock outstanding by reason of any other
event or transaction, the Committee may, but need not, make such
adjustments in the number and class of shares of Stock with
respect to which Awards may be granted as the Committee may deem
appropriate.
(b) OUTSTANDING AWARDS - INCREASE OR DECREASE IN ISSUED SHARES
WITHOUT CONSIDERATION. Subject to any required action by the
shareholders of the Company, in the event of any increase or
decrease in the number of issued shares of Stock resulting from a
subdivision or consolidation of shares of Stock or the payment of
a stock dividend (but only on the shares of Stock), or any other
increase or decrease in the number of such shares effected
without receipt or payment of consideration by the Company, the
13
Committee shall proportionally adjust the number of shares of
Stock subject to each outstanding Award and the exercise price
per share of Stock of each such Award.
(c) OUTSTANDING AWARDS - CERTAIN MERGERS. Subject to any required
action by the shareholders of the Company, in the event that the
Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of
which the holders of shares of Stock receive securities of
another corporation), each Award outstanding on the date of such
merger or consolidation shall pertain to and apply to the
securities which a holder of the number of shares of Stock
subject to such Award would have received in such merger or
consolidation.
(d) OUTSTANDING AWARDS - CERTAIN OTHER TRANSACTIONS. In the event of
(i) a dissolution or liquidation of the Company, (ii) a sale of
all or substantially all of the Company's assets, (iii) a merger
or consolidation involving the Company in which the Company is
not the surviving corporation or (iv) a merger or consolidation
involving the Company in which the Company is the surviving
corporation but the holders of shares of Stock receive securities
of another corporation and/or other property, including cash, the
Committee shall, in its absolute discretion, have the power to:
(1) cancel, effective immediately prior to the occurrence of
such event, each Award outstanding immediately prior to such
event (whether or not then exercisable), and, in full
consideration of such cancellation, pay to the Participant
to whom such Award was granted an amount in cash, for each
share of Stock subject to such Award, respectively, equal to
the excess of (A) the value, as determined by the Committee
in its absolute discretion, of the property (including cash)
received by the holder of a share of Stock as a result of
such event over (B) the exercise of such Award; or
(2) provide for the exchange of each Award outstanding
immediately prior to such event (whether or not then
exercisable) for an option, a stock appreciation right,
restricted stock award, performance share award or
performance-based award with respect to, as appropriate,
some or all of the property for which such Award is
exchanged and, incident thereto, make an equitable
adjustment as determined by the Committee in its absolute
discretion in the exercise price or value of the option,
stock appreciate right, restricted stock award, performance
share award or performance-based award or the number of
shares or amount of property subject to the option, stock
appreciation right, restricted stock award, performance
share award or performance-based award or, if appropriate,
provide for a cash payment to the Participant to whom such
Award was granted in partial consideration for the exchange
of the Award, or any combination thereof.
(e) OUTSTANDING AWARDS - OTHER CHANGES. In the event of any other
change in the capitalization of the Company or corporate change
other than those specifically referred to in this Article, the
Committee may, in its absolute discretion, make such adjustments
in the number and class of shares subject to Awards outstanding
on the date on which such change occurs and in the per share
exercise price of each Award as the Committee may consider
appropriate to prevent dilution or enlargement of rights.
(f) NO OTHER RIGHTS. Except as expressly provided in the Plan, no
Participant shall have any rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any
dividend, any increase or decrease in the number of shares of
stock of any class or any dissolution, liquidation, merger, or
consolidation of the Company or any other corporation. Except as
expressly provided in the Plan, no issuance by the Company of
shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number of
shares of Stock subject to an Award or the exercise price of any
Award.
ARTICLE 14
AMENDMENT, MODIFICATION, AND TERMINATION
14.1 AMENDMENT, MODIFICATION, AND TERMINATION. At any time and from time to
time, the Board may terminate, amend or modify the Plan; provided, however, that
the Board shall not, without the affirmative vote of the holder of a majority of
the voting stock of the Company, make any amendment which would (i) abolish the
Committee without designating such other committee, change the qualifications of
its members, or withdraw the administration of the Plan from its supervision,
(ii) increase the maximum number of shares of Stock
14
for which Awards may be granted under the Plan, (iii) amend the formula for
determination of the exercise price Options, (iv) extend the term of the Plan,
and (v) amend the requirements as to the employees eligible to receive Awards;
and further provided that no other amendment shall be made without shareholder
approval to the extent necessary or desirable to comply with any applicable law,
regulations or stock exchange rule.
14.2 AWARDS PREVIOUSLY GRANTED. Except as otherwise provided in the Plan,
including without limitation, the provisions of Article 13, no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan, without the written consent of
the Participant.
ARTICLE 15
GENERAL PROVISIONS
15.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person shall
have any claim to be granted any Award under the Plan, and neither the Company
nor the Committee is obligated to treat Participants, employees, and other
persons uniformly.
15.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.
15.3 WITHHOLDING. The Company shall have the authority and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of this Plan. A Participant may elect to
have the Company withhold from those Stock that would otherwise be received upon
the exercise of any Option, a number of shares having a Fair Market Value equal
to the minimum statutory amount necessary to satisfy the Company's applicable
federal, state, local and foreign income and employment tax withholding
obligations.
15.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company to
terminate any Participant's employment or services at any time, nor confer upon
any Participant any right to continue in the employ of the Company.
15.5 INDEMNIFICATION. To the extent allowable under applicable law, each
member of the Committee or of the Board shall be indemnified and held harmless
by the Company from any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by such member in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action or failure to act under
the Plan and against and from any and all amounts paid by him or her in
satisfaction of judgment in such action, suit, or proceeding against him or her
provided he or she gives the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
15.6 FRACTIONAL SHARES. No fractional shares of stock shall be issued and
the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or down as appropriate.
15.7 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
make payment of awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by government agencies as
may be required. The Company shall be under no obligation to register under the
Securities Act of 1933, as amended, any of the shares of Stock paid under the
Plan. If the shares paid under the Plan may in certain circumstances be exempt
from registration under the Securities Act of 1933, as amended, the
15
Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
15.8 GOVERNING LAW. The Plan and the terms of all Awards shall be construed
in accordance with and governed by the laws of the State of Ohio.
16
REVOCABLE PROXY
PVF CAPITAL CORP.
ANNUAL MEETING OF STOCKHOLDERS
October 20, 2003
The undersigned hereby appoints Robert K. Healey, Stuart D. Neidus and
Gerald A. Fallon, with full powers of substitution, to act as attorneys and
proxies for the undersigned, to vote all shares of common stock of PVF Capital
Corp. (the "Company") which the undersigned is entitled to vote at the Annual
Meeting of Stockholders (the "Meeting"), to be held at the Company's Corporate
Center, 30000 Aurora Road, Solon, Ohio, on Monday, October 20, 2003 at 10:00
a.m., local time, and at any and all adjournments thereof, as follows:
VOTE
FOR WITHHELD
1. The election as directors for two-year terms of all nominees /_/ /_/
listed below (except as marked to the contrary below).
John R. Male
Stanley T. Jaros
Raymond J. Negrelli
Ronald D. Holman, II
INSTRUCTION: To withhold your vote for any individual nominee,
insert that nominee's name on the line provided below.
FOR AGAINST ABSTAIN
2. Approval of the Amendment and Restatement of the /_/ /_/ /_/
PVF Capital Corp. 2000 Incentive Stock Option Plan
as the PVF Capital Corp. 2000 Incentive Stock Option
and Deferred Compensation Plan.
FOR AGAINST ABSTAIN
3. Proposal to ratify the appointment of /_/ /_/ /_/
Crowe, Chizek and Company LLP as independent
certified public accountants of the Company
for the fiscal year ending June 30, 2004.
The Board of Directors recommends a vote "FOR" each of the nominees and "FOR"
each of the other propositions stated.
________________________________________________________________________________
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE NOMINEES FOR DIRECTOR LISTED ABOVE AND FOR
THE OTHER PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE
WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT
TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
ANNUAL MEETING. THIS PROXY CONFERS DISCRETIONARY AUTHORITY ON THE HOLDERS
THEREOF TO VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE
NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT
TO THE CONDUCT OF THE ANNUAL MEETING.
________________________________________________________________________________
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Meeting of the stockholder's decision to terminate this proxy, then the
power of said attorneys and proxies shall be deemed terminated and of no further
force and effect.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders, a proxy
statement dated September 19, 2003 and an Annual Report to Stockholders.
Dated: ________________________, 2003
______________________________ ______________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
______________________________ ______________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
