EXHIBIT 10.3
THE FIDELITY DEPOSIT AND DISCOUNT BANK
DIVIDEND REINVESTMENT PLAN
EXPLANATION OF THE DIVIDEND REINVESTMENT PLAN
The following explanation comprises The Fidelity Deposit and Discount Bank
Dividend Reinvestment Plan.
Purpose
1. What is the purpose of the Plan?
The Plan provides holders of record of shares of the Bank's Common Stock
(or "Shares") a simple and convenient method of investing cash dividends in
additional Shares without payment of brokerage commissions.
Advantages to Participants
2. What are the advantages of the Plan to participants?
Participants in the Plan may purchase Shares at each dividend payment date
with reinvested cash dividends on all or a portion (but not less than 40 unless
such lesser number represents all of the Shares registered in the participant's
name) of the Shares registered in their names.
All brokerage fees and commissions incurred in connection with purchases
of Shares under the Plan will be paid by the Bank. Full investment of funds is
possible under the Plan because the Plan permits fractions of Shares, as well as
full Shares, to be credited to a participant's account. In addition, dividends
in respect of such full and fractional Shares will be credited to a
participant's account and automatically reinvested in additional Shares. The
plan administrator will provide participants with periodic statements of
account.
Administration
3. Who administers the Plan?
Subject to the Bank's right to terminate and appoint in its place another
bank or corporation to serve as "Plan Agent", the Bank will initially serve in
such capacity. The Plan Agent will administer the Plan, keep records, send
statements of account to participants and perform other duties relating to the
Plan. All correspondence relating to the Plan should be directed to:
The Fidelity Deposit and Discount Bank
Dividend Reinvestment Plan
Blakely and Drinker Streets
Dunmore, Pennsylvania 18512
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Participation
4. Who is eligible to participate?
All holders of record are eligible to participate and may join the Plan by
signing the Authorization Form, additional copies of which may be obtained at
any time by contacting the Bank, and returning the form to the Bank. Partial
participation is permissible for shareholders who hold of record more than forty
(40) Shares. Refer to Question 6, below. The Bank reserves the right, however,
to terminate the Plan for any reason whatsoever and to refuse to offer the Plan
to those shareholders of the Bank who are residents of a state which may require
registration, qualification or exemption of the Shares to be issued under the
Plan, or registration or qualification of the Bank or any of its officers or
employees as a broker, dealer, salesman or agent, and the Plan Agent determines,
at its discretion, that the number of shareholders or number of Shares held in
such state does not justify the expense of registration and other fees in said
state.
5. When may a shareholder join the Plan?
Subject to the conditions set forth in question and answer 4., above, a
shareholder may join the Plan at any time. Dividends on all participating Shares
will be reinvested on the next reinvestment date (see Question 9) after the Bank
receives the Authorization Form, provided the form is received on or before the
dividend record date. Otherwise, purchases of Shares under the Plan will begin
on the next subsequent reinvestment date. Dividend payment dates are expected to
be at the end of each of March 10, June 10, September 10, December 10, and
dividend record dates generally precede dividend payment dates by about ten
days.
6. What does the Authorization Form provide?
By signing and returning the Authorization Form to the Bank, a participant
directs the Plan Agent to reinvest dividends on all or a portion of the Shares
held of record by the participant in additional Shares. Participants electing
partial enrollment must participate with respect to at least 40 Shares unless
the participant has 40 Shares or less registered in his or her name, in which
case the participant must participate, if at all, with respect to all Shares
registered in his or her name. Shares in a participant's account under the Plan
will have cash dividends received on such Shares automatically reinvested to
purchase additional Shares.
Records
7. What reports will be sent to participants?
Each participant will receive a periodic statement of his or her account
describing cash dividends, the number of Shares purchased, the average price per
Share and total Shares accumulated under the Plan. In addition, each participant
will receive copies of any of the Bank's annual and periodic reports sent to
shareholders, proxies and proxy statements and other
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correspondence sent to shareholders generally. Each participant will also
receive any supplements to or updates of the Offering Circular for the Plan.
8. Are there any expenses to participants in connection with purchases under the
Plan?
All brokerage fees and commissions incurred in connection with purchases
of Shares and all other costs of administration of the Plan will be paid by the
Bank. A $3.00 service charge may be deducted, however, from a participant's
account at the time of his or her termination from the Plan or at the time any
stock certificate is requested by a participant.
Purchases
9. How will purchases be made?
On each dividend payment date, the Bank will pay to the Plan Agent the
total amount of dividends payable on Shares which a participant has specified
are to be included in the Plan. The Plan Agent will use that amount to purchase
Shares in the open market or in negotiated transactions at such prices and other
terms, and from or through such brokers or dealers, as the Plan Agent may
determine from time to time. The Bank reserves the right to direct the Plan
Agent to make all or part of its purchases under the Plan for that particular
quarter from the Bank's authorized but unissued Common Stock. Purchases of
Shares will be made as soon as practicable on or after each dividend payment
date, but in no event more than 30 days after each such date. Full and
fractional Shares will be allocated to each participant's account after the date
on which the Plan Agent has purchased sufficient Shares to cover the purchases
for all participants under the Plan for the applicable dividend date.
10. How will the price of Shares be determined?
The purchase price of Shares purchased in the open market or in negotiated
transactions will be the price paid by the Plan Agent to the independent
broker-dealer (the "Independent Plan Purchasing Agent") who purchases the Shares
at the request of the Plan Agent. The purchase price shall be the actual cost of
such Shares (not including brokerage fees or commissions). The Bank will bear
the cost of all brokerage fees and commissions on purchases under the Plan. The
price of Shares purchased from the Bank will be the average of the low bid and
high asked quotations for the Shares obtained by the Plan Agent on the purchase
date or if no such bid and asked prices are quoted on that date, the most recent
prior date on which such prices were quoted. The purchase price per Share
allocated to each participant will be the participant's pro rata portion of the
actual price of all Shares purchased under the Plan at each dividend date.
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11. Will participants be credited with dividends on fractional Shares?
Each participant's account will be credited with that number of full and
fractional Shares derived by dividing the amounts to be invested for such
participants by the total amount invested for all participants for that
particular dividend payment date and multiplying the resulting quotient by the
total number of Shares purchased.
12. Will certificates be issued for Shares purchased?
Shares purchased under the Plan will be registered in the name of the Plan
Agent or its nominee, as agent for participants in the Plan, and certificates
for such Shares will not be issued to participants unless requested in writing.
This procedure protects against loss, theft or destruction of stock
certificates.
Certificates for any number, greater than or equal to ten (10), of full
Shares credited to an account under the Plan will be issued after receipt of a
written request to the Plan Agent (see Question 3) signed by the participant (or
participants if a joint registration) and accompanied by a $3.00 payment for the
service charge. Any remaining full and fractional Shares will continue to be
held in the participant's account. Certificates for fractional Shares will not
be issued under any circumstance.
Withdrawal from the Plan
13. How does a participant withdraw from the Plan?
Participation in the Plan may be terminated at any time by either the
participant or by the Bank. Participants who wish to terminate may do so by
writing to the Plan Agent at the address provided in Question 3. After the Plan
Agent's receipt of such notice, or after the termination of the Plan by the
Bank, a certificate for full Shares will be issued to the participant and the
Bank will return any uninvested dividends. A participant's written notice of
termination received by the Plan Agent less than 10 days in advance of the next
dividend record date will not be effective until after the cash dividend for
such period is paid. Fractional Shares held in a participant's account will be
paid in cash based on the average of the low bid and high asked quotations on
the day the Plan Agent receives written notice of termination or termination of
the Plan by the Bank, or if no such bid and asked prices are quoted on that
date, the most recent prior date on which such prices were quoted. A $3.00
service charge may be deducted from a participant's account upon receipt of a
participant's notice of termination.
14. Can a participant re-enter the Plan after terminating his or her
participation?
Yes. A shareholder may rejoin at any time upon submission of a new
Authorization Form.
Other Information
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15. May the Plan be changed or discontinued?
The Bank reserves the right to amend the Plan from time to time, at its
sole discretion, and to terminate the Plan at any time upon written notice of
termination or of any such amendment that is deemed by the Plan Agent in its
sole discretion to be a material amendment, mailed to each participant at the
address which appears on the Plan Agent's records.
16. What are the federal income tax consequences of participating in the Plan?
For federal income tax purposes, a participant in the Plan will be treated
as having received a dividend equal to the purchase price of the full and
fractional Shares purchased with reinvested dividends plus the brokerage
commissions and service charges attributable to such Shares which are paid by
the Company. Each periodic statement of account will indicate the purchase price
of the Shares purchased with reinvested dividends. The portion of commissions
and charges paid by the Bank allocated to the participant's Shares will be
listed on the annual tax statement.
17. When and how are gains and losses determined?
A participant will realize gain or loss whenever full Shares purchased
under the Plan are sold or exchanged or whenever the participant receives a cash
payment for a fractional Share credited to his or her account. The amount of
gain or loss will be the difference between the amount received by the
participant for his or her full or fractional Shares and his or her tax basis
therefor. The tax basis of a Share will be its purchase price under the Plan
plus the portion of commissions paid by the Bank attributable to such Shares.
18. When does the holding period begin?
The holding period for Shares acquired pursuant to the Plan will begin on
the day the Shares are purchased, which will be no later than the date on which
Shares are allocated to a participant's account under the Plan.
All participants in the Plan are urged to consult their own tax advisers
to determine the particular tax consequences which may result from their
participation in the Plan and the subsequent disposal of Shares acquired under
the Plan.
19. How is a rights offering, stock dividend or stock split treated under the
Plan?
If the Bank sells additional Shares through a rights offering, the rights
will be forwarded to the participants for their disposition. Likewise, any stock
dividend or Shares resulting from a stock dividend or split in respect of a
participant's Shares held under the Plan will be credited to the participant's
account. Similarly, the Shares available for issuance pursuant to the Plan will
be adjusted pro rata to give effect to any stock split.
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20. How will a participant's Shares held under the Plan be voted?
The Plan Agent will forward proxies to participants and will vote a
participant's full Shares held under the Plan in accordance with instructions
received from the participant. If a participant does not return a proxy, his or
her Shares will not be voted.
21. What is the responsibility of the Bank and the Plan Agent under the Plan?
Neither the Bank nor the Plan Agent shall be liable under the Plan for any
act performed by it in good faith or for any good faith omission to act,
including, without limitation, any claims of liability: (i) arising out of the
termination of or failure to terminate a participant's account; (ii) with
respect to the purchase of Shares, the prices at which Shares are purchased for
the participant's account, the time such purchases are made, the decision
whether to purchase Shares from the Bank, fluctuations in the market value of
Shares; or (iii) concerning any matters relating to the operation or management
of the Plan.
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