SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
PennFed Financial Services, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
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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.
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September 22, 2003
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of PennFed Financial
Services, Inc., we cordially invite you to attend the Annual Meeting of
Stockholders of the Company. The Meeting will be held at 10:00 a.m., local time,
on Wednesday, October 29, 2003, at the Radisson Hotel, located at 690 Route 46
East, Fairfield, New Jersey.
An important aspect of the annual meeting process is the annual
stockholder vote on corporate business items. I urge you to exercise your rights
as a stockholder to vote and participate in this process. Stockholders are being
asked to consider and vote upon (i) the election of two directors of the
Company, (ii) a proposal to change the Company's state of incorporation from
Delaware to Maryland and (iii) the ratification of the appointment of the
Company's independent auditors. In addition, the Meeting will include
management's report to you on the Company's fiscal 2003 financial and operating
performance.
Reincorporating in Maryland would allow the Company to achieve significant
cost savings by no longer having to pay Delaware franchise taxes. For calendar
year 2002, the Company paid approximately $67,000 in Delaware franchise taxes,
an amount that is expected to increase for 2003 and future years if the Company
remains a Delaware corporation. Accordingly, your Board of Directors unanimously
recommends that you vote FOR the reincorporation proposal. The Board also
unanimously recommends that you vote FOR the election of the director nominees
named in the accompanying proxy statement and FOR the ratification of the
appointment of the Company's independent auditors.
We encourage you to attend the Meeting in person. Whether or not you plan
to attend, however, please read the enclosed proxy statement and then complete,
sign and date the enclosed proxy card and return it in the accompanying postpaid
return envelope as promptly as possible. If your shares are held through a bank
or broker, check your proxy card to see if you can also vote by telephone or via
the internet. Voting as early as possible will save the Company additional
expense in soliciting proxies and will ensure that your shares are represented
at the Meeting.
Your Board of Directors and management are committed to the continued
success of PennFed Financial Services, Inc., and the enhancement of your
investment. As President, I want to express my appreciation for your confidence
and support.
Very truly yours,
/s/ Joseph L. LaMonica
----------------------
Joseph L. LaMonica
President and Chief
Executive Officer
PENNFED FINANCIAL SERVICES, INC.
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
(973) 669-7366
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on October 29, 2003
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of PennFed Financial Services, Inc. (the "Company") will be held at
the Radisson Hotel, located at 690 Route 46 East, Fairfield, New Jersey, at
10:00 a.m., local time, on Wednesday, October 29, 2003.
A proxy card and a proxy statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. the election of two directors of the Company;
2. a proposal to change the Company's state of incorporation from
Delaware to Maryland;
3. the ratification of the appointment of Deloitte & Touche LLP
as independent auditors for the Company for the fiscal year
ending June 30, 2004;
and such other matters as may properly come before the Meeting, or any
adjournments or postponements 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 the Meeting may be
adjourned or postponed. Stockholders of record at the close of business on
September 5, 2003 are the stockholders entitled to vote at the Meeting and any
adjournments or postponements thereof. A complete list of stockholders entitled
to vote at the Meeting will be available for stockholders at the offices of the
Company during the ten days prior to the Meeting, as well as at the Meeting.
You are requested to complete and sign the enclosed proxy card, which is
solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. If you hold your shares through a bank or broker, check you
proxy card to see whether you can also vote by telephone or via the internet.
Your proxy will not be used if you attend and vote at the Meeting in person.
By Order of the Board of Directors
William C. Anderson
Chairman of the Board
West Orange, New Jersey
September 22, 2003
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
PROXY STATEMENT
PENNFED FINANCIAL SERVICES, INC.
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989
(973) 669-7366
ANNUAL MEETING OF STOCKHOLDERS
October 29, 2003
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of PennFed Financial Services, Inc. (the
"Company") of proxies to be used at the Annual Meeting of Stockholders of the
Company (the "Meeting"), which will be held at the Radisson Hotel, located at
690 Route 46 East, Fairfield, New Jersey, on Wednesday, October 29, 2003, at
10:00 a.m., local time, and all adjournments or postponements of the Meeting.
The accompanying Notice of Annual Meeting and form of proxy and this Proxy
Statement are first being mailed to stockholders on or about September 22, 2003.
Certain of the information provided in this Proxy Statement relates to Penn
Federal Savings Bank ("Penn Federal" or the "Bank"), a wholly owned subsidiary
of the Company.
At the Meeting, stockholders of the Company are being asked to consider
and vote upon (i) the election of two directors of the Company, (ii) a proposal
to change the Company's state of incorporation from Delaware to Maryland (the
"Reincorporation Proposal") and (iii) the ratification of the appointment of
Deloitte & Touche LLP as the Company's independent auditors for the fiscal year
ending June 30, 2004.
Vote Required and Proxy Information
All shares of the Company's common stock represented at the Meeting by
properly executed proxies received prior to or at the Meeting, and not revoked,
will be voted at the Meeting in accordance with the instructions thereon. If no
instructions are indicated, properly executed proxies will be voted for the
election of the nominees named in this Proxy Statement, for the Reincorporation
Proposal and for the ratification of the appointment of Deloitte & Touche LLP.
The Company does not know of any matters, other than as described in the Notice
of Annual Meeting of Stockholders, that are to come before the Meeting. If any
other matters are properly presented at the Meeting for action, the Board of
Directors, as proxy for the stockholder, will have the discretion to vote on
such matters in accordance with its best judgment.
Directors will be elected by a plurality of the votes cast. The approval
of the Reincorporation Proposal requires the affirmative vote of the holders of
a majority of the outstanding shares of the Company's common stock. The
ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditors requires the affirmative vote of a majority of the votes
cast on the matter. In the election of directors, stockholders may either vote
"FOR" both nominees for election or withhold their votes from either nominee or
both nominees for election. Votes that are withheld and shares held by a broker,
as nominee, that are not voted (so-called "broker non-votes") in the election of
directors will not be included in determining the number of votes cast. On the
Reincorporation Proposal and the proposal to ratify the appointment of the
independent auditors, stockholders may vote "FOR," "AGAINST" or "ABSTAIN" with
respect to these proposals. Proxies marked to abstain and broker non-votes will
have the same effect as votes against the Reincorporation Proposal. Abstentions
will have the same effect as votes against the proposal to ratify the
appointment of the independent auditors, and broker non-votes will have no
effect on this proposal. The holders of at least one-third of the outstanding
shares of the common stock, present in person or represented by proxy, will
constitute a quorum for purposes of the Meeting. Proxies marked to abstain and
broker non-votes will be counted for purposes of determining a quorum.
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by stockholders of record by: (i)
filing with the Secretary of the Company at or before the Meeting a written
notice of revocation bearing a later date than the proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Secretary
of the Company at or before the Meeting; or (iii) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute revocation of a proxy). Any written notice revoking a proxy should be
delivered to Patrick D. McTernan, Secretary, PennFed Financial Services, Inc.,
622 Eagle Rock Avenue, West Orange, New Jersey 07052-2989. A person holding
shares through a bank, broker or other nominee must follow the instructions of
the bank, broker or other nominee in order to revoke a proxy.
Voting Securities and Certain Holders Thereof
Stockholders of record as of the close of business on September 5, 2003
will be entitled to one vote for each share then held. As of that date, the
Company had 6,870,178 shares of common stock issued and outstanding. The
following table sets forth, as of September 5, 2003, information regarding share
ownership of: (i) those persons or entities known by management to beneficially
own more than five percent of the common stock; (ii) each of the executive
officers of the Company and the Bank who do not beneficially own more than five
percent of the common stock but who are named in the "Summary Compensation
Table" below; and (iii) all directors and executive officers of the Company and
the Bank as a group. For information regarding the beneficial ownership of
common stock by directors of the Company, see "Proposal I. Election of
Directors--General."
Shares Percent
Beneficially of
Beneficial Owner Owned Class
- ------------------------------------------- ------------ --------
PennFed Financial Services, Inc.
Employee Stock Ownership Plan
622 Eagle Rock Avenue
West Orange, New Jersey 07052-2989 875,727(1) 12.75%
The Trust Company of New Jersey
35 Journal Square
Jersey City, New Jersey 07036 557,791(2) 8.12%
Tontine Partners, L.P.
Tontine Financial Partners, L.P.
Tontine Management, L.L.C.
Tontine Overseas Associates, L.L.C.
Jeffrey L. Gendell
200 Park Avenue
Suite 3900
New York, New York 10166 542,500(3) 7.90%
Dimensional Fund Advisors
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401 471,400(4) 6.86%
John Hancock Financial Services, Inc.
John Hancock Life Insurance Company and
John Hancock Subsidiaries LLC
P.O. Box 111
Boston, Massachusetts 02117 370,500(5) 5.39%
and
The Berkeley Financial Group and
John Hancock Advisors, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
William C. Anderson
Chairman of the Board of Directors 410,381(6) 5.74%
2
Shares Percent
Beneficially of
Beneficial Owner Owned Class
- ------------------------------------------- ------------ --------
Joseph L. LaMonica
President and Chief
Executive Officer 530,426(7) 7.38%
Patrick D. McTernan
Senior Executive Vice President,
General Counsel and Secretary 156,660(7) 2.26%
Jeffrey J. Carfora
Senior Executive Vice President and
Chief Operating Officer 83,306(7) 1.21%
Claire M. Chadwick
Executive Vice President and
Chief Financial Officer 26,395(7) 0.38%
Barbara A. Flannery
Executive Vice President and
Retail Banking Group Executive of the Bank 80,807(7) 1.17%
Directors and executive officers
of the Company and the Bank
as a group (10 persons) 1,668,709(8) 21.44%
footnotes follow
- ----------
(1) The amount reported represents shares held by the PennFed Financial
Services, Inc. Employee Stock Ownership Plan (the "ESOP"), 746,897 of
which have been allocated to accounts of participants. First Bankers Trust
Company, Quincy, Illinois, the trustee of the ESOP, may be deemed to
beneficially own the shares held by the ESOP which have not been allocated
to the accounts of participants. Pursuant to the terms of the ESOP,
participants in the ESOP have the right to direct the voting of shares
allocated to participant accounts. Unallocated shares are voted by the
trustee in the same proportion that the allocated shares are voted
pursuant to participant instructions.
(2) As reported by The Trust Company of New Jersey ("Trust Co.") in an
amendment to a Schedule 13G filed with the Securities and Exchange
Commission (the "SEC") on February 13, 2003. Trust Co. reported sole
voting and dispositive powers over 556,791 shares and shared voting and
dispositive powers over 1,000 shares.
(3) As reported by Tontine Partners, L.P. ("TP"), Tontine Financial Partners,
L.P. ("TF"), Tontine Management, L.L.C. ("TM"), Tontine Overseas
Associates, L.L.C. ("TO") and Jeffrey L. Gendell in an amendment to a
Schedule 13G filed with the SEC on February 6, 2003. TM is general partner
of TF and TP and Mr. Gendell serves as the managing member of TM and TO.
With respect to the 542,500 shares listed, TP reported shared voting and
dispositive powers over 80,840 shares, TF reported shared voting and
dispositive powers over 379,300 shares, TM reported shared voting and
dispositive powers over 460,140 shares, TO reported shared voting and
dispositive powers over 82,360 shares and Mr. Gendell reported shared
voting and dispositive powers over all 542,500 shares.
(4) As reported by Dimensional Fund Advisors ("Dimensional") in an amendment
to a Schedule 13G filed with the SEC on February 14, 2003. Dimensional
reported sole voting and dispositive powers over all shares listed.
(5) As reported by John Hancock Financial Services, Inc.("JHFS"), JHFS's
wholly-owned subsidiary, John Hancock Life Insurance Company ("JHLIC"),
JHLIC's wholly-owned subsidiary, John Hancock Subsidiaries, LLC ("JHS"),
JHS's wholly-owned subsidiary, The Berkeley Financial Group ("TBFG"), and
TBFG's wholly-owned subsidiary, John Hancock Advisers, Inc., ("JHA") in an
amendment to a Schedule 13G filed with the SEC on February 4, 2002. JHFS,
JHLIC, JHS, and TBFG reported indirect beneficial ownership of these
shares. JHA reported sole voting and dispositive powers as to all of such
shares.
(6) Includes 278,550 shares which Mr. Anderson has the right to acquire
pursuant to stock options that are currently exercisable.
(7) Includes shares held directly, as well as shares held jointly with family
members, in retirement accounts, in a fiduciary capacity, by certain
members of the officers' families, by trusts of which the officer is a
trustee or substantial beneficiary, with respect to which the officer may
be deemed to have sole or shared voting and/or dispositive powers. Also
includes 319,721, 69,434, 29,984, 11,000 and 44,634 shares which Mr.
LaMonica, Mr. McTernan, Mr. Carfora, Ms. Chadwick and Ms. Flannery,
respectively, have the right to acquire pursuant to stock options that are
currently exercisable, and 23,674, 23,674, 19,843, 11,854 and 19,263
shares allocated to the ESOP accounts of Mr. LaMonica, Mr. McTernan, Mr.
Carfora, Ms. Chadwick and Ms. Flannery, respectively.
(8) This amount includes shares held directly, shares allocated to the
accounts of executive officers under the ESOP, as well as shares held
jointly with family members, in retirement accounts, in a fiduciary
capacity, by certain of the group members' families, by certain related
entities or by trusts of which the group member is a trustee or
substantial beneficiary, with respect to which shares the group member may
be deemed to have sole or shared voting and/or dispositive powers. This
amount also includes an aggregate of 913,023 shares which directors and
executive officers as a group have the right to acquire pursuant to stock
options that are currently exercisable, and excludes 13,660 shares of
which Mario Teixeira, Jr., a director of the Company, disclaims beneficial
ownership.
3
PROPOSAL I. ELECTION OF DIRECTORS
General
The Company's Board of Directors consists of six members, each of whom is also a
director of the Bank. Each of the current directors of the Company has served in
such capacity since the Company's incorporation as a Delaware corporation in
March 1994. The Board is divided into three classes, each of which contains
one-third of the Board. One-third of the directors are elected annually.
Directors of the Company are generally elected to serve for three-year terms or
until their respective successors are elected and qualified.
The following table sets forth certain information, as of September 5, 2003,
regarding the composition of the Company's Board of Directors, including each
director's term of office. The Board of Directors acting as the nominating
committee has recommended and approved the nominees identified in the following
table. 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 a nominee)
will be voted at the Meeting FOR the election of the nominees identified below.
If a nominee is unable to serve, the shares represented by all valid proxies
will be voted for the election of such substitute nominee as the Board of
Directors may recommend. At this time, the Board of Directors knows of no reason
why either nominee may be unable to serve, if elected. Except as disclosed in
this Proxy Statement, there are no arrangements or understandings between the
nominee and any other person pursuant to which the nominee was selected. Note
that if the Reincorporation Proposal is approved and the Company's state of
incorporation is changed to Maryland, the individuals named below will, under
the Company's new Maryland charter, serve as directors following the
reincorporation for terms to expire in the years indicated below. See "Proposal
II. Reincorporation as a Maryland Corporation--Comparison of
Stockholder Rights-Number and Classification of Directors."
Shares of
Common Stock Percent
Position(s) Held Director Term to Beneficially of
Name Age in the Company Since(1) Expire Owned(2) Class
- ----------------- ----- ----------------------- -------- -------- -------------- ------
NOMINEES
Joseph L. LaMonica 53 Director, President and
Chief Executive Officer 1987 2006 530,426 7.38%
Mario Teixeira, Jr. 67 Director 1971 2006 175,685 (3) 2.54%
DIRECTORS CONTINUING IN OFFICE
William C. Anderson 55 Chairman of the Board 1979 2004 410,381 5.74%
Amadeu L. Carvalho 74 Director 1990 2004 115,124 1.66%
Patrick D. McTernan 51 Director, Senior
Executive Vice
President, General
Counsel and Secretary 1989 2005 156,660 2.26%
Marvin D. Schoonover 53 Director 1990 2005 72,380 1.05%
- ----------
(1) Includes service as a director of the Bank prior to the formation of the
Company.
(2) Amounts include shares held directly, as well as shares held jointly with
family members, in retirement accounts, in a fiduciary capacity, by
certain members of the directors' families, by certain related entities or
by trusts of which the director is a trustee or substantial beneficiary,
with respect to which shares the respective director may be deemed to have
sole or shared voting and/or dispositive powers. Amounts also include
319,721, 52,500, 278,550, 67,600, 69,434 and 29,600 shares which Messrs.
LaMonica, Teixeira, Anderson, Carvalho, McTernan and Schoonover,
respectively, have the right to acquire pursuant to stock options that are
currently exercisable. With respect to Messrs. LaMonica and McTernan,
amounts also include 23,674 shares which have been allocated to each of
their respective accounts under the ESOP.
(3) Amount excludes 13,660 shares of which Mr. Teixeira disclaims beneficial
ownership.
4
The principal occupation of each director of the Company and each of the
nominees for director is set forth below. All directors and nominees have held
their present principal occupation for at least five years unless otherwise
indicated.
Joseph L. LaMonica--Mr. LaMonica has been President and Chief Executive
Officer of the Company since its incorporation as a Delaware corporation in
March 1994, and of Penn Federal since 1988. Mr. LaMonica has served Penn Federal
in various capacities since joining the Bank in 1980. He also is a member of and
serves as a director to many charitable and philanthropic organizations.
Mario Teixeira, Jr.--Mr. Teixeira has been a licensed funeral director
since 1961. He is owner and President of the Buyus Funeral Home in Newark and
owns the Bernauer Funeral Home and the Rucki Funeral Home, both located in
Newark, as well as the Shaw-Buyus Home for Services, located in Kearny, New
Jersey.
William C. Anderson--Mr. Anderson has been Chairman of the Board of the
Company since its incorporation in March 1994 and Chairman of the Board of Penn
Federal since 1988. Mr. Anderson is also the Chairman of the Board and President
of John Young Company, Inc., a real estate agency located in Caldwell, New
Jersey.
Amadeu L. Carvalho--Mr. Carvalho, retired Controller of the Singer
Company, currently is in private accounting practice in Elizabeth, New Jersey.
His practice includes tax services and business and strategic planning for small
and medium size companies.
Patrick D. McTernan--Mr. McTernan has been General Counsel and Secretary
of the Company since its incorporation in March 1994. He joined Penn Federal in
1989 as Senior Vice President and General Counsel, and was named Senior
Executive Vice President in 1999. Mr. McTernan is a member of the New Jersey
State Bar Association and the Legal Committee of the New Jersey League of
Community Bankers.
Marvin D. Schoonover--Mr. Schoonover is a Senior Account Executive with
the EMAR Group, Inc., an insurance agency located in Livingston, New Jersey, and
is responsible for the marketing, sales and servicing of commercial property and
casualty insurance. Mr. Schoonover first joined the EMAR Group, Inc. in 1980.
Meetings and Committees of the Board of Directors
Meetings and Committees of the Company. Meetings of the Company's Board of
Directors are generally held on a monthly basis. For the fiscal year ended June
30, 2003, the Board of Directors met 19 times. During fiscal 2003, no incumbent
director of the Company attended fewer than 75% of the aggregate of the total
number of Board meetings and the total number of meetings held by the committees
of the Board of Directors on which he served. The Board of Directors of the
Company has standing Executive and Audit Committees.
The Executive Committee is comprised of all members of the Board. The
Executive Committee meets on an as needed basis and exercises the power of the
Board of Directors between Board meetings, to the extent permitted by law. This
Committee did not meet during fiscal 2003.
The Audit Committee is comprised of Chairman Anderson (Chairman) and
Directors Carvalho and Teixeira. The Audit Committee operates under a written
charter adopted by the Company's Board of Directors. The Audit Committee is
appointed by the Company's Board of Directors to provide assistance to the Board
in fulfilling its oversight responsibility relating to the integrity of the
Company's consolidated financial statements and the financial reporting
processes, the systems of internal accounting and financial
5
controls, compliance with legal and regulatory requirements, the independent
auditor's qualifications and independence and the performance of the Company's
internal audit function and independent auditors. The Audit Committee also is
responsible for hiring, retaining and terminating the Company's independent
auditors. The Audit Committee met three times in fiscal 2003. For additional
information on the Company's Audit Committee, see "Audit Committee Matters"
below.
The entire Board of Directors acts as a nominating committee for selecting
nominees for election as directors. While the Board of Directors of the Company
will consider nominees recommended by stockholders, the Board has not actively
solicited such nominations. The Board of Directors met one time in fiscal 2003
in its capacity as a nominating committee.
Pursuant to the Company's bylaws, nominations for directors by
stockholders must be made in writing and delivered to the Secretary of the
Company at least 90 days prior to the meeting date. If, however, less than 100
days' notice of the date of the meeting is given or made to stockholders by
public notice or mail, nominations must be received by the Company not later
than the close of business on the tenth day following the earlier of the day on
which notice of the date of the meeting was mailed or public announcement of the
date of the meeting was first made. In addition to meeting the applicable
deadline, nominations must be accompanied by certain information specified in
the Company's bylaws. If the Reincorporation Proposal is approved and the
Company's state of incorporation is changed to Maryland, the deadline for
stockholder submissions of director nominations will remain the same, except
that these nominations may not be delivered earlier than 120 days prior to the
meeting date. See "Proposal II. Reincorporation as a Maryland
Corporation--Comparison of Stockholder Rights-Advance Notice Requirements for
Presentation of Business and Nominations of Directors at Annual Meetings of
Stockholders."
Meetings and Committees of the Bank. The Bank's Board of Directors
generally meets twice per month and may have additional special meetings upon
the written request of the Chairman of the Board, the President or at least
three directors. The Bank's Board of Directors met 24 times during the fiscal
year ended June 30, 2003. During fiscal 2003, no incumbent director of the Bank
attended fewer than 75% of the aggregate of the total number of Board meetings
and the total number of meetings held by the committees of the Board of
Directors on which he served. The Bank has standing Audit, Human Resources and
Compensation Committees, as well as other committees which meet periodically.
Set forth below is a description of certain committees of the Bank.
The Audit Committee is responsible for the oversight of the Bank's
Internal Audit Department and for the review of the Bank's annual audit report
prepared by the Bank's independent auditors. The current members of the
committee are Chairman Anderson (Chairman) and Directors Carvalho and Teixeira.
The Audit Committee met five times during fiscal 2003.
The Bank's Human Resources Committee is responsible for the review and
approval of the numerous personnel policies of the Bank. This Committee
addresses, among other things, the Bank's benefit programs and plans and
affirmative action plan. The current members of the Human Resources Committee
are Directors Teixeira (Chairman), Schoonover and LaMonica. The Committee met
one time during fiscal 2003.
The Bank's Compensation Committee, which acts as the compensation
committee of the Company and the Bank, determines salary ranges and incentive
compensation. This Committee is also responsible for administering the Company's
1994 Stock Option and Incentive Plan (the "Stock Option Plan") and Management
Recognition Plan (the "MRP"). The current members of the Compensation Committee
are Directors Carvalho (Chairman) and Teixeira. This Committee met one time
during the fiscal year ended June 30, 2003.
6
Audit Committee Matters
Audit Committee Report. The Audit Committee of the Company's Board of
Directors has issued the following report with respect to the audited financial
statements of the Company for the fiscal year ended June 30, 2003:
o The Audit Committee has reviewed and discussed with the Company's
management the Company's fiscal 2003 audited financial statements;
o The Audit Committee has discussed with the Company's independent
auditors (Deloitte & Touche LLP) the matters required to be
discussed by Statement on Auditing Standards No. 61;
o The Audit Committee has received the written disclosures and letter
from the independent auditors required by Independence Standards
Board No. 1 (which relates to the auditors' independence from the
Company) and has discussed with the auditors their independence from
the Company; and
o Based on the review and discussions referred to in the three items
above, the Audit Committee recommended to the Board of Directors
that the fiscal 2003 audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 2003.
Submitted by the Audit Committee of the Company's Board of Directors:
William C. Anderson
Amadeu L. Carvalho
Mario Teixeira, Jr.
Independence of Members and Audit Committee Charter. Each of Messrs.
Anderson, Carvalho and Teixeira is "independent" under the definition of
independence contained in the National Association of Securities Dealers'
current listing standards for the Nasdaq Stock Market. The Company's Board of
Directors has adopted a written charter for the audit committee. A copy of the
charter as currently in effect is attached to this Proxy Statement as Appendix
A.
Director Compensation
Fees. Each director of the Company is also a director of the Bank. For
fiscal 2003, each non-employee director, other than the Chairman of the Board,
was paid a retainer of $33,000 for service on the Bank's Board of Directors and
a retainer of $2,000 for service on the Company's Board of Directors. For the
Chairman, these amounts were $75,000 and $10,000, respectively. During fiscal
2003, each non-employee director other than the Chairman also received a fee of
$500 for each meeting of the Bank's Board attended and $350 for each meeting of
the Company's Board attended. For the Chairman, these fees were $750 and $350,
respectively. In addition, during fiscal 2003, each non-employee director
received $400 for each Company Board committee meeting attended ($500 for the
chairman of each committee) and $5,000 for the payment of an annual life
insurance premium ($10,000 for the Chairman of the Board). Each director who is
employed by the Company (Messrs. LaMonica and McTernan) was paid a fee of $350
for each meeting of the Company's Board attended during fiscal 2003.
Director's Retirement Plan. Effective as of March 1, 2003, the Company
adopted the PennFed Financial Services, Inc. Director's Retirement Plan (the
"Director's Retirement Plan") to provide for retirement benefits to directors
selected for participation in the Director's Retirement Plan. The Director's
7
Retirement Plan provides that upon the later of the date of the termination of
the participant's service as a director or advisory director and the
participant's attainment of age 65, the participant will receive an annual
benefit, payable in monthly installments over a ten-year period, equal to 70% of
the annual director fees payable by the Company and the Bank to the participant
as of the date of the participant's retirement. If a participant's service as a
director or advisory director is terminated for cause, no benefits will be paid
to him under the Director's Retirement Plan.
If a participant dies while still providing services as a director or
advisory director, no death benefit will be paid for the participant under the
Director's Retirement Plan. If a participant dies after he has begun to receive
retirement benefits under the Director's Retirement Plan, payment of these
benefits will cease following his death.
A participant becomes fully vested in his Director's Retirement Plan
benefits in accordance with the vesting schedule, if any, set forth in his
individual plan agreement. The current participants in the Director's Retirement
Plan are Directors Anderson and Schoonover, each of whom is fully vested in his
retirement benefits under the Director's Retirement Plan. The Director's
Retirement Plan is an unfunded plan. The Company has, however, obtained life
insurance policies on the lives of participants in the Director's Retirement
Plan as a means of offsetting some of the costs of providing the benefits under
the Director's Retirement Plan.
Consulting Agreements. Effective as of March 1, 2003, the Company entered
into consulting agreements ("Consulting Agreements") with each of Directors'
Carvalho and Teixeira for the purpose of ensuring the retention of the services
and expertise of these directors as consultants following the termination of
their service as directors. Each Consulting Agreement provides for a term
commencing on the date the consultant ceases to be a director for any reason
other than death (the "Retirement Date") and ending on the earlier of the date
ten years after the Retirement Date or the date the consultant dies. Each
Consulting Agreement calls for the consultant to provide expertise and services
regarding director matters, matters pertaining to the management and operation
of the Company and matters pertaining to publicly traded companies generally as
the Company shall reasonably request. During the term of his Consulting
Agreement, each consultant will be paid by the Company a monthly amount equal to
one-twelfth of 70% of the annual director fees that the consultant was receiving
from the Company and the Bank when he ceased providing services as a director of
the Company and the Bank.
8
Executive Compensation
The following table sets forth information regarding compensation paid to
the Company's Chief Executive Officer and to the four highest earning other
executive officers of the Company and the Bank, each of whom earned a salary and
bonus for fiscal 2003 in excess of $100,000 (the "Named Officers").
=============================================================================================================================
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------
Long-Term
Compensation
---------------------------
Annual Compensation Awards
- -----------------------------------------------------------------------------------------------------------
Restricted Securities
Stock Underlying All Other
Year Salary Bonus Award(s) Options Compensation
Name and Principal Position ($) ($) ($) (#) ($)
- -----------------------------------------------------------------------------------------------------------------------------
Joseph L. LaMonica, 2003 $450,000 $187,500 -- -- $122,557 (1)
President and Chief 2002 425,000 125,000 -- -- 113,429
Executive Officer 2001 366,894 -- -- -- 86,407
Patrick D. McTernan, 2003 $205,000 $ 75,000 -- -- $105,275 (1)
Senior Executive Vice 2002 205,000 65,000 -- -- 94,340
President, General Counsel and 2001 204,339 -- -- -- 73,240
Secretary
Jeffrey J. Carfora, 2003 $205,000 $ 75,000 -- -- $ 87,451 (1)
Senior Executive Vice President 2002 171,250 65,000 -- -- 75,867
and Chief Operating Officer 2001 126,846 -- -- -- 47,645
Claire M. Chadwick, 2003 $127,404 $ 37,500 -- -- $ 72,095 (1)
Executive Vice President 2002 106,298 25,000 -- -- 53,156
and Chief Financial Officer 2001 95,067 -- -- 35,152
Barbara A. Flannery, 2003 $135,000 $ 20,000 -- -- $ 67,495 (1)
Executive Vice President 2002 133,269 22,500 -- -- 63,817
and Retail Banking Group 2001 126,846 -- -- -- 48,040
Executive of the Bank
=============================================================================================================================
- ----------
(1) Includes imputed income under the group term life insurance plan, income
attributable under whole-life insurance policy, employer contributions to
Penn Federal's 401(k) Plan, ESOP allocations, and fees for attending
meetings of the Company's Board of Directors, respectively, as follows:
Mr. LaMonica - $2,263, $29,041, $3,000, $81,603 and $6,650; Mr. McTernan -
$1,242, $13,379, $3,101, $81,603 and $5,950; Mr. Carfora - $573, $0,
$3,100, $80,178 and $3,600; Ms. Chadwick - $354, $0, $3,198, $65,343 and
$3,200; and Ms. Flannery - $639, $0, $2,363, $64,493 and $0.
9
The following table sets forth certain information concerning stock option
exercises during the last fiscal year and the number and value of stock options
held by the Named Officers as of June 30, 2003. No stock options were granted to
the Named Officers in fiscal 2003.
=====================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at FY-End (#) FY-End ($)(1)
on -------------------------------------------------------------
Exercise Value
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------
Joseph L. LaMonica 21,343 $451,996 (2) 334,721 -- $6,337,473 --
- ---------------------------------------------------------------------------------------------------------------------
Patrick D. McTernan -- -- 111,784 -- $2,192,981 --
- ---------------------------------------------------------------------------------------------------------------------
Jeffrey J. Carfora 11,900 $258,772 (2) 35,934 -- $ 593,794 --
- ---------------------------------------------------------------------------------------------------------------------
Claire M. Chadwick 1,500 $ 32,065 (2) 11,000 -- $ 118,063 --
- ---------------------------------------------------------------------------------------------------------------------
Barbara A. Flannery -- -- 46,634 -- $ 834,544 --
=====================================================================================================================
- ----------
(1) Represents the aggregate market value (market price of the common stock
less the exercise price) of the in-the-money options based on the closing
price of the common stock on the Nasdaq National Market on June 30, 2003
($27.75). An option is in-the-money if the exercise price of the option is
less than the market value of the common stock.
(2) Represents the difference between the market value of the shares acquired
upon exercise at the time of exercise (the average of the high and low per
share prices of the common stock on the Nasdaq National Market on the date
of exercise) and the exercise price ($5.25 per share).
Employment Agreements
On November 28, 2000, the Company entered into new employment agreements
with Mr. LaMonica, Mr. McTernan, Mr. Carfora and Ms. Flannery, replacing the
existing employment agreements between Penn Federal and these officers.
Effective as of August 12, 2003, the Company entered into an employment
agreement with Ms. Chadwick. Each agreement is for a five-year term and provides
for extensions of one year, in addition to the then-remaining term under the
agreement, on each November 28th, as long as (1) the Company has not notified
the officer at least 90 days in advance that the term will not be extended
further and (2) the officer has not received an unsatisfactory performance
review by the Board of Directors of the Company or the Bank. Each agreement
provides for an annual base salary not less than the officer's current salary,
discretionary and performance-based bonuses and participation in benefit plans
and the receipt of fringe benefits to the same extent as the other executive
officers of the Company and the Bank.
Each agreement provides that if the officer's employment is involuntarily
terminated, then during the lesser period (referred to below as the "applicable
payout period") of the remaining term of the agreement or three years after the
date of termination, he or she will be entitled to receive (1) on a monthly
basis, 1/12th of his or her annual salary and 1/12th of the average annual
amount of cash bonus and cash incentive compensation for the two full fiscal
years preceding the date of termination, subject to reduction by the amount of
any cash income earned from providing personal services during the applicable
payout period; (2) substantially the same life and disability insurance coverage
and health and dental benefits as he or she would have received if he or she had
remained employed, subject to reduction to the extent the officer receives
equivalent or better benefits from another employer; and (3) if the involuntary
termination occurs within the six months preceding, at the time of, or within 24
months after a change in control of the Company, an amount in cash equal to 299%
of the officer's "base amount" (as defined in Section 280G of the Internal
Revenue Code), less the acceleration and lapse value of stock options held by
the officer that are taken into
10
account under Section 280G of the Internal Revenue Code. The term "involuntary
termination" is defined as termination of the officer's employment by the
Company or the Bank (other than for cause, or due to death, disability or
specified violations of law) without the officer's consent or by the officer
following a material reduction of or interference with his or her duties,
responsibilities or benefits without his or her consent.
Based on current compensation levels, if the employment of Mr. LaMonica,
Mr. McTernan, Mr. Carfora, Ms. Flannery and Ms. Chadwick had been involuntary
terminated as of June 30, 2003, under circumstances entitling them to severance
pay described in items (1) and (3) above, they would have been entitled to
receive monthly cash payments of approximately $50,521, $22,917, $22,917,
$14,063 and $13,021, respectively, for three years after termination, and lump
sum cash payments of approximately $1,672,134, $853,606, $508,750, $430,723 and
$313,152, respectively. Each agreement provides that to the extent the officer
receives any amounts or benefits that will constitute "excess parachute
payments" under Section 280G of the Internal Revenue Code and subject him or her
to excise tax under Section 4999 of the Internal Revenue Code, he or she will be
paid an additional amount that will offset the effect of any such excise tax.
Each agreement also provides that to the extent the officer's total compensation
for any calendar year exceeds the greater of $1,000,000 or the maximum amount of
compensation deductible by the Company under Section 162(m) of the Internal
Revenue Code (the greater of these two amounts referred to below as the "maximum
allowable amount"), the excess amount must be deferred, with interest at 8% per
annum compounded annually, to a calendar year in which the amount to be paid to
the officer in that year (including deferred amounts and interest) does not
exceed the maximum allowable amount.
Supplemental Executive Retirement Plan
Effective as of March 1, 2003, the Bank adopted the Penn Federal Savings
Bank Supplemental Executive Retirement Plan (the "SERP") to provide for
supplemental retirement benefits to a select group of senior officers. The SERP
provides that upon the later of the date of the termination of the participant's
employment or the participant's attainment of age 65, the participant will
receive an annual benefit, payable in monthly installments over a 15-year
period, equal to 70% of the average of the participant's aggregate cash
compensation (including pre-tax deferrals but excluding bonuses) during the two
Company fiscal years in the five fiscal year period immediately prior to the
termination of the participant's employment which results in the largest total
amount of cash compensation. The maximum annual benefit may not exceed $300,000.
A participant may elect to receive an early retirement benefit under the SERP
beginning on the later of the date of the termination of the participant's
employment or the participant's attainment of age 55, payable in monthly
installments over a period of 15 years plus one month for each full month by
which the participant's early retirement date precedes his or her normal
retirement date. The early retirement benefit is equal to the annual benefit
described above, reduced by two percent for each year the participant's early
retirement date precedes his normal retirement date. A participant whose
employment is terminated for cause will not receive any benefits under the SERP.
If a participant dies before receiving any retirement benefits under the
SERP, his or her designated beneficiary will receive a discounted lump sum
payment of the participant's retirement benefits. If a participant dies after he
or she has begun to receive retirement benefits under the SERP, the remaining
payments will continue to made to the participant's designated beneficiary for
the rest of the payout period. In addition to the death benefit described in the
two preceding sentences, a participant's beneficiary will receive a lump sum
death benefit of $600,000.
A participant becomes fully vested in his or her SERP benefits after ten
years of service (with credit for years of service prior to the adoption of the
SERP). The committee administering the SERP may accelerate the payment of a
participant's retirement benefits at such time and in such manner as the
committee may determine, in which case the accelerated benefit will consist of a
discounted lump sum
11
payment of the participant's unpaid retirement benefits. Following a change in
control of the Company, the Company will be required to pay to the participant a
discounted lump sum payment of the participant's retirement benefits unless the
participant's individual plan agreement provides otherwise (in which case the
participant will have the option of receiving the lump sum payment).
The current participants in the SERP are Mr. LaMonica, Mr. McTernan, Mr.
Carfora and Ms. Chadwick. Based on their years of service, Mr. LaMonica and Mr.
McTernan are fully vested in their retirement benefits under SERP, and Mr.
Carfora and Ms. Chadwick will become fully vested in their retirement benefits
under ther SERP in December 2003 and July 2004, respectfully.
The SERP is an unfunded plan. The Bank has, however, obtained life
insurance policies on the lives of participants in the SERP as a means of
offsetting some of the costs of providing the benefits under the SERP.
Supplemental Executive Life Insurance Plan
Effective March 1, 2003, the Bank adopted the Penn Federal Savings Bank
Supplemental Executive Life Insurance Plan (the "Supplemental Life Insurance
Plan") to provide supplemental life insurance benefits to a select group of
officers who do not participate in the SERP. The Supplemental Life Insurance
Plan provides that upon the death of a participant whose employment with the
Company after at least ten years of service was terminated for any reason
(including the participant's death while employed by the Bank) except cause, the
participant's designated beneficiary will receive a lump sum amount equal to the
participant's annual salary for the calendar year preceding the calendar year in
which the participant's employment was terminated.
The Supplemental Life Insurance Plan is an unfunded plan. The Bank has,
however, obtained life insurance policies on the lives of participants as a
means of offsetting the costs of providing the benefits under the Supplemental
Life Insurance Plan. Ms. Flannery is the only Named Officer who currently
participates in the Supplemental Life Insurance Plan.
Certain Transactions
The Bank has followed a policy of granting loans to eligible directors,
officers, employees and members of their immediate families for the financing of
their personal residences and for consumer or business purposes. All loans by
the Bank to its senior officers and directors are subject to regulations of the
Office of Thrift Supervision restricting loans and other transactions with
affiliated persons of the Bank. Under applicable law, all loans or extensions of
credit to executive officers and directors must 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. In
this regard, all outstanding loans to the Bank's directors and senior officers
have been made in the ordinary course of business and on the same terms,
including collateral and interest rates, as those prevailing at the time for
comparable transactions and did not involve more than the normal risk of
collectibility.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Bank's Board of Directors, which acts as
the Compensation Committee for the Company and the Bank, has furnished the
following report on executive compensation:
The Compensation Committee has responsibility for reviewing the
compensation policies and plans for the Company and its affiliates. The policies
and plans established are designed to enhance both short-term and long-term
operational performance of the Bank and to build stockholder value through
anticipated appreciation in the Company's common stock price.
12
One of the Committee's primary objectives is to develop and maintain
compensation plans which allow the Company to attract and retain quality
executives at competitive compensation levels and which enhance stockholder
value by aligning closely the financial interests of the executives of the
Company and the Bank with those of the Company's stockholders. In determining
compensation levels, plans and adjustments, the Committee takes into account,
among other things, compensation reviews made by third parties each year. These
studies primarily compare the compensation of the Bank's officers to officers of
other local financial institutions.
With respect to Mr. LaMonica's base salary for the fiscal year ended June
30, 2003, the Committee took into account a comparison of salaries of chief
executive officers of local and regional financial institutions and financial
institutions comparable in size to the Bank. Likewise, each executive officer's
base salary was determined utilizing financial institution compensation surveys.
Mr. LaMonica's base salary for fiscal year 2003 was increased by $25,000 from
his base salary for fiscal year 2002 because the Committee determined that Mr.
LaMonica was undercompensated when compared to chief executive officers of other
institutions with the same asset size as the Bank and because of the Company's
numerous achievements during fiscal 2002 attributable to the performance of Mr.
LaMonica.
Effective July 1, 2001, the Company implemented a cash bonus program tied
to percentage growth in earnings per share. The plan has two principal
components, each providing for bonuses if the Company's earnings per share
growth exceeds a minimum threshold. The first component provides for
pre-determined bonus amounts payable quarterly to the Company's Chief Executive
Officer, General Counsel, Chief Operating Officer and Chief Financial Officer
depending on the quarterly increase, if any, in earnings per share on an
annualized basis. The second component provides for bonus amounts payable
annually to other personnel in the discretion of senior management. For fiscal
2003, the Company's earnings per share growth on an annualized basis exceeded
the highest threshold for the first three quarters and the second highest
threshold for the fourth quarter, entitling Mr. LaMonica, the Company's Chief
Executive Officer, Mr. McTernan, the Company's General Counsel, Mr. Carfora, the
Company's Chief Operating Officer, and Ms. Chadwick, the Company's Chief
Financial Officer, to bonus amounts payable to them under the plan of $187,500,
$75,000, $75,000 and $37,500, respectively. Ms. Flannery was awarded a
discretionary bonus under the plan for fiscal 2003 of $20,000.
The Bank and the Company have also included stock option and restricted
stock awards as key elements in their total compensation package. Equity-based
compensation provides a long-term alignment of interests and results achieved
for stockholders with the compensation rewards provided to executive officers by
providing those executives and others on whom the continued success of the
Company most depends with a proprietary interest in the Company. In fiscal 1995,
the Stock Option Plan and the MRP were adopted, providing for the grant of
several types of equity-based awards, including stock option and restricted
stock awards. These plans were ratified by the Company's stockholders in fiscal
1995, and an amendment to the Stock Option Plan increasing the number of shares
available for issuance under the Stock Option Plan was approved by the Company's
stockholders in fiscal 1998. All of the Company's and the Bank's executive
officers have received awards pursuant to these plans.
Through the compensation programs described above, a significant portion
of the Company's executive compensation is linked to corporate performance. The
Committee will continue to review all elements of compensation to ensure that
the compensation objectives and plans meet the Company's business objectives and
philosophy of linking executive compensation to stockholder interests in
corporate performance as discussed above.
In 1993, Congress amended the Internal Revenue Code of 1986 to add Section
162(m) to limit the corporate deduction for compensation paid to a corporation's
five most highly compensated officers to $1.0
13
million per executive per year, with certain exemptions. The Committee carefully
reviewed the impact of this legislation on the cost of the Company's and the
Bank's current executive compensation plans. Under the legislation and
regulations adopted thereunder, it is not expected that any portion of the
Company's employee compensation will be non-deductible in fiscal 2003 or in
future years by reason of compensation paid in fiscal 2003. The Committee
intends to review the Company's executive compensation policies on an ongoing
basis, and propose appropriate modifications, if the Committee deems them
necessary, to these executive compensation plans with a view toward implementing
the Company's compensation policies in a manner that avoids or minimizes any
disallowance of tax deductions under Section 162(m). In this regard, each of the
Company's employment agreements with the Named Officers provides for mandatory
deferral of compensation that would otherwise be non-deductible by virtue of the
limitations of Section 162(m). See "Employment Agreements."
The foregoing report is furnished by the Compensation Committee of the
Board of Directors:
Amadeu L. Carvalho, Chairman
Mario Teixeira, Jr.
14
Stock Performance Presentation
The line graph below compares the cumulative total stockholder return on
the Company's common stock to the cumulative total return of a broad index (all
Nasdaq U.S. Stocks) and a savings and loan industry index for the period June
30, 1998 through June 30, 2003.
[LINE GRAPH OMITTED]
Period Ending
----------------------------------------------------------------------
Index 06/30/98 06/30/99 06/30/00 06/30/01 06/30/02 06/30/03
- --------------------------------------------------------------------------------------------------------------
PennFed Financial Services, Inc. 100.00 96.13 87.18 144.06 175.76 177.46
NASDAQ - Total US 100.00 143.67 212.43 115.39 78.60 87.64
SNL $1B-$5B Thrift Index 100.00 86.01 70.02 119.44 169.19 199.04
15
PROPOSAL II. REINCORPORATION AS A MARYLAND CORPORATION
General
The Board of Directors of the Company has unanimously approved, subject to
stockholder approval, a proposal (previously defined in this Proxy Statement as
the "Reincorporation Proposal") to change the Company's state of incorporation
from Delaware to Maryland by means of a merger (the "Merger") of the Company
with and into PennFed Financial Services, Inc., a Maryland corporation ("PennFed
Maryland"), a newly formed, wholly-owned subsidiary of the Company. PennFed
Maryland will be the surviving corporation of the Merger, the effect of which
will be a change in the law applicable to the Company's corporate affairs from
Delaware law to Maryland law. While this will result in some changes in
stockholders' rights, in the opinion of the Company's Board of Directors these
changes are not material to stockholders. See "--Comparison of Stockholder
Rights."
The following discussion summarizes certain aspects of the Reincorporation
Proposal, including certain material differences between Delaware law and
Maryland law. This summary is not intended to be a complete description of the
Reincorporation Proposal or the differences between stockholders' rights under
Delaware law and Maryland law, and is qualified in its entirety by reference to
the following documents:
o the Plan of Reorganization and Agreement of Merger, dated as of
September 16 2003, between the Company and PennFed Maryland (the
"Merger Agreement"), a copy of which is attached to this Proxy
Statement as Appendix B;
o the Articles of Incorporation of PennFed Maryland (the "New
Charter"), a copy of which is attached to this Proxy Statement as
Appendix C; and
o the Bylaws of PennFed Maryland (the "New Bylaws"), a copy of which
is attached to this Proxy Statement as Appendix D.
Copies of the Company's Certificate of Incorporation (the "Present
Charter") and Bylaws (the "Present Bylaws") are available for inspection at the
Company's executive office, and copies will be provided to stockholders upon
request. To request copies of these documents, contact: Patrick D. McTernan,
Secretary, PennFed Financial Services, Inc., 622 Eagle Rock Avenue, West Orange,
New Jersey 07052-2989.
For the reasons discussed below, the Company's Board of Directors believes
that the best interests of the Company and its stockholders would be served by
changing the Company's state of incorporation from Delaware to Maryland. The
Company's Board of Directors unanimously recommends that the Company's
stockholders vote "FOR" the Reincorporation Proposal.
Approval of the Reincorporation Proposal by the Company's stockholders
will constitute adoption by the Company's stockholders of the Merger Agreement
and approval by the Company's stockholders of the New Charter and the New Bylaws
and of all other transactions and proceedings relating to the Merger, including
ratification of the directors of PennFed Maryland in the classes as set forth
under "--Comparison of Stockholder Rights-Number and Classification of
Directors," the assumption by PennFed Maryland, as the surviving corporation of
the Merger, of the Company's employee benefit plans, agreements and arrangements
and the obligations of the Company under such plans, agreements and
arrangements. Pursuant to the terms of the Merger Agreement, the New Charter and
New Bylaws will replace the Present Charter and Present Bylaws as the Company's
principal corporate governance documents. See "--Comparison of Stockholder
Rights." Accordingly, stockholders are urged to read carefully this Proxy
Statement and the attached appendices.
16
Principal Features of the Reincorporation Proposal
At the effective time of the Merger, the separate corporate existence of
the Company will cease and PennFed Maryland, as the surviving corporation, will
succeed to all business, properties, assets and liabilities of the Company. Each
share of the Company's common stock that is issued and outstanding immediately
prior to the Merger will, by virtue of the Merger, be converted into one share
of the common stock of PennFed Maryland. At the effective time of the Merger,
certificates which immediately prior to the effective time represented shares of
the Company's common stock will be deemed for all purposes to represent the same
number of shares of PennFed Maryland's common stock. It will not be necessary
for stockholders of the Company to exchange their existing stock certificates
for stock certificates of PennFed Maryland. However, when outstanding
certificates representing shares of the Company's common stock are presented for
transfer after the Merger, new certificates representing shares of PennFed
Maryland's common stock will be issued. New certificates also will be issued
upon the request of any stockholder, subject to normal requirements as to proper
endorsement, signature guarantee, if required, and payment of applicable taxes,
if any.
The stock purchase rights attached to each share of the Company's common
stock pursuant to the Rights Agreement between the Company and Registrar and
Transfer Company, as rights agent (the "Rights Plan"), will continue to be in
effect in relation to PennFed Maryland's common stock, and the terms of the
Rights Plan will not be affected by the reincorporation. See "--Comparison of
Stockholder Rights-Rights Plan." The Company's Dividend Reinvestment Plan
("DRIP") will continue to operate in the same manner after the Merger, and any
shares of the Company's common stock held in a DRIP account immediately before
the Merger will automatically convert into the same number of shares of PennFed
Maryland's common stock.
Following consummation of the Merger, PennFed Maryland's common stock will
be listed for trading on the Nasdaq National Market System, the market on which
the Company's common stock is currently listed for trading. PennFed Maryland's
common stock will be listed under the symbol "PFSB," the current symbol for the
Company's common stock. Delivery of existing stock certificates representing
shares of Company common stock will constitute "good delivery" of shares of
PennFed Maryland common stock in transactions subsequent to the Merger.
Reincorporation of the Company will effect a change in the legal domicile
of the Company and certain other changes of a legal nature, as described in this
Proxy Statement. Reincorporation of the Company will not, in and of itself,
result in any change in the name, business, management, location of the
principal executive offices, assets, liabilities or stockholders' equity of the
Company. The directors and officers of the Company prior to the Merger will
continue to serve as the directors and officers of PennFed Maryland following
the Merger. As noted above, approval by stockholders of the Reincorporation
Proposal will constitute ratification by stockholders of all of the currently
serving directors of PennFed Maryland as set forth in the New Charter. See
"--Comparison of Stockholder Rights-Number and Classification of Directors."
Pursuant to the terms of the Merger Agreement, each option to purchase
Company common stock outstanding immediately prior to the effective time of the
Merger under the Company's Stock Option Plan will become an option to purchase
PennFed Maryland common stock, subject to the same terms and conditions as are
set forth in the Stock Option Plan and the applicable option agreement. The
Stock Option Plan and all other employee benefit plans, agreements and
arrangements of the Company will be assumed and continued by PennFed Maryland
following the Merger upon the same terms and subject to the same conditions,
subject to the right of the PennFed Maryland Board of Directors to make
amendments to such plans, agreements and arrangements. As noted above, approval
by stockholders of the Reincorporation
17
Proposal will constitute approval by stockholders of the assumption by PennFed
Maryland of these plans, agreements and arrangements.
If the Reincorporation Proposal is approved by the Company's stockholders,
the Merger will be effective when articles of merger for the Merger are filed
with and accepted for record by the State Department of Assessments and Taxation
of Maryland and a certificate of ownership and merger for the Merger is filed
with the Secretary of State of the State of Delaware. These filings will be made
at such time as the Boards of Directors of the Company and PennFed Maryland
determine is advisable.
The Merger Agreement provides that the Merger may be abandoned by the
Board of Directors of either the Company or PennFed Maryland prior to the
effective time of the Merger, either before or after stockholder approval. In
addition, the Merger Agreement may be amended prior to the effective time,
either before or after stockholder approval; provided, however, that the Merger
Agreement may not be amended after stockholder approval if the amendment would
(a) alter or change the amount or kind of shares or other consideration to be
received by stockholders in the Merger, (b) alter or change any term of the New
Charter, (c) alter or change any of the terms and conditions of the Merger
Agreement if such alteration or change would adversely affect the stockholders,
or (d) otherwise violate applicable law. The Company's Board of Directors has
made no determination as to any circumstances which may prompt a decision to
abandon the proposed reincorporation or amend the Merger Agreement.
Purpose for Reincorporation Proposal
The Board of Directors believes that reincorporating the Company in
Maryland would be in the best interests of the Company and its stockholders
because the Company would no longer be required to pay Delaware franchise taxes.
For calendar years 2002 and 2001, the Company paid approximately $67,000 and
$63,000, respectively, in Delaware franchise taxes. As a result of a
recent increase in Delaware franchise tax rates which became effective as of
January 1, 2003, it is expected that the Company will pay higher franchise tax
amounts for 2003 and future years if it remains a Delaware corporation. Unlike
Delaware, the State of Maryland does not impose a franchise tax on corporations
incorporated under its laws. If the Company is reincorporated in Maryland, the
only amount payable annually to the State of Maryland as a result of being
incorporated under its laws would be $100, which will be paid in conjunction
with Maryland's annual reporting requirements. During the current fiscal year,
some of the savings anticipated by the reincorporation will initially be offset
by expenses associated with the reincorporation, such as filing, legal, printing
and similar expenses.
After considering the advantages and disadvantages of the Reincorporation
Proposal, including the differences between Delaware law and Maryland law, the
Company's Board of Directors has concluded that the benefits to the Company and
its stockholders of becoming a Maryland corporation outweigh the benefits of
remaining a Delaware corporation. See "--Comparison of Stockholder Rights" and
"--Possible Disadvantages of the Reincorporation Proposal."
Comparison of Stockholder Rights
Upon consummation of the Merger, the Company's corporate affairs will be
governed by Maryland law and the New Charter and New Bylaws. The New Charter and
New Bylaws are substantially similar to the Present Charter and Present Bylaws
with respect to material provisions. Differences between the New Charter and New
Bylaws and the Present Charter and Present Bylaws are primarily the result of
differences between the Delaware General Corporation Law (the "Delaware GCL")
and the Maryland General Corporation Law (the "Maryland GCL"). Although it is
impracticable to compare all of the aspects in which Maryland law and Delaware
law differ, the following is a summary of certain significant differences and
18
important similarities between the laws of these two states and the Present and
New Charters and Bylaws. This discussion is qualified in its entirety by
reference to the New Charter and New Bylaws, copies of which are attached as
Appendices C and D, respectively, to this Proxy Statement, the Present Charter
and Present Bylaws and the Delaware GCL and Maryland GCL.
For purposes of this section, the "Company" refers in most places to
PennFed Financial Services, Inc. incorporated under the laws of the State of
Delaware; in those instances where reference is made to the "Company" after the
Merger, the reference means PennFed Financial Services, Inc. incorporated under
the laws of the State of Maryland.
Capital Stock
Company. The Company's authorized capital stock consists of 15,000,000
shares of common stock, par value $.01 per share, and 7,000,000 shares of
preferred stock, par value $.01 per share. No shares of preferred stock of the
Company have been issued. As of September 5, 2003, 6,870,178 shares of the
Company's common stock were issued and outstanding.
The Present Charter authorizes the Company's Board of Directors to issue
preferred stock from time to time in one or more series subject to applicable
provisions of law, and the Company's Board of Directors is authorized to fix the
designations, powers, preferences and relative participating, optional and other
special rights of such shares, including voting rights (which could be multiple
or as a separate class) and conversion rights.
The authorized but unissued shares of common stock are available for
general corporate purposes, including but not limited to, possible issuance as
stock dividends, in mergers or acquisitions, under the DRIP, in a future
underwritten or other public or private offering, under the Rights Plan or under
a stock-based employee benefit plan. The authorized but unissued shares of
preferred stock are likewise available for issuance in future mergers or
acquisitions, in a future underwritten or other public or private offering or
for other corporate purposes. Except as required by law, the rules of the Nasdaq
Stock Market or as otherwise required to approve the transaction in which the
additional authorized shares of common stock or authorized shares of preferred
stock would be issued, no stockholder approval is required for the issuance of
these shares. Accordingly, the Board of Directors of the Company, generally
without stockholder approval, may issue additional shares of common stock and
preferred stock with voting and conversion rights which could dilute and
otherwise adversely affect the voting power of the existing holders of common
stock.
PennFed Maryland. PennFed Maryland's authorized capital stock consists of
15,000,000 shares of common stock, par value $.01 per share, and 7,000,000
shares of preferred stock, par value $.01 per share.
Under the New Charter, the Board of Directors of PennFed Maryland has
rights and powers with respect to the issuance of common stock and preferred
stock that are substantially similar to those provided in the Present Charter.
As of the date of this Proxy Statement, management is not aware that any
person or group has indicated an intention or desire to institute a takeover of
the Company. In addition, the Board of Directors has no present plans or
understandings for the issuance of any preferred stock and does not intend to
issue any preferred stock except on terms which the Board deems to be in the
best interests of the Company and its stockholders.
19
Dividends
Company. Pursuant to the Delaware GCL, the Company may pay dividends on
its common stock out of its surplus or, if there is no surplus, out of its net
profits for the fiscal year in which the dividend is declared and/or for the
preceding fiscal year. The Delaware GCL also provides that dividends may not be
paid out of net profits if, after the payment of the dividends, the capital of
the Company would be less than the capital represented by the outstanding stock
of all classes having a preference upon the distribution of assets.
PennFed Maryland. Under the Maryland GCL, PennFed Maryland is permitted to
make dividends or other distributions unless after the distribution: (1) PennFed
Maryland would not be able to pay its debts as they become due in the usual
course of business; or (2) PennFed Maryland's total assets would be less than
the sum of its total liabilities, plus, unless the New Charter permits
otherwise, the amount that would be needed, if PennFed Maryland were dissolved
at the time of the distribution, to satisfy preferential rights of stockholders
whose preferential rights are superior to those receiving the distribution.
Advance Notice Requirements for Presentation of Business and Nominations of
Directors at Annual Meetings of Stockholders
Company. Pursuant to the Present Bylaws, nominations for directors by
stockholders must be made in writing and delivered to the Secretary of the
Company at least 90 days prior to the meeting date. If, however, less than 100
days' notice of the date of the meeting is given or made to stockholders by
public notice or mail, nominations must be received by the Company not later
than the close of business on the tenth day following the earlier of the day on
which notice of the date of the meeting was mailed or public announcement of the
date of the meeting was first made. In addition to meeting the applicable
deadline, nominations must be accompanied by certain information specified in
the Present Bylaws.
The Present Bylaws provide that the Company must receive written notice of
any stockholder proposal for business at an annual meeting of stockholders at
least 90 days before the first anniversary of the preceding year's annual
meeting. If the date of the current year annual meeting is advanced by more than
20 days or delayed by more than 60 days from the anniversary date of the
preceding year's annual meeting, notice of the proposal must be received by the
Company by no later than the close of business on the later of the 90th day
prior to the annual meeting or the 10th day following the day on which notice of
the meeting is mailed or public disclosure of the meeting date is first made. In
addition to meeting the applicable deadline, stockholder proposals must be
accompanied by certain information specified in the Present Bylaws.
PennFed Maryland. Under the New Bylaws, the deadlines for stockholder
submissions of director nominations and proposals are the same as under the
Present Bylaws, except that under the New Bylaws, these submissions may not be
made earlier than 120 days prior to the meeting date. As with the Present
Bylaws, under the New Bylaws, director nominations and stockholder proposals
must be accompanied by certain information specified in the New Bylaws.
Stockholders wishing to submit a proposal for business to be included in
management's proxy statement for an annual meeting are reminded that, in
addition to the bylaw provisions described above, they must adhere to the
deadline and other rules for doing so established by the Securities and Exchange
Commission. See "Stockholder Proposals."
Adequate advance notice of stockholder proposals and director nominations
gives management time to evaluate these proposals and nominations and to
determine whether to recommend to the stockholders that submitted stockholder
proposals be adopted. In certain instances, these provisions could make it more
20
difficult to oppose management's proposals or nominations if stockholders
believe such proposals or nominations are not in their best interests.
Cumulative Voting for Election of Directors
Under the Delaware GCL and Maryland GCL, a corporation may provide for
cumulative voting in the election of directors in its certificate of
incorporation (in the case of a Delaware corporation) or charter (in the case of
a Maryland corporation). Pursuant to the Present and New Charters, neither the
Company nor PennFed Maryland permits cumulative voting in the election of
directors. The absence of cumulative voting rights means that the holders of a
majority of the shares voted at a meeting of stockholders may, if they so
choose, elect all the directors to be elected at that meeting, and thus preclude
minority stockholder representation on the board of directors.
Restrictions on Voting Rights
Company. The Present Charter generally prohibits any stockholder that
beneficially owns more than 10% of the outstanding shares of Company common
stock from voting shares in excess of this limit.
PennFed Maryland. The New Charter contains a voting limitation
substantially identical to the one in the Present Charter.
Maryland Control Share Acquisition Statute. The Maryland GCL contains a
control share acquisition statute which, in general terms, provides that where a
stockholder acquires issued and outstanding shares of a corporation's voting
stock (referred to as control shares) within one of several specified ranges
(one-tenth or more but less than one-third, one-third or more but less than a
majority, or a majority or more), approval by stockholders of the control share
acquisition must be obtained before the acquiring stockholder may vote the
control shares. The required stockholder vote is two-thirds of all votes
entitled to be cast, excluding "interested shares," defined as shares held by
the acquiring person, officers of the corporation and employees who are also
directors of the corporation. A corporation may, however, opt-out of the control
share statute through a charter or bylaw provision, which PennFed Maryland has
done pursuant to the New Bylaws. Accordingly, the Maryland control share
acquisition statute will not apply to acquisitions of shares of PennFed
Maryland's common stock. Though not expected, the PennFed Maryland Board of
Directors could cause PennFed Maryland to become subject to the Maryland control
share acquisition statute by amending the New Bylaws to eliminate the opt-out
provision. See "-Amendment of Charter and Bylaws-PennFed Maryland."
The Delaware GCL does not contain a control share acquisition or similar
statute.
Number and Classification of Directors
The Present Charter provides that the number of directors is set from time
to time by vote of a majority of the whole board (meaning the total number of
directors the Company would have if there were no vacancies on the board). The
New Charter provides that the initial number of directors is six, which number
may be increased or decreased in accordance with the New Bylaws. Similar to the
Present Charter, the New Bylaws provide that the number of directors is set from
time to time by vote of the Board of Directors. Both the Company's Board of
Directors and PennFed Maryland's Board of Directors is currently comprised of
six members. Both boards are divided into three classes, with each class serving
a staggered three-year term, meaning that approximately one-third of the
directors are elected at each annual meeting of stockholders.
21
The New Charter sets forth the names of the initial directors of PennFed
Maryland and the term of office for each director, as follows:
Position(s) Held in the Company Term to
Name and to be Held in PennFed Maryland Expire
- ----------------------------- ---------------------------------------------------- ------
William C. Anderson Chairman of the Board 2004
Amadeu L. Carvalho Director 2004
Patrick D. McTernan Director, Senior Executive Vice President, General
Counsel and Secretary 2005
Marvin D. Schoonover Director 2005
Joseph L. LaMonica Director, President and Chief Executive Officer 2006*
Mario Teixeira, Jr. Director 2006*
- ----------
* The current terms of Company Directors LaMonica and Teixeira expire at the
Meeting and they have each been nominated for re-election for a term to
expire in 2006. See "Proposal I. Election of Directors."
All of the individuals named above presently serve as directors of the
Company, for terms to expire corresponding to those indicated above (with
Directors LaMonica and Teixeira nominated for re-election at the Meeting for
terms to expire in 2006). By voting in favor of the Reincorporation Proposal,
the Company's stockholders will be deemed to have approved of these individuals
as directors of PennFed Maryland without further action and without changes in
the classes or terms of office. For additional information regarding these
individuals, see "Proposal I. Election of Directors."
Removal of Directors
The Present Charter and the New Charter each provide that, subject to the
rights of the holders of any series of preferred stock outstanding, directors
may be removed from office only for cause and only by the vote of the holders of
at least 80% of the voting power of the outstanding shares of capital stock
entitled to vote generally in the election of directors, voting together as a
single class.
Filling Vacancies on the Board of Directors
Company. The Present Charter provides that, subject to the rights of the
holders of any series of preferred stock outstanding, vacancies in the board of
directors may be filled only by a majority vote of the directors then in office,
even if less than a quorum. Newly appointed directors serve until the expiration
of the term of the class to which they are appointed.
PennFed Maryland. The New Bylaws provide that vacancies in the board of
directors may be filled only by a majority vote of the directors then in office,
even if less than a quorum. As under the Present Charter, under the New Bylaws
newly appointed directors serve until the expiration of the term of the class to
which they are appointed.
Amendment of Charter and Bylaws
Company. Generally, the Present Charter may be amended in the manner
prescribed by the Delaware GCL, which requires the approval of the Company's
Board of Directors and the holders of at least a majority of the outstanding
shares of the Company's common stock. The amendment of certain other provisions
of the Present Charter, however, requires the vote of at least 80% of the
outstanding shares of capital stock entitled to vote generally in the election
of directors, voting together as a single class. These include provisions
relating to: authorization of the Board of Directors to set the terms of and
issue preferred stock;
22
voting limitations on 10% or greater stockholders; the prohibition on
stockholder action by written consent; the call of special stockholders'
meetings; the number, classification, election and removal of directors; certain
business combinations with greater than 10% stockholders; the prevention of
greenmail; indemnification of directors and officers; and amendments to the
Present Charter and Bylaws.
The Present Charter provides that the Present Bylaws may be amended either
by the Company's Board of Directors, by the vote of a majority of the whole
board, or by the Company's stockholders, by the vote of the holders of 80% of
the voting power of the capital stock entitled to vote generally in the election
of directors, voting together as a single class.
PennFed Maryland. The New Charter contains a provision regarding
amendments of the New Charter that is substantially similar to the one contained
in the Present Charter. That is, generally the New Charter may be amended upon
approval by the Board of Directors of PennFed Maryland and the holders of a
majority of the outstanding shares of PennFed Maryland's common stock, with a
super-majority stockholder vote required for amending specified provisions. The
provisions of the New Charter requiring a super-majority stockholder vote for
amendment are essentially the same as those specified in the Present Charter,
except that amendment of the New Charter provision limiting the liability of
directors and officers requires a super-majority stockholder vote; the
comparable provision of the Present Charter, which limits the liability of
directors (but not officers), requires only a majority vote for an amendment.
Also, the New Charter does not contain provisions concerning stockholder action
by written consent or the calling of special stockholders' meetings; these
matters are dealt with in the New Bylaws. See "-Action by Stockholders Without a
Meeting" and "-Special Meetings of Stockholders." In addition, as noted below
under "-Super-Majority Stockholder Vote for Mergers, Acquisitions and Certain
Other Transactions," the New Charter contains a provision which provides that
any action requiring a super-majority stockholder vote by law instead requires
only a majority stockholder vote; this provision itself requires a
super-majority stockholder vote to amend. The Present Charter does not contain a
comparable provision.
Under the Maryland GCL, the New Charter may be amended by the PennFed
Maryland Board of Directors without stockholder approval to (1) change the name
of the corporation or (2) change the name or other designation or the par value
of any class or series of stock and the aggregate par value of that stock.
Like the Present Charter, the New Charter provides that the New Bylaws may
be amended by the vote of a majority of the whole board, or by the stockholders,
by the vote of the holders of 80% of the voting power of the capital stock
entitled to vote generally in the election of directors, voting together as a
single class.
Business Combinations with Certain Persons
Company. The Present Charter provides that certain business combinations
(for example, mergers, share exchanges, significant asset sales and significant
stock issuances) involving "interested stockholders" of the Company require, in
addition to any vote required by law, the approval of at least 80% of the voting
power of the outstanding shares of stock entitled to vote generally in the
election of directors, voting together as a single class, unless either (1) a
majority of the disinterested directors have approved the business combination
or (2) certain fair price and procedure requirements are satisfied. An
"interested stockholder" generally means a person who is a 10% or greater
stockholder of the Company or who is an affiliate of the Company and at any time
within the past two years was a 10% stockholder of Company.
PennFed Maryland. The New Charter contains a substantially identical
provision.
23
Delaware Business Combination Statute. Section 203 of the Delaware GCL
provides that if a person acquires 15% or more of the stock of a Delaware
corporation, thereby becoming an "interested stockholder" (for purposes of
Section 203), that person may not engage in certain business combinations with
the corporation for a period of three years unless one of the following three
exceptions applies:
o the board of directors approved the acquisition of stock or the
business combination transaction prior to the time that the person
became an interested stockholder;
o the person became an interested stockholder and 85% owner of the
voting stock of the corporation in the transaction in which it
became an interested stockholder, excluding voting stock owned by
directors who are also officers and certain employee stock plans; or
o the business combination transaction is approved by the board of
directors and by the affirmative vote of two-thirds of the
outstanding voting stock which is not owned by the interested
stockholder at an annual or special meeting.
A Delaware corporation may elect not to be governed by Section 203. The
Company has not made such an election. Section 203 does not apply to the merger
of the Company and PennFed Maryland.
Maryland Business Combination Statute. Like the Delaware GCL, the Maryland
GCL contains a business combination statute. The Maryland business combination
statute prohibits a business combination between a corporation and an interested
stockholder (one who beneficially owns 10% or more of the voting power) for a
period of five years after the interested stockholder first becomes an
interested stockholder, unless the transaction has been approved by the board of
directors before the interested stockholder became an interested stockholder or
the corporation has exempted itself from the statute pursuant to a charter
provision. After the five-year period has elapsed, a corporation subject to the
statute may not consummate a business combination with an interested stockholder
unless (1) the transaction has been recommended by the board of directors and
(2) the transaction has been approved by (a) 80% of the outstanding shares
entitled to be cast and (b) two-thirds of the votes entitled to be cast other
than shares owned by the interested stockholder. This approval requirement need
not be met if certain fair price and terms criteria have been satisfied.
PennFed Maryland has opted-out of the Maryland business combination
statute through a provision in the New Charter.
Prevention of Greenmail
Company. The Present Charter generally prohibits the Company from
acquiring any of its own equity securities from a beneficial owner of 5% or more
of the Company's voting stock unless: (i) the acquisition is approved by the
holders of at least 80% of the Company's voting stock not owned by the seller;
(ii) the acquisition is made as part of a tender or exchange offer by the
Company or a subsidiary of the Company to purchase securities of the same class
on the same terms to all holders of such securities; (iii) the acquisition is
pursuant to an open market purchase program approved by a majority of the board
of directors, including a majority of the disinterested directors; or (iv) the
acquisition is at or below the market price of the Company's common stock and is
approved by a majority of the board of directors, including a majority of the
disinterested directors.
PennFed Maryland. The New Charter contains a provision substantially
identical to the one contained in the Present Charter.
24
Super-Majority Stockholder Vote for Mergers, Acquisitions and Certain Other
Transactions
The Delaware GCL does not, and the Present Charter and Bylaws do not,
contain any provision requiring a super-majority vote for mergers and similar
transactions, except with respect to certain business combinations with large
stockholders under certain circumstances. See "--Business Combinations with
Certain Persons." Generally, under the Delaware GCL and the Present Charter,
mergers and similar transactions require approval by the holders of a majority
of the outstanding shares entitled to vote. The Maryland GCL provides that a
merger or similar transaction generally requires the approval of the holders of
at least two-thirds of the outstanding shares entitled to vote on the matter,
absent a provision in the corporation's charter to the contrary. The New Charter
specifically provides that notwithstanding any provision of law requiring action
by stockholders by a vote of greater than a majority of the outstanding shares
to vote and except for matters which under the New Charter require a
super-majority stockholder vote, the action will be valid if approved by the
holders of at least a majority of the outstanding shares entitled to vote.
Non-Shareholder Constituency Provision
Company. The Present Charter provides that when evaluating any offer of
another person to (1) make a tender or exchange offer for any equity security of
the Company, (2) merge or consolidate the Company with another corporation or
entity or (3) acquire all or substantially all of the properties and assets of
the Company, the Company's Board of Directors may, in exercising its judgment as
to what is in the best interest of the Company and its stockholders, give due
consideration to all relevant factors, including, among other things:
o the social and economic effects of acceptance of the offer on the
present and future customers and employees of the Company and its
subsidiaries and on the communities in which the Company and its
subsidiaries operate or are located; and
o the effect on the ability of the Company to fulfill its corporate
objectives as a financial institution holding company and on the
ability of its subsidiary financial institution to fulfill the
objectives of a federally insured financial institution.
PennFed Maryland. The New Charter provides that when evaluating any offer
of another person to (1) make a tender or exchange offer for any equity security
of PennFed Maryland, (2) merge or consolidate PennFed Maryland with another
corporation or entity or (3) acquire all or substantially all of the properties
and assets of PennFed Maryland, or when evaluating any other transaction which
would or may involve a change in control of PennFed Maryland, the Board of
Directors may, in exercising its business judgment as to what is in the best
interests of PennFed Maryland and its stockholders and in making any
recommendation to PennFed Maryland's stockholders, give due consideration to all
relevant factors, including, but not limited to:
o the immediate and long-term economic effect upon PennFed Maryland's
stockholders, including stockholders, if any, who do not participate
in the transaction;
o the social and economic effect on the employees, creditors and
customers of, and others dealing with, PennFed Maryland and its
subsidiaries and on the communities in which PennFed Maryland and
its subsidiaries operate or are located;
o whether the proposal is acceptable based on the historical, current
or projected future operating results or financial condition of
PennFed Maryland;
25
o whether a more favorable price could be obtained for PennFed
Maryland's stock or other securities in the future;
o the reputation and business practices of the other entity to be
involved in the transaction and its management and affiliates as
they would affect the employees of PennFed Maryland and its
subsidiaries;
o the future value of the stock or any other securities of PennFed
Maryland or the other entity to be involved in the proposed
transaction;
o any antitrust or other legal and regulatory issues that are raised
by the proposal;
o the business and historical, current or expected future financial
condition or operating results of the other entity to be involved in
the proposed transaction, including, but not limited to, debt
service and other existing financial obligations, financial
obligations to be incurred in connection with the proposed
transaction, and other likely financial obligations of the other
entity to be involved in the proposed transaction; and
o the ability of PennFed Maryland to fulfill its objectives as a
financial institution holding company and on the ability of its
subsidiary financial institution(s) to fulfill the objectives of a
federally insured financial institution.
The New Charter provides that if PennFed Maryland's Board of Directors
determines that any proposed transaction of the type described above should be
rejected, it may take any lawful action to defeat the transaction, including,
but not limited to, any or all of the following:
o advising stockholders not to accept the proposal;
o instituting litigation against the party making the proposal;
o filing complaints with governmental and regulatory authorities;
o acquiring the stock or any other securities of PennFed Maryland;
o selling or otherwise issuing authorized but unissued stock, other
securities or granting options or rights with respect to authorized
but unissued stock;
o acquiring a company to create an antitrust or other regulatory
problem for the party making the proposal; and
o obtaining a more favorable offer from another individual or entity.
Action By Stockholders Without a Meeting
Company. The Present Charter provides that, subject to the rights of
holders of any class or series of preferred stock, any action required or
permitted to be taken by the stockholders must be effected at a duly called
annual or special meeting of stockholders and not by written consent.
PennFed Maryland. The New Bylaws provide that, except as described in the
following sentence, any action required or permitted to be taken at a meeting of
stockholders may instead be taken without a
26
meeting if a unanimous consent which sets forth the action is given in writing
or by electronic transmission by each stockholder entitled to vote on the
matter. The New Bylaws also provide that, unless the New Charter provides
otherwise, the holders of any class of PennFed Maryland stock, other than common
stock, that is entitled to vote generally in the election of directors may act
without a meeting by delivering a consent in writing or by electronic
transmission of the stockholders entitled to cast not less than the minimum
number of votes that would be necessary to approve the action at a meeting of
stockholders if PennFed Maryland gives notice of the action so taken to each
stockholder within ten days after the action is taken.
Special Meetings of Stockholders
Company. The Present Charter provides that, subject to the rights of
holders of any class or series of preferred stock, special meetings of
stockholders may be called only by the Board of Directors by vote of a majority
of the whole board.
PennFed Maryland. The New Bylaws provide that special meetings of
stockholders may be called by the President or by the Board of Directors by vote
of a majority of the whole board. In addition, the New Bylaws provide that a
special meeting of stockholders shall be called by the Secretary of PennFed
Maryland on the written request of stockholders entitled to cast at least a
majority of all votes entitled to be cast at the meeting.
Limitations on Directors' and Officers' Liability
Company. The Present Charter contains a provision limiting the personal
liability of directors to the extent permitted by the Delaware GCL, which
provides that no director will be personally liable to the company or its
stockholders for monetary damages for any breach of fiduciary duty as a director
except as follows:
(1) a director may be liable under Section 174 of the Delaware GCL,
which creates liability for unlawful payment of dividends and
unlawful stock purchases or redemptions; and
(2) a director also may be liable for:
o breaching his or her duty of loyalty to the company or its
stockholders;
o for acts and omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; or
o any transaction from which the director derived an improper
personal benefit.
PennFed Maryland. Consistent with Maryland law, the New Charter provides
that an officer or director of PennFed Maryland may not be liable to PennFed
Maryland or its stockholders for money damages, except to the extent:
o it is proved that the person actually received an improper benefit
or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received;
o a judgment or other final adjudication adverse to the person is
entered in a proceeding based on a finding in the proceeding that
the person's action, or failure to act, was the result of
27
active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding; or
o otherwise provided by the Maryland GCL.
Indemnification
Delaware Law. Under the Delaware GCL, a corporation may indemnify its
directors, officers, employees and certain other individuals against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with specified actions, suits or
proceedings arising because of the person's relationship to the corporation.
Generally, the indemnification will cover expenses regardless of whether the
action stems from a civil, criminal, administrative or investigative proceeding
if the individual acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
in the case of a criminal proceeding, had no reasonable cause to believe his or
her conduct was unlawful. A similar standard applies in an action or suit by or
in the right of the corporation (i.e., a stockholder derivative claim) except
that indemnification only extends to expenses (including attorneys' fees)
incurred in the defense or settlement of such a proceeding. In cases involving
the right of the corporation, the Delaware GCL requires court approval before
there can be any indemnification when the person seeking the indemnification has
been found liable to the corporation. To the extent that a person otherwise
eligible to be indemnified is successful on the merits or otherwise in defense
in any action, suit or proceeding described above, indemnification for expenses
(including attorneys' fees) actually and reasonably incurred is mandatory under
the Delaware GCL.
The Delaware GCL provides that a corporation may pay the expenses incurred
by a director or officer in defending a proceeding in advance of the final
disposition of that proceeding, provided that the corporation has received from
the director or officer a written undertaking to repay the amount advanced if it
is ultimately determined that the director or officer is not entitled to be
indemnified for the expenses.
The Present Charter generally provides for the indemnification of and
advancement of expenses to directors and officers to the extent permitted by the
Delaware GCL. The Present Charter also provides that the Company may, to the
extent authorized by a majority vote of the disinterested directors, grant
rights to indemnification and to the advancement of expenses to any employee or
agent of the Company to the same extent these rights are conferred upon
directors and officers by the Present Charter. The Present Charter further
provides, consistent with the Delaware GCL, that the right to indemnification
and advancement of expenses conferred by the Present Charter is not exclusive of
any other right which a person may have under the Present Charter, the Present
Bylaws, any agreement, any vote of stockholders or disinterested directors, or
otherwise.
Maryland Law. The Maryland GCL permits a corporation to indemnify its
directors, officers, employees and agents against judgments, penalties, fines,
settlements and reasonable expenses actually incurred unless it is proven that
(1) the conduct of the person was material to the matter giving rise to the
proceeding and the person acted in bad faith or with active and deliberate
dishonesty, (2) the person actually received an improper personal benefit or (3)
in the case of a criminal proceeding, the person had reason to believe that his
conduct was unlawful. The Maryland GCL provides that where a person is a
defendant in a derivative proceeding, the person may not be indemnified if the
person is found liable to the corporation. The Maryland GCL also provides that a
person may not be indemnified in respect of any proceeding alleging improper
personal benefit in which the person was found liable on the grounds that
personal benefit was improperly received. The person found liable in the
derivative proceeding or in the proceeding alleging improper personal benefit
may petition a court to nevertheless order indemnification for expenses if the
court determines that the person is fairly and reasonably entitled to
indemnification in view of all the relevant
28
circumstances. Similar to the Delaware GCL, the Maryland GCL provides that
unless otherwise provided in the corporation's charter, a director or officer
(but not an employee or agent) who is successful on the merits or otherwise in
defense of any proceeding must be indemnified against reasonable expenses.
The Maryland GCL provides that reasonable expenses incurred by a director,
officer, employee or agent who is a party to a proceeding may be paid by the
corporation in advance of the final disposition of the proceeding if the
corporation receives a written affirmation from the person to receive the
advancement of that person's good faith belief that he or she has met the
standard of conduct necessary for indemnification and a written undertaking by
the person to repay the advanced amount if it is ultimately determined that he
or she has not met the standard of conduct.
The New Charter provides that PennFed Maryland will indemnify and advance
expenses to its directors and officers to the fullest extent required or
permitted by the Maryland GCL. The New Charter also provides that PennFed
Maryland may indemnify other employees and agents to the extent authorized by
its Board of Directors and permitted by law. The New Charter further provides,
consistent with the Maryland GCL, that the rights to indemnification and to the
advancement of expenses conferred by the New Charter are not exclusive of any
other right which a person may have under any statute, the New Charter, the New
Bylaws, any agreement, any vote of stockholders or the Board of Directors, or
otherwise.
Rights Plan
The Company has a stockholder rights plan (defined above as the "Rights
Plan") initially adopted by its Board of Directors in March 1996, which could
discourage unwanted or hostile takeover attempts which are not negotiated with
its Board of Directors. The Rights Plan discourages such attempts by causing
substantial dilution to any person who acquires an amount in excess of a
specified percentage of the Company's common stock and by making an acquisition
of the Company without the consent of its Board of Directors prohibitively
expensive.
Each share of the Company's common stock has attached to it a stock
purchase right (a "Right") having the terms set forth in the Rights Plan. Prior
to separating from the Company's common stock, the Rights will be evidenced by
the Company's common stock certificates, will trade automatically with the
Company's common stock and will not be exercisable.
Rights will separate from the Company's common stock and become
exercisable at the close of business on the earlier of the Flip-in Date (as
defined below) or the tenth business day (or such later date as the Company's
Board of Directors may fix) after any person (other than the Company or any
subsidiary of the Company or any employee benefit plan of the Company or any
subsidiary) commences a tender offer or exchange offer which, if completed,
would result in the person owning 15% or more of the Company's common stock and
becoming an "Acquiring Person" under the Rights Plan. After the Rights separate
from the Company's common stock, each Right will entitle its holder to purchase
for an exercise price of $67.50 (subject to adjustment) one share of the
Company's common stock (or, under certain circumstances, debt or other equity
securities or assets).
Upon public announcement that any person or group has become an Acquiring
Person and unless the Company's Board of Directors acts to redeem the Rights,
then ten business days after the announcement (or such earlier or later date,
not more than 30 days after the announcement, as the Company's Board of
Directors may fix) (the "Flip-in Date"), each Right (other than Rights owned by
any Acquiring Person or affiliate, associate or transferee of an Acquiring
Person, which Rights become void) will entitle the holder to purchase, for an
exercise price of $67.50 (subject to adjustment), a number of shares of the
Company's common stock (or, under certain circumstances, debt or other equity
securities or assets) having an aggregate
29
market value of $135.00 (subject to corresponding adjustment for any adjustment
to the exercise price). If an Acquiring Person acquires between 15% and 50% of
the outstanding shares of the Company's common stock, the Company's Board of
Directors may, in lieu of allowing Rights to be exercised, require the
outstanding Rights to be exchanged for shares of the Company's common stock (or,
under certain circumstances, debt or other equity securities or assets).
After a person or group becomes an Acquiring Person under the Rights Plan,
the Company may not:
o consolidate or merge or participate in a binding share exchange with
any person, or sell or otherwise transfer to any person assets
representing more than 50% of the Company's assets or generating
more than 50% of the Company's operating income or cash flow, if at
the time of the transaction (or at the time of entering into an
agreement for the transaction) the Acquiring Person controls the
Company's Board of Directors and, in the case of a consolidation,
merger or share exchange, will receive different treatment than
other Company stockholders; or
o allow certain transactions to occur which would increase the
Acquiring Person's proportionate share of ownership of Company stock
by more than 1%;
unless provision is made so that each Right would after the transaction become a
right to buy, for an exercise price of $67.50 (subject to adjustment), that
number of shares of common stock or equivalent equity interest of the other
person having a market value of $135.00 (subject to corresponding adjustment for
any adjustment to the exercise price).
The Rights may be redeemed by the Company's Board of Directors at any time
until the close of business on the Flip-in Date, at a redemption price of $0.01
per Right. The Company's Board of Directors may amend the Rights Plan in any
respect until the close of business on the Flip-in Date. After that point, the
Company's Board of Directors may amend the Plan in any respect not materially
adverse to Rights holders generally or in order to cure any ambiguity or correct
any provision which is inconsistent with the other provisions of the Rights
Plan. In the absence of board action to extend the term of the Rights, the
Rights will expire at the close of business on February 10, 2008.
Following the Merger, PennFed Maryland will assume the Company's
obligations under the Rights Plan, and the Rights will continue to be in effect
in relation to PennFed Maryland's common stock. Although no changes to the
Rights Plan are currently anticipated, PennFed Maryland reserves the right to
amend the Rights Plan from time to time as its Board of Directors deems
necessary or appropriate.
Delaware and Maryland laws permit stockholder rights plans of the type
adopted by the Company. The Delaware courts have generally upheld stockholder
rights plans, but in recent decisions successively invalidated provisions of
stockholder rights plans which would permit the rights issued under the plans to
be redeemed (before they can be exercised to acquire additional shares) only by
a board of directors controlled by the continuing directors who adopted the plan
or by their chosen successors (a) at any time during the entire term of the plan
(a so-called "dead hand" provision) or (b) for a period not to exceed 180 days
(a so-called "slow hand" provision). Maryland statutorily permits stockholder
rights plans in general and specifically permits plans with a slow hand
provision, which would provide a stronger bargaining position to a board of
directors opposing an unsolicited takeover attempt than would a stockholder
rights plan without such a provision.
30
The Company's Rights Plan does not contain a "dead hand" or "slow hand"
redemption provision. Although the Maryland GCL will permit the PennFed Maryland
Board of Directors to amend the Rights Plan to add a "slow hand" redemption
provision, the Board has no current plans to adopt such an amendment.
Appraisal Rights
Delaware Law. Under the Delaware GCL, stockholders of a corporation who
are voting on a merger or consolidation generally are entitled to dissent from
the transaction and obtain payment of the fair value of their shares (so-called
"appraisal rights"), if they properly follow the statutory procedures for
asserting these rights. Appraisal rights do not apply if, however, (1) the
shares are listed on a national securities exchange or The Nasdaq Stock Market
National Market system or are held by 2,000 or more holders of record and (2)
except for cash in lieu of fractional share interests, the shares are being
exchanged for the shares of the surviving corporation of the merger or the
shares of any other corporation, which shares of such other corporation will, as
of the effective date of the merger or consolidation, be listed on a national
securities exchange or The Nasdaq Stock Market National Market system or held of
record by more than 2,000 holders.
Pursuant to the Delaware GCL, appraisal rights generally are not available
in a merger of two corporations where one of the corporations owns at least 90%
of the outstanding stock of the other corporation. Because the Company owns 100%
of the outstanding stock of PennFed Maryland, Company stockholders are not
entitled to appraisal rights in connection with the Merger.
Maryland Law. The Maryland GCL provides that, except in connection with a
transaction governed by the Maryland business combination statute or exempted
from that statute pursuant to the statute's fair price provisions, a stockholder
is not entitled to demand the fair value of his or her shares of stock in any
transaction if the stock is listed on a national securities exchange or The
Nasdaq Stock Market National Market system or SmallCap system. Because, as
described under "--Business Combinations with Certain Persons," PennFed Maryland
has opted-out of the Maryland business combination statute through a charter
provision, and since PennFed Maryland common stock will be listed on The Nasdaq
Stock Market upon completion of the Merger, the holders of PennFed Maryland
common stock after the Merger will not be entitled to appraisal rights under any
circumstances, regardless of the form of consideration to be paid for their
shares in a merger. In contrast, as noted above, the Company's stockholders
would be entitled to appraisal rights under the Delaware GCL if the Company were
a party to a merger and the consideration payable to the Company's stockholders
consisted, entirely or in part, of cash (other than cash payable in lieu of
fractional share interests).
Stockholder Inspection Rights
Delaware Law. The Delaware GCL provides that any stockholder, regardless
of the number of shares held and how long he has held his shares, generally has
the right to inspect the corporation's stock ledger, list of stockholders and
other books and records, provided he has a proper purpose for doing so and
satisfies certain procedural requirements.
Maryland Law. Under the Maryland GCL, any stockholder may inspect the
corporation's bylaws, stockholder minutes, annual statement of affairs and any
voting trust agreements. However, only a holder or group of holders of 5% or
more of the corporation's stock for at least six months has the right to inspect
the corporation's stock ledger, list of stockholders and books of account.
31
Anti-takeover Effects
The Present and New Charter and Bylaws contain a number of provisions
which may be viewed as having anti-takeover effects. These include, but are not
limited to, the following:
o classification of the board of directors, which prevents a majority
of the incumbent directors from being replaced at a single annual
stockholders' meeting;
o authorization of the board of directors to issue additional shares
of common stock and preferred stock generally without stockholder
approval;
o advance notice requirements for stockholder proposals and director
nominations;
o not permitting cumulative voting in the election of directors;
o a voting limitation on 10% or greater stockholders;
o providing that directors may be removed only for cause and only upon
approval of 80% of the outstanding voting power;
o providing that certain charter provisions can only be amended upon
approval of 80% of the outstanding voting power;
o providing that the bylaws can be amended by stockholders only upon
approval of 80% of the outstanding voting power;
o providing that certain business combinations with 10% or greater
stockholders require the approval of 80% of the outstanding voting
power unless the transaction has been approved by a majority of the
disinterested directors or certain fair price and procedure
requirements have been satisfied;
o an anti-greenmail provision applicable to repurchases of shares from
5% or greater stockholders;
o in the case of the Company, in the Present Charter, providing that
stockholders may not act by written consent, and in the case of
PennFed Maryland, in the New Bylaws, providing that except with
respect to the holders of preferred stock, stockholders may act by
written consent only if the consent is given by each stockholder
entitled to vote on the matter; and
o in the case of the Company, in the Present Charter, providing that
stockholders may not call special meetings of stockholders, and in
the case of PennFed Maryland, in the New Bylaws, providing that
stockholders may cause a special meeting of stockholders to be
called upon the written request of stockholders entitled to cast a
majority of the votes.
Except where noted, the provisions of the type described above that are
contained in the Present Charter and Bylaws are substantially the same as those
contained in the New Charter and Bylaws. In addition to the charter and bylaw
provisions described above, the Company is subject to Section 203 of the
Delaware GCL, which imposes a three-year moratorium on certain business
combinations with an "interested stockholder" unless one of three exceptions
applies. See "-Business Combinations with Certain Persons-Delaware Business
Combination Statute." PennFed Maryland has, through a provision in the New
Charter,
32
opted out of the comparable business combination statute contained in the
Maryland GCL, and, through a provision in the New Bylaws, opted out of the
Maryland control share acquisition statute (though the PennFed Maryland Board of
Directors could at any time cause PennFed Maryland to become subject to the
control share statute by amending the Bylaws to change the opt-out provision).
See "-Business Combinations with Certain Persons-Maryland Business Combination
Statute" and "-Restrictions on Voting Rights-Maryland Control Share Acquisition
Statute." In addition, the Company has in place the Rights Plan, which will be
assumed and continued on the same terms by PennFed Maryland following the
Merger. See "-Rights Plan."
Anti-takeover provisions in the Delaware and Maryland statutes and in the
corporate governance structure of both the Company and PennFed Maryland could
have the effect of discouraging an acquisition of the Company or PennFed
Maryland or stock purchases in furtherance of an acquisition, and could, under
certain circumstances, discourage transactions which might otherwise have a
favorable effect on the price of the Company's or PennFed Maryland's common
stock. These provisions may serve to make it more difficult to remove incumbent
management and board members and may also discourage all attempts to acquire
control not approved by the Board of Directors for any reason. As a result,
stockholders who might desire to participate in, or benefit from, such a
transaction might not have an opportunity to do so.
Possible Disadvantages of the Reincorporation Proposal
Despite the belief of the Company's Board of Directors that the
Reincorporation Proposal is in the best interests of the Company and its
stockholders, stockholders should be aware that many provisions of the New
Charter, the New Bylaws and the Maryland GCL have not received extensive
scrutiny and interpretation by the Maryland courts. The Delaware GCL is widely
regarded as the most extensive and well-defined body of corporate law in the
United States. Because of Delaware's prominence as a state of incorporation for
many major corporations, both the legislature and courts in Delaware have
demonstrated an ability and willingness to act quickly and effectively to meet
changing business needs. Furthermore, Delaware corporations are often guided by
the extensive body of court decisions interpreting Delaware's corporate law. The
Company's Board of Directors believes, however, that Maryland law will provide
the Company with the comprehensive, flexible structure which it needs to operate
effectively.
Tax Consequences
Under current federal income tax laws, the Merger will be a tax free
reorganization under the Internal Revenue Code of 1986, as amended. Accordingly,
(i) no gain or loss will be recognized for federal income tax purposes by the
stockholders of the Company as a result of the Merger and (ii) the basis and
holding period for the common stock of PennFed Maryland received by the
stockholders of the Company in exchange for common stock of the Company will be
the same as the basis and holding period of the common stock of the Company
exchanged therefor. The Merger will have no federal income tax effect on the
Company. State, local or foreign income tax consequences to stockholders may
vary from the federal tax consequences described above, and stockholders should
consult their own tax advisors as to the effect of the Merger under applicable
state, local or foreign income tax laws.
Vote Required
Pursuant to the Delaware GCL and the Present Charter, the affirmative vote
of the holders of a majority of the outstanding shares of the Company's common
stock is required for approval of the Reincorporation Proposal. Approval of the
Reincorporation Proposal by stockholders of the Company will constitute adoption
of the Merger Agreement, and specific approval of the New Charter and New Bylaws
and of all other transactions and proceedings relating to the Merger, including
ratification of the directors
33
of PennFed Maryland in the classes as set forth under "--Comparison of
Stockholder Rights-Number and Classification of Directors," the assumption by
PennFed Maryland, as the surviving corporation of the Merger, of the Company's
employee benefit plans, agreements and arrangements, and the obligations of the
Company under such plans, agreements and arrangements.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
REINCORPORATION PROPOSAL.
PROPOSAL III. RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has renewed the Company's
arrangement for Deloitte & Touche LLP to be its independent auditors for the
2004 fiscal year, subject to the ratification of the appointment by the
Company's stockholders. A representative of Deloitte & Touche LLP is expected to
attend the Meeting to respond to appropriate questions and will have an
opportunity to make a statement if he or she so desires.
For the fiscal year ended June 30, 2003, Deloitte & Touche LLP provided
various audit and non-audit services to the Company. Set forth below are the
aggregate fees billed for these services:
(a) Audit Fees: Aggregate fees billed for professional services rendered
for the audit of the Company's fiscal 2003 annual financial
statements and review of financial statements included in the
Company's Quarterly Reports on Form 10-Q for fiscal 2003: $218,500.
(b) Financial Information Systems Design and Implementation Fees: $0.
(c) All other fees: $65,125.
The Audit Committee of the Company's Board of Directors has considered
whether the provision of services covered by item (c) above is compatible with
maintaining the independence of Deloitte & Touche LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2004.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's next
annual meeting must be received by its Secretary at the administrative office of
the Company, located at 622 Eagle Rock Avenue, West Orange, New Jersey
07052-2989, no later than May 25, 2004 to be eligible for inclusion in the
Company's proxy statement and form of proxy relating to the next annual meeting.
Any such proposal will be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934, as amended, and as with any
stockholder proposal (regardless of whether included in the Company's proxy
materials), the Company's charter and bylaws and applicable state law.
To be considered for presentation at the next annual meeting, but not for
inclusion in the Company's proxy statement and form of proxy for that meeting,
proposals must be received by the Company no later than July 31, 2004. In
addition, if the Reincorporation Proposal is approved and the Company
reincorporates in Maryland, proposals may not be submitted to the Company before
July 1, 2004. If, however, the date of
34
the next annual meeting is before October 9, 2004 or after December 28, 2004,
proposals must instead be received by the Company by the later of the 90th day
before the date of the next annual meeting or the tenth day following the day on
which notice of the date of the next annual meeting is mailed or public
announcement of the date of the next annual meeting is first made (and, if the
Reincorporation Proposal is approved and the Company reincorporates in Maryland,
proposals may not be submitted to the Company earlier than the 120th day prior
to the date of the next annual meeting). If a stockholder proposal that is
received by the Company after the applicable deadline for presentation at the
next annual meeting is raised at the next annual meeting, the holders of the
proxies for that meeting will have the discretion to vote on the proposal in
accordance with their best judgment and discretion, without any discussion of
the proposal in the Company's proxy statement for the next annual meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons owning more than 10% of a registered class of the
Company's equity securities, to file periodic reports of ownership and changes
in ownership with the SEC and to provide the Company with copies of such
reports. Based solely upon information provided to the Company by the directors
and officers subject to Section 16(a), all Section 16(a) filing requirements
applicable to these persons were complied with during fiscal 2003.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement. If,
however, any other matter should properly come before the Meeting, it is
intended that the Board of Directors, as proxy for the stockholder, will act in
accordance with its best judgment.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of the Company's common stock. In addition to
solicitation by mail, directors, officers and regular employees of the Company
and/or the Bank may solicit proxies personally or by telephone without
additional compensation. The Company has retained Regan & Associates, Inc. to
assist in the solicitation of proxies for a fee of $6,500, including expenses.
BY ORDER OF THE BOARD OF DIRECTORS
William C. Anderson
Chairman of the Board
West Orange, New Jersey
September 22, 2003
35
APPENDIX A
PENNFED FINANCIAL SERVICES, INC.
--------------------------------
AUDIT COMMITTEE CHARTER
-----------------------
I. Statement of Policy
-------------------
The Audit Committee ("Committee") is appointed by the Board of Directors
of PennFed Financial Services, Inc. (the "Company") to assist the Board of
Directors in fulfilling its oversight responsibility relating to the integrity
of the Company's financial statements and the financial reporting processes; the
systems of internal accounting and financial controls; compliance with legal and
regulatory requirements; the independent auditors' qualifications and
independence; and the performance of the Company's internal audit function and
independent auditors. The Committee is empowered to investigate any matter, with
full access to all necessary books, records, facilities and personnel of the
Company, and has the authority to retain at the Company's expense legal,
accounting or other advisors, consultants or experts as it deems appropriate.
It is recognized that members of the Committee are not full-time employees
of the Company. The Company's management is responsible for preparing the
Company's financial statements. The independent auditors are responsible for
auditing the Company's annual financial statements and reviewing the Company's
quarterly financial statements prior to the filing of the Company's annual and
quarterly reports on Forms 10-K and 10-Q with the Securities and Exchange
Commission (the "SEC"). It is not the duty or responsibility of the Committee or
its members to conduct auditing or accounting reviews or procedures, and each
member of the Committee shall be entitled to rely on the integrity of those
persons and organizations within and outside the Company that it receives
information from and the accuracy of the financial and other information
provided to the Committee by such persons or organizations, absent actual
knowledge to the contrary (which shall be promptly reported to the Board of
Directors).
II. Audit Committee Composition and Meetings
----------------------------------------
The Committee shall be comprised of three or more directors appointed by
the Board of Directors, each of whom shall be an independent director qualified
to serve on the Committee under applicable law, the rules and regulations of the
SEC and the rules of The Nasdaq Stock Market, and each of whom shall be free
from any relationship that would interfere with the exercise of his or her
independent judgment. A chairperson may be designated by the Board or may be
chosen by a majority of the full Committee membership. Each Committee member
shall be financially literate, as such qualification is interpreted by the Board
of Directors in its business judgment. At least one member of the Committee must
have past employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
A-1
The Company will seek to have at least one member of the Committee who is
an "audit committee financial expert," as that term is defined in the SEC's
regulations and as the Board of Directors interprets such term in its business
judgment. Committee members shall not simultaneously serve on the audit
committees of more than two other public companies.
The Committee shall meet at least quarterly. The Committee chairperson
shall prepare and/or approve an agenda in advance of each meeting. If the
chairperson is not available for a meeting, the other members of the Committee
may appoint a temporary chairperson for such meeting. The Committee may ask
members of management or others to attend meetings and provide pertinent
information as necessary. The Committee will meet privately in executive session
at such times as the Committee may determine, and shall meet with management,
the chief internal auditor, the independent auditors, regulatory examiners and
as a committee to discuss any matters that the Committee or each of these groups
believes should be discussed.
III. Audit Committee Duties, Responsibilities and Processes
The following shall be the principal duties, responsibilities and
recurring processes of the Committee in carrying out its oversight role. The
processes are set forth as a guide with the understanding that the Committee may
supplement them as appropriate. As part of its oversight responsibility, the
Committee shall:
Review Procedures
-----------------
1. Review and discuss the form of presentation and type of information to be
contained in earnings press releases. Prior to the filing of quarterly and
annual reports on Forms 10-Q and 10-K with the SEC, review and discuss
with management and the independent auditors: (i) the Company's quarterly
and annual consolidated financial statements; (ii) matters that affect the
Company's consolidated financial statements, including disclosures under
"Management's Discussion and Analysis of Financial Condition and Results
of Operations;" (iii) the results of the independent auditors' interim
reviews, annual audit and report, and any other matters required to be
communicated to the Committee by the independent auditors, as well as
discussions regarding qualitative judgments of the independent auditors
about the appropriateness, not just the acceptability, of the Company's
accounting principles, and the clarity of the financial statements; (iv)
all critical accounting policies and practices to be used; and (v) other
material written communications between the independent auditors and
management. Prior to the filing of the Company's Annual Report on Form
10-K, recommend to the Board of Directors whether the audited financial
statements should be included in the Form 10-K.
2. In consultation with management, the independent auditors and the internal
auditors, monitor the integrity and effectiveness of the Company's
financial reporting processes and systems of internal controls, including
reviewing significant financial risk exposures and the steps management
has taken to monitor, control and report such exposures; review
significant findings relating to the foregoing prepared by the independent
auditors
A-2
or the internal auditors, together with management's responses and
follow-up to these reports. Monitor changes to commitment dates for
correcting audit findings.
3. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls and auditing matters and for the confidential
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
Independent Auditors and Other External Services
------------------------------------------------
4. Review the independence and performance of the independent auditors
annually. The Committee is directly responsible for the appointment,
compensation, retention and oversight of the work of the independent
auditors (including resolution of disagreements between management and the
independent auditors regarding financial reporting) engaged for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services for the Company. The independent auditors shall
report directly to the Committee. Ensure the rotation of the lead (or
coordinating) audit partner having primary responsibility for the audit
and the audit partner responsible for reviewing the audit as required by
law and the rotation of any other audit partner whose rotation is required
by the regulations of the SEC.
5. Approve the engagement letters and the fees to be paid to the independent
auditors. Pre-approve, except as permitted by law, all audit and non-audit
services to be provided by the independent auditors and consider the
possible effect that these services could have on the independence of such
auditors. Ensure that prohibited non-audit services are not performed. The
Committee may delegate to one or more of its members pre-approval
authority of non-audit services in accordance with applicable law.
6. On an annual basis, review and discuss with the independent auditors their
independence and all significant relationships they have with the Company
that could impair the auditors' objectivity and independence and receive
the written disclosures and letter from the independent auditors required
by Independence Standards Board Standard No. 1.
7. Review the audit plan of the independent auditors -- discuss scope,
staffing, timing, estimated and actual fees, reliance upon management and
internal audit and general audit approach.
8. Discuss with the independent auditors the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit. Review with the independent auditors any audit problems or
difficulties and management's response.
9. Establish clear and appropriate hiring policies for employees or former
employees of the independent auditors who participated in any capacity in
the audit of the Company.
A-3
Internal Audit Function
- -----------------------
10. Review the budget, program, changes in program, activities, strategies,
organizational structure and qualifications of the internal audit
function, as needed, it being understood that the internal audit function
reports directly to the Committee. Evaluate whether the internal audit
function operation and structure permits unrestricted access by internal
auditors to records, personnel and physical properties relevant to the
performance of its responsibilities and to top management, the Committee,
and the Board. Assess the appropriateness of the resources allocated to
internal auditing. Evaluate the effectiveness of the internal audit
function.
11. Review the appointment, performance and replacement of the individual
heading the internal audit function. Decisions regarding hiring or
termination of this person require endorsement by the Committee. The
chairperson of the Committee will also be involved in performance
evaluation and compensation decisions related to this person.
12. Review significant issues presented by the internal audit function
together with management's response and follow-up to these reports.
Other Audit Committee Responsibilities
--------------------------------------
13. Annually prepare a report to shareholders as required by the SEC for
inclusion in the Company's proxy statement.
14. Review and reassess the adequacy of this Charter at least annually, and
submit the Charter to the Board for approval annually and have the
document published at least every three years in accordance with SEC
regulations.
15. Maintain minutes of meetings and periodically report to the Board of
Directors on results of the foregoing activities.
16. Conduct an appropriate review of and approve all related party
transactions on an ongoing basis, as required by the rules of the Nasdaq
Stock Market. For these purposes, the term "related party transactions"
shall refer to transactions required to be disclosed pursuant to SEC
Regulation S-K, Item 404.
17. Review with the Company's counsel: (i) any significant legal matter that
could have a material impact on the Company's financial statements; (ii)
legal compliance matters, including corporate securities trading policies
and material notices to or inquiries received from governmental agencies;
and (iii) reports of evidence of a material violation of securities laws
or breaches of fiduciary duty.
18. Review disclosures made to the Committee by the Company's CEO and CFO
during their certification processes for the Form 10-K and Form 10-Q.
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19. Ensure required certifications are made to Nasdaq: (i) that a formal
written charter has been adopted for the Committee and that the Committee
has reviewed and reassessed the adequacy of the charter on an annual
basis; and (ii) as to the independence of the members of the Committee.
20. Perform any other activities consistent with this Charter, the Company's
Bylaws or governing law as the Committee or the Board of Directors deems
necessary or appropriate.
IV. Funding
-------
The Company shall provide the Committee with appropriate funding, as
determined by the Committee, in its capacity as a committee of the Board of
Directors, for payment of: (i) compensation to the independent auditors engaged
for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services for the Company; (ii) compensation to any
advisors employed by the Committee; and (iii) ordinary administrative expenses
of the Committee that are necessary or appropriate in carrying out its duties.
Revised September 9, 2003
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APPENDIX B
PLAN OF REORGANIZATION AND AGREEMENT OF MERGER
This Plan of Reorganization and Agreement of Merger (hereinafter called
the "Merger Agreement") is made as of September 16, 2003, by and between PennFed
Financial Services, Inc., a Delaware corporation ("PennFed Delaware") and
PennFed Financial Services, Inc., a Maryland corporation ("PennFed Maryland").
PennFed Delaware and/or PennFed Maryland, when reference is made to the entity
irrespective of the state of incorporation, is sometimes herein referred to as
the "Company."
WITNESSETH:
WHEREAS, PennFed Delaware is a corporation duly organized and existing
under the laws of the State of Delaware;
WHEREAS, PennFed Maryland is a corporation duly organized and existing
under the laws of the State of Maryland;
WHEREAS, as of the date of this Merger Agreement, PennFed Delaware has
authority to issue 15,000,000 shares of common stock, par value $.01 per share,
of which 6,870,178 shares are issued and outstanding; and 7,000,000 shares of
preferred stock, par value $.01 per share, none of which are issued or
outstanding;
WHEREAS, as of the date of this Merger Agreement, PennFed Maryland has
authority to issue 15,000,000 shares of common stock, par value $.01 per share,
of which of which 100 shares are issued and outstanding and owned by PennFed
Delaware; and 7,000,000 shares of preferred stock, par value $.01 per share,
none of which are issued or outstanding;
WHEREAS, the respective Boards of Directors of PennFed Delaware and PennFed
Maryland have determined that, for the purpose of effecting the reincorporation
of PennFed Delaware in the State of Maryland, it is advisable and to their
advantage and the advantage of their respective stockholders that PennFed
Delaware merge with and into PennFed Maryland upon the terms and conditions
herein provided; and
WHEREAS, the respective Boards of Directors of PennFed Delaware and PennFed
Maryland have approved this Merger Agreement and have directed that this Merger
Agreement be submitted to the vote of their respective stockholders.
AGREEMENT
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that PennFed Delaware
shall merge with and into PennFed Maryland on the following terms, conditions
and other provisions:
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I. TERMS AND CONDITIONS
1.1 Merger. Subject to approval of the respective stockholders of PennFed
Delaware and PennFed Maryland and the receipt of all required regulatory
approvals, PennFed Delaware shall be merged with and into PennFed Maryland (the
"Merger"), and PennFed Maryland shall be the surviving corporation, effective
upon the date when this Merger Agreement is made effective in accordance with
applicable law (the "Effective Date").
1.2 Succession. Upon the Effective Date, PennFed Maryland shall succeed to
all of the rights, privileges, powers and property of PennFed Delaware in the
manner of and as more fully set forth in Section 3-114 of the Maryland General
Corporation Law.
1.3 Common Stock of PennFed Delaware. Upon the Effective Date, by virtue of
the Merger and without any action on the part of the holder thereof, each share
of common stock, par value $.01 per share, of PennFed Delaware outstanding
immediately prior thereto shall be changed and converted into one fully paid and
non-assessable share of the common stock of PennFed Maryland, par value $.01 per
share.
1.4 Common Stock of PennFed Maryland. Upon the Effective Date, by virtue of
the Merger and without any action on the part of the holder thereof, the 100
shares of common stock, par value $.01 per share, of PennFed Maryland
outstanding immediately prior thereto shall be cancelled and returned to the
status of authorized but unissued shares.
1.5 Stock Certificates. Upon and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of common
stock, par value $.01 per share, of PennFed Delaware and the associated stock
purchase rights (the "Stock Purchase Rights") under the Stockholder Protection
Rights Agreement, dated as of March 21, 1996 (as amended, the "Rights
Agreement"), between the Company and Registrar and Transfer Company, as rights
agent, shall be deemed for all purposes to evidence ownership of and to
represent the shares of common stock, par value $.01 per share, of PennFed
Maryland into which the shares of PennFed Delaware represented by such
certificates have been converted as herein provided and the associated Stock
Purchase Rights assumed by PennFed Maryland pursuant to Section 1.8 of this
Merger Agreement. The registered owner on the books and records of PennFed
Maryland or its transfer agent of any such outstanding stock certificate shall,
until such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to PennFed Maryland or its transfer agent, have and be
entitled to exercise any voting and other rights with respect to, and to receive
any dividend and other distributions upon, the shares of PennFed Maryland
evidenced by such outstanding certificate as above provided.
1.6 Options. Upon the Effective Date, PennFed Maryland will assume and
continue all of PennFed Delaware's stock option and restricted stock plans, and
the outstanding and unexercised portions of all options and rights to buy common
stock, par value $.01 per share, of PennFed Delaware shall become options or
rights for the same number of shares of common stock, par value $.01 per share,
of PennFed Maryland, with no other changes in the terms and conditions of such
options or rights, including exercise prices, and effective upon the Effective
Date, PennFed Maryland
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hereby assumes the outstanding and unexercised portions of such options and
rights and the obligations of PennFed Delaware with respect thereto.
1.7 Other Employee Benefit Plans. Upon the Effective Date, PennFed Maryland
will assume all obligations of PennFed Delaware under any and all employee
benefit plans in effect as of the Effective Date or with respect to which
employee rights or accrued benefits are outstanding as of the Effective Date.
1.8 Assumption of Stock Purchase Rights and Rights Agreement. Upon the
Effective Date, all outstanding Stock Purchase Rights shall be assumed by
PennFed Maryland and become rights to purchase the common stock, par value $.01
per share, of PennFed Maryland, with no other changes in the terms and
conditions of such Stock Purchase Rights, including the exercise price. Upon the
Effective Date, PennFed Maryland also shall adopt and assume the Rights
Agreement as successor to PennFed Delaware.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Articles of Incorporation and Bylaws. The Articles of Incorporation of
PennFed Maryland in effect on the Effective Date (a copy of which is attached
hereto and incorporated herein by this reference), shall continue to be the
Articles of Incorporation of PennFed Maryland. The Bylaws of PennFed Maryland in
effect on the Effective Date shall continue to be the Bylaws of PennFed
Maryland.
2.2 Directors. The directors of PennFed Maryland immediately preceding the
Effective Date shall remain the directors of PennFed Maryland on and after the
Effective Date. Such directors of PennFed Maryland shall hold office in the
classes and for the terms as in effect immediately prior to the Effective Date,
and until their successors are elected and qualified or their prior resignation,
removal or death.
2.3 Officers. The officers of PennFed Maryland shall remain the officers of
PennFed Maryland upon the Effective Date and shall serve until their successors
are elected and qualified or their prior resignation, removal or death.
III. MISCELLANEOUS
3.1 Further Assurances. From time to time, as and when required by PennFed
Maryland or by its successors and assigns, there shall be executed and delivered
on behalf of PennFed Delaware such deeds and other instruments, and there shall
be taken or caused to be taken by it such further and other action as shall be
appropriate or necessary in order to vest or perfect, or to conform of record or
otherwise, in PennFed Maryland the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises, and
authority of PennFed Delaware, and otherwise to carry out the purposes of this
Merger Agreement, and the officers and directors of PennFed Maryland are fully
authorized in the name of and on behalf of PennFed Delaware or otherwise to take
any and all such action and to execute and deliver any and all such deeds and
other instruments.
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3.2 Amendment. At any time before or after approval by the stockholders of
PennFed Delaware, this Merger Agreement may be amended in any manner (except
that Section 1.3 and 1.4 and any of the other principal terms hereof as set
forth in Section 251(d) of the Delaware General Corporation Law may not be
amended without the approval of the stockholders of PennFed Delaware) as may be
determined in the judgment of the respective Boards of Directors of PennFed
Delaware and PennFed Maryland to be necessary, desirable or expedient in order
to clarify the intention of the parties hereto or to effect or facilitate the
purposes and intent of this Merger Agreement.
3.3 Abandonment. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either PennFed Delaware or PennFed Maryland or both,
notwithstanding the approval of this Merger Agreement by the stockholders of
PennFed Delaware.
3.4 Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Boards of Directors of PennFed Delaware and PennFed Maryland, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
ATTEST: PENNFED FINANCIAL SERVICES, INC.
a Delaware Corporation
/s/ Patrick D. McTernan By: /s/ Joseph L. LaMonica
- ----------------------------------- ------------------------------------
Patrick D. McTernan Joseph L. LaMonica
Secretary President and Chief Executive Officer
ATTEST: PENNFED FINANCIAL SERVICES, INC.,
a Maryland Corporation
/s/ Patrick D. McTernan By: /s/ Joseph L. LaMonica
- ----------------------------------- ------------------------------------
Patrick D. McTernan Joseph L. LaMonica
Secretary President and Chief Executive Officer
B-5
APPENDIX C
ARTICLES OF INCORPORATION
OF
PENNFED FINANCIAL SERVICES, INC.
The undersigned, Joseph L. LaMonica, whose address is 622 Eagle Rock
Avenue, West Orange, New Jersey 07052, being at least eighteen years of age,
acting as incorporator, does hereby form a corporation under the general laws of
the State of Maryland, having the following Articles:
ARTICLE 1. Name. The name of the corporation is PennFed Financial
Services, Inc. (herein the "Corporation").
ARTICLE 2. Principal Office. The address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
300 East Lombard Street, Baltimore, Maryland 21202.
ARTICLE 3. Purpose. The purpose for which the Corporation is formed is to
engage in any lawful act or activity for which corporations may be organized
under the general laws of the State of Maryland as now or hereafter in force.
ARTICLE 4. Resident Agent. The name and address of the registered agent of
the Corporation in the State of Maryland is The Corporation Trust Incorporated,
300 East Lombard Street, Baltimore, Maryland 21202. Said resident agent is a
Maryland corporation.
ARTICLE 5.
A. Capital Stock. The total number of shares of capital stock of all
classes which the Corporation has authority to issue is twenty-two million
(22,000,000) shares, consisting of:
1. Seven million (7,000,000) shares of preferred stock, par value
one cent ($.01) per share (the "Preferred Stock"); and
2. Fifteen million (15,000,000) shares of common stock, par value
one cent ($.01) per share (the "Common Stock").
The aggregate par value of all the authorized shares of capital stock is
two hundred twenty thousand dollars ($220,000). Except to the extent required by
governing law, rule or regulation, the shares of capital stock may be issued
from time to time by the Board of Directors without further approval of the
stockholders of the Corporation. The Corporation shall have the authority to
purchase its capital stock out of funds lawfully available therefor which funds
shall include, without limitation, the Corporation's unreserved and unrestricted
capital surplus.
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B. Common Stock. Except as provided under the terms of any series of
Preferred Stock and as limited by Section D of this Article 5, the exclusive
voting power shall be vested in the Common Stock, the holders thereof being
entitled to one vote for each share of such Common Stock standing in the
holder's name on the books of the Corporation. Subject to any rights and
preferences of any series of Preferred Stock, holders of Common Stock shall be
entitled to such dividends as may be declared by the Board of Directors out of
funds lawfully available therefor. Upon any liquidation, dissolution or winding
up of the affairs of the Corporation, whether voluntary or involuntary, holders
of Common Stock shall be entitled to receive pro rata the remaining assets of
the Corporation after payment or provision for payment of all debts and
liabilities of the Corporation and payment or provision for payment of any
amounts owed to the holders of any series of Preferred Stock having preference
over the Common Stock on distributions on liquidation, dissolution or winding up
of the Corporation.
C. Preferred Stock. The Board of Directors is hereby expressly
authorized, subject to any limitations prescribed by law, to provide for the
issuance of the shares of Preferred Stock in series, to establish from time to
time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof. The number of
authorized shares of the Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the Common Stock, without a vote of the holders of
the Preferred Stock, or of any series thereof, unless a vote of any such holders
is required by law or pursuant to the terms of such Preferred Stock.
D. Restrictions on Voting Rights of the Corporation's Equity
Securities.
1. Notwithstanding any other provision of the Charter, in no event
shall any record owner of any outstanding Common Stock which is
beneficially owned, directly or indirectly, by a person who, as of any
record date for the determination of stockholders entitled to vote on any
matter, beneficially owns in excess of 10% of the then-outstanding shares
of Common Stock (the "Limit"), be entitled, or permitted to any vote in
respect of the shares held in excess of the Limit. The number of votes
which may be cast by any record owner by virtue of the provisions hereof
in respect of Common Stock beneficially owned by such person owning shares
in excess of the Limit shall be a number equal to the total number of
votes which a single record owner of all Common Stock owned by such person
would be entitled to cast after giving effect to the provisions hereof,
multiplied by a fraction, the numerator of which is the number of shares
of such class or series beneficially owned by such person and owned of
record by such record owner and the denominator of which is the total
number of shares of Common Stock beneficially owned by such person owning
shares in excess of the Limit.
2. The following definitions shall apply to this Section D of this
Article 5.
(a) An "affiliate" of a specified person shall mean a person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
person specified.
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(b) "Beneficial ownership" shall be determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934 (or any successor rule or statutory provision),
or, if said Rule 13d-3 shall be rescinded and there shall be no
successor rule or statutory provision thereto, pursuant to said Rule
13d-3 as in effect on June 30, 2003; provided, however, that a
person shall, in any event, also be deemed the "beneficial owner" of
any Common Stock:
(1) which such person or any of its affiliates
beneficially owns, directly or indirectly; or
(2) which such person or any of its affiliates has (i)
the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding (but shall not be
deemed to be the beneficial owner of any voting shares solely
by reason of an agreement, contract, or other arrangement with
the Corporation to effect any transaction which is described
in any one or more of the clauses of Section A of Article 9
hereof) or upon the exercise of conversion rights, exchange
rights, warrants, or options or otherwise, or (ii) sole or
shared voting or investment power with respect thereto
pursuant to any agreement, arrangement, understanding,
relationship or otherwise (but shall not be deemed to be the
beneficial owner of any voting shares solely by reason of a
revocable proxy granted for a particular meeting of
stockholders, pursuant to a public solicitation of proxies for
such meeting, with respect to shares of which neither such
person nor any such affiliate is otherwise deemed the
beneficial owner); or
(3) which are beneficially owned, directly or
indirectly, by any other person with which such first
mentioned person or any of its affiliates acts as a
partnership, limited partnership, syndicate or other group
pursuant to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any
shares of capital stock of the Corporation;
and provided further, however, that (i) no director or officer of
the Corporation (or any affiliate of any such director or officer)
shall, solely by reason of any or all of such directors or officers
acting in their capacities as such, be deemed, for any purposes
hereof, to beneficially own any Common Stock beneficially owned by
any other such director or officer (or any affiliate thereof), and
(ii) neither any employee stock ownership or similar plan of the
Corporation or any subsidiary of the Corporation nor any trustee
with respect thereto (or any affiliate of such trustee) shall,
solely by reason of such capacity of such trustee, be deemed, for
any purposes hereof, to beneficially own any Common Stock held under
any such plan. For purposes of computing the percentage beneficial
ownership of Common Stock of a person, the outstanding Common Stock
shall include shares deemed owned by such person through application
of this subsection but shall not include any other Common Stock
which may be issuable by the Corporation pursuant to any agreement,
or upon exercise of conversion rights, warrants or options, or
otherwise. For all other
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purposes, the outstanding Common Stock shall include only Common
Stock then outstanding and shall not include any Common Stock which
may be issuable by the Corporation pursuant to any agreement, or
upon the exercise of conversion rights, warrants or options, or
otherwise.
(c) A "person" shall mean any individual, firm, corporation,
or other entity.
(d) The Board of Directors shall have the power to construe
and apply the provisions of this Section D and to make all
determinations necessary or desirable to implement such provisions,
including but not limited to matters with respect to (i) the number
of shares of Common Stock beneficially owned by any person, (ii)
whether a person is an affiliate of another, (iii) whether a person
has an agreement, arrangement, or understanding with another as to
the matters referred to in the definition of beneficial ownership,
(iv) the application of any other definition or operative provision
of this Section D to the given facts, or (v) any other matter
relating to the applicability or effect of this Section.
3. The Board of Directors shall have the right to demand that any
person who is reasonably believed to beneficially own Common Stock in
excess of the Limit (or holds of record Common Stock beneficially owned by
any person in excess of the Limit) (a "Holder in Excess") supply the
Corporation with complete information as to (i) the record owner(s) of all
shares beneficially owned by such Holder in Excess, and (ii) any other
factual matter relating to the applicability or effect of this section as
may reasonably be requested of such Holder in Excess. The Board of
Directors shall further have the right to receive from any Holder in
Excess reimbursement for all expenses incurred by the Board in connection
with its investigation of any matters relating to the applicability or
effect of this section on such Holder in Excess, to the extent such
investigation is deemed appropriate by the Board of Directors as a result
of the Holder in Excess refusing to supply the Corporation with the
information described in the previous sentence.
4. Except as otherwise provided by law or expressly provided in this
Section D, the presence, in person or by proxy, of the holders of record
of shares of capital stock of the Corporation entitling the holders
thereof to cast one-third of the votes (after giving effect, if required,
to the provisions of this Section D) entitled to be cast by the holders of
shares of capital stock of the Corporation entitled to vote shall
constitute a quorum at all meetings of the stockholders, and every
reference in the Charter to a majority or other proportion of capital
stock (or the holders thereof) for purposes of determining any quorum
requirement or any requirement for stockholder consent or approval shall
be deemed to refer to such majority or other proportion of the votes (or
the holders thereof) then entitled to be cast in respect of such capital
stock.
5. Any constructions, applications, or determinations made by the
Board of Directors, pursuant to this Section D in good faith and on the
basis of such information and assistance as was then reasonably available
for such purpose, shall be conclusive and binding upon the Corporation and
its stockholders.
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6. In the event any provision (or portion thereof) of this Section D
shall be found to be invalid, prohibited or unenforceable for any reason,
the remaining provisions (or portions thereof) of this Section D shall
remain in full force and effect, and shall be construed as if such
invalid, prohibited or unenforceable provision had been stricken herefrom
or otherwise rendered inapplicable, it being the intent of the Corporation
and its stockholders that each such remaining provision (or portion
thereof) of this Section D remain, to the fullest extent permitted by law,
applicable and enforceable as to all stockholders, including stockholders
owning an amount of stock over the Limit, notwithstanding any such
finding.
E. Majority Vote. Notwithstanding any provision of law requiring the
authorization of any action by a greater proportion than a majority of the total
number of shares of all classes of capital stock or of the total number of
shares of any class of capital stock, such action shall be valid and effective
if authorized by the affirmative vote of the holders of a majority of the total
number of shares of all classes outstanding and entitled to vote thereon, except
as otherwise provided in the Charter.
ARTICLE 6. Preemptive Rights. No holder of the capital stock of the
Corporation or series of stock or of options, warrants or other rights to
purchase shares of any class or series of stock or of other securities of the
Corporation shall have any preemptive right to purchase or subscribe for any
unissued capital stock of any class or series, or any unissued bonds,
certificates of indebtedness, debentures or other securities convertible into or
exchangeable for capital stock of any class or series, or carrying any right to
purchase stock of any class or series, except such as may be established by the
Board of Directors.
ARTICLE 7. Directors. The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
A. Management of the Corporation. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors. All
powers of the Corporation may be exercised by or under the authority of the
Board of Directors, except as conferred on or as reserved to the stockholders by
law or by the Charter or the Bylaws of the Corporation.
B. Number, Class and Terms of Directors; Cumulative Voting. The
number of directors constituting the Board of Directors of the Corporation shall
initially be six, which number may be increased or decreased in the manner
provided in the Bylaws of the Corporation; provided, however, that such number
shall never be less than the minimum number of directors required by the
Maryland General Corporation Law (the "MGCL") now or hereafter in force. The
directors, other than those who may be elected by the holders of any series of
Preferred Stock, shall be divided into three classes, as nearly equal in number
as reasonably possible, with the term of office of the first class ("Class I")
to expire at the conclusion of the first annual meeting of stockholders, the
term of office of the second class ("Class II") to expire at the conclusion of
the annual meeting of stockholders one year thereafter and the term of office of
the third class ("Class III") to expire at the conclusion of the annual meeting
of stockholders two years thereafter, with each director to hold office until
his or her successor shall have been duly elected and qualified. At each annual
meeting of stockholders, directors elected to succeed those directors whose
terms expire shall be elected for
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a term of office to expire at the third succeeding annual meeting of
stockholders after their election, with each director to hold office until his
or her successor shall have been duly elected and qualified.
The names of the individuals who will serve as directors of the
Corporation until their successors are elected and qualify are as follows:
(1) Class I directors:
Name Term to Expire in
---- -----------------
William C. Anderson 2004
Amadeu L. Carvalho 2004
(2) Class II directors:
Name Term to Expire in
---- -----------------
Patrick D. McTernan 2005
Marvin D. Schoonover 2005
(3) Class III directors:
Name Term to Expire in
---- -----------------
Joseph L. LaMonica 2006
Mario Teixeira, Jr. 2006
Stockholders shall not be permitted to cumulate their votes in the
election of directors.
C. Vacancies. Any vacancies in the Board of Directors may be filled
in the manner provided in the Bylaws of the Corporation.
D. Removal. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 80% of the voting power of
all of the then-outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors (after giving effect to the
provisions of Article 5 hereof) voting together as a single class.
E. Stockholder Proposals and Nominations of Directors. Advance
notice of stockholder nominations for the election of directors and of business
to be brought by stockholders before any meeting of the stockholders of the
Corporation shall be given in the manner provided in the Bylaws of the
Corporation.
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ARTICLE 8. Bylaws. The Board of Directors is expressly empowered to adopt,
amend or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal
of the Bylaws of the Corporation by the Board of Directors shall require the
approval of a majority of the total number of directors the Corporation would
have if there were no vacancies on the Board of Directors. The stockholders
shall also have power to adopt, amend or repeal the Bylaws of the Corporation.
In addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by the Charter, the affirmative vote of the
holders of at least 80% of the voting power of all of the then-outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors (after giving effect to the provisions of Article 5
hereof), voting together as a single class, shall be required for the adoption,
amendment or repeal of any provisions of the Bylaws of the Corporation by the
stockholders.
ARTICLE 9. Approval of Certain Business Combinations.
A. Super-majority Voting Requirement; Business Combination Defined.
In addition to any affirmative vote required by law or by the Charter, and
except as otherwise expressly provided in this Section:
1. any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (a) any Interested Stockholder (as
hereinafter defined) or (b) any other corporation (whether or not itself
an Interested Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an Interested
Stockholder; or
2. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder, or any Affiliate of any Interested
Stockholder, of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value (as hereafter defined) equaling or exceeding
25% or more of the combined assets of the Corporation and its
Subsidiaries; or
3. the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an aggregate Fair
Market Value equaling or exceeding 25% of the combined assets of the
Corporation and its Subsidiaries except pursuant to an employee benefit
plan of the Corporation or any Subsidiary thereof; or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate of any Interested Stockholder; or
5. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing
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the proportionate share of the outstanding shares of any class of equity
or convertible securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder (a "Disproportionate
Transaction"); provided, however, that no such transaction shall be deemed
a Disproportionate Transaction if the increase in the proportionate
ownership of the Interested Stockholder or Affiliate as a result of such
transaction is no greater than the increase experienced by the other
stockholders generally;
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then-outstanding shares of stock of the Corporation entitled to
vote in the election of directors (the "Voting Stock"), voting together as a
single class. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified, by
law or by any other provisions of the Charter (including those applicable to any
class or series of capital stock) or in any agreement with any national
securities exchange or quotation system or otherwise.
The term "Business Combination" as used in this Article 9 shall mean any
transaction which is referred to in any one or more of paragraphs 1 through 5 of
Section A of this Article 9.
B. Exception to Super-majority Voting Requirement. The provisions of
Section A of this Article 9 shall not be applicable to any particular Business
Combination, and such Business Combination shall require only the affirmative
vote of the majority of the outstanding shares of capital stock entitled to
vote, or such vote as is required by law or by the Charter, if, in the case of
any Business Combination that does not involve any cash or other consideration
being received by the stockholders of the Corporation solely in their capacity
as stockholders of the Corporation, the condition specified in the following
paragraph 1 is met or, in the case of any other Business Combination, all of the
conditions specified in either of the following paragraphs 1 and 2 are met:
1. The Business Combination shall have been approved by a majority
of the Disinterested Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by the
holders of Common Stock in such Business Combination shall at least
be equal to the higher of the following:
(i) (if applicable) the Highest Per Share Price,
including any brokerage commissions, transfer taxes and
soliciting dealers' fees, paid by the Interested Stockholder
or any of its Affiliates for any shares of Common Stock
acquired by it (x) within the two-year period immediately
prior to the first public announcement of the proposal of the
Business Combination (the "Announcement Date"), or (y) in the
transaction in which it became an Interested Stockholder,
whichever is higher; and
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(ii) the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date
is referred to in this Article 9 as the "Determination Date"),
whichever is higher.
(b) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
shares of any class of outstanding Voting Stock other than Common
Stock shall be at least equal to the highest of the following (it
being intended that the requirements of this subparagraph (b) shall
be required to be met with respect to every such class of
outstanding Voting Stock, whether or not the Interested Stockholder
has previously acquired any shares of a particular class of Voting
Stock):
(i) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder for any shares of such class of Voting
Stock acquired by it (x) within the two-year period
immediately prior to the Announcement Date, or (y) in the
transaction in which it became an Interested Stockholder,
whichever is higher;
(ii) (if applicable) the highest preferential amount per
share to which the holders of shares of such class of Voting
Stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation; and
(iii) the Fair Market Value per share of such class of
Voting Stock on the Announcement Date or on the Determination
Date, whichever is higher.
(c) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common
Stock) shall be in cash or in the same form as the Interested
Stockholder has previously paid for shares of such class of Voting
Stock. If the Interested Stockholder has paid for shares of any
class of Voting Stock with varying forms of consideration, the form
of consideration to be received per share by holders of shares of
such class of Voting Stock shall be either cash or the form used to
acquire the largest number of shares of such class of Voting Stock
previously acquired by the Interested Stockholder. The price
determined in accordance with Section B.2. of this Article 9 shall
be subject to appropriate adjustment in the event of any stock
dividend, stock split, combination of shares or similar event.
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination: (i) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to declare
and pay at the regular date therefor any full quarterly dividends
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(whether or not cumulative) on any outstanding stock having
preference over the Common Stock as to dividends or liquidation;
(ii) there shall have been (X) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect
any subdivision of the Common Stock), except as approved by a
majority of the Disinterested Directors, and (Y) an increase in such
annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of
Common Stock, unless the failure to so increase such annual rate is
approved by a majority of the Disinterested Directors; and (iii)
neither such Interested Stockholder nor any of its Affiliates shall
have become the beneficial owner of any additional shares of Voting
Stock except as part of the transaction which results in such
Interested Stockholder becoming an Interested Stockholder.
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules
or regulations) shall be mailed to stockholders of the Corporation
at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is
required to be mailed pursuant to such Act or subsequent
provisions).
C. Certain Definitions. For the purposes of this Article 9:
1. A "Person" shall include an individual, a group acting in
concert, a corporation, a partnership, an association, a joint venture, a
pool, a joint stock company, a trust, an unincorporated organization or
similar company, a syndicate or any other group or entity formed for the
purpose of acquiring, holding or disposing of securities.
2. "Interested Stockholder" shall mean any Person (other than the
Corporation or any holding company or Subsidiary thereof) who or which:
(a) is the beneficial owner, directly or indirectly, of more
than 10% of the voting power of the outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question was
the beneficial owner, directly or indirectly, of more than 10% of
the voting power of the then-outstanding Voting Stock; or
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(c) is an assignee of or has otherwise succeeded to any shares
of Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions
not involving a public offering within the meaning of the Securities
Act of 1933.
3. A Person shall be a "beneficial owner" of any Voting Stock:
(a) which such Person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns, directly or indirectly
within the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934, as in effect on June 30, 2003; or
(b) which such Person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding (but neither such Person nor any such
Affiliate or Associate shall be deemed to be the beneficial owner of
any shares of Voting Stock solely by reason of a revocable proxy
granted for a particular meeting of stockholders, pursuant to a
public solicitation of proxies for such meeting, and with respect to
which shares neither such Person nor any such Affiliate or Associate
is otherwise deemed the beneficial owner); or
(c) which are beneficially owned, directly or indirectly
within the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934, as in effect on June 30, 2003, by any other Person with
which such Person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purposes of
acquiring, holding, voting (other than solely by reason of a
revocable proxy as described in Subparagraph (b) of this Paragraph
3) or in disposing of any shares of Voting Stock;
provided, however, that, in the case of any employee stock ownership
or similar plan of the Corporation or of any Subsidiary in which the
beneficiaries thereof possess the right to vote any shares of Voting
Stock held by such plan, no such plan nor any trustee with respect
thereto (nor any Affiliate of such trustee), solely by reason of
such capacity of such trustee, shall be deemed, for any purposes
hereof, to beneficially own any shares of Voting Stock held under
any such plan.
4. For the purpose of determining whether a Person is an Interested
Stockholder pursuant to Paragraph 2 of this Section C, the number of
shares of Voting Stock deemed to be outstanding shall include shares
deemed owned through application of Paragraph 3 of this Section C but
shall not include any other shares of Voting Stock which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise
of conversion rights, warrants or options, or otherwise.
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5. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on June 30, 2003.
6. "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 2 of this Section C, the
term "Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned, directly or indirectly, by the
Corporation.
7. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any director who is
thereafter chosen to fill any vacancy on the Board of Directors or who is
elected and who, in either event, is unaffiliated with the Interested
Stockholder, and in connection with his or her initial assumption of
office is recommended for appointment or election by a majority of
Disinterested Directors then on the Board of Directors.
8. "Fair Market Value" means: (a) in the case of stock, the highest
closing sale price of the stock during the 30-day period immediately
preceding the date in question of a share of such stock on the Nasdaq
System or any system then in use, or, if such stock is admitted to trading
on a principal United States securities exchange registered under the
Securities Exchange Act of 1934, Fair Market Value shall be the highest
sale price reported during the 30-day period preceding the date in
question, or, if no such quotations are available, the Fair Market Value
on the date in question of a share of such stock as determined by the
Board of Directors in good faith, in each case with respect to any class
of stock, appropriately adjusted for any dividend or distribution in
shares of such stock or in combination or reclassification of outstanding
shares of such stock into a smaller number of shares of such stock, and
(b) in the case of property other than cash or stock, the Fair Market
Value of such property on the date in question as determined by the Board
of Directors in good faith.
9. Reference to "Highest Per Share Price" shall in each case with
respect to any class of stock reflect an appropriate adjustment for any
dividend or distribution in shares of such stock or any stock split or
reclassification of outstanding shares of such stock into a greater number
of shares of such stock or any combination or reclassification of
outstanding shares of such stock into a smaller number of shares of such
stock.
10. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in Sections B.2.(a) and B.2.(b) of this Article 9 shall
include the shares of Common Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holders of such shares.
D. Construction and Interpretation. A majority of the Disinterested
Directors of the Corporation shall have the power and duty to determine for the
purposes of this Article 9, on the basis of information known to them after
reasonable inquiry, (a) whether a person is an Interested
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Stockholder; (b) the number of shares of Voting Stock beneficially owned by any
person; (c) whether a person is an Affiliate or Associate of another; and (d)
whether the assets which are the subject of any Business Combination have, or
the consideration to be received for the issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value equaling or exceeding 25% of the combined assets of the
Corporation and its Subsidiaries. A majority of the Disinterested Directors
shall have the further power to interpret all of the terms and provisions of
this Article 9.
E. Fiduciary Duty. Nothing contained in this Article 9 shall be
construed to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
F. Maryland Business Combination Statute. Notwithstanding any
contrary provision of law, the provisions of Sections 3-601 through 3-604 of the
MGCL, as now and hereafter in force, shall not apply to any "business
combination" (as defined in Section 3-601(e) of the MGCL, as now and hereafter
in force), of the Corporation.
ARTICLE 10. Evaluation of Certain Offers. The Board of Directors, when
evaluating (i) any offer of another Person (as defined in Article 9 hereof) to
(A) make a tender or exchange offer for any equity security of the Corporation,
(B) merge or consolidate the Corporation with another corporation or entity, or
(C) purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation or (ii) any other actual or proposed transaction which
would or may involve a change in control of the Corporation (whether by
purchases of shares of stock or any other securities of the Corporation in the
open market, or otherwise, tender offer, merger, consolidation, share exchange,
dissolution, liquidation, sale of all or substantially all of the assets of the
Corporation, proxy solicitation or otherwise), may, in connection with the
exercise of its business judgment in determining what is in the best interests
of the Corporation and its stockholders and in making any recommendation to the
Corporation's stockholders, give due consideration to all relevant factors,
including, but not limited to: (A) the economic effect, both immediate and
long-term, upon the Corporation's stockholders, including stockholders, if any,
who do not participate in the transaction; (B) the social and economic effect on
the present and future employees, creditors and customers of, and others dealing
with, the Corporation and its subsidiaries and on the communities in which the
Corporation and its subsidiaries operate or are located; (C) whether the
proposal is acceptable based on the historical, current or projected future
operating results or financial condition of the Corporation; (D) whether a more
favorable price could be obtained for the Corporation's stock or other
securities in the future; (E) the reputation and business practices of the other
entity to be involved in the transaction and its management and affiliates as
they would affect the employees of the Corporation and its subsidiaries; (F) the
future value of the stock or any other securities of the Corporation or the
other entity to be involved in the proposed transaction; (G) any antitrust or
other legal and regulatory issues that are raised by the proposal; (H) the
business and historical, current or expected future financial condition or
operating results of the other entity to be involved in the transaction,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
proposed transaction, and other likely financial obligations of the other entity
to be involved in the proposed transaction; and (I) the ability of the
Corporation to fulfill its objectives as a financial institution holding company
and on the ability of its subsidiary financial institution(s) to fulfill the
objectives of a federally insured financial institution under applicable
statutes and regulations. If the Board of Directors determines that any
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proposed transaction of the type described in clause (i) or (ii) of the
immediately preceding sentence should be rejected, it may take any lawful action
to defeat such transaction, including, but not limited to, any or all of the
following: advising stockholders not to accept the proposal; instituting
litigation against the party making the proposal; filing complaints with
governmental and regulatory authorities; acquiring the stock or any of the
securities of the Corporation; selling or otherwise issuing authorized but
unissued stock, other securities or granting options or rights with respect
thereto; acquiring a company to create an antitrust or other regulatory problem
for the party making the proposal; and obtaining a more favorable offer from
another individual or entity. This Article 10 does not create any inference
concerning factors that may be considered by the Board of Directors regarding
any proposed transaction of the type described in clause (i) or (ii) of the
first sentence of this Article 10.
ARTICLE 11. Acquisitions of Equity Securities from Interested Persons.
A. Super-majority Voting Requirement. Except as set forth in Section
B of this Article 11, in addition to any affirmative vote of stockholders
required by law or the Charter, any direct or indirect purchase or other
acquisition by the Corporation of any Equity Security (as hereinafter defined)
of any class from any Interested Person (as hereinafter defined) shall require
the affirmative vote of the holders of at least 80% of the Voting Stock of the
Corporation that is not beneficially owned (for purposes of this Article 11
beneficial ownership shall be determined in accordance with Section D.2(b) of
Article 5 hereof) by such Interested Person, voting together as a single class.
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be specified, by law or by any
other provisions of the Charter (including those applicable to any class or
series of capital stock) or in any agreement with any national securities
exchange or quotation system, or otherwise. Certain defined terms used in this
Article 11 are as set forth in Section C below.
B. Exceptions. The provisions of Section A of this Article 11 shall
not be applicable with respect to:
1. any purchase or other acquisition of securities made as part of a
tender or exchange offer by the Corporation or a Subsidiary (which term,
as used in this Article 11, is as defined in the first clause of Section
C.6 of Article 9 hereof) of the Corporation to purchase securities of the
same class made on the same terms to all holders of such securities and
complying with the applicable requirements of the Securities Exchange Act
of 1934 and the rules and regulations thereunder (or any subsequent
provision replacing such Act, rules or regulations);
2. any purchase or acquisition made pursuant to an open market
purchase program approved by a majority of the Board of Directors,
including a majority of the Disinterested Directors (which term, as used
in this Article 11, is as defined in Article 9 hereof); or
3. any purchase or acquisition which is approved by a majority of
the Board of Directors, including a majority of the Disinterested
Directors, and which is made at no more than the Market Price (as
hereinafter defined), on the date that the understanding between the
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Corporation and the Interested Person is reached with respect to such
purchase (whether or not such purchase is made or a written agreement
relating to such purchase is executed on such date), of shares of the
class of Equity Security to be purchased.
C. Certain Definitions. For the purposes of this Article 11:
(i) The term Interested Person shall mean any Person (other than the
Corporation, Subsidiaries of the Corporation, pension, profit sharing,
employee stock ownership or other employee benefit plans of the
Corporation and its Subsidiaries, entities organized or established by the
Corporation or any of its Subsidiaries pursuant to the terms of such plans
and trustees and fiduciaries with respect to any such plan acting in such
capacity) that is the direct or indirect beneficial owner of 5% or more of
the Voting Stock of the Corporation, and any Affiliate or Associate of any
such person. For purposes of this Article 11, the terms "Affiliate" and
"Associate" shall have the definitions given them in Article 9 hereof.
(ii) The Market Price of shares of a class of Equity Security on any
day shall mean the highest sale price of shares of such class of Equity
Security on such day, or, if that day is not a trading day, on the trading
day immediately preceding such day, on the national securities exchange or
the Nasdaq System or any other system then in use on which such class of
Equity Security is traded.
(iii) The term Equity Security shall mean any security described in
Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on
June 30, 2003, which is traded on a national securities exchange or the
Nasdaq System or any other system then in use.
(iv) For purposes of this Article 11, all references to the term
Interested Stockholder in the definition of Disinterested Director shall
be deemed to refer to the term Interested Person.
ARTICLE 12. Indemnification, etc. of Directors and Officers.
A. Indemnification. The Corporation shall indemnify (1) its current
and former directors and officers, whether serving the Corporation or at its
request any other entity, to the fullest extent required or permitted by the
MGCL now or hereafter in force, including the advancement of expenses under the
procedures and to the fullest extent permitted by law, and (2) other employees
and agents to such extent as shall be authorized by the Board of Directors and
permitted by law; provided, however, that, except as provided in Section B
hereof with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
B. Procedure. If a claim under Section A of this Article 12 is not
paid in full by the Corporation within 60 days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be 20 days, the indemnitee
may at any time thereafter bring suit against the Corporation to recover the
unpaid
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amount of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the indemnitee shall also be entitled to be
reimbursed the expense of prosecuting or defending such suit. It shall be a
defense to any action for advancement of expenses that the Corporation has not
received both (i) an undertaking as required by law to repay such advances in
the event it shall ultimately be determined that the standard of conduct has not
been met and (ii) a written affirmation by the indemnitee of his good faith
belief that the standard of conduct necessary for indemnification by the
Corporation has been met. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the indemnitee
to enforce a right to an advancement of expenses) it shall be a defense that,
and (ii) any suit by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
the applicable standard for indemnification set forth in the MGCL. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the MGCL, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article 12 or otherwise shall be on the Corporation.
C. Non-Exclusivity. The rights to indemnification and to the
advancement of expenses conferred in this Article 12 shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, the Charter, the Corporation's Bylaws, any agreement, any vote of
stockholders or the Board of Directors, or otherwise.
D. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the MGCL.
E. Miscellaneous. The Corporation shall not be liable for any
payment under this Article 12 in connection with a claim made by any indemnitee
to the extent such indemnitee has otherwise actually received payment under any
insurance policy, agreement, or otherwise, of the amounts otherwise
indemnifiable hereunder. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this Article 12 shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be a
director or officer and shall inure to the benefit of the indemnitee's heirs,
executors and administrators.
Any repeal or modification of this Article 12 shall not in any way
diminish any rights to indemnification or advancement of expenses of such
director or officer or the obligations of the
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Corporation arising hereunder with respect to events occurring, or claims made,
while this Article 12 is in force.
ARTICLE 13. Limitation of Liability. An officer or director of the
Corporation, as such, shall not be liable to the Corporation or its stockholders
for money damages, except (i) to the extent that it is proved that the person
actually received an improper benefit or profit in money, property or services
for the amount of the benefit or profit in money, property or services actually
received; (ii) to the extent that a judgment or other final adjudication adverse
to the person is entered in a proceeding based on a finding in the proceeding
that the person's action, or failure to act, was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in the
proceeding; or (iii) to the extent otherwise provided by the MGCL. If the MGCL
is amended to further eliminate or limit the personal liability of officers and
directors, then the liability of officers and directors of the Corporation shall
be eliminated or limited to the fullest extent permitted by the MGCL, as so
amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director or officer of the Corporation existing at the time of such repeal or
modification.
ARTICLE 14. Amendment of the Charter. The Corporation reserves the right
to amend or repeal any provision contained in the Charter in the manner
prescribed by the MGCL, including any amendment altering the terms or contract
rights, as expressly set forth in the Charter, of any of the Corporation's
outstanding stock by classification, reclassification or otherwise, and all
rights conferred upon stockholders are granted subject to this reservation;
provided, however, that, notwithstanding any other provision of the Charter or
any provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any vote of the holders of any class or series of the stock of
the Corporation required by law or by the Charter, the affirmative vote of the
holders of at least 80% of the voting power of all of the then-outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors (after giving effect to the provisions of Article 5),
voting together as a single class, shall be required to amend or repeal this
Article 14, Section C, D or E of Article 5, Article 7, Article 8, Article 9,
Article 11, Article 12 or Article 13.
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IN WITNESS WHEREOF, I have signed these Articles of Incorporation,
acknowledging the same to be my act, on September 11, 2003.
Witness:
/s/ Patrick D. McTernan /s/Joseph L. LaMonica
- -------------------------------- -----------------------------------
Patrick D. McTernan Joseph L. LaMonica
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Consent of Resident Agent
THE UNDERSIGNED hereby consents to act as resident agent in Maryland for
the entity named in the attached instrument.
The Corporation Trust Incorporated
By: /s/ Anusha Putty
-----------------------------------
Printed Name: Anusha Putty
-------------------------
Its: Vice President and Assistant Secretary
----------------------------------
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APPENDIX D
BYLAWS
OF
PENNFED FINANCIAL SERVICES, INC.
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
---------------
The Corporation shall hold an annual meeting of its stockholders to elect
directors to succeed those whose terms expire and to transact any other business
within its powers, at such place, on such date, and at such time during the
31-day period beginning on the second Wednesday in October of each year as the
Board of Directors shall fix. Except as provided otherwise by the Corporation's
Charter or by law, any business may be considered at an annual meeting without
the purpose of the meeting having been specified in the notice. Failure to hold
an annual meeting does not invalidate the Corporation's existence or affect any
otherwise valid corporate act.
Section 2. Special Meetings.
-----------------
Special meetings of stockholders of the Corporation may be called by the
President or by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which the Corporation would have if
there were no vacancies on the Board of Directors (hereinafter the "Whole
Board"). Special meetings of the stockholders shall be called by the Secretary
at the request of stockholders only on the written request of stockholders
entitled to cast at least a majority of all the votes entitled to be cast at the
meeting. Such written request shall state the purpose or purposes of the meeting
and the matters proposed to be acted upon at the meeting, and shall be delivered
at the principal office of the Corporation addressed to the President or the
Secretary. The Secretary shall inform the stockholders who make the request of
the reasonably estimated cost of preparing and mailing a notice of the meeting
and, upon payment of these costs to the Corporation, notify each stockholder
entitled to notice of the meeting. The Board of Directors shall have the sole
power to fix (1) the record date for determining stockholders entitled to
request a special meeting of stockholders and the record date for determining
stockholders entitled to notice of and to vote at the special meeting and (2)
the date, time and place of the special meeting and the means of remote
communication, if any, by which stockholders and proxy holders may be considered
present in person and may vote at the special meeting.
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Section 3. Notice of Meetings; Adjournment.
--------------------------------
Not less than ten nor more than 90 days before each stockholders' meeting,
the Secretary shall give notice in writing or by electronic transmission of the
meeting to each stockholder entitled to vote at the meeting and to each other
stockholder entitled to notice of the meeting. The notice shall state the time
and place of the meeting, the means of remote communication, if any, by which
stockholders and proxy holders may be deemed to be present in person and may
vote at the meeting, and, if the meeting is a special meeting or notice of the
purpose is required by statute, the purpose of the meeting. Notice is given to a
stockholder when it is personally delivered to the stockholder, left at the
stockholder's usual place of business, mailed to the stockholder at his or her
address as it appears on the records of the Corporation, transmitted to the
stockholder by an electronic transmission to any address or number of the
stockholder at which the stockholder receives electronic transmissions. If the
Corporation has received a request from a stockholder that notice not be sent by
electronic transmission, the Corporation may not provide notice to the
stockholder by electronic transmission. Notwithstanding the foregoing
provisions, each person who is entitled to notice waives notice if such person,
before or after the meeting, delivers a written waiver or waiver by electronic
transmission which is filed with the records of the stockholders' meetings, or
is present at the meeting in person or by proxy.
A meeting of stockholders convened on the date for which it was called may
be adjourned from time to time without further notice to a date not more than
120 days after the original record date. At any adjourned meeting, any business
may be transacted which might have been transacted at the original meeting.
As used in these Bylaws, the term "electronic transmission" shall have the
meaning given to such term by Section 1-101(k-1) of the Maryland General
Corporation Law (the "MGCL") or any successor provision.
Section 4. Quorum.
-------
At any meeting of the stockholders, the holders of at least one-third of
all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy, shall constitute a quorum for all purposes, unless or except
to the extent that the presence of a larger number may be required by law.
Unless the Charter of the Corporation provides otherwise, where a separate vote
by a class or classes is required, a majority of the shares of such class or
classes, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may, in accordance with Section 3 of this
Article I, adjourn the meeting to another place, date or time.
Section 5. Organization and Conduct of Business.
-------------------------------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall
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call to order any meeting of the stockholders and act as chairman of the
meeting. In the absence of the Secretary of the Corporation, the secretary of
the meeting shall be such person as the chairman appoints. The chairman of any
meeting of stockholders shall determine the order of business and the procedure
at the meeting, including such regulation of the manner of voting and the
conduct of discussion as seem to him or her in order.
Section 6. Advance Notice Provisions for Business to be Transacted at Annual
---------------------------------------------------------------------
Meetings and Elections of Directors.
-----------------------------------
(a) At any annual meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) as specified in the
Corporation's notice of the meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Corporation who (1) is a
stockholder of record on the date of giving the notice provided for in this
Section 6(a) and on the record date for the determination of stockholders
entitled to vote at such annual meeting, and (2) complies with the notice
procedures set forth in this Section 6(a). For business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of the
immediately preceding sentence, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such business must
otherwise be a proper matter for action by stockholders.
To be timely, a stockholder's notice must be delivered or mailed to and
received by the Secretary at the principal executive office of the Corporation
by not later than the close of business on the 90th day prior to the first
anniversary of the date of the preceding year's annual meeting and not earlier
than the close of business on the 120th day prior to the first anniversary of
the date of the preceding year's annual meeting; provided, however, that in the
event the annual meeting is the first annual meeting of stockholders of the
Corporation, notice by the stockholder to be timely must be so received by not
later than the close of business on the 90th day prior to the first anniversary
of the date of the last annual meeting of stockholders of PennFed Financial
Services, Inc. ("PennFed Delaware") prior to its merger with and into the
Corporation (the "Final PennFed Delaware Annual Meeting") and not earlier than
the close of business on the 120th day prior to the first anniversary of the
date of the Final PennFed Delaware Annual Meeting; provided, further, that in
the event that the date of the annual meeting is advanced by more than 20 days,
or delayed by more than 60 days, from the anniversary date of the preceding
year's annual meeting (or, in the case of the first annual meeting of
stockholders of the Corporation, from the first anniversary of the Final PennFed
Delaware Annual Meeting), notice by the stockholder to be timely must be so
received not earlier than the close of business on the 120th day prior to the
date of such annual meeting and not later than the close of business on the
later of (A) the 90th day prior to the date of such annual meeting or (B) the
tenth day following the first to occur of (i) the day on which notice of the
date of the annual meeting was mailed or (ii) the day on which public
announcement of the date of the annual meeting was first made by the
Corporation. No adjournment or postponement of a meeting of stockholders shall
commence a new period for the giving of notice hereunder.
A stockholder's notice to the Secretary must set forth as to each matter
such stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting; (ii) the name
and address of such stockholder as they appear on the Corporation's books
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and of the beneficial owner, if any, on whose behalf the proposal is made; (iii)
the class or series and number of shares of capital stock of the Corporation
which are owned beneficially or of record by such stockholder and such
beneficial owner; (iv) a description of all arrangements or understandings
between such stockholder and any other person or persons (including their names)
in connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business; and (v) a representation
that such stockholder intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting.
Notwithstanding anything in these Bylaws to the contrary, no business shall
be brought before or conducted at an annual meeting except in accordance with
the provisions of this Section 6(a). The officer of the Corporation or other
person presiding over the annual meeting shall, if the facts so warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 6(a) and,
if he or she should so determine, he or she shall so declare to the meeting and
any such business so determined to be not properly brought before the meeting
shall not be transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting pursuant to the
Corporation's notice of the meeting.
(b) Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the Corporation.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders at which directors are to be elected
only (i) by or at the direction of the Board of Directors or (ii) by any
stockholder of the Corporation who (1) is a stockholder of record on the date of
giving the notice provided for in this Section 6(b) and on the record date for
the determination of stockholders entitled to vote at such meeting, and (2)
complies with the notice procedures set forth in this Section 6(b). Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made by timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered or mailed
to and received by the Secretary at the principal executive offices of the
Corporation not less than 90 days or more than 120 days prior to the date of the
meeting; provided, however, that in the event that less than 100 days' notice or
public announcement of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or the day on which public announcement of the
date of the meeting was first made by the Corporation, whichever shall first
occur. A stockholder's notice must be in writing and set forth (a) as to each
person whom the stockholder proposes to nominate for election as a director, all
information relating to such person that is required to be disclosed in
connection with solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor rule or
regulation; and (b) as to the stockholder giving the notice: (i) the name and
address of such stockholder as they appear on the Corporation's books and of the
beneficial owner, if any, on whose behalf the nomination is made; (ii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder and such beneficial owner;
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder; (iv) a representation that
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such stockholder intends to appear in person or by proxy at the meeting to
nominate the persons named in its notice; and (v) any other information relating
to such stockholder that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Regulation 14A under the Exchange Act or
any successor rule or regulation. Such notice must be accompanied by a written
consent of each proposed nominee to be named as a nominee and to serve as a
director if elected. No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the provisions of this
Section 6(b). The officer of the Corporation or other person presiding at the
meeting shall, if the facts so warrant, determine that a nomination was not made
in accordance with such provisions and, if he or she should so determine, he or
she shall so declare to the meeting and the defective nomination shall be
disregarded.
(c) For purposes of subsections (a) and (b) of this Section 6, the term
"public announcement" shall mean disclosure (i) in a press release reported by a
nationally recognized news service, (ii) in a document publicly filed or
furnished by the Corporation with the U.S. Securities and Exchange Commission or
(iii) on a website maintained by the Corporation.
Section 7. Proxies and Voting.
------------------
Unless the Charter of the Corporation provides for a greater or lesser
number of votes per share or limits or denies voting rights, each outstanding
share of stock, regardless of class, is entitled to one vote on each matter
submitted to a vote at a meeting of stockholders; however, a share is not
entitled to be voted if any installment payable on it is overdue and unpaid. In
all elections for directors, directors shall be determined by a plurality of the
votes cast, and except as otherwise required by law or as provided in the
Charter of the Corporation, all other matters voted on by stockholders shall be
determined by a majority of the votes cast on the matter.
A stockholder may vote the stock the stockholder owns of record either in
person or by proxy. A stockholder may sign a writing authorizing another person
to act as proxy. Signing may be accomplished by the stockholder or the
stockholder's authorized agent signing the writing or causing the stockholder's
signature to be affixed to the writing by any reasonable means, including
facsimile signature. A stockholder may authorize another person to act as proxy
by transmitting, or authorizing the transmission of, an authorization for the
person to act as the proxy to the person authorized to act as proxy or to any
other person authorized to receive the proxy authorization on behalf of the
person authorized to act as the proxy, including a proxy solicitation firm or
proxy support service organization. The authorization may be transmitted by a
telegram, cablegram, datagram, electronic mail or any other electronic or
telephonic means. Unless a proxy provides otherwise, it is not valid more than
11 months after its date. A proxy is revocable by a stockholder at any time
without condition or qualification unless the proxy states that it is
irrevocable and the proxy is coupled with an interest. A proxy may be made
irrevocable for as long as it is coupled with an interest. The interest with
which a proxy may be coupled includes an interest in the stock to be voted under
the proxy or another general interest in the Corporation or its assets or
liabilities.
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Section 8. Consent of Stockholders in Lieu of Meeting.
------------------------------------------
Except as provided in the following sentence, any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if a unanimous consent which sets forth the action is given in writing
or by electronic transmission by each stockholder entitled to vote on the matter
and is filed in paper or electronic format with the records of stockholder
meetings. Unless the Charter of the Corporation requires otherwise, the holders
of any class of the Corporation's stock other than common stock, entitled to
vote generally in the election of directors, may take action or consent to any
action by delivering a consent in writing or by electronic transmission of the
stockholders entitled to cast not less than the minimum number of votes that
would be necessary to authorize or take the action at a meeting of the
stockholders if the Corporation gives notice of the action so taken to each
stockholder not later than ten days after the effective time of the action.
Section 9. Conduct of Voting
-----------------
The Board of Directors shall, in advance of any meeting of stockholders,
appoint one or more persons as inspectors of election, to act at the meeting or
any adjournment thereof and make a written report thereof, in accordance with
applicable law. At all meetings of stockholders, the proxies and ballots shall
be received, and all questions touching the qualification of voters and the
validity of proxies and the acceptance or rejection of votes shall be decided or
determined by the inspector of elections. All voting, including on the election
of directors but excepting where otherwise required by law, may be by a voice
vote; provided, however, that upon demand therefor by a stockholder entitled to
vote or his or her proxy or the chairman of the meeting, a written vote shall be
taken. Every written vote shall be taken by ballot, each of which shall state
the name of the stockholder or proxy voting and such other information as may be
required under the procedure established for the meeting. Every vote taken by
ballot shall be counted by an inspector or inspectors appointed by the chairman
of the meeting. No candidate for election as a director at a meeting shall serve
as an inspector at such meeting.
Section 10. Control Share Acquisition Act.
-----------------------------
Notwithstanding any other provision of the Charter of the Corporation or
these Bylaws, Title 3, Subtitle 7 of the MGCL (or any successor statute) shall
not apply to any acquisition by any person of shares of stock of the
Corporation. This Section 10 may be repealed, in whole or in part, at any time,
whether before or after an acquisition of Control Shares (as defined in Section
3-701(d) of the MGCL, or any successor provision) and, upon such repeal, may, to
the extent provided by any successor bylaw, apply to any prior or subsequent
Control Share Acquisition (as defined in Section 3-701(d) of the MGCL, or any
successor provision).
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ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
------------------------------------------
The business and affairs of the Corporation shall be managed under the
direction of the Board of Directors. The number of directors of the Corporation
shall, by virtue of the Corporation's election made hereby to be governed by
Section 3-804(b) of the MGCL, be fixed from time to time exclusively by vote of
the Board of Directors; provided, however, that such number shall never be less
than the minimum number of directors required by the MGCL now or hereafter in
force. The Board of Directors shall annually elect a Chairman of the Board and a
President from among its members and shall designate, when present, either the
Chairman of the Board or the President to preside at its meetings.
The directors, other than those who may be elected by the holders of any
series of preferred stock, shall be divided into three classes, as nearly equal
in number as reasonably possible, with the term of office of the first class to
expire at the first annual meeting of stockholders, the term of office of the
second class to expire at the annual meeting of stockholders one year thereafter
and the term of office of the third class to expire at the annual meeting of
stockholders two years thereafter, with each director to hold office until his
or her successor shall have been duly elected and qualified. At each annual
meeting of stockholders, commencing with the first annual meeting, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election, with each director to hold office until his or her
successor shall have been duly elected and qualified.
No person 70 years of age or older shall be eligible for election,
re-election, appointment or re-appointment to the Board of Directors. No
director who has attained age 70 shall continue to serve as a director beyond
the annual meeting of stockholders at which his term as a director expires.
Notwithstanding the foregoing, the provisions of this paragraph shall not apply
to persons who served as directors of PennFed Delaware on July 14, 1994. Nor
shall the age limitation imposed by the provisions of this paragraph apply to
persons serving as advisory directors or directors emeriti, in their capacities
as such.
Section 2. Vacancies and Newly Created Directorships.
------------------------------------------
By virtue of the Corporation's election made hereby to be subject to
Section 3-804(c) of the MGCL, any vacancies in the Board of Directors resulting
from an increase in the size of the Board of Directors or the death, resignation
or removal of a director may be filled only by the affirmative vote of a
majority of the remaining directors in office, even if the remaining directors
do not constitute a quorum, and any director elected to fill a vacancy shall
hold office for the remainder of the full term of the class of directors in
which the vacancy occurred and until a successor is elected and qualifies. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
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Section 3. Regular Meetings.
-----------------
Regular meetings of the Board of Directors shall be held at such place or
places or by means of remote communication, on such date or dates, and at such
time or times as shall have been established by the Board of Directors and
publicized among all directors. A notice of each regular meeting shall not be
required. Any regular meeting of the Board of Directors may adjourn from time to
time to reconvene at the same or some other place, and no notice need be given
of any such adjourned meeting other than by announcement.
Section 4. Special Meetings.
----------------
Special meetings of the Board of Directors may be called by one-third (1/3)
of the directors then in office (rounded up to the nearest whole number) or by
the President and shall be held at such place or by means of remote
communication, on such date, and at such time as they or he or she shall fix.
Notice of the place, date, and time of each such special meeting shall be given
to each director by whom it is not waived by mailing written notice not less
than five (5) days before the meeting or by telegraphing or telexing or by
facsimile or electronic transmission of the same not less than twenty-four (24)
hours before the meeting. Any director may waive notice of any special meeting,
either before or after such meeting, by delivering a written waiver or a waiver
by electronic transmission that is filed with the records of the meeting.
Attendance of a director at a special meeting shall constitute a waiver of
notice of such meeting, except where the director attends the meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
special meeting of the Board of Directors need be specified in the notice of
such meeting. Any special meeting of the Board of Directors may adjourn from
time to time to reconvene at the same or some other place, and no notice need be
given of any such adjourned meeting other than by announcement.
Section 5. Quorum.
-------
At any meeting of the Board of Directors, a majority of the authorized
number of directors then constituting the Board shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
--------------------------------------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of a conference
telephone or other communications equipment if all persons participating in the
meeting can hear each other at the same time. Such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
--------------------
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the
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vote of a majority of the directors present, except as otherwise provided in
these Bylaws, the Corporation's Charter or required by law. Action may be taken
by the Board of Directors without a meeting if a unanimous consent which sets
forth the action is given in writing or by electronic transmission by each
member of the Board of Directors and filed in paper or electronic form with the
minutes of proceedings of the Board of Directors.
Section 8. Powers.
-------
All powers of the Corporation may be exercised by or under the authority of
the Board of Directors except as conferred on or reserved to the stockholders by
law or by the Corporation's Charter or these Bylaws. Consistent with the
foregoing, the Board of Directors shall have, among other powers, the
unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges on
such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it may
determine, of written obligations of every kind, negotiable or non-negotiable,
secured or unsecured, and to do all things necessary in connection therewith;
(4) To remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any other
person for the time being;
(5) To confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase, bonus or
other compensation plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with these
Bylaws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors.
--------------------------
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
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Section 10. Resignation.
------------
Any director may resign at any time by giving written notice of such
resignation to the President or the Secretary at the principal office of the
Corporation. Unless otherwise specified therein, such resignation shall take
effect upon receipt thereof.
Section 11. Presumption of Assent.
----------------------
A director of the Corporation who is present at a meeting of the Board of
Director at which action on any corporate matter is taken shall be presumed to
have assented to such action unless such director announces his dissent at the
meeting and (a) such director's dissent is entered in the minutes of the
meeting, (b) such director files his written dissent to such action with the
secretary of the meeting before the adjournment thereof, or (c) such director
forwards his written dissent within 24 hours after the meeting is adjourned, by
certified mail, return receipt requested, bearing a postmark from the United
States Postal Service, to the secretary of the meeting or the Secretary of the
Corporation. Such right to dissent shall not apply to a director who voted in
favor of such action or failed to make his dissent known at the meeting.
ARTICLE III
COMMITTEES
Section 1. Committees of the Board of Directors.
------------------------------------
The Board of Directors may appoint from among its members an Executive
Committee and other committees composed of one or more directors and delegate to
these committees any of the powers of the Board of Directors, except the power
to authorize dividends on stock (except as provided in Section 2-309(c) of the
MGCL), issue stock other than as provided in the next sentence, recommend to the
stockholders any action which requires stockholder approval, amend these Bylaws,
or approve any merger or share exchange which does not require stockholder
approval. If the Board of Directors has given general authorization for the
issuance of stock providing for or establishing a method or procedure for
determining the maximum number of shares to be issued, a committee of the Board
of Directors, in accordance with that general authorization or any stock option
or other plan or program adopted by the Board of Directors, may authorize or fix
the terms of stock subject to classification or reclassification and the terms
on which any stock may be issued, including all terms and conditions required or
permitted to be established or authorized by the Board of Directors under
Sections 2-203 and 2-208 of the MGCL. Any committee so designated may exercise
the power and authority of the Board of Directors if the resolution which
designated the committee or a supplemental resolution of the Board of Directors
shall so provide.
Section 2. Conduct of Business.
-------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the
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members shall constitute a quorum unless the committee shall consist of one (1)
or two (2) members, in which event one (1) member shall constitute a quorum; and
all matters shall be determined by a majority vote of the members present.
Action may be taken by any committee without a meeting if a unanimous consent
which sets forth the action is given in writing or by electronic transmission by
each member of the committee and filed in paper or electronic form with the
minutes of the proceedings of such committee. The members of any committee may
conduct any meeting thereof by conference telephone or other communications
equipment in accordance with the provisions of Section 6 of Article II.
Section 3. Nominating Committee.
---------------------
The Board of Directors may appoint a Nominating Committee of the Board,
consisting of at least three (3) members. The Nominating Committee shall have
authority (a) to review any nominations for election to the Board of Directors
made by a stockholder of the Corporation pursuant to Section 6(b) of Article I
of these Bylaws in order to determine compliance with such By- law and (b) to
recommend to the Whole Board nominees for election to the Board of Directors to
replace those directors whose terms expire at the annual meeting of stockholders
next ensuing.
ARTICLE IV
OFFICERS
Section 1. Generally.
----------
(a) The Board of Directors as soon as may be practicable after the annual
meeting of stockholders shall choose a President, one or more Vice Presidents, a
Secretary and a Treasurer and from time to time may choose such other officers
as it may deem proper. Any number of offices may be held by the same person,
except that no person may concurrently serve as both President and Vice
President of the Corporation.
(b) The term of office of all officers shall be until the next annual
election of officers and until their respective successors are chosen, but any
officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of directors then constituting the Board of
Directors.
(c) All officers chosen by the Board of Directors shall each have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this Article IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 2. President.
----------
The President shall be the chief executive officer and, subject to the
control of the Board of Directors, shall have general power over the management
and oversight of the administration and operation of the Corporation's business
and general supervisory power and authority over its policies
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and affairs. He shall see that all orders and resolutions of the Board of
Directors and of any committee thereof are carried into effect.
Section 3. Vice President.
--------------
The Vice President or Vice Presidents, if any, shall perform the duties of
the President in his absence or during his disability to act. In addition, the
Vice Presidents shall perform the duties and exercise the powers usually
incident to their respective offices and/or such other duties and powers as may
be properly assigned to them from time to time by the Board of Directors, the
Chairman of the Board or the President.
Section 4. Secretary.
---------
The Secretary or an Assistant Secretary shall issue notices of meetings,
shall keep their minutes, shall have charge of the seal and the corporate books,
shall perform such other duties and exercise such other powers as are usually
incident to such offices and/or such other duties and powers as are properly
assigned thereto by the Board of Directors, the Chairman of the Board or the
President.
Section 5. Treasurer.
---------
The Treasurer shall have charge of all monies and securities of the
Corporation, other than monies and securities of any division of the Corporation
which has a treasurer or financial officer appointed by the Board of Directors,
and shall keep regular books of account. The funds of the Corporation shall be
deposited in the name of the Corporation by the Treasurer with such banks or
trust companies or other entities as the Board of Directors from time to time
shall designate. He or she shall sign or countersign such instruments as require
his or her signature, shall perform all such duties and have all such powers as
are usually incident to such office and/or such other duties and powers as are
properly assigned to him or her by the Board of Directors, the Chairman of the
Board or the President, and may be required to give bond for the faithful
performance of his or her duties in such sum and with such surety as may be
required by the Board of Directors.
Section 6. Assistant Secretaries and Other Officers.
----------------------------------------
The Board of Directors may appoint one or more assistant secretaries and
one or more assistants to the Treasurer, or one appointee to both such
positions, which officers shall have such powers and shall perform such duties
as are provided in these Bylaws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 7. Action with Respect to Securities of Other Corporations
-------------------------------------------------------
Stock of other corporations or associations, registered in the name of the
Corporation, may be voted by the President, a Vice-President, or a proxy
appointed by either of them. The Board of Directors, however, may by resolution
appoint some other person to vote such shares, in which case such person shall
be entitled to vote such shares upon the production of a certified copy of such
resolution.
D-12
ARTICLE V
STOCK
Section 1. Certificates of Stock.
---------------------
The Board of Directors may determine to issue certificated or
uncertificated share of capital stock and other securities of the Corporation.
For certificated stock, each stockholder is entitled to certificates which
represent and certify the shares of stock he or she holds in the Corporation.
Each stock certificate shall include on its face the name of the Corporation,
the name of the stockholder or other person to whom it is issued, and the class
of stock and number of shares it represents. It shall also include on its face
or back (a) a statement of any restrictions on transferability and a statement
of the designations and any preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the stock of each class which the Corporation is
authorized to issue, of the differences in the relative rights and preferences
between the shares of each series of preferred stock which the Corporation is
authorized to issue, to the extent they have been set, and of the authority of
the Board of Directors to set the relative rights and preferences of subsequent
series of preferred stock or (b) a statement which provides in substance that
the Corporation will furnish a full statement of such information to any
stockholder on request and without charge. Such request may be made to the
Secretary or to the Corporation's transfer agent. Upon the issuance of
uncertificated shares of capital stock, the Corporation shall send the
stockholder a written statement of the same information required above on stock
certificates. Each stock certificate shall be in such form, not inconsistent
with law or with the Corporation's Charter, as shall be approved by the Board of
Directors or any officer or officers designated for such purpose by resolution
of the Board of Directors. Each stock certificate shall be signed by the
Chairman of the Board, the President, or a Vice-President, and countersigned by
the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer.
Each certificate may be sealed with the actual corporate seal or a facsimile of
it or in any other form and the signatures may be either manual or facsimile
signatures. A certificate is valid and may be issued whether or not an officer
who signed it is still an officer when it is issued. A certificate may not be
issued until the stock represented by it is fully paid.
Section 2. Transfers of Stock.
------------------
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Dates or Closing of Transfer Books.
------------------------------------------
The Board of Directors may, and shall have the power to, set a record date
or direct that the stock transfer books be closed for a stated period for the
purpose of making any proper determination with respect to stockholders,
including which stockholders are entitled to notice of a meeting, vote
D-13
at a meeting, receive a dividend, or be allotted other rights. The record date
may not be prior to the close of business on the day the record date is fixed
nor, subject to Section 3 of Article I, more than 90 days before the date on
which the action requiring the determination will be taken; the transfer books
may not be closed for a period longer than 20 days; and, in the case of a
meeting of stockholders, the record date or the closing of the transfer books
shall be at least ten days before the date of the meeting. Any shares of the
Corporation's own stock acquired by the Corporation between the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders and the time of the meeting may be voted at the meeting by the
holder of record as of the record date and shall be counted in determining the
total number of outstanding shares entitled to be voted at the meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
---------------------------------------
The Board of Directors of the Corporation may determine the conditions for
issuing a new stock certificate in place of one which is alleged to have been
lost, stolen, or destroyed, or the Board of Directors may delegate such power to
any officer or officers of the Corporation. In their discretion, the Board of
Directors or such officer or officers may require the owner of the certificate
to give a bond, with sufficient surety, to indemnify the Corporation against any
loss or claim arising as a result of the issuance of a new certificate. In their
discretion, the Board of Directors or such officer or officers may refuse to
issue such new certificate without the order of a court having jurisdiction over
the matter.
Section 5. Stock Ledger.
------------
The Corporation shall maintain a stock ledger which contains the name and
address of each stockholder and the number of shares of stock of each class
which the stockholder holds. The stock ledger may be in written form or in any
other form which can be converted within a reasonable time into written form for
visual inspection. The original or a duplicate of the stock ledger shall be kept
at the offices of a transfer agent for the particular class of stock or, if
none, at the principal executive office of the Corporation.
Section 6. Regulations.
-----------
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI
MISCELLANEOUS
Section 1. Facsimile Signatures.
--------------------
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
D-14
Section 2. Corporate Seal.
--------------
The Board of Directors may provide a suitable seal, bearing the name of the
Corporation, which shall be in the charge of the Secretary. The Board of
Directors may authorize one or more duplicate seals and provide for the custody
thereof. If the Corporation is required to place its corporate seal to a
document, it is sufficient to meet the requirement of any law, rule, or
regulation relating to a corporate seal to place the word "(seal)" adjacent to
the signature of the person authorized to sign the document on behalf of the
Corporation.
Section 3. Annual Statement of Affairs.
----------------------------
The President or chief accounting officer shall prepare annually a full
and correct statement of the affairs of the Corporation, to include a balance
sheet and a financial statement of operations for the preceding fiscal year. The
statement of affairs shall be submitted at the annual meeting of the
stockholders and, within 20 days after the meeting, placed on file at the
Corporation's principal office.
Section 4. Books and Records.
------------------
The Corporation shall keep correct and complete books and records of its
accounts and transactions and minutes of the proceedings of its stockholders and
Board of Directors and of any committee when exercising any of the powers of the
Board of Directors. The books and records of the Corporation may be in written
form or in any other form which can be converted within a reasonable time into
written form for visual inspection. Minutes shall be recorded in written form
but may be maintained in the form of a reproduction. The original or a certified
copy of these Bylaws shall be kept at the principal office of the Corporation.
Section 5. Reliance upon Books, Reports and Records.
-----------------------------------------
Each director, each member of any committee designated by the Board of
Directors, and each officer and agent of the Corporation shall, in the
performance of his or her duties, in addition to any protections conferred upon
him or her by law, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director, committee member, officer or
agent reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation.
Section 6. Fiscal Year.
------------
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
D-15
Section 7. Time Periods.
------------
In applying any provision of these Bylaws which requires that an act be
done or no be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded
and the day of the event shall be included.
Section 8. Checks, Drafts, Etc.
--------------------
In checks, drafts and orders for the payment of money, notes and other
evidences of indebtedness, issued in the name of the Corporation, shall, unless
otherwise provided by resolution of the Board of Directors, be signed by the
President, a Vice-President, an Assistant Vice-President, the Treasurer or
anAssistant Treasurer.
Section 9. Mail.
----
Any notice or other document which is required by these Bylaws to be mailed
shall be deposited in the United States mail, postage prepaid.
Section 10. Contracts and Agreements.
------------------------
To the extent permitted by applicable law, and except as otherwise
prescribed by the Charter or these Bylaws, the Board of Directors may authorize
any officer, employee or agent of the Corporation to enter into any contract or
execute and deliver any instrument in the name of and on behalf of the
Corporation. Such authority may be general or confined to specific instances. A
person who holds more than one office in the Corporation may not act in more
than one capacity to execute, acknowledge, or verify an instrument required by
law to be executed, acknowledged, or verified by more than one officer.
ARTICLE VIII
AMENDMENTS
These Bylaws may be adopted, amended or repealed as provided in the Charter
of the Corporation.
D-16
REVOCABLE PROXY
PENNFED FINANCIAL SERVICES, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
Annual Meeting of Stockholders
OCTOBER 29, 2003
The undersigned hereby appoints the Board of Directors of PennFed Financial
Services, Inc. (the "Company"), and its survivor, with full power of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of common stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Stockholders (the "Meeting"), to be held on Wednesday,
October 29, 2003 at the Radisson Hotel, located at 690 Route 46 East, Fairfield,
New Jersey, at 10:00 a.m., local time, and at any and all adjournments or
postponements thereof, as follows:
Please be sure to sign and date
this Proxy in the box below.
Date
- ----------------------------------------
Stockholder sign above
Co-holder (if any) sign above
III. The election of the following directors for three-year terms:
JOSEPH L. LAMONICA
MARIO TEIXEIRA, JR.
With- For All
For hold Except
[_] [_] [_]
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
II. Proposal to change the Company's state of incorporation from Delaware to
Maryland.
For Against Abstain
[_] [_] [_]
III. The ratification of the appointment of Deloitte & Touche LLP as independent
auditors for the Company for the fiscal year ending June 30, 2004.
For Against Abstain
[_] [_] [_]
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Meeting or any adjournment or postponement
thereof.
The Board of Directors recommends a vote "FOR" the election of the nominees
named herein, "FOR" the proposal to change the Company's state of incorporation
from Delaware to Maryland and "FOR" the ratification of the appointment of
Deloitte & Touche LLP.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE NOMINEES NAMED HEREIN, FOR THE PROPOSAL TO CHANGE
THE COMPANY'S STATE OF INCORPORATION FROM DELAWARE TO MARYLAND AND FOR THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP. IF ANY OTHER BUSINESS
IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED AS DIRECTED BY THE BOARD
OF DIRECTORS IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
Detach above card, sign, date and mail in postage-paid envelope provided.
PENNFED FINANCIAL SERVICES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
This Proxy may be revoked at any time before it is voted by: (i) filing
with the Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than this Proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Secretary
of the Company at or before the Meeting; or (iii) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute revocation of this Proxy). If this Proxy is properly revoked as
described above, then the power of such attorneys and proxies shall be deemed
terminated and of no further force and effect.
The above signor(s) acknowledge(s) receipt from the Company, prior to the
execution of this Proxy, of a Notice of the Meeting, a Proxy Statement and the
Company's Annual Report to Stockholders for the fiscal year ended June 30, 2003.
Please sign exactly as your name appears above 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 PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE
If your address has changed, please correct the address in the space provided
below and return this portion with the proxy in the envelope provided.
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