SCHEDULE 14-A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Wayne Savings Bancshares, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
.......................................................................
4) Proposed maximum aggregate value of transaction:
.......................................................................
[_] 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: June 19, 2003
June 20, 2003
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Wayne
Savings Bancshares, Inc. The Annual Meeting will be held at the Greenbriar
Conference Centre at 50 Riffel Road, Wooster, Ohio, at 10:00 a.m. (local time)
on July 24, 2003.
The enclosed Notice of Annual Meeting and proxy statement describe the formal
business to be transacted.
The Annual Meeting is being held so that stockholders will be given an
opportunity to elect two directors, to ratify the appointment of Grant Thornton
LLP as auditors for Wayne Savings Bancshares, Inc.'s 2004 fiscal year and to
approve two stock benefit plans, the 2003 Stock Option Plan and the 2003
Recognition and Retention Plan.
The Board of Directors of Wayne Savings Bancshares, Inc. has determined that the
matters to be considered at the Annual Meeting are in the best interest of the
Wayne Savings Bancshares, Inc. and its stockholders. For the reasons set forth
in the proxy statement, the Board of Directors unanimously recommends a vote
"FOR" each matter to be considered.
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 that
you own. Voting by proxy 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,
Charles F. Finn
President and Chief Executive Officer
Wayne Savings Bancshares, Inc.
151 North Market Street
Wooster, Ohio 44691
(330) 264-5767
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 24, 2003
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Wayne Savings Bancshares, Inc. will be held at the Greenbriar
Conference Centre at 50 Riffel Road, Wooster, Ohio, on July 24, 2003 at 10:00
a.m., local time.
A proxy statement and proxy card for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of two directors of Wayne Savings Bancshares, Inc.;
2. Approval of the Wayne Savings Bancshares, Inc. 2003 Stock Option Plan;
3. Approval of the Wayne Savings Bancshares, Inc. 2003 Recognition and
Retention Plan;
4. The ratification of the appointment of Grant Thornton LLP as auditors
for Wayne Savings Bancshares, Inc. for the fiscal year ending March
31, 2004; and
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 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 June 13, 2003 are the stockholders entitled to vote at the Meeting,
and any adjournments thereof. A list of stockholders entitled to vote at the
Meeting will be available at 151 North Market Street, Wooster, Ohio for a period
of 10 days prior to the Meeting and will also be available for inspection at the
Meeting.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF WAYNE SAVINGS BANCSHARES, INC. A WRITTEN REVOCATION OR A
DULY EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING
MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE
THE MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED
IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER
IN ORDER TO VOTE PERSONALLY AT THE MEETING.
By Order of the Board of Directors
Michael C. Anderson
Secretary
Wooster, Ohio
June 20, 2003
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IMPORTANT: A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
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PROXY STATEMENT
of
WAYNE SAVINGS BANCSHARES, INC.
151 North Market Street
Wooster, Ohio 44691
(330) 264-5767
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ANNUAL MEETING OF STOCKHOLDERS
JULY 24, 2003
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This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Wayne Savings Bancshares, Inc. to
be used at the Annual Meeting of Stockholders of Wayne Savings Bancshares, Inc.
(the "Meeting"), which will be held at the Greenbriar Conference Centre at 50
Riffel Road, Wooster, Ohio, on July 24, 2003 at 10:00 a.m., local time, and all
adjournments thereof. The accompanying Notice of Annual Meeting of Stockholders
and this proxy statement are first being mailed to stockholders on or about June
20, 2003.
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REVOCATION OF PROXIES
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Stockholders who execute proxies in the form solicited hereby retain the
right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
Wayne Savings Bancshares, Inc. will be voted in accordance with the directions
given thereon. Please sign and return your proxy to the Secretary at Wayne
Savings Bancshares, Inc. in order for your vote to be counted. Where no
instructions are indicated, proxies will be voted "FOR" the proposals set forth
in this proxy statement for consideration at the Meeting.
Proxies may be revoked by sending written notice of revocation to the
Secretary of Wayne Savings Bancshares, Inc., Michael C. Anderson, at the address
of Wayne Savings Bancshares, Inc. shown above, by filing a duly executed proxy
bearing a later date or by voting in person at the Meeting. The presence at the
Meeting of any stockholder who had given a proxy shall not revoke such proxy
unless the stockholder delivers his or her ballot in person at the Meeting or
delivers a written revocation to the Secretary of Wayne Savings Bancshares, Inc.
prior to the voting of such proxy.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Holders of record of Wayne Savings Bancshares, Inc. common stock ("common
stock") at the close of business on June 13, 2003 (the "Voting Record Date") are
entitled to one vote for each share held. As of the Voting Record Date, there
were 3,888,795 shares of common stock issued and outstanding. The presence in
person or by proxy of at least a majority of the issued and outstanding shares
of common stock entitled to vote is necessary to constitute a quorum at the
Meeting.
In accordance with the provisions of the Certificate of Incorporation of
Wayne Savings Bancshares, Inc., record holders of common stock who beneficially
own in excess of 10% of the outstanding shares of common stock (the "Limit") are
not entitled to any vote with respect to the shares held in excess of the Limit.
Wayne Savings Bancshares, Inc.'s Certificate of Incorporation authorizes the
Board of Directors (i) to make all determinations necessary to implement and
apply the Limit, including determining whether persons or entities are acting in
concert, and (ii) to demand that any person who is reasonably believed to
beneficially own stock in excess of the Limit supply information to Wayne
Savings Bancshares, Inc. to enable the Board of Directors to implement and apply
the Limit.
Persons and groups who beneficially own in excess of five percent of Wayne
Savings Bancshares, Inc.'s common stock are required to file certain reports
with the Securities and Exchange Commission ("SEC") regarding such ownership
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"). The
following table sets forth information as to those persons who were the
beneficial owners of more than five percent of Wayne Savings Bancshares, Inc.'s
outstanding shares of common stock on the Voting Record Date.
Amount of Shares Owned and Percent of Shares of
Name and Address of Beneficial Owner Nature of Beneficial Ownership Common Stock Outstanding
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Wayne Savings Employee Stock Ownership Plan (1) 254,296 6.5%
151 North Market Street
Wooster, Ohio 44691
Kenneth R. Lehman 202,821 5.2%
1408 N. Abingdon Street
Arlington, VA 22207
(1) All shares are held on behalf of the plan by a third-party trustee.
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VOTING PROCEDURES AND METHOD OF COUNTING VOTES
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As to the election of directors, the proxy card provided by the Board of
Directors enables the stockholders to vote "FOR" the election of the two
nominees proposed by the Board of Directors or to "WITHHOLD AUTHORITY" to vote
for the nominees being proposed. Under Delaware law and Wayne Savings
Bancshares, Inc.'s Certificate of Incorporation and Bylaws, directors are
elected by a plurality of the shares voted at the Meeting without regard to
either broker non-votes or proxies as to which the authority to vote for the
nominee is being withheld.
As to the approval by stockholders of each of the 2003 Stock Option Plan
and the 2003 Recognition and Retention Plan, by checking the appropriate box a
stockholder may vote "FOR" each item, vote "AGAINST" each item or "ABSTAIN" from
voting on each item. Each of the 2003 Stock Option Plan and the 2003 Recognition
and Retention Plan must be approved by a majority of the shares outstanding and
eligible to be voted at the Meeting. Therefore, broker non-votes and proxies
marked "ABSTAIN" will have the same effect as a vote against each of these
items.
As to the ratification of Grant Thornton LLP as auditors of Wayne Savings
Bancshares, Inc., by checking the appropriate box a stockholder may vote "FOR"
the item, vote "AGAINST" the item or "ABSTAIN" from voting on the item. The
ratification of auditors must be approved by a majority of the shares voted at
the Meeting without regard to broker non-votes or proxies marked "ABSTAIN."
In the event at the time of the Meeting there are not sufficient votes for
a quorum or to approve or ratify any matter being presented, the Meeting may be
adjourned in order to permit the further solicitation of proxies.
Proxies solicited hereby will be returned to Wayne Savings Bancshares, Inc.
and will be tabulated by inspectors of election designated by the Board of
Directors of Wayne Savings Bancshares, Inc.
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PROPOSAL I--ELECTION OF DIRECTORS
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Wayne Savings Bancshares, Inc.'s Board of Directors is currently composed
of seven persons. The bylaws provide that approximately one-third of the
directors are to be elected annually. Directors are generally elected to serve
for a three-year period or until their respective successors shall have been
elected and shall qualify. Two directors will be elected at the Meeting. The
Board of Directors has nominated James C. Morgan and Kenneth R. Lehman, each to
serve for a three-year term.
The table below sets forth certain information, as of the Voting Record
Date, regarding the Board of Directors. Historical information includes service
as a director with Wayne Savings Community Bank and its predecessors. It is
intended that the proxies solicited on behalf of the Board of Directors (other
than proxies in which the vote is withheld as to one or more nominees) will be
voted at the Meeting for the election of the nominees identified below. If any
nominee is unable to serve, the shares represented by all such proxies will be
voted for the election of such substitute as the Board of Directors may
recommend. At this time, the Board of Directors knows of no reason why any of
the nominees might be unable to serve, if elected. There are no arrangements or
understandings between any nominee and any other person pursuant to which such
nominee was selected.
Shares of
Current Common Stock
Director Term Beneficially Percent
Name Age Positions Held Since Expires Owned of Class
---- --- -------------- ----- ------- ----- --------
NOMINEES
James C. Morgan 65 Director 1995 2003 19,887 *
Kenneth R. Lehman 44 Director 2003 2003 202,821 5.2%
DIRECTORS CONTINUING IN OFFICE
Charles F. Finn 65 Chairman of the Board, 1976 2005 97,049 (1) 2.5%
President and Chief
Executive Officer
Joseph L. Retzler 75 Director 1985 2005 23,874(2) *
Donald E. Massaro 74 Director 1990 2004 17,456 *
Russell L. Harpster 68 Director 1979 2004 59,092(3) 1.5%
Terry A. Gardner 56 Director 1994 2004 48,075 1.2%
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Wanda Christopher-Finn 60 Executive Vice 97,049 (4) 2.5%
President and Chief
Administrative Officer
Michael C. Anderson 52 Executive Vice 15,056(5) *
President and Chief
Financial Officer
All directors and executive officers 580,359(6)(7) 14.9%
as a group (9 persons)
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(1) Includes 4,835 shares that may be acquired pursuant to presently
exercisable stock options.
(2) Includes 6,749 shares that may be acquired pursuant to presently
exercisable stock options.
(3) Includes 1,272 shares that may be acquired pursuant to presently
exercisable stock options.
(4) Includes 3,084 shares that may be acquired pursuant to presently
exercisable stock options.
(5) Includes 7,556 shares that may be acquired pursuant to presently
exercisable stock options.
(6) Includes 13,987 shares allocated to the accounts of executive officers
under the ESOP and excludes the remaining 240,309 shares (amounting to 6.2%
of the shares outstanding) owned by the ESOP for the benefit of employees.
Under the terms of the ESOP, shares of common stock allocated to the
account of employees are voted in accordance with the instructions of the
respective employees. Unallocated shares are voted by the ESOP trustee in a
manner calculated to most accurately reflect the instructions it has
received from participants regarding the allocated shares, unless its
fiduciary duty requires otherwise.
(7) Unless otherwise indicated, each person effectively exercises sole (or
shared with spouse) voting and dispositive power as to the shares reported.
* Less than 1%
The principal occupation during the past five years of each director and
executive officer of Wayne Savings Bancshares, Inc. is set forth below. All
directors and executive officers have held their present positions for five
years unless otherwise stated.
James C. Morgan is President of Franklin Oil & Gas, Inc. in Wooster, Ohio.
He was elected director on February 28, 1995 to fill the unexpired term of a
retiring director.
Kenneth R. Lehman is a private investor and a former corporate and
securities attorney. Mr. Lehman was a founding partner of the Washington, D.C.
law firm of Luse Lehman Gorman Pomerenk & Schick (since renamed Luse Gorman
Pomerenk & Schick). He retired from the law firm in April 2002. Mr. Lehman also
served as an attorney/advisor with the Securities and Exchange Commission,
Washington, D.C.
Charles F. Finn has been President and Chief Executive Officer of Wayne
Savings Community Bank since 1983. He has been employed by Wayne Savings
Community Bank for 39 years. Mr. Finn is the spouse of Wanda Christopher-Finn,
Executive Vice President of Wayne Savings Bancshares, Inc. He was appointed
Chairman of the Board of Directors of Wayne Savings Bancshares, Inc. on
September 25, 1997.
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Joseph L. Retzler is President of Retzler Hardware in Wooster, Ohio.
Donald E. Massaro has been affiliated with Wayne Savings Community Bank for
37 years. He previously was 1st Senior Vice President of Lending of Wayne
Savings Community Bank and retired in December 1992.
Russell L. Harpster is an attorney and a partner in the law firm of
Henderson, Harpster & Vanosdall in Ashland, Ohio.
Terry A. Gardner is Executive Vice President and owner of Greenbriar
Conference Centre, Wooster, Ohio. He was elected director on October 25, 1994 to
fill the unexpired term of a retiring director.
Executive Officers Who Are Not Directors
Wanda Christopher-Finn is Executive Vice President, Chief Administrative
Officer and has been affiliated with Wayne Savings Community Bank since 1972.
Ms. Christopher-Finn is the spouse of Charles F. Finn.
Michael C. Anderson is Executive Vice President, Chief Financial Officer
and joined Wayne Savings Community Bank in October 2001. He has most recently
been a member of senior management in the health care field responsible for
accounting and financial operations. Mr. Anderson was Senior Vice President,
Chief Financial Officer of Wayne Savings Community Bank between 1984-1986.
Meetings and Committees of the Board of Directors
The business of Wayne Savings Bancshares, Inc.'s Board of Directors is
conducted through meetings and activities of the Board and its committees.
During the year ended March 31, 2003, the Board of Directors held 12 regular
meetings and one special meeting. During the year ended March 31, 2003, no
director attended fewer than 75 percent of the total meetings of the Board of
Directors of Wayne Savings Bancshares, Inc. and committees on which such
director served.
The Executive Committee of the Board of Directors, consists of Directors
Kenneth G. Rhode, Charles F. Finn, Russell L. Harpster and Joseph L. Retzler.
The Executive Committee meets as necessary when the Board is not in session to
exercise general control and supervision in all matters pertaining to the
interests of Wayne Savings Bancshares, Inc., subject at all times to the
direction of the Board of Directors. The Executive Committee met three times
during the fiscal year ended March 31, 2003.
The Compensation Committee of Wayne Savings Bancshares, Inc., consisting of
Directors Kenneth G. Rhode, Charles F. Finn, Russell L. Harpster and Joseph L.
Retzler, meets periodically to review the performance of officers and employees
and to determine and administer compensation programs and adjustments, as well
as personnel policy and practice. The Compensation Committee met three times
during the fiscal year ended March 31, 2003.
The Nominating Committee consists of the full Board of Directors. While the
Nominating Committee will consider nominees recommended by stockholders, it has
not actively solicited recommendations from stockholders for nominees, nor
established any procedures for this purpose. Any nominations must, however, be
made pursuant to applicable provisions of the Bylaws of Wayne Savings
Bancshares, Inc. The Board of Directors met one time in its capacity as the
Nominating Committee during the fiscal year ended March 31, 2003.
The Employee Stock Ownership Plan Committee consists of Directors Kenneth
G. Rhode, Charles F. Finn, Russell L. Harpster and Donald E. Massaro. The ESOP
Committee did not meet during the fiscal year ended March 31, 2003, and
administers Wayne Savings Bancshares, Inc. ESOP.
The Audit Committee consists of Directors Kenneth G. Rhode, Donald E.
Massaro, Terry A. Gardner and James C. Morgan. Each member of the Audit
Committee is "independent" as defined in the listing standards of the National
Association of Securities Dealers. The Audit Committee examines and approves the
audit report prepared by the independent auditors of Wayne Savings Bancshares,
Inc. and Wayne Savings Community Bank, reviews and approves the independent
auditors to be engaged by Wayne Savings Bancshares, Inc., reviews the internal
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accounting controls of Wayne Savings Bancshares, Inc., and reviews and approves
internal audit policies and procedures. Wayne Savings Bancshares, Inc.'s Board
of Directors has adopted a written charter for the Audit Committee. The Audit
Committee met four times during the fiscal year ended March 31, 2003.
Audit Committee Report
The Audit Committee operates under a written charter adopted by the Board
of Directors, which was last amended on January 21, 2003 and is included as
Exhibit C to this proxy statement.
Management is responsible for Wayne Savings Bancshares, Inc.'s internal
controls and financial reporting process. The independent auditors are
responsible for performing an independent audit of Wayne Savings Bancshares,
Inc.'s consolidated financial statements in accordance with auditing standards
generally accepted in the United States and to issue a report thereon. The Audit
Committee's responsibility is to monitor and oversee these processes.
As part of its ongoing activities, the Audit Committee has:
o Reviewed and discussed with management, and the independent
auditors, Wayne Savings Bancshares, Inc.'s audited consolidated
financial statements for the fiscal year ended March 31, 2003;
o Discussed with the independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended; and
o Received the written disclosures and the letter from the
independent auditors required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees,
and has discussed with the independent auditors their
independence from Wayne Savings Bancshares, Inc.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in Wayne Savings Bancshares, Inc.'s Annual Report on Form
10-K for the fiscal year ended March 31, 2003 and be filed with the Securities
and Exchange Commission. In addition, the Audit Committee recommended that the
Board of Directors appoint Grant Thornton LLP as Wayne Savings Bancshares,
Inc.'s independent auditors for the fiscal year ending March 31, 2004, subject
to the ratification of this appointment by the stockholders of Wayne Savings
Bancshares, Inc.
This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that Wayne Savings Bancshares, Inc.
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The Audit Committee
Kenneth G. Rhode (Chairman)
Donald E. Massaro
Joseph L. Retzler
James C. Morgan
Employment Agreements
Wayne Savings Community Bank has entered into employment agreements
with Chairman, President and Chief Executive Officer Charles F. Finn, and
Executive Vice Presidents Wanda Christopher-Finn and Michael C. Anderson. Under
the agreements, the base salaries of Mr. Finn, Ms. Christopher-Finn and Mr.
Anderson are $159,600, $102,300 and $100,000, respectively. Mr. Finn's agreement
provides for a term of 36 months, and Ms. Christopher-Finn's and Mr. Anderson's
provide for terms of 24 months. On each anniversary date, the agreements may be
extended for an additional 12 months, so that the remaining term shall be 36
months and 24 months, respectively. If an agreement is not renewed, the
agreement will expire 36 months, or 24 months, respectively,
5
following the anniversary date. The base salaries under the agreements may be
increased but not decreased. In addition to the base salaries, the agreements
provide for, among other things, insurance benefits and participation in other
employee and fringe benefits applicable to executive personnel. The agreements
provide for termination of the employment of the executive by Wayne Savings
Community Bank for cause at any time. In the event Wayne Savings Community Bank
terminates the executive's employment during the term of the agreement for
reasons other than cause, or in the event of the executive's resignation from
Wayne Savings Community Bank upon (i) failure to re-elect the executive to his
or her current offices, (ii) a material change in the executive's functions,
duties or responsibilities, or relocation of his or her principal place of
employment by more than a specified number of miles, (iii) liquidation or
dissolution of Wayne Savings Community Bank, or (iv) a breach of the agreement
by Wayne Savings Community Bank, Mr. Finn, Ms. Christopher-Finn, or Mr.
Anderson, or in the event of death, his or her beneficiary, would be entitled to
severance pay in an amount equal to three times, or two times, as applicable,
his or her highest annual Base Salary and bonus. Wayne Savings Community Bank
would also continue the executive's life and, if applicable, dental coverage for
the remaining unexpired term of the agreement. In the event the payments to the
executive include an "excess parachute payment" as defined in the Internal
Revenue Code, the payments will be reduced in order to avoid having an excess
parachute payment.
An executive's employment may be terminated upon his or her attainment of
retirement age. Upon an executive's retirement, he or she will be entitled to
all benefits available to him or her under any retirement or other benefit plan
maintained by Wayne Savings Community Bank. In the event of an executive's
disability for a period of six months, Wayne Savings Community Bank may
terminate the agreement, provided that Wayne Savings Community Bank will be
obligated to pay the executive a bi-weekly payment equal to three quarters of
the executive's bi-weekly rate of base salary, reduced by any benefits paid to
the executive pursuant to any disability insurance policy or similar arrangement
maintained by Wayne Savings Community Bank. The disability payments shall end on
the earlier of (i) the date the executive returns to full-time employment with
Wayne Savings Community Bank or another employer, (ii) his or her attainment of
retirement age, or (iii) his or her death.
Compensation of Directors
Fees. Members of the Board of Directors receive no fees for serving on the
Board of Directors or committees of Wayne Savings Bancshares, Inc. Each
non-employee director who served on the Board of Directors of Wayne Savings
Community Bank during the fiscal year ended March 31, 2003 received a monthly
meeting fee of $825 and a monthly retainer of $550. The monthly meeting fee is
paid to the director only if the director attends the meeting or has an excused
absence. No additional fees were paid for special meetings of the Board of
Directors. During the fiscal year ended March 31, 2003, the members of the
Executive Committee received an annual fee of $2,000; however, Kenneth G. Rhode,
Chairman of the Board of Directors of Wayne Savings Community Bank, received a
"grandfathered" executive committee fee of $4,000. Members of the Loan Committee
and Audit Committee received an annual fee of $1,800. Directors who attend the
quarterly meetings of Wayne Savings Bancshares, Inc.'s Asset Review Committee
received a fee of $100 for each meeting attended. Kenneth G. Rhode, the Chairman
of the Board of Directors of Wayne Savings Community Bank and Chairman of the
Executive Committee, received $12,850 in additional Board fees during the fiscal
year ended March 31, 2003. Mr. Finn did not receive any fees as Chairman of the
Board of Wayne Savings Bancshares, Inc.
Honorarium. In recognition of 45 years' service as a director of Wayne
Savings Community Bank (including 31 years' service as Chairman of the Board),
the Board of Directors of Wayne Savings Bancshares, Inc. unanimously approved an
honorarium of $45,000 to be paid to Kenneth G. Rhode, who is retiring at the
Meeting.
Director Emeritus Plan. Wayne Savings Community Bank has adopted a director
emeritus plan pursuant to which retiring directors who have completed at least
eight years of continuous service on the Board may be designated as "Director
Emeritus" by a majority vote of the Board of Directors. The annual compensation
for a Director Emeritus is fixed by the Board but cannot exceed two-thirds of
annual board meeting fees. Wayne Savings Community Bank currently has no
individuals serving as Director Emeritus.
Stock Option Plan for Outside Directors. The Board of Directors of Wayne
Savings Community Bank adopted the 1993 Stock Option Plan for Outside Directors
in connection with its stock offering in 1993. The plan was ratified by Wayne
Savings Community Bank's stockholders at the 1993 annual meeting. The plan
authorizes the grant of non-statutory stock options for 54,419 shares (adjusted
for stock-splits, stock dividends and the "second step" offering of Wayne
Savings Bancshares, Inc. that was completed in January 2003) of common stock to
non-
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employee directors of Wayne Savings Bancshares, Inc. The plan is a self
administering plan that granted to Messrs. Rhode, Harpster, Retzler, and Massaro
non-statutory options to purchase 10,884, 8,260, 8,260 and 8,062 shares of
common stock (as adjusted), respectively. The exercise price of the options was
originally $10.00 per share, the fair market value of the shares of common stock
underlying such option on the date the option was granted. As of March 31, 2003,
the exercise price of all such options was $3.31 due to stock-splits, stock
dividends and the second-step offering. All options granted under the plan may
be exercised from time to time in whole or in part, and expire upon the earlier
of 10 years following the date of grant or one year following the date the
optionee ceases to be a director.
Executive Compensation
The following table sets forth certain information as to the total
remuneration paid to executive officers of Wayne Savings Bancshares, Inc. who
earned over $100,000 in salary and bonuses during fiscal 2003.
Annual Compensation Long-Term Compensation
------------------- --------------------------------------------------------------
Awards Payouts
-------------------------------------- ----------------------
Year Other Annual Restricted
Name and Ended Compensation Stock Options/ LTIP All Other
Principal Position 3/31 Salary Bonus (1) Awards SARS(#) Payouts Compensation
- -------------------- ----- ------ ----- ------------ ---------- -------- ------- ------------
Charles F. Finn 2003 $ 165,400 $ 20,000 -- -- -- -- $ --
Chairman, President and 2002 $ 159,600 $ 20,000 -- -- -- -- $ --
Chief Executive Officer 2001 $ 152,800 $ 16,000 -- -- -- -- $ --
Wanda Christopher-Finn
Executive Vice President 2003 $ 106,600 $ 18,000 -- -- -- -- $ --
and Chief Administrative 2002 $ 102,300 $ 15,000 -- -- -- -- $ --
Officer 2001 $ 97,500 $ 13,000 -- -- -- -- $ --
Michael C. Anderson
Executive Vice President
and Chief Financial
Officer 2003 $ 104,200 18,000 -- -- -- -- $ --
- ----------
(1) Wayne Savings Community Bank provides certain members of senior management
with certain other personal benefits, the aggregate value of which did not
exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for each officer. The value of such benefits is not included in
this table.
Compensation Committee Interlocks and Insider Participation
Except for Charles F. Finn, the Compensation Committee consists entirely of
non-employee directors and there are no interlocks or insider participation in
compensation decisions. Mr. Finn does not participate in the Committee's
determination of compensation for his office or for the office of Ms.
Christopher-Finn, his wife.
Wayne Savings Bancshares, Inc. does not engage in any transactions with any
of the members of the Compensation Committee other than banking transactions in
the ordinary course of business. All loans and commitments included in those
transactions were made and are expected to be made on substantially the same
terms, including interest rate and collateral as those prevailing at the time
for comparable transactions with other borrowers and did not and are not
expected to involve more than the normal risk of collectibility or present other
unfavorable features.
Report of the Compensation Committee on Executive Compensation
Under rules established by the SEC, the Company is required to provide
certain data and information regarding compensation and benefits provided to its
Chief Executive Officer and other executive officers. The disclosure
requirements for the Chief Executive Officer and other executive officers
include a report explaining the rationale and considerations that led to
fundamental executive compensation decisions affecting those individuals. In
fulfillment of this requirement, the Compensation Committee of the Board of
Directors has prepared the following report for inclusion in this proxy
statement.
The Committee annually reviews the performance of the Chief Executive
Officer and other executive officers and approves changes to base compensation
as well as the level of bonus, if any, to be awarded. In determining whether the
employment agreements of the Chief Executive Officer and other executive
officers should
7
be extended, the Committee took into account the individual performance of each
executive officer and the performance of the Company under the direction of the
executive officers. Other factors considered by the Committee in 2003 included
each executive officer's general managerial oversight of the Company, the
quality of communications with the Board of Directors, and the Company's record
of compliance with regulatory requirements.
While the Committee does not use strict numerical formulas to determine
changes in compensation for the Chief Executive Officer and other executive
officers, and while it weighs a variety of different factors in its
deliberations, it has emphasized and expects to continue to emphasize the
Company's level of net operating income, net interest margin, non-performing
assets and operating expenses, as well as the experience, expertise and
management skills of the executive officers and their specific roles in the
future success of the Company. The Committee also considers compensation surveys
prepared by banking associations and professional firms to determine
compensation paid to executives performing similar duties for similarly-sized
financial institutions. Specifically, in 2003, the Committee examined and
evaluated compensation data for each executive position at similarly-sized
financial institutions, as set forth in the 2002 SNL Compensation Survey. The
Committee also weighed fiscal 2003 earnings, which represented an earnings
record for the Company. While each of the quantitative and non-quantitative
factors described above was considered by the Committee, such factors were not
assigned a specific weight in evaluating the performance of the Chief Executive
Officer and other executive officers. Rather, all factors were considered.
In 2003, the Committee, after taking into account the foregoing
quantitative and qualitative criteria and other factors, established the base
compensation and bonus payments for the executive officers. With respect to
Charles F. Finn, the President and Chief Executive Officer, the Committee
recommended to the full Board of Directors a $5,800 increase in base salary to
$171,200. Mr. Finn's annual bonus was maintained at $20,000. Mr. Finn did not
vote on or participate in the Committee's discussions of his individual base
salary and bonus.
This report has been provided by the Compensation Committee:
Kenneth G. Rhode, Chairman Joseph L. Retzler
Russell L. Harpster Charles F. Finn
8
Stock Performance Graph
Set forth hereunder is a stock performance graph comparing (a) the
cumulative total return on the common stock for the period beginning with the
last trade of Wayne Savings Bancshares, Inc.'s stock on March 31, 1998, as
reported by the Nasdaq Stock Market, through March 31, 2003, (b) the cumulative
total return on stocks included in the Nasdaq-Total U.S. Stock Index over such
period, and (c) the cumulative total return on stocks included in the SNL All
Bank & Thrift Index over such period. Cumulative return assumes the reinvestment
of dividends, and is expressed in dollars based on an assumed initial investment
of $100.
[OBJECT OMITTED]
Period Ended
-------------------------------------------------------------------
Index 03/31/98 03/31/99 03/31/00 03/31/01 03/31/02 03/31/03
- ------------------------------------------------------------------------------------------------------------
Wayne Savings Bancshares, Inc. 100.00 63.50 66.75 80.70 89.38 83.80
NASDAQ - Total US 100.00 135.08 250.99 100.60 101.32 74.37
SNL All Bank & Thrift Index 100.00 98.71 93.62 107.69 119.82 103.09
There can be no assurance that the common stock's performance will continue
in the future with the same or similar trend depicted in the graph. Wayne
Savings Bancshares, Inc. will not make or endorse any predictions as to future
stock performance.
9
Stock Benefit Plans
Stock Option Plan. The Board of Directors of Wayne Savings Community Bank
adopted the 1993 Incentive Stock Option Plan in connection with the mutual
holding company reorganization and stock offering in 1993. The plan was ratified
by the stockholders at the 1993 annual meeting. Set forth below is information
concerning exercisable and unexercisable options held by the named executive
officers at March 31, 2003.
====================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
====================================================================================================================
Number of Unexercised Value of Unexercised
Shares Acquired Value Options at In-the-Money Options at
Name Upon Exercise Realized Fiscal Year End Fiscal Year End (1)
------------------------- --------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------------- ---------------- ----------------- ------------------------- --------------------------
Charles F. Finn -- $ -- 4,835/-- $38,293/--
Wanda Christopher-Finn -- $ -- 3,084/-- $24,425/--
Michael C. Anderson -- $ -- 7,556/-- $--
============================ ================ ================= ========================= ==========================
- ----------
(1) Equals the difference between the aggregate exercise price of such options
and the aggregate fair market value of the shares of common stock that
would be received upon exercise, assuming such exercise occurred on March
31, 2003 (based on the price of the last sale reported on the Nasdaq
National Market System on March 31, 2003).
Employee Stock Ownership Plan and Trust. Wayne Savings Community Bank
implemented an employee stock ownership plan in connection with its initial
mutual holding company reorganization. The employee stock ownership plan
purchased 7% of the shares of common stock sold in the initial public offering
(all of which have been allocated) and 163,265 shares in the offering that was
completed on January 8, 2003. Employees with at least one year of employment in
which they work 1,000 hours or more with Wayne Savings Community Bank and who
have attained age 21 are eligible to participate in the employee stock ownership
plan. The employee stock ownership plan borrowed funds from Wayne Savings
Bancshares, Inc. and used those funds to purchase the shares of the common stock
of Wayne Savings Bancshares, Inc. The collateral for the loan is the common
stock purchased by the employee stock ownership plan. The loan is being repaid
principally from Wayne Savings Community Bank's contributions to the employee
stock ownership plan over a period of 20 years. The interest rate on the loan
adjusts at the prime rate, which is the base rate charged on corporate loans at
large U.S. money center commercial banks. Shares purchased by the employee stock
ownership plan are held in a suspense account for allocation among participants
as the loan is repaid.
Contributions to the employee stock ownership plan and shares released from
the suspense account in an amount proportional to the repayment of the employee
stock ownership plan loan are allocated among employee stock ownership plan
participants on the basis of compensation in the year of allocation. For the
plan year ended December 31, 2002, no shares were released from the suspense
account and allocated to employees. Benefits will not vest at all during the
first four years of service and will become 100% vested upon the completion of
five years of service. A participant also becomes 100% vested upon early or
normal retirement, disability or death of the participant or a change in control
(as defined in the employee stock ownership plan). A participant who terminates
employment for reasons other than death, retirement or disability prior to five
years of credited service will forfeit his entire benefit under the employee
stock ownership plan. Benefits will be payable in the form of common stock and
cash upon death, retirement, early retirement, disability or separation from
service. Wayne Savings Community Bank's contributions to the employee stock
ownership plan are discretionary, and subject to the loan terms and tax law
limits and, therefore, benefits payable under the employee stock ownership plan
cannot be estimated. Wayne Savings Community Bank is required to record
compensation expense in an amount equal to the fair market value of the shares
released from the suspense account.
The ESOP Committee of the Board of Directors administers the employee stock
ownership plan. Wayne Savings Community Bank has appointed an independent
financial institution to serve as trustee of the employee stock ownership plan.
The employee stock ownership plan committee may instruct the trustee regarding
investment of funds contributed to the employee stock ownership plan. The
employee stock ownership plan trustee, subject to its fiduciary duty, must vote
all allocated shares held in the employee stock ownership plan in accordance
with the
10
instructions of participating employees. Under the employee stock ownership
plan, nondirected shares and shares held in the suspense account will be voted
in a manner calculated to most accurately reflect the instructions the trustee
has received from participants regarding the allocated stock so long as such
vote is in accordance with the provisions of ERISA.
Set forth below is information as of March 31, 2003 regarding equity
compensation plans categorized by those plans that have been approved by
stockholders and those plans that have not been approved by stockholders.
=============================== ============================ ============================ ============================
Plan Number of Securities to be Weighted Average Number of Securities
Issued upon Exercise of
Outstanding Options and Remaining Available for
Rights Exercise Price Issuance under Plan
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans 235,699 $4.12 -- (1)
approved by stockholders
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not
approved by stockholders -- -- --
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Total 235,699 $4.12 -- (1)
=============================== ============================ ============================ ============================
(1) There are no shares available for future issuance pursuant to the 1993
Recognition and Retention Plan and no shares underlying options available
for future issuance pursuant to the 1993 Stock Option Plan.
Pension Plan
Wayne Savings Community Bank makes available to all full-time employees who
have attained the age of 21 and completed one year of service with the bank a
defined benefit pension plan. The pension plan provides for monthly payments to
or on behalf of each covered employee upon the employee's normal retirement date
(i.e., the first day of the month coincident with or next following the later of
age 65 or five years of participation). These payments are calculated in
accordance with a formula based on the employee's "average monthly
compensation," which is defined as the highest average of total compensation for
five consecutive calendar years of employment. The normal retirement benefit is
equal to 29% of the "average monthly compensation" up to the integration level,
plus 51% of the "average monthly compensation" in excess of the integration
level, reduced for less than 35 years of service. The normal form of benefit is
a monthly income payable for life. Optional forms of benefit are available.
Under the pension plan, we make an annual contribution for the benefit of
eligible employees computed on an actuarial basis. Employee benefits under the
plan vest as designated in the schedule below:
Completed Years Vested
of Employment Percentages
------------- -----------
Fewer than 1 ............................................... 0
2 but fewer than 3 ......................................... 20%
3 but fewer than 4 ......................................... 40%
4 but fewer than 5 ......................................... 60%
5 but fewer than 6 ......................................... 80%
6 or more .................................................. 100%
The following table illustrates regular annual allowance amounts at age
65 under the regular retirement benefit plan provisions available at various
levels of compensation and years of benefit service (based on the formula
described above):
Years of Benefit Service
Average Salary 10 15 20 25 30 35
-------------- ---------- ---------- ---------- ---------- ---------- --------
$ 20,000 $ 1,811 $ 2,717 $ 3,622 $ 4,528 $ 5,433 $ 6,339
$ 30,000 $ 3,268 $ 4,902 $ 6,537 $ 8,171 $ 9,805 $ 11,439
$ 50,000 $ 6,183 $ 9,274 $ 12,365 $ 15,456 $ 18,548 $ 21,639
$ 80,000 $10,554 $ 15,831 $ 21,108 $ 26,385 $ 31,662 $ 37,939
$ 100,000 $13,468 $ 20,202 $ 27,937 $ 33,671 $ 40,405 $ 47,139
At March 31, 2003, Mr. Finn and Ms. Christopher-Finn had 39 years and 31
years of credited service under the pension plan, respectively.
11
Section 16(a) Beneficial Ownership Reporting Compliance
The common stock of Wayne Savings Bancshares, Inc. is registered with the
SEC pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the
"Exchange Act"). The officers and directors of Wayne Savings Bancshares, Inc.
and beneficial owners of greater than 10% of Wayne Savings Bancshares, Inc.'s
common stock ("10% beneficial owners") are required to file reports on Forms 3,
4, and 5 with the SEC disclosing beneficial ownership and changes in beneficial
ownership of the common stock. SEC rules require disclosure in Wayne Savings
Bancshares, Inc.'s Proxy Statement or Annual Report on Form 10-K of the failure
of an officer, director, or 10% beneficial owner of Wayne Savings Bancshares,
Inc.'s common stock to file a Form 3, 4, or 5 on a timely basis. All of Wayne
Savings Bancshares, Inc.'s officers and directors filed these reports on a
timely basis for 2003.
Transactions with Certain Related Persons
Federal law and regulations generally require that all loans or extensions
of credit to executive officers and directors be made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with the general public, and must not involve more
than the normal risk of repayment or present other unfavorable features.
However, regulations also permit executive officers and directors to receive the
same plan benefits that are widely available to other employees, as long as the
director or executive officer is not given preferential treatment compared to
the other participating employees. According to a policy adopted by Wayne
Savings Bancshares, Inc., all loans made to a director or executive officer in
excess of the greater of $25,000 or 5% of Wayne Savings Bancshares, Inc.'s
capital and surplus, must be approved in advance by a majority of the
disinterested members of the Board of Directors. As of March 21, 2003, loans to
officers, directors and their related business interests totaled $2.6 million,
including a $2.1 million loan to a partnership in which one of the directors is
a partner. All loans outstanding made by Wayne Savings Bancshares, Inc. to
executive officers, directors, immediate family members of executive officers
and directors, or organizations with which executive officers and directors are
affiliated, were made in the ordinary course of business, on substantially the
same terms including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons.
Director Russell L. Harpster is a partner in the law firm of Henderson,
Harpster & Vanosdall of Ashland, Ohio, which has represented Wayne Savings
Bancshares, Inc. in certain legal matters since 1979. During the fiscal year
ended March 31, 2003, Wayne Savings Bancshares, Inc. paid $10,660 in legal fees
to the law firm. No retainer was paid, and Wayne Savings Bancshares, Inc. was
billed for services performed at the firm's hourly rates.
Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits an issuer
from: (1) extending or maintaining credit; (2) arranging for the extension of
credit; or (3) renewing an extension of credit in the form of a personal loan
for an officer or director. There are several exceptions to this general
prohibition, one of which is applicable to Wayne Savings Bancshares, Inc. The
Sarbanes-Oxley Act does not apply to loans made by a depository institution,
such as Wayne Savings Community Bank, that is insured by the Federal Deposit
Insurance Corporation and is subject to the insider lending restrictions of the
Federal Reserve Act. All loans to Wayne Savings Bancshares, Inc.'s and Wayne
Savings Community Bank's officers are made in conformity with the Federal
Reserve Act and Regulation O.
- --------------------------------------------------------------------------------
PROPOSAL II--APPROVAL OF THE 2003 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
General
Subject to stockholder approval at the Meeting, Wayne Savings Bancshares,
Inc. has established the Wayne Savings Bancshares, Inc. 2003 Stock Option Plan
(the "Stock Option Plan"). Pursuant to the Stock Option Plan, options to
purchase up to 204,081 shares of common stock may be granted to Wayne Savings
Community Bank's and Wayne Savings Bancshares, Inc.'s employees and directors.
As of June 11, 2003, the market value of the common stock was $13.60 per share.
The Board of Directors of Wayne Savings Bancshares, Inc. believes that it is
appropriate to adopt a flexible and comprehensive stock option plan that permits
the granting of a variety of long-term incentive awards to directors and
officers as a means of enhancing and encouraging the recruitment and retention
of those individuals on whom the continued success of Wayne Savings Community
Bank and Wayne Savings Bancshares, Inc. most depends. Attached as Exhibit A to
this proxy statement is the complete text of the form of Stock Option Plan. The
principal features of the Stock Option Plan are summarized below.
12
Principal Features of the Stock Option Plan
The Stock Option Plan provides for awards in the form of stock options,
reload options, dividend equivalent rights and/or limited stock appreciation
rights ("Limited Rights"). Each award shall be on such terms and conditions,
consistent with the Stock Option Plan and applicable Office of Thrift
Supervision regulations, as the committee administering the Stock Option Plan
may determine.
The term of stock options generally will not exceed ten years from the date
of grant. Stock options granted under the Stock Option Plan may be either
"Incentive Stock Options" as defined under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") or stock options not intended to qualify
as such ("non-qualified stock options"). No stock option awards have been
granted to date.
Shares issued upon the exercise of a stock option may be either authorized
but unissued shares, treasury shares, or shares acquired by Wayne Savings
Bancshares, Inc. in open market purchases. Any shares subject to an award that
expires or is terminated unexercised will again be available for issuance under
the Stock Option Plan. Generally, in the discretion of the Board of Directors,
all or any non-qualified stock options granted under the Stock Option Plan may
be transferable by the participant but only to the persons or classes of persons
determined by the Board of Directors. No other award or any right or interest
therein is assignable or transferable except under certain limited exceptions
set forth in the Stock Option Plan.
The Stock Option Plan will be administered by a committee (the "Committee")
consisting of either two or more "non-employee directors" (as defined in the
Stock Option Plan), or the entire Board of Wayne Savings Bancshares, Inc. The
members of the Committee shall be appointed by the Board of Directors of Wayne
Savings Bancshares, Inc. Pursuant to the terms of the Stock Option Plan, outside
directors and employees of Wayne Savings Community Bank or Wayne Savings
Bancshares, Inc. or its affiliates are eligible to participate. As of June 13,
2003, there were seven non-employee directors eligible to participate in the
2003 Stock Option Plan. Subject to the provisions of the plan, the Committee
will determine to whom the awards will be granted, in what amounts, and the
period over which such awards will vest. In accordance with Office of Thrift
Supervision regulations, the Stock Option Plan provides that no individual
officer shall be granted awards with respect to more than 25% of the total
shares of common stock subject to the Stock Option Plan; no outside director
shall be granted awards with respect to more than 5% of the total shares of
common stock subject to the Stock Option Plan; all outside directors in the
aggregate may not be granted awards with respect to more than 30% of the total
shares of common stock subject to the Stock Option Plan; no awards shall begin
vesting earlier than one year from the date the Stock Option Plan is approved by
stockholders of Wayne Savings Bancshares, Inc.; no awards shall vest at a rate
in excess of 20% per year beginning from the date of grant; and the vesting of
an award shall not accelerate in the event of termination of employment or
service due to normal retirement. While the Stock Option Plan complies with
Office of Thrift Supervision regulations, the Office of Thrift Supervision has
not in any way endorsed or approved the Stock Option Plan.
In granting awards under the Stock Option Plan, the Committee will
consider, among other things, position and years of service, and the value of
the individual's services to Wayne Savings Bancshares, Inc. and Wayne Savings
Community Bank. The exercise price of stock options will be at least the fair
market value of the underlying common stock at the time of the grant. Once
granted, stock options may not be re-priced (i.e., the exercise price may not be
changed other than adjustments for stock splits, stock dividends and similar
events). The exercise price may be paid in cash, common stock, or via a
broker-assisted "cashless exercise" (as defined in the Stock Option Plan).
Stock Options. Incentive Stock Options can only be granted to employees of
Wayne Savings Community Bank, Wayne Savings Bancshares, Inc. or an "affiliate"
(i.e., a parent or subsidiary corporation of Wayne Savings Community Bank or
Wayne Savings Bancshares, Inc.). Outside directors will be granted non-qualified
stock options. No option granted to an officer in connection with the Stock
Option Plan will be exercisable as an Incentive Stock Option subject to
incentive tax treatment if exercised more than three months after the date on
which the optionee terminates employment with Wayne Savings Community Bank
and/or Wayne Savings Bancshares, Inc., except as set forth below. In the event a
participant ceases to maintain continuous service with Wayne Savings Bancshares,
Inc. or an affiliate by reason of death, disability, or following a change in
control, options still subject to restrictions will vest and be free of these
restrictions and can be exercised for up to one year
13
after cessation of service but in no event beyond the expiration of the options'
original term. In the event a participant ceases to maintain continuous service
for any other reason, the participant will forfeit all nonvested options. The
participant's vested options will remain exercisable for up to three months in
the case of Incentive Stock Options, and one year in the case of non-qualified
stock options. If an optionee terminates employment with Wayne Savings Community
Bank, Wayne Savings Bancshares, Inc. or an affiliate, any Incentive Stock
Options exercised more than three months following the date the optionee
terminates employment shall be treated as a non-qualified stock option;
provided, however, that in the event of death or disability, Incentive Stock
Options may be exercised and receive incentive tax treatment for up to at least
one year following termination of employment, subject to the requirements of the
Code.
In the event of death or disability of an optionee, Wayne Savings
Bancshares, Inc., if requested by the optionee or beneficiary, may elect, in
exchange for the option, to pay the optionee or beneficiary the amount by which
the fair market value of the common stock exceeds the exercise price of the
option on the date of the optionee's termination of service for death or
disability.
Limited Stock Appreciation Rights. The Committee may grant Limited Rights
to employees simultaneously with the grant of any option. A Limited Right gives
the option holder the right, upon a change in control of Wayne Savings
Bancshares, Inc. or Wayne Savings Community Bank, to receive the excess of the
market value of the shares represented by the Limited Rights on the date
exercised over the exercise price. Limited Rights generally will be subject to
the same terms and conditions and exercisable to the same extent as stock
options, as described above. Payment upon exercise of a Limited Right will be in
cash.
Limited Rights may be granted at the time of, and must be related to, the
grant of a stock option. The exercise of one will reduce to that extent the
number of shares represented by the other. If a Limited Right is granted with
and related to an Incentive Stock Option, the Limited Right must satisfy all the
restrictions and limitations to which the related Incentive Stock Option is
subject.
Reload Options. Reload options may also be granted at the time of the grant
of a stock option. Reload options entitle the option holder, who has delivered
shares that he or she owns as payment of the exercise price for option stock, to
a new option to acquire additional shares equal in amount to the shares he or
she has traded in. Reload options may also be granted to replace option shares
retained by the employer for payment of the option holder's withholding tax. The
option price at which additional shares of stock can be purchased by the option
holder through the exercise of a reload option is equal to the market value of
the previously owned stock at the time it was surrendered to the employer. The
option period during which the reload option may be exercised expires at the
same time as that of the original option that the holder has exercised.
Dividend Equivalent Rights. Dividend equivalent rights may also be granted
at the time of the grant of a stock option. Dividend equivalent rights entitle
the option holder to receive an amount of cash at the time that certain
extraordinary dividends are declared equal to the amount of the extraordinary
dividend, multiplied by the number of options that the person holds. For these
purposes, an extraordinary dividend is defined under the Stock Option Plan as
any dividend paid on shares of common stock where (i) the dividend rate exceeds
150% of Wayne Savings Community Bank's weighted average cost of funds on
interest-bearing liabilities for the current quarter and preceding three
quarters and (ii) the annualized aggregate dollar amount of the dividend exceeds
Wayne Savings Community Bank's after-tax net income for the current quarter and
preceding three quarters, or any dividend that exceeds the aggregate amount of
the last four quarterly dividends but does not result in an adjustment of the
exercise price under the Plan because such adjustment would cause variable
accounting under the Plan.
Effect of Adjustments. Shares as to which awards may be granted under the
Stock Option Plan, and shares then subject to awards, will be adjusted by the
Committee in the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination or exchange of shares
or other change in the corporate structure of Wayne Savings Bancshares, Inc.
without receipt of payment or consideration by Wayne Savings Bancshares, Inc. In
addition, in the event Wayne Savings Bancshares, Inc. pays a dividend that
exceeds the aggregate amount of the last four quarterly dividends or pays a
return of capital to its stockholders generally, the exercise price of the
options will be adjusted to reflect such dividend or return of capital unless to
do so would cause variable accounting with respect to outstanding awards.
14
In the case of any merger, consolidation or combination of Wayne Savings
Bancshares, Inc. with or into another holding company or other entity, whereby
holders of common stock will receive a cash payment (the "Merger Price") for
each share of common stock exchanged in the transaction, any individual with
exercisable options will receive an amount equal to the difference between the
Merger Price times the number of shares of common stock subject to such options
and the aggregate exercise price of all surrendered options.
Amendment and Termination. The Board of Directors may at any time amend,
suspend or terminate the Stock Option Plan or any portion thereof; provided,
however, that no such amendment, suspension or termination shall impair the
rights of any individual, without his consent, in any award made pursuant to the
plan. Unless previously terminated, the Stock Option Plan shall continue in
effect for a term of ten years, after which no further awards may be granted
under the Stock Option Plan.
Federal Income Tax Consequences. The following brief description of the tax
consequences of stock option grants under the Stock Option Plan is based on
federal income tax laws currently in effect and does not purport to be a
complete description of such federal income tax consequences.
The exercise of a stock option which is an "Incentive Stock Option" within
the meaning of Section 422 of the Code will generally not, by itself, result in
the recognition of taxable income to the individual nor entitle Wayne Savings
Bancshares, Inc. to a deduction at the time of such exercise. However, the
difference between the exercise price and the fair market value of the option
shares on the date of exercise is an item of tax preference which may, in
certain situations, trigger the alternative minimum tax. The alternative minimum
tax is incurred only when it exceeds the regular income tax. The sale of an
Incentive Stock Option share prior to the end of the applicable holding period,
i.e., the longer of two years from the date of grant or one year from the date
of exercise, will cause any gain to be taxed at ordinary income tax rates, with
respect to the spread between the exercise price and the fair market value of
the share on the date of exercise and at applicable capital gains rates with
respect to any post exercise appreciation in the value of the share.
The exercise of a non-qualified stock option will result in the recognition
of ordinary income on the date of exercise in an amount equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise.
Reload options are of the same type (non-qualified or incentive) as the
option that the option holder exercised. Therefore, the tax consequences of the
reload option are determined under the applicable tax rules for Incentive Stock
Options or non-qualified stock options.
The exercise of a Limited Right will result in the recognition of ordinary
income by the individual on the date of exercise in an amount of cash, and/or
the fair market value on that date of the shares, acquired pursuant to the
exercise.
Similarly, the receipt of a cash payment pursuant to a dividend equivalent
right will result in the recognition of compensation or self-employment income
by the recipient.
Wayne Savings Bancshares, Inc. will be allowed a deduction at the time, and
in the amount of, any ordinary income recognized by the individual under the
various circumstances described above, provided that Wayne Savings Bancshares,
Inc. meets its federal withholding tax obligations.
The affirmative vote of a majority of the total votes eligible to be cast
is required for approval of the Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE STOCK
OPTION PLAN.
15
PROPOSAL III-- APPROVAL OF THE
2003 RECOGNITION AND RETENTION PLAN
General
Subject to stockholder approval at the Meeting, Wayne Savings Bancshares,
Inc. has established the Wayne Savings Bancshares, Inc. 2003 Recognition and
Retention Plan (the "2003 Recognition Plan") as a method of providing certain
key employees and outside directors of Wayne Savings Bancshares, Inc. with a
proprietary interest in Wayne Savings Bancshares, Inc. in a manner designed to
encourage such persons to remain with Wayne Savings Community Bank and/or Wayne
Savings Bancshares, Inc., and to provide further incentives to achieve corporate
objectives. The following discussion is qualified in its entirety by reference
to the 2003 Recognition Plan, the form of which is attached hereto as Exhibit B.
Wayne Savings Community Bank intends to contribute stock or sufficient
funds for the 2003 Recognition Plan to acquire 81,632 shares of common stock of
Wayne Savings Bancshares, Inc., which will be available to be awarded to key
employees and outside directors of Wayne Savings Bancshares, Inc. It is expected
that such shares will be purchased in the open market, although authorized but
unissued shares may be used. No stock awards have been granted to date.
Principal Features of the 2003 Recognition Plan
The 2003 Recognition Plan provides for the award of shares of common stock
("2003 Recognition Plan Shares") subject to the restrictions described below. As
of June 11, 2003, the market value of the common stock was $13.60 per share.
Each award under the 2003 Recognition Plan will be made on terms and conditions
consistent with the 2003 Recognition Plan.
The 2003 Recognition Plan is administered by a committee (the "Committee"),
which shall be appointed by the Board of Directors of Wayne Savings Bancshares,
Inc. and shall consist of either (i) at least two "non-employee directors" (as
defined in the 2003 Recognition Plan) of Wayne Savings Bancshares, Inc. or (ii)
the entire Board of Wayne Savings Bancshares, Inc. The Committee will select the
recipients and terms of awards pursuant to the 2003 Recognition Plan. Pursuant
to the terms of the 2003 Recognition Plan, any director or key employee of Wayne
Savings Community Bank, Wayne Savings Bancshares, Inc. or its affiliates may be
selected by the Committee to participate in the 2003 Recognition Plan. In
determining to whom and in what amount to grant awards, the Committee will
consider the position and responsibilities of eligible persons, the value of
their services to Wayne Savings Bancshares, Inc. and Wayne Savings Community
Bank and other factors it deems relevant. As of June 13, 2003, there were seven
non-employee directors eligible to participate in the 2003 Recognition Plan.
In accordance with Office of Thrift Supervision regulations, the 2003
Recognition Plan provides that no individual officer shall be granted awards
with respect to more than 25% of the total shares subject to the 2003
Recognition Plan; no outside director shall be granted awards with respect to
more than 5% of the total shares of common stock subject to the 2003 Recognition
Plan; all outside directors in the aggregate may not be granted awards with
respect to more than 30% of the total shares of common stock subject to the 2003
Recognition Plan; no awards shall begin vesting earlier than one year from the
date the 2003 Recognition Plan is approved by stockholders of Wayne Savings
Bancshares, Inc.; no awards shall vest at a rate in excess of 20% per year
beginning from the date of grant; and the vesting of an award shall not
accelerate in the event of termination of employment or service due to normal
retirement. While the 2003 Recognition Plan complies with Office of Thrift
Supervision regulations, the Office of Thrift Supervision has not in any way
endorsed or approved the 2003 Recognition Plan.
Subject to the above restrictions, in the event a recipient ceases to
maintain continuous service with Wayne Savings Bancshares, Inc. or Wayne Savings
Community Bank by reason of death or disability, or following a change in
control, Recognition Plan shares still subject to restrictions ("restricted
stock") will vest and be free of these restrictions. In the event of termination
for any other reason, all nonvested restricted stock will be forfeited. Prior to
vesting of the nonvested restricted stock, a recipient will have the right to
vote the nonvested restricted stock which has been awarded to the recipient and
will receive any dividends declared on such restricted stock. Nonvested
restricted stock is subject to forfeiture if the recipient fails to remain in
the continuous service (as defined in the 2003 Recognition Plan) as an employee,
officer, or director of Wayne Savings Bancshares, Inc. or Wayne Savings
Community Bank for the restricted period.
16
Effect of Adjustments. Restricted stock awarded under the 2003 Recognition
Plan will be adjusted by the Committee in the event of a reorganization,
recapitalization, stock split, stock dividend, combination or exchange of
shares, merger, consolidation or other change in corporate structure.
Federal Income Tax Consequences. Holders of restricted stock will recognize
ordinary income on the date that the shares of restricted stock are no longer
subject to a substantial risk of forfeiture, in an amount equal to the fair
market value of the shares on that date. In certain circumstances, a holder may
elect to recognize ordinary income and determine such fair market value on the
date of the grant of the restricted stock. Holders of restricted stock will also
recognize compensation income (or in the case of nonemployee directors, self
employment income) equal to their dividend payments when such payments are
received. Generally, the amount of income recognized by individuals will be a
deductible expense for tax purposes by Wayne Savings Bancshares, Inc.
Amendment to the 2003 Recognition Plan. The Board of Directors of Wayne
Savings Bancshares, Inc. may at any time amend, suspend or terminate the 2003
Recognition Plan or any portion thereof, provided, however, that no such
amendment, suspension or termination shall impair the rights of any award
recipient, without his consent, in any award therefore made pursuant to the 2003
Recognition Plan.
The affirmative vote of a majority of the total votes eligible to be cast
is required to approve the 2003 Recognition Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2003
RECOGNITION PLAN.
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PROPOSAL IV--RATIFICATION OF APPOINTMENT OF AUDITORS
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Wayne Savings Bancshares, Inc.'s independent auditors for the fiscal year
ended March 31, 2003 were Grant Thornton LLP. The Audit Committee of the Board
of Directors of Wayne Savings Bancshares, Inc. has approved the engagement of
Grant Thornton LLP to be Wayne Savings Bancshares, Inc.'s auditors for the 2004
fiscal year, subject to the ratification of the engagement by Wayne Savings
Bancshares, Inc.'s stockholders at the Meeting. A representative of Grant
Thornton LLP is expected to attend the Meeting to respond to appropriate
questions and to make a statement if he so desires.
Audit Fees. Provided below is certain information concerning aggregate fees
billed for professional services rendered by Grant Thornton LLP during fiscal
2003:
Audit Fees $ 52,700
Audit-Related Fees (1) 270,035
Tax Fees 9,875
All Other Fees --
-----------
Total Fees $ 332,610
===========
- ----------
(1) Includes assistance with and review of Wayne Savings Bancshares, Inc.'s
registration and prospectus, including the audited consolidated financial
statements presented therein, prepared and filed with the Securities and
Exchange Commission in connection with Wayne Savings Bancshares, Inc.'s
"second step" reorganization and stock offering.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining Grant Thornton LLP's independence. The
Audit Committee concluded that performing such services does not affect Grant
Thornton LLP's independence in performing its function as auditor of Wayne
Savings Bancshares, Inc.
In order to ratify the selection of Grant Thornton LLP as the auditors for
the 2004 fiscal year, the proposal must receive at least a majority of the votes
cast, either in person or by proxy, in favor of such ratification.
17
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
GRANT THORNTON LLP AS AUDITORS FOR THE 2004 FISCAL YEAR.
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STOCKHOLDER PROPOSALS AND NOMINATIONS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in Wayne Savings Bancshares, Inc.'s
proxy materials for next year's Annual Meeting of Stockholders, any stockholder
proposal to take action at such meeting must be received at Wayne Savings
Bancshares, Inc.'s executive office, 151 North Market Street, Wooster, Ohio
44691, no later than February 21, 2004. Any such proposals shall be subject to
the requirements of the proxy rules adopted under the Securities Exchange Act of
1934.
The Bylaws of Wayne Savings Bancshares, Inc. provide an advance notice
procedure for certain business, or nominations to the Board of Directors, to be
brought before an annual meeting. In order for a stockholder to properly bring
business before an annual meeting, or to propose a nominee to the Board, the
stockholder must give written notice to the Secretary of Wayne Savings
Bancshares, Inc. not less than ninety (90) days before the date fixed for such
meeting; provided, however, that in the event that less than one hundred (100)
days notice or prior public disclosure of the date of the meeting is given or
made, notice by the stockholder to be timely must be received no later than the
close of business on the tenth day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made. The
notice must include the stockholder's name, record address, and number of shares
owned by the stockholder, describe briefly the proposed business, the reasons
for bringing the business before the annual meeting, and any material interest
of the stockholder in the proposed business. In the case of nominations to the
Board, certain information regarding the nominee must be provided. Nothing in
the paragraph shall be deemed to require Wayne Savings Bancshares, Inc. to
include in its proxy statement and proxy relating to an annual meeting any
stockholder proposal which does not meet all of the requirements or inclusion
established by the SEC in effect at the time such proposal is received.
The date on which the next Annual Meeting of Stockholders of Wayne Savings
Bancshares, Inc. is expected to be held is July 22, 2004. Accordingly, advance
written notice of business or nominations to the Board of Directors to be
brought before the 2004 Annual Meeting of Stockholders must be given to Wayne
Savings Bancshares, Inc. no later than April 23, 2004.
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MISCELLANEOUS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in the proxy statement. However,
if any matters should properly come before the Meeting, it is intended that
holders of the proxies will act as directed by a majority of the Board of
Directors, except for matters related to the conduct of the Meeting, as to which
they shall act in accordance with their best judgment.
The cost of solicitation of proxies will be borne by Wayne Savings
Bancshares, Inc. Wayne Savings Bancshares, Inc. 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.
Wayne Savings Bancshares, Inc. has retained Regan and Associates, a proxy
solicitation firm, to assist in the solicitation of proxies. It is not expected
that the cost of using the proxy solicitation firm for solicitation of proxies
will exceed $6,000. In addition to solicitations by mail, directors, officers
and regular employees of Wayne Savings Community Bank may solicit proxies
personally or by telegraph or telephone without additional compensation.
A copy of the Wayne Savings Bancshares, Inc.'s Annual Report on Form 10-K
for the fiscal year ended March 31, 2003 will be furnished without charge to
stockholders as of the record date upon written request to the Secretary, Wayne
Savings Bancshares, Inc., 151 North Market Street, Wooster, Ohio 44691.
BY ORDER OF THE BOARD OF DIRECTORS
Michael C. Anderson
Wooster, Ohio Secretary
June 20, 2003
18
EXHIBIT A
WAYNE SAVINGS BANCSHARES, INC.
2003 STOCK OPTION PLAN
1. Purpose
The purpose of the Wayne Savings Bancshares, Inc. 2003 Stock Option Plan
(the "Plan") is to advance the interests of Wayne Savings Bancshares, Inc. (the
"Company") and its shareholders by providing Key Employees and Outside Directors
of the Company and its Affiliates, including Wayne Savings Community Bank (the
"Bank"), upon whose judgment, initiative and efforts the successful conduct of
the business of the Company and its Affiliates largely depends, with an
additional incentive to perform in a superior manner as well as to attract
people of experience and ability.
2. Definitions
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Company or the Bank, as such terms are defined in Section 424(e) or 424(f),
respectively, of the Code, or a successor to a parent corporation or subsidiary
corporation.
"Award" means an Award of Non-Statutory Stock Options, Incentive Stock
Options, Limited Rights, Dividend Equivalent Rights and/or Reload Options
granted under the provisions of the Plan.
"Bank" means Wayne Savings Community Bank, or a successor corporation.
"Beneficiary" means the person or persons designated by a Participant to
receive any benefits payable under the Plan in the event of such Participant's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, his estate.
"Board" or "Board of Directors" means the board of directors of the
Company, unless otherwise noted herein.
"Cause" means personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Company or an Affiliate.
"Change in Control" of the Bank or the Company means a change in control of
a nature that: (i) would be required to be reported in response to Item 1(a) of
the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a Change in Control of the Bank or the Company within the
meaning of the Home Owners' Loan Act, as amended ("HOLA"), and applicable rules
and regulations promulgated thereunder, as in effect at the time of the Change
in Control; or (iii) without limitation such a Change in Control shall be deemed
to have occurred at such time as (a) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of Company's outstanding securities except for any
securities purchased by the Bank's employee stock ownership plan or trust; or
(b) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (b), considered as though
he were a member of the Incumbent Board; or (c) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or the Company or similar transaction in which the Bank or Company is not the
surviving institution occurs; or (d) a proxy statement
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soliciting proxies from stockholders of the Company, by someone other than the
current management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or similar transaction
with one or more corporations as a result of which the outstanding shares of the
class of securities then subject to the Plan are to be exchanged for or
converted into cash or property or securities not issued by the Company; or (e)
a tender offer is made for 25% or more of the voting securities of the Company
and the shareholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee consisting of either (i) at least two
Non-Employee Directors of the Company, or (ii) the entire Board of the Company.
For these purposes, the Company has designated the Compensation Committee of the
Company as the Committee.
"Common Stock" means shares of the common stock of the Company, par value
$0.10 per share.
"Company" means Wayne Savings Bancshares, Inc., the stock holding company
of the Bank, or a successor corporation.
"Continuous Service" means employment as a Key Employee and/or service as
an Outside Director without any interruption or termination of such employment
and/or service. Continuous Service shall also mean a continuation as a member of
the Board of Directors following a cessation of employment as a Key Employee or
continuation of service as a Director Emeritus following termination of service
as a Director. In the case of a Key Employee, employment shall not be considered
interrupted in the case of sick leave, military leave or any other approved
leave of absence or in the case of transfers between payroll locations of the
Company, its subsidiaries or its successor.
"Date of Grant" means the actual date on which an Award is granted by the
Committee.
"Director" means a member of the Board.
"Director Emeritus" means a former member of the Board who has been
appointed to a Director Emeritus position.
"Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him, or of a Director or Outside Director to serve as such.
Additionally, in the case of an employee, a medical doctor selected or approved
by the Board must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it appears probable that
such Disability will be permanent during the remainder of said employee's
lifetime.
"Dividend Equivalent Rights" means the right to receive an amount of cash
based upon the terms set forth in Section 11 hereof.
"Effective Date" means the date of, or a date determined by the Board of
Directors following, approval of the Plan by the Company's shareholders.
"Fair Market Value" means, when used in connection with the Common Stock on
a certain date, the reported closing price of the Common Stock as reported by
the Nasdaq stock market (as published in The Wall Street Journal, if published)
on the day prior to such date, or if the Common Stock was not traded on the day
prior to such date then, on the next preceding day on which the Common Stock was
traded; provided, however, that if the Common Stock is not reported on the
Nasdaq stock market, Fair Market Value shall mean the average sale price of all
shares of Common Stock sold during the 30-day period immediately preceding the
date on which such stock option was granted, and if no shares of stock have been
sold within such 30-day period, the average sale price of the last three sales
of Common Stock sold during the 90-day period immediately preceding the date on
which such stock option was granted. In the event Fair Market Value cannot be
determined in the manner described above, then Fair
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Market Value shall be determined by the Committee. The Committee is authorized,
but is not required, to obtain an independent appraisal to determine the Fair
Market Value of the Common Stock.
"Incentive Stock Option" means an Option granted by the Committee to a Key
Employee, which Option is designated as an Incentive Stock Option pursuant to
Section 9.
"Key Employee" means any person who is currently employed by the Company or
an Affiliate who is chosen by the Committee to participate in the Plan.
"Limited Right" means the right to receive an amount of cash based upon the
terms set forth in Section 10.
"Non-Statutory Stock Option" means an Option granted by the Committee to
(i) an Outside Director or (ii) any other Participant and such Option is either
(A) not designated by the Committee as an Incentive Stock Option, or (B) fails
to satisfy the requirements of an Incentive Stock Option as set forth in Section
422 of the Code and the regulations thereunder.
"Non-Employee Director" means, for purposes of the Plan, a Director who (a)
is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
"Option" means an Award granted under Section 8 or Section 9.
"OTS" means the Office of Thrift Supervision.
"Outside Director" means a Director of the Company or an Affiliate who is
not an employee of the Company or an Affiliate.
"Participant" means a Key Employee or Outside Director of the Company or
its Affiliates who receives or has received an award under the Plan.
"Reload Option" mean an option to acquire shares of Common Stock equivalent
to the number of shares (i) used by a Participant to pay for an Option, or (ii)
deducted from any distribution in order to satisfy income tax required to be
withheld, based upon the terms set forth in Section 20 of the Plan.
"Right" means a Limited Right.
"Termination for Cause" means the termination of employment or termination
of service on the Board caused by the individual's personal dishonesty, willful
misconduct, any breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, or the willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), or a final
cease-and-desist order, any of which results in material loss to the Company or
one of its Affiliates.
3. Plan Administration Restrictions
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan and OTS regulations and
policy, to establish such rules and regulations as it deems necessary for the
proper administration of the Plan and to make whatever determinations and
interpretations in connection with the Plan it deems necessary or advisable. All
determinations and interpretations made by the Committee shall be binding and
conclusive on all Participants in the Plan and on their legal representatives
and beneficiaries.
All transactions involving a grant, award or other acquisition from the
Company shall:
(a) be approved by the Company's full Board or by the Committee; or
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(b) be approved, or ratified, in compliance with Section 14 of the Exchange
Act, by either: the affirmative vote of the holders of a majority of the
securities present, or represented and entitled to vote at a meeting duly held
in accordance with the laws of the state in which the Company is incorporated;
or the written consent of the holders of a majority of the securities of the
issuer entitled to vote provided that such ratification occurs no later than the
date of the next annual meeting of shareholders; or
(c) result in the acquisition of an Option or Limited Right that is held by
the Participant for a period of six months following the date of such
acquisition.
4. Types of Awards
Awards under the Plan may be granted in any one or a combination of: (a)
Incentive Stock Options; (b) Non-Statutory Stock Options; (c) Limited Rights;
(d) Dividend Equivalent Rights and (e) Reload Options.
5. Stock Subject to the Plan
Subject to adjustment as provided in Section 17, the maximum number of
shares reserved for issuance under the Plan is 204,081 shares. Shares issued
under the Plan may be issued by the Company from authorized but unissued shares,
treasury shares, or acquired by the Company in open market purchases. To the
extent that Options or Rights granted under the Plan are exercised, the shares
covered will be unavailable for future grants under the Plan; to the extent that
Options together with any related Rights granted under the Plan terminate,
expire or are forfeited without having been exercised or, in the case of Limited
Rights exercised for cash, new Awards may be made with respect to these shares.
Any shares that are issued by the Company, and any awards that are granted
by, or become obligations of, the Company, through the assumption by the Company
or an affiliate thereof, or in substitution for, outstanding awards previously
granted by an acquired company, shall not be counted against the shares
available for issuance under the Plan. In addition, any Reload Options issued
with respect to shares that are used for the full or partial payment of the
exercise price of any option or in connection with shares returned to the issuer
to satisfy federal tax withholding requirements, if any, will not be counted as
issued under the Plan and will not reduce the number of options available for
issuance.
6. Eligibility
Key Employees of the Company and its Affiliates shall be eligible to
receive Incentive Stock Options, Non-Statutory Stock Options, Limited Rights,
Dividend Equivalent Rights and/or Reload Options under the Plan. Outside
Directors shall be eligible to receive Non-Statutory Stock Options, Dividend
Equivalent Rights and Reload Options under the Plan.
7. General Terms and Conditions of Options and Rights
(a) The Committee shall have full and complete authority and discretion,
subject to OTS regulations and policy and except as expressly limited by the
Plan, to grant Options and/or Rights and to provide the terms and conditions
(which need not be identical among Participants) thereof. In particular, the
Committee shall prescribe the following terms and conditions: (i) the Exercise
Price of any Option or Right, which shall not be less than the Fair Market Value
per share on the Date of Grant, (ii) the number of shares of Common Stock
subject to, and the expiration date of, any Option or Right, which expiration
date shall not exceed ten years from the Date of Grant, (iii) the manner, time
and rate (cumulative or otherwise) of exercise of such Option or Right, and (iv)
the restrictions, if any, to be placed upon such Option or Right or upon shares
of Common Stock which may be issued upon exercise of such Option or Right.
(b) The following provisions shall apply to all Awards made under this
plan: no individual officer shall be granted Awards with respect to more than
25% of the total shares subject to the Plan; no Outside Director shall be
granted Awards with respect to more than 5% of the total shares of Common Stock
subject to the Plan; all Outside Directors in the aggregate may not be granted
Awards with respect to more than 30% of the total shares of Common Stock subject
to the Plan; no Awards shall begin vesting earlier than one year from the date
the Plan is approved by shareholders of the Company; and no Awards shall vest at
a rate in excess of 20% per year beginning
A-4
from the Date of Grant. Notwithstanding anything herein to the contrary, and
subject to any adjustment that may be made pursuant to Section 18 hereof, once
an Option has been awarded at Fair Market Value, the Committee shall not have
the authority to reprice such Option so that the exercise price of the Option
shall be less than the exercise price on the Date of Grant.
8. Non-Statutory Stock Options
The Committee may, from time to time, grant Non-Statutory Stock Options to
eligible Key Employees and Outside Directors. Non-Statutory Stock Options
granted under the Plan, including Non-Statutory Stock Options granted in
exchange for and upon surrender of previously granted Awards, are subject to the
terms and conditions set forth in this Section.
(a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Company and the Participant specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of the
Plan.
(b) Price. The purchase price per share of Common Stock deliverable upon
the exercise of each Non-Statutory Stock Option shall be the Fair Market Value
of the Common Stock of the Company on the Date of Grant. Shares may be purchased
only upon full payment of the purchase price in one or more of the manners set
forth in Section 14 hereof, as determined by the Committee.
(c) Vesting. Subject to Section 7(b) hereof, a Non-Statutory Stock Option
granted under the Plan shall vest in a Participant at the rate or rates
determined by the Committee. No Options shall become vested in a Participant
unless the Participant maintains Continuous Service until the vesting date of
such Option, except as set forth herein. The Committee may, subject to OTS
regulations and policy, accelerate the time at which any Non-Statutory Stock
Option may be exercised in whole or in part.
(d) Exercise of Options. A vested Option may be exercised from time to
time, in whole or in part, by delivering a written notice of exercise to the
President or Chief Executive Officer of the Company, or his designee. Such
notice shall be irrevocable and must be accompanied by full payment of the
purchase price in cash or shares of Common Stock at the Fair Market Value of
such shares, determined on the exercise date in the manner described in Section
2 hereof. If previously acquired shares of Common Stock are tendered in payment
of all or part of the exercise price, the value of such shares shall be
determined as of the date of such exercise.
(e) Amount of Awards. Subject to Section 7(b) hereof, Non-Statutory Stock
Options may be granted to any Key Employee or Outside Director in such amounts
as determined by the Committee. In granting Non-Statutory Stock Options, the
Committee shall consider such factors as it deems relevant, which factors may
include, among others, the position and responsibility of the Key Employee or
Outside Director, the length and value of his service to the Bank, the Company
or the Affiliate, the compensation paid to the Key Employee or Outside Director,
and the Committee's evaluation of the performance of the Bank, the Company or
the Affiliate, according to measurements that may include, among others, key
financial ratios, level of classified assets and independent audit findings.
(f) Term of Options. Unless the Committee determines otherwise, the term
during which Non-Statutory Stock Options may be exercised shall not exceed ten
years from the Date of Grant. In no event shall a Non-Statutory Stock Option be
exercisable in whole or in part more than ten years from the Date of Grant.
(g) Termination of Continuous Service. Upon the termination of a Key
Employee's or Outside Director's Continuous Service, for any reason other than
death, Disability, Termination for Cause, termination following a Change in
Control (other than for Cause following a Change in Control), the Participant's
Non-Statutory Stock Options shall be exercisable only as to those shares that
were immediately purchasable on the date of termination and only for one year
following termination. In the event of Termination for Cause, all rights under a
Participant's Non-Statutory Stock Options shall expire upon termination. In the
event of the Participant's termination of Continuous Service due to death,
Disability, or following a Change in Control, all Non-Statutory Stock Options
held by the Participant, whether or not vested at such time, shall vest and
become exercisable by the Participant or his legal representative or
beneficiaries for one year following the date of such termination, death or
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cessation of employment or service, provided that in no event shall the period
extend beyond the expiration of the Non-Statutory Stock Option term.
(h) Transferability. In the discretion of the Board, all or any
Non-Statutory Stock Option granted hereunder may be transferable by the
Participant once the Option has vested in the Participant, provided, however,
that the Board may limit the transferability of such Option or Options to a
designated class or classes of persons.
9. Incentive Stock Options
The Committee may, from time to time, grant Incentive Stock Options to Key
Employees. Incentive Stock Options granted pursuant to the Plan shall be subject
to the following terms and conditions:
(a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Company and the Key Employee specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of the
Plan.
(b) Price. Subject to Section 18 hereof and Section 422 of the Code, the
purchase price per share of Common Stock deliverable upon the exercise of each
Incentive Stock Option shall be not less than 100% of the Fair Market Value of
the Company's Common Stock on the date the Incentive Stock Option is granted.
However, if a Key Employee owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or its Affiliates
(or under Section 424(d) of the Code is deemed to own stock representing more
than 10% of the total combined voting power of all classes of stock of the
Company or its Affiliates by reason of the ownership of such classes of stock,
directly or indirectly, by or for any brother, sister, spouse, ancestor or
lineal descendent of such Key Employee, or by or for any corporation,
partnership, estate or trust of which such Key Employee is a shareholder,
partner or Beneficiary), the purchase price per share of Common Stock
deliverable upon the exercise of each Incentive Stock Option shall not be less
than 110% of the Fair Market Value of the Company's Common Stock on the date the
Incentive Stock Option is granted. Shares may be purchased only upon payment of
the full purchase price. Payment of the purchase price may be made, in whole or
in part, through the surrender of shares of the Common Stock of the Company at
the Fair Market Value of such shares determined on the exercise date.
(c) Vesting. Subject to Section 7(b) hereof, Incentive Stock Options
awarded to Key Employees shall vest at the rate or rates determined by the
Committee. No Incentive Stock Option shall become vested in a Participant unless
the Participant maintains Continuous Service until the vesting date of such
Option, except as set forth herein.
(d) Exercise of Options. Vested Options may be exercised from time to time,
in whole or in part, by delivering a written notice of exercise to the President
or Chief Executive Officer of the Company, or his designee. Such notice is
irrevocable and must be accompanied by full payment of the exercise price in
cash or shares of Common Stock at the Fair Market Value of such shares
determined on the exercise date.
The Options comprising each installment may be exercised in whole or in
part at any time after such installment becomes vested, provided that the amount
able to be first exercised in a given year is consistent with the terms of
Section 422 of the Code. To the extent required by Section 422 of the Code, the
aggregate Fair Market Value (determined at the time the Option is granted) of
the Common Stock for which Incentive Stock Options are exercisable for the first
time by a Participant during any calendar year (under all plans of the Company
and its Affiliates) shall not exceed $100,000.
The Committee may, in its sole discretion and subject to OTS regulations
and policy, accelerate the time at which any Incentive Stock Option may be
exercised in whole or in part, provided that it is consistent with the terms of
Section 422 of the Code. Notwithstanding the above, in the event of a Change in
Control of the Company, all Incentive Stock Options that have been awarded shall
become immediately exercisable, provided, however, that if the aggregate Fair
Market Value (determined at the time the Option is granted) of Common Stock for
which Options are exercisable as a result of a Change in Control, together with
the aggregate Fair Market Value (determined at the time the Option is granted)
of all other Common Stock for which Incentive Stock Options become exercisable
during such year, exceeds $100,000, then the first $100,000 of Incentive Stock
Options (determined as of the Date
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of Grant) shall be exercisable as Incentive Stock Options and any excess shall
be exercisable as Non-Statutory Stock Options (but shall remain subject to the
provisions of this Section to the extent permitted).
(e) Amounts of Awards. Subject to Section 7(b) hereof, Incentive Stock
Options may be granted to any eligible Key Employee in such amounts as
determined by the Committee; provided that the amount granted is consistent with
the terms of Section 422 of the Code. In granting Incentive Stock Options, the
Committee shall consider such factors as it deems relevant, which factors may
include, among others, the position and responsibilities of the Key Employee,
the length and value of his or her service to the Bank, the Company, or the
Affiliate, the compensation paid to the Key Employee and the Committee's
evaluation of the performance of the Bank, the Company, or the Affiliate,
according to measurements that may include, among others, key financial ratios,
levels of classified assets, and independent audit findings. The provisions of
this subsection (e) shall be construed and applied in accordance with Section
422(d) of the Code and the regulations, if any, promulgated thereunder.
(f) Terms of Options. The term during which each Incentive Stock Option may
be exercised shall be determined by the Committee, provided, however, in no
event shall an Incentive Stock Option be exercisable in whole or in part more
than 10 years from the Date of Grant. If any Key Employee, at the time an
Incentive Stock Option is granted to him, owns stock representing more than 10%
of the total combined voting power of all classes of stock of the Company or its
Affiliate (or, under Section 424(d) of the Code, is deemed to own stock
representing more than 10% of the total combined voting power of all classes of
stock, by reason of the ownership of such classes of stock, directly or
indirectly, by or for any brother, sister, spouse, ancestor or lineal descendent
of such Key Employee, or by or for any corporation, partnership, estate or trust
of which such Key Employee is a shareholder, partner or Beneficiary), the
Incentive Stock Option granted to him shall not be exercisable after the
expiration of five years from the Date of Grant.
(g) Termination of Continuous Service. Upon the termination of a Key
Employee's Continuous Service for any reason other than death, Disability,
Termination for Cause or termination following a Change in Control (other than
for Cause following a Change in Control) the Key Employee's Incentive Stock
Options shall be exercisable only as to those shares that were immediately
purchasable by such Key Employee at the date of termination for a period of
three months following termination. Upon termination of a Key Employee's
Continuous Service due to death or Disability or following a Change in Control,
all Incentive Options held by a Key Employee, whether or not vested at such
time, shall vest and become exercisable by the Participant or his legal
representative or beneficiaries for one year following the date of such
termination, death or cessation of Continuous Service, provided that in no event
shall the period extend beyond the expiration of the Stock Option term, and
provided, further, that, except in the event of death or Disability, such Option
shall not be eligible for treatment as an Incentive Stock Option in the event
such Option is exercised more than three months following termination. In the
event of Termination for Cause, all rights under the Incentive Stock Options
shall expire upon termination.
In order to obtain Incentive Stock Option treatment for Options exercised
by heirs or devisees of an Optionee, the Optionee's death must have occurred
while employed or within three months of termination of Continuous Service.
(h) Transferability. No Incentive Stock Option granted under the Plan is
transferable except by will or the laws of descent and distribution and is
exercisable during his lifetime only by the Key Employee to which it is granted.
(i) Compliance with Code. The options granted under this Section are
intended to qualify as Incentive Stock Options within the meaning of Section 422
of the Code, but the Company makes no warranty as to the qualification of any
Option as an Incentive Stock Option within the meaning of Section 422 of the
Code. If an Option granted hereunder fails for whatever reason to comply with
the provisions of Section 422 of the Code, and such failure is not or cannot be
cured, such Option shall be a Non-Statutory Stock Option.
10. Limited Rights
The Committee may grant a Limited Right simultaneously with the grant of
any Option to any Key Employee of the Bank or the Company, with respect to all
or some of the shares covered by such Option. Limited Rights granted under the
Plan are subject to the following terms and conditions:
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(a) Terms of Rights. In no event shall a Limited Right be exercisable in
whole or in part before the expiration of six months from the date of grant of
the Limited Right. A Limited Right may be exercised only in the event of a
Change in Control of the Company.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, provided that the Fair Market Value of the underlying
shares on the day of exercise is greater than the exercise price of the related
Option.
Upon exercise of a Limited Right, the related Option shall cease to be
exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of the
difference between the exercise price and the Fair Market Value of the Common
Stock subject to the underlying Option. The Limited Right is transferable only
when the underlying Option is transferable and under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall promptly
receive from the Company an amount of cash equal to the difference between the
Fair Market Value on the Date of Grant of the related Option and the Fair Market
Value of the underlying shares on the date the Limited Right is exercised,
multiplied by the number of shares with respect to which such Limited Right is
being exercised. The number of shares to be received on the exercise of such
Limited Right shall be determined by dividing the amount of cash that would have
been available under the first sentence above by the Fair Market Value at the
time of exercise of the shares underlying the Option subject to the Limited
Right.
11. Dividend Equivalent Rights
Simultaneously with the grant of any Option to a Participant, the Committee
may grant a Dividend Equivalent Right with respect to all or some of the shares
covered by such Option. Dividend Equivalent Rights granted under this Plan are
subject to the following terms and conditions:
(a) Terms of Rights. The Dividend Equivalent Right provides the Participant
with a cash benefit per share for each share underlying the unexercised portion
of the related Option equal to the amount of any extraordinary dividend (as
defined in Section 11(c)) per share of Common Stock declared by the Company. The
terms and conditions of any Dividend Equivalent Right shall be evidenced in the
Option agreement entered into with the Participant and shall be subject to the
terms and conditions of the Plan. The Dividend Equivalent Right is transferable
only when the related Option is transferable and under the same conditions.
(b) Payment. Upon the payment of an extraordinary dividend, the Participant
holding a Dividend Equivalent Right with respect to Options or portions thereof
which have vested shall promptly receive from the Company the amount of cash
equal to the amount of the extraordinary dividend per share of Common Stock,
multiplied by the number of shares of Common Stock underlying the unexercised
portion of the related Option. With respect to options or portions thereof which
have not vested, the amount that would have been received pursuant to the
Dividend Equivalent Right with respect to the shares underlying such unvested
Option or portion thereof shall be paid to the Participant holding such Dividend
Equivalent Right together with earnings thereon, on such date as the Option or
portion thereof becomes vested. Payments shall be decreased by the amount of any
applicable tax withholding prior to distribution to the Participant as set forth
in Section 20.
(c) Extraordinary Dividend. For purposes of this Section 11, an
extraordinary dividend is any dividend paid on shares of Common Stock where (i)
the dividend rate exceeds 150% of the Bank's weighted average cost of funds on
interest-bearing liabilities for the current quarter and preceding three
quarters, and (ii) the annualized aggregate dollar amount of the dividend
exceeds the Bank's after-tax net income for the current quarter and preceding
three quarters, or any dividend that exceeds the aggregate amount of the last
four quarterly dividends but does not result in an adjustment under section 18
of the Plan because such adjustment would cause variable accounting under the
Plan. For purposes of this Section 11, the dividend rate equals the quotient,
expressed as a percentage, of (i) the annualized dollar amount of the dividend,
and (ii) the last trade price of the Company's Common Stock on the day
immediately before the dividend is declared.
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12. Reload Option
Simultaneously with the grant of any Option to a Participant, the Committee
may grant a Reload Option with respect to all or some of the shares covered by
such Option. A Reload Option may be granted to a Participant who satisfies all
or part of the exercise price of the Option with shares of Common Stock (as
described in Section 14(c) below). The Reload Option represents an additional
Option to acquire the same number of shares of Common Stock as is used by the
Participant to pay for the original Option or to replace Common Stock withheld
by the Company for payment of a Participant's withholding tax under Section 20.
A Reload Option is subject to all of the same terms and conditions as the
original Option, including the remaining Option exercise term, except that (i)
the exercise price of the shares of Common Stock subject to the Reload Option
will be determined at the time the original Option is exercised and (ii) such
Reload Option will conform to all provisions of the Plan at the time the
original Option is exercised.
13. Surrender of Option
In the event of a Participant's termination of employment or termination of
service as a result of death or Disability, the Participant (or his or her
personal representative(s), heir(s), or devisee(s)) may, in a form acceptable to
the Committee make application to surrender all or part of the Options held by
such Participant in exchange for a cash payment from the Company of an amount
equal to the difference between the Fair Market Value of the Common Stock on the
date of termination of employment or the date of termination of service on the
Board and the exercise price per share of the Option. Whether the Company
accepts such application or determines to make payment, in whole or part, is
within its absolute and sole discretion, it being expressly understood that the
Company is under no obligation to any Participant whatsoever to make such
payments. In the event that the Company accepts such application and determines
to make payment, such payment shall be in lieu of the exercise of the underlying
Option and such Option shall cease to be exercisable.
14. Alternate Option Payment Mechanism
The Committee has sole discretion to determine what form of payment it will
accept for the exercise of an Option. The Committee may indicate acceptable
forms in the agreement with the Participant covering such Options or may reserve
its decision to the time of exercise. No Option is to be considered exercised
until payment in full is accepted by the Committee or its agent.
(a) Cash Payment. The exercise price may be paid in cash or by certified
check. To the extent permitted by law, the Committee may permit all or a portion
of the exercise price of an Option to be paid through borrowed funds.
(b) Cashless Exercise. Subject to vesting requirements, if applicable, a
Participant may engage in a "cashless exercise" of the Option. Upon a cashless
exercise, the Participant shall give the Company written notice of the exercise
of the Option together with an order to a registered broker-dealer or equivalent
third party, to sell part or all of the Common Stock subject to the Option and
to deliver enough of the proceeds to the Company to pay the Option exercise
price and any applicable withholding taxes. If the Participant does not sell the
Common Stock subject to the Option through a registered broker-dealer or
equivalent third party, the Participant may give the Company written notice of
the exercise of the Option and the third party purchaser of the Common Stock
subject to the Option shall pay the Option exercise price plus applicable
withholding taxes to the Company.
(c) Exchange of Common Stock. The Committee may permit payment of the
Option exercise price by the tendering (or constructively tendering) of
previously acquired shares of Common Stock. All shares of Common Stock tendered
in payment of the exercise price of an Option shall be valued at the Fair Market
Value of the Common Stock. No tendered shares of Common Stock which were
acquired by the Participant upon the previous exercise of an Option or as awards
under a stock award plan (such as the Company's Stock Award Plan) shall be
accepted for exchange unless the Participant has held such shares (without
restrictions imposed by said plan or award) for at least six months prior to the
exchange.
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15. Rights of a Shareholder
A Participant shall have no rights as a shareholder with respect to any
shares covered by a Non-Statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in the Plan or in
any Award granted confers on any person any right to continue in the employ of
the Company or its Affiliates or to continue to perform services for the Company
or its Affiliates or interferes in any way with the right of the Company or its
Affiliates to terminate his services as an officer, director or employee at any
time.
16. Agreement with Participants
Each Award of Options, Limited Rights, Dividend Equivalent Rights and/or
Reload Options will be evidenced by a written agreement, executed by the
Participant and the Company or its Affiliates that describes the conditions for
receiving the Awards, including the date of Award, the purchase price,
applicable periods, and any other terms and conditions as may be required by the
Board or applicable securities laws.
17. Designation of Beneficiary
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any Option, Limited Rights, Reload
Option or Dividend Equivalent Right to which he would then be entitled. Such
designation will be made upon forms supplied by and delivered to the Company and
may be revoked in writing. If a Participant fails effectively to designate a
Beneficiary, then his estate will be deemed to be the Beneficiary.
18. Dilution and Other Adjustments
In the event of any change in the capitalization of the Company or the
number of outstanding shares of Common Stock by reason of any stock dividend or
split, pro rata return of capital to all shareholders or any dividend (other
than a quarterly dividend) that exceeds the aggregate amount of the last four
quarterly dividends by more than 100%, recapitalization, or any merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares,
without receipt or payment of consideration by the Company, the Committee will
make such adjustments to previously granted Awards, to prevent dilution or
enlargement of the rights of the Participant, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
that may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
covered by Awards already made under the Plan; or
(c) adjustments in the purchase price of outstanding Incentive and/or
Non-Statutory Stock Options, or any Limited Rights attached to such
Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. With respect to
Incentive Stock Options, no such adjustment shall be made if it would be deemed
a "modification" of the Award under Section 424 of the Code. Further, no such
adjustment shall be made if it will cause variable accounting under the Plan.
19. Effect of a Change in Control on Option Awards
In the event of a Change in Control, the Committee and the Board of
Directors will take one or more of the following actions to be effective as of
the date of such Change in Control:
(a) provide that such Options shall be assumed, or equivalent options shall
be substituted ("Substitute Options") by the acquiring or succeeding corporation
(or an affiliate thereof), provided that: (A) any such Substitute Options
exchanged for Incentive Stock Options shall meet the requirements of Section
424(a) of the Code, and (B) the shares of stock issuable upon the exercise of
such Substitute Options shall be registered in accordance with the Securities
Act of 1933, as amended ("1933 Act") or such securities shall be exempt from
such registration in
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accordance with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively,
"Registered Securities"), or in the alternative, if the securities issuable upon
the exercise of such Substitute Options shall not constitute Registered
Securities, then the Participant will receive upon consummation of the Change in
Control a cash payment for each Option surrendered equal to the difference
between the (1) fair market value of the consideration to be received for each
share of Common Stock in the Change in Control times the number of shares of
Common Stock subject to such surrendered Options, and (2) the aggregate exercise
price of all such surrendered Options; or
(b) in the event of a transaction under the terms of which the holders of
Common Stock will receive upon consummation thereof a cash payment (the "Merger
Price") for each share of Common Stock exchanged in the Change in Control
transaction, make or provide for a cash payment to the Participants equal to the
difference between (1) the Merger Price times the number of shares of Common
Stock subject to such Options held by each Participant (to the extent then
exercisable at prices not in excess of the Merger Price), and (2) the aggregate
exercise price of all such surrendered Options.
20. Withholding
There may be deducted from each distribution of cash and/or Common Stock
under the Plan the minimum amount of any federal or state taxes, including
payroll taxes, that are applicable to such supplemental taxable income and that
are required by any governmental authority to be withheld. Shares of Common
Stock will be withheld where required from any distribution of Common Stock.
21. Amendment of the Plan
The Board may at any time, and from time to time, modify or amend the Plan
in any respect, or modify or amend an Award received by Key Employees and/or
Outside Directors; provided, however, that no such termination, modification or
amendment may affect the rights of a Participant, without his consent, under an
outstanding Award.
22. Effective Date of Plan
The Plan shall become effective upon the date of approval of the Plan by
the Company's shareholders.
23. Termination of the Plan
The right to grant Awards under the Plan will terminate upon the earlier of
(i) 10 years after the Effective Date, or (ii) the date on which the exercise of
Options or related rights equaling the maximum number of shares reserved under
the Plan occurs. The Board may suspend or terminate the Plan at any time,
provided that no such action will, without the consent of a Participant,
adversely affect his rights under a previously granted Award.
24. Applicable Law
The Plan will be administered in accordance with the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
as of the ____ day of ________, 2003.
Date Approved by Stockholders:
-------------
Effective Date:
--------------------
ATTEST: WAYNE SAVINGS BANCSHARES, INC.
- ------------------------ -------------------------------------
Secretary President and Chief Executive Officer
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EXHIBIT B
WAYNE SAVINGS BANCSHARES, INC.
2003 RECOGNITION AND RETENTION PLAN
1. Establishment of the Plan; Creation of Separate Trust
(a) Wayne Savings Bancshares, Inc. (the "Company") hereby establishes the
Wayne Savings Bancshares, Inc. 2003 Recognition and Retention Plan (the "Plan")
upon the terms and conditions hereinafter stated in the Plan.
(b) A separate trust or trusts may be established to purchase shares of the
Common Stock that will be awarded hereunder (the "Trust"). If a trust is
established and a Recipient hereunder fails to satisfy the conditions of the
Plan and forfeits all or any portion of the Common Stock awarded to him or her,
such forfeited shares will be returned to said Trust. If no trust is
established, forfeited shares shall be cancelled or held in treasury as
determined by the Committee.
2. Purpose of the Plan
The purpose of the Plan is to advance the interests of Wayne Savings
Community Bank (the "Bank") and the Company and the Company's shareholders by
providing Key Employees and Outside Directors of the Company and its Affiliates,
including the Bank, upon whose judgment, initiative and efforts the successful
conduct of the business of the Company and its Affiliates largely depends, with
compensation for their contributions to the Company and its Affiliates and an
additional incentive to perform in a superior manner, as well as to attract
people of experience and ability.
3. Definitions
The following words and phrases, when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Company or the Bank, as such terms are defined in Section 424(e) and (f),
respectively, of the Code, or a successor to a parent corporation or subsidiary
corporation.
"Award" means the grant by the Committee of Restricted Stock, as provided
in the Plan.
"Bank" means Wayne Savings Community Bank, or a successor corporation.
"Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
"Board" or "Board of Directors" means the Board of Directors of the
Company, unless otherwise noted.
"Cause" means personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Company or an Affiliate.
"Change in Control" of the Bank or the Company means a change in control of
a nature that: (i) would be required to be reported in response to Item 1(a) of
the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a
B-1
Change in Control of the Bank or the Company within the meaning of the Home
Owners' Loan Act, as amended ("HOLA"), and applicable rules and regulations
promulgated thereunder, as in effect at the time of the Change in Control; or
(iii) without limitation such a Change in Control shall be deemed to have
occurred at such time as (a) any "person" (as the term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 25% or more of the combined voting power of Company's
outstanding securities except for any securities purchased by the Bank's
employee stock ownership plan or trust; or (b) individuals who constitute the
Board on the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved by the
same Nominating Committee serving under an Incumbent Board, shall be, for
purposes of this clause (b), considered as though he were a member of the
Incumbent Board; or (c) a plan of reorganization, merger, consolidation, sale of
all or substantially all the assets of the Bank or the Company or similar
transaction in which the Bank or Company is not the surviving institution
occurs; or (d) a proxy statement soliciting proxies from stockholders of the
Company, by someone other than the current management of the Company, seeking
stockholder approval of a plan of reorganization, merger or consolidation of the
Company or similar transaction with one or more corporations as a result of
which the outstanding shares of the class of securities then subject to the Plan
are to be exchanged for or converted into cash or property or securities not
issued by the Company; or (e) a tender offer is made for 25% or more of the
voting securities of the Company and the shareholders owning beneficially or of
record 25% or more of the outstanding securities of the Company have tendered or
offered to sell their shares pursuant to such tender offer and such tendered
shares have been accepted by the tender offeror.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee of the Board of the Company consisting of
either (i) at least two Non-Employee Directors of the Company, or (ii) the
entire Board of the Company. For these purposes, the Company has designated the
Compensation Committee of the Company as the Committee.
"Common Stock" means shares of the common stock of the Company, par value
$0.10 per share.
"Company" means Wayne Savings Bancshares, Inc., the stock holding company
of the Bank, or a successor corporation.
"Continuous Service" means employment as a Key Employee and/or service as
an Outside Director without any interruption or termination of such employment
and/or service. Continuous Service shall also mean a continuation as a member of
the Board of Directors following a cessation of employment as a Key Employee or
continuation of service as a Director Emeritus following termination of service
as a Director. In the case of a Key Employee, employment shall not be considered
interrupted in the case of sick leave, military leave or any other leave of
absence approved by the Bank or in the case of transfers between payroll
locations of the Bank or between the Bank, its parent, its subsidiaries or its
successor.
"Date of Grant" means the actual date on which an Award is granted by the
Committee.
"Director" means a member of the Board.
"Director Emeritus" means a former member of the Board who has been
appointed by the Board to a Director Emeritus position.
"Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him, or of a Director or Outside Director to serve as such.
Additionally, in the case of an employee, a medical doctor selected or approved
by the Board must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it appears probable that
such Disability will be permanent during the remainder of such employee's
lifetime.
"Effective Date" means the date of, or a date determined by the Board
following, approval of the Plan by the Company's shareholders.
B-2
"Key Employee" means any person who is currently employed by the Company or
an Affiliate who is chosen by the Committee to participate in the Plan.
"Non-Employee Director" means, for purposes of the Plan, a Director who (a)
is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
"OTS" means the Office of Thrift Supervision.
"Outside Director" means a Director of the Company or an Affiliate who is
not an employee of the Company or an Affiliate.
"Recipient" means a Key Employee or Outside Director of the Company or its
Affiliates who receives or has received an Award under the Plan.
"Restricted Period" means the period of time selected by the Committee for
the purpose of determining when restrictions are in effect under Section 6 with
respect to Restricted Stock awarded under the Plan.
"Restricted Stock" means shares of Common Stock that have been contingently
awarded to a Recipient by the Committee subject to the restrictions referred to
in Section 6, so long as such restrictions are in effect.
4. Administration of the Plan
(a) Role of the Committee. The Plan shall be administered by the Committee.
The interpretation and construction by the Committee of any provisions of the
Plan or of any Award granted hereunder shall be final and binding. The Committee
shall act by vote or written consent of a majority of its members. Subject to
the express provisions and limitations of the Plan and subject to OTS
regulations and policy, the Committee may adopt such rules and procedures as it
deems appropriate for the conduct of its affairs. The Committee shall report its
actions and decisions with respect to the Plan to the Board at appropriate
times, but in no event less than one time per calendar year.
(b) Role of the Board. The members of the Committee shall be appointed or
approved by, and will serve at the pleasure of, the Board of Directors of the
Company. The Board may in its discretion from time to time remove members from,
or add members to, the Committee. The Board shall have all of the powers
allocated to it in the Plan, may take any action under or with respect to the
Plan that the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that except as provided in Section 6(b), the Board may
not revoke any Award except in the event of revocation for Cause.
(c) Plan Administration Restrictions. All transactions involving a grant,
award or other acquisitions from the Company shall:
(i) be approved by the Company's full Board or by the Committee;
(ii) be approved, or ratified, in compliance with Section 14 of the
Exchange Act, by either: the affirmative vote of the holders of a
majority of the shares present, or represented and entitled to
vote at a meeting duly held in accordance with the laws under
which the Company is incorporated; or the written consent of the
holders of a majority of the securities of the issuer entitled to
vote, provided that such ratification occurs no later than the
date of the next annual meeting of shareholders; or
(iii)result in the acquisition of Common Stock that is held by the
Recipient for a period of six months following the date of such
acquisition.
B-3
(d) Limitation on Liability. No member of the Board or the Committee shall
be liable for any determination made in good faith with respect to the Plan or
any Awards granted under it. If a member of the Board or the Committee is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of anything done or not done by him in such capacity
under or with respect to the Plan, the Bank or the Company shall indemnify such
member against expense (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Bank and the Company and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
5. Eligibility; Awards
(a) Eligibility. Key Employees and Outside Directors are eligible to
receive Awards.
(b) Awards to Key Employees and Outside Directors. The Committee may
determine which of the Key Employees and Outside Directors referenced in Section
5(a) will be granted Awards and the number of shares covered by each Award;
provided, however, that in no event shall any Awards be made that will violate
the Bank's Charter and Bylaws, the Company's Certificate of Incorporation and
Bylaws, or any applicable federal or state law or regulation. Shares of
Restricted Stock that are awarded by the Committee shall, on the date of the
Award, be registered in the name of the Recipient and transferred to the
Recipient, in accordance with the terms and conditions established under the
Plan. The aggregate number of shares that shall be issued under the Plan is
81,632. Awards issued under the Plan may be issued by the Company from
authorized but unissued shares, treasury shares or shares acquired by the
Company in open market purchases.
(c) The following provisions shall apply to all Awards made under this
plan: no individual officer shall be granted Awards with respect to more than
25% of the total shares subject to the Plan; no Outside Director shall be
granted Awards with respect to more than 5% of the total shares of Common Stock
subject to the Plan; all Outside Directors in the aggregate may not be granted
Awards with respect to more than 30% of the total shares of Common Stock subject
to the Plan; no Awards shall begin vesting earlier than one year from the date
the Plan is approved by shareholders of the Company; and no Awards shall vest at
a rate in excess of 20% per year beginning from the Date of Grant.
(d) In the event Restricted Stock is forfeited for any reason, the
Committee, from time to time, may determine which of the Key Employees and
Outside Directors will be granted additional Awards to be awarded from forfeited
Restricted Stock.
(e) In selecting those Key Employees and Outside Directors to whom Awards
will be granted and the amount of Restricted Stock covered by such Awards, the
Committee shall consider such factors as it deems relevant, which factors may
include, among others, the position and responsibilities of the Key Employees
and Outside Directors, the length and value of their services to the Company and
its Affiliates, the compensation paid to the Key Employees or fees paid to the
Outside Directors, and the Committee may request the written recommendation of
the Chief Executive Officer and other senior executive officers of the Bank, the
Company and its Affiliates or the recommendation of the full Board. All
allocations by the Committee shall be subject to review, and approval or
rejection, by the Board.
No Restricted Stock shall be earned unless the Recipient maintains
Continuous Service with the Company or an Affiliate until the restrictions
lapse.
(f) Manner of Award. As promptly as practicable after a determination
is made pursuant to Section 5(b) to grant an Award, the Committee shall notify
the Recipient in writing of the grant of the Award, the number of shares of
Restricted Stock covered by the Award, and the terms upon which the Restricted
Stock subject to the Award may be earned. Upon notification of an Award of
Restricted Stock, the Recipient shall execute and return to the Company a
restricted stock agreement (the "Restricted Stock Agreement") setting forth the
terms and conditions under which the Recipient shall earn the Restricted Stock,
together with a stock power or stock powers endorsed in blank. Thereafter, the
Recipient's Restricted Stock and stock power shall be deposited with an escrow
agent specified by the Company ("Escrow Agent") who shall hold such Restricted
Stock under the terms and
B-4
conditions set forth in the Restricted Stock Agreement. Each certificate in
respect of shares of Restricted Stock Awarded under the Plan shall be registered
in the name of the Recipient.
(g) Treatment of Forfeited Shares. In the event shares of Restricted Stock
are forfeited by a Recipient, such shares shall be returned to the Company and
shall be held and accounted for pursuant to the terms of the Plan until such
time as the Restricted Stock is re-awarded to another Recipient, in accordance
with the terms of the Plan and the applicable state and federal laws, rules and
regulations.
6. Terms and Conditions of Restricted Stock
The Committee shall have full and complete authority, subject to Section
5(c) and the other limitations of the Plan, to grant awards of Restricted Stock
to Key Employees and Outside Directors and, in addition to the terms and
conditions contained in Sections 6(a) through 6(h), to provide such other terms
and conditions (which need not be identical among Recipients) in respect of such
Awards, and the vesting thereof, as the Committee shall determine.
(a) General Rules. Subject to Section 5(c) hereof, and to OTS regulations
and policy, Restricted Stock shall be earned by a Recipient at the rate or rates
determined by the Committee, provided that such Recipient maintains Continuous
Service. No shares shall vest in any year in which the Bank is not meeting all
of its fully phased-in capital requirements. Subject to any such other terms and
conditions as the Committee shall provide with respect to Awards, shares of
Restricted Stock may not be sold, assigned, transferred (within the meaning of
Code Section 83), pledged or otherwise encumbered by the Recipient, except as
hereinafter provided, during the Restricted Period.
(b) Continuous Service; Forfeiture. Except as provided in Section 6(c), if
a Recipient ceases to maintain Continuous Service for any reason, unless the
Committee shall otherwise determine, all shares of Restricted Stock theretofore
awarded to such Recipient and which at the time of such termination of
Continuous Service are subject to the restrictions imposed by Section 6(a) shall
upon such termination of Continuous Service be forfeited. Any stock dividends or
declared but unpaid cash dividends attributable to such shares of Restricted
Stock shall also be forfeited.
(c) Exception for Termination Due to Death or Disability, and Following a
Change in Control. Notwithstanding the general rule contained in Section 6(a),
Restricted Stock awarded to a Recipient whose Continuous Service with the
Company or an Affiliate terminates due to death, Disability, or following a
Change in Control, shall be deemed earned as of the Recipient's last day of
Continuous Service with the Company or an Affiliate.
(d) Revocation for Cause. Notwithstanding anything hereinafter to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Award, or portion thereof, previously awarded under the Plan, to the extent
Restricted Stock has not been redelivered by the Escrow Agent to the Recipient,
whether or not yet earned, in the case of a Key Employee whose employment is
terminated by the Company or an Affiliate or an Outside Director whose service
is terminated by the Company or an Affiliate for Cause or who is discovered
after termination of employment or service on the Board to have engaged in
conduct that would have justified termination for Cause.
(e) Restricted Stock Legend. Each certificate in respect of shares of
Restricted Stock awarded under the Plan shall be registered in the name of the
Recipient and deposited by the Recipient, together with a stock power endorsed
in blank, with the Escrow Agent, and shall bear the following (or a similar)
legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the Wayne Savings Bancshares, Inc. 2003
Recognition and Retention Plan. Copies of such Plan are on file in the
offices of the Secretary of Wayne Savings Bancshares, Inc., 151 North
Market Street, Wooster, Ohio 44691."
B-5
(f) Payment of Dividends and Return of Capital. After an Award has been
granted but before such Award has been earned, the Recipient shall receive any
cash dividends paid with respect to such shares, or shall share in any pro-rata
return of capital to all shareholders with respect to the Common Stock. Stock
dividends declared by the Company and paid on Awards that have not yet been
earned shall be subject to the same restrictions as the Restricted Stock and the
certificate(s) or other instruments representing or evidencing such shares shall
be legended in the manner provided in Section 6(e) and shall be delivered to the
Escrow Agent for distribution to the Recipient when the Restricted Stock upon
which such dividends were paid are earned. Unless the Recipient has made an
election under Section 83(b) of the Code, cash dividends or other amounts so
paid on shares that have not yet been earned by the Recipient shall be treated
as compensation income to the Recipient when paid. If dividends are paid with
respect to shares of Restricted Stock under the Plan that have been forfeited
and returned to the Company or to a trust established to hold issued and
unawarded or forfeited shares, the Committee can determine to award such
dividends to any Recipient or Recipients under the Plan, to any other employee
or director of the Company or the Bank, or can return such dividends to the
Company.
(g) Voting of Restricted Shares. After an Award has been granted, the
Recipient as conditional owner of the Restricted Stock shall have the right to
vote such shares.
(h) Delivery of Earned Shares. At the expiration of the restrictions
imposed by Section 6(a), the Escrow Agent shall redeliver to the Recipient (or
where the relevant provision of Section 6(c) applies in the case of a deceased
Recipient, to his Beneficiary) the certificate(s) and any remaining stock power
deposited with it pursuant to Section 5(d) and the shares represented by such
certificate(s) shall be free of the restrictions referred to in Section 6(a).
7. Adjustments upon Changes in Capitalization
In the event of any change in the outstanding shares subsequent to the
Effective Date by reason of any reorganization, recapitalization, stock split,
stock dividend, combination or exchange of shares, or any merger, consolidation
or any change in the corporate structure or shares of the Company, without
receipt or payment of consideration by the Company, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive. Any shares of stock or other securities received, as a result of any
of the foregoing, by a Recipient with respect to Restricted Stock shall be
subject to the same restrictions and the certificate(s) or other instruments
representing or evidencing such shares or securities shall be legended and
deposited with the Escrow Agent in the manner provided in Section 6(e).
8. Assignments and Transfers
No Award nor any right or interest of a Recipient under the Plan in any
instrument evidencing any Award under the Plan may be assigned, encumbered or
transferred (within the meaning of Code Section 83) except, in the event of the
death of a Recipient, by will or the laws of descent and distribution until such
Award is earned.
9. Key Employee Rights under the Plan
No Key Employee shall have a right to be selected as a Recipient nor,
having been so selected, to be selected again as a Recipient and no Key Employee
or other person shall have any claim or right to be granted an Award under the
Plan or under any other incentive or similar plan of the Company or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any Key Employee any right to be retained in the employ of the Company
or any Affiliate.
10. Outside Director Rights under the Plan
Neither the Plan nor any action taken thereunder shall be construed as
giving any Outside Director any right to be retained in the service of the
Company or any Affiliate.
B-6
11. Withholding Tax
Upon the termination of the Restricted Period with respect to any shares of
Restricted Stock (or at any such earlier time that an election is made by the
Recipient under Section 83(b) of the Code, or any successor provision thereto,
to include the value of such shares in taxable income), the Bank or the Company
shall have the right to require the Recipient or other person receiving such
shares to pay the Bank or the Company the minimum amount of any federal or state
taxes, including payroll taxes, that are applicable to such supplemental income
and that the Bank or the Company is required to withhold with respect to such
shares, or, in lieu thereof, to retain or sell without notice, a sufficient
number of shares held by it to cover the amount required to be withheld. The
Bank or the Company shall have the right to deduct from all dividends paid with
respect to shares of Restricted Stock the amount of any taxes which the Bank or
the Company is required to withhold with respect to such dividend payments.
12. Amendment or Termination
The Board of the Company may amend, suspend or terminate the Plan or any
portion thereof at any time, provided, however, that no such amendment,
suspension or termination shall impair the rights of any Recipient, without his
consent, in any Award theretofore made pursuant to the Plan. Any amendment or
modification of the Plan or an outstanding Award under the Plan, shall be
approved by the Committee, or the full Board of the Company.
13. Governing Law
The Plan shall be governed by the laws of the State of Delaware.
14. Term of Plan
The Plan shall become effective on the date of, or a date determined by the
Board of Directors following, approval of the Plan by the Company's
shareholders. It shall continue in effect until the earlier of (i) ten years
from the Effective Date unless sooner terminated under Section 12 hereof, or
(ii) the date on which all shares of Common Stock available for award hereunder,
have vested in the Recipients of such Awards.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
as of the ____ day of __________________, 2003.
Date Approved by Shareholders:
-------------
Effective Date:
----------------------------
ATTEST: WAYNE SAVINGS BANCSHARES, INC.
- ---------------------------------- -------------------------------------
Secretary President and Chief Executive Officer
B-7
EXHIBIT C
WAYNE SAVINGS BANCSHARES, INC.
AUDIT COMMITTEE CHARTER
Purpose
- -------
There shall be a committee of the board of directors to be known as the audit
committee. The audit committee shall be composed of directors who are
independent of the management of the Company and are free of any relationship
that, in the opinion of the board of directors, would interfere with their
exercise of independent judgment as a committee member.
Statement of Policy
- -------------------
The audit committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to the corporate accounting, reporting practices
of the Company, and the quality and integrity of the financial reports of the
Company.
Composition
- -----------
The audit committee shall be comprised of three or more directors as determined
by the board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the board, would interfere with the
exercise of his or her independent judgment. No director will be considered
independent if s/he has accepted any consulting, advisory or compensatory fee
from Wayne (other than in his or her capacity as a director) or is an affiliated
person of the company or any subsidiary. Affiliated person for this charter
means an executive officer and/or controlling shareholder.
Frequency of Meeting
- --------------------
The audit committee shall meet at least four times annually, or more frequently
as matters dictate. The audit committee shall keep minutes and other relevant
records of all of its meetings and will submit its minutes to the board no later
than one board meeting following the audit committee meeting.
Responsibilities
- ----------------
The Audit Committee shall have direct supervision over, and shall receive all
reports from, the bank's internal audit staff and shall report significant
findings and events to the full board of directors. In carrying out its
responsibilities, the audit committee believes its policies and procedures
should remain flexible, in order to best react to changing conditions and to
ensure to the directors and shareholders that the corporate accounting and
reporting practices of Wayne are in accordance with all requirements and are of
the highest quality. The Audit Committee also shall:
o Review the internal audit function, including the independence and
authority of its reporting obligations and the proposed audit plans for the
coming year.
o Receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit plan,
with explanations for any deviations from the original plan.
o Provide sufficient opportunity for the internal auditors to meet with the
members of the audit committee without members of management present to
discuss matters of importance regarding audit coverage.
o Review and resolve any identifiable material weaknesses in the bank's
system of internal controls.
o Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
C-1
Audit Authorization
- -------------------
The Board recognizes that to effectively fulfill the intended audit tasks, an
auditor should achieve a degree of independence that prevents the personnel
being reviewed form controlling the auditor's work and reports. Accordingly the
board authorizes the following:
The director of auditing is authorized to direct a broad, comprehensive program
of internal auditing within the bank. Internal auditing examines and evaluates
the adequacy and effectiveness of the systems of control provided by the bank to
direct its activities toward the accomplishment of its objectives in accordance
with institution policies and plans. In accomplishing these activities, the
director of auditing and authorized representatives are authorized to have full,
free, and unrestricted access to all institution functions, records, property,
and personnel.
Policy Review
- -------------
The Audit Committee will review this charter on at least an annual basis, if not
more frequently, so that changing regulatory positions with regard to the
operation of the Audit Committee are addressed.
C-2
REVOCABLE PROXY
WAYNE SAVINGS BANCSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
July 24, 2003
The undersigned hereby appoints the full Board of Directors, with full
powers of substitution to act as attorneys and proxies for the undersigned to
vote all shares of common stock of Wayne Savings Bancshares, Inc. which the
undersigned is entitled to vote at the Annual Meeting of Stockholders (the
"Meeting") to be held at the Greenbriar Conference Centre at 50 Riffel Road,
Wooster, Ohio, at 10:00 a.m. (local time) on July 24, 2003. The official proxy
committee is authorized to cast all votes to which the undersigned is entitled
as follows:
1. The election as Directors of all nominees listed below each to serve for a
three-year term
VOTE
FOR WITHHELD
[_] [_]
James C. Morgan
Kenneth R. Lehman
INSTRUCTION: To withhold your vote for one or more nominees, write the name
of the nominee(s) on the line(s) below.
- ----------------------------
- ----------------------------
2. Approval of the 2003 Stock Option Plan.
FOR AGAINST ABSTAIN
--- ------- -------
[_] [_] [_]
3. Approval of the 2003 Recognition and Retention Plan.
FOR AGAINST ABSTAIN
--- ------- -------
[_] [_] [_]
4. The ratification of the appointment of Grant Thornton LLP as auditors for
the fiscal year ending March 31, 2004.
FOR AGAINST ABSTAIN
--- ------- -------
[_] [_] [_]
The Board of Directors recommends a vote "FOR" each of the listed proposals.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE
ABOVE-NAMED PROXIES AT THE DIRECTION 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 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 Wayne Savings
Bancshares, Inc. 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. This proxy may also be revoked by sending
written notice to the Secretary of Wayne Savings Bancshares, Inc. at the address
set forth on the Notice of Annual Meeting of Stockholders, or by the filing of a
later proxy statement prior to a vote being taken on a particular proposal at
the Meeting.
The undersigned acknowledges receipt from Wayne Savings Bancshares, Inc.
prior to the execution of this proxy of a Notice of the Meeting, a proxy
statement dated June __, 2003, and audited financial statements.
Dated: , 2003 [_] Check Box if You Plan
----------------------- to Attend Meeting
- ----------------------------------- -------------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ----------------------------------- -------------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. 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 and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.
- --------------------------------------------------------------------------------