UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. _____)
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14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
Wayne Savings Bancshares, Inc.
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(Name of Registrant as Specified in Its Charter)
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[Wayne Savings Bancshares, Inc. Letterhead]
June 24, 2004
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Wayne Savings Bancshares, Inc. The annual meeting will be held at the Greenbriar
Conference Centre located at 50 Riffel Road, Wooster, Ohio, on Thursday, July
22, 2004 at 10:00 a.m., local time.
At the annual meeting, you will be asked to elect three (3) directors for a
three-year term, approve the amendment and restatement of our 2003 Stock Option
Plan, approve the amendment and restatement of our 2003 Recognition and
Retention Plan and ratify the appointment of Grant Thornton LLP as our
independent auditors for the year ending March 31, 2005. Each of these matters
is more fully described in the accompanying materials.
The Board of Directors of Wayne Savings has determined that the matters to
be considered at the annual meeting are in the best interest of Wayne Savings
and our stockholders. For the reasons set forth in the proxy statement, the
Board of Directors unanimously recommends a vote "FOR" each matter to be
considered.
It is very important that you be represented at the annual meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign, and date your proxy card today and
return it in the envelope provided, even if you plan to attend the annual
meeting. This will not prevent you from voting in person at the annual meeting,
but will ensure that your vote is counted if you are unable to attend.
Your continued support of Wayne Savings Bancshares, Inc. is sincerely
appreciated.
Sincerely,
/s/ Charles F. Finn
-------------------
Charles F. Finn
Chairman, President and Chief Executive Officer
Wayne Savings Bancshares, Inc.
151 North Market Street
Wooster, Ohio 44691
(330) 264-5767
____________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 22, 2004
____________________
Our 2004 annual meeting of stockholders will be held at the Greenbriar
Conference Centre located at 50 Riffel Road, Wooster, Ohio, on Thursday, July
22, 2004 at 10:00 a.m., local time, for the following purposes, all of which are
more completely set forth in the accompanying Proxy Statement:
(1) To elect three (3) directors for a three-year term, and until their
successors are elected and qualified;
(2) To consider and approve the amendment and restatement of the 2003
Stock Option Plan;
(3) To consider and approve the amendment and restatement of the 2003
Recognition and Retention Plan;
(4) To ratify the appointment by the Audit Committee of the Board of
Directors of Grant Thornton LLP as our independent auditors for the
fiscal year ending March 31, 2005; and
(5) To transact such other business as may properly come before the
meeting or at any adjournment thereof. We are not aware of any other
such business.
Our stockholders of record as of the close of business on June 10, 2004,
the voting record date, are entitled to notice of and to vote at the annual
meeting and at any adjournment of the annual meeting.
By Order of the Board of Directors
/s/ Michael C. Anderson
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Michael C. Anderson
Secretary
Wooster, Ohio
June 24, 2004
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You are cordially invited to attend the annual meeting. It is important that
your shares be represented regardless of the number you own. Even if you plan to
be present, you are urged to complete, sign, date and return the enclosed proxy
promptly in the envelope provided. If you attend the meeting, you may vote
either in person or by proxy. Any proxy given may be revoked by you in writing
or in person at any time prior to the exercise of the proxy.
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Table of Contents
Page
----
About the Annual Meeting of Stockholders............................................... 1
Proposal I - Election of Directors and Information with Respect to
Continuing Directors and Executive Officers.......................................... 3
Election of Directors............................................................. 3
Members of the Board of Directors Continuing in Office............................ 4
Executive Officers Who Are Not Directors.......................................... 5
Committees and Meetings of the Board of Directors................................. 5
Directors Attendance at Annual Meetings........................................... 6
Director Nominations.............................................................. 6
Director Compensation............................................................. 7
Compensation Committee Interlocks and Insider Participation....................... 7
Management Compensation................................................................ 7
Summary Compensation Table........................................................ 7
Stock Options..................................................................... 8
Equity Compensation Plan Information.............................................. 9
Employment Agreements............................................................. 9
Benefit Plans..................................................................... 10
Indebtedness of Management and Related Party Transactions......................... 11
Report of the Compensation Committee................................................... 12
Report of the Audit Committee.......................................................... 13
Performance Graph...................................................................... 14
Beneficial Ownership of Common Stock by Certain Beneficial Owners and
Management as a Group................................................................ 15
Section 16(a) Beneficial Ownership Reporting Compliance........................... 16
Proposal II - Proposal to Amend and Restate the 2003 Stock Option Plan................. 16
Proposal III - Proposal to Amend and Restate the 2003 Recognition and Retention Plan .. 17
Proposal IV - Ratification of Appointment of Auditors.................................. 18
Audit Fees........................................................................ 18
Stockholder Proposals, Nominations and Communications with the Board of Directors...... 19
Annual Reports......................................................................... 20
Other Matters.......................................................................... 20
Appendix A - Amended and Restated Audit Committee Charter.............................. A-1
Appendix B - Charter of Nominating and Corporate Governance Committee of the
Board of Directors................................................................ B-1
Appendix C - Amended and Restated 2003 Stock Option Plan............................... C-1
Appendix D - Amended and Restated 2003 Recognition and Retention Plan ................. D-1
PROXY STATEMENT
of
WAYNE SAVINGS BANCSHARES, INC.
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ABOUT THE ANNUAL MEETING OF STOCKHOLDERS
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This Proxy Statement is furnished to holders of common stock of Wayne
Savings Bancshares, Inc., the parent holding company of Wayne Savings Community
Bank. We are soliciting proxies on behalf of our Board of Directors to be used
at the Annual Meeting of Stockholders to be held at the Greenbriar Conference
Centre located at 50 Riffel Road, Wooster, Ohio, on Thursday, July 22, 2004 at
10:00 a.m., local time, and at any adjournment thereof, for the purposes set
forth in the attached Notice of Annual Meeting of Stockholders. This proxy
statement is first being mailed to stockholders on or about June 24, 2004. In
this proxy statement, "Wayne Savings", "we", "us", and "our" refer to Wayne
Savings Bancshares, Inc.
What is the purpose of the Annual Meeting?
At our annual meeting, stockholders will act upon the matters outlined in
the notice of meeting on the cover page of this proxy statement, including the
election of directors, approval of the amended and restated 2003 Stock Option
Plan, approval of the amended and restated 2003 Recognition and Retention Plan
and ratification of our independent auditors. In addition, management will
report on the performance of Wayne Savings and respond to questions from
stockholders.
Who is entitled to vote?
Only our stockholders of record as of the close of business on the record
date for the meeting, June 10, 2004, are entitled to vote at the meeting. On the
record date, we had 3,769,818 shares of common stock issued and outstanding and
no other class of equity securities outstanding. For each issued and outstanding
share of common stock you own on the record date, you will be entitled to one
vote on each matter to be voted on at the meeting, in person or by proxy.
In accordance with the provisions of our Certificate of Incorporation,
record holders who beneficially own in excess of 10% of the outstanding shares
of our common stock are not entitled to vote with respect to the shares held in
excess of the 10% limit. Our Certificate of Incorporation authorizes the Board
of Directors (a) to make all determinations necessary to implement and apply the
10% limit, including determining whether persons or entities are acting in
concert, and (b) to demand that any person who is reasonably believed to
beneficially own stock in excess of the 10% limit supply information to us to
enable the Board of Directors to implement and apply the 10% limit.
How do I submit my proxy?
After you have carefully read this proxy statement, indicate on your proxy
form how you want your shares to be voted. Then sign, date and mail your proxy
form in the enclosed prepaid return envelope as soon as possible. This will
enable your shares to be represented and voted at the annual meeting.
If my shares are held in "street name" by my broker, could my broker
automatically vote my shares for me?
No. Your broker will not be able to vote your shares on the proposal to
approve the amended and restated 2003 Stock Option Plan or the proposal to
approve the amended and restated 2003 Recognition Plan without instructions from
you. You should instruct your broker to vote your shares, following the
directions your broker provides. However, your broker may vote in his or her
discretion on the election of directors and ratification of the auditors if you
do not furnish instructions.
1
Can I attend the meeting and vote my shares in person?
Yes. All stockholders are invited to attend the annual meeting.
Stockholders of record can vote in person at the annual meeting. If your shares
are held in street name, then you are not the stockholder of record and you must
ask your broker or other nominee how you can vote at the annual meeting.
Can I change my vote after I return my proxy card?
Yes. If you have not voted through your broker or other nominee, there are
three ways you can change your vote or revoke your proxy after you have sent in
your proxy form.
o First, you may send a written notice to our Secretary, Michael C.
Anderson, Wayne Savings Bancshares, Inc., 151 North Market Street,
Wooster, Ohio 44691, stating that you would like to revoke your proxy.
o Second, you may complete and submit a new proxy form. Any earlier
proxies will be revoked automatically.
o Third, you may attend the annual meeting and vote in person. Any
earlier proxy will be revoked. However, attending the annual meeting
without voting in person will not revoke your proxy.
If you have instructed a broker or other nominee to vote your shares, you
must follow directions you receive from your broker or other nominee to change
your vote.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum. Proxies received but marked as abstentions and broker
non-votes will be included in the calculation of the number of votes considered
to be present at the meeting.
What are the Board of Directors' recommendations?
The recommendations of the Board of Directors are set forth under the
description of each proposal in this proxy statement. In summary, the Board of
Directors recommends that you vote FOR the nominees for director described
herein, FOR the approval of the amended and restated 2003 Stock Option Plan, FOR
the approval of the amended and restated 2003 Recognition and Retention Plan and
FOR ratification of the appointment of Grant Thornton LLP for the fiscal year
ending March 31, 2005.
The proxy solicited hereby, if properly signed and returned to us and not
revoked prior to its use, will be voted in accordance with your instructions
contained in the proxy. If no contrary instructions are given, each proxy signed
and received will be voted in the manner recommended by the Board of Directors
and, upon the transaction of such other business as may properly come before the
meeting, in accordance with the best judgment of the persons appointed as
proxies. Proxies solicited hereby may be exercised only at the annual meeting
and any adjournment of the annual meeting and will not be used for any other
meeting.
What vote is required to approve each item?
The election of directors will be determined by a plurality of the votes
cast at the annual meeting. The three nominees for director receiving the most
"for" votes will be elected. The approval of the proposals to amend and restate
the 2003 Stock Option Plan, amend and restate the 2003 Recognition Plan and to
ratify the appointment of our independent auditors and any other proposal will
require the affirmative vote of a majority of the votes cast on the proposal.
2
Under the Delaware General Corporation Law, an abstention or broker
non-vote is not counted as a vote cast and, accordingly, will have no effect on
the vote to adopt the amended and restated 2003 Stock Option Plan and the
amended and restated 2003 Recognition Plan and to ratify the appointment of our
independent auditors.
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PROPOSAL I - ELECTION OF DIRECTORS AND INFORMATION WITH RESPECT TO
CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
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Election of Directors
Our Bylaws provide that the Board of Directors shall be divided into three
classes as nearly equal in number as possible. The directors are elected by our
stockholders for staggered terms and until their successors are elected and
qualified.
At this annual meeting, you will be asked to elect one class of directors,
consisting of three directors, for a three-year term expiring in 2007 and until
their respective successors are elected and qualified. Donald E. Massaro, whose
term expires at this annual meeting, will retire after 38 years of service to
Wayne Savings Community Bank. Our Nominating and Corporate Governance Committee
has recommended the nomination of Mr. Frederick J. Krum to stand for election to
the class of directors whose terms are expiring at this annual meeting. The
Board of Directors identified a present need to select a nominee who met the
Audit Committee's financial expert criteria as defined by the Securities and
Exchange Commission. Mr. Krum, whose name was submitted for consideration by the
Chief Executive Officer, was deemed by the Board to be a qualified financial
expert. In addition, the Nominating and Corporate Governance Committee has
recommended the re-election of Russell L. Harpster and Terry A. Gardner as
directors. No nominee for director is related to any other director or executive
officer by blood, marriage or adoption. Stockholders are not permitted to use
cumulative voting for the election of directors.
Unless otherwise directed, each proxy executed and returned will be voted
for the election of the nominees for director listed below. If any person named
as a nominee should be unable or unwilling to stand for election at the time of
the annual meeting, the proxies will nominate and vote for any replacement
nominee or nominees recommended by our Board of Directors. At this time, the
Board of Directors knows of no reason why any of the nominees listed below may
not be able to serve as a director if elected.
The following tables present information concerning the nominees for
director and each director whose term continues. Other than Charles F. Finn,
whose spouse is Ms. Wanda Christopher-Finn, no continuing directors are related
to any other director or executive officer by blood, marriage or adoption. Ages
and shares of common stock beneficially owned are reflected as of June 10, 2004.
Where applicable, service as a director includes service as a director of Wayne
Savings Community Bank.
Nominees for Director for a Three-Year Term Expiring in 2007
Shares of
Positions Held Director Common Stock Percent
Name Age With Wayne Savings Since Beneficially Owned of Class
- ------------------- ----- ------------------------ -------- ------------------ -----------
Russell L. Harpster 69 Director 1979 63,173(1) 1.7%
Terry A. Gardner 57 Director 1994 52,156(2) 1.4%
Frederick J. Krum 52 Director 2004 300 *
The Board of Directors recommends that you vote FOR election of the nominees for
director.
(Footnotes on following page)
3
Members of the Board of Directors Continuing in Office
Directors Whose Term Expires in 2005
Shares of
Positions Held Director Common Stock Percent
Name Age With Wayne Savings Since Beneficially Owned of Class
- ----------------- ---- ------------------------ -------- ------------------ --------
Charles F. Finn 66 Chairman of the Board, 1976 131,423(3) 3.5%
President and Chief
Executive Officer
Joseph L. Retzler 76 Director 1985 27,955 *
Directors Whose Term Expires in 2006
Shares of
Positions Held Director Common Stock Percent
Name Age With Wayne Savings Since Beneficially Owned of Class
- ----------------- ---- ----------------------------------------- ------------------ --------
James C. Morgan 66 Director 1995 24,068(4) *
Kenneth R. Lehman 45 Director 2003 206,902(5) 5.5%
___________________
* Represents less than 1% of our outstanding common stock.
(1) Includes 26,646 shares held by Mr. Harpster's spouse.
(2) Includes 32,349 shares held jointly with Mr. Gardner's spouse, 5,242 shares
held by Mr. Gardner's spouse and 5,242 shares held by Mr. Gardner's
daughter.
(3) Includes 52,884 shares held by Mr. Finn's spouse, Ms. Wanda Christopher
Finn, Executive Vice President of Wayne Savings and 3,716 shares allocated
to Mr. Finn's account in the Wayne Savings 401(k) Retirement Plan.
(4) Includes 1,397 shares held by Mr. Morgan's spouse and 1,642 shares held by
Franklin Gas & Oil Co. LLC of which Mr. Morgan is a partner.
(5) The 206,902 shares are held jointly with Mr. Lehman's spouse.
The principal occupation during the past five years of each director of
Wayne Savings is set forth below.
Charles F. Finn. Mr. Finn has served as President and Chief Executive
Officer of Wayne Savings Community Bank since 1984 and has been employed by
Wayne Savings Community Bank for 40 years. Mr. Finn is the spouse of Wanda
Christopher-Finn, Executive Vice President of Wayne Savings. He was appointed
Chairman of the Board of Directors of Wayne Savings Community Bank in July 2003
and has served as Chairman of Wayne Savings since September 25, 1997.
Joseph L. Retzler. Mr. Retzler, who retired in 2003, is the former
President and Chief Executive Officer of Retzler Hardware in Wooster, Ohio.
Russell L. Harpster. Mr. Harpster is an attorney and a partner in the law
firm of Henderson, Harpster & Vanosdall, LLP in Ashland, Ohio.
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Terry A. Gardner. Mr. Gardner is Executive Vice President and part owner of
Greenbriar Conference Centre, Wooster, Ohio since January 2001. Previously, Mr.
Gardner was President and general partner of Terra Management and Terra
Developers in Wooster, Ohio, firms involved in the management and construction
of mutli- family housing projects.
Frederick J. Krum. Mr. Krum has served as Director of the Akron-Canton
Airport since 1981. Mr. Krum served on the Board of Directors of Village Savings
Bank, a wholly-owned subsidiary of Wayne Savings Community Bank, from June 1998
until the merger of Village Savings into Wayne Savings Community Bank in
September 2003.
James C. Morgan. Mr. Morgan is President of Franklin Gas & Oil Co., Inc. in
Wooster, Ohio and a partner of Franklin Gas & Oil Co. LLC since 2001.
Kenneth R. Lehman. Mr. Lehman is a private investor and a former corporate
and securities attorney. Mr. Lehman was a founding partner of the Washington,
D.C. law firm of Luse Lehman Gorman Pomerenk & Schick (since renamed Luse Gorman
Pomerenk & Schick). He retired from the law firm in April 2002.
Executive Officers Who Are Not Directors
Shares of
Positions Held Common Stock Percent
Name With Wayne Savings Beneficially Owned of Class
- ---------------------- ----------------------------------- ------------------ --------
Wanda Christopher-Finn Executive Vice President and Chief 130,362(1) 3.5%
Administrative Officer
Michael C. Anderson Executive Vice President and Chief 35,045(2) *
Financial Officer
___________________
* Represents less than 1% of our outstanding common stock.
(1) Includes 74,823 shares held by Ms. Christopher-Finn's spouse, Mr. Charles
Finn, President and Chief Executive Officer of Wayne Savings and 2,655
shares allocated to Ms. Christopher-Finn's account in the Wayne Savings
401(k) Retirement Plan.
(2) Includes 2,500 shares held jointly with Mr. Anderson's spouse, 7,556 shares
subject to stock options exercisable within 60 days of the voting record
date and 1,616 shares allocated to Mr. Anderson's account in the Wayne
Savings 401(k) Retirement Plan.
Set forth below is the information with respect to the principal
occupations during the last five years for the two executive officers of Wayne
Savings who do not also serve as directors. Ages are reflected as of June 10,
2004.
Wanda Christopher-Finn. Age 61 years. Ms. Christopher-Finn is Executive
Vice President and Chief Administrative Officer of Wayne Savings and Wayne
Savings Community Bank and has been affiliated with Wayne Savings Community Bank
since 1972. Ms. Christopher-Finn is the spouse of Mr. Charles F. Finn.
Michael C. Anderson. Age 53 years. Mr. Anderson is Executive Vice President
and Chief Financial Officer of Wayne Savings and Wayne Savings Community Bank
and joined Wayne Savings Community Bank in October 2001. He has most recently
been a member of senior management in the health care field responsible for
accounting and financial operations. Mr. Anderson was Senior Vice President,
Chief Financial Officer of Wayne Savings Community Bank between 1984-1986.
Committees and Meetings of the Board of Directors
The Board of Directors of Wayne Savings has established an Audit Committee,
Executive Committee, Nominating and Corporate Governance Committee and
Compensation Committee. Members of the Board also serve
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on committees of Wayne Savings Community Bank. Wayne Savings has not paid
separate compensation to its executive officers or directors.
During the fiscal year ended March 31, 2004, the Board of Directors of
Wayne Savings met 14 times. No director of Wayne Savings attended fewer than 75%
of the total number of Board of Directors meetings and all committees of the
Board on which such director served during the periods that he served. Our Board
of Directors has determined that a majority of our members are independent
directors as defined in the Nasdaq listing standards. The current independent
members are Messrs. Gardner, Harpster, Lehman, Massaro, Morgan and Retzler. Mr.
Krum will also be deemed independent if elected.
Audit Committee. The Audit Committee reviews with management and the
independent auditors the systems of internal control, reviews the annual
financial statements, including the Form 10-K and monitors Wayne Savings'
adherence in accounting and financial reporting to generally accepted accounting
principles. The Audit Committee is comprised of four directors, all of whom are
independent directors as defined in the Nasdaq's listing standards. The current
members of the Audit Committee are Directors Gardner, Massaro, Morgan and
Lehman. The Board of Directors has determined that, if elected, Mr. Krum will be
designated as our Audit Committee Financial Expert. Mr. Krum has extensive
financial and accounting experience as the managing director of the Akron-Canton
Airport. Mr. Krum served as Chief Financial Officer of the airport from
1975-1982. The Audit Committee of Wayne Savings met six times in fiscal 2004.
The Audit Committee of Wayne Savings has adopted a charter which has been
amended and attached to this proxy statement as Appendix A.
Executive Committee. The Executive Committee is empowered to act in place
of the full Board, with certain exceptions, between meetings of the full Board.
The Executive Committee performs general control and supervision functions
subject to the discretion of the full Board of Directors. The Executive
Committee meets as needed and met once in fiscal 2004. The current members of
the Executive Committee are Messrs. Finn, Harpster and Retzler.
Nominating and Corporate Governance Committee. Wayne Savings established a
Nominating and Corporate Governance Committee in 2004 for the purpose of
nominating directors for election at this annual meeting. The current members of
the Nominating and Corporate Governance Committee are Directors Lehman, Massaro,
Morgan and Retzler. The Nominating and Corporate Governance Committee met once
in 2004 to consider director nominations and recommended nominees to the full
Board of Directors. The Nominating and Corporate Governance Committee members
are independent directors, as defined in the Nasdaq listing standards, who
rotate annually so that no director will be in a position to recommend himself
for nomination to the Board of Directors. The committee's charter, as adopted at
a June 21, 2004 meeting, is attached hereto as Appendix B.
Compensation Committee. It is the responsibility of the Compensation
Committee of Wayne Savings to set the compensation of our Chief Executive
Officer, Chief Administrative Officer and Chief Financial Officer as well as
review the performance of other officers and to determine and administer
compensation programs and adjustments, including personnel policies and
practices. The Compensation Committee met twice during fiscal 2004. The current
members of the Compensation Committee are Messrs. Gardner, Harpster, Lehman,
Massaro, Morgan and Retzler. Each of the members is an independent director as
defined in the Nasdaq listing standards.
Directors Attendance at Annual Meetings
Directors are expected to attend the annual meeting absent a valid reason
for not doing so. We expect that a Board meeting will typically be scheduled in
conjunction with our annual meetings of stockholders, as is the case for this
annual meeting. In 2003 all of our directors attended the annual meeting of
stockholders.
Director Nominations
In June 2004, the Nominating and Corporate Governance Committee adopted a
written charter which is attached hereto as Appendix B. The Charter sets forth
certain criteria the committee may consider when
6
recommending individuals for nomination including: ensuring that the Board of
Directors, as a whole, is diverse and consists of individuals with various and
relevant career experience, relevant technical skills, industry knowledge and
experience, financial expertise (including expertise that could qualify a
director as a "financial expert," as that term is defined by the rules of the
SEC), local or community ties, minimum individual qualifications, including
strength of character, mature judgment, familiarity with our business and
industry, independence of thought and an ability to work collegially. The
committee also may consider the extent to which the candidate would fill a
present need on the Board of Directors. The Nominating and Corporate Governance
Committee will also consider candidates for director suggested by other
directors, as well as our management and stockholders. Any stockholder wishing
to make a nomination must follow our procedures for stockholder nominations,
which are described under "Stockholder Proposals, Nominations and Communications
with the Board of Directors."
Director Compensation
Our directors currently do not receive fees for serving on the Board or
committees of Wayne Savings. Each non-employee director who served on the Board
of Wayne Savings Community Bank received a fee of $1,500 for each monthly board
meeting which totaled $18,000 for fiscal 2004. No fees are paid for special
meetings of the Board, nor does Mr. Finn receive compensation for service on the
Board. During fiscal 2004, members of the Executive Committee, Loan Committee
and Audit Committee received fees of $166.67, $150.00 and $150.00 per month,
respectively, regardless of attendance and Asset Review Committee members
received a fee of $100 for each quarterly meeting.
2003 Stock Option Plan and 2003 Recognition Plan. The Board of Directors of
Wayne Savings adopted the 2003 Stock Option Plan and 2003 Recognition Plan on
May 22, 2003. The plans were approved by our stockholders at the 2003 annual
meeting. We granted to each of Messrs. Harpster, Retzler, Massaro, Morgan,
Gardner and Lehman non-statutory options to purchase 10,204 shares of common
stock at an exercise price of $13.95 per share, the fair market value of the
shares of common stock underlying such option on the date the option was
granted. Such options vest at a rate of 20% per year commencing one year from
the date of grant. Pursuant to the 2003 Recognition Plan, we granted to each of
Messrs. Harpster, Retzler, Massaro, Morgan, Gardner and Lehman 4,081 shares of
restricted stock that vest at a rate of 20% per year from the date of grant.
Compensation Committee Interlocks and Insider Participation
Determinations regarding compensation of our President and Chief Executive
Officer, our Executive Vice President and Chief Administrative Officer and our
Executive Vice President and Chief Financial Officer is reviewed by Wayne
Savings' Compensation Committee. Messrs. Gardner, Lehman, Massaro, Morgan,
Retzler and Harpster who is the Committee's lead director, serve as members of
the Compensation Committee.
No person who served as a member of the Compensation Committee during
fiscal 2004 was a current or former officer or employee of Wayne Savings or
Wayne Savings Community Bank or engaged in certain transactions with Wayne
Savings or Wayne Savings Community Bank required to be disclosed by regulations
of the SEC. Additionally, there were no compensation committee "interlocks"
during fiscal 2004, which generally means that no executive officer of Wayne
Savings served as a director or member of the compensation committee of another
entity, one of whose executive officers served as a director or member of the
Compensation Committee.
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MANAGEMENT COMPENSATION
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Summary Compensation Table
The following table sets forth a summary of certain information concerning
the compensation paid by Wayne Savings (including amounts deferred to future
periods by the officers) for services rendered in all capacities
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during the years ended March 31, 2004, 2003 and 2002, to the President and Chief
Executive Officer and other executive officers of Wayne Savings whose salary
plus bonus exceeded $100,000 in fiscal 2004.
Long- Term Compensation
--------------------------------------
Awards
Annual --------------------------------------
Compensation(1) Restricted Securities
--------------- Stock Underlying All Other
Name and Principal Position Year Salary Bonus Awards (2)(3) Options Compensation
- ------------------------------- ---- -------- ----- ---------------------- ----------- ------------
Charles F. Finn, Chairman, 2004 $171,597 $20,000 $289,793 23,857 $22,829(4)
President and Chief Executive 2003 165,400 20,000 -- -- 3,280
Officer 2002 159,600 20,000 -- -- 3,149
Wanda Christopher-Finn, 2004 118,213 18,000 260,839 20,000 20,191(4)
Executive Vice President and 2003 106,600 18,000 -- -- 2,081
Chief Administrative Officer 2002 102,300 15,000 -- -- 2,005
Michael C. Anderson, 2004 116,074 18,000 260,839 20,000 20,614(4)
Executive Vice President and 2003 104,200 18,000 -- -- --
Chief Financial Officer 2002 -- -- -- -- --
_____________________
(1) Wayne Savings provides various miscellaneous benefits to the named
executive officers. The costs of providing such benefits did not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
each of such individuals.
(2) Reflects the value of shares of restricted stock on the date of grant
awarded pursuant to the 2003 Recognition Plan. Such restricted stock vests
over five years, 20% per year from the date of the grant.
(3) As of March 31, 2004, Mr. Finn, Ms. Christopher-Finn and Mr. Anderson had
20,408, 18,369 and 18,369 shares of unearned restricted stock,
respectively, pursuant to the 2003 Recognition Plan, which had fair market
values of $334,691, $301,252 and $301,252 at March 31, 2004.
(4) Reflects compensation received in lieu of dividends paid on unearned
restricted common stock, amounts contributed to the 401(k) accounts of the
named executive officers and the dollar value of 987.536, 693.272 and
684.176 shares allocated to the employee stock ownership plan accounts of
Mr. Finn, Ms. Christopher-Finn and Mr. Anderson, respectively, at December
31, 2003, the date of allocation.
Stock Options
Stock Option Grants During Fiscal Year 2004
The following table sets forth, with respect to each executive officer
named in the Summary Compensation Table, information with respect to stock
options granted during fiscal 2004. Each stock option grant vests and becomes
exercisable at the rate of 20% per year from the date of grant.
Individual Grants
- --------------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options-Granted Exercise
Underlying to Employees in Price- Expiration Fair Value of
Name Options Granted Fiscal Year ($/Sh)(1) Date Options(2)
- ------------------------- ----------------- --------------- ---------- ---------- -------------
Charles F. Finn 23,857 11.7% $13.95 8/6/13 $93,758
Wanda Christopher-Finn 20,000 9.8 13.95 8/6/13 78,600
Michael C. Anderson 20,000 9.8 13.95 8/6/13 78,600
(Footnotes on following page)
8
- -------------------------
(1) The exercise price was based on the market price of the common stock on the
date of the grant.
(2) The fair value of the options was estimated using the Black-Scholes Pricing
Model. Under such analysis, the risk free interest rate was assumed to be
4.38%, the expected life of the options to be ten years, the expected
volatility to be 28.81% and the dividend yield to be 3.30% per share.
Fiscal Year-End Option Values
The following table sets forth, with respect to the executive officers
named in the Summary Compensation Table, information with respect to the number
of options held at the end of the fiscal year ended March 31, 2004 and the value
with respect thereto.
Number of Securities Value of Unexercised
Underlying Unexercised Options in the Money Options
at Fiscal Year End at Fiscal Year End(1)
-------------------------------------- -----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ------------- ---------------- ------------- ----------------
Charles F. Finn -- 23,857 $ -- $58,450
Wanda Christopher-Finn -- 20,000 -- 49,000
Michael C. Anderson 7,556 20,000 34,909 49,000
_____________________
(1) Calculated by determining the difference between the fair market value of a
share of the common stock underlying the options at March 31, 2004 ($16.40)
and the exercise price of the options.
Equity Compensation Plan Information
The following table sets forth certain information for all equity
compensation plans and individual compensation arrangements (whether with
employees or non-employees, such as directors), in effect as of March 31, 2004.
Number of Shares to be issued upon Weighted-Average Number of Shares Remaining Available
the Exercise of Outstanding Options, Exercise Price of for Future Issuance (Excluding Shares
Plan Category Warrants and Rights Outstanding Options Reflected in the First Column)
- ----------------------------- ------------------------------------ ------------------- -------------------------------------
Equity Compensation Plans
Approved by Security Holders 295,836(1) $13.84(1) --
Equity Compensation Plans Not
Approved by Security Holders -- -- --
------- -------
Total 295,836 --
======= =======
_________________
(1) Included in such number are 81,632 shares which are subject to restricted
stock grants which were not vested as of March 31, 2004. The weighted
average exercise price excludes restricted stock grants.
Employment Agreements
Wayne Savings Community Bank entered into employment agreements with
Chairman, President and Chief Executive Officer, Charles F. Finn, and Executive
Vice Presidents Wanda Christopher-Finn and Michael C. Anderson effective April
1, 2004, and Senior Vice President, Bryan K. Fehr, effective May 27, 2004, at
their then current base salaries. Mr. Finn's agreement provides for a term of 36
months, and Ms. Christopher-Finn's, Mr. Anderson's and Mr. Fehr's provide for
terms of 24 months. On each anniversary date, the agreements may be extended for
an additional 12 months, so that the remaining term shall be 36 months and 24
months, respectively. If an agreement is not renewed, the agreement will expire
36 months, or 24 months, respectively, following the
9
anniversary date. The base salaries under the agreements shall be reviewed at
least annually and may be increased but not decreased. In addition to the base
salaries, the agreements provide for, among other things, insurance benefits and
participation in other employee and fringe benefits applicable to executive
personnel. The agreements provide for termination of the employment of the
executive by Wayne Savings Community Bank for cause at any time.
The employment agreements provide for certain payments to the executives in
the event Wayne Savings Community Bank terminates the executive's employment
during the term of the agreement for reasons other than cause, retirement or
disability, each as defined in the agreements, or in the event of the
executive's resignation upon (a) failure to re-elect the executive to his or her
current offices, (b) a material change in the executive's functions, duties or
responsibilities, (c) relocation of his or her principal place of employment by
more than a specified number of miles, (d) liquidation or dissolution of Wayne
Savings Community Bank or Wayne Savings, or (e) a breach of the agreement by
Wayne Savings Community Bank or in the event of the termination or resignation
of the executive following our change in control, as defined. In the above
circumstances, the executive, or in the event of death, his or her beneficiary,
would be entitled to severance pay in an amount equal to three times, or two
times, as applicable, his or her highest annual base salary and bonus. Wayne
Savings Community Bank would also continue the executive's life and, if
applicable, dental coverage for the remaining unexpired term of the agreement.
In the event the payments to the executive include an "excess parachute payment"
as defined in the Internal Revenue Code, the payments will be reduced in order
to avoid having an excess parachute payment.
Upon termination of the executive's employment upon the executive's
retirement, he or she will be entitled to all benefits available to him or her
under any retirement or other benefit plan maintained by Wayne Savings Community
Bank. In the event of an executive's disability for a period of six months,
Wayne Savings Community Bank may terminate the agreement, provided that Wayne
Savings Community Bank will be obligated to pay the executive a bi-weekly
payment equal to three quarters of the executive's bi-weekly rate of base
salary, reduced by any benefits paid to the executive pursuant to any disability
insurance policy or similar arrangement maintained by Wayne Savings Community
Bank. The disability payments shall end on the earlier of (i) the date the
executive returns to full-time employment with Wayne Savings Community Bank or
another employer, (ii) his or her attainment of retirement age, or (iii) his or
her death.
In the event of a change in control of Wayne Savings or Wayne Savings
Community Bank, as defined, the total payment that would be due under the
employment agreements of Mr. Finn, Ms. Christopher-Finn, Mr. Anderson and Mr.
Fehr, based solely on the current annual compensation paid to such officers and
excluding any payments or benefits under any employee benefit plan which may be
payable, would be approximately $1.0 million. Such payments may tend to
discourage takeover attempts by increasing the costs to be incurred in the event
of a takeover.
Benefit Plans
Retirement Plan. Wayne Savings Community Bank maintains a defined benefit
pension plan for eligible employees. We froze the pension plan as of December
31, 2003. Subsequent to December 31, 2003, there have been no new enrollments
and no further benefit accruals in the pension plan. Credited service ceases to
accrue after December 31, 2003, however, vesting continues for periods of
employment subsequent to such date. The pension plan provides for monthly
payments to or on behalf of each covered employee upon the employee's normal
retirement date (i.e., the first day of the month coincident with or next
following the later of age 65 or five years of participation). These payments
are calculated in accordance with a formula based on the employee's "average
monthly compensation," which is defined as the highest average of total
compensation for five consecutive calendar years of employment. The normal
retirement benefit is equal to 29% of the "average monthly compensation" up to
the integration level, plus 51% of the "average monthly compensation" in excess
of the integration level, reduced for less than 35 years of service. The normal
form of benefit is a monthly income payable for life. Optional forms of benefit
are available.
10
Under the pension plan, we make an annual contribution for the benefit of
eligible employees computed on an actuarial basis. Employee benefits under the
plan vest as designated in the schedule below:
Completed Years of Employment Vested Percentages
----------------------------- -------------------
Fewer than 3 --
3 but fewer than 4 20%
4 but fewer than 5 40%
5 but fewer than 6 60%
6 but fewer than 7 80%
7 or more 100%
The following table sets forth the estimated annual benefits payable upon
retirement at age 65 for the period ended March 31, 2004.
Years of Benefit Service
Final Average --------------------------------------------------------------------------------------------
Earnings 10 15 20 25 30 35 40
-------- --------- -------- -------- ------- ------- ------- ----------
$ 50,000 6,046 9,069 12,092 15,115 18,138 21,161 21,161
75,000 9,689 14,533 19,378 24,222 29,067 33,911 33,911
100,000 13,332 19,998 26,664 33,329 39,995 46,661 46,661
125,000 16,975 25,462 33,949 42,437 50,924 59,411 59,411
150,000 20,617 30,926 41,235 51,544 61,852 72,161 72,161
175,000 23,532 35,298 47,064 58,829 70,595 82,361 82,361
200,000 24,989 37,483 49,978 62,472 74,967 87,461 87,461
225,000 24,989 37,483 49,978 62,472 74,967 87,461 87,461
250,000(1) 24,989 37,483 49,978 62,472 74,967 87,461 87,461
_____________________
(1) The maximum amount of annual compensation which the retirement plan can
consider in computing benefits is $205,000 in 2004, as adjusted for
subsequent years pursuant to the Internal Revenue Code provisions.
The approximate full years of credited service, as of March 31, 2004, for
the named executive officers are as follows:
Name Years of Service
- ---------------------- ----------------------
Charles F. Finn 41
Wanda Christopher-Finn 32
Michael C. Anderson 2
Indebtedness of Management and Related Party Transactions
In accordance with applicable federal laws and regulations, Wayne Savings
Community Bank makes loans to its directors, officers and employees as well as
members of their immediate families for the financing of their primary
residences and certain other loans. These loans are generally made on
substantially the same terms as those prevailing at the time for comparable
transactions with non-affiliated persons. According to a policy adopted by Wayne
Savings, all loans made to a director or executive officer in excess of the
greater of $25,000 or 5% of Wayne Savings' capital and surplus, must be approved
in advance by a majority of the disinterested members of our Board of Directors.
As of June 10, 2004, loans to officers, directors and their related business
interests totaled $2.7 million, including a $2.4 million loan and $200,000 line
of credit to a partnership in which one of the directors is a partner. It is the
belief of management that these loans neither involve more than the normal risk
of collectibility nor present other unfavorable features. All loans were current
as of March 31, 2004.
11
Director Russell L. Harpster is a partner in the law firm of Henderson,
Harpster & Vanosdall, LLP of Ashland, Ohio, which has represented Wayne Savings
Community Bank in certain legal matters since 1979, including drafting legal
documents, bankruptcies and foreclosures. During the fiscal year ended March 31,
2004, Wayne Savings paid $21,713 in legal fees to the law firm. No retainer was
paid, and Wayne Savings was billed for services performed at the firm's hourly
rates. The fees for use of Greenbriar Conference Centre, of which Mr. Gardner is
a part owner, for Wayne Savings' annual meeting are standard fees and will not
exceed $1,000.
- --------------------------------------------------------------------------------
REPORT OF THE COMPENSATION COMMITTEE
- --------------------------------------------------------------------------------
The Compensation Committee annually reviews the performance of the Chief
Executive Officer and other executive officers and approves changes to base
compensation as well as the level of bonus, if any, to be awarded. In
determining whether the employment agreements of the Chief Executive Officer and
other executive officers should be extended, the Committee took into account the
individual performance of each executive officer and the performance of Wayne
Savings under the direction of the executive officers. Other factors considered
by the Committee in 2004 included each executive officer's general managerial
oversight of Wayne Savings, the quality of communications with the Board of
Directors, and Wayne Savings' record of compliance with regulatory requirements.
While the Committee does not use strict numerical formulas to determine
changes in compensation for the Chief Executive Officer and other executive
officers, and while it weighs a variety of different factors in its
deliberations, it has emphasized and expects to continue to emphasize Wayne
Savings' level of net operating income, net interest margin, non-performing
assets and operating expenses, as well as the experience, expertise and
management skills of the executive officers and their specific roles in the
future success of Wayne Savings. The Committee also considers compensation
surveys prepared by banking associations and professional firms to determine
compensation paid to executives performing similar duties for similarly-sized
financial institutions. Specifically, in 2004, the Committee examined and
evaluated compensation data for each executive position at similarly-sized
financial institutions, as set forth in the 2003 SNL Compensation Survey. The
Committee also weighed fiscal 2004 earnings, which represented earnings
substantially in line with record earnings in 2003. While each of the
quantitative and non-quantitative factors described above was considered by the
Committee, such factors were not assigned a specific weight in evaluating the
performance of the Chief Executive Officer and other executive officers. Rather,
all factors were considered.
In 2004, the Committee, after taking into account the foregoing
quantitative and qualitative criteria and other factors, established the base
compensation and bonus payments for the executive officers. With respect to
Charles F. Finn, the President and Chief Executive Officer, the Committee
recommended to the full Board of Directors a $6,197 or 3.7%, increase in base
salary to $171,597. Mr. Finn's annual bonus was maintained at $20,000. Mr. Finn
did not participate in the Committee's discussions of his individual base salary
and bonus.
Members of the Compensation Committee
Terry A. Gardner
Joseph L. Retzler
Russell L. Harpster
Kenneth R. Lehman
Donald E. Massaro
James C. Morgan
12
- --------------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
- --------------------------------------------------------------------------------
The functions of the Wayne Savings Audit Committee include the following:
performing all duties assigned by the Board of Directors; selecting our
independent auditors; reviewing with Wayne Savings' management and our
independent public accountants the financial statements issued by Wayne Savings
and Wayne Savings Community Bank pursuant to federal regulatory requirements;
meeting with the independent public accountants to review the scope of audit
services, significant accounting changes and audit conclusions regarding
significant accounting estimates; assessments as to the adequacy of internal
controls and the resolution of any significant deficiencies or material control
weaknesses; and assessing compliance with laws and regulations and overseeing
the internal audit function.
The Audit Committee has reviewed and discussed Wayne Savings' audited
financial statements with management. The Audit Committee has discussed with
Wayne Savings' independent auditors, Grant Thornton LLP, the matters required to
be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committees." The Audit Committee has received the written disclosures and
the letter from the independent auditors required by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees" and has
discussed with Grant Thornton LLP, the independent auditors' independence. Based
on the review and discussions referred to above in this report, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in Wayne Savings' Annual Report on Form 10-K for fiscal
year 2004 for filing with the Securities and Exchange Commission.
Members of the Audit Committee
Terry A. Gardner
Donald E. Massaro
James C. Morgan
Kenneth R. Lehman
13
- --------------------------------------------------------------------------------
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph represents $100 invested in our common stock at the per
share closing price of the common stock on the Nasdaq National Market on March
31, 1999. The cumulative total returns include the payment of dividends by Wayne
Savings. The graph demonstrates comparison of the cumulative total returns for
the common stock of Wayne Savings, the Nasdaq-Total US Stock Index and the SNL
Securities All Bank & Thrift Index for the periods indicated.
[Total Return Performance* Graph]
Period Ending
-------------------------------------------------------------------------
Index 03/31/99 03/31/00 03/31/01 03/31/02 03/31/03
- ---------------------------------------------- ------------- -------- -------- -------- ---------
Wayne Savings Bancshares, Inc. 100.00 105.12 127.09 140.75 196.87
NASDAQ - Total US 100.00 186.24 75.12 55.20 82.45
SNL All Bank & Thrift Index 100.00 94.85 109.10 121.39 151.48
____________________
* Source: SNL Financial LC, Charlottesville, VA
14
- --------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AS A GROUP
- --------------------------------------------------------------------------------
The following table sets forth as of June 10, 2004, the voting record date,
certain information as to the common stock beneficially owned by each person or
entity, including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, who or which was known to us to be the
beneficial owner of more than 5% of the issued and outstanding common stock, and
all directors and executive officers of Wayne Savings as a group.
Amount and Nature
Name of Beneficial of Beneficial
Owner or Number of Ownership as of Percent of
Persons in Group June 10, 2004(1) Common Stock
- ----------------------------------------------------- --------------------- -----------------
Wayne Savings Employee Stock Ownership Plan 254,067(2) 6.7%
151 North Market Street
Wooster, Ohio 44691
Kenneth and Joan Lehman 206,902(3) 5.5%
1408 North Abington Street
Arlington, Virginia 22207
All directors and executive officers of Wayne Savings 541,022(4) 14.4%
as a group (9 persons)
_____________________
* Represents less than 1% of our outstanding common stock.
(1) Based upon filings made pursuant to the Securities Exchange Act of 1934 and
information furnished by the respective individuals. Under regulations
promulgated pursuant to the Securities Exchange Act of 1934, shares of
common stock are deemed to be beneficially owned by a person if he or she
directly or indirectly has or shares (i) voting power, which includes the
power to vote or to direct the voting of the shares, or (ii) investment
power, which includes the power to dispose or to direct the disposition of
the shares. Unless otherwise indicated, the named beneficial owner has sole
voting and dispositive power with respect to the shares.
(2) The Wayne Savings Community Bank Employee Stock Ownership Plan Trust was
established pursuant to the Wayne Savings Community Bank Employee Stock
Ownership Plan by an agreement between Wayne Savings Community Bank and
Messrs. Anderson and Finn who act as Trustees of the ESOP. As of December
31, 2003, 105,447 shares held in the ESOP Trust had been allocated to the
accounts of participating employees. Under the terms of the ESOP, the
Trustees must vote all allocated shares held in the ESOP in accordance with
the instructions of the participating employees and unallocated shares will
be voted in the same ratio on any matter as to those shares for which
instructions are given. The amount of common stock beneficially owned by
directors who serve as Trustees of the ESOP and by all directors and
executive officers as a group does not include the shares held by the ESOP
Trust.
(3) The information on number of shares held is based on a Schedule 13G/A filed
on February 6, 2004 by Kenneth R. Lehman and Joan Abercrombie Lehman,
spouses, who report joint ownership of all of the shares. According to such
filing, they each share voting power and dispositive power over all the
shares.
(4) Includes 9,257 shares allocated to executive officers pursuant to the Wayne
Savings Community Bank Employee Stock Ownership Plan, 7,556 shares which
may be acquired by Mr. Anderson upon the exercise of stock options
exercisable within 60 days of June 10, 2004, the voting record date and
7,987 shares allocated to the executive officers in the Wayne Savings
401(k) Retirement Plan.
15
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the officers and directors, and persons who own more than 10% of our common
stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Officers, directors and greater than 10% stockholders
are required by regulation to furnish us with copies of all Section 16(a) forms
they file. We know of no person who owns 10% or more of Wayne Savings' common
stock.
Based solely on our review of the copies of such forms furnished to us, or
written representations from our officers and directors, we believe that during,
and with respect to, the fiscal year ended March 31, 2004, our officers and
directors complied in all respects with the reporting requirements promulgated
under Section 16(a) of the Securities Exchange Act of 1934, other than with
respect to the grants of options and recognition plan shares in August 2003 that
were reported late by each of our directors and executive officer in September
2003.
- --------------------------------------------------------------------------------
PROPOSAL II - PROPOSAL TO AMEND AND RESTATE THE 2003 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
The Board of Directors of Wayne Savings adopted the 2003 Stock Option Plan
on May 22, 2003, and the Plan was subsequently approved by our stockholders at
the annual meeting of stockholders held on July 24, 2003. Under applicable
regulations of the Office of Thrift Supervision, stock benefit plans such as the
Option Plan established or implemented within one year following the completion
of a mutual to stock conversion, including our "second step" reorganization, are
required to contain certain restrictions and limitations. We completed our
reorganization on January 8, 2003. Specifically, the OTS regulations provide,
among other provisions, that awards granted pursuant to such plans begin vesting
no earlier than one year from the date the plans are approved by stockholders,
shall not vest at a rate in excess of 20% per year and shall not provide for
accelerated vesting except in the case of disability, or death or following a
change in control. The OTS has authorized the elimination of these provisions
more than one year after a reorganization, provided that stockholder approval of
such amendments to the plans is obtained.
The Option Plan is administered and interpreted by a committee of the Board
of Directors that is comprised solely of two or more non-employee directors. We
have designated the Compensation Committee as the committee to administer the
Option Plan.
The Board of Directors of Wayne Savings has adopted amendments to the
Option Plan, subject to approval by the stockholders, in order to remove the
restrictions on the amount of awards that may be granted to individual officers
and outside directors, to provide that new awards shall vest at the rate
determined by the administering committee and that both existing and new awards
shall accelerate and vest upon normal retirement, as defined in the Option Plan
or at the discretion of the Compensation Committee. The Option Plan was also
amended for conforming changes and certain administrative matters. The
amendments do not increase the number of shares reserved for issuance under the
Option Plan or change the vesting schedule or terms of outstanding awards under
the Option Plan other than to accelerate the vesting upon retirement or at the
discretion of the Compensation Committee. In the event that these amendments to
the Option Plan are not approved by stockholders, the vesting of existing awards
will not accelerate in the event of retirement or at the discretion of the
Compensation Committee, but the other provisions will remain in effect as
originally adopted.
The Option Plan was adopted by us to attract and retain qualified personnel
in key positions, provide officers and employees with a proprietary interest in
Wayne Savings as an incentive to contribute to our success and reward key
employees for outstanding performance. The Option Plan is also designed to
retain qualified directors for Wayne Savings. The Option Plan provides for the
grant of incentive stock options intended to comply with the requirements of
Section 422 of the Internal Revenue Code, non-incentive or compensatory stock
options, reload options, dividend equivalent rights and/or limited stock
appreciation rights. Awards are available for grant to non- employee directors
and key employees of Wayne Savings and any subsidiaries, except that
non-employee directors are eligible to receive only awards of non-incentive
stock options.
16
As of June 10, 2004, options to purchase 204,081 shares of common stock
have been granted and are outstanding under the Option Plan and no shares remain
available for future grant under the plan. A copy of the Amended and Restated
2003 Stock Option Plan is attached hereto as Appendix C.
The Board of Directors recommends that you vote FOR approval of the amendment
and restatement of the 2003 Stock Option Plan.
- --------------------------------------------------------------------------------
PROPOSAL III - PROPOSAL TO AMEND AND RESTATE THE 2003 RECOGNITION AND
RETENTION PLAN
- --------------------------------------------------------------------------------
The Board of Directors of Wayne Savings adopted the 2003 Recognition and
Retention Plan on May 22, 2003, and the plan was subsequently approved by our
stockholders at the annual meeting of stockholders held on July 24, 2003.
Similar to the Option Plan, discussed in Proposal 2, under applicable
regulations of the Office of Thrift Supervision, stock benefit plans such as the
Recognition Plan established or implemented within one year following the
completion of a mutual to stock conversion, including our "second step"
reorganization completed in January 8, 2003, are required to contain certain
restrictions and limitations. The OTS has authorized the elimination of these
provisions more than one year after a reorganization, provided that stockholder
approval of such amendments to the Recognition Plan is obtained.
The Recognition Plan is administered and interpreted by a committee of the
Board of Directors that is comprised solely of two or more non-employee
directors. We have designated the Compensation Committee as the committee to
administer the Recognition Plan.
Our Board of Directors has adopted amendments to the Recognition Plan,
subject to approval by the stockholders, in order to remove the restrictions on
the amount of awards that may be granted to individual officers and outstanding
directors, to provide that new awards shall vest at the rate determined by the
administering committee and that both existing and new awards shall accelerate
and vest upon normal retirement, as defined in the Recognition Plan or at the
discretion of the Compensation Committee. The Recognition Plan was also amended
for conforming changes and certain administrative matters. The amendments do not
increase the number of shares reserved for issuance under the Recognition Plan
or change the vesting schedule or terms of outstanding awards other than to
accelerate the vesting upon retirement or at the discretion of the Compensation
Committee. In the event that these amendments to the Recognition Plan are not
approved by stockholders, the vesting of existing awards will not accelerate in
the event of retirement or at the discretion of the Compensation Committee, but
the other provisions will remain in effect as originally adopted.
The Recognition Plan was adopted by us to attract and retain qualified
personnel in key positions, provide officers and employees with a proprietary
interest in Wayne Savings as an incentive to contribute to the success of Wayne
Savings and reward key employees for outstanding performance. The Recognition
Plan is also designed to retain qualified directors for Wayne Savings. Officers,
key employees and non-employee directors of Wayne Savings and its subsidiaries
who are selected by our Board of Directors or members of the administering
committee appointed by the Board are eligible to receive plan share awards under
the Recognition Plan.
As of June 10, 2004, plan share awards for 81,632 shares have been granted
under the 2003 Recognition Plan and no shares are available for future grant
under the Recognition Plan. Previously granted awards under the Recognition Plan
will vest at the rate of 20% per year over five years. The proposed amendments
to the Recognition Plan will not affect the number of shares previously granted
nor change the vesting schedule of outstanding awards but will provide that
outstanding awards as well as newly granted awards will accelerate in certain
circumstances as described above. A copy of the Amended and Restated 2003
Recognition and Retention Plan is attached hereto as Appendix D.
The Board of Directors recommends that you vote FOR approval of the amendment
and restatement of the 2003 Recognition and Retention Plan.
17
- --------------------------------------------------------------------------------
PROPOSAL IV - RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
The Audit Committee of the Board of Directors of Wayne Savings has
appointed Grant Thornton LLP, independent certified public accountants, to
perform the audit of our financial statements for the year ending March 31,
2005, and further directed that the selection of auditors be submitted for
ratification by the stockholders at the annual meeting.
We have been advised by Grant Thornton LLP that neither that firm nor any
of its associates has any relationship with Wayne Savings or its subsidiaries
other than the usual relationship that exists between independent certified
public accountants and clients. Grant Thornton LLP will have one or more
representatives at the annual meeting who will have an opportunity to make a
statement, if they so desire, and will be available to respond to appropriate
questions.
In determining whether to appoint Grant Thornton LLP as our auditors, our
Audit Committee considered whether the provision of services, other than
auditing services, by Grant Thornton LLP is compatible with maintaining the
auditors' independence. In addition to performing auditing services as well as
reviewing Wayne Savings' public filings, our auditors performed tax-related
services, including the completion of Wayne Savings' corporate tax returns, in
fiscal 2004. The Audit Committee believes that Grant Thornton LLP's performance
of these other services is compatible with maintaining the auditor's
independence.
The Board of Directors recommends that you vote FOR the ratification of the
appointment of Grant Thornton LLP as our independent auditors for the fiscal
year ending March 31, 2005.
Audit Fees
The following table sets forth the aggregate fees paid by us to Grant
Thornton LLP for professional services rendered in connection with the audit of
our consolidated financial statements for 2004 and 2003, as well as the fees
paid by us to Grant Thornton LLP for audit-related services, tax services and
all other services rendered by Grant Thornton LLP to us during fiscal 2004 and
2003.
Year Ended March 31,
----------------------------------
2004 2003
------------ ------------
Audit fees (1)............................ $ 70,500 $ 52,700
Audit-related fees (2).................... 21,300 270,035
Tax fees (3).............................. 13,140 9,875
All other fees............................ -- --
--------- ---------
Total............................ $ 104,940 $ 332,610
========= =========
- ----------
(1) Audit fees consist of fees incurred in connection with the audit of our
annual financial statements and the review of the interim financial
statements included in our quarterly reports filed with the Securities and
Exchange Commission, as well as work generally only the independent auditor
can reasonably be expected to provide, such as statutory audits, consents
and assistance with and review of documents filed with the Securities and
Exchange Commission, including Wayne Savings' registration statement and
prospectus in 2003.
(2) Includes for fiscal 2004, assistance with and review of Wayne Savings'
quarterly filings on Form 10-Q as well as assistance with respect to
acquisitions, principally Stebbins National Bank. Includes for fiscal 2003,
assistance with and review of our registration statement and prospectus,
including the audited consolidated financial statements presented therein,
prepared and filed with the Securities and Exchange Commission in
connection with our "second step" reorganization and stock offering.
(3) Tax fees consist primarily of fees paid in connection with preparing
federal and state income tax returns and other tax related services.
18
As provided in its charter, the Audit Committee selects our independent
auditors and pre-approves all audit services to be provided by the independent
auditors to Wayne Savings. The Audit Committee also reviews and pre- approves
all audit-related and non-audit related services rendered by our independent
auditors in accordance with the Audit Committee's Pre-Approval Policy adopted in
April 2004. In its review of these services and related fees and terms, the
Audit Committee considers, among other things, the possible effect of the
performance of such services on the independence of our independent auditors.
The Audit Committee pre-approves certain audit-related services and certain
non-audit related tax services which are specifically described by the Audit
Committee on an annual basis and separately approves other individual
engagements as necessary.
Each new engagement of Grant Thornton LLP was approved in advance by the
Audit Committee, and none of those engagements made use of the de minimis
exception to pre-approval contained in the Securities and Exchange Commission
rules.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS, NOMINATIONS AND COMMUNICATIONS
WITH THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
Stockholder Proposals. Any proposal which a stockholder wishes to have
included in the proxy materials of Wayne Savings relating to the next annual
meeting of stockholders, which is currently expected to be held in July 2005,
must be received at the principal executive offices of Wayne Savings Bancshares,
Inc., 151 North Market Street, Wooster, Ohio 44691, no later than February 24,
2005. If such proposal is in compliance with all of the requirements of Rule
14a-8 under the Securities Exchange Act of 1934, as amended, it will be included
in the proxy statement and set forth on the form of proxy issued for such annual
meeting of stockholders. It is urged that any such proposals be sent certified
mail, return receipt requested.
Stockholder proposals which are not submitted for inclusion in Wayne
Savings' proxy materials pursuant to Rule 14a-8 may be brought before an annual
meeting pursuant to Section 6(b) of our Bylaws. Notice of the proposal must also
be given in writing and delivered to, or mailed and received at, our principal
executive offices by March 26, 2005. The notice must include the information
required by Section 6(b) of our Bylaws.
Stockholder Nominations. Our Bylaws provide that, subject to the rights of
the holders of any class or series of stock having a preference over the common
stock as to dividends or upon liquidation, all nominations for election to the
Board of Directors, other than those made by the Board or the Nominating
Committee thereof, shall be made by a stockholder who has complied with the
notice provisions in the Bylaws. Written notice of a stockholder nomination
generally must be communicated to the attention of the Corporate Secretary and
either delivered to, or mailed and received at, our principal executive offices
not later than, with respect to an annual meeting of stockholders, 90 days prior
to the anniversary date of the mailing of proxy materials by us in connection
with the immediately preceding annual meeting of stockholders. For our annual
meeting in 2005, this notice must have been received by March 26, 2005. Each
written notice of a stockholder nomination is required to set forth certain
information specified in Section 6(c) of our Bylaws. We did not receive any
stockholder nominations with respect to this annual meeting.
Other Stockholder Communications. Our Board of Directors has adopted a
formal process by which stockholders may communicate with the Board.
Stockholders who wish to communicate with our Board of Directors may do so by
sending written communications addressed to the Board of Directors of Wayne
Savings Bancshares, Inc. c/o Michael C. Anderson, Secretary, 151 North Market
Street, Wooster, Ohio 44691.
19
- --------------------------------------------------------------------------------
ANNUAL REPORTS
- --------------------------------------------------------------------------------
A copy of our Annual Report to Stockholders for the year ended March 31,
2004 accompanies this Proxy Statement. Such report is not part of the proxy
solicitation materials.
Upon receipt of a written request we will furnish without charge to any
stockholder a copy of the Annual Report on Form 10-K for fiscal 2004. Such
written requests should be directed to Mr. Michael C. Anderson, Secretary, Wayne
Savings Bancshares, Inc., 151 North Market Street, Wooster, Ohio 44691.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
Management is not aware of any business to come before the annual meeting
other than the matters described above in this Proxy Statement. However, if any
other matters should properly come before the meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by Wayne Savings.
Wayne Savings will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending the proxy
materials to the beneficial owners of our common stock. In addition to
solicitations by mail, directors, officers and employees of Wayne Savings may
solicit proxies personally or by telephone without additional compensation.
20
Appendix A
WAYNE SAVINGS BANCSHARES, INC.
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
I. Purpose
-------
There shall be a committee of the board of directors to be known as the audit
committee. The audit committee shall be composed of directors who are
independent of the management of the Company and are free of any relationship
that, in the opinion of the board of directors, would interfere with their
exercise of independent judgment as a committee member.
The Audit Committee's primary duties and responsibilities are to:
o Appoint the Company's independent auditors.
o Monitor the integrity of the Company's financial reporting
process and systems of internal controls regarding finance,
accounting, legal, and regulatory compliance as prepared by
management and reviewed by the independent auditors.
o Monitor the qualifications, independence, and performance of the
Company's independent auditors and internal auditing department.
o Provide an avenue of communication among the independent
auditors, management, the internal auditing department, and the
Board of Directors.
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities, and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary within the Audit Committee's scope of
responsibilities.
The Audit Committee shall be directly responsible for appointing, determining
funding for, and overseeing the independent auditors in accordance with Section
301 of the Sarbanes-Oxley Act of 2002 and Section 10A(m)2 of the Securities
Exchange Act of 1934 as amended.
II. Statement of Policy
-------------------
The audit committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to the corporate accounting, reporting practices
of the Company, and the quality and integrity of the financial reports of the
Company.
III. Composition
-----------
The audit committee shall be comprised of three or more directors as determined
by the board, each of whom shall be independent directors, as such term is
defined in the Rules of the Nasdaq Stock Market, and free from any relationship
that, in the opinion of the board, would interfere with the exercise of his or
her independent judgment. No director will be considered independent if s/he has
accepted any consulting, advisory or compensatory fee from Wayne (other than in
his or her capacity as a director) or is an affiliated person of the company or
any subsidiary. Affiliated person for this charter means an executive officer
and/or controlling shareholder.
A-1
IV. Frequency of Meeting
--------------------
The audit committee shall meet at least four times annually, or more frequently
as matters dictate. The audit committee shall keep minutes and other relevant
records of all of its meetings and will submit its minutes to the board no later
than one board meeting following the audit committee meeting.
V. Responsibilities
----------------
Internal Audit Function
- -----------------------
The Audit Committee shall have direct supervision over, and shall receive all
reports from, the bank's internal audit staff and shall report significant
findings and events to the full board of directors. In carrying out its
responsibilities, the audit committee believes its policies and procedures
should remain flexible, in order to best react to changing conditions and to
ensure to the directors and shareholders that the corporate accounting and
reporting practices of Wayne are in accordance with all requirements and are of
the highest quality. The Audit Committee also shall:
o Review the internal audit function, including the independence
and authority of its reporting obligations and the proposed audit
plans for the coming year.
o Receive prior to each meeting, a summary of findings from
completed internal audits and a progress report on the proposed
internal audit plan, with explanations for any deviations from
the original plan.
o Provide sufficient opportunity for the internal auditors to meet
with the members of the audit committee without members of
management present to discuss matters of importance regarding
audit coverage.
o Review and resolve any identifiable material weaknesses in the
bank's system of internal controls.
o Investigate any matter brought to its attention within the scope
of its duties, with the power to retain outside counsel for this
purpose if, in its judgment, that is appropriate.
Independent Auditors
- --------------------
The Audit Committee shall be directly responsible for the appointment,
compensation, oversight of the work, evaluation, and termination of the
independent auditors (subject, if applicable, to shareholder ratification). The
independent auditors report directly to the Audit Committee and the Audit
Committee will be responsible for the resolution of any disagreements between
management and the independent auditor regarding financial reporting. The Audit
Committee shall also review the independence of the auditors.
All auditing services and all non-audit services, which are not prohibited by
law, shall be pre-approved by the Audit Committee pursuant to the Audit
Committee Pre-Approval Policy.
VI. Audit Authorization
-------------------
The Board recognizes that to effectively fulfill the intended audit tasks, an
auditor should achieve a degree of independence that prevents the personnel
being reviewed from controlling the auditor's work and reports. Accordingly the
board authorizes the following:
The director of auditing is authorized to direct a broad, comprehensive program
of internal auditing within the bank. Internal auditing examines and evaluates
the adequacy and effectiveness of the systems of control provided by the bank to
direct its activities toward the accomplishment of its objectives in accordance
with institution policies and
A-2
plans. In accomplishing these activities, the director of auditing and
authorized representatives are authorized to have full, free, and unrestricted
access to all institution functions, records, property, and personnel.
VII. Policy Review
-------------
The Audit Committee will review this charter on at least an annual basis, if not
more frequently, so that changing regulatory positions with regard to the
operation of the Audit Committee are addressed.
VIII. Other Audit Committee Responsibilities
--------------------------------------
Establish procedures for the receipt, retention, and treatment of internal and
external complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters. In establishing such procedures, the
Committee must provide for the ability of the Company's employees to submit by
confidential, anonymous submission any concerns regarding questionable
accounting or auditing matters.
Review the process for communicating and compliance with the Company's "Code of
Conduct" to all employees as detailed in the employee manual. This "Code" also
includes procedures for reporting violations of the Code of Conduct.
A-3
Appendix B
WAYNE SAVINGS BANCSHARES, INC.
CHARTER OF NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
I. Purpose
The Nominating and Corporate Governance Committee (the "Committee") is
appointed by the Board of Directors (the "Board") of Wayne Savings Bancshares,
Inc. (the "Company") to assist the Board in fulfilling its oversight
responsibility. The primary duties and responsibilities of the Committee are to:
o identify and recommend to the full Board the selection of qualified
individuals to serve as Board members and recommend to the full Board
director nominees for each Annual Meeting of Stockholders;
o review existing corporate governance documents and establish corporate
governance principles applicable to the Company and to govern the
conduct of the Board and its members; and
o review nominations for director submitted by shareholders pursuant to
Section 6(c) of the Company's Bylaws.
The Committee has the authority to access any consultant of the Company to
aid it in its responsibilities. The Committee has the authority and ability to
retain, compensate and terminate, at the Company's expense, any search firm used
to identify director candidates as is necessary to undertake its
responsibilities.
II. Compensation and Meetings
Members of the Committee must meet applicable Nasdaq National Market
listing standards and other statutory or regulatory requirements relative to
director independence. The Committee must have two or more directors as
determined by the Board, each of whom must be independent, non-employee
directors, free from any relationship that would interfere with the exercise of
its members' equitable judgment. Non-independent directors may attend Committee
meetings and assist the Committee in establishing its meeting agendas.
Compensation for service on the Committee will be established by the full Board
based on the recommendations of the Compensation Committee.
Members of the Committee are appointed by the Board of Directors at its
Annual Meeting. The chair of this Committee shall be selected by all members of
this Committee.
The Committee shall establish its own schedule for meetings throughout the
year. If the Chair is not present, the members of the Committee may designate a
Chair by a majority vote of those present. The Committee shall meet in executive
session annually to review the performance of the Board and/or to discuss any
other matters that it believes should be discussed without management present
and will present a report to the Board.
The Committee shall report to the Board of Directors. The Committee shall
have authority to delegate any of its responsibilities to subcommittees as it
may deem appropriate in its sole discretion and to retain, terminate and obtain
advice, reports or opinions from search firms or other internal or outside
advisors and legal counsel in the performance of its responsibilities, and shall
have the sole authority to approve related fees and retention terms.
III. Goals, Responsibilities and Duties
The Committee shall establish criteria for the selection of new directors
to serve on the Board of Directors.
B-1
A. Recommend Qualified Individuals for Board membership
o Review individual qualifications for service of individuals on
the full Board;
o Recommend to the Board individuals for Board membership;
o Review shareholder submitted nominees for election of directors
at the Annual Meeting of Stockholders; and
o Recommend to the Board nominees for election of directors at the
Annual Meeting of Stockholders.
In identifying candidates for membership on the Board of Directors, the
Committee shall take into account all factors it considers appropriate, which
may include (a) ensuring that the Board of Directors, as a whole, is diverse and
consists of individuals with various and relevant career experience, relevant
technical skills, industry knowledge and experience, financial expertise
(including expertise that could qualify a director as a "financial expert," as
that term is defined by the rules of the SEC), local or community ties and (b)
minimum individual qualifications, including strength of character, mature
judgment, familiarity with the Company's business and industry, independence of
thought and an ability to work collegially. The Committee also may consider the
extent to which the candidate would fill a present need on the Board of
Directors.
B. Committee Membership and Qualifications
o Recommend to the full Board the establishment of Board committees
and subcommittees, as necessary, at the Annual Meeting of the
Board and at other times during the year, if necessary;
o Recommend to the full Board the membership and composition of
each of the Board committees and sub-committees and recommend
removal of any committee member, if necessary; and
o Review qualifications of Directors for committee membership.
C. Develop and Oversee Corporate Governance Principles
o Develop and annually review Corporate Governance Principles for
the overall governance of the Board of the Company and its
subsidiaries and keep abreast of developments with regard to
corporate governance to enable the Committee to make
recommendations to the Board in light of such developments as may
be appropriate.
D. Other
o Maintain minutes of meetings, which are circulated to the full
Board and report to the full Board of Directors on a regular
basis.
Date: June 21, 2004
Approved by Nominating and Corporate
Governance Committee
Date: June 21, 2004
Approved by Board of Directors of
Wayne Savings Bancshares, Inc.
B-2
Appendix C
WAYNE SAVINGS BANCSHARES, INC.
AMENDED AND RESTATED
2003 STOCK OPTION PLAN
1. Purpose
The purpose of the Wayne Savings Bancshares, Inc. Amended and Restated 2003
Stock Option Plan (the "Plan") is to advance the interests of Wayne Savings
Bancshares, Inc. (the "Company") and its shareholders by providing Key Employees
and Outside Directors of the Company and its Affiliates, including Wayne Savings
Community Bank (the "Bank"), upon whose judgment, initiative and efforts the
successful conduct of the business of the Company and its Affiliates largely
depends, with an additional incentive to perform in a superior manner as well as
to attract people of experience and ability.
2. Definitions
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Company or the Bank, as such terms are defined in Section 424(e) or 424(f),
respectively, of the Code, or a successor to a parent corporation or subsidiary
corporation.
"Award" means an Award of Non Statutory Stock Options, Incentive Stock
Options, Limited Rights, Dividend Equivalent Rights and/or Reload Options
granted under the provisions of the Plan.
"Bank" means Wayne Savings Community Bank, or a successor corporation.
"Beneficiary" means the person or persons designated by a Participant to
receive any benefits payable under the Plan in the event of such Participant's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, his estate.
"Board" or "Board of Directors" means the board of directors of the
Company, unless otherwise noted herein.
"Cause" means personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Company or an Affiliate.
"Change in Control" of the Bank or the Company means a change in control of
a nature that: (i) would be required to be reported in response to Item 1(a) of
the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a Change in Control of the Bank or the Company within the
meaning of the Home Owners' Loan Act, as amended ("HOLA"), and applicable rules
and regulations promulgated thereunder, as in effect at the time of the Change
in Control; or (iii) without limitation such a Change in Control shall be deemed
to have occurred at such time as (a) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of Company's outstanding securities except for any
securities purchased by the Bank's employee stock ownership plan or trust; or
(b) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this
C-1
clause (b), considered as though he were a member of the Incumbent Board; or (c)
a plan of reorganization, merger, consolidation, sale of all or substantially
all the assets of the Bank or the Company or similar transaction in which the
Bank or Company is not the surviving institution occurs; or (d) a proxy
statement soliciting proxies from stockholders of the Company, by someone other
than the current management of the Company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Company or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to the Plan are to be exchanged
for or converted into cash or property or securities not issued by the Company;
or (e) a tender offer is made for 25% or more of the voting securities of the
Company and the shareholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee consisting of either (i) at least two
Non-Employee Directors of the Company, or (ii) the entire Board of the Company.
For these purposes, the Company has designated the Compensation Committee of the
Company as the Committee.
"Common Stock" means shares of the common stock of the Company, par value
$0.10 per share.
"Company" means Wayne Savings Bancshares, Inc., the stock holding company
of the Bank, or a successor corporation.
"Continuous Service" means employment as a Key Employee and/or service as
an Outside Director without any interruption or termination of such employment
and/or service. Continuous Service shall also mean a continuation as a member of
the Board of Directors following a cessation of employment as a Key Employee or
continuation of service as a Director Emeritus following termination of service
as a Director. In the case of a Key Employee, employment shall not be considered
interrupted in the case of sick leave, military leave or any other approved
leave of absence or in the case of transfers between payroll locations of the
Company, its subsidiaries or its successor.
"Date of Grant" means the actual date on which an Award is granted by the
Committee.
"Director" means a member of the Board.
"Director Emeritus" means a former member of the Board who has been
appointed to a Director Emeritus position.
"Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him, or of a Director or Outside Director to serve as such.
Additionally, in the case of an employee, a medical doctor selected or approved
by the Board must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it appears probable that
such Disability will be permanent during the remainder of said employee's
lifetime.
"Dividend Equivalent Rights" means the right to receive an amount of cash
based upon the terms set forth in Section 11 hereof.
"Effective Date" means the date of, or a date determined by the Board of
Directors following, approval of the Plan by the Company's shareholders.
"Fair Market Value" means, when used in connection with the Common Stock on
a certain date, the reported closing price of the Common Stock as reported by
the Nasdaq stock market (as published in The Wall Street Journal, if published)
on the day prior to such date, or if the Common Stock was not traded on the day
prior to such
C-2
date then, on the next preceding day on which the Common Stock was traded;
provided, however, that if the Common Stock is not reported on the Nasdaq stock
market, Fair Market Value shall mean the average sale price of all shares of
Common Stock sold during the 30 day period immediately preceding the date on
which such stock option was granted, and if no shares of stock have been sold
within such 30 day period, the average sale price of the last three sales of
Common Stock sold during the 90 day period immediately preceding the date on
which such stock option was granted. In the event Fair Market Value cannot be
determined in the manner described above, then Fair Market Value shall be
determined by the Committee. The Committee is authorized, but is not required,
to obtain an independent appraisal to determine the Fair Market Value of the
Common Stock.
"Incentive Stock Option" means an Option granted by the Committee to a Key
Employee, which Option is designated as an Incentive Stock Option pursuant to
Section 9.
"Key Employee" means any person who is currently employed by the Company or
an Affiliate who is chosen by the Committee to participate in the Plan.
"Limited Right" means the right to receive an amount of cash based upon the
terms set forth in Section 10.
"Non-Statutory Stock Option" means an Option granted by the Committee to
(i) an Outside Director or (ii) any other Participant and such Option is either
(A) not designated by the Committee as an Incentive Stock Option, or (B) fails
to satisfy the requirements of an Incentive Stock Option as set forth in Section
422 of the Code and the regulations thereunder.
"Non-Employee Director" means, for purposes of the Plan, a Director who (a)
is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
"Normal Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Company or an Affiliate, or, if no such plan is applicable, which would
constitute "retirement" under any qualified pension benefit plan maintained by
the Company or an Affiliate, if such individual were a participant in such plan.
With respect to an Outside Director, shall mean retirement from the Board in
connection with any retirement policy established by the Board, or if none,
retirement on or after attainment of age 65.
"Option" means an Award granted under Section 8 or Section 9.
"Outside Director" means a Director of the Company or an Affiliate who is
not an employee of the Company or an Affiliate.
"Participant" means a Key Employee or Outside Director of the Company or
its Affiliates who receives or has received an Award under the Plan.
"Reload Option" mean an option to acquire shares of Common Stock equivalent
to the number of shares (i) used by a Participant to pay for an Option, or (ii)
deducted from any distribution in order to satisfy income tax required to be
withheld, based upon the terms set forth in Section 20 of the Plan.
"Right" means a Limited Right.
"Termination for Cause" means the termination of employment or termination
of service on the Board caused by the individual's personal dishonesty, willful
misconduct, any breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, or the willful violation of any law, rule or
regulation (other than
C-3
traffic violations or similar offenses), or a final cease and desist order, any
of which results in material loss to the Company or one of its Affiliates.
3. Plan Administration Restrictions
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the Plan and
to make whatever determinations and interpretations in connection with the Plan
it deems necessary or advisable. All determinations and interpretations made by
the Committee shall be binding and conclusive on all Participants in the Plan
and on their legal representatives and beneficiaries.
All transactions involving a grant, award or other acquisition from the
Company shall:
(a) be approved by the Company's full Board or by the Committee; or
(b) be approved, or ratified, in compliance with Section 14 of the Exchange
Act, by either: the affirmative vote of the holders of a majority of the
securities present, or represented and entitled to vote at a meeting duly held
in accordance with the laws of the state in which the Company is incorporated;
or the written consent of the holders of a majority of the securities of the
issuer entitled to vote, provided that such ratification occurs no later than
the date of the next annual meeting of shareholders; or
(c) result in the acquisition of an Option or Limited Right that is held by
the Participant for a period of six months following the date of such
acquisition.
4. Types of Awards
Awards under the Plan may be granted in any one or a combination of: (a)
Incentive Stock Options; (b) Non Statutory Stock Options; (c) Limited Rights;
(d) Dividend Equivalent Rights and (e) Reload Options.
5. Stock Subject to the Plan
Subject to adjustment as provided in Section 17, the maximum number of
shares reserved for issuance under the Plan is 204,081 shares. Shares issued
under the Plan may be issued by the Company from authorized but unissued shares,
treasury shares, or acquired by the Company in open market purchases. To the
extent that Options or Rights granted under the Plan are exercised, the shares
covered will be unavailable for future grants under the Plan; to the extent that
Options together with any related Rights granted under the Plan terminate,
expire or are forfeited without having been exercised or, in the case of Limited
Rights exercised for cash, new Awards may be made with respect to these shares.
Any shares that are issued by the Company, and any awards that are granted
by, or become obligations of, the Company, through the assumption by the Company
or an affiliate thereof, or in substitution for, outstanding awards previously
granted by an acquired company, shall not be counted against the shares
available for issuance under the Plan. In addition, any Reload Options issued
with respect to shares that are used for the full or partial payment of the
exercise price of any option or in connection with shares returned to the issuer
to satisfy federal tax withholding requirements, if any, will not be counted as
issued under the Plan and will not reduce the number of options available for
issuance.
6. Eligibility
Key Employees of the Company and its Affiliates shall be eligible to
receive Incentive Stock Options, Non Statutory Stock Options, Limited Rights,
Dividend Equivalent Rights and/or Reload Options under the Plan. Outside
Directors shall be eligible to receive Non-Statutory Stock Options, Dividend
Equivalent Rights and Reload Options under the Plan.
C-4
7. General Terms and Conditions of Options and Rights
(a) The Committee shall have full and complete authority and discretion,
except as expressly limited by the Plan, to grant Options and/or Rights and to
provide the terms and conditions (which need not be identical among
Participants) thereof. In particular, the Committee shall prescribe the
following terms and conditions: (i) the Exercise Price of any Option or Right,
which shall not be less than the Fair Market Value per share on the Date of e
Grant, (ii) the number of shares of Common Stock subject to, and the expiration
date of, any Option or Right, which e expiration date shall not exceed ten years
from the Date of Grant, (iii) the manner, time and rate (cumulative or e
otherwise) of exercise of such Option or Right, and (iv) the restrictions, if
any, to be placed upon such Option or e Right or upon shares of Common Stock
which may be issued upon exercise of such Option or Right.
(b) Notwithstanding anything herein to the contrary, and subject to any
adjustment that may be made e pursuant to Section 18 hereof, once an Option has
been awarded at Fair Market Value, the Committee shall not have e the authority
to reprice such Option so that the exercise price of the Option shall be less
than the exercise price one the Date of Grant.
8. Non-Statutory Stock Options
The Committee may, from time to time, grant Non-Statutory Stock Options to
eligible Key Employees and Outside Directors. Non-Statutory Stock Options
granted under the Plan, including Non-Statutory Stock Options granted in
exchange for and upon surrender of previously granted Awards, are subject to the
terms and conditions set forth in this Section.
(a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Company and the Participant specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of the
Plan.
(b) Price. The purchase price per share of Common Stock deliverable upon
the exercise of each Non Statutory Stock Option shall be the Fair Market Value
of the Common Stock of the Company on the Date of Grant. Shares may be purchased
only upon full payment of the purchase price in one or more of the manners set
forth in Section 14 hereof, as determined by the Committee.
(c) Vesting. A Non-Statutory Stock Option granted under the Plan shall vest
in a Participant at the rate or rates determined by the Committee. No Options
shall become vested in a Participant unless the Participant maintains Continuous
Service until the vesting date of such Option, except as set forth herein. The
Committee may accelerate the time at which any Non-Statutory Stock Option may be
exercised in whole or in part.
(d) Exercise of Options. A vested Option may be exercised from time to
time, in whole or in part, by delivering a written notice of exercise to the
President or Chief Executive Officer of the Company, or his designee. Such
notice shall be irrevocable and must be accompanied by full payment of the
purchase price in cash or shares of Common Stock at the Fair Market Value of
such shares, determined on the exercise date in the manner described in Section
2 hereof. If previously acquired shares of Common Stock are tendered in payment
of all or part of the exercise price, the value of such shares shall be
determined as of the date of such exercise.
(e) Amount of Awards. Non-Statutory Stock Options may be granted to any Key
Employee or Outside Director in such amounts as determined by the Committee. In
granting Non-Statutory Stock Options, the Committee shall consider such factors
as it deems relevant, which factors may include, among others, the position and
responsibility of the Key Employee or Outside Director, the length and value of
his service to the Bank, the Company or the Affiliate, the compensation paid to
the Key Employee or Outside Director, and the Committee's evaluation of the
performance of the Bank, the Company or the Affiliate, according to measurements
that may include, among others, key financial ratios, level of classified assets
and independent audit findings.
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(f) Term of Options. Unless the Committee determines otherwise, the term
during which Non Statutory Stock Options may be exercised shall not exceed ten
years from the Date of Grant. In no event shall a Non Statutory Stock Option be
exercisable in whole or in part more than ten years from the Date of Grant.
(g) Termination of Continuous Service. Upon the termination of a Key
Employee's or Outside Director's Continuous Service, for any reason other than
death, Disability, Termination for Cause, termination upon Normal Retirement, or
termination following a Change in Control (other than for Cause following a
Change in Control), the Participant's Non Statutory Stock Options shall be
exercisable only as to those shares that were immediately purchasable on the
date of termination and only for one year following termination. In the event of
Termination for Cause, all rights under a Participant's Non Statutory Stock
Options shall expire upon termination. In the event of the Participant's
termination of Continuous Service due to death, Disability, Normal Retirement,
or following a Change in Control, all Non Statutory Stock Options held by the
Participant, whether or not vested at such time, shall vest and become
exercisable by the Participant or his legal representative or beneficiaries for
one year following the date of such termination, death or cessation of
Continuous Service, provided that in no event shall the period extend beyond the
expiration of the Non Statutory Stock Option term.
(h) Transferability. In the discretion of the Board, all or any
Non-Statutory Stock Option granted hereunder may be transferable by the
Participant once the Option has vested in the Participant, provided, however,
that the Board may limit the transferability of such Option or Options to a
designated class or classes of persons.
9. Incentive Stock Options
The Committee may, from time to time, grant Incentive Stock Options to Key
Employees. Incentive Stock Options granted pursuant to the Plan shall be subject
to the following terms and conditions:
(a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Company and the Key Employee specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of the
Plan.
(b) Price. Subject to Section 18 hereof and Section 422 of the Code, the
purchase price per share of Common Stock deliverable upon the exercise of each
Incentive Stock Option shall be not less than 100% of the Fair f Market Value of
the Company's Common Stock on the date the Incentive Stock Option is granted.
However, if a Key Employee owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or its Affiliates
(or under Section 424(d) of the Code is deemed to own stock representing more
than 10% of the total combined voting power of all classes of stock of the
Company or its Affiliates by reason of the ownership of such classes of stock,
directly or indirectly, by or for any brother, sister, spouse, ancestor or
lineal descendent of such Key Employee, or by or for any corporation,
partnership, estate or trust of which such Key Employee is a shareholder,
partner or Beneficiary), the purchase price per share of Common Stock
deliverable upon the exercise of each Incentive Stock Option shall not be less
than 110% of the Fair Market Value of the Company's Common Stock on the date the
Incentive Stock Option is granted. Shares may be purchased only upon payment of
the full purchase price. Payment of the purchase price may be made, in whole or
in part, through the surrender of shares of the Common Stock of the Company at
the Fair Market Value of such shares determined on the exercise date.
(c) Vesting. Incentive Stock Options awarded to Key Employees shall vest at
the rate or rates determined by the Committee. The Committee may accelerate the
time at which any Incentive Stock Option may be exercised in whole or part. No
Incentive Stock Option shall become vested in a Participant unless the
Participant maintains Continuous Service until the vesting date of such Option,
except as set forth herein.
(d) Exercise of Options. Vested Options may be exercised from time to time,
in whole or in part, by delivering a written notice of exercise to the President
or Chief Executive Officer of the Company, or his designee. Such notice is
irrevocable and must be accompanied by full payment of the exercise price in
cash or shares of Common Stock at the Fair Market Value of such shares
determined on the exercise date.
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The Options comprising each installment may be exercised in whole or in
part at any time after such installment becomes vested, provided that the amount
able to be first exercised in a given year is consistent with the terms of
Section 422 of the Code. To the extent required by Section 422 of the Code, the
aggregate Fair Market Value (determined at the time the Option is granted) of
the Common Stock for which Incentive Stock Options are exercisable for the first
time by a Participant during any calendar year (under all plans of the Company
and its Affiliates) shall not exceed $100,000.
The Committee may, in its sole discretion, accelerate the time at which any
Incentive Stock Option may be exercised in whole or in part, provided that it is
consistent with the terms of Section 422 of the Code. Notwithstanding the above,
in the event of a Change in Control of the Company, all Incentive Stock Options
that have been awarded shall become immediately exercisable, provided, however,
that if the aggregate Fair Market Value (determined at the time the Option is
granted) of Common Stock for which Options are exercisable as a result of a
Change in Control, together with the aggregate Fair Market Value (determined at
the time the Option is granted) of all other Common Stock for which Incentive
Stock Options become exercisable during such year, exceeds $100,000, then the
first $100,000 of Incentive Stock Options (determined as of the Date of Grant)
shall be exercisable as Incentive Stock Options and any excess shall be
exercisable as Non-Statutory Stock Options (but shall remain subject to the
provisions of this Section to the extent permitted).
(e) Amounts of Awards. Incentive Stock Options may be granted to any
eligible Key Employee in such amounts as determined by the Committee; provided
that the amount granted is consistent with the terms of Section 422 of the Code.
In granting Incentive Stock Options, the Committee shall consider such factors
as it deems relevant, which factors may include, among others, the position and
responsibilities of the Key Employee, the length and value of his or her service
to the Bank, the Company, or the Affiliate, the compensation paid to the Key
Employee and the Committee's evaluation of the performance of the Bank, the
Company, or the Affiliate, according to measurements that may include, among
others, key financial ratios, levels of classified assets, and independent audit
findings. The provisions of this subsection (e) shall be construed and applied
in accordance with Section 422(d) of the Code and the regulations, if any,
promulgated thereunder.
(f) Terms of Options. The term during which each Incentive Stock Option may
be exercised shall be determined by the Committee, provided, however, in no
event shall an Incentive Stock Option be exercisable in whole or in part more
than 10 years from the Date of Grant. If any Key Employee, at the time an
Incentive Stock Option is granted to him, owns stock representing more than 10%
of the total combined voting power of all classes of stock of the Company or its
Affiliate (or, under Section 424(d) of the Code, is deemed to own stock
representing more than 10% of the total combined voting power of all classes of
stock, by reason of the ownership of such classes of stock, directly or
indirectly, by or for any brother, sister, spouse, ancestor or lineal descendent
of such Key Employee, or by or for any corporation, partnership, estate or trust
of which such Key Employee is a shareholder, partner or Beneficiary), the
Incentive Stock Option granted to him shall not be exercisable after the
expiration of five years from the Date of Grant.
(g) Termination of Continuous Service. Upon the termination of a Key
Employee's Continuous Service for any reason other than death, Disability,
Termination for Cause, termination upon Normal Retirement, or termination
following a Change in Control (other than for Cause following a Change in
Control) the Key Employee's Incentive Stock Options shall be exercisable only as
to those shares that were immediately purchasable by such Key Employee at the
date of termination for a period of three months following termination. Upon
termination of a Key Employee's Continuous Service due to death, Disability,
Normal Retirement, or following a Change in Control, all Incentive Options held
by a Key Employee, whether or not vested at such time, shall vest and become
exercisable by the Participant or his legal representative or beneficiaries for
one year following the date of such termination, death or cessation of
Continuous Service, provided that in no event shall the period extend beyond the
expiration of the Stock Option term, and provided, further, that, except in the
event of death or Disability, such Option shall not be eligible for treatment as
an Incentive Stock Option in the event such Option is exercised more than three
months following termination. In the event of Termination for Cause, all rights
under the Incentive Stock Options shall expire upon termination.
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In order to obtain Incentive Stock Option treatment for Options exercised
by heirs or devisees of an Optionee, the Optionee's death must have occurred
while employed or within three months of termination of Continuous Service.
(h) Transferability. No Incentive Stock Option granted under the Plan is
transferable except by will or the laws of descent and distribution and is
exercisable during his lifetime only by the Key Employee to which it is granted.
(i) Compliance with Code. The options granted under this Section are
intended to qualify as Incentive Stock Options within the meaning of Section 422
of the Code, but the Company makes no warranty as to the qualification of any
Option as an Incentive Stock Option within the meaning of Section 422 of the
Code. If an Option granted hereunder fails for whatever reason to comply with
the provisions of Section 422 of the Code, and such failure is not or cannot be
cured, such Option shall be a Non-Statutory Stock Option.
10. Limited Rights
The Committee may grant a Limited Right simultaneously with the grant of
any Option to any Key Employee of the Bank or the Company, with respect to all
or some of the shares covered by such Option. Limited Rights granted under the
Plan are subject to the following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right be exercisable in
whole or in part before the expiration of six months from the date of grant of
the Limited Right. A Limited Right may be exercised only in the event of a
Change in Control of the Company.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, provided that the Fair Market Value of the underlying
shares on the day of exercise is greater than the exercise price of the related
Option.
Upon exercise of a Limited Right, the related Option shall cease to be
exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of the
difference between the exercise price and the Fair Market Value of the Common
Stock subject to the underlying Option. The Limited Right is transferable only
when the underlying Option is transferable and under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall promptly
receive from the Company an amount of cash equal to the difference between the
Fair Market Value on the Date of Grant of the related Option and the Fair Market
Value of the underlying shares on the date the Limited Right is exercised,
multiplied by the number of shares with respect to which such Limited Right is
being exercised. The number of shares to be received on the exercise of such
Limited Right shall be determined by dividing the amount of cash that would have
been available under the first sentence above by the Fair Market Value at the
time of exercise of the shares underlying the Option subject to the Limited
Right.
11. Dividend Equivalent Rights
Simultaneously with the grant of any Option to a Participant, the Committee
may grant a Dividend Equivalent Right with respect to all or some of the shares
covered by such Option. Dividend Equivalent Rights granted under this Plan are
subject to the following terms and conditions:
(a) Terms of Rights. The Dividend Equivalent Right provides the Participant
with a cash benefit per share for each share underlying the unexercised portion
of the related Option equal to the amount of any extraordinary dividend (as
defined in Section 11(c)) per share of Common Stock declared by the Company. The
terms and conditions of any Dividend Equivalent Right shall be evidenced in the
Option agreement entered into with
C-8
the Participant and shall be subject to the terms and conditions of the Plan.
The Dividend Equivalent Right is transferable only when the related Option is
transferable and under the same conditions.
(b) Payment. Upon the payment of an extraordinary dividend, the Participant
holding a Dividend Equivalent Right with respect to Options or portions thereof
which have vested shall promptly receive from the Company the amount of cash
equal to the amount of the extraordinary dividend per share of Common Stock,
multiplied by the number of shares of Common Stock underlying the unexercised
portion of the related Option. With respect to options or portions thereof which
have not vested, the amount that would have been received pursuant to the
Dividend Equivalent Right with respect to the shares underlying such unvested
Option or portion thereof shall be paid to the Participant holding such Dividend
Equivalent Right together with earnings thereon, on such date as the Option or
portion thereof becomes vested. Payments shall be decreased by the amount of any
applicable tax withholding prior to distribution to the Participant as set forth
in Section 20.
(c) Extraordinary Dividend. For purposes of this Section 11, an
extraordinary dividend is any dividend paid on shares of Common Stock where (i)
the dividend rate exceeds 150% of the Bank's weighted average cost of funds on
interest-bearing liabilities for the current quarter and preceding three
quarters, and (ii) the annualized aggregate dollar amount of the dividend
exceeds the Bank's after-tax net income for the current quarter and preceding
three quarters, or any dividend that exceeds the aggregate amount of the last
four quarterly dividends but does not result in an adjustment under section 18
of the Plan because such adjustment would cause variable accounting under the
Plan. For purposes of this Section 11, the dividend rate equals the quotient,
expressed as a percentage, of (i) the annualized dollar amount of the dividend,
and (ii) the last trade price of the Company's Common Stock on the day
immediately before the dividend is declared.
12. Reload Option
Simultaneously with the grant of any Option to a Participant, the Committee
may grant a Reload Option with respect to all or some of the shares covered by
such Option. A Reload Option may be granted to a Participant who satisfies all
or part of the exercise price of the Option with shares of Common Stock (as
described in Section 14(c) below). The Reload Option represents an additional
Option to acquire the same number of shares of Common Stock as is used by the
Participant to pay for the original Option or to replace Common Stock withheld
by the Company for payment of a Participant's withholding tax under Section 20.
A Reload Option is subject to all of the same terms and conditions as the
original Option, including the remaining Option exercise term, except that (i)
the exercise price of the shares of Common Stock subject to the Reload Option
will be determined at the time the original Option is exercised and (ii) such
Reload Option will conform to all provisions of the Plan at the time the
original Option is exercised.
13. Surrender of Option
In the event of a Participant's termination of employment or termination of
service as a result of death or Disability, the Participant (or his or her
personal representative(s), heir(s), or devisee(s)) may, in a form acceptable to
the Committee, make application to surrender all or part of the Options held by
such Participant in exchange for a cash payment from the Company of an amount
equal to the difference between the Fair Market Value of the Common Stock on the
date of termination of employment or the date of termination of service on the
Board and the exercise price per share of the Option. Whether the Company
accepts such application or determines to make payment, in whole or part, is
within its absolute and sole discretion, it being expressly understood that the
Company is under no obligation to any Participant whatsoever to make such
payments. In the event that the Company accepts such application and determines
to make payment, such payment shall be in lieu of the exercise of the underlying
Option and such Option shall cease to be exercisable.
14. Alternate Option Payment Mechanism
The Committee has sole discretion to determine what form of payment it will
accept for the exercise of an Option. The Committee may indicate acceptable
forms in the agreement with the Participant covering such Options
C-9
or may reserve its decision to the time of exercise. No Option is to be
considered exercised until payment in full is accepted by the Committee or its
agent.
(a) Cash Payment. The exercise price may be paid in cash or by certified
check. To the extent permitted by law, the Committee may permit all or a portion
of the exercise price of an Option to be paid through borrowed funds.
(b) Cashless Exercise. Subject to vesting requirements, if applicable, a
Participant may engage in a "cashless exercise" of the Option. Upon a cashless
exercise, the Participant shall give the Company written notice of the exercise
of the Option together with an order to a registered broker-dealer or equivalent
third party, to sell part or all of the Common Stock subject to the Option and
to deliver enough of the proceeds to the Company to pay the Option exercise
price and any applicable withholding taxes. If the Participant does not sell the
Common Stock subject to the Option through a registered broker-dealer or
equivalent third party, the Participant may give the Company written notice of
the exercise of the Option and the third party purchaser of the Common Stock
subject to the Option shall pay the Option exercise price plus applicable
withholding taxes to the Company.
(c) Exchange of Common Stock. The Committee may permit payment of the
Option exercise price by the tendering (or constructively tendering) of
previously acquired shares of Common Stock. All shares of Common Stock tendered
in payment of the exercise price of an Option shall be valued at the Fair Market
Value of the Common Stock. No tendered shares of Common Stock which were
acquired by the Participant upon the previous exercise of an Option or as awards
under a stock award plan (such as the Company's Recognition and Retention Plan)
shall be accepted for exchange unless the Participant has held such shares
(without restrictions imposed by said plan or award) for at least six months
prior to the exchange.
15. Rights of a Shareholder
A Participant shall have no rights as a shareholder with respect to any
shares covered by a Non Statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in the Plan or in
any Award granted confers on any person any right to continue in the employ of
the Company or its Affiliates or to continue to perform services for the Company
or its Affiliates or interferes in any way with the right of the Company or its
Affiliates to terminate his services as an officer, director or employee at any
time.
16. Agreement with Participants
Each Award of Options, Limited Rights, Dividend Equivalent Rights and/or
Reload Options will be evidenced by a written agreement, executed by the
Participant and the Company or its Affiliates that describes the conditions for
receiving the Awards, including the date of Award, the purchase price,
applicable periods, and any other terms and conditions as may be required by the
Board or applicable securities laws.
17. Designation of Beneficiary
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any Option, Limited Rights, Reload
Option or Dividend Equivalent Right to which he would then be entitled. Such
designation will be made upon forms supplied by and delivered to the Company and
may be revoked in writing. If a Participant fails effectively to designate a
Beneficiary, then his estate will be deemed to be the Beneficiary.
18. Dilution and Other Adjustments
In the event of any change in the capitalization of the Company or the
number of outstanding shares of Common Stock by reason of any stock dividend or
split, pro rata return of capital to all shareholders or any dividend (other
than a quarterly dividend) that exceeds the aggregate amount of the last four
quarterly dividends by more than 100%, recapitalization, or any merger,
consolidation, spin off, reorganization, combination or exchange of shares, or
C-10
other similar corporate change, or other increase or decrease in such shares,
without receipt or payment of consideration by the Company, the Committee will
make such adjustments to previously granted Awards, to prevent dilution or
enlargement of the rights of the Participant, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
that may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
covered by Awards already made under the Plan; or
(c) adjustments in the purchase price of outstanding Incentive and/or Non
Statutory Stock Options, or any Limited Rights attached to such
Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. With respect to
Incentive Stock Options, no such adjustment shall be made if it would be deemed
a "modification" of the Award under Section 424 of the Code. Further, no such
adjustment shall be made if it will cause variable accounting under the Plan.
19. Effect of a Change in Control on Option Awards
In the event of a Change in Control, the Committee and the Board of Directors
will take one or more of the following actions to be effective as of the date of
such Change in Control:
(a) provide that such Options shall be assumed, or equivalent options shall
be substituted ("Substitute Options") by the acquiring or succeeding corporation
(or an affiliate thereof), provided that: (A) any such Substitute Options
exchanged for Incentive Stock Options shall meet the requirements of Section
424(a) of the Code, and (B) the shares of stock issuable upon the exercise of
such Substitute Options shall be registered in accordance with the Securities
Act of 1933, as amended ("1933 Act") or such securities shall be exempt from
such registration in accordance with Sections 3(a)(2) or 3(a)(5) of the 1933
Act, (collectively, "Registered Securities"), or in the alternative, if the
securities issuable upon the exercise of such Substitute Options shall not
constitute Registered Securities, then the Participant will receive upon
consummation of the Change in Control a cash payment for each Option surrendered
equal to the difference between the (1) fair market value of the consideration
to be received for each share of Common Stock in the Change in Control times the
number of shares of Common Stock subject to such surrendered Options, and (2)
the aggregate exercise price of all such surrendered Options; or
(b) in the event of a transaction under the terms of which the holders of
Common Stock will receive upon consummation thereof a cash payment (the "Merger
Price") for each share of Common Stock exchanged in the Change in Control
transaction, make or provide for a cash payment to the Participants equal to the
difference between (1) the Merger Price times the number of shares of Common
Stock subject to such Options held by each Participant (to the extent then
exercisable at prices not in excess of the Merger Price), and (2) the aggregate
exercise price of all such surrendered Options.
20. Withholding
There may be deducted from each distribution of cash and/or Common Stock
under the Plan the minimum amount of any federal or state taxes, including
payroll taxes, that are applicable to such supplemental taxable income and that
are required by any governmental authority to be withheld. Shares of Common
Stock will be withheld where required from any distribution of Common Stock.
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21. Amendment of the Plan
The Board may at any time, and from time to time, modify or amend the Plan
in any respect, or modify or amend an Award received by Key Employees and/or
Outside Directors; provided, however, that no such termination, modification or
amendment may affect the rights of a Participant, without his consent, under an
outstanding Award.
22. Effective Date of Plan
The Plan shall become effective upon the date of approval of the Plan by
the Company's shareholders.
23. Termination of the Plan
The right to grant Awards under the Plan will terminate upon the earlier of
(i) 10 years after the Effective Date, or (ii) the date on which the exercise of
Options or related rights equaling the maximum number of shares reserved under
the Plan occurs. The Board may suspend or terminate the Plan at any time,
provided that no such action will, without the consent of a Participant,
adversely affect his rights under a previously granted Award.
24. Applicable Law
The Plan will be administered in accordance with the laws of the State of
Delaware.
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Appendix D
WAYNE SAVINGS BANCSHARES, INC.
AMENDED AND RESTATED
2003 RECOGNITION AND RETENTION PLAN
1. Establishment of the Plan; Creation of Separate Trust
(a) Wayne Savings Bancshares, Inc. (the "Company") hereby establishes the
Wayne Savings Bancshares, Inc. Amended and Restated 2003 Recognition and
Retention Plan (the "Plan") upon the terms and conditions hereinafter stated in
the Plan.
(b) A separate trust or trusts may be established to purchase shares of the
Common Stock that will be awarded hereunder (the "Trust"). If a trust is
established and a Recipient hereunder fails to satisfy the conditions of the
Plan and forfeits all or any portion of the Common Stock awarded to him or her,
such forfeited shares will be returned to said Trust. If no trust is
established, forfeited shares shall be cancelled or held in treasury as
determined by the Committee.
2. Purpose of the Plan
The purpose of the Plan is to advance the interests of Wayne Savings
Community Bank (the "Bank") and the Company and the Company's shareholders by
providing Key Employees and Outside Directors of the Company and its Affiliates,
including the Bank, upon whose judgment, initiative and efforts the successful
conduct of the business of the Company and its Affiliates largely depends, with
compensation for their contributions to the Company and its Affiliates and an
additional incentive to perform in a superior manner, as well as to attract
people of experience and ability.
3. Definitions
The following words and phrases, when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Company or the Bank, as such terms are defined in Section 424(e) and (f),
respectively, of the Code, or a successor to a parent corporation or subsidiary
corporation.
"Award" means the grant by the Committee of Restricted Stock, as provided
in the Plan.
"Bank" means Wayne Savings Community Bank, or a successor corporation.
"Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
"Board" or "Board of Directors" means the Board of Directors of the
Company, unless otherwise noted.
"Cause" means personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Company or an Affiliate.
D-1
"Change in Control" of the Bank or the Company means a change in control of
a nature that: (i) would be required to be reported in response to Item 1(a) of
the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a Change in Control of the Bank or the Company within the
meaning of the Home Owners' Loan Act, as amended ("HOLA"), and applicable rules
and regulations promulgated thereunder, as in effect at the time of the Change
in Control; or (iii) without limitation such a Change in Control shall be deemed
to have occurred at such time as (a) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of Company's outstanding securities except for any
securities purchased by the Bank's employee stock ownership plan or trust; or
(b) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (b), considered as though
he were a member of the Incumbent Board; or (c) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or the Company or similar transaction in which the Bank or Company is not the
surviving institution occurs; or (d) a proxy statement soliciting proxies from
stockholders of the Company, by someone other than the current management of the
Company, seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company or similar transaction with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to the Plan are to be exchanged for or converted into
cash or property or securities not issued by the Company; or (e) a tender offer
is made for 25% or more of the voting securities of the Company and the
shareholders owning beneficially or of record 25% or more of the outstanding
securities of the Company have tendered or offered to sell their shares pursuant
to such tender offer and such tendered shares have been accepted by the tender
offeror.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee of the Board of the Company consisting of
either (i) at least two Non-Employee Directors of the Company, or (ii) the
entire Board of the Company. For these purposes, the Company has designated the
Compensation Committee of the Company as the Committee.
"Common Stock" means shares of the common stock of the Company, par value
$0.10 per share.
"Company" means Wayne Savings Bancshares, Inc., the stock holding company
of the Bank, or a successor corporation.
"Continuous Service" means employment as a Key Employee and/or service as
an Outside Director without any interruption or termination of such employment
and/or service. Continuous Service shall also mean a continuation as a member of
the Board of Directors following a cessation of employment as a Key Employee or
continuation of service as a Director Emeritus following termination of service
as a Director. In the case of a Key Employee, employment shall not be considered
interrupted in the case of sick leave, military leave or any other leave of
absence approved by the Bank or in the case of transfers between payroll
locations of the Bank or between the Bank, its parent, its subsidiaries or its
successor.
"Date of Grant" means the actual date on which an Award is granted by the
Committee.
"Director" means a member of the Board.
"Director Emeritus" means a former member of the Board who has been
appointed by the Board to a Director Emeritus position.
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"Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him, or of a Director or Outside Director to serve as such.
Additionally, in the case of an employee, a medical doctor selected or approved
by the Board must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it appears probable that
such Disability will be permanent during the remainder of such employee's
lifetime.
"Effective Date" means the date of, or a date determined by the Board
following, approval of the Plan by the Company's shareholders.
"Key Employee" means any person who is currently employed by the Company or
an Affiliate who is chosen by the Committee to participate in the Plan.
"Non-Employee Director" means, for purposes of the Plan, a Director who (a)
is not employed by the Company or an Affiliate; (b) does not receive
compensation directly or indirectly as a consultant (or in any other capacity
than as a Director) greater than $60,000; (c) does not have an interest in a
transaction requiring disclosure under Item 404(a) of Regulation S-K; or (d) is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
"Normal Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Company or an Affiliate, or, if no such plan is applicable, which would
constitute "retirement" under any qualified pension benefit plan maintained by
the Company or an Affiliate, if such individual were a participant in such plan.
With respect to an Outside Director, shall mean retirement from the Board in
connection with any retirement policy established by the Board, or if none,
retirement on or after attainment of age 65.
"Outside Director" means a Director of the Company or an Affiliate who is
not an employee of the Company or an Affiliate.
"Recipient" means a Key Employee or Outside Director of the Company or its
Affiliates who receives or has received an Award under the Plan.
"Restricted Period" means the period of time selected by the Committee for
the purpose of determining when restrictions are in effect under Section 6 with
respect to Restricted Stock awarded under the Plan.
"Restricted Stock" means shares of Common Stock that have been contingently
awarded to a Recipient by the Committee subject to the restrictions referred to
in Section 6, so long as such restrictions are in effect.
4. Administration of the Plan
(a) Role of the Committee. The Plan shall be administered by the Committee.
The interpretation and construction by the Committee of any provisions of the
Plan or of any Award granted hereunder shall be final and binding. The Committee
shall act by vote or written consent of a majority of its members. Subject to
the express provisions and limitations of the Plan, the Committee may adopt such
rules and procedures as it deems appropriate for the conduct of its affairs. The
Committee shall report its actions and decisions with respect to the Plan to the
Board at appropriate times, but in no event less than one time per calendar
year.
(b) Role of the Board. The members of the Committee shall be appointed or
approved by, and will serve at the pleasure of, the Board of Directors of the
Company. The Board may in its discretion from time to time remove members from,
or add members to, the Committee. The Board shall have all of the powers
allocated to it in the Plan, may take any action under or with respect to the
Plan that the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that except as provided in Section 6(b), the Board may
not revoke any Award except in the event of
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revocation for Cause, or with respect to unearned Awards in the event the
Recipient of an Award fails to maintain Continuous Service with the Company or
one of its Affiliates prior to Normal Retirement.
(c) Plan Administration Restrictions. All transactions involving a grant,
award or other acquisitions from the Company shall:
(i) be approved by the Company's full Board or by the Committee;
(ii) be approved, or ratified, in compliance with Section 14 of the
Exchange Act, by either: the affirmative vote of the holders of a
majority of the shares present, or represented and entitled to
vote at a meeting duly held in accordance with the laws under
which the Company is incorporated; or the written consent of the
holders of a majority of the securities of the issuer entitled to
vote, provided that such ratification occurs no later than the
date of the next annual meeting of shareholders; or
(iii) result in the acquisition of Common Stock that is held by the
Recipient for a period of six months following the date of such
acquisition.
(d) Limitation on Liability. No member of the Board or the Committee shall
be liable for any determination made in good faith with respect to the Plan or
any Awards granted under it. If a member of the Board or the Committee is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of anything done or not done by him in such capacity
under or with respect to the Plan, the Bank or the Company shall indemnify such
member against expense (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Bank and the Company and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
5. Eligibility; Awards
(a) Eligibility. Key Employees and Outside Directors are eligible to
receive Awards.
(b) Awards to Key Employees and Outside Directors. The Committee may
determine which of the Key Employees and Outside Directors referenced in Section
5(a) will be granted Awards and the number of shares covered by each Award;
provided, however, that in no event shall any Awards be made that will violate
the Bank's Charter and Bylaws, the Company's Certificate of Incorporation and
Bylaws, or any applicable federal or state law or regulation. Shares of
Restricted Stock that are awarded by the Committee shall, on the date of the
Award, be registered in the name of the Recipient and transferred to the
Recipient, in accordance with the terms and conditions established under the
Plan. The aggregate number of shares that shall be issued under the Plan is
81,632. Awards issued under the Plan may be issued by the Company from
authorized but unissued shares, treasury shares or shares acquired by the
Company in open market purchases.
(c) In the event Restricted Stock is forfeited for any reason, the
Committee, from time to time, may determine which of the Key Employees and
Outside Directors will be granted additional Awards to be awarded from forfeited
Restricted Stock.
(d) In selecting those Key Employees and Outside Directors to whom Awards
will be granted and the amount of Restricted Stock covered by such Awards, the
Committee shall consider such factors as it deems relevant, which factors may
include, among others, the position and responsibilities of the Key Employees
and Outside Directors, the length and value of their services to the Company and
its Affiliates, the compensation paid to the Key Employees or fees paid to the
Outside Directors, and the Committee may request the written recommendation of
the Chief Executive Officer and other senior executive officers of the Bank, the
Company and its Affiliates or the
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recommendation of the full Board. All allocations by the Committee shall be
subject to review, and approval or rejection, by the Board.
No Restricted Stock shall be earned unless the Recipient maintains
Continuous Service with the Company or an Affiliate until the restrictions
lapse.
(e) Manner of Award. As promptly as practicable after a determination is
made pursuant to Section 5(b) to grant an Award, the Committee shall notify the
Recipient in writing of the grant of the Award, the number of shares of
Restricted Stock covered by the Award, and the terms upon which the Restricted
Stock subject to the Award may be earned. Upon notification of an Award of
Restricted Stock, the Recipient shall execute and return to the Company a
restricted stock agreement (the "Restricted Stock Agreement") setting forth the
terms and conditions under which the Recipient shall earn the Restricted Stock,
together with a stock power or stock powers endorsed in blank. Thereafter, the
Recipient's Restricted Stock and stock power shall be deposited with an escrow
agent specified by the Company ("Escrow Agent") who shall hold such Restricted
Stock under the terms and conditions set forth in the Restricted Stock
Agreement. Each certificate in respect of shares of Restricted Stock Awarded
under the Plan shall be registered in the name of the Recipient.
(f) Treatment of Forfeited Shares. In the event shares of Restricted Stock
are forfeited by a Recipient, such shares shall be returned to the Company and
shall be held and accounted for pursuant to the terms of the Plan until such
time as the Restricted Stock is re-awarded to another Recipient, in accordance
with the terms of the Plan and the applicable state and federal laws, rules and
regulations.
6. Terms and Conditions of Restricted Stock
The Committee shall have full and complete authority, subject to
limitations of the Plan, to grant wards of Restricted Stock to Key Employees and
Outside Directors and, in addition to the terms and conditions contained in
Sections 6(a) through 6(h), to provide such other terms and conditions (which
need not be identical among Recipients) in respect of such Awards, and the
vesting thereof, as the Committee shall determine.
(a) General Rules. Restricted Stock shall be earned by a Recipient at the
rate or rates determined by the Committee, provided that such Recipient
maintains Continuous Service. The Committee may also accelerate the time at
which any Award may be earned. No shares shall vest in any year in which the
Bank is not meeting all of its fully phased-in capital requirements. Subject to
any such other terms and conditions as the Committee shall provide with respect
to Awards, shares of Restricted Stock may not be sold, assigned, transferred
(within the meaning of Code Section 83), pledged or otherwise encumbered by the
Recipient, except as hereinafter provided, during the Restricted Period.
(b) Continuous Service; Forfeiture. Except as provided in Section 6(c), if
a Recipient ceases to maintain Continuous Service for any reason, unless the
Committee shall otherwise determine, all shares of Restricted Stock theretofore
awarded to such Recipient and which at the time of such termination of
Continuous Service are subject to the restrictions imposed by Section 6(a) shall
upon such termination of Continuous Service be forfeited. Any stock dividends or
declared but unpaid cash dividends attributable to such shares of Restricted
Stock shall also be forfeited.
(c) Exception for Termination Due to Death, Disability, Normal Retirement
and Following a Change in Control. Notwithstanding the general rule contained in
Section 6(a), Restricted Stock awarded to a Recipient whose Continuous Service
with the Company or an Affiliate terminates due to death, Disability, Normal
Retirement, or following a Change in Control, shall be deemed earned as of the
Recipient's last day of Continuous Service with the Company or an Affiliate.
(d) Revocation for Cause. Notwithstanding anything hereinafter to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Award, or portion thereof, previously awarded under the Plan, to the extent
Restricted Stock has not been redelivered by the Escrow Agent to the Recipient,
whether or not
D-5
yet earned, in the case of a Key Employee whose employment is terminated by the
Company or an Affiliate or an Outside Director whose service is terminated by
the Company or an Affiliate for Cause or who is discovered after termination of
employment or service on the Board to have engaged in conduct that would have
justified termination for Cause.
(e) Restricted Stock Legend. Each certificate in respect of shares of
Restricted Stock awarded under the Plan shall be registered in the name of the
Recipient and deposited by the Recipient, together with a stock power endorsed
in blank, with the Escrow Agent, and shall bear the following (or a similar)
legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the Wayne Savings Bancshares, Inc. Amended
and Restated 2003 Recognition and Retention Plan. Copies of such Plan
are on file in the offices of the Secretary of Wayne Savings
Bancshares, Inc., 151 North Market Street, Wooster, Ohio 44691."
(f) Payment of Dividends and Return of Capital. After an Award has been
granted but before such Award has been earned, the Recipient shall receive any
cash dividends paid with respect to such shares, or shall share in any pro-rata
return of capital to all shareholders with respect to the Common Stock. Stock
dividends declared by the Company and paid on Awards that have not yet been
earned shall be subject to the same restrictions as the Restricted Stock and the
certificate(s) or other instruments representing or evidencing such shares shall
be legended in the manner provided in Section 6(e) and shall be delivered to the
Escrow Agent for distribution to the Recipient when the Restricted Stock upon
which such dividends were paid are earned. Unless the Recipient has made an
election under Section 83(b) of the Code, cash dividends or other amounts so
paid on shares that have not yet been earned by the Recipient shall be treated
as compensation income to the Recipient when paid. If dividends are paid with
respect to shares of Restricted Stock under the Plan that have been forfeited
and returned to the Company or to a trust established to hold issued and
unawarded or forfeited shares, the Committee can determine to award such
dividends to any Recipient or Recipients under the Plan, to any other employee
or director of the Company or the Bank, or can return such dividends to the
Company.
(g) Voting of Restricted Shares. After an Award has been granted, the
Recipient as conditional owner of the Restricted Stock shall have the right to
vote such shares.
(h) Delivery of Earned Shares. At the expiration of the restrictions
imposed by Section 6(a), the Escrow Agent shall redeliver to the Recipient (or
where the relevant provision of Section 6(c) applies in the case of a deceased
Recipient, to his Beneficiary) the certificate(s) and any remaining stock power
deposited with it pursuant to Section 5(e) and the shares represented by such
certificate(s) shall be free of the restrictions referred to in Section 6(a).
7. Adjustments upon Changes in Capitalization
In the event of any change in the outstanding shares subsequent to the
Effective Date by reason of any reorganization, recapitalization, stock split,
stock dividend, combination or exchange of shares, or any merger, consolidation
or any change in the corporate structure or shares of the Company, without
receipt or payment of consideration by the Company, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive. Any shares of stock or other securities received, as a result of any
of the foregoing, by a Recipient with respect to Restricted Stock shall be
subject to the same restrictions and the certificate(s) or other instruments
representing or evidencing such shares or securities shall be legended and
deposited with the Escrow Agent in the manner provided in Section 6(e).
D-6
8. Assignments and Transfers
No Award nor any right or interest of a Recipient under the Plan in any
instrument evidencing any Award under the Plan may be assigned, encumbered or
transferred (within the meaning of Code Section 83) except, in the event of the
death of a Recipient, by will or the laws of descent and distribution until such
Award is earned.
9. Key Employee Rights under the Plan
No Key Employee shall have a right to be selected as a Recipient nor,
having been so selected, to be selected again as a Recipient and no Key Employee
or other person shall have any claim or right to be granted an Award under the
Plan or under any other incentive or similar plan of the Company or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any Key Employee any right to be retained in the employ of the Company
or any Affiliate.
10. Outside Director Rights under the Plan
Neither the Plan nor any action taken thereunder shall be construed as
giving any Outside Director any right to be retained in the service of the
Company or any Affiliate.
11. Withholding Tax
Upon the termination of the Restricted Period with respect to any shares of
Restricted Stock (or at any such earlier time that an election is made by the
Recipient under Section 83(b) of the Code, or any successor provision thereto,
to include the value of such shares in taxable income), the Bank or the Company
shall have the right to require the Recipient or other person receiving such
shares to pay the Bank or the Company the minimum amount of any federal or state
taxes, including payroll taxes, that are applicable to such supplemental income
and that the Bank or the Company is required to withhold with respect to such
shares, or, in lieu thereof, to retain or sell without notice, a sufficient
number of shares held by it to cover the amount required to be withheld. The
Bank or the Company shall have the right to deduct from all dividends paid with
respect to shares of Restricted Stock the amount of any taxes which the Bank or
the Company is required to withhold with respect to such dividend payments.
12. Amendment or Termination
The Board of the Company may amend, suspend or terminate the Plan or any
portion thereof at any time, provided, however, that no such amendment,
suspension or termination shall impair the rights of any Recipient, without his
consent, in any Award theretofore made pursuant to the Plan. Any amendment or
modification of the Plan or an outstanding Award under the Plan, shall be
approved by the Committee, or the full Board of the Company.
13. Governing Law
The Plan shall be governed by the laws of the State of Delaware.
14. Term of Plan
The Plan shall become effective on the date of, or a date determined by the
Board of Directors following, approval of the Plan by the Company's
shareholders. It shall continue in effect until the earlier of (i) ten years
from the Effective Date unless sooner terminated under Section 12 hereof, or
(ii) the date on which all shares of Common Stock available for award hereunder,
have vested in the Recipients of such Awards.
D-7
REVOCABLE PROXY
Wayne Savings Bancshares, Inc.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
Annual Meeting of Stockholders
July 22, 2004
The undersigned hereby appoints the full Board of Directors, with full
powers of substitution to act as attorneys and proxies for the undersigned to
vote all shares of common stock of Wayne Savings Bancshares, Inc. which the
undersigned is entitled to vote at the Annual Meeting of Stockholders (the
"Meeting") to be held at the Greenbriar Conference Centre, 50 Riffel Road,
Wooster, Ohio, at 10:00 a.m. (local time) on July 22, 2004. The official proxy
committee is authorized to cast all votes to which the undersigned is entitled
as follows: FOR the election of all nominees, FOR amendment and restatement of
the 2003 Stock Option Plan, FOR amendment and restatement of the 2003
Recognition and Retention Plan and For the ratification of appointment of Grant
Thornton LLP as auditors for fiscal 2005.
This proxy is solicited by the Board of Directors
1. The election as directors of all nominees listed (except as marked to the
contrary):
For three year term expiring in 2007:
Russell L. Harpster Terry A. Gardner Frederick J. Krum
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.
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2. Approval of the Amendment and Restatement of the 2003 Stock Option Plan.
For Against Abstain
[_] [_] [_]
3. Approval of the Amendment and Restatement of the 2003 Recognition and
Retention Plan.
For Against Abstain
[_] [_] [_]
4. The ratification of the appointment of Grant Thornton LLP as auditors for
the fiscal year ending March 31, 2005.
For Against Abstain
[_] [_] [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. [ ]
- --------------------------------------------------------------------------------
This Proxy will be voted as directed, but if no instructions are specified,
this proxy will be voted for each of the propositions stated hereof. If any
other business is presented at such meeting, this Proxy will be voted by the
named proxies at the direction of a majority of the Board of Directors. At the
present time, the Board of directors knows of no other business to be presented
at the meeting.
- --------------------------------------------------------------------------------
Please be sure to sign and date this Proxy below.
----------------------------------------
Date
----------------------------------------
Stockholder sign above
----------------------------------------
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
Wayne Savings Bancshares, Inc.
The above signed acknowledges receipt from Wayne Savings Bancshares, Inc.
prior to the execution of this proxy of notice of the Meeting, a proxy statement
dated June 24, 2004 and audited financial statements.
Should the above signed be present and elect to vote at the Meeting or at
any adjournment thereof and after notification to the Secretary of Wayne Savings
Bancshares, Inc. at the Meeting of the stockholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect. This proxy may also be revoked by sending
written notice to the Secretary of Wayne Savings Bancshares, Inc. at the address
set forth on Notice of Annual Meeting of Stockholders, or by the filing of a
later proxy prior to a vote being taken on a particular proposal at the Meeting.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
Please sign, date and mail this proxy card promptly using the enclosed
postage-prepaid envelope.
If your address has changed, pleases correct the address in the space provided
below and return this portion with the proxy in the envelope provided.