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. - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) - -------------------------------------------------------------------------------- (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: ---------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ---------------------------------------------------------------------- (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): ---------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ---------------------------------------------------------------------- (5) Total fee paid: ---------------------------------------------------------------------- /_/ Fee paid previously with preliminary materials: ---------------------------------------------------------------------- /_/ 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: -------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: -------------------------------------------------------------- (3) Filing Party: -------------------------------------------------------------- (4) Date Filed: -------------------------------------------------------------- [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 - -------------------------------------------------------------------------------- NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held on October 20, 2003 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PROXY STATEMENT OF PVF CAPITAL CORP. 30000 AURORA ROAD SOLON, OHIO 44139 ANNUAL MEETING OF STOCKHOLDERS October 20, 2003 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GENERAL - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- VOTING AND REVOCABILITY OF PROXIES - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF - -------------------------------------------------------------------------------- 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. 2 (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. - -------------------------------------------------------------------------------- PROPOSAL I -- ELECTION OF DIRECTORS - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- AUDIT COMMITTEE REPORT - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - --------------------------------------------------------------------------------- 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. 10 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. 11 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.
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DEF 14A Filing
PVF Capital (PVFC) Inactive DEF 14ADefinitive proxy
Filed: 19 Sep 03, 12:00am